Document:

Exhibit 10.7

 

LICENSE AND CO-DEVELOPMENT
AGREEMENT

 

BY AND BETWEEN

 

GENZYME CORPORATION

 

AND

 

ISIS PHARMACEUTICALS, INC.

 

June 24, 2008

 

 

TABLE OF CONTENTS

 

	
  Article 1. DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Article 2. LICENSES

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  2.1.

  	
   

  	
  Product License

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  2.2.

  	
   

  	
  Limited Right to
  Sublicense

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  2.3.

  	
   

  	
  Additional Rights after
  Prior Agreement Execution Date

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  2.4.

  	
   

  	
  Follow-On Compound

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  2.5.

  	
   

  	
  Retained Rights

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  2.6.

  	
   

  	
  Isis’ Right of First
  Negotiation

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  2.7.

  	
   

  	
  Third Party Agreements

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  2.8.

  	
   

  	
  No Implied License

  	
  23

  
	
   

  	
   

  	
   

  
	
  Article 3. EXCLUSIVITY

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  3.1.

  	
   

  	
  Non-Compete

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  3.2.

  	
   

  	
  [**] Technology

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 4. JOINT COMMITTEES

  	
  23

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
   

  	
  Joint Development
  Committee

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  4.2.

  	
   

  	
  Joint Patent Committee

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  4.3.

  	
   

  	
  Expenses

  	
  25

  
	
   

  	
   

  	
   

  
	
  Article 5. DEVELOPMENT

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
   

  	
  Development Plan and
  Development Budget

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  5.2.

  	
   

  	
  Roles and Responsibilities

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  5.3.

  	
   

  	
  Clinical and Launch
  Supplies

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  5.4.

  	
   

  	
  Know-How Transfer

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  5.5.

  	
   

  	
  Subcontracting

  	
  28

  
	
   

  	
   

  	
   

  
	
  Article 6. COMMERCIALIZATION AND REGULATORY MATTERS

  	
  28

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
   

  	
  Commercialization
  Responsibilities

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  6.2.

  	
   

  	
  Regulatory Matters and
  Filings

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  6.3.

  	
   

  	
  Commercial Manufacture

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  6.4.

  	
   

  	
  Isis Safety Database

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  6.5.

  	
   

  	
  Safety Reporting

  	
  32

  
									

 

ii

 

	
  6.6.

  	
   

  	
  Commercial
  Forecasts & Plans

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 7. RESEARCH RELATED TO THE PRODUCT

  	
  33

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
   

  	
  Research Programs

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  7.2.

  	
   

  	
  Research Funding

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  7.3.

  	
   

  	
  Research Efforts

  	
  33

  
	
   

  	
   

  	
   

  
	
  Article 8. FINANCIAL PROVISIONS

  	
  34

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
   

  	
  Upfront License Fee

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  8.2.

  	
   

  	
  Milestones

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  8.3.

  	
   

  	
  Financial Provisions
  Relating to Development Activities

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  8.4.

  	
   

  	
  Sharing of Net Revenue

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  8.5.

  	
   

  	
  Sharing of Net Profits

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  8.6.

  	
   

  	
  Periodic Reporting and
  Reconciliation

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  8.7.

  	
   

  	
  Accounting and Allocation
  Methods

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  8.8.

  	
   

  	
  Audits and Interim Reviews

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  8.9.

  	
   

  	
  Withholding Taxes

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  8.10.

  	
   

  	
  Interest on Late Payments

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  8.11.

  	
   

  	
  Currency; Payment

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  8.12.

  	
   

  	
  Material Safety Warnings

  	
  44

  
	
   

  	
   

  	
   

  
	
  Article 9. INTELLECTUAL PROPERTY MATTERS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  9.1.

  	
   

  	
  Product-Specific Patents

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  9.2.

  	
   

  	
  Program IP

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  9.3.

  	
   

  	
  Manufacturing Improvements

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  9.4.

  	
   

  	
  Filing, Prosecution and
  Maintenance of Patents

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  9.5.

  	
   

  	
  Enforcement of Patents and
  Know-How

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  9.6.

  	
   

  	
  Claimed Infringement of
  Third Party Rights

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  9.7.

  	
   

  	
  Other Infringement
  Resolutions

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  9.8.

  	
   

  	
  Patent Term Extensions

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  9.9.

  	
   

  	
  Orange Book Listings

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  9.10.

  	
   

  	
  Cooperative Research and
  Technology Act Acknowledgement

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  9.11.

  	
   

  	
  Common Interest

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  9.12.

  	
   

  	
  Product Trademarks

  	
  58

  
									

 

iii

 

	
  Article 10. REPRESENTATIONS AND WARRANTIES;
  INDEMNIFICATION

  	
  59

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
   

  	
  Representations and
  Warranties of Both Parties

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  10.2.

  	
   

  	
  Isis’ Representations and
  Warranties

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  10.3.

  	
   

  	
  Indemnification

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  10.4.

  	
   

  	
  Insurance

  	
  64

  
	
   

  	
   

  	
   

  
	
  Article 11. TERM AND TERMINATION

  	
  64

  
	
   

  	
   

  	
   

  
	
  11.1.

  	
   

  	
  Term

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  11.2.

  	
   

  	
  Termination

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  11.3.

  	
   

  	
  Consequences of
  Termination

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  11.4.

  	
   

  	
  Remedies for Isis’
  Material Breach

  	
  69

  
	
   

  	
   

  	
   

  
	
  Article 12. CONFIDENTIALITY; PUBLIC DISCLOSURE

  	
  70

  
	
   

  	
   

  	
   

  
	
  12.1.

  	
   

  	
  Non-Disclosure

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  12.2.

  	
   

  	
  Authorized Disclosure and
  Use

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  12.3.

  	
   

  	
  Terms of Agreement

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  12.4

  	
   

  	
  Public Disclosures

  	
  71

  
	
   

  	
   

  	
   

  
	
  Article 13. DISPUTE RESOLUTION

  	
  73

  
	
   

  	
   

  	
   

  
	
  13.1.

  	
   

  	
  Escalation

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  13.2.

  	
   

  	
  Mediation

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
  13.3.

  	
   

  	
  Jurisdiction; Venue;
  Service of Process

  	
  75

  
	
   

  	
   

  	
   

  
	
  Article 14. MISCELLANEOUS

  	
  76

  
	
   

  	
   

  	
   

  
	
  14.1.

  	
   

  	
  Change of Control of Isis

  	
  76

  
	
   

  	
   

  	
   

  	
   

  
	
  14.2.

  	
   

  	
  Specific Performance

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  14.3.

  	
   

  	
  Governing Law

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  14.4.

  	
   

  	
  Waiver; Remedies
  Cumulative

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  14.5.

  	
   

  	
  Notices

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  14.6.

  	
   

  	
  Entire Agreement

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  14.7.

  	
   

  	
  Binding Effect; Assignment

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  14.8.

  	
   

  	
  Severability

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  14.9.

  	
   

  	
  Further Assurances

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  14.10.

  	
   

  	
  Independent Contractors

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  14.11.

  	
   

  	
  Interpretation

  	
  80

  
											

 

iv

 

	
  14.12.

  	
   

  	
  Counterparts

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
  14.13.

  	
   

  	
  Rights in Bankruptcy

  	
  80

  

 

v

 

	
  Schedules and Exhibits

  	
   

  
	
   

  	
   

  
	
  Schedule 1.35

  	
  Isis
  Methodology for Determining its Cost of Manufacture

  	
   

  
	
  Schedule 1.49

  	
  Example
  of Calculation of Internal Development Expenses

  	
   

  
	
  Schedule 1.52

  	
  Isis
  Core Technology Patents

  	
   

  
	
  Schedule 1.56

  	
  Isis
  Manufacturing and Analytical Patents

  	
   

  
	
  Schedule 1.99

  	
  Product-Specific
  Patents

  	
   

  
	
  Schedule 1.113

  	
  Special Isis Core
  Technology Patents

  	
   

  
	
  Schedule 2.1

  	
  Licenses
  to Third Parties

  	
   

  
	
  Schedule 10.2.2

  	
  Third
  Party Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Development
  Plan

  	
   

  
	
  Exhibit B

  	
  Development
  Budget

  	
   

  
	
  Exhibit C

  	
  Form of
  Supply Agreement

  	
   

  
	
  Exhibit D

  	
  Form of
  Quality Agreement

  	
   

  
	
  Exhibit E

  	
  Form of
  Patent Assignment

  	
   

  
	
  Exhibit F

  	
  Disclosure
  Schedule

  	
   

  

 

vi

 

LICENSE AND CO-DEVELOPMENT
AGREEMENT

 

This License and Co-Development Agreement (together with all Exhibits,
Schedules and other attachments hereto, this “Agreement”), is dated as
of the 24th day of June, 2008 (the “Execution Date”), by and between
Genzyme Corporation, a Massachusetts corporation (“Genzyme”) and Isis
Pharmaceuticals, Inc., a Delaware corporation (“Isis”). Genzyme and
Isis each may be referred to herein individually as a “Party” or
collectively as the “Parties.”

 

WITNESSETH:

 

WHEREAS, the Parties entered into a License and Research Agreement
dated January 7, 2008 and effective as of January 30, 2008 (the “Prior
Agreement”) pursuant to which Isis granted to Genzyme an exclusive license
to certain Isis intellectual property to advance mipomersen, formerly known as
ISIS 301012, and related compounds targeting apoB, through human clinical
trials and ultimately commercialize it as a product;

 

WHEREAS, pursuant to Section 2.1.2 of the Prior Agreement, the
Parties agreed to negotiate and enter into a more detailed written license and
co-development agreement containing additional terms and conditions that are
reasonable and customary for license and co-development agreements of this type
(the “More Detailed Product Agreement”); and

 

WHEREAS, the Parties desire to enter into this Agreement to supersede
and replace the Prior Agreement and evidence the More Detailed Product
Agreement.

 

NOW, THEREFORE, in consideration of the respective covenants,
representations, warranties and agreements set forth herein, the Parties hereto
agree as follows:

 

Article 1.

DEFINITIONS

 

For purposes of this Agreement, the following capitalized terms have
the following meanings.

 

1.1.                              “Action”
has the meaning set forth in Section 13.3.1 (Jurisdiction).

 

1.2.                             “Additional
Third Party Agreement” has the meaning set forth in Section 2.3
(Additional Rights after Prior Agreement Execution Date).

 

1.3.                             “Affiliate”
of an entity means any other entity that, directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with such first entity. For purposes of this definition only, “control” (and,
with correlative meanings, the terms “controlled by” and “under common control
with”) means the possession of the actual power to direct the management or
policies of an entity, whether through the ownership of voting securities or by
contract relating to voting rights or corporate governance. For clarity, as of
the Execution Date, [**], which is engaged in the discovery, development and
commercialization of microRNA therapeutics, is not an Affiliate of Isis because
Isis has entered into an agreement pursuant to which Isis does 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

 

not have control of Regulus.

 

1.4.                              “API”
means the active pharmaceutical ingredient of the Product.

 

1.5.                              “apoB”
means apolipoprotein B.

 

1.6.                             “Approval”
means, with respect to any Product in any regulatory jurisdiction, approval
from the applicable Regulatory Authority sufficient for the manufacture,
distribution, use and sale of the Product in such jurisdiction in accordance
with Applicable Laws. In jurisdictions where the applicable Regulatory
Authority sets the pricing authorizations for a Product, Approval will not be
deemed to have occurred until the earlier of (a) Genzyme or its
Sublicensee and the Regulatory Authority have determined pricing, or (b) ninety
(90) days after approval (whether national or centralized) is received for the
applicable Regulatory Authority sufficient for the manufacture, distribution,
use and sale of the Product in such jurisdiction (other than pricing
authorization for the Product) in accordance with Applicable Laws.

 

1.7.                             “Applicable
Law” or “Law” means all applicable laws, statutes, rules,
regulations and other pronouncements having the effect of law of any federal,
national, multinational, state, provincial, county, city or other political
subdivision, agency or other body, domestic or foreign, including but not
limited to any applicable rules, regulations, guidelines, or other requirements
of the Regulatory Authorities that may be in effect from time to time, but
excluding patent and copyright laws.

 

1.8.                             “ASO Product”
any preparation in final form for sale by prescription, over-the-counter or any
other method for any indication, including human or animal use, which contains
one or more oligonucleotides or an analog thereof that [**].

 

1.9.                             “Bankruptcy
Code” has the meaning set forth in Section 14.13 (Rights in
Bankruptcy).

 

1.10.                       “Calendar
Quarter”1.11.      means the
respective periods of three (3) consecutive calendar months ending on March 31,
June 30, September 30 or December 31.

 

1.10.                       “Change of
Control” means, with respect to a Party, (a) a merger or consolidation
of such Party with a Third Party which results in the voting securities of such
Party outstanding immediately prior thereto ceasing to represent at least fifty
percent (50%) of the combined voting power of the surviving entity immediately
after such merger or consolidation, or (b) except in the case of a bona
fide equity financing in which a Party issues new shares of its capital stock,
a transaction or series of related transactions in which a Third Party,
together with its Affiliates, becomes the beneficial owner of fifty percent
(50%) or more of the combined voting power of the outstanding securities of
such Party, or (c) the sale or other transfer to a Third Party of all or
substantially all of such Party’s business to which the subject matter of this
Agreement relates, but excluding any financial factoring arrangements.

 

1.12.                       “Commercially
Reasonable Efforts” means, (a) with respect to the research,
development or commercialization by Genzyme of a Product, at any given time as
the case may be, 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

2

 

efforts reasonably used by Genzyme or its
Affiliates (giving due consideration to relevant industry standards) for
Genzyme’s own products (including internally developed, acquired and
in-licensed products) with similar commercial potential at a similar stage in
their lifecycle (assuming continuing development of such product), taking into
consideration their safety, tolerability and efficacy, the profitability
(taking into account any payments payable under this Agreement), the extent of
market exclusivity, patent protection, cost to develop the product, promotable
claims and health economic claims and (b) with respect to the research and
development by Isis of a Product, at any given time as the case may be, efforts
reasonably used by an entity in the biotechnology/pharmaceutical industry of
similar resources and expertise as Isis, for such similar entity’s own products
(including internally developed, acquired and in-licensed products) with
similar commercial potential at a similar stage in their lifecycle (assuming
continuing development of such product), taking into consideration their
safety, tolerability and efficacy, the profitability (taking into account any
payments payable under this Agreement), the extent of market exclusivity,
patent protection, cost to develop the product, promotable claims and health
economic claims.

 

1.13.                       “Commercial
Scale Manufacturing IP” means any confidential or patented scientific or
technical data, information, method, technique, protocol, invention or
processes that has been found to be useful for commercial scale manufacturing
facility but is not generally useful for manufacturing oligonucleotides on a
non-commercial scale, including all manufacturing plant designs, plans diagrams
and descriptions and also including all regulatory filings.

 

(a)                                  For
illustrative purposes only and not as a limitation, the following would be
considered to be Commercial Scale Manufacturing IP:

 

(i)            Piping
and Instrumentation Diagrams (P&ID) for a Genzyme manufacturing facility;

 

(ii)           Design
plans and schematics for a Genzyme manufacturing facility (including tank
farms, synthesis and purification suites, and analytical testing laboratories);

 

(iii)          Operating
Documents, for example batch records, SOPs, validation master plans;

 

(iv)          Floor
plans and equipment layout drawings for a Genzyme manufacturing facility; and

 

(v)           Regulatory
filings.

 

(b)                                 For
illustrative purposes only and not as a limitation, the following would not
be considered to be Commercial Scale Manufacturing IP:

 

(i)            Discovery
that a particular side reaction leads to an unexpected impurity;

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

3

 

(ii)           Discovery
regarding how to avoid the impurity or how to remove it.

 

(iii)          Development
of the use of alternative reagents;

 

(iv)          Discovery
of recycle possibilities;

 

(v)           Discovery
to enhance yields;

 

(vi)          Discovery
of the Mipomersen oxidant;

 

(vii)         Development
and validation of QbD/Design Space filing strategy.

 

(viii)        Development and validation of PAT
measures.

 

1.14.                        “Confidential
Information” has the meaning set forth in Section 12.1
(Non-Disclosure).

 

1.15.                       “Control”
or “Controlled” means, with respect to any Know-How, Patent or other
intellectual property right or Regulatory Materials, possession by a Party
(including its Affiliates) of the right (whether by ownership, license or
otherwise) to grant to the other Party a license or a sublicense under such
Know-How, Patent or other intellectual property right or access to Regulatory
Materials without violating the terms of any agreement or other arrangement
with any Third Party.

 

1.16.                       “Cover,”
“Covered” or “Covering” means, with respect to a Patent and the
subject matter at issue, that, but for a license granted under an issued claim
included in such Patent, the manufacture, use, sale, offer for sale or
importation of the subject matter at issue would infringe such claim or, in the
case of a Patent that is a patent application, would infringe a claim in such
patent application if it were to issue as a patent.

 

1.17.                       “Development
Budget” means the initial written development budget attached hereto as Exhibit B
setting forth, for the time period covered by the Development Plan, the budget
for the development of the Product during the applicable time period, as it may
be updated and amended by the JDC or the Parties during the Term in accordance
with this Agreement.

 

1.18.                       “Development
Expenses” means internal or external expenses incurred in accordance with
the Development Plan and the Development Budget, including the costs of all
clinical trials and preclinical studies, including post-marketing trials. The
types of expenses included in this category are investigator grants, laboratory
services, clinical PK assays, carcinogenicity studies, CMC studies, CRO
services and pass-throughs, pharmacovigilence and risk management activities,
costs for packaging, distribution and reconciliation (including labels and
translations, inventory control, IVRS, off-site storage and destruction), data
management (including EDC), clinical study reports, drug costs (API &
DP), investigator meetings, monitoring, SAB costs, DSMB costs, key opinion
leader costs, program specific travel, metabolomics assays, courier services
and clinical trial liability insurance costs. Development Expenses include
quality assurance costs for auditing clinical trial activities and preclinical
studies support (report reviews and CMC 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

4

 

review). When a Party is a manufacturer of
the Product under development, Development Expenses include such Party’s Fully
Absorbed Cost of Goods.

 

1.19.                       “Development
Plan” means the initial written development and regulatory plan attached
hereto as Exhibit A for the Product as it may be updated and
amended during the Term by the JDC or the Parties in accordance with this
Agreement.

 

1.20.                       “Development
Program” means the program to be conducted by the Parties in accordance
with an approved Development Plan to develop and obtain Approval of the Product
in the Territory, all as more fully described in Article 5
(Development).

 

1.21.                       “Disclosure
Schedule” means the schedule delivered by Isis to Genzyme that includes exceptions
to Isis’ representations and warranties in Section 10.2 (Isis
Representations and Warranties) hereof.

 

1.22.                       “Dispute”
has the meaning set forth in Section 13.1 (Dispute Resolution
Mechanism).

 

1.23.                       “Effective
Date” means January 30, 2008.

 

1.24.                       “Execution
Date” has the meaning set forth in the preamble.

 

1.25.                       “EMEA” means the European Regulatory Authority known as
the European Medicines Agency and any successor agency thereto.

 

1.26.                       “Encumbered
Follow-On Compound” has the meaning set forth in Section 2.4
(Follow-On Compound).

 

1.27.                       “Executives”
has the meaning set forth in Section 13.1 (Escalation to Senior
Management).

 

1.28.                       “External
Development Expenses” means Development Expenses other than Internal
Development Expenses. For clarity, External Development Expenses include the
manufacturing Party’s Fully Absorbed Cost of Goods.

 

1.29.                       “External
Sales & Marketing Expenses” means Sales & Marketing
Expenses other than Internal Sales & Marketing Expenses.

 

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

 

1.31.                       “FH”
means familial hypercholesterolemia.

 

1.32.                       “Fixed Costs”
means the cost of facilities, utilities, insurance (including any accrual for
self-insurance), facility and equipment depreciation, and other fixed costs
directly attributable to the applicable activity, allocated based upon the
proportion of such costs directly attributable to the support or performance of
the applicable activity in accordance with the Development Plan or the Product’s
manufacturing or commercialization plan, as 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

5

 

the case may be. Fixed Costs will be
determined in accordance with GAAP.

 

1.33.                       “Follow-On
Compound” means all pharmaceutical compositions, formulations, dosage
forms, delivery systems and presentations that contain [**] apoB (alone or with
other active ingredients) other than Mipomersen.

 

1.34.                       “Follow-On
Compound Encumbrances” has the meaning set forth in Section 2.4.2.

 

1.35.                       “Fully
Absorbed Cost of Goods” means:

 

(a)           with respect to units of Product produced by Genzyme, the
Variable Costs and Fixed Costs incurred by Genzyme to the extent associated
with the manufacture (inclusive of finishing processes including filling,
packaging, labeling and other preparation), quality assurance, quality control
and other testing, storage and shipping of batches of such units of Product;

 

(b)           with respect to units of Product manufactured by Isis, the
costs incurred by Isis as determined using the methodology set forth in Schedule
1.35, which Schedule will be updated by Isis on an annual basis in advance
of each fiscal year (with material changes to such methodology subject to
Genzyme’s prior agreement); and

 

(c)           with respect to units or components of Product that are
not manufactured by the Parties, the amounts paid to the vendor plus costs
associated with acquisition from such vendor.

 

If a facility that is used to manufacture Product has the capacity to
manufacture products for other programs of either Genzyme or Isis outside of
the activities contemplated by this Agreement, the Fixed Costs component of the
Fully Absorbed Cost of Goods will be allocated in proportion to the actual use
of such facility for the manufacture of Product pursuant to this Agreement and
the capacity to manufacture products for such other programs outside of this
Agreement in a manner that is mutually agreeable to the Parties. No idle
capacity of a manufacturing facility, or a proportionate use thereof, will be
included in Fully Absorbed Cost of Goods unless such capacity or
facility was built specifically to manufacture Product and is not being used to
manufacture any other products, in which case the depreciation associated with
such idle capacity will be included in Fully Absorbed Cost of Goods to the
extent that such facility is in service. Fully Absorbed Cost of Goods will
exclude all costs otherwise reimbursed pursuant to this Agreement. Fully
Absorbed Costs of Goods will be determined in accordance with GAAP. Genzyme
will use commercially reasonable efforts to minimize and mitigate circumstances
that would result in idle capacity being included in Fully Absorbed Cost of
Goods.

 

1.36.                       “G&A
Costs” will mean the costs of general and administration services
(including legal, finance, accounting, human resources and other general and
administrative support services) as reasonably required to support the
activities of the Parties under this 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

6

 

Agreement, which costs will be determined and
reported in accordance with GAAP and in good faith by each Party.

 

1.37.                        “GAAP”
means then-current United States generally accepted accounting principles,
consistently applied.

 

1.38.                        “Genzyme”
has the meaning set forth in the preamble.

 

1.39.                        “Genzyme
Indemnitees” has the meaning set forth in Section 10.3.2
(Indemnification by Isis).

 

1.40.                        “Genzyme
Manufacturing Improvements” has the meaning set forth in Section 9.3.2(b) (Terms
of Sharing Program).

 

1.41.                       “Genzyme
Program IP” means the Genzyme Program Patents, Genzyme Program Know-How and
any work-of-authorship authored in the performance of the Development Program
or Research Programs solely by Genzyme’s employees or Third Parties acting on
Genzyme’s behalf.

 

1.42.                       “Genzyme
Program Know-How” means any and all Know-How which is made or conceived
during and in connection with the conduct of the Development Program or the
Research Programs or commercializing the Product solely by Genzyme’s employees
or Third Parties acting on Genzyme’s behalf.

 

1.43.                        “Genzyme
Program Patents” means any and all Patents Controlled by Genzyme that Cover
Genzyme Program Know-How.

 

1.44.                       “IND”
means an Investigational New Drug Application, as defined in the US Federal
Food, Drug, and Cosmetic Act, as amended from time to time (21 U.S.C. Section 301
et seq.), together with any rules and regulations promulgated thereunder,
or similar application or submission that is required to be filed with any
Regulatory Authority before beginning clinical testing of a Product in human
subjects.

 

1.45.                        “Indemnitee”
has the meaning set forth in Section 10.3.3 (Indemnification
Procedure).

 

1.46.                        “Indemnifying
Party” has the meaning set forth in Section 10.3.3
(Indemnification Procedure).

 

1.47.                        “Infringement
Claim” has the meaning set forth in Section 9.6.1 (Notice).

 

1.48.                       “In-Licensed
Third Party IP” means Patents or Know-How Controlled by Isis that are
licensed to Isis pursuant to a Third Party Agreement.

 

1.49.                       “Internal
Development Expenses” means Development Expenses attributable to the
internal costs of base salary plus a factor for reasonable and customary
employee benefits and payroll taxes for those employees and temporary employees
directly responsible for performing the development activity, plus program
specific travel for such employees 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

7

 

and temporary employees, plus G&A Costs,
or other overhead costs; provided, however, that where the
Product is being manufactured by a Party, Internal Development Expenses will
not include such Party’s Fully Absorbed Cost of Goods. A hypothetical example
illustrating the methodology Genzyme currently uses to calculate its Internal
Development Costs is set forth in Schedule 1.49.

 

1.50.                      “Internal
Sales & Marketing Expenses” means Sales & Marketing
Expenses attributable to the internal costs of base salary and commissions
payable to employees plus a factor for reasonable and customary employee
benefits and payroll taxes for those employees directly responsible for
performing the sales and marketing activity, plus sales and marketing specific
travel for such employees, plus G&A Costs or other overhead costs.

 

1.51.                        “Isis”
has the meaning set forth in the preamble.

 

1.52.                      “Isis Core
Technology Patents” means all Patents Controlled by Isis or any of its
Affiliates as of the Prior Agreement Execution Date or during the Term,
including Isis Program Patents and Joint Patents, that are necessary or useful
for the development and commercialization of Product, including the Patents identified
on Schedule 1.52, in each case other than Product-Specific Patents, Licensed
Product Patents and Isis Manufacturing and Analytical Patents.

 

1.53.                      “Isis
Database” has the meaning set forth in Section 6.4 (Isis Safety
Database).

 

1.54.                      “Isis Indemnitees”
has the meaning set forth in Section 10.3.1 (Indemnification by
Genzyme).

 

1.55.                      “Isis
Manufacturing and Analytical Know-How” means Know-How other than Product
Know-How Controlled by Isis or its Affiliates as of the Prior Agreement
Execution Date or during the Term, including Isis Program Know-How and Joint
Know-How, that relates to the synthesis or analysis of Products independent of
sequence or chemical modification.

 

1.56.                      “Isis
Manufacturing and Analytical Patents” means Patents Controlled by Isis or
its Affiliates as of the Prior Agreement Execution Date or during the Term,
including Isis Program Patents and Joint Patents, that claim methods and
materials used in the synthesis or analysis of Products independent of sequence
or chemical modification, including the Patents identified on Schedule 1.56. Isis
Manufacturing and Analytical Patents do not include the Product-Specific
Patents, Licensed Product Patents and the Isis Core Technology Patents.

 

1.57.                      “Isis
Manufacturing and Analytical IP” means the Isis Manufacturing and
Analytical Know-How and Isis Manufacturing and Analytical Patents solely to the
extent necessary or useful to manufacture a Product.

 

1.58.                      “Isis
Manufacturing Improvements” has the meaning set forth in Section 9.3.2(c) (Terms
of Sharing Program).

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

8

 

1.59.                      “Isis
Program IP” means the Isis Program Patents and Isis Program Know-How and
any works-of-authorship authored in the performance of the Development Program
or Research Programs solely by Isis’ employees or Third Parties acting on Isis’
behalf.

 

1.60.                      “Isis
Program Know-How” means any and all Know-How which is made or conceived in
the performance of the Development Program or the Research Programs solely by
Isis’ employees or Third Parties acting on Isis’ behalf.

 

1.61.                      “Isis
Program Patents” means any and all Patents Controlled by Isis that Cover
Isis Program Know-How.

 

1.62.                      “Joint
Development Committee” or “JDC” has the meaning set forth in Section 4.1.1
(Establishment of JDC).

 

1.63.                      “Joint
Know-How” means any and all Know-How that is made or conceived in the
performance of the Development Program or the Research Programs jointly by Isis’
and Genzyme’s employees or others acting on Isis’ and Genzyme’s behalf.

 

1.64.                      “Joint
Patent Committee” or “JPC” has the meaning set forth in Section 4.2.1
(Establishment of the JPC).

 

1.65.                      “Joint
Patents” means any and all Patents that Cover Joint Know-How.

 

1.66.                      “Joint
Program IP” means Joint Patents, Joint Know-How and any works-of-authorship
authored in the performance of the Development Program or Research Programs
jointly by Isis’ and Genzyme’s employees or others acting on their behalf.

 

1.67.                      “Know-How”
means inventions, technical information, know-how and materials, including
technology, software, instrumentation, devices, data, compositions, formulas, biological
materials, assays, reagents, constructs, compounds, discoveries, procedures,
processes, practices, protocols, methods, techniques, results of
experimentation or testing, knowledge, trade secrets, skill and experience, in
each case whether or not patentable or copyrightable.

 

1.68.                      “Licensed IP”
means the Licensed Patents, the Product Know-How, the Isis Manufacturing and
Analytical Know-How; provided, however, that (a) for any
such Know-How or Patent that becomes Controlled by Isis after the Prior Agreement
Execution Date pursuant to an Additional Third Party Agreement, the provisions
of Section 2.3 (Additional Rights after Prior Agreement Execution
Date) will govern whether such Know-How or Patent will be included as Licensed
IP and (b) with respect to any Follow-On Compound, the provisions of Section 2.4
(Follow-On Compound) will govern the extent to which In-Licensed Third Party IP
will be included in Licensed IP.

 

1.69.                      “Licensed
Patent(s)” means the Licensed Product Patents, Isis Core Technology Patents
and Isis Manufacturing and Analytical Patents.

 

1.70.                      “Licensed
Product Patents” means (i) the [**] Patent, and (ii) any Patent
Controlled by 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

9

 

Isis during the Term, including any Isis
Program Patents and Joint Patents, claiming (a) [**] apoB, (b) the
sequence of apoB, (c) the specific composition of matter of a Product, or (d) methods
of using Product as a therapeutic, methods of using Product to modulate apoB,
and methods of using the Product to inhibit expression of apoB; and also
claiming or describing (x) [**], or (y) methods of using such nucleic
acids as a therapeutic or to modulate a gene target [**]. Notwithstanding the
foregoing, a Patent that has been issued for at least two years that claims
(a), (b), (c) or (d) above and that also describes, but does not claim,
(x) or (y) above, will be a Product-Specific Patent, not a Licensed
Product Patent

 

1.71.                        [**].

 

1.72.                        “[**]
Manufacturing Improvements” has the meaning set forth in Section [**].

 

1.73.                      “MAA”
means a marketing authorization application filed with (a) the EMEA under
the centralized EMEA filing procedure or (b) a Regulatory Authority in any
Major European Country if the centralized EMEA filing procedure is not used,
after completion of clinical trials to obtain marketing approval.

 

1.74.                        “MAA Approval” means the Approval of a MAA for the
applicable Product in any of the Major European Countries.

 

1.75.                        “Major European Country” means France, Germany,
Italy, Spain, or the United Kingdom.

 

1.76.                        “Major
Market Countries” means Canada, the United States, Japan and each Major
European Country.

 

1.77.                      “Manufacturing
Improvements” means any and all scientific and technical data, information,
methods, techniques, protocols, inventions, and processes that have been found
to be useful in the manufacture of ASO Products, excluding Commercial Scale
Manufacturing IP.

 

1.78.                      “Mipomersen”
means mipomersen sodium, formerly known as ISIS 301012, including all
pharmaceutically acceptable salts, solvates, hydrates, hemihydrates,
metabolites, pro-drug forms, stereoisomers, enantiomers, racemates and all
optically active forms thereof.

 

1.79.                      “NDA” means a New Drug Application filed with the FDA
after completion of clinical trials to obtain marketing approval for the
applicable Product in the United States.

 

1.80.                        “NDA Approval” means the Approval of an NDA by the FDA for
the applicable Product in the U.S.

 

1.81.                        “NDA Filing” means the acceptance by the FDA of the
filing of an NDA for the applicable Product.

 

1.82.                        “Net Profits
or Losses” means Net Revenues less Program Costs. To the extent Net 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

10

 

Revenues exceed Program Costs for the
relevant period, the amount of such difference will be deemed “Net Profits,”
and, to the extent Program Costs exceed Net Revenues for the relevant period,
the amount of such difference will be deemed “Net Losses.”

 

1.83.                      “Net Revenue”
during the relevant period means the sum of (a) Net Sales, if any, of
Products in the Territory during such period, plus (b) all revenue
received by either Party or their respective Affiliates from a Third Party in
consideration for the grant of a right to make, use, sell, offer for sale or
import a Product in the Territory, including monies received pursuant to a
license with a Third Party such as upfront fees, milestones and royalties, and
monies received for marketing rights or distribution rights. If Genzyme or its
Affiliates receives non-cash consideration for the grant of a right to make,
use, sell, offer for sale or import a Product in the Territory, the Parties
will agree in good faith on the valuation of such consideration to be included
in Net Revenue.

 

1.84.                      “Net Sales”
means the gross invoiced sales amount of the Product billed by Genzyme or its
Affiliates or Sublicensees, in each case to independent Third Parties,
including to distributors and end-users, for the sale or other commercial
disposition of the Product in the Territory, less the following items (“Net
Sales Adjustments”) as applicable to such Product to the extent actually
taken or incurred with respect to such sale:

 

(a)                                  credits or
allowances for returns, rejections or recalls (due to spoilage, damage,
expiration of useful life or otherwise), retroactive price reductions or
billing corrections;

 

(b)                                 invoiced
freight, postage, shipping and insurance, handling and other transportation
costs;

 

(c)                                  sales, use,
value added and other similar taxes (excluding income taxes), tariffs, customs
duties, surcharges and other governmental charges levied on the production,
sale, transportation, delivery or use of the Product in the Territory that are
incurred at time of sale or are directly related to the sale (which in all
cases will be the direct responsibility of the selling Party); and

 

(d)                                 quantity, cash
or other trade discounts, rebates, refunds, charge backs, fees, credits or
allowances (including amounts incurred in connection with government-mandated
rebate and discount programs, Third Party rebates and charge backs, and
hospital buying group/group purchasing organization administration fees and
payor organizations), distribution fees, sales commissions, and commissions
paid to Third Parties;

 

all in accordance with standard allocation procedures, allowance
methodologies and accounting methods consistently applied, in accordance with
GAAP.

 

Notwithstanding the foregoing, the following will not be included in
Net Sales: (1) Genzyme’s transfer of Product to an Affiliate, (2) Product
provided by Genzyme or an Affiliate for administration to patients enrolled in
clinical trials or distributed through a not-for-profit foundation at no charge
to eligible patients, provided, however, that 

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

11

 

Genzyme or its Affiliate receive no consideration from such clinical
trials or not-for-profit foundation for such use of Product and (3) Product
used as samples to promote additional Net Sales, in amounts consistent with
normal business practices of Genzyme.

 

1.85.                        “[**]”
has the meaning set forth in Section [**].

 

1.86.                        “[**]
Process” has the meaning set forth in Section [**].

 

1.87.                      “Participating
Isis Partner” means any Third Party that has a then-current contractual
relationship with Isis pursuant to which (i) such Third Party is required
to disclose to Isis on at least an annual basis any Manufacturing Improvements
invented or developed by such Third Party, and (ii) Isis has the right to
license such Third Party’s Manufacturing Improvements to Genzyme under this
Agreement and in accordance Section 9.3.2 (Terms of Sharing Arrangement),
and (iii)  such Third Party is either (A) [**] or [**], (B) manufacturing
at least 50% of its requirements for the active pharmaceutical ingredient for
an ASO Product under license from Isis on its own behalf or through Isis (i.e.,
it is not using a Third Party manufacturer to manufacture such portion of such
active ingredient) or (C) maintaining an ongoing and substantial internal
process development program related to the manufacture of ASO Products.

 

1.88.                      “Party
and Parties” has the meaning set forth in the preamble.

 

1.89.                      “Patent(s)”
means (a) patents, patent applications and similar government-issued
rights protecting inventions in any country or jurisdiction however
denominated, (b) all priority applications, divisionals, continuations,
substitutions, continuations-in-part of and similar applications claiming
priority to any of the foregoing and (c) all patents and similar
government-issued rights protecting inventions issuing on any of the foregoing
applications, together with all registrations, reissues, renewals,
re-examinations, confirmations, supplementary protection certificates, and
extensions of any of (a), (b) or (c).

 

1.90.                      “Permitted
Licenses” means licenses granted by Isis after the Effective Date to any
Third Party under the Isis Core Technology Patents or the Isis Manufacturing
and Analytical IP (but not under the Licensed Product Patents or for use of the
[**]) to (a) use oligonucleotides (or supply oligonucleotides to end
users) in quantities not to exceed [**] per oligonucleotide per end user solely
to conduct Pre-Clinical Research, or (b) enable such Third Party to [**],
where such Third Party is primarily engaged in providing contract manufacturing
or services and is not engaged in drug discovery, development or
commercialization. Notwithstanding the foregoing, Permitted Licenses do not
include any licenses that allow (i) a Third Party to make, use or sell an
oligonucleotide having the same [**] as a Product or Isis’ preferred [**]; (ii) a
Third Party to manufacture any nucleic acid that (A) is designed to [**]
apoB or (B) acts predominantly by [**] apoB, in each case ((A) or
(B)), that will be incorporated into a therapeutic product for use in human
clinical trials or for commercial sale; or (iii) Isis to directly supply
to any Third Party any nucleic acid that any nucleic acid that (i) is
designed to [**] apoB or (ii) acts predominantly by [**] apoB.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

12

 

1.91.       “Pivotal Trial” means
a clinical study (whether or not denominated as a “Phase III” clinical study
under applicable regulations) in human patients that is of size and design
agreed to by a Regulatory Authority to be appropriate to establish that the
Product is safe and effective for its intended use, to define warnings,
precautions and adverse reactions that are associated with the Product in the
dosage range to be prescribed, and to support Regulatory Approval of such
Product.

 

1.92.       “Pre-Clinical Research”
means pre-clinical research including gene function, gene expression and target
validation research using cells and animals, which may include small pilot
toxicology studies but excludes pharmacokinetic and toxicology studies required
to meet the regulations for filing an IND, clinical development and
commercialization.

 

1.93.       “Primary Safety Contact
Person” has the meaning set forth in Section 6.5 (Safety Reporting).

 

1.94.       “Prior Agreement” has
the meaning set forth in the recitals.

 

1.95.       “Prior Agreement
Execution Date” means January 7, 2008.

 

1.96.       “Product” means all
pharmaceutical compositions, formulations, dosage forms, delivery systems and
presentations that contain Mipomersen or any Follow-On Compound as an active
ingredient.

 

1.97.       “Product Know-How”
means Know-How Controlled by Isis on the Prior Agreement Execution Date or
during the Term, including Isis Program Know-How and Joint Know-How, relating
to or otherwise necessary for the development and commercialization of Product.  Product Know-How does not include the Isis
Manufacturing and Analytical Know How.

 

1.98.       “Product License”
means the license granted to Genzyme in Section 2.1 (Product
License).

 

1.99.       “Product-Specific Patents”
means Patents Controlled by Isis or any of its Affiliates as of the Prior
Agreement Execution Date and during the Term, including any Isis Program
Patents and Joint Patents, claiming (a) [**] apoB, (b) the [**] of
apoB, (c) the specific composition of matter of a Product, or (d) methods
of using Product as a therapeutic, methods of using Product to modulate apoB,
or methods of using the Product to inhibit expression of apoB, including the
Patents identified on Schedule 1.99, other than Licensed Product Patents.

 

1.100.     “Product Trademarks”  means the trademark(s), service mark(s), accompanying
logos, trade dress and/or indicia of origin used in connection with the
distribution, marketing, promotion and commercialization of the Product in the
Territory.  For purposes of clarity, the
term Product Trademark(s) will not include the corporate names and logos
of either Party and will include any internet domain names incorporating such
Product Trademarks.

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

13

 

1.101.     “Program Costs”
during the relevant period means all actual costs and expenses (including
accruals chargeable against profits under GAAP) incurred (a) by either
Party in the conduct of the Development Program (including all Development
Expenses) (or the Research Program to the extent permitted under Section 7.2)  and (b) by Genzyme, its Affiliates or Sublicensees
pursuant to the manufacturing, sale, promotion and marketing of the Product in
the Territory.

 

Program Costs will be determined and accounted for in accordance with Section 8.7.1
(Accounting).  Each component of Program
Costs will be allocated according to the allocation method mutually agreed to
by the Parties under Section 8.7.2 (Allocation Methods).  Program Costs will include:

 

(a)           direct, out-of-pocket
external costs and expenses, including clinical grants, clinical laboratory
fees, positive controls and the cost of pre-clinical and clinical studies
conducted and services provided by contract research organizations;

 

(b)           Fully Absorbed Cost of Goods
associated with the manufacture of preclinical, clinical and commercial grade
materials;

 

(c)           depreciation and/or amortization
relating to (i) capital investments, (ii) process improvements or, (iii) any
other capital expenditure for the construction or renovation of any
manufacturing facility for the production of the Product;

 

(d)           costs and expenses related
to the conduct of clinical studies, including costs and expenses associated
with data management, statistical designs and studies, document preparation and
other expenses associated with the clinical testing program for the Product;

 

(e)           costs and expenses associated
with pharmacovigilence and risk management activities associated with the
Product;

 

(f)            costs and expenses of
samples (without any mark-up) of Product provided by Genzyme to Isis;

 

(g)           costs and expenses of
preparing, submitting, reviewing or developing data or information for the
purpose of submission of applications to obtain Approvals for the Product or
maintenance of such Approvals (including user fees, establishment fees, product
fees, or similar international maintenance fees);

 

(h)           all royalties, milestones
and license fees payable to Third Parties, including (i) those owed by
Isis to [**] and [**] under the existing Third Party Agreements set forth on Schedule
10.2.2, and (ii) Genzyme’s allocable portion of amounts due under any
Additional Third Party Agreement in accordance with to Section 2.3
(Additional Rights after Prior Agreement Execution Date); provided, however
that royalties, milestones and license fees payable under any Additional Third
Party Agreement entered into in violation of Section 2.3
(Additional Rights After Prior Agreement Execution) will not be included in
Program Costs;

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

14

 

(i)            Sales and Marketing
Expenses;

 

(j)            costs and expenses
associated with shipping, storage and distribution of the Product in the
Territory, including (i) invoice, freight, postage, shipping, insurance,
handling and other transportation charges to fulfill orders and not otherwise
accounted for as Net Sales Adjustments, (ii) customer services, including
collection of data about sales to hospitals, prescribers and end users, order entry,
billing and adjustments, inquiry, credit and collection, (iii) cost of
labor utilized for the distribution of the Product, (iv) duties and other
monies paid to Third Parties pursuant thereto and (v) amounts paid to
Third Parties with respect to storage or distribution of the Product;

 

(k)           G&A Costs
to the extent they are attributable to a Product;

 

(l)            bad debt expense as
calculated in accordance with GAAP;

 

(m)          costs and expenses
associated with any write-offs relating to (i) inventory, (ii) manufacturing
costs and expenses, if applicable, (iii) product failures or (iv) associated
regulatory compliance costs and expenses (each such write-off will be deemed
Program Costs in the period in which they are incurred);

 

(n)           damages (including
out-of-court settlements) and out-of-pocket legal expenses (collectively “Damages”)
reasonably incurred by a Party or its Affiliates with respect to a Third Party
claim or action arising out of the research, development, manufacture, use,
distribution, marketing or sale of the Product within the scope of this
Agreement (including Third Party Infringement Claims); provided, however,
that such Damages (i) do not arise out of a claim or action that is
subject to any indemnification obligation of Genzyme under Section 10.3.1
(Indemnification by Genzyme) or Isis under Section 10.3.2 (Indemnification
by Isis), and (ii) are not incurred by either Party for activities
conducted after the Term or conducted outside the scope of this Agreement;

 

(o)           costs and expenses incurred
in challenging Patents owned by Third Parties in accordance with Section 9.6.2
(Defense of Infringement Claim; Declaratory Judgment Actions) or 9.6.3
(Other Challenges);

 

(p)           costs and expenses incurred
enforcing intellectual property rights against Third Parties to the extent
provided in Section 9.5.4 (Procedures and Expenses);

 

(q)           costs and expenses relating
to the filing, prosecution, maintenance and enforcement of Joint Patents and as
provided in Section 9.4.2 (Election Not to Continue Prosecution;
Abandonment), in each case in the Territory; and

 

(r)            costs and expenses of
insurance (including any product liability insurance or accrual for
self-insurance).

 

For clarity, the following costs will not
be considered Program Costs:

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

15

 

(a)           the license fee or milestone
payments payable by Genzyme to Isis pursuant to Section 8.1 or Section 8.2,
respectively;

 

(b)           Isis’ costs and expenses of
prosecuting and maintaining the Isis Core Technology Patents and Isis
Manufacturing and Analytical Patents (other than as provided in Section 9.6.3
(Other Challenges));

 

(c)           Genzyme’s costs and expenses
of prosecuting and maintaining the Product-Specific Patents and the Licensed
Product Patents (other than as provided in Section 9.6.3 (Other
Challenges));

 

(d)           the costs and expenses of
the mutually agreed upon Research Programs as described in Article 7
(Research Related to the Product);

 

(e)           costs and expenses
associated with stock-based compensation expenses or other pro forma
adjustments to either Party’s financials determined in accordance with U.S. GAAP;

 

(f)            any costs and expenses of
corporate overhead expenses, other than G&A Costs;

 

(g)           unless otherwise deemed
necessary for activities under this Agreement and mutually agreed by the
Parties:

 

(A)          amortization
and depreciation expenses (unless consistent with Section 1.32
(Fixed Costs) hereof), deductions, credits, expenses including taxes and
extraordinary or nonrecurring losses customarily deducted by a Party in
calculating and reporting consolidated net income, manufacturing facility
capital costs, capital expenditures, including purchases of facilities,
property or equipment; and

 

(B)           property
taxes and any other taxes not related to the research, development,
manufacture, commercialization or distribution of a Product in the Territory.

 

In addition, in no event will any amounts deducted from gross sales
(Net Sales Adjustments) for the purpose of calculating Net Sales also be
counted toward the amount of Program Costs.

 

Each of the following will be accounted for
as a credit against Program Costs:

 

(a)           to the extent provided in Section 9.5.5
(Recoveries), amounts recovered from an infringer of the Licensed IP;

 

(b)           amounts received as insurance payments for damages,
losses, costs or expenses previously included in the calculation of Program
Costs; and

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

16

 

(c)           tax refunds received to the extent they relate to
tax payments previously deducted from Net Sales as a Net Sales Adjustment or
Program Costs.

 

1.102.     “Program IP” means Genzyme
Program IP, Isis Program IP and Joint Program IP, collectively.

 

1.103.     “Regulatory Authority”
means any governmental authority, including the FDA, EMEA or Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any
successor agency thereto), that has responsibility for granting any licenses or
approvals or granting pricing and/or reimbursement approvals necessary for the
marketing and sale of a Product in any country.

 

1.104.     “Regulatory Materials”
means any regulatory submissions, notifications, registrations, approvals
and/or other filings and correspondence made to or with a Regulatory Authority
in any country or jurisdiction in the Territory, and any other records required
by Applicable Law to be maintained that may be necessary or useful to develop,
manufacture, market, sell or otherwise commercialize Product in the Territory.

 

1.105.     “Reporting Period”
has the meaning set forth in Section 8.6.1 (Reports).

 

1.106.     “Research Programs”
has the meaning set forth in Section 7.1 (Research Programs).

 

1.107.     “Responsible Party”
has the meaning set forth in either Section 9.4.1(b)(i) or 9.4.1(d) as
the context requires.

 

1.108.     “Reversion” has the
meaning set forth in Section 11.3.5(a)(iii) (Isis Reversion
Rights).

 

1.109.     “Sales &
Marketing Expenses” means  sales and marketing costs and expenses
(including labor costs) incurred in connection with the sale, promotion and
marketing of the Product in the Territory including (i) costs and expenses
related to performing market research, post-marketing studies, advertising,
producing promotional literature, sponsoring seminars and symposia, sales training
meetings and seminars, originating sales, providing reimbursement, and other
similar sales, marketing, and patient support services and (ii) all costs
and expenses incurred for the sales force and sales force management by
Genzyme, including costs and expenses related to salaries, commissions, current
period reasonable and customary employee benefits and payroll taxes, sales
incentive payments, sales training expenses, and travel expenses, all in
accordance with GAAP.

 

1.110.     “Sharing Agreement”
means an agreement between Isis and a Participating Isis Partner pursuant to
which (i) the Participating Isis Partner is required to disclose to Isis
on at least an annual basis any Manufacturing Improvements invented or
developed by such Third Party, and (ii) Isis has the right to license such
Participating Partner’s Manufacturing Improvements to Genzyme under this
Agreement and in accordance Section 9.3.2 (Terms of Sharing Arrangement).

 

1.111.     “Sharing Period” has
the meaning given to it in Section 9.3.2(a) (Terms of Sharing
Arrangement).

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

17

 

1.112.     “[**] Patent” means
Patent No. PCT/US[**].

 

1.113.     “Special Isis Core
Technology Patents” means (a) the Isis Core Technology Patents
identified on Schedule 1.113 and all divisionals, continuations,
substitutions, continuations-in-part of and similar applications claiming
priority to any of the foregoing and all patents and similar government-issued
rights protecting inventions issuing on any of the foregoing applications,
together with all registrations, reissues, renewals, re-examinations,
confirmations, supplementary protection certificates, and extensions of any of
the foregoing, and (b) any other Isis Core Technology Patent that is
similar to the Patents identified on Schedule 1.113 that Isis or its
Affiliates come to Control after the Execution Date during the Term that
Genzyme reasonably requests in writing be designated as a Special Isis Core
Technology Patent.

 

1.114.     “Sublicensee” means a
Third Party who receives a sublicense of the Product License in accordance with
Section 2.2 (Limited Right to Sublicense).

 

1.115.     “Supply Agreement”
means the Supply Agreement entered into between Genzyme and Isis pursuant to Section 5.3
(Clinical and Launch Supplies).

 

1.116.     “Territory” means
worldwide.

 

1.117.     “Term” has the
meaning set forth in Section 11.1 (Term).

 

1.118.     “Third Party” means a
person or entity other than the Parties, their respective Affiliates and their
employees.

 

1.119.     “Third Party Agreement”
means any agreement with a Third Party now existing or entered into during the
Term pursuant to which Isis obtains rights applicable to the development or
commercialization of a Product.

 

1.120.     “Third Party Claim”
has the meaning set forth in Section 10.3.3 (Indemnification
Procedure).

 

1.121.     “Third Party Services
Agreement” has the meaning set forth in Section 6.2.2 (Third Party
Services Agreements).

 

1.122.     “Variable Costs”
means the cost of labor (which includes salaries and wages plus a factor for
reasonable and customary employee benefits and payroll taxes for the applicable
employees), raw materials, scrap, obsolescence, supplies, services, fees and
other resources directly consumed or used in the conduct of the applicable
activity in accordance with the Development Plan, or Genzyme’s manufacturing or
commercialization plan, as the case may be. 
All such cost determinations will be made in accordance with GAAP.

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

18

 

Article 2.

LICENSES

 

2.1.          Product License.  Isis hereby grants to Genzyme an exclusive
license, with the limited right to sublicense as set forth in Section 2.2
(Limited Right to Sublicense), under the Licensed IP to research, develop,
make, have made, use, sell, offer for sale, have sold, import and export
Products in the Territory for therapeutic purposes.  Notwithstanding the foregoing, (a) the
exclusive license to the Isis Core Technology Patents will be subject to the
licenses granted by Isis to Third Parties identified on Schedule 2.1 and
Isis’ right to grant Permitted Licenses and (b) with respect to any
Follow-On Compound, the provisions of Section 2.4 (Follow-On
Compound) will govern the extent to which In-Licensed Third Party IP is
included within Licensed IP.

 

2.2.          Limited Right to Sublicense.

 

2.2.1.       The Product License is
sublicensable only in connection with a sublicense of a Product to any
Affiliate of Genzyme or to any Third Party, in each case for the continued
research, development or commercialization of such Product in accordance with
the terms of the Product License.

 

2.2.2.       Notwithstanding the
foregoing, the licenses granted to Genzyme under the Isis Manufacturing and Analytical
IP are sublicensable to a Third Party [**] only in accordance with Section 6.3.1
(Manufacture).

 

2.3.          Additional Rights after
Prior Agreement Execution Date.  After the Prior Agreement Execution Date,
Isis may wish to in-license or acquire rights to Know-How or Patents Controlled
by Third Parties (such a Third Party in-license or acquisition agreement being
an “Additional Third Party Agreement”) which, if so licensed or
acquired, may be included in the Licensed IP licensed to Genzyme under Section 2.1.  In such event (and to the extent permitted by
Isis’ confidentiality agreement with the applicable Third Party), Isis will
notify Genzyme regarding the nature of the technology and status of
negotiations related to the Additional Third Party Agreement through the
JDC.  Once Isis has executed such
Additional Third Party Agreement, Isis will offer such Third Party Patents or
Know-How to Genzyme (which offer will include a description of the payments
paid or potentially payable by Isis thereunder).  At such time, if Genzyme wishes to include
such Third Party Patents or Know-How under the license granted under Section 2.1,
Genzyme will notify Isis of its desire to do so and the Parties will fairly and
in good faith allocate upfront payments or ongoing payment obligations between
Products and compounds that are not Products, if any, and other Isis licensees,
if appropriate.  As part of this
allocation process, Isis will share with Genzyme, in reasonable detail, the
assumptions and methodology Isis used to create the proposed allocation.  If Genzyme does not agree to reimburse Isis
for the amount of any upfront or similar acquisition payments fairly allocated
to Product, and to be responsible for the payment of its share of any upfront,
milestone, and royalty payments, then the Know-How or Patents acquired or in
licensed by Isis under the Additional Third Party Agreement will not be
considered Licensed IP licensed to Genzyme under the Product License.  When Genzyme pays its share of any upfront,
milestone, and royalty payments assumed by Genzyme under this Section 2.3,
such payments will be considered Program Costs for the applicable Product.  Except for Patents acquired by Isis as part
of an acquisition of a Third Party’s business, 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

19

 

before Isis in-licenses or
acquire rights to any Patent Controlled by Third Parties which, if acquired,
would be a Product-Specific Patent, Isis will first notify Genzyme in writing
and allow Genzyme to license or acquire such Patent on the terms offered
Isis.  If Genzyme informs Isis that
Genzyme is not interested in licensing or acquiring such Patent or does not
license or acquire such Patent within 180 days of Isis’ notice to Genzyme, then
Isis will be free to in-license or acquire such Patent.

 

2.4.          Follow-On Compound.  The Parties contemplate that after the
Effective Date Genzyme, either on its own or in collaboration with Isis, may
wish to research, develop, and commercialize Follow-On Compounds.  The scope of the In-Licensed Third Party IP
included in Licensed IP under the Product License with respect to such
Follow-On Compounds will be determined in accordance with the procedures set
forth in this Section 2.4. 
At the time Genzyme intends to designate a Follow-On Compound as a
development candidate, Genzyme will notify Isis in writing of such intention
and will describe in reasonable detail the applicable Follow-On Compound.  Subject to Section 2.3
(Additional Rights after Prior Agreement Execution Date), if a Follow-On
Compound utilizes any In-Licensed Third Party IP (an “Encumbered Follow-On
Compound”), such In-Licensed Third Party IP will be included in Licensed IP
only to the extent set forth below:

 

2.4.1.       If the applicable Third
Party Agreement contains a contractual obligation that would preclude Isis from
including such In-Licensed Third Party IP in Licensed IP with respect to such
Encumbered Follow-On Compound, then the In-Licensed Third Party IP that is the
subject of such Third Party Agreement will not be included in Licensed IP.

 

2.4.2.       If the applicable Third
Party Agreement contains any potential encumbrances known by Isis and related
to the potential Follow-On Compound, including field or territory restrictions,
covenants, or milestones, royalty, sublicense revenue, or other payments (“Follow-On
Compound Encumbrances”), Isis will fully disclose to Genzyme such Follow-On
Compound Encumbrances and, if Genzyme agrees in writing to assume the Follow-On
Compound Encumbrances (with any payments being included in Program Costs for
such Encumbered Follow-On Compound), then the In-Licensed Third Party IP that
is the subject of such Third Party Agreement will be included in Licensed IP.

 

2.4.3.       If the applicable Third
Party Agreement does not contain the obligations or encumbrances described in Sections
2.4.1 and 2.4.2 above, the In-Licensed Third Party IP that is the
subject of such Third Party Agreement will automatically be included in
Licensed IP.

 

2.4.4.       If the applicable Third
Party Agreement is or was also applicable to Mipomersen, then the In-Licensed
Third Party IP that is the subject of such Third Party Agreement will
automatically be included in the Licensed IP to the extent that (a) the
terms of such Third Party Agreement do not preclude Isis from including it and (b) Genzyme
agrees in writing to assume any applicable Follow-On 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

20

 

Compound Encumbrances associated
with such Third Party Agreement.

 

2.4.5.       Each time the Parties
complete the process set forth above, Isis will update the schedules relating
to Licensed Patents and Third Party Agreements, and Schedule 2.1 as
appropriate.

 

2.5.          Retained Rights.  Subject to the terms and conditions of this
Agreement, Isis retains the non-exclusive, non-transferable, non-licensable
right under the Licensed IP only to the extent necessary for Isis to perform
its obligations under this Agreement and the Supply Agreement.

 

2.6.          Isis’ Right of First
Negotiation.  With
respect to any Genzyme Program IP that would be relevant to antisense therapies
as a whole, including but not limited to, manufacturing, formulation and
delivery technologies or oligonucleotide chemical modifications or the design
of antisense therapeutics generally, then Genzyme hereby grants to Isis a right
of first negotiation with respect to any exclusive license that Genzyme may
elect to grant under such Genzyme Program IP (each, an “Antisense License”)
on the following terms and conditions:

 

2.6.1.       General.  Genzyme will not grant an Antisense License
to any Third Party (or enter into discussions with, or solicit interest from,
any Third Party regarding an Antisense License) unless and until:

 

(a)           Genzyme gives written notice (the “Antisense License
Notice”) to Isis of Genzyme’s interest in granting an Antisense License,
which notice will identify in reasonable detail the proposed scope and terms
and conditions of the license Genzyme proposes to grant; and

 

(b)           (i) Isis notifies Genzyme that it declines the
opportunity to negotiate with Genzyme regarding such a license, (ii) Isis
does not indicate to Genzyme a desire to proceed with negotiations within
forty-five (45) days after receipt of the Antisense License Notice, or (iii) Genzyme
is otherwise permitted to enter into an Antisense License with a Third Party
pursuant to Section 2.6.3 (Look Back).

 

2.6.2.       Negotiation Period.  If Isis notifies Genzyme, within forty-five
(45) days after receipt of the Antisense License Notice, that it desires the
opportunity to negotiate with Genzyme regarding such an Antisense License, the
Parties will negotiate exclusively with each other for ninety (90) days (or
such longer period as mutually agreed by the Parties) (the “Exclusive
Negotiation Period”) and will use commercially reasonable efforts to reach
agreement regarding a mutually satisfactory Antisense License on commercially
reasonable terms.  During the Exclusive
Negotiation Period, Genzyme will not enter into negotiations regarding an
Antisense License with any Third Party.

 

2.6.3.       Look Back.  In the event that the Exclusive Negotiation
Period expires before Genzyme and Isis have entered into an Antisense License,
Genzyme will have no further obligation to negotiate with Isis with respect to
any Antisense License in 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

21

 

any country in the
Territory, and Genzyme will be free to grant one or more Antisense Licenses to
one or more Third Parties in any country or countries in the Territory at
Genzyme’s sole discretion; provided, however, that for a period
equal to the longer of (i) the Term plus one (1) year or (ii) three
(3) years following the expiration of the Exclusive Negotiation Period,
Genzyme will not offer any Third Party an Antisense License containing a
license scope and financial terms that are more favorable to the Third Party
than the license scope and financial terms that Genzyme last offered to Isis
during the Negotiation Period unless Genzyme first offers an Antisense License
with such more favorable scope and terms to Isis in writing and Isis fails to
accept such offer within fourteen (14) days after receiving it.

 

2.6.4.       Non-Exclusive License.  If Genzyme grants any Third Party a
non-exclusive license under any Genzyme Program IP that would be relevant to
antisense therapies as a whole, including but not limited to, manufacturing,
formulation and delivery technologies or oligonucleotide chemical modifications
or the design of antisense therapeutics generally, then Genzyme will promptly
notify Isis of such license and will offer Isis a non-exclusive license under
such licensed Genzyme Program IP with substantially similar scope and financial
terms.

 

2.7.          Third Party Agreements.

 

2.7.1.       Exercise of Rights.  Isis will exercise its rights under the Third
Party Agreements in a manner that is as consistent as possible with the terms
of this Agreement and in consultation with and as reasonably requested by
Genzyme.  Isis covenants that it will
not, without Genzyme’s prior written consent, agree, consent or acquiesce to
any amendment, supplement or other modification to any Third Party Agreement or
take any action under such Third Party Agreement or with respect to the
intellectual property licensed thereunder that would adversely affect the
rights granted to Genzyme under this Agreement, including under the Product
License.  Isis will immediately notify
Genzyme of (a) any event that adversely affects the rights granted to Isis
under a Third Party Agreement that are, in turn, sublicensed to Genzyme
pursuant to this Agreement or (b) receipt by Isis of any notice of breach
or termination of any Third Party Agreement. 
Isis will take all reasonable actions necessary, or permit Genzyme to
take such actions, to maintain and enforce its rights under the Third Party
Agreements in a manner that is consistent with the terms of this Agreement.

 

2.7.2.       Sublicense Survival.  Isis covenants that it will use good faith
and Commercially Reasonable Efforts to enter into any necessary amendments or
side agreements to its Third Party Agreements to ensure that (a) sublicenses
under each Third Party Agreement will survive termination of such Third Party
Agreement or (b) Genzyme will receive a direct license from the
counterparty to each Third Party Agreement upon termination of such Third Party
Agreement.

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

22

 

2.8.          No Implied License.  Except as expressly provided in this
Agreement, neither Party will be deemed by estoppel or implication to have
granted the other Party any license or other right with respect to any
intellectual property of such Party. 
Without limiting the generality for the foregoing, a license to use
Know-How will not be interpreted as an implied license under any Patent Rights
other than as expressly provided in this Agreement.

 

Article 3.

EXCLUSIVITY

 

3.1.          Non-Compete.  During the Term, Isis and its Affiliates will
not, directly or indirectly, and will not collaborate with, license or
otherwise authorize any Third Party to, research, develop or commercialize any
nucleic acid that (i) [**] apoB or (ii) [**] apoB, except pursuant to
(a) the agreements identified on Schedule 2.1, as they existed on
the Prior Agreement Execution Date, (b) Permitted Licenses, or (c) this
Agreement.

 

3.2.          [**] Technology.  Without first obtaining Genzyme’s written
consent, which will not be unreasonably withheld, Isis will not license to a
Third Party any technology that (a) is specifically useful in researching,
developing or commercializing therapeutics whose primary purpose at the time of
the license or primary therapeutic benefit at the time of commercialization is
[**], (b) is not broadly applicable to other [**] and (c) was
invented by Isis while performing activities pursuant to the Development Plan
or pursuant to the Research Programs under Article 7 (Research).

 

Article 4.

JOINT COMMITTEES

 

4.1.          Joint Development Committee.

 

4.1.1.       Establishment of JDC.  The Parties will establish a Joint
Development Committee (the “JDC”), which will consist of a total of
eight (8) members, with four (4) members from each Party, to oversee
the Development Program.  Members of the
JDC may be represented at any meeting by a designee appointed by such member
for such meeting.  Each Party will be
free to change its members on prior written notice to the other Party.  The JDC will remain in place for four (4) years
following the Effective Date; provided, however that if the commercial
launch of the Product for a non-FH indication has not occurred by the end of
such 4-year period, the Parties will mutually agree upon an appropriate
extension of the JDC.

 

4.1.2.       Responsibilities of the JDC.  In addition to any responsibilities expressly
described elsewhere in this Agreement, the JDC will:

 

(a)           On a Calendar Quarter basis, review and evaluate progress
under the Development Plan and expenditures relative to the Development Budget;

 

(b)           Develop updates or amendments to the Development Plan and
the Development Budget;

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

23

 

(c)           Perform any other activities related to the Development
Plan as jointly requested by both Parties from time to time;

 

(d)           Review and approve a scientific and medical publication
plan and medical affairs plan for the Product;

 

(e)           Appoint one or more working group(s) to oversee
particular activities to be performed under the Development Plan or create the
scientific and medical publication plan and medical affairs plan for the
Product, which working group(s) will dissolve no later than the date of
the dissolution of the JDC.

 

For the avoidance of doubt, the JDC will have no
authority to amend this Agreement.

 

4.1.3.       Meetings; Minutes.  During the course of implementing the
Development Plan, the JDC will meet at least once each Calendar Quarter, and
more frequently as the Parties mutually agree is appropriate, on such dates, in
such places and at such times as the Parties will agree.  The JDC will be chaired by Genzyme as of the
Effective Date.  The role of the
chairperson will be to convene and preside at meetings of the JDC, but the
chairperson will not be entitled to prevent items from being discussed or to
cast any tie-breaking vote.  Reasonably
detailed written minutes will be kept of all JDC meetings and will reflect
without limitation material decisions made at such meetings.  The chairperson of the JDC will have
responsibility for keeping minutes. 
Draft meeting minutes will be sent to each member of the JDC for review
and approval within ten (10) business days after a meeting.  Minutes will be deemed approved unless a
member of the JDC objects to the accuracy or completeness of such minutes
within thirty (30) calendar days of receipt.

 

4.1.4.       Decision-Making and Dispute
Resolution.  The JDC
will act by unanimous consent.  The
representatives of each Party will have collectively one vote on behalf of such
Party; provided, however, that no such vote taken at a meeting
will be valid unless at least one representative of each Party is present and
participating in the vote.  In the case
of any matter which cannot be resolved unanimously by the JDC, at the written
request of either Party, the dispute will be referred to senior management of
the Parties in accordance with Section 13.1 (Escalation to Senior
Management).

 

4.2.          Joint Patent Committee.

 

4.2.1.       Establishment of JPC. The Parties
will establish a Joint Patent Committee (the “JPC”) to discuss the
continued prosecution of the Licensed Patents and Product-Specific Patents,
(including Joint Patents).  The JPC will
be comprised of at least one (1) senior patent attorney from each Party.  Each Party will be
free to change its members at its sole discretion.  The JPC will exist for so long as the JDC
exists.  Thereafter, the Parties will
meet from time to time as necessary, or as may 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

24

 

be mutually agreed by the
Parties, to discuss patent related issues.

 

4.2.2.       Responsibilities of the JPC.  At least once per Calendar Quarter, the JPC
will meet (in person or by phone) to discuss prosecution strategy for the
Licensed Patents and Product-Specific Patents (including Joint Patents) with
the goal of maintaining the broadest coverage for the Product in accordance
with Section 9.3 (Filing, Prosecution and Maintenance of
Patents).  Subject to Section 9.5
(Enforcement of Patents and Know-How) and Section 9.6 (Claimed
Infringement by Third Parties), the JPC will also discuss any (a) potential
Third Party infringement of the Licensed Patents and Product-Specific Patents
(including Joint Patents) that might affect the Product and (b) Third
Party intellectual property right that the Parties may want to license or
challenge.

 

4.2.3.       Decision-Making and Dispute
Resolution.  Subject to Section 9.3
(Filing, Prosecution and Maintenance of Patents), in the event a dispute
relates to the prosecution or maintenance of a Patent, Genzyme will have the
ultimate sole decision-making authority with respect to the Product-Specific
Patents and Licensed Product Patents and Isis will have the ultimate sole
decision-making authority with respect to the Isis Core Technology Patents and
the Isis Manufacturing and Analytical Patents. 
Any other dispute at the JPC will be referred to the JDC for resolution.

 

4.3.          Expenses.  Each Party will be responsible for all of its own
travel and related costs and expenses for its members (or designees) of the JDC
and JPC and such expenses will not be treated as Program Costs.

 

Article 5.

DEVELOPMENT

 

5.1.          Development Plan and
Development Budget.  The initial
Development Plan and Development Budget through the end of 2009 that have been
agreed to by the Parties as of the Execution Date are attached to this
Agreement as Exhibit A and Exhibit B,
respectively.  The Parties acknowledge
and agree that the Development Plan and Development Budget as of the Execution
Date will need to be updated and augmented by the JDC on a quarterly basis and
also from time to time in the discretion of the JDC.  The purpose of the Development Plan is to (a) set
forth a strategy and plan for development, manufacturing and Approval for the
Product, (b) detail the responsibilities and activities of Isis and
Genzyme with respect to the development of the Product and (c) specify the
expected timing of such activities, including the estimated dates of the
initiation and completion of such activities. 
The Development Budget contains the estimated costs associated with the
tasks outlined in the Development Plan. 
The JDC (or directly by the written mutual agreement of the authorized
representatives of the Parties) may amend the Development Plan and Development
Budget at any time, but, in any event, the JDC will review and update the
Development Plan and Development Budget by agreeing to a Development Budget for
each calendar year during the Term not later than November 15th
of the prior calendar year and prior to the commencement of each successive 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

25

 

calendar quarter during such
calendar year.  Any update or amendment
to the Development Plan or Development Budget must be in writing.  After the JDC has disbanded, if requested by
either Party, Genzyme and Isis will meet as necessary at least annually on a
mutually agreed schedule to review and evaluate progress under the Development
Plan and expenditures relative to the Development Budget and to develop updates
or amendments to the Development Plan and Development Budget, with decisions
made by the Parties consistent with the principles contemplated for JDC
decision making in Section 4.1.4 (Decision Making and Dispute Resolution).

 

5.2.          Roles and Responsibilities.

 

5.2.1.       Clinical Trials.  The Development Budget includes the preclinical
work and clinical trials to be conducted in and initiated in calendar year 2008
and classifies each item of preclinical work and clinical trials as “Isis
Funded” or “Non Isis Funded.”  The JDC
will assign specific responsibilities with respect to the conduct of such work
and trials and will develop a written plan for transitioning responsibility
between the Parties; provided, however, that such transition plan
will not delegate the JDC’s decision making authority to a Party.  Except as otherwise determined by the JDC,
Genzyme will conduct all clinical trials and all preclinical work for
Mipomersen initiated in calendar year 2009 and thereafter.  If pursuant to Section 4.1.4
(Decision-Making and Dispute Resolution) the JDC amends the Development Plan so
as to increase the size or scope of a clinical study designated as “Isis Funded”
(such as by increasing the number of patients or increasing the dosing period
of a clinical study) and as a result of such increase the actual expenses
associated with such study exceed [**]% of the amount budgeted for such study
in the Development Budget as of the Execution Date, then the incremental cost
and expenses for such study in excess of [**]% of such Development Budget
amount will be considered “Non Isis Funded” (i.e. not
“Isis Funded”) for purposes of Section 8.3 (Financial Provisions Related
to Development Activities).

 

5.2.2.       Performance of the
Development Program.  Each Party
will use Commercially Reasonable Efforts to conduct all activities and
responsibilities assigned to it under the Development Plan and in accordance
with the Development Budget and to cooperate with and provide reasonable
support to the other Party in such other Party’s conduct of activities under
the Development Plan.  Each Party will undertake
its respective development activities, including its obligation to conduct
clinical trials, in accordance with all Applicable Laws.

 

5.2.3.       Responsibility.  Except for those certain clinical trial
responsibilities allocated to Isis as set forth in the Development Plan or
other written document approved by the JDC, Genzyme will be responsible for all
other aspects of the development of the Product.

 

5.3.          Clinical and Launch Supplies.  Isis will be responsible for manufacturing
and supplying API for the Phase II clinical trials, the Pivotal Trial(s) and
the initial commercial launch 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

26

 

of the Product, pursuant to
a Supply Agreement the form of which is set forth on Exhibit C and
a Quality Agreement the form of which is set forth on Exhibit D.  In accordance with Section 8(a) and
(b) of the Supply Agreement, the transfer price for the Product under the
Supply Agreement will be Isis’ Fully Absorbed Cost of Goods, and all amounts
paid by Genzyme to Isis under the Supply Agreement will be Program Costs under
this Agreement.  The quantity of API that
Isis will be required to supply for commercial launch will be mutually agreed
by the Parties and set forth in the Supply Agreement.  If Isis cannot manufacture as set forth
above, upon written request by Genzyme, Isis will transfer to Genzyme all
documentation and information, and permit Genzyme to reference and use any
regulatory filings, and otherwise fully cooperate with Genzyme to enable
Genzyme to make or have made the API for use by Genzyme in accordance with the
Agreement.  Genzyme will be responsible
for all finished drug product and placebo needed for clinical trials of Product
and finished drug product for commercial sale.

 

5.4.          Know-How Transfer.

 

5.4.1.       Transfer to Genzyme.  During the existence of the JDC (or after the
dissolution of the JDC at Genzyme’s request), Isis will transfer to Genzyme and
its representatives all material Product Know-How and Isis Manufacturing and
Analytical Know-How within the possession or Control of Isis or any of its
Affiliates, including all Regulatory Materials related to the Product;
provided, however, that Isis will be required to deliver Isis Manufacturing and
Analytical Know-How only to Genzyme or a Third Party manufacturer approved by
Isis in accordance with Section 6.3 (Commercial Manufacture).  Without limiting the generality of the
foregoing:

 

(a)           Before or promptly following
the Execution Date, Isis will transfer any preclinical pharmacology and safety
data, clinical data that then exists and any other information related to the
Product that Genzyme may reasonably request. 
Thereafter during the Term, Isis will provide copies of all data from
Isis’ clinical or preclinical activities undertaken pursuant to the Development
Plan.

 

(b)           Isis will promptly disclose
in reasonable detail and in a reasonable manner specified by Genzyme the
Product Know-How and Isis Manufacturing and Analytical Know-How learned,
discovered, developed, acquired or otherwise coming within the Control of Isis
during the Term.

 

(c)           At Genzyme’s request from
time to time during the Term, Isis will deliver to Genzyme copies (for
documents and information) and samples (for materials) of any documents, files,
diagrams, plans, specifications, designs, recipes, schematics, reports, models,
prototypes, chemical or biologic materials, assays, reagents, or other tangible
documentation or material in Isis’ possession recording or embodying the
Product Know-How and Isis Manufacturing and Analytical Know-How in Isis’ or its
Affiliate’s possession.

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

27

 

(d)           At Genzyme’s request from
time to time during the Term, and on a commercially reasonable schedule and at
a commercially reasonable venue to be agreed on by the Parties, technically
qualified personnel from each Party (and, if applicable, any Third Party
manufacturer approved by Isis in accordance with Section 6.3
(Commercial Manufacture)) will meet and/or participate in telephone conference
calls as reasonably necessary to exchange knowledge necessary to fully transfer
all such Know-How.

 

(e)           Section 2.2 (Limited Right
to Sublicensee) and Article 12 (Confidentiality and Public
Disclosures) will apply to any transfer of such Know How by Genzyme to a Third
Party.

 

5.4.2.       Transfer from Genzyme to
Isis.  Upon Isis’ reasonable request,
Genzyme will provide to Isis copies of any and all data from Genzyme’s clinical
or preclinical studies with the Product.

 

5.5.          Subcontracting.  Each Party may contract with one or more
Third Party contractors to perform any or all of its obligations under the
Development Plan; provided, however, that (a) except as
otherwise agreed to by the JDC, each Third Party contractor will be approved by
the JDC for the proposed work, such approval not to be unreasonably withheld,
delayed or conditioned; and (b) the contracting Party provides the other
Party with a true and accurate copy of each agreement pursuant to which such
Third Party contractor is engaged promptly after execution thereof.

 

Article 6.

COMMERCIALIZATION AND REGULATORY MATTERS

 

6.1.          Commercialization
Responsibilities.  Genzyme
will have the exclusive right to commercialize any Product itself or through
one or more Affiliates or Third Parties selected by Genzyme in the Territory
and will have sole discretion, authority and responsibility in all matters
relating to the commercialization of any Product in the Territory; provided,
however, that Genzyme must use Commercially Reasonable Efforts to
commercialize at least one Product in each of the Major Market Countries upon
obtaining Approval in such country.

 

6.2.          Regulatory Matters and
Filings.

 

6.2.1.       Regulatory Responsibility.  Genzyme will be responsible for all
regulatory matters relating to the Product in the Territory.  Isis will transfer to Genzyme (or to a
Genzyme Affiliate designated by Genzyme) the IND(s), orphan drug designation(s) and
other existing Regulatory Materials for Mipomersen within thirty (30) days of
the Execution Date.  Between the
Execution Date and the transfer to Genzyme of the IND related to the Product,
Isis will not file or send any Regulatory Material related to the Product with
or to any Regulatory Authority without Genzyme’s prior written consent, which
consent will not unreasonably withheld or delayed.  Genzyme will prepare and file, in its own
name, all NDAs, MAAs and other Regulatory Materials for the Product in the 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

28

 

Territory.  Genzyme will have sole authority with respect
to (a) obtaining Approvals for the Product and subsequently maintaining
such Approvals, (b) communicating with Regulatory Authorities about the
Product and (c) preparing and submitting supplements, communications, annual
reports, adverse event reports, manufacturing changes, supplier designations
and other related regulatory filings and Regulatory Materials.  Isis will provide Genzyme with reasonable
access to and copies of any documents or other materials Controlled by Isis
that are useful for such regulatory filings and correspondence and maintenance
of Approvals for the Product in the Territory and will otherwise cooperate with
Genzyme’s efforts to obtain and maintain Approval for the Product.

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

29

 

6.2.2.       Third Party Services
Agreements.

 

(a)           Isis will exercise
its rights under any agreement with a Third Party now existing or entered into
during the Term pursuant to which Isis obtains services applicable to the
pre-clinical or clinical development of a Product, including without limitation
any agreement with a contract research organization (each a “Third Party
Services Agreement”) in a manner that is as consistent as possible with the
terms of this Agreement and in consultation with and as reasonably requested by
Genzyme.  Isis covenants that it will
not, without Genzyme’s prior written consent, (i) agree, consent or acquiesce
to any amendment, supplement or other modification to any Third Party Services
Agreement or (ii) take any action under any Third Party Services
Agreement, in each case that may adversely affect Genzyme as the holder of the
Regulatory Materials related to the Product. 
Isis will take all reasonable actions necessary, or permit Genzyme to
take such actions, to maintain and enforce its rights under the Third Party
Services Agreements in a manner that is consistent with the terms of this
Agreement.

 

(b)           In connection with
the transfer of the Regulatory Materials for Mipomerson and Genzyme’s
assumption of responsibility for regulatory matters related to the Product, at
Genzyme’s written request Isis will use commercially reasonable efforts to
promptly assign and transfer to Genzyme any Third Party Services Agreements
solely related to the pre-clinical or clinical development of the
Products.  If the terms of any Third
Party Services Agreement requires the consent of the other party thereto to
effect such assignment, then upon Genzyme’s request for an assignment, Isis
will use commercially reasonable efforts to obtain such consent.  In the event of any assignment to Genzyme
under this Section 6.2.2, Genzyme will assume full responsibility
for satisfying all obligations of Isis under any assigned agreement to the
extent arising after such assignment and assumption, and Isis will remain
responsible for satisfying all obligations under any assigned agreement to the
extent arising prior to such assignment and assumption.  If a Third Party Services Agreement relates
both to the pre-clinical or clinical development of the Product and to the
development of some other Isis product not licensed to Genzyme under this Agreement,
then at Genzyme’s request, the Parties will use commercially reasonable efforts
to enter into such amendment(s) or new agreement(s) with the Third
Party service provider to effect the transfer to Genzyme of all rights and
obligations related to the Product under such Third Party Services Agreement.

 

6.2.3.       Regulatory Audit.  If a Regulatory Authority desires to conduct
an inspection or audit of a Party’s facility, or a facility under contract with
a Party, with regard to a Product, then such Party will promptly notify the
other Party and permit and cooperate with such inspection or audit, and will
cause the contract facility to permit and cooperate with such Regulatory
Authority and such other Party during such inspection or audit.  Genzyme will have the right to have a
representative observe such inspection or audit of a facility operated by Isis
or under contract with Isis.  Following
receipt of the inspection or audit observations of such Regulatory Authority (a
copy of which the audited Party will immediately provide to the other Party),
the audited Party will prepare the response to any such 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

30

 

observations, and will
provide a copy of such response to the other Party.

 

6.2.4.       Class Generic Label
Claims.  Notwithstanding the foregoing,
to the extent Genzyme intends to make any claims in a Product label that are of
general applicability to antisense oligonucleotides, Genzyme will provide such
claims to Isis in advance and will consider any proposals and comments made by
Isis.

 

6.3.          Commercial Manufacture.

 

6.3.1.       Manufacture.  Subject to Isis’ obligation to manufacture
and supply API for the commercial launch of the Product pursuant to Section 5.3
(Clinical and Launch Supplies) and the Supply Agreement, Genzyme will be
responsible for securing commercial quantities of API and finished drug product
for the Product.  If Genzyme chooses not
to manufacture the API for Product itself, then prior to using any Third Party
manufacturer to supply commercial quantities of the API for Product, Genzyme
must obtain Isis’ prior written consent to the identity of the Third Party
manufacturer and the material terms and conditions on which such Third Party
manufacturer will supply commercial quantities of the API for Product, which
consent will not be unreasonably withheld, conditioned or delayed; provided,
however, that Isis will not withhold its consent to a Third Party
manufacturer if its basis for doing so is an objection to the country in which
such manufacturing will take place and the country in question is a member
country of the European Union or Switzerland. 
In any event, Isis will cooperate with and provide commercially
reasonable assistance to Genzyme and any approved Third Party manufacturer,
including by transferring relevant Know-How in accordance with Section 5.4
(Know-How Transfer).

 

6.3.2.       Assignment of Agreements
With Third Parties.  At Genzyme’s
written request in connection with the transfer of responsibility for
manufacture, Isis will use commercially reasonable efforts to promptly assign
and transfer to Genzyme any existing supply or other agreements solely related
to the manufacture of the Products. 
Concurrent with the Execution of this Agreement, Isis will assign and
transfer to Genzyme its agreement with [**] related to the preparation and
packaging of drug product.  If the terms
of any of the agreements referred to in the previous two sentences require the
consent of the other party thereto to effect such assignment, then upon Genzyme’s
request for an assignment, until Isis is able to obtain such consent and effect
such assignment, Isis will exercise its rights under such agreements for the
benefit of Genzyme and as reasonably requested by Genzyme.  In the event of any assignment to Genzyme
under this Section 6.3.2, Genzyme will assume full responsibility
for satisfying all obligations of Isis under any assigned agreement to the
extent arising after such assignment and assumption, and Isis will remain
responsible for satisfying all obligations under any assigned agreement to the
extent arising prior to such assignment and assumption.

 

6.4.          Isis Safety Database.  Isis maintains a database that includes
information regarding the 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

31

 

tolerability of its drug
compounds, individually and as a class, including information discovered during
pre-clinical and clinical development (the “Isis Database”).  In an effort to maximize understanding of the
safety profile and pharmacokinetics of Isis’ drug compounds, Genzyme will
reasonably cooperate in providing information to Isis to populate the Isis
Database by providing Isis with copies of toxicology, pharmacokinetic and
serious adverse event final reports related to the Product, as well as any
supporting data reasonably requested by Isis. 
Genzyme’s obligation under this Section 6.4 will be subject
to Applicable Law, any necessary informed consents and obligations to Third
Parties.

 

6.5.          Safety Reporting.  Each Party will designate a primary contact
person for the receipt of all reports called for in this Section 6.5 (the “Primary
Safety Contact Person”) and promptly notify the other Party of such designation
or any change thereto.  Each Party will
notify the other Party’s Primary Safety Contact Person of (a) all
available information concerning any serious adverse event (SAE) occurring in
patients treated with the Product, for any indication, (b) any information,
regardless of source, which is relevant to known or potential human safety
risks associated with the Product, (c) signals of human risk including
information from in vitro or
animal studies which may suggest a significant hazard to humans, including any
findings from tests in laboratory animals that suggest a significant risk to
human beings, including reports of mutagenicity, teratogenicity or
carcinogenicity, and (d) information related to other products that are
chemically similar to the Product or that have a pharmacologically similar
mechanism of action (e.g., antisense oligonucleotides) that suggests a
significant hazard for humans related to the Product.  For purposes of this Section 6.5, a “serious
adverse event (SAE)” is one which has an outcome which (i) is fatal or
life threatening, (ii) requires or prolongs in-patient hospitalization, (iii) is
a persistent or significant disability/incapacity, (iv) is a congenital
anomaly/birth defect, or (v) is an important medical event, e.g., required
medical or surgical intervention to prevent one of the other serious outcomes
listed above.  Each Party will promptly
(but no later than twenty-four (24) hours after it becomes aware of the serious
adverse event (SAE) or such other information and as necessary for compliance
with regulatory requirements) provide the other Party with all such safety
information through the receiving Party’s Primary Safety Contact Person.  Isis will conduct all safety reporting for
the Product in accordance with Genzyme standard operating procedures
communicated to Isis in writing.  Upon
transfer of the IND(s) to Genzyme and assumption by Genzyme of regulatory
responsibilities under the IND(s), Genzyme will assume responsibility for the
global safety database related to the Product. 
Genzyme will be solely responsible for reporting to Regulatory
Authorities in accordance with the Applicable Law for expeditable adverse
events and for periodic safety reporting relating to the safety of the Product
and will furnish copies of such reports to Isis.

 

6.6.          Commercial Forecasts &
Plans.

 

6.6.1.       In addition to the reports
required under Section 8.6 (Periodic Reporting and Reconciliation),
beginning on the last year in which the JDC is in place and each calendar year
thereafter (1) not later than October 1st of the applicable year,
Isis 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

32

 

will provide Genzyme with a
non-binding, good-faith forecast of Isis’ aggregate Program Costs for the
following calendar year if any; and (2)  not later than November 15th
of the applicable year (i) Genzyme will provide Isis with a non-binding,
good-faith forecast of Genzyme’s aggregate Program Costs for the following
calendar year, (ii) Isis will provide Genzyme with an updated non-binding,
good-faith forecast of Isis’ aggregate Program Costs for the following calendar
year, if any, and (iii) based upon the Parties’ non-binding forecasts of
aggregate Program Costs, Genzyme will provide Isis with a non-binding,
good-faith forecast of the Net Sales, Net Revenue and Net Profit for such
year.  Each Party’s forecasts will include
sufficient supporting detail to allow the other Party an opportunity to review
and understand the forecasts.

 

6.6.2.       Prior to the initial
commercial launch of the Product and on an annual basis thereafter, Genzyme
will provide Isis with a reasonably detailed written summary of its marketing
plan and budget and will consider in good faith all comments and suggestions
provided by Isis on such plans and budgets.

 

Article 7.

RESEARCH RELATED TO THE PRODUCT

 

7.1.          Research Programs.  The Parties will agree to conduct research
programs related to the Product that may include, but are not limited to, the
following research topics:  (a) [**],
(b) [**], (c) [**] and (d) [**] 
(collectively, the “Research Programs”).  The nature and scope of the Research Programs
will be determined within sixty (60) days of the Execution Date by a
subcommittee to be appointed the JDC.

 

7.2.          Research Funding.  Isis will fund all external research expenses
incurred in calendar years [**] in connection with the Research Programs.  Genzyme will fund all external research
expenses incurred in connection with the Research Programs in calendar year
[**].  Thereafter, the Parties will agree
upon allocation of any external research expenses incurred in connection with
the Research Programs.  Each Party will
be responsible for their own internal research expenses incurred in connection
with the Research Programs, and, unless otherwise agreed in writing by the
Parties, internal and external research expenses incurred in connection with
the Research Program will not be included as Program Costs.  For the purposes of this Section 7.2,
“internal research expenses” means costs and expenses incurred in
connection with the Research Programs attributable to the internal costs of
base salary plus a factor for reasonable and customary employee benefits and
payroll taxes for those employees directly responsible for performing the
research activity plus G&A Costs and other overhead expenses reasonably
required to support the activities of the Parties under the Research Programs
as allocated consistent with the methodologies agreed to under Section 8.7.2.  Meanwhile, “external research expenses”
means expenses incurred in connection with the Research Programs other than
internal research expenses.

 

7.3.          Research Efforts.  If at any time during the Term no Product has
received Approval in any Major Market Country and no Product is being developed
pursuant to a Development

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request.  An unredacted version
of this exhibit has been filed separately with the Commission.

 

33

 

Plan, Genzyme will use
Commercially Reasonable Efforts to conduct research activities designed to
advance a Product to the stage where it can be developed pursuant to a
Development Plan.

 

Article 8.

FINANCIAL
PROVISIONS 

 

8.1.          Upfront License Fee.  Genzyme will pay to Isis a non-refundable,
non-creditable license fee of one hundred and seventy-five million dollars
($175,000,000) within five (5) days after the Execution Date.

 

8.2.          Milestones.

 

8.2.1.       Development Milestones.

 

(a)           Mipomersen in FH. 
Within thirty (30) days after the achievement of the following indicated
events by Genzyme, its Affiliate or its Sublicensee, Genzyme will pay Isis the
following development milestone payments:

 

	
  Milestone Event

  	
   

  	
  Milestone

  Payment

  
	
  NDA Filing for the use of Mipomersen to
  treat homozygous FH and/or patients who would be eligible under then-approved
  FDA labeling to receive low-density lipoprotein apheresis

  	
   

  	
  $[**]

  
	
  NDA Approval for the use of Mipomersen to
  treat patients who have homozygous FH and/or who would be eligible under
  then-approved FDA labeling to receive low-density lipoprotein apheresis

  	
   

  	
  $[**]

  
	
  MAA Approval for the use of Mipomersen to
  treat patients who have heterozygous FH or an otherwise comparably sized
  eligible patient population

  	
   

  	
  $[**]

  

 

(b)           Mipomersen in Other Indications.  Within thirty (30) days after the achievement
of the following indicated events by Genzyme, its Affiliate or its Sublicensee,
Genzyme will pay Isis the following development milestone payments:

 

	
  Milestone Event*

  	
   

  	
  Milestone

  Payment

  
	
  NDA Approval for the use of Mipomersen to
  treat patients who have polygenic hypercholesterolemia or any patient
  population of a size comparable to the patient population deemed to be at
  “high risk” as determined in accordance with the National Cholesterol Education
  Program’s clinical practice guidelines on cholesterol management with LDL-C
  greater than or equal to [**] mg/dL

  	
   

  	
  $[**]

  

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

34

 

	
  MAA Approval for the use of Mipomersen to
  treat patients who have polygenic hypercholesterolemia or any patient
  population of a size comparable to the patient population deemed to be at
  “high risk” as determined in accordance with the National Cholesterol
  Education Program’s clinical practice guidelines on cholesterol management
  with LDL-C greater than or equal to [**] mg/dL

  	
   

  	
  $[**]

  
	
  Approval of a Japanese New Drug Application
  for the use of Mipomersen to treat patients who have polygenic
  hypercholesterolemia or any patient population of a size comparable to the
  patient population deemed to be at “high risk” as determined in accordance
  with the National Cholesterol Education Program’s clinical practice
  guidelines on cholesterol management with LDL-C greater than or equal to [**]
  mg/dL

  	
   

  	
  $[**]

  

 

The Parties acknowledge that the current Development Plan contemplates [one or more] Pivotal Trials, that, if successful, are
currently intended to achieve the milestones set forth in Section 8.2.1(b).  To minimize the likelihood of any
disagreement between the Parties around whether an Approval based upon a
successful Pivotal Trial is sufficient to satisfy any of the milestones set
forth in Section 8.2.1(b), the Parties agree to adopt the following
process:

 

(1)   Prior to final approval of any Pivotal Trial
protocol or any material change to the protocol of an ongoing Pivotal Trial by
the JDC, Genzyme will notify the JDC in writing if Genzyme believes, were a
Regulatory Authority to grant an Approval for the treatment of a patient
population that is co-extensive with the patient population(s) included
for enrollment in such Pivotal Trial, that such approval will not qualify to
meet the milestones set forth in Section 8.2.1(b).

 

(2)   If Genzyme fails to provide the
JDC with the notice contemplated by subsection (1) above, an Approval in
the relevant jurisdiction for the treatment of a patient population that is co-extensive
with the patient population(s) included for enrollment in the Pivotal
Trial will be deemed to satisfy the applicable milestone in Section 8.2.1(b).

 

(3)   In addition, in the event a
Regulatory Authority proposes a limitation that would, in Genzyme’s view,
preclude the achievement of one of the milestones in Section 8.2.1(b),
Genzyme will notify the JDC and in good faith attempt to avoid such
restriction, to the extent practical under the circumstances. In such event,
Genzyme will also reasonably consult with Isis regarding the best strategy to
attempt to avoid such restrictions.

 

(c)           Follow-On Compound. 
Within thirty (30) days after the achievement of the following indicated
events by Genzyme, its Affiliate or its Sublicensee, Genzyme will pay Isis the
following development milestone payments:

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

35

 

	
  Milestone Event

  	
   

  	
  Milestone

  Payment

  
	
  NDA Approval
  for the Follow-On Compound

  	
   

  	
  $[**]

  
	
  MAA Approval
  for the Follow-On Compound

  	
   

  	
  $[**]

  
	
  Approval of
  a Japanese New Drug Application for the Follow-On Compound

  	
   

  	
  $[**]

  

 

8.2.2.       Commercial Milestones.  Within thirty (30) days after the achievement
of the following indicated events by Genzyme, its Affiliate or its Sublicensee,
Genzyme will pay Isis the following commercial milestone payments:

 

	
  Milestone Event

  	
   

  	
  Milestone

  Payment

  	
   

  
	
  Annual Net Revenues for all Products equals
  or exceeds three billion dollars ($3,000,000,000) in each of any two
  consecutive calendar years

  	
   

  	
  $

  	
  250,000,000

  	
   

  
	
  Annual Net Revenues for all Products equals
  or exceeds four billion dollars ($4,000,000,000) in each of any two
  consecutive calendar years

  	
   

  	
  $

  	
  250,000,000

  	
   

  
	
  Annual Net Revenues for all Products equals
  or exceeds five billion dollars ($5,000,000,000) in each of any two
  consecutive calendar years

  	
   

  	
  $

  	
  250,000,000

  	
   

  

 

In the event that more than one of the above commercial
milestones is achieved simultaneously, Genzyme will make only one milestone
payment, which will be for the milestone requiring the highest Annual Net
Revenues.  The Annual Net Revenues in any
calendar year may be counted toward only one consecutive two calendar year
period, except that if Annual Net Revenues for all Products equals or
exceeds five billion dollars ($5,000,000,000) in any calendar year, that year
may be counted as both the last year of one two consecutive year period and
the first year of a second two consecutive year period.  For the purpose of illustration, it will
require at least five (5) years before Genzyme has been required to pay
Isis the total of the seven hundred and fifty million dollars ($750,000,000) in
milestone payments pursuant to this Section 8.2.2 (Commercial
Milestone) unless Annual Net Revenue exceeds five billion dollars
($5,000,000,000) for three (3) or more consecutive years, in which case it
would require four (4) years (assuming there was at least three billion
dollars ($3,000,000,000) in sales in the first or fourth year during the four
year period).

 

8.2.3.       Hybrid Milestones.  Within thirty (30) days after the achievement
of the following indicated events by Genzyme, its Affiliate or its Sublicensee,
Genzyme will pay Isis the following milestone payments:

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

36

 

	
  Milestone Event*

  	
   

  	
  Milestone

  Payment

  
	
  The earlier
  to occur of (A) NDA Approval for the use of Mipomersen to treat patients
  who have heterozygous FH or an otherwise comparably sized eligible patient
  population; or (B) annual Net Revenues for all Products equals or
  exceeds two hundred and fifty million dollars ($250,000,000) in any calendar
  year

  	
   

  	
  $[**]

  
	
  The earlier
  to occur of (A) NDA Approval for the use of Mipomersen to treat patients
  who have heterozygous FH or an otherwise comparably sized eligible patient
  population; or (B) annual Net Revenues for all Products equals or
  exceeds five hundred million dollars ($500,000,000) in any calendar year

  	
   

  	
  $[**]

  

 

* For purposes of
clarification, if the first hybrid milestone above had not already been
payable, and annual Net Revenues for all Products equals or exceeds five
hundred million dollars ($500,000,000) in a calendar year, then both hybrid
milestones would be triggered.

 

8.2.4.       Milestones Payable Only Once.  Once Genzyme has made any particular
milestone payment under this Section 8.2, Genzyme will not be
obligated to make any payment under this Section 8.2 with respect
to the re-occurrence of same milestone, whether or not such re-occurrence is
with respect to a different or the same Product or indication.

 

8.2.5.       Indications of Mipomersen
Approval.  If
Mipomersen receives an Approval for a label indication that is sufficiently
broad to include the entire patient population contemplated by one or
more development milestone(s) set forth in Sections 8.2.1(a) (Mipomersen
in FH) or 8.2.1(b) (Mipomersen in Other Indications) or 8.2.3 (Hybrid
Milestones), then Genzyme will pay Isis the milestone payment(s) for such
development milestone(s), even though the indication for which Mipomersen is
approved is not identical to the indication(s) of such development
milestone(s).

 

8.3.          Financial Provisions
Relating to Development Activities.

 

8.3.1.       Isis Funding of External
Development Expenses.

 

(a)           Subject to Section 5.2.1 (Clinical Trials), Isis will
fund the clinical studies described as “Isis Funded” in the Development Budget.

 

(b)           In addition to its funding obligations under Section 8.3.1(a) above,
Isis will fund the first one hundred and twenty-five million dollars
($125,000,000) of the External Development Expenses for the Product that will
be incurred by the Parties in accordance with the Development Plan starting as
of January 1, 2008, including expenses for (a) the clinical studies
described as “Non Isis Funded” in the Development Budget, (b) future
clinical studies undertaken in accordance with the Development Plan, (c) toxicology
studies undertaken in accordance with the Development Plan (except for those
described as “Isis Funded” in the Development Budget), (d) pharmacokinetic
studies undertaken in accordance with 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

37

 

the Development Plan, (e) the
manufacturing of API, as well as the packaging and distribution of the final
Product and (f) the scientific advisory board and drug safety monitoring
board.  Any External Development Expenses
that are recouped by Isis pursuant to Section 8.4 (Sharing of Net Revenue)
will not be counted toward the fulfillment of this $125 million funding
commitment.  For purposes of clarity, in
the event that Net Profit is achieved prior to the exhaustion of the Isis $125
million funding commitment set forth in this section 8.3.1, then for so long as
Net Profit is maintained, Isis will not be obligated to fund External
Development Expenses and the provisions of Section 8.5 (Sharing of Net
Profits) will apply.

 

8.3.2.       Shared Funding of External
Development Expenses.  After one
hundred and twenty-five million dollars ($125,000,000) of External Development
Expenses for the Product have been funded as described in Section 8.3.1(b) above,
and after the sharing of Net Revenue in accordance with Section 8.4
(Sharing of Net Revenue), the Parties will share equally (on a 50/50 basis) all
remaining External Development Expenses in any calendar year in which Net
Profit is not achieved.  In any calendar
year in which Net Profit is achieved, the External Development Expenses will be
included as Program Costs.

 

8.3.3.       Internal Development
Expenses.  Each Party
will be responsible for their own Internal Development Expenses with respect to
development of the Product in any calendar year in which Net Profit is not
achieved.  In any calendar year in which
Net Profit is achieved, the Parties’ Internal Development Expenses will be
included as Program Costs.

 

8.4.          Sharing of Net Revenue.  In any calendar year in which there is not a
Net Profit, the Parties will share Net Revenue as follows:

 

8.4.1.       Costs of Goods.   Net Revenue first will be allocated between
the Parties to reimburse them for the Fully Absorbed Cost of Goods incurred by
the Parties in such calendar year.

 

8.4.2.       External Sales &
Marketing Expenses.  Once the
Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods,
Net Revenue next will be allocated between the Parties to reimburse them for
External Sales & Marketing Expenses incurred by the Parties in such
calendar year.

 

8.4.3.       Internal Sales &
Marketing Expenses.  Once the
Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods
and External Sales & Marketing Expenses, Net Revenue next will be
allocated between the Parties to compensate them for Internal Sales &
Marketing Expenses incurred by the Parties in such calendar year.

 

8.4.4.       External Development
Expenses. Once the Parties have each been fully reimbursed
for the Fully Absorbed Cost of Goods, External Sales & Marketing
Expenses and Internal Sales & Marketing Expenses, Net Revenue next
will be 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

38

 

allocated between the
Parties to compensate them for External Development Expenses incurred by the
Parties in such calendar year (other than Fully Absorbed Cost of Goods already
reimbursed under Section 8.4.1 above).

 

8.4.5.       Internal Development
Expenses.  Once the
Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods,
External Sales & Marketing Expenses, Internal Sales &
Marketing Expenses and External Development Expenses, Net Revenue next will be
allocated between the parties to compensate them for Internal Development
Expenses incurred by the Parties in such calendar year.

 

8.4.6.       Revenue Sharing Proportional
to Expenses. For each category of cost or expense set forth in
this Section 8.3, if Net Revenue is sufficient to only
partially compensate the Parties for particular category of cost or expense,
then the Parties will allocate the Net Revenue that may be allocated for such
category between the Parties on a pro rata basis in proportion to the relative
amounts of such category of cost or expense incurred by each Party.

 

8.5.          Sharing of Net Profits.

 

8.5.1.       Responsibility for Net Loss.  Except as set forth in Section 8.4
(Sharing of Net Revenue), in any calendar year in which there is a Net Loss,
Genzyme’s share of Net Revenue will be one hundred percent (100%) and, subject
to Section 8.3 (Financial Provisions Related to Development
Activities), Genzyme will be solely responsible for all Program Costs.  Isis will not be required to compensate
Genzyme for any Net Loss.

 

8.5.2.       Sharing of Net Profits.  In any calendar year in which there is a Net
Profit, the Parties will share such Net Profit in accordance with the following
allocation based on Net Revenue for such calendar year:

 

	
  Annual Net Revenue

  	
   

  	
  Genzyme Percentage

  	
   

  	
  Isis Percentage

  
	
  $1 to <
  $200 M

  	
   

  	
  70%

  	
   

  	
  30%

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  >$2 B

  	
   

  	
  50%

  	
   

  	
  50%

  

 

Notwithstanding the foregoing, in any calendar year
in which Net Profits are generated in an amount greater than or equal to [**]
of Net Revenue, Isis’ share of 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

39

 

Net Profits will not fall below an amount equal to
[**] of Net Revenue.

 

8.6.          Periodic Reporting and
Reconciliation.

 

8.6.1.       Reports.  Within thirty (30) days after the end of each
Calendar Quarter during the Term (a “Reporting Period”), each Party will
submit a written report to the other Party setting forth in reasonable detail
the following, as applicable: (a) External Development Expenses incurred
by Isis in accordance with Section 8.3.1 (Isis Funding of External
Development Expenses) for each month during such Reporting Period, if any; (b) Fully
Absorbed Costs of Goods, External Sales & Marketing Expenses, Internal
Sales & Marketing Expenses, External Development Expenses, and
Internal Development Expenses incurred by each Party for each month during such
Reporting Period (if any); (c) actual Net Revenues, Net Sales and Program
Costs incurred by or on behalf of the reporting Party for each month during
such Reporting Period, if any, and (d) forecasts for the next four (4) Reporting
Periods of Program Costs attributable to such Party (including, for each Party,
the Fully-Absorbed Cost of Goods, External Sales & Marketing Expenses,
Internal Sales & Marketing Expenses, External Development Expenses,
and Internal Development Expenses) and, for Genzyme, Genzyme’s estimate of Net
Revenues.  Such written reports will
provide supporting detail for actual Net Revenues, Net Sales and Program Costs.  The Parties recognize that the forecasts
provided pursuant to subsection (d) are estimates only, and the Party
providing such forecasts for the next Reporting Period will have no liability
to the other Party based thereon.  The
Parties agree to consider in good faith the utilization of more rapid and
detailed reporting mechanisms in order to meet the reporting requirements of
the Parties.  Development Expenses
reported pursuant to this Section 8.5.1 will be included in Program
Costs for determining Net Profits or Net Losses (and any revenue sharing or
resulting funding obligations under Sections 8.3 and 8.4), as applicable, only
to the extent made or incurred in accordance with the Development Plan and to
the extent that they do not exceed the amount budgeted for such expense in the
then-current Development Budget (if any) by more than [**] for a calendar year
or as otherwise approved by the JDC. 
Costs and expenses included in Program Costs, as well as the deductions
taken from Net Sales, will not be double counted (i.e.,
any item of expense included in any expense category will not also be included
in any other expense category).

 

8.6.2.       Reconciliation.

 

(a)           Within forty-five (45) days following the exchange of the
reports under Section 8.6.1 (Reports), Genzyme will send to Isis a
written report setting forth the calculation of any net amount owed by Genzyme
to Isis (or by Isis to Genzyme), in order to ensure that (i) Isis fulfills
its funding obligations under Section 8.3 (Financial Provisions Relating
to Development Activities) and (ii) the Parties share Net Revenue as
specified in Section 8.4 (Sharing of Net Revenue) or Net Profits as
specified in Section 8.5.2 (Sharing of Net Profits).  The Parties will 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

40

 

use the most recent
forecasts for Annual Net Revenue and Net Profit provided pursuant to Section 8.6.1
(Reports) to determine the applicable Net Profit share in any given Calendar
Quarter (other than in the final Calendar Quarter of any calendar year).  The Parties will use the actual Annual Net
Revenue and Net Profit for the calendar year to determine the applicable Profit
Share percentage for the last Calendar Quarter in any calendar year.

 

(b)           This reconciliation report will, among other things,
contain (i) a tally of Isis’ fulfillment of its funding obligations under Section 8.3
(Financial Provisions Relating to Development Activities), which tally will
include any necessary adjustments, (ii) appropriate retroactive
adjustments for prior Calendar Quarters in the same calendar year to take into
account increases (or decreases) in Isis’ share of Net Profits or Isis’
fulfillment of its funding obligations under Section 8.3 (Financial
Provisions Relating to Development Activities) and (iii) appropriate
credit for Program Costs directly incurred by Isis.

 

8.6.3.       Payments.  If the reconciliation conducted under Section 8.6.2
(Reconciliation) results in a payment being owed by Genzyme to Isis, then the
net amounts payable will be paid by Genzyme to Isis within forty-five (45) days
of Genzyme receiving confirmation from Isis that Genzyme’s report required by
Section 8.6.2 (Reconciliation) is accurate.  If the reconciliation conducted under Section 8.6.2
(Reconciliation) results in a payment being owed by Isis to Genzyme, then the
net amounts payable will be paid by Isis within forty-five (45) days of its
receipt of the reconciliation report.

 

8.6.4.       Disputes.  In the event of a dispute regarding any
amount reported by a Party pursuant to Section 8.6.1 (Reports) or
the amount owed under Section 8.6.2 (Reconciliation), the Parties
will promptly meet and negotiate in good faith a resolution to such
dispute.  In the event that the Parties
are unable to resolve such dispute within sixty (60) days after notice by the
disputing Party, the Parties will (a) use commercially reasonable efforts
to reach agreement on the appointment of one internationally-recognized
independent accounting firm to determine the matter or (b) if the Parties
cannot reach agreement on such accounting firm, then each Party will appoint
one internationally-recognized accounting firm and such firms will choose a
third internationally-recognized independent accounting firm to make the final
determination.  Interest will be payable
on any disputed amounts determined to be due in the same manner as provided for
in Section 8.10 (Interest on Late Payments), with interest accruing
from the end of the thirty (30) day period during which such payment should
have been made.

 

8.7.          Accounting and Allocation
Methods.

 

8.7.1.       Accounting.  To the extent possible in accordance with the
terms and conditions of this Agreement, the Parties will account for all
amounts required to be determined under this Agreement (including Net Profits,
Net Revenues, Program Costs, and all elements of any of the foregoing) in
accordance with GAAP, 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

41

 

consistently applied.  Where more than one accounting treatment is
possible consistent with the terms and conditions of this Agreement and GAAP,
each Party will account for amounts in a manner that is consistent with the
manner in which such Party accounts for similar amounts for the purposes of its
publicly reported financial statements.

 

8.7.2.       Allocation Methods.  Promptly upon the execution of this Agreement
and before the start of each successive fiscal year of the Term, the Parties
will agree upon a consistently applied methodology for determining and
allocating to Program Costs (including Development Expenses and Sales and
Marketing Expenses) for such year an appropriate portion of each of their
respective (i) costs and expenses that relate both to the Product and any
of the Parties’ other products or programs and (ii) G&A Costs and
other overhead attributable to this Agreement.

 

8.8.          Audits and Interim Reviews.  Each Party will maintain accurate books and
records regarding Program Costs, Fully-Absorbed Cost of Goods, External Sales &
Marketing Expenses, Internal Sales & Marketing Expenses, External
Development Expenses, and Internal Development Expenses, Net Revenues and Net
Sales, as applicable, sufficient to enable the calculation of amounts payable
hereunder to be verified, and will retain such books and records for each
quarterly period for three (3) years after submission of the corresponding
report pursuant to this Agreement. 
Either Party will have the right to request that an independent
certified public accountant selected by it (but excluding its own accountant)
and reasonably acceptable to the other Party perform an audit, not more than
once in any four (4) consecutive Calendar Quarters during the Term, but
including one post-termination audit and, if any such audit results in a
material restatement of records (i.e., a
discrepancy of 5% or more for any calendar year), such Party will be permitted
an additional examination within such four (4) quarter period, of the
other Party’s books of accounts covering the preceding three (3) year
period for the sole purpose of verifying compliance with the payment provisions
of this Agreement.  Such audits will be
conducted at the expense of the requesting Party at reasonable times during
regular business hours and upon at least twenty (20) business days’ prior
notice.  Audit results will be shared
with both Parties, subject to Article 12 (Confidentiality); provided, however, that the accounting firm may not
disclose copies of the audited Party’s books of accounts (or excerpts thereof)
to the other Party.  Any accounting firm
conducting such an audit will enter into a confidentiality agreement with both
Parties containing restrictions substantially similar to the confidentiality
provisions of Article 12 (Confidentiality) limiting the disclosure
and use of information contained in such books and records for the purposes
expressly permitted by this Section 8.8.  Any inspection or audit pursuant to this Section 8.8
will be at the expense of the Party initiating the audit; provided, however, that if the Party’s accountants reasonably
determine that Net Profits or Net Revenues have been understated or Program
Costs (including associated labor costs, reimbursable costs and expenses) or
Fully-Absorbed Cost of Goods, External Sales & Marketing Expenses,
Internal Sales & Marketing Expenses, External Development Expenses,
and Internal Development Expenses have been overstated by an amount equal to or
greater than five percent (5%), for any calendar year, the audited Party will
pay the reasonable fees of such accountants for such audit, in addition to
remitting the Net Profits 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

42

 

or refund of Net Losses,
Program Costs, Fully-Absorbed Cost of Goods, External Sales &
Marketing Expenses, Internal Sales & Marketing Expenses, External
Development Expenses, or Internal Development Expenses with interest thereon
computed in accordance with Section 8.10 (Interest on Late
Payments).

 

8.9.          Withholding Taxes.  If Applicable Law requires that taxes be
withheld from payments made hereunder, or from Net Revenue or Net Profits, the
Party making such payments or otherwise responsible for such withholding (the “Withholding
Party”) will (a) deduct such taxes from any payments to which they
relate or in the case of taxes withheld from the other Party’s share of Net
Revenues or Net Profits account for such taxes as amounts paid on behalf of the
other Party, (b) timely pay such taxes to the proper authority and (c) send
written evidence of payment to the Party with respect to which such taxes were
withheld or paid within sixty (60) days after payment.  Taxes withheld from payments made hereunder
will be treated as amounts received by the Party with respect to which such
taxes were withheld for all purposes under this Agreement.  If the Withholding Party is required to
withhold and pay over taxes on the other Party’s share of Net Revenues or Net
Profits, the other Party will promptly reimburse or otherwise make whole the
Withholding Party for any amounts so withheld upon receipt of written evidence
of the payment of such taxes.  Any taxes paid
(excluding income taxes) by the Withholding Party on the other Party’s share of
Net Revenues or Net Profits for which the Withholding Party has not been
reimbursed or otherwise made whole within thirty (30) days after the end of
each Reporting Period will be treated as an amount received by the other Party
(and not by the Withholding Party) for purposes of determining amounts owed
under Section 8.6.2 (Reconciliation).  Each Party will assist the other Party or
Parties in claiming tax refunds, deductions or credits at such other Party’s
request and will cooperate to minimize any withholding tax as permitted by
Applicable Law.

 

8.10.        Interest on Late Payments.  Any payments to be made hereunder that are
not paid on or before the date such payments are due under this Agreement will
bear interest at a rate per annum equal to the lesser of (x) the rate
announced by Bank of America (or its successor) as its prime rate in effect on
the date that such payment would have been first due plus one percent (1%) or (y) the
maximum rate permissible under applicable law.

 

8.11.        Currency; Payment.  All amounts payable under this Agreement will
be paid in United States dollars in immediately available funds, and will be
directly deposited to a bank account designated for this purpose from time to
time by the Party to receive payment. 
Isis will provide the necessary bank account information to Genzyme no
later than the Execution Date and may update such information from time to time
by written notice.  The Parties may vary the
method of payment set forth herein at any time upon mutual agreement,
consistent with Applicable Law.  As
applicable, Net Sales, Net Sales Adjustments, and other elements of Net Revenue
and Program Costs will be translated into United States dollars at the exchange
rate used by Genzyme for public financial accounting purposes in accordance
with GAAP.  If, due to restrictions or
prohibitions imposed by national or international authority, payments cannot be
made as provided in this Article 8 (Financial Provisions) with
respect to sales occurring outside of the United States, the Parties will
consult with a view to finding a prompt and acceptable solution, 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

43

 

and Genzyme will deal with
such monies as Isis may lawfully direct.

 

8.12.        Material Safety Warnings.  Notwithstanding the financial provisions
contained in this Article 8 (Financial Provisions), in the event
that the approved label for the Product [**], which is not anticipated by the
Parties as of the Effective Date, the Parties will discuss in good faith
(without obligation) the extent to which such [**] change the [**] for the
Product.

 

Article 9.

INTELLECTUAL PROPERTY MATTERS

 

9.1.          Product-Specific Patents.

 

9.1.1.       Assignment of
Product-Specific Patents.  Isis
will assign and transfer, and hereby does assign and transfer, to Genzyme, all
rights, title, and interests in and to the Product-Specific Patents and all
claims and causes of action arising from or relating to the Product-Specific
Patents, including all rights to recovery for damages from infringement arising
prior to, on or after the Execution Date. 
Simultaneously with the execution of this Agreement, Isis will execute
and deliver a confirmatory assignment relating to all Product-Specific Patents
in existence on the Execution Date in the form attached to this Agreement as Exhibit E.

 

9.1.2.       Disclosure of Future
Product-Specific Patents.  Upon
becoming aware of any potentially patentable invention Controlled by Isis that
would, if patented, be included within the definition of Product-Specific
Patents or Licensed Patents, Isis will promptly disclose such invention to
Genzyme in writing in reasonable detail.

 

9.1.3.       Covenants in Support of
Assignment.  Isis will
provide all further cooperation which Genzyme reasonably determines is
necessary to accomplish the complete transfer of the Product-Specific Patents
and all associated rights to Genzyme, and to ensure Genzyme the full and quiet
enjoyment of the Product-Specific Patents including executing and delivering
further assignments, consents, releases and other commercially reasonable
documentation, and providing good faith testimony by affidavit, declaration,
deposition, in-person or other proper means and otherwise assisting Genzyme in
support of any effort by Genzyme to establish, perfect, defend or enforce its
rights in the Product-Specific Patents through filing and prosecution of
Product-Specific Patents, interferences, oppositions, other regulatory
proceedings, litigation, or other means. 
Isis will obtain the cooperation of the individual inventors of any
inventions disclosed in the Assigned Product Specific Patents, including (a) obtaining
signatures of such inventors on any patent applications or other documentation
reasonably necessary to obtain patent protection for such inventions and (b) procuring
(at Genzyme’s expense) such inventors’ good faith testimony by affidavit,
declaration, deposition in-person or other proper means in support of Genzyme’s
efforts in establishing, 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

44

 

perfecting, defending or
enforcing patent rights to such inventions. 
To the extent Isis cannot transfer and assign the Product-Specific
Patents, or any portion thereof, as of the Execution Date, then Isis will
transfer and assign such Product-Specific Patents to Genzyme at its first
opportunity to do so and pending such transfer and assignment such Product-Specific
Patents will be deemed to be Licensed Patents for the purposes of Section 2.1
(Product License).  To the extent further
transfer or assignment of the Product-Specific Patents is required or permitted
and Isis has not executed and returned to Genzyme the form of assignment
reasonably requested by Genzyme within ten (10) business days of the
delivery of such assignment to Isis at the address for notices set forth in Section 14.5
(Notices), then Isis hereby irrevocably appoints Genzyme as its attorney-in-fact
with the right, authority and ability to execute and enter into such assignment
on behalf of Isis.  Isis stipulates and
agrees that such appointment is a right coupled with an interest and will
survive the unavailability of Isis at any future time.

 

9.1.4.       Grant-Back License.  Subject to the terms and conditions of this
Agreement, Genzyme hereby grants Isis a non-exclusive, non-transferable license
(with no right to sublicense) under the Product-Specific Patents to the extent
necessary to perform Isis’ obligations under this Agreement and the Supply
Agreement.

 

9.2.          Program IP.

 

9.2.1.       Ownership.  Unless prohibited by Applicable Law,
inventorship and authorship will be determined in accordance with U.S. patent
and copyright law.  Genzyme will own all
Genzyme Program IP .  Subject to the
terms and conditions of this Agreement including Section 2.1
(Product License) and Section 9.1 (Product-Specific Patents), Isis
will own all Isis Program IP, and Isis and Genzyme will jointly own all Joint
Program IP.  Subject to the terms and
conditions of this Agreement including Section 2.1 (Product
License), Section 9.1 (Product-Specific Patents), 9.2.3 (No
Encumbrances) and Article 3 (Exclusivity), each Party will have the
right to practice and license the Joint Program IP without consent of the other
Party (where consent is required by law, such consent is deemed hereby granted)
and without a duty of accounting to the other Party; provided, however
that Isis will not grant a license to a Third Party under Joint Program IP to
develop or commercialize any nucleic acid molecule whose primary purpose at the
time of the license or primary therapeutic benefit at the time of
commercialization is to cause the [**], without Genzyme’s prior written
consent.  Notwithstanding
the foregoing, Isis will not be in breach of the preceding sentence if, despite
exercising commercially reasonable efforts, it inadvertently licenses Joint
Know-How to such a Third Party without Genzyme’s prior written consent, unless,
prior to Isis disclosing such Joint Know-How to such a Third Party licensee,
Genzyme provides Isis with a written summary description of such Joint Know-How
that clearly indicates it is Joint Know-How under this Agreement.  Subject to the terms
and conditions of this Agreement, each Party will cooperate with the other
Party’s efforts to establish, perfect, defend and 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

45

 

enforce its rights in its
Program IP in the Territory.  This Section 9.2.1
will be subject to the terms and conditions of Section 9.3.2 (Terms of
Sharing Arrangement).

 

9.2.2.       Cooperation/Compensation of
Employees.  Each Party
represents and agrees that (a) all of its employees and all of its
Affiliates’ employees acting under its or its Affiliates’ authority in the
performance of this Agreement or pursuant to the Product License will be
obligated under a binding written agreement or established corporate policy to
assign to such Party, or as such Party will direct, all Technology and Patents
discovered, made, conceived by such employee as a result of such employee’s
employment, and (b) both it and its Affiliates have taken all appropriate
actions under the Applicable Law in the Territory to ensure proper compensation
to any employee for the assignment of such Technology and Patents as
contemplated hereunder.  In the case of
all others acting in the performance of the Development Program or Research
Programs or pursuant to the Product License, such as consultants,
subcontractors, licensees, sublicensees, outside contractors, clinical
investigators, agents, or non-employees working for non-profit academic
institutions, such others will also be obligated under an agreement that meets
the criteria of the preceding sentences, unless otherwise approved by the
Parties.  The Parties agree reasonably to
undertake to enforce the agreements referenced in this Section 9.2.2 (including,
where appropriate, by legal action) considering, among other things, the
commercial value of such Technology and Patents.

 

9.2.3.       No Encumbrances.  Except as expressly provided in this
Agreement, neither Party will sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in (e.g., as
collateral for a loan or other financing) or otherwise encumber in the
Territory any Joint Program IP necessary or useful for the research,
development, manufacture or commercialization of the Product in the Territory
without the prior written consent of the other Party; provided, however,
that nothing contained in this Section 9.2.3 will prohibit an
assignment permitted by Section 14.7 (Binding Effect; Assignment)
or a license permitted by Section 9.2.1 (Ownership).

 

9.3.          Manufacturing Improvements.

 

9.3.1.       Background.  As part of its collaborations with other
pharmaceutical partners, Isis has an arrangement where Isis can share
manufacturing technology improvements made by such pharmaceutical partners with
other third parties so long as such third parties similarly agree to share
their manufacturing technology improvements. 
After reviewing the proposed terms of such arrangement, Genzyme is
willing to participate in the arrangement only with the clarifications and
under the terms set forth in this Section 9.3 (Manufacturing
Improvements).

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

46

 

9.3.2.       Terms of Sharing Arrangement.

 

(a)           During the period beginning on the Effective Date and
ending [**] (the “Sharing Period”), the Parties will meet at least
annually to review Manufacturing Improvements developed by either of the
Parties during the Sharing Period during and in connection with the conduct of
the Development Program or the Research Programs or commercializing the Product
and, in the case of Isis, any Manufacturing Improvements made by or on behalf
of Isis or any Participating Isis Partners and disclosed to Isis pursuant to a
Sharing Agreement.  The Parties will
disclose all Manufacturing Improvements Controlled by such Party (including, in
the case of Isis, Manufacturing Improvements made by other Participating Isis
Partners and disclosed to Isis pursuant to a Sharing Agreement) in reasonable
detail as to enable the other Party to use such Manufacturing Improvements in
the manufacture of ASO Products.  All
such disclosures will be subject to appropriate confidentiality
obligations.  Isis will have the right to
disclose and sublicense any Manufacturing Improvements Controlled by Genzyme
only to Third Parties that are licensees of Isis with respect to the
commercialization of one or more ASO Products and are Participating Isis
Partners and only in accordance with Section 9.3.2(b).

 

(b)           Without limiting the generality of Section 9.2.1
(Ownership), all rights, title, and interests in and to all Manufacturing
Improvements developed or invented during the Sharing Period during and in
connection with the conduct of the Development Program or the Research Programs
or commercializing the Product solely by Genzyme’s employees or Third Parties
acting on Genzyme’s behalf (“Genzyme Manufacturing Improvements”) will
be the sole and exclusive property of Genzyme. 
Genzyme hereby grants Isis a worldwide, royalty-free, perpetual,
non-exclusive license to practice under Genzyme’s rights to any Know-How in or
Patent Covering such Genzyme Manufacturing Improvements Controlled by Genzyme
to make and have made ASO Products other than the Product.  The license granted under this Section 9.3.2(b) is
sublicensable by Isis to Participating Isis Partners solely in connection with
a license to develop, make, use, import, offer for sale and sell an ASO Product
developed or commercialized by a Participating Isis Partner.  Such Participating Isis Partners may not
further disclose or sublicense Genzyme Manufacturing Improvements except in
connection with a sublicense of the ASO Product being developed or
commercialized under license from Isis. 
The license granted under this Section 9.3.2(b) will survive
the termination of this Agreement with respect to any Genzyme Manufacturing
Improvements made prior to such termination.

 

(c)           Without limiting the generality of Section 9.2.1
(Ownership), all rights, title, and interests in and to all Manufacturing
Improvements developed or invented during the Sharing Period solely by Isis’s employees
or Third Parties acting on Isis’ behalf (“Isis Manufacturing Improvements”)
will be the sole and exclusive property of Isis.  Without limiting the rights granted to
Genzyme in Article 2, Isis hereby grants Genzyme a worldwide,
royalty-free, perpetual, non-exclusive license to practice under Isis’ rights
to any Know-How in or Patent Covering any Manufacturing Improvements Controlled
by Isis (including any

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

47

 

Manufacturing Improvements
made by or on behalf of any Participating Isis Partners) to make and have made
the Product and other ASO Products developed or commercialized by Genzyme.  The license granted under this Section 9.3.2(c) is
sublicensable by Genzyme solely in connection with a license to develop, make,
use, import, offer for sale and sell an ASO Product developed or commercialized
by Genzyme under license from Isis (including the Product).  The license granted under this Section 9.3.2(c) will
survive the termination of this Agreement or any Sharing Agreement with respect
to any Manufacturing Improvements (including any Manufacturing Improvements
made by Participating Isis Partners) made prior to such termination.

 

(d)           Notwithstanding Section 9.2.1 (Ownership) and subject
to Section 9.1 (Product-Specific Patents), all rights, title, and
interests in and to all Manufacturing Improvements developed or invented during
the Sharing Period jointly by Isis’ and Genzyme’s employees or Third Parties
acting on Isis’ and Genzyme’s behalf will be the joint property of Isis and
Genzyme with each party having an undivided joint interest in such
Manufacturing Improvements.  Each Party
may license its rights under such Manufacturing Improvements for its own
account and without the consent of the other Party (where consent is required
by law, such consent is deemed hereby granted) and without a duty of accounting
to the other Party, subject in all cases to the licenses granted to Genzyme
under Article 2 (Licenses).

 

9.3.3.       [**].

 

9.3.4.       [**] Manufacturing
Improvements.  If Isis
does not [**] of the Execution Date, Isis will [**].  In such event, Isis will be solely
responsible for all costs and expenses associated with such development effort
and will reimburse Genzyme for any such costs and expenses incurred by
Genzyme.  Failure of Isis to reimburse
Genzyme for such costs and expenses will be deemed to be a material breach of
this Agreement entitling Genzyme to setoff such amounts pursuant to Section 11.4.2
(Genzyme’s Right of Setoff).

 

9.3.5.       Representations Regarding
[**].  Isis represents and warrants
to Genzyme as follows:

 

(a)           [**], Isis will Control all Know-How [**] that is [**] the
manufacture, development or commercialization of Mipomersen, including the [**]
Manufacturing Improvements and will have the sufficient legal and/or beneficial
title and ownership or rights to grant the Product License to Genzyme under
such Know-How and the grant of such license to Genzyme does not violate the
terms of any Third Party Agreement or any other agreement Isis has with a Third
Party [**].

 

(b)           If [**], Isis will Control all Know-How [**] that is [**]
the manufacture, development or commercialization of Mipomersen as of such date
and will have 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

48

 

the sufficient legal and/or
beneficial title and ownership or rights to grant the Product License to
Genzyme under such Know-How and the grant of such license to Genzyme does not
violate the terms of any Third Party Agreement or any other agreement Isis has
with a Third [**].

 

9.3.6.       [**] Sharing Agreement.  Isis will use reasonable
efforts to [**].

 

9.3.7.       Cooperation.  Genzyme will provide reasonable cooperation
with Isis’ efforts to [**].  In no event,
however, will Genzyme be required to enter into any agreement that (i) [**]
in any way or (ii) imposes any material obligations, liabilities or
constraints on Genzyme except those contemplated by this Agreement.

 

9.4.          Filing, Prosecution and
Maintenance of Patents.

 

9.4.1.       Responsibility.

 

(a)           Product-Specific Patents and Genzyme Program Patents.  Genzyme, through counsel of its choosing and
at its sole expense, will be responsible for and have control over obtaining,
prosecuting (including any interferences, reissue proceedings, re-examinations
and oppositions), and maintaining throughout the Territory the Product-Specific
Patents and Genzyme Program Patents in Genzyme’s name and Isis will cooperate
with Genzyme in regard thereto.  Without
limiting the generality of the foregoing, Genzyme may, in its sole discretion,
elect not to pursue patent protection for any Product-Specific Patent(s) and
Genzyme Program Patent(s) in one or more countries in the Territory.  Genzyme will consider input from the JPC
regarding prosecution strategy for the Product-Specific Patents and Genzyme
Program Patents, but will make all decisions relating to the prosecution and
maintenance of Product-Specific Patents and Genzyme Program Patents.

 

(b)           Licensed Product Patents.

 

(i)            Primary Responsibility.  Subject to Section 9.4.2(a) (Election
Not to Continue Prosecution; Abandonment) and this Section 9.4.1(b),
Genzyme, through counsel of its choosing and at its sole expense, will have
primary responsibility for and control over obtaining, prosecuting (including
any interferences, reissue proceedings, re-examinations and oppositions), and
maintaining throughout the Territory the Licensed Product Patents and Isis will
cooperate with Genzyme in regard thereto; provided, however that Genzyme
will prosecute such Licensed Product Patents such that they do not claim (x) [**]
other than apoB, or (y) methods of using such nucleic acids as a
therapeutic or [**] other than apoB. 
Genzyme will consider input from Isis regarding prosecution strategy for
the Licensed Product Patents, but will make all decisions relating to the
prosecution and maintenance of Licensed Product Patents.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

49

 

(ii)           Prosecution Strategy.  In prosecuting Licensed Product Patents, the
Parties will avoid filing patent applications that both claim (a) [**]
apoB, (b) the [**] of apoB, (c) the specific composition of matter of
a Product, or (d) methods of using Product as a therapeutic, methods of
using Product to modulate apoB, or methods of using the Product to inhibit
expression of apoB, and also claim (x) [**] other than apoB, or (y) methods
of using such nucleic acids as a therapeutic or [**] other than apoB.

 

(c)           Isis Core Technology Patents and the Isis Manufacturing
and Analytical Patents.  Subject to Section 9.4.2(b) (Election
Not to Continue Prosecution; Abandonment), Isis, through counsel of its
choosing and at its sole expense, will have primary responsibility for and
control over obtaining, prosecuting (including any interferences, reissue
proceedings, re-examinations and oppositions), and maintaining throughout the
Territory the Isis Core Technology Patents and the Isis Manufacturing and Analytical
Patents (in each case, other than Joint Patents), and Genzyme will cooperate
with Isis in regard thereto.  Isis will
consider input from the JPC regarding prosecution strategy for the Isis Core
Technology Patents, Isis Manufacturing and Analytical Patents (in each case,
other than Joint Patents) and will consult with Genzyme before taking any
action that would have an adverse impact on the scope of claims within the
Special Isis Core Technology Patents (other than Joint Patents).  However, Isis will make all decisions
relating to the prosecution and maintenance of the Isis Core Technology Patents
and Isis Manufacturing and Analytical Patents (in each case, other than Joint
Patents).  For clarity, this Section 9.4.1(c) will
not apply to Joint Patents that are Isis Core Technology Patents or Isis
Manufacturing and Analytical Patents, which will be governed Section 9.4.1(d) below.

 

(d)           Joint Patents. 
Subject to Section 9.4.1(a) (Product-Specific Patents
and Genzyme Program Patents) and Section 9.4.1(b) (Licensed
Product Patents), with respect to any Joint Patent (other than Product-Specific
Patents and Licensed Product Patents), the JPC will designate one Party (the “Responsible
Party”) who will have primary responsibility for the preparation, filing,
prosecution and maintenance of any such Joint Patent in the Territory (in both
Genzyme’s and Isis’ name), using patent counsel selected by the JPC or
otherwise agreed by the Parties.  If the
JPC has disbanded, the Parties will mutually agree on a Responsible Party.  Each Party will assist the Responsible Party
in the preparation, filing, prosecution and maintenance of such Joint
Patents.  The Responsible Party will
consult with and keep the other Party (through the JPC if possible) informed of
important issues relating to the preparation, filing, prosecution and
maintenance of the Joint Patents (other than Product-Specific Patents or
Licensed Product Patents) and will furnish the other Party (through the JPC if
possible) with copies of documents relevant to such preparation, filing,
prosecution or maintenance in sufficient time prior to filing such document or
making any payment due thereunder to allow for review and comment by the other
Party and, to the extent possible in the reasonable exercise of its discretion,

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

50

 

the Responsible Party will
incorporate all such comments.  If the
Responsible Party decides to discontinue the preparation, filing, prosecution
or maintenance of a Joint Patent (other than a Product-Specific Patent or
Licensed Product Patent), the Responsible Party will notify the other Party at
least sixty (60) days prior to any deadline that, if missed, would materially
prejudice the Joint Patent, and the other Party will have the right to prepare,
file, prosecute and maintain such Patent. 
The Parties will share equally the reasonable costs and expenses of the
preparation, filing, prosecution and maintenance of such Joint Patents (other
than Product-Specific Patents and Licensed Product Patents), and such costs and
expenses will be considered Program Costs. 
Neither Party will make any statements or omissions or take any other
action during prosecution or enforcement of any Joint Patent (other than
Product-Specific Patents and Licensed Product Patents) which admits or concedes
that any of the Licensed Patents (or any Product-Specific Patent) is invalid or
unenforceable, which adversely affects or limits the scope of any claims in any
such Patent, or which adversely affects the other Party’s rights under this
Agreement in any way, without the prior written consent of the other
Party.  For clarity, this Section 9.4.1(d) does
not apply to Joint Patents that are Product-Specific Patents or Licensed
Product Patents, which are governed by Section 9.1
(Product-Specific Patents) and Section 9.4.1(a) and Section 9.4.1(b) above,
but does apply to Joint Patents that are Isis Core Technology Patents or Isis
Manufacturing and Analytical Patents.

 

9.4.2.       Election Not to Continue
Prosecution; Abandonment.

 

(a)           If Genzyme elects not to file for or continue the
prosecution (including any interferences, oppositions, reissue proceedings and
re-examinations) or maintenance of a Licensed Product Patent in a particular
country in the Territory, then Genzyme will notify Isis promptly in writing of
its intention in good time to enable Isis to meet any deadlines by which an
action must be taken to establish or preserve any such rights in such Patent in
such country and Isis will have the right, but not the obligation, to file for
or continue the prosecution or maintenance of such Patent in such country, and
Genzyme will cooperate with Isis in regard thereto.  In such event, Isis’ expenses incurred in
connection with the prosecution or maintenance of such Patent in such country
will be Program Costs.

 

(b)           If Isis elects not to file for or continue the prosecution
(including any interferences, oppositions, reissue proceedings and
re-examinations) or maintenance of a Special Isis Core Technology Patent (other
than Joint Patents), then, Isis will notify Genzyme promptly in writing of its
intention in good time to enable Genzyme to meet any deadlines by which an
action must be taken to establish or preserve any such rights in such Patent in
such country and Genzyme will have the right, but not the obligation, to file
for or continue the prosecution or maintenance of such Patent in such country,
and Isis will cooperate with Genzyme in regard thereto.  In such event, Genzyme’s expenses incurred in
connection with the prosecution or maintenance of such Patent in such country
will be Program Costs.  For clarity, this
Section 9.4.2(b) will not apply to Joint 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

51

 

Patents that are Special
Isis Core Technology Patents, which will be governed Section 9.4.1(d) (Joint
Patents).

 

9.4.3.       Cooperation.  Each Party hereby agrees: (a) to make
its employees, agents and consultants reasonably available to the other Party
(or to the other Party’s authorized attorneys, agents or representatives), to
the extent reasonably necessary to enable such Party to undertake patent
prosecution as contemplated by this Agreement; (b) to cooperate, if
necessary and appropriate, with the other Party in gaining patent term
extensions wherever applicable to Patents that are subject to this Agreement;
and (c) to endeavor in good faith to coordinate its efforts with the other
Party to minimize or avoid interference with the prosecution and maintenance of
the other Party’s patent applications that are subject to this Agreement.

 

9.5.          Enforcement of Patents and
Know-How.

 

9.5.1.       Notification.  Each Party will promptly report in writing to
the other Party during the Term any (a) known or suspected Third Party
infringement of any Product-Specific Patents, Licensed Product Patents, Special
Isis Core Technology Patent, or (b) known or suspected Third Party
infringement of any Isis Core Technology Patents or Isis Manufacturing and
Analytical Patents to the extent the infringement relates to a product that
contains a nucleic acid that hybridizes to a nucleic acid molecule encoding
apoB, or (c) unauthorized use or misappropriation of any Product Know-How
or other Confidential Information by a Third Party of which it becomes aware,
and will provide the other Party with all available evidence supporting such
infringement or unauthorized use or misappropriation.

 

9.5.2.       Rights to Enforce.

 

(a)           Genzyme First Right.  Genzyme will have the first right, but not
the obligation, to take any reasonable measures it deems appropriate to stop
activities in the Territory infringing the Product-Specific Patents, Licensed
Product Patents or the use without proper authorization of any Product Know-How
or the infringement of any Isis Core Technology Patent by a Third Party product
that contains a [**] encoding apoB, including (i) initiating or
prosecuting an infringement or other appropriate suit or action against or (ii) granting
adequate rights and licenses necessary for continuing such activities in the
Territory to any Third Party who at any time has infringed, or is suspected of
infringing, any Product-Specific Patents or Licensed Product Patents or has
used or is suspected of using without proper authorization the Product
Know-How.  If Genzyme desires to assert
an Isis Core Technology Patent pursuant to this Section 9.5.2(a) and
the infringing product is also Covered by a Product-Specific Patent, then
Genzyme will assert both the Product-Specific Patent and the Isis Core
Technology Patent, unless it obtains Isis’ written consent to assert only the
Isis Core Technology Patent.  In such a
case, at Genzyme’s request Isis’ representatives will meet with Genzyme’s
representatives to discuss whether it 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

52

 

would be advisable to assert
an Isis Core Technology Patent without also asserting a Product-Specific
Patent.

 

(b)           Isis First Right. 
Subject to Section 9.5.2(a) (Genzyme First Right to Enforce),
Isis will have the first right, but not the obligation, to take any reasonable
measures it deems appropriate to stop activities in the Territory infringing
the Isis Core Technology Patents or Isis Manufacturing and Analytical
Patents  (in each case, other than Joint
Patents) or the use without proper authorization of any Isis Manufacturing and
Analytical Know-How (other than Joint Know-How), including (i) initiating
or prosecuting an infringement or other appropriate suit or action against or (ii) granting
a Permitted License to any Third Party who at any time has infringed, or is suspected
of infringing, any Isis Core Technology Patents or Isis Manufacturing and
Analytical Patents (other than Joint Patents) or has used or is suspected of
using without proper authorization the Isis Manufacturing and Analytical
Know-How (other than Joint Know-How). 
For clarity, this Section 9.5.2(b) will not apply to Joint
Patents that are Isis Core Technology Patents or Isis Manufacturing and
Analytical Patents, which will be governed Section 9.5.2(c) (Joint
Patents and Know-How).

 

(c)           Joint Patents and Know-How.  Subject to Section 9.5.2(a) (Genzyme
First Right to Enforce), Isis and Genzyme will confer and may agree jointly to
take any reasonable measures they deem appropriate to stop activities in the
Territory infringing the Joint Patents (other than Product-Specific Patents and
Licensed Product Patents) or the use without proper authorization of any Joint
Know-How and any expenses of taking such measures will be included as Program
Costs.  If the Parties do not agree on
whether or how to proceed with enforcement activity within either (i) sixty
(60) days following the notice of alleged infringement or (ii) ten (10) days
before the time limit to respond, if any, set forth in the Applicable Law for
the filing of such actions, whichever comes first, then either Party may
commence litigation with respect to the alleged or threatened infringement at
its own expense.  In the event a Party
brings an infringement action, the other Party will cooperate reasonably at the
litigating Party’s expense, including being joined as a party-plaintiff and
providing good faith testimony.  The
other Party will have the right, at its expense, to retain its own counsel to
monitor such litigation, and the costs associated with such monitoring will not
be Program Costs.  Neither Party will
have the right to settle any patent infringement or Know-How misappropriation
litigation under this Section in a manner that diminishes the rights or
interests of the other Party without the express written consent of such other
Party.  For purposes of clarification,
the grant of a license under a Joint Patent to a Third Party that would not
otherwise result in a breach under this Agreement will not be considered to
diminish the rights or interests of the other Party.  Notwithstanding the foregoing, this Section 9.5.2(c) will
not apply to Joint Patents that are Product-Specific Patents or Licensed
Product Patents or to the infringement of any Joint Patent that is a Isis Core
Technology Patent by a Third Party product that [**] encoding apoB, each of
which will be governed by Section 9.5.2(a) (Genzyme First
Right to Enforce) above.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

53

 

9.5.3.       Election Not to Enforce.

 

(a)           Isis Second Right. 
In the event that Genzyme elects not to take action pursuant to Section 9.5.2(a) (Genzyme
First Right to Enforce), Genzyme will so notify Isis in writing of its
intention within ninety (90) days of Genzyme’s notice of such infringement
activities to enable Isis to meet any deadlines by which an action must be
taken to establish or preserve any enforcement rights, and Isis will have the
right, but not the obligation, to take any such reasonable measures to stop
such infringing activities by such alleged infringer.  Notwithstanding the foregoing, Genzyme will
have the exclusive right to bring actions with
respect to infringement of Product-Specific Patents or Licensed Product
Patent.  Accordingly, Genzyme will not be
required to notify Isis with respect to any election not to take action with
respect to a Product-Specific Patent, and Isis will have no right to take
reasonable measure to stop any infringement of Product-Specific Patents.

 

(b)           Genzyme Second Right.  In the event that Isis elects not to take
action pursuant to Section 9.5.2(b) (Isis First Right to
Enforce), Isis will so notify Genzyme in writing of its intention within ninety
(90) days of Isis’ notice of such infringement activities to enable Genzyme to
meet any deadlines by which an action must be taken to establish or preserve
any enforcement rights, and Genzyme will have the right, but not the
obligation, to take any such reasonable measures to stop any such infringing
activities that involves a product that causes the [**].   If Genzyme desires to assert an Isis Core
Technology Patent pursuant to this Section 9.5.3(b) and the
infringing product is also Covered by a Product-Specific Patent, then Genzyme
will assert both the Product-Specific Patent and the Isis Core Technology
Patent, unless it obtains Isis’ written consent to assert only the Isis Core
Technology Patent.

 

(c)           Due Consideration. 
In any event, if one Party has elected not to take action pursuant to Section 9.5.2
(Right to Enforce), then it will explain its reasons for such decision to the
other Party, and the other Party will consider these reasons in good faith
prior to determining whether to exercise its second right to take action.

 

9.5.4.       Procedures and Expenses.

 

(a)           The Party having the right to initiate any infringement
suit under Section 9.5.2 (Rights to Enforce) or Section 9.5.3
(Election Not to Enforce) above will have the sole and exclusive right to
select counsel for any such suit and will pay all expenses of the suit,
including attorneys’ fees and court costs and reimbursement of the other Party’s
reasonable out-of-pocket expenses in rendering assistance requested by the
initiating Party.  If required under
Applicable Law in order for the initiating Party to initiate and/or maintain
such suit, or if either Party is unable to initiate or prosecute such suit
solely in its own name or it is otherwise advisable to obtain an effective
legal remedy, in each case, 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

54

 

the other Party will join as
a party to the suit and will execute and cause its Affiliates to execute all
documents necessary for the initiating Party to initiate litigation to
prosecute and maintain such action.  In
addition, at the initiating Party’s request, the other Party will provide
reasonable assistance to the initiating Party in connection with an
infringement suit at no charge to the initiating Party except for reimbursement
by the initiating Party of reasonable out-of-pocket expenses incurred in rendering
such assistance.  The non-initiating
Party will have the right to participate and be represented in any such suit by
its own counsel at its own expense.

 

(b)           If the Parties have mutually agreed that a Party should
initiate an infringement action or take such other reasonable measures it deems
appropriate to stop infringing activities under Section 9.5.2
(Rights to Enforce) or Section 9.5.3 (Election Not to Enforce),
then any expenses incurred by such Party to take such action will be included
in Program Costs.

 

9.5.5.       Recoveries.  If the Parties obtain from a Third Party
infringer, in connection with such suit, any damages, license fees, royalties
or other compensation (including any amount received in settlement of such
litigation), such amounts will be allocated as follows:

 

(a)           If the Parties mutually agreed that such Third Party
infringer should be pursued under Section 9.5.2 (Rights to Enforce)
or Section 9.5.3 (Election Not to Enforce) and the expenses
incurred in connection with such action were included in Program Costs, then
any amounts recovered by either Party will be included as Net Revenues.  In such case, the Party pursuing the Third
Party infringer under Section 9.5.2 or 9.5.3 will bear all
payments awarded against or agreed to be paid by such Party pursuant to such
action, including any costs or expenses incurred that exceed the amounts
recovered by such Party, but such payments, costs and expenses will be included
as Program Costs.

 

(b)           If the Parties did not mutually agree that such Third Party
infringer should be pursued under Section 9.5.2 (Rights to Enforce)
or Section 9.5.3 (Election Not to Enforce) and the expenses
incurred in connection with such action were not included in Program Costs,
then any amounts recovered by either Party will be used to reimburse the
Parties for their reasonable costs and expenses, including attorneys’ fees
incurred in making such recovery (which amounts will be allocated pro rata if
insufficient to cover the totality of such expenses), with any remainder to be
retained by the Party initiating action under Section 9.5.2 (Rights
to Enforce) or Section 9.5.3 (Election Not to Enforce).  In such case, such initiating Party will bear
all payments awarded against or agreed to be paid by such Party pursuant to
such action, including any costs or expenses incurred that exceed the amounts
recovered by such Party, and such payments will not be included as Program
Costs.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

55

 

9.6.          Claimed Infringement of
Third Party Rights.

 

9.6.1.       Notice.  In the event that a Third Party at any time
provides written notice of a claim to, or brings an action, suit or proceeding
against, any Party, or any of such Party’s respective Affiliates or
sublicensees, claiming infringement of its patent rights or unauthorized use or
misappropriation of its know-how, based upon the development, manufacture or
commercialization of the Product in the Territory (“Infringement Claim”),
such Party will promptly notify the other Party of the Infringement Claim or
the commencement of such action, suit or proceeding, enclosing a copy of the
Infringement Claim and all papers served. 
Each Party agrees to make available to the other Party its advice and
counsel regarding the technical merits of any such claim at no cost to the
other Party and to offer reasonable assistance to the other Party at no cost to
the other Party.

 

9.6.2.       Defense of Infringement
Claim; Declaratory Judgment Actions.

 

(a)           Genzyme will have the first right, but not the obligation,
to control the defense of any Infringement Claim brought against either Party
or any of its Affiliates or sublicensees arising out of the development,
manufacture or commercialization of the Product in the Territory.  Isis will have the second right, but not the
obligation to control the defense of an Infringement Claim in the event Genzyme
fails to exercise its right to assume such defense within thirty (30) days
following written notice from the other Party of such Infringement Claim.  In addition, if applicable prior to the
initiation of an Infringement Claim, Genzyme will have the exclusive
right, but not the obligation, to bring a declaratory judgment action relating
to any Patent that a Third Party has alleged is infringed by the development,
manufacture or commercialization of the Product in the Territory.  Genzyme will not settle any such claims or
suits in a manner that admits the invalidity or unenforceability of any Isis
Core Technology Patent or Isis Manufacturing and Analytical Patent or that
agrees to any injunction or other equitable remedy binding Isis without
obtaining the prior written consent of Isis. 
Similarly, Isis will not settle any such claims or suits in a manner
that admits the invalidity or unenforceability of any Product-Specific Patent
or Licensed Product Patent or that agrees to any injunction or other equitable
remedy binding Genzyme without obtaining the prior written consent of
Genzyme.  All litigation costs and
expenses incurred in connection with such Infringement Claim or declaratory
judgment action, and all damages, payments and other amounts awarded against,
or payable by, either Party, including under any settlement with such Third
Party, will be included as Program Costs.

 

(b)           The Party controlling the defense of an Infringement Claim
or bringing such declaratory judgment action will have the sole and exclusive
right to select counsel for any Infringement Claim; provided, however,
that it will consult with the other Party with respect to selection of counsel
for such defense.  The Party controlling
the defense of an Infringement Claim or bringing such declaratory judgment
action will keep the other Party informed, and will from time to time 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

56

 

consult with the other party
regarding the status of any such claims and will provide the other party with
copies of all documents filed in, and all written communications relating to,
any suit brought in connection with such claims.  The other Party will also have the right to
participate and be represented in any such claim or related suit, at its own
expense.

 

9.6.3.       Other Challenges.  If the JPC determines (or if after the JPC
disbands, the Parties mutually agree) that a Patent owned by a Third Party is
or could potentially or arguably be infringed by the development, manufacture
or commercialization of the Product in the Territory, then the Parties will
discuss the matter and agree upon a strategy relating to such Third Party
Patent; provided, however, that if the Parties fail to agree upon such a
strategy, then subject to Section 9.3 (Filing, Prosecution and
Maintenance of Patents) and Section 9.5 (Enforcement of Patents and
Know-How), Genzyme will determine the appropriate strategy in its reasonable
discretion.  If, consistent with such
strategy, either or both Parties challenge such Third Party Patent through
opposition, re-examination, nullity or revocation proceeding, or other available
administrative mechanism, then all costs and expenses incurred by the Parties
in connection with such challenge will be included as Program Costs.

 

9.7.          Other Infringement
Resolutions.  In the
event of a dispute or potential dispute that has not ripened into a demand,
claim or suit of the types described in Section 9.5 (Enforcement of
Patents and Know-How) and Section 9.6 (Claimed Infringement of
Third Party Rights) (e.g., actions
seeking declaratory judgments and revocation proceedings), the same principles
governing control of the resolution of the dispute, consent to settlements of
the dispute, and implementation of the settlement of the dispute (including
sharing in and allocating the payment or receipt of damages, license fees,
royalties and other compensation) will apply. 
Each Party will immediately notify the other Party of any certification
of which it becomes aware filed pursuant to 21 U.S.C. § 355(b)(2)(A) or      § 355(j)(2)(A)(vii) (or any
amendment or successor statute thereto) or declaratory judgment action filed by
a Third Party claiming that a Product-Specific Patent, Licensed Product Patent,
Special Isis Core Technology Patent is invalid or that infringement of such
Patent will not arise from the development, manufacture, use or sale of any
product by a Third Party.  The provisions
of Section 9.5 (Enforcement of Patents and Know-How) will
thereafter apply as if such Third Party were an infringer or suspected
infringer; provided, however, that in the event that Genzyme
elects not to take action, Genzyme will so notify Isis in writing of its
intention within ten (10) days of Genzyme’s notice of such infringement
activities to enable Isis to meet any deadlines by which an action must be
taken to establish or preserve any enforcement rights.

 

9.8.          Patent Term Extensions.  The Parties will use commercially reasonable
efforts to obtain all available supplementary protection certificates (“SPC”)
and other extensions of Licensed Patents and Product-Specific Patents
(including those available under the Hatch-Waxman Act).  The Parties will cooperate with each other in
gaining patent term restorations, extensions and/or SPCs wherever applicable to
Licensed Patents and Product-Specific Patents. 
If more than one patent is eligible for extension or patent term 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

57

 

restoration, Genzyme will
determine, in its sole discretion, a strategy that will be designed to maximize
patent protection and commercial value for the Product, and the Parties will
seek patent term restorations in accordance with that strategy.  The Party who is responsible under this
Agreement for prosecution and maintenance of the relevant Patent will make the
filings for such extensions and certificates as directed by Genzyme.  Each Party will execute such authorizations and
other documents and take such other actions as may be reasonably requested by
the other Party to obtain such extensions.

 

9.9.          Orange Book Listings.  At least fifteen
(15) business days prior to the expiration of the time period under 21 C.F.R. §
314.53, or any successor regulation, for submitting patent information
pertaining to Product-Specific Patents, Licensed Product Patents, Isis Core
Technology Patents or Isis Manufacturing and Analytical Patents with respect to
the Product, Genzyme will submit to Isis any such draft submission, including
any forms such as Form FDA 3542, Form FDA 3542a or any equivalent
thereof, for Isis’ review and comment. 
Genzyme will consider in good faith any comments made by Isis pursuant
to this Section.  In the event that the
Parties, after good faith discussions, cannot agree with respect to any
decision to be made concerning such submission of patent information, Genzyme
will make such decision.

 

9.10.        Cooperative Research and
Technology Act Acknowledgement.  The Parties acknowledge and agree that this
Agreement is a joint research agreement for the purposes of Section 35
U.S.C. 103(c).

 

9.11.        Common Interest.  All information exchanged between the Parties
representatives regarding the preparation, filing, prosecution, maintenance, or
enforcement of the Product-Specific Patents and Licensed Patents will be deemed
Confidential Information.  In addition,
the Parties acknowledge and agree that, with regard to such preparation,
filing, prosecution, maintenance, and enforcement of the Product-Specific
Patents and Licensed Patents, the interests of the Parties as collaborators and
licensor and licensee are to obtain the strongest patent protection possible,
and as such, are aligned and are legal in nature.  The Parties agree and acknowledge that they
have not waived, and nothing in this Agreement constitutes a waiver of, any
legal privilege concerning the Product-Specific Patents and the Licensed
Patents, including privilege under the common interest doctrine and similar or
related doctrines.

 

9.12.        Product Trademarks.  Genzyme will select and own the Product
Trademarks for the Product and will be solely responsible for applying for and
maintaining registrations the Product Trademarks in the Territory (including
payment of costs associated therewith), and all goodwill associated therewith
will inure to the benefit of Genzyme. 
All costs incurred by Genzyme to apply for and maintain Product
Trademarks, will be included as Program Costs. 
Genzyme will assume full responsibility, at its sole cost and expense,
for any infringement of a Product Trademark by a Third Party, and will defend
and indemnify Isis for and against any claims of infringement of the rights of
a Third Party by the use of a Product Trademark in connection with the Product
in accordance with Section 10.3 (Indemnification).

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

58

 

Article 10.

REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION

 

10.1.        Representations and
Warranties of Both Parties.  Each Party hereby represents and warrants to
the other Party as of the Execution Date that:

 

10.1.1.         it is a duly organized and
validly existing corporation under the laws of its jurisdiction of
incorporation;

 

10.1.2.         it has the power and
authority and the legal right to enter into this Agreement and perform its
obligations hereunder, and that it has taken all necessary action on its part
required to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder;

 

10.1.3.         the execution
and delivery of this Agreement and the performance of such Party’s obligations
hereunder do not conflict with or violate any requirement of Applicable Law or
any provision of its articles of incorporation or similar organizational
documents, its bylaws, or the terms or provisions of any agreement or other
instrument to which it is a party or by which it is bound, or any order, award,
judgment or decree to which it is a party or by which it is bound; and

 

10.1.4.         this Agreement has been duly
executed and delivered on behalf of such Party and constitutes a legal, valid
and binding obligation of such Party and is enforceable against it in
accordance with its terms subject to the effects of bankruptcy, insolvency or
other laws of general application affecting the enforcement of creditor rights
and judicial principles affecting the availability of specific performance and
general principles of equity, whether enforceability is considered a proceeding
at law or equity.

 

10.2.        Isis’ Representations and
Warranties.  Isis
represents and warrants to Genzyme that the statements contained in this Section 10.2
are true and correct as of the Execution Date with each such representation and
warranty subject only to such exceptions, if any, as are set forth in the
particular section in the Disclosure Schedule attached hereto as Exhibit F
that corresponds to the particular section number in this Agreement:

 

10.2.1.     Schedule 1.52,  Schedule
1.56 and Schedule 1.99 set forth true, correct and complete lists of
all Isis Core Technology Patents, Isis Manufacturing and Analytical Patents,
and Product-Specific Patents, respectively, and all Licensed Patents used in
the development or commercialization of Mipomersen and existing as of the
Execution Date and indicates whether each such Patent is owned by Isis or
licensed by Isis from a Third Party and if so, identifies the licensor or
sublicensor from which the Patent is licensed.

 

10.2.2.     A true, correct and complete
list of any Third Party Agreements related to Mipomersen and a true and
accurate calculation of the royalty burden for Mipomersen (as it exists on the
Execution Date) is set forth on Schedule 10.2.2.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

59

 

	
  10.2.3.

  	
   

  	
  With respect to the Licensed Patents and all Know-How that is
  developed by Isis or received by Isis under an agreement with a Third Party
  that is used in the development or commercialization of Mipomersen [**], Isis
  has the sufficient legal and/or beneficial title and ownership or rights to
  grant the Product License to Genzyme under such Licensed Patents and Know-How
  and the grant of such license to Genzyme does not violate the terms of any
  Third Party Agreement or any other agreement Isis has with a Third Party.

  
	
   

  	
   

  	
   

  
	
  10.2.4.

  	
   

  	
  Isis exclusively owns all rights, title, and interests in, and has
  good and marketable title to, (a) the Product-Specific Patents and the
  [**]Patent (b) any other Patent identified on Schedule 1.52 or  Schedule
  1.56 as being owned by Isis, free of any lien, encumbrance, restriction,
  or other right or interest granted to any Third Party. Isis owns or Controls
  all Know-How developed by Isis or received by Isis under an agreement with a
  Third Party that is used in the development or commercialization of
  Mipomersen [**].

  
	
   

  	
   

  	
   

  
	
  10.2.5.

  	
   

  	
  Each of the Product-Specific Patents, and each of the Licensed
  Patents used in the development or commercialization of Mipomersen properly
  identifies each and every inventor of the claims thereof as determined in
  accordance with the laws of the jurisdiction in which such Patent is issued
  or such application is pending.

  
	
   

  	
   

  	
   

  
	
  10.2.6.

  	
   

  	
  With respect to all Product-Specific Patents owned by Isis, and all
  Licensed Patents owned by Isis and used in the development or
  commercialization of Mipomersen, (a) each person who has or has had any
  rights in or to each of such Patents has executed an agreement assigning his,
  her or its entire right, title and interest in and to such Patents to Isis
  and (b) to the best of Isis’ knowledge, each such inventor has complied
  in all material respects with all applicable duties of candor and good faith
  in dealing with any patent office, including the duty to disclose to any
  applicable patent office all information known to be material to
  patentability.

  
	
   

  	
   

  	
   

  
	
  10.2.7.

  	
   

  	
  To the best of Isis’ knowledge, no circumstances or grounds exist
  that would invalidate, reduce or eliminate, in whole or in part, the
  enforceability, validity or scope of any Product-Specific Patent or any
  Licensed Patent used in the development or commercialization of Mipomersen.

  
	
   

  	
   

  	
   

  
	
  10.2.8.

  	
   

  	
  Isis is not aware of any Patents or Know-How owned or Controlled by a
  Third Party that would be infringed by Genzyme during the development or
  commercialization of Mipomersen in its current form. To the best of Isis’
  knowledge, Isis has not misappropriated from any Third Party any Know-How
  used in the development or commercialization of Mipomersen.

  
	
   

  	
   

  	
   

  
	
  10.2.9.

  	
   

  	
  To the best of Isis’ knowledge, no actions, suits, claims, disputes or
  proceedings concerning the Licensed Patents are currently pending or are
  threatened, that if determined adversely to Isis would have a material
  adverse effect on or would impair Genzyme’s rights under the Product License.

  

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

60

 

	
  10.2.10.

  	
   

  	
  Isis is not subject to any agreement with any Third Party or to any
  outstanding order, judgment or decree of any court or administrative agency
  that restricts it in any way from granting to Genzyme the Product License.

  
	
   

  	
   

  	
   

  
	
  10.2.11.

  	
   

  	
  Isis has not granted, or permitted to be attached, and it will not
  grant or permit to be attached, any lien, security interest or other
  encumbrance with respect to any Product-Specific Patent, or any Licensed
  Patent or Know-How used in the development or commercialization of Mipomersen
  which would adversely affect the rights granted to Genzyme hereunder.

  
	
   

  	
   

  	
   

  
	
  10.2.12.

  	
   

  	
  Each Third Party Agreement related to Mipomersen is in full force and
  effect, and Isis, and to the best of Isis’ knowledge, each counterparty
  thereto, is in compliance in all material respects with all such Third Party
  Agreements and no circumstances or grounds exist that would reasonably be
  expected to give rise to a claim of material breach or right of rescission,
  termination, revision or amendment of such Third Party Agreements.

  
	
   

  	
   

  	
   

  
	
  10.2.13.

  	
   

  	
  Isis has not assigned, licensed, sublicensed, granted any interest in
  or options to, or entered into an agreement with respect to the Licensed IP
  with a Third Party that would adversely impair Genzyme’s exclusive rights
  under this Agreement, except for the agreements identified on Schedule 2.1.

  
	
   

  	
   

  	
   

  
	
  10.2.14.

  	
   

  	
  Isis has not received any claim alleging that Isis’ development of
  Mipomersen or use of any Product-Specific Patent or any Licensed Patent or
  Know-How used in the development or commercialization of Mipomersen
  interferes with, infringes, or misappropriates any intellectual property
  rights of any Third Party (including any claim that Isis must license or
  refrain from using any intellectual property rights of any Third Party in
  order to develop, make, use, sell or offer for sale Mipomersen or any product
  or technology using or incorporating the Licensed IP), and to the best of
  Isis’ knowledge, the development and commercialization of Mipomersen and the
  use of any Product-Specific Patent or any Licensed IP used in the development
  or commercialization of Mipomersen will not interfere with, infringe or
  misappropriate the intellectual property rights of any Third Party. To the
  best of Isis’ knowledge, no Third Party has interfered with, infringed upon
  or misappropriated the Licensed IP in the making, using or selling of a lipid
  lowering product.

  
	
   

  	
   

  	
   

  
	
  10.2.15.

  	
   

  	
  Isis holds, and is operating in material compliance with, such
  exceptions, permits, licenses, franchises, authorizations and clearances of
  any governmental entity required in connection with the current development
  of Mipomersen. Isis has not received any warning letters or written
  correspondence from any governmental entity requiring the termination,
  suspension or modification of any clinical or pre-clinical studies or tests
  with respect to Mipomersen. Isis has conducted and required its contractors
  to conduct all clinical studies related to Mipomersen in accordance with
  cGCP, cGLP and Applicable Law.

  

 

[**] = Portions of this exhibit have been omitted pursuant
to a confidential treatment request.  An unredacted version of this
exhibit has been filed separately with the Commission.

 

61

 

	
  10.2.16.

  	
   

  	
  As of the Execution Date, Isis has prepared, maintained and retained
  all Regulatory Materials required to be maintained or reported pursuant to
  and in accordance with Applicable Law and the Regulatory Materials do not
  contain any materially false or misleading statements.

  
	
   

  	
   

  	
   

  
	
  10.2.17.

  	
   

  	
  Except for the agreements identified on Schedule 2.1, Isis has
  not granted to any Third Party rights under the Licensed IP to research,
  develop or commercialize any nucleic acid that hybridizes to a nucleic acid
  molecule encoding apoB.

  

 

10.3.                        Indemnification.

 

10.3.1.               Indemnification by Genzyme.  Genzyme will indemnify, hold harmless, and
defend Isis, its Affiliates, and their respective directors, officers,
employees and agents (“Isis Indemnitees”) from and against any and all
action, losses, liabilities, damages, costs, fees and expenses (including
reasonable attorneys’ fees) arising from a claim, suit, proceeding or other
action of a Third Party (collectively, “Losses”) arising out of or
resulting from, (a) any breach of, or inaccuracy in, any representation or
warranty made by Genzyme in this Agreement, or any breach or violation of any
covenant or agreement of Genzyme in or pursuant to this Agreement, and (b) the
gross negligence or willful misconduct by or of Genzyme, its Affiliates and
their respective directors, officers, employees and agents.  This indemnification excludes Losses arising
out of Third Party Infringement Claims resulting from Genzyme’s exercise in
accordance with the terms of this Agreement of any intellectual property rights
granted by Isis hereunder, including Genzyme’s exercise of its rights under the
Product-Specific Patents.  Furthermore,
Genzyme will have no obligation to indemnify the Isis Indemnitees to the extent
that the Losses arise out of or result from, directly or indirectly, any breach
of, or inaccuracy in, any representation or warranty made by Isis in this
Agreement, or any breach or violation of any covenant or agreement of Isis in
or pursuant to this Agreement, or the negligence or willful misconduct by or of
any of the Isis Indemnitees.

 

10.3.2.               Indemnification by Isis.  Isis will indemnify, hold harmless, and
defend Genzyme, its Affiliates and their respective directors, officers,
employees and agents (“Genzyme Indemnitees”) from and against any and
all Losses arising out of or resulting from, (a) any breach of, or
inaccuracy in, any representation or warranty made by Isis in this Agreement,
or any breach or violation of any covenant or agreement of Isis in or pursuant
to this Agreement, (b) actions taken by Isis with respect to Mipomersen,
the Product, the Licensed IP or the Product-Specific Patents prior to the
Execution Date, and (c) the gross negligence or willful misconduct by
Isis, its Affiliates, and their respective directors, officers, employees and
agents.  Isis will have no obligation to
indemnify the Genzyme Indemnitees to the extent that the Losses arise out of or
result from, directly or indirectly, any breach of, or inaccuracy in, any
representation or warranty made by Genzyme in this Agreement, or any breach or
violation of any covenant or 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

62

 

agreement of Genzyme in or
pursuant to this Agreement, or the negligence or willful misconduct by or of
any of the Genzyme Indemnitees.

 

10.3.3.               Special Indemnification for
Manufacturing Defects.  Each
Party will indemnify, hold harmless, and defend the other Party and its
Affiliates and their respective directors, officers, employees and agents from
and against any and all Losses arising out of or resulting from product
liability claims resulting from the failure of any API or Product manufactured
by such Party (or a Third Party on behalf of such Party) to conform to the
applicable specifications or any failure of such Party (or a Third Party on
behalf of such Party) to meet the standards of cGMP for the API or
Product.  Neither Party will have any
obligation to indemnify the other Party and its related indemnitees to the
extent that the Losses arise out of or result from, directly or indirectly, any
breach of, or inaccuracy in, any representation or warranty made by the other
Party in this Agreement, or any breach or violation of any covenant or
agreement of the other Party in or pursuant to this Agreement, or the gross
negligence or willful misconduct by or of any of the other Party or its related
indemnitees.  Notwithstanding the foregoing,
the indemnification obligations of each Party set forth in this Section 10.3.3
(Special Indemnification for Manufacturing Defects) will only apply to the
extent that there would be a Net Loss if such Damages were included in Program
Costs in the applicable calendar year. 
In other words, the manufacturing Party will be required to indemnity
the other Party under this Section 10.3.3 only to the extent there are
insufficient Net Revenue in the applicable calendar year to permit such Damages
to be fully credited as Program Costs.

 

10.3.4.               Damages that are Program
Costs.  The indemnification
obligations of each Party set forth in Section 10.3.1 (Indemnification by
Genzyme) and 10.3.2 (Indemnification by Isis) will exclude any Losses resulting
from Damages to the extent that the Indemnitee has been reimbursed for such
Damages by virtue of the inclusion of such Damages in Program Costs.

 

10.3.5.               Indemnification Procedure.  In the event of any
claim, suit, proceeding or action of a Third Party (a “Third Party Claim”)
giving rise to an indemnification obligation under this Section 10.3,
the person or entity entitled to indemnification under this Section 10.3
(individually, an “Indemnitee”), will promptly notify the Party from
whom indemnification is sought (the “Indemnifying Party”), in writing of
the Third Party Claim (it being understood and agreed, however, that the
failure by an Indemnitee to give notice of a Third Party Claim as provided in
this Section 10.3 will not relieve the Indemnifying Party of its
indemnification obligation under this Agreement, except and only to the extent
that such Indemnifying Party is actually prejudiced as a result of such failure
to give notice).  The Indemnifying Party
will manage and control, at its sole expense, the defense of the claim and its
settlement.  Within thirty (30) days
after delivery of such notification, the Indemnifying Party may, upon written
notice to the Indemnitee, assume control of the defense of such Third Party
Claim with counsel reasonably satisfactory to the Indemnitee.  The Indemnitee may participate therein 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

63

 

at its own expense; provided,
however, that if the Indemnifying Party assumes control of such defense
and the Indemnitee reasonably concludes, based on advise from counsel, that the
Indemnifying Party and the Indemnitee have conflicting interests with respect
to such Third Party Claim, the Indemnifying Party will be responsible for the
reasonable fees and expenses of counsel to the Indemnitee solely in connection
therewith; provided  further, however, that in no event
will the Indemnifying Party be responsible for the fees and expenses of more
than one counsel in any one jurisdiction for all Indemnified Parties.  If the Indemnifying Party does not assume
control of the defense of the Third Party Claim within thirty (30) days after
delivery of Indemnitee’s notice of such claim and request for indemnification,
the Indemnitee(s) may defend such Third Party Claim. Each Party will keep
the other Party advised of the status of such Third Party Claim and the defense
thereof, and the Indemnifying Party will consider recommendations made by the
other Party with respect thereto.  If the
Indemnifying Party does assume control of the defense of the Third Party Claim,
the Indemnifying Party will not agree to any settlement of such Third Party
Claim or consent to any judgment in respect thereof that does not include a
complete and unconditional release of the Indemnitee from all liability with
respect thereto or that imposes any liability or obligation on the Indemnitee
without the prior written consent of the Indemnitee.  The Indemnifying Party will not be obligated
to indemnify the Indemnitee(s) for any Third Party Claim settled by the
Indemnitee(s) without the Indemnifying Party’s prior written consent,
which consent will not be unreasonably withheld, delayed or conditioned.

 

10.4.                        Insurance.  The parties will
obtain by the Execution Date and maintain at all times during
the term of this Agreement, Products Liability Insurance, including
Clinical Trial coverage, with reputable and financially secure insurance
carriers each having an A.M. Best rating of [**] or better, to
cover their respective indemnification obligations under Section 10.3
(Indemnification), with limits of not less than [**] dollars [**] per
occurrence and [**] dollars [**] in the aggregate.  Each party will
provide the other with a Certificate of Insurance evidencing this coverage
within thirty (30) days after the Execution Date.  Genzyme will have
the right to maintain self-insurance with respect to all or a part of its
insurance obligations under this Section 10.4.

 

Article 11.

TERM AND
TERMINATION

 

11.1.                        Term.  The term of this Agreement (the “Term”)
commences on the Effective Date and, unless earlier terminated in accordance
with the provisions of this Article 11, will continue in
perpetuity.

 

11.2.                        Termination.

 

11.2.1.               Genzyme Right to Terminate.  At any time during the Term, but following
payment by Genzyme of the upfront license fee under Section 8.1,
Genzyme will be entitled to terminate this Agreement by providing written
notice to Isis of such 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

64

 

termination.

 

11.2.2.               Termination for Material
Breach.

 

(a)           If either Party believes that the other Party is in
material breach of this Agreement (other than with respect to Genzyme’s failure
to use Commercially Reasonable Efforts under Section 5.2.2
(Performance of the Development Program) or Section 6.1
(Commercialization Responsibilities) or Section 7.3 (Research Efforts),
which is governed by Section 11.2.3 below), then the non-breaching
Party may deliver notice of such breach to the other Party.  In such notice, the non-breaching Party will
identify the actions or conduct that it wishes such Party to take for an
acceptable and prompt cure of such breach (or will otherwise state its good
faith belief that such breach is incurable); provided, however,
that such identified actions or conduct will not be binding upon the other
Party with respect to the actions that it may need to take to cure such
breach.  If the breach is curable, the
allegedly breaching Party will have ninety (90) days to either cure such breach
(except to the extent such breach involves the failure to make a payment when
due, which breach must be cured within thirty (30) days following such notice)
or, if a cure cannot be reasonably effected within such ninety (90) day period,
to deliver to the non-breaching Party a plan for curing such breach which is
reasonably sufficient to effect a cure within a reasonable period.  If the breaching Party fails to (a) cure
such breach within the ninety (90) day or thirty (30) day period, as
applicable, or (b) use Commercially Reasonable Efforts to carry out the
plan and cure the breach, the non-breaching Party may terminate this Agreement
by providing written notice to the breaching Party.

 

(b)           Notwithstanding the foregoing, if the allegedly breaching
Party disputes in good faith the existence, materiality, or failure to cure of
any such breach which is not a payment breach, and provides notice to the
non-breaching Party (the “Other Party”) of such dispute within such
ninety (90) day period or such other reasonable cure period, as applicable, the
Other Party will not have the right to terminate this Agreement in accordance
with this Section 11.2.2 unless and until it has been determined in
accordance with Article 13 (Dispute Resolution) that this Agreement
was materially breached by the allegedly breaching Party and that Party fails
to cure such breach within the allowed cure period following such
determination.  It is understood and
acknowledge that during the pendency of such dispute, all the terms and
conditions of this Agreement will remain in effect and the Parties will
continue to perform all of their respective obligations hereunder.

 

(c)           This Section 11.2.2 will be subject to and
will not limit the provisions of Section 11.2.3 (Termination by
Isis for Failure of Genzyme to Use Commercially Reasonable Efforts) and Section 11.3
(Consequences of Termination).

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

65

 

11.2.3.               Termination by Isis for
Failure of Genzyme to Use Commercially Reasonable Efforts.

 

(a)           Subject to Sections 11.2.3(b) and 11.2.3(c) below,
Isis will have the right to terminate this Agreement on (i) a Major Market
Country-by-Major Market Country basis if Genzyme is in material breach of its
obligations to use Commercially Reasonable Efforts (A) under Section 5.2.2
(Performance of the Development Program) to develop the Product in such Major
Market Country or (B) under Section 6.1 (Commercialization
Responsibilities) to commercialize the Product in such Major Market Country and
(ii) in its entirety if Genzyme is in material breach of its obligations
to use Commercially Reasonable Efforts (A) under Section 5.2.2
(Performance of the Development Program) to develop the Product in all Major
Market Countries or (B) under Section 6.1 (Commercialization
Responsibilities) to commercialize the Product in all Major Market Countries or
(C) under Section 7.3 (Research Efforts) to conduct research
activities designed to advance a Product to the stage where it can be developed
pursuant to a Development Plan. 
Notwithstanding the foregoing, the Agreement will not so terminate (in
its entirety or in any particular Major Market Country) unless (x) Genzyme
is given ninety (90) days prior written notice by Isis of Isis’ intent to
terminate, stating the reasons and justification for such termination and
recommending steps which Genzyme should take and (y) Genzyme or its
Sublicensee has not used good faith Commercially Reasonable Efforts in such
Major Market Country(ies) during the ninety (90) day period following such
notice to diligently pursue the development and/or commercialization of the
Product.

 

(b)           It is understood and acknowledged that if Genzyme (by
itself or through its Affiliates or Sublicensees) uses Commercially Reasonable
Efforts to research, develop or commercialize a Product in each and every Major
Market Country, Genzyme will be deemed to be in compliance with its obligation
under Section 5.2.2 (performance of Development Program), Section 
6.1 (Commercialization Responsibilities) and Section 7.3 (Research
Efforts) to use Commercially Reasonable Efforts to research, develop and
commercialize a Product with respect to all countries in the world.

 

(c)           If Genzyme disputes in good faith the existence or
materiality of an alleged breach specified in a notice provided by Isis
pursuant to Section 11.2.3(a) above, and provides notice to
Isis of such dispute within the ninety (90) day period following such notice
provided by Isis, Isis will not have the right to terminate this Agreement
unless and until the existence of such material breach or failure by Genzyme
has been determined in accordance with Article 13 and Genzyme fails
to cure such breach within ninety (90) days following such determination.  It is understood and acknowledged that during
the pendency of such dispute, all the terms and conditions of this Agreement
will remain in effect and the Parties will continue to perform all of their
respective obligations hereunder.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

66

 

(d)           This Section 11.2.3 and Section 11.3
(Consequences of Termination) set forth Isis’ sole and exclusive remedy for
Genzyme’s breach of its obligation to use Commercially Reasonable Efforts under
Section 5.2.2 (Performance of the Development Program) or Section 6.1
(Commercialization Responsibilities) or Section 7.3 (Research Efforts).

 

11.3.                        Consequences of
Termination.  The
following terms will apply on termination of this Agreement:

 

11.3.1.               Licenses.  Upon termination of this Agreement by either
Party pursuant to this Article 11, the Product License will
terminate and Genzyme, its Affiliates and Sublicensees will cease selling the
Product.

 

11.3.2.               Return of Information and
Materials.  Upon
termination of this Agreement by either Party pursuant to this Article 11,
the Parties will return (or destroy, as directed by the other Party) all data,
files, records and other materials containing or comprising the other Party’s
Confidential Information. Notwithstanding the foregoing, the Parties will be
permitted to retain one copy of such data, files, records, and other materials
for archival purposes.

 

11.3.3.               Accrued
Rights. Termination of this
Agreement for any reason will be without prejudice to any rights or financial
compensation that will have accrued to the benefit of a Party prior to such
termination or expiration. Such termination or expiration will not relieve a
Party from obligations that are expressly indicated to survive the termination or
expiration of this Agreement.  For
clarification, (a) no milestone payments under Section 8.2
(Milestones) and (b) no payments under Section 8.5.2 (Sharing
of Net Profits) will be payable by Genzyme following termination of this
Agreement, except to the extent that the milestone event was achieved (in the
case of milestone payments) or the Net Profits were achieved (in the case of
net profit sharing) prior to such termination.

 

11.3.4.               Survival.  The following provisions of this Agreement
will survive the expiration or termination of the Agreement:  Section 6.5 (Safety Reporting),  Section 8.8
(Audits and Interim Reviews), Section 9.3.2 (Terms of Sharing
Agreement), Section 10.3 (Indemnification), Section 11.3
(Consequences of Termination), Section 11.4 (Remedies for Isis’
Material Breach), Article 12 (Confidentiality), Article 13
(Dispute Resolution), and Article 14 (Miscellaneous).

 

11.3.5.               Reversion.

 

(a)           Isis Reversion Rights.  If (a) Genzyme terminates the Agreement
under Section 11.2.1 (Genzyme Right to Terminate) or (b) Isis
terminates the Agreement under Section 11.2.2 (Termination for
Material Breach) or Section 11.2.3 (Termination by Isis for Failure
of Genzyme to Use Commercially Reasonable Efforts), Genzyme will:

 

(i)                                     grant to Isis a
non-exclusive, sublicensable, worldwide license to 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

67

 

any Product Trademarks,
Genzyme Program Patents and other Patents owned or Controlled by Genzyme as of
the date of termination that Cover the Product;

 

(ii)                                  transfer to
Isis, for Isis’ use with respect to the development and commercialization of
the Product, any data, results, Regulatory Materials and files in Genzyme’s
possession as of the date of termination that relate solely to the Product; and

 

(iii)                               re-assign to
Isis the Product-Specific Patents assigned to Genzyme pursuant to Section 9.1.1
(Assignment of Product-Specific Patents) using a form of assignment
substantially similar to the one attached as Exhibit E hereto
(collectively with clauses (i) and (ii) above, the “Reversion”).

 

(b)           Limitation. 
Isis hereby agrees and acknowledges that it may only use the license
granted and the materials transferred pursuant to clauses (a)(i) and (a)(ii) of
Section 11.3.5(a) in connection with the development and
commercialization of the Product for therapeutic purposes.

 

(c)           Consideration for Reversion Rights.

 

(i)                                     In
consideration for the rights granted and materials transferred by Genzyme to
Isis under Section 11.3.5(a) above, Isis will pay to Genzyme a
royalty on Net Revenue as follows: (a) [**] of Net Revenue if the
Reversion occurs prior to [**], (b) [**] of Net Revenue if the Reversion
occurs after the [**] but prior to the [**] and (c) [**] of Net Revenue if
the Reversion occurs after the [**] and at the time of or after the [**].

 

(ii)                                  Such payments
will be governed by the financial provisions in Sections 8.6 (Periodic
Reporting and Reconciliation), 8.7 (Audits and Interim Reviews), 8.9
(Withholding Taxes) and 8.10 (Interest on Late Payments).  In addition, the definition of Net Sales will
apply to Isis in the same way as they applied to Genzyme prior to such
termination of the Agreement.

 

(iii)                               Notwithstanding
the foregoing, in no event will the total royalty payable to Genzyme exceed the
aggregate amount of Program Costs that Genzyme has contributed to the Product,
with interest thereon at ten percent (10%) per calendar year, compounded
monthly, net of any amounts paid for by Isis or covered by Net Revenue.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

68

 

11.4.                        Remedies for
Isis’ Material Breach.

 

11.4.1.            Termination of Committees
and Information Sharing.  If Isis materially breaches this Agreement and fails
to cure such breach within the time periods provided under Section 11.2.2   (Termination
for Material Breach) and Genzyme does not wish to terminate this Agreement in
its entirety, then, in addition to any other remedies Genzyme may have under
this Agreement or otherwise, Genzyme will have the right to do any or all
of the following in Genzyme’s discretion: (a) terminate Isis’ right to
participate in the JDC and JPC and any other subcommittees or working groups
established pursuant to this Agreement, each of which will be disbanded; (b) terminate
the participation of Isis in any ongoing research and development programs and
Genzyme’s funding obligations associated therewith, (c) make all decisions
required to be made by such committees or the Parties collectively under this
Agreement in connection with the development and commercialization of the
Product, (d) exclude Isis from all discussions with Regulatory Authorities
regarding Isis Products, (e) require Isis to assign to Genzyme all of Isis’
right, title and interests in any IND or other Regulatory Materials then held
by Isis pertaining to Products and any agreements with Third Parties related
solely to the development or supply of the Product; (f) require Isis to
enable Genzyme or a Third Party manufacturer to manufacture clinical and
initial commercial quantities of the Product in lieu of Isis, with such
transition occurring on a commercially reasonable timetable; (g) terminate
Genzyme’s obligation to make further disclosures of Know-How or other information
to Isis pursuant to this Agreement (including pursuant to Section 5.4.2 (Transfer from Genzyme to Isis)
and Section 6.4 (Isis Safety Database)), other than
reports required by Section 8.6 (Periodic Reporting and
Reconciliation) and as reasonably required to permit Isis to perform its
remaining obligations under this Agreement. 
In addition, if Isis has not completed the development activities that
are its responsibility under this Agreement, then Genzyme may, but will not be
obligated to, assume all responsibility for all such development activities
that would have otherwise been Isis’ responsibility under the Agreement.  Isis will cooperate with the foregoing and
provide to Genzyme and its Third Party contractors all Know-How, assistance,
assignments and other support reasonably requested to assist Genzyme in
assuming complete responsibility for the development and manufacture of the
Product in an efficient and orderly manner.

 

11.4.2.            Genzyme’s Right of Setoff.  If
Isis materially breaches this Agreement and fails to cure such breach within
the time periods provided under Section 11.2.2   (Termination
for Material Breach) and Genzyme does not wish to terminate this Agreement in
its entirety, then, in addition to any other remedies Genzyme may have under
this Agreement or otherwise (an “Isis Breach Event”), Genzyme may setoff against any amounts owed to Isis pursuant to Article 8 (Financial Provisions) its good faith estimate of the
amount of any losses, damages and expenses incurred by Genzyme as a result of
Isis’ breach of this Agreement (the “Setoff Amount”).  If Genzyme exercises its
setoff right under this Section 11.4.2, Genzyme will provide Isis with a
written certificate, signed by Genzyme’s Chief Financial Officer, certifying
that the amount setoff by Genzyme represents 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

69

 

Genzyme’s good faith estimate of such losses, damages and expenses.  Notwithstanding the foregoing, if Isis
notifies Genzyme in writing that it disputes Genzyme’s assertion that Isis is
in material breach of this Agreement or the amount setoff by Genzyme, then (a) Genzyme
will initiate the dispute resolution process set forth in Article 13
(Dispute Resolution), and (b) pending the Parties’ agreement
regarding the appropriate setoff (if any) or a determination by the mediator of
the proper amount that Genzyme may setoff (if any) in accordance with Section 13.2
(Mediation), Genzyme will pay the Setoff Amount into an interest-bearing escrow account established for the purpose at a
bank.  If the Parties cannot settle their
dispute by mutual agreement, then, in accordance with Section 13.2.2
(Mediation of Setoff Disputes) the mediator will determine (1) the amount
(if any) that Genzyme may setoff against future payments to Isis going forward,
and (2) whether any portion of the escrow account should be released to
Isis.  In the event that it is finally
determined pursuant to Article 13  (Dispute Resolution) by a court of competent
jurisdiction that Genzyme has setoff an amount that exceeds the amount of
losses, damages and expenses actually incurred by Genzyme as a result of Isis’
breach of this Agreement, then Genzyme will promptly pay Isis the amount of
such excess, plus interest on such amount as provided for in Section 8.10 (Interest on
Late Payments), with interest accruing from the time Genzyme applied such
excess setoff.

 

Article 12.

CONFIDENTIALITY; PUBLIC DISCLOSURE

 

12.1.                        Non-Disclosure.  Genzyme and Isis agree that all information
relating to the Licensed IP, the terms and conditions of this Agreement, or any
activities conducted in connection with or pursuant to this Agreement and
disclosed by either Party in accordance with this Agreement (“Confidential
Information”) will be used and disclosed by the receiving Party only to
perform its obligations and exercise its rights under this Agreement.  Information relating to the development of
the Product, the Licensed IP and the terms and conditions of this Agreement
will be considered the Confidential Information of both Parties under the
Agreement, as if both Parties were receiving Parties.  Notwithstanding the foregoing, “Confidential
Information” will not include information that the receiving Party can
establish:

 

(a)           was already known by the receiving Party (other than under
an obligation of confidentiality) at the time of disclosure by the disclosing
Party;

 

(b)           was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving Party;

 

(c)           became generally available to the public or otherwise part
of the public domain after its disclosure or development, as the case may be,
other than through any act or omission of the receiving Party or any of its
Affiliates;

 

(d)           was disclosed to the receiving Party, other than under an
obligation of 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

70

 

confidentiality, by a Third
Party who had no obligation to the disclosing Party not to disclose such
information to others; or

 

(e)           was independently discovered or developed by or on behalf
of the receiving Party without the use of any Confidential Information
belonging to the disclosing Party.

 

12.2.                        Authorized
Disclosure and Use.  Notwithstanding the foregoing provisions of Section 12.1,
each Party may disclose Confidential Information belonging to the other Party
to the extent such disclosure is reasonably necessary to:

 

(a)           prosecute or defend litigation,

 

(b)           comply with applicable governmental laws and regulations
(including the rules and regulations of the Securities and Exchange Commission); or

 

(c)           make filings and submissions to, or correspond or
communicate with, any government authority.

 

In the event a Party deems it reasonably
necessary to disclose Confidential Information belonging to the other Party
pursuant to clauses (a), (b) and (c) of this Section 12.2,
the disclosing Party will to the extent possible give reasonable advance notice
of such disclosure to the other Party and take reasonable measures to ensure
confidential treatment of such information. 
Each Party will promptly notify the other Party upon becoming aware of
any misappropriation or unauthorized disclosure or use of the other Party’s
Confidential Information.

 

12.3.                        Terms of
Agreement.  The Parties
agree that the terms of this Agreement are confidential and will not be
disclosed by either Party to any Third Party (except to a Party’s professional
advisors, including, without limitation, accountants, financial advisors, and
attorneys) without prior written permission of the other Party; provided,
however, that (a) either Party may
make any filings of this Agreement required by Applicable Law in any country so
long as such Party uses its reasonable efforts to obtain confidential treatment
for portions of this Agreement as available, consults with the other Party, and
permits the other Party to participate, to the greatest extent practicable, in
seeking a protective order or other confidential treatment; (b) either
Party may disclose this Agreement on a confidential basis to potential Third
Party investors or acquirers or, in the case of Genzyme, to potential
Sublicensees, in each case in connection with due diligence or similar
investigations; and (c) a Party may publicly disclose, without regard to
the preceding requirements of this Article 12 (Confidentiality),
information that was previously publicly disclosed in compliance with such
requirements.

 

12.4              Public Disclosures.

 

(a)           The Parties have agreed upon, and from time to time will
agree upon updates to, a communication strategy document containing detailed
substantive messaging and a detailed fact sheet with respect to the
development, regulatory

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

71

 

Approval process,
manufacturing and commercialization of the Product (the “Communications Plan”).  The Communication Plan will identify agreed
spokespeople according to subject matter and will include a calendar detailing
events (investor and medical meetings, earnings dates, etc) and anticipated new
Product disclosures warranting press releases, updates to any slide
presentation or other communication materials. 
If the Parties are unable to agree upon the content of a particular
disclosure in any update to the Communications Plan, then the Party to whom the
Agreement assigns primary responsibility over the subject matter of the
disclosure will have the right to decide upon the appropriate content.  Accordingly, in the event of such a
disagreement, Isis will have the right to decide upon the appropriate
disclosure on scientific matters, and Genzyme will have the right to decide
upon the appropriate disclosure for pre-clinical and clinical development,
regulatory, and commercial matters.  If
any spokesperson identified in the Communications Plan leaves the employ of a
Party or changes roles such that it is no longer appropriate for him or her to
serve as a spokesperson, the Party who employs such spokesperson may designate
a replacement.

 

(b)           In addition, from time to
time the JDC will approve a scientific and medical publication plan (the “Scientific
Publication Plan”).  The Parties will
refrain from making any public communications or disclosures regarding the
Product other than those set forth in the Communications Plan or as expressly
contemplated by the Scientific Publication Plan.  Without limiting the generality of the
foregoing, except for the specific disclosures set forth in the Communication
Plan or as otherwise expressly contemplated by the Scientific Publication Plan,
each Party will refrain from making any public disclosures concerning (i) the
status of any Approval, (ii) any application for any Approval, or (iii) any
communication with or from any Regulatory Authority.  Isis will refer to Genzyme, in its capacity
as holder of the IND, NDA or other Approval (as applicable) for the Product,
any questions it may receive concerning these matters that call for information
beyond that provided in the Communications Plan.

 

(c)           To the extent that either Party
proposes to make any public disclosure that deviates from the Communications
Plan, it will submit to the other Party an initial draft of any press release,
slide presentation or other public communication for review and comment at
least five (5) Business Days in advance of such proposed public
communication.  In such event, each Party
will not make any public communication unless and until the Parties revise the
Communications Plan in accordance with Section 12.4(a) so as
to include the disclosure included in such proposed public communication.  For public disclosures that do not deviate
from the Communications Plan, each Party will submit to the other Party a draft
of any such public communication for review and comment at least forty-eight
(48) hours in advance of such public disclosure.  Notwithstanding any other provision of this
Agreement, however, each Party may at any time make any press release or other
public communication as it determines, based upon the advice of counsel, to be
necessary to comply with any public disclosure obligations under Applicable
Laws (including securities laws), so long as the announcing Party 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

72

 

provides the other Party at
least some advance notice (which will be at least forty-eight (48) hours
whenever possible) regarding the proposed public disclosure.  Genzyme may satisfy its notice obligation
under this Section 12.4 by emailing and
telephoning either Isis’ Chief Executive Officer or Chief Operating Officer,
and Isis may satisfy its notice obligation under this Section 12.4
by emailing and telephoning either the Genzyme
Senior Vice President, Cardiovascular or the Genzyme Senior Vice President of
Corporate Affairs.

 

(d)           Each Party will promptly
notify (and provide as much advance notice as possible to) the other of any
event materially related to Products (including any regulatory Approval) so
that the Parties may, subject to the provisions of subsections (a) and (b) of
this Section 12.4, analyze the need to or desirability of publicly
disclosing or reporting such event.

 

(e)           In accordance with Section 2.7
(Third Party Agreements), Isis will promptly provide Genzyme with any draft
publication relating to the Product submitted to it for review pursuant to any
agreement with any Third Party and will exercise its rights under any such
agreement to comment on such publication in consultation with and as reasonably
requested by Genzyme.  Isis will not
enter into any agreement after the Execution Date that grants any Third Party
the right to make public statements regarding the Product unless the form of
such agreement is approved in advance by Genzyme.

 

(f)            Unless otherwise
contemplated by the Scientific Publication Plan, Genzyme will serve as the
principal point of contact for any Third Party author intending to publish a
scientific or medical publication on matters with respect to which Genzyme is
assigned primary responsibility under this Agreement, and Isis will serve as
the principal point of contact for any such author on matters with respect to
which Isis is assigned primary responsibility under this Agreement.

 

Article 13.

DISPUTE RESOLUTION

 

13.1.        Escalation.  In the event of any dispute (other than a
dispute regarding the construction, validity or enforcement of either Party’s
Patents, which disputes will be resolved pursuant to Section 13.3
(Jurisdiction; Venue; Service of Process)) arising between the Parties relating
to, arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of this Agreement that cannot be
resolved by the Parties (each, a “Dispute”), either Party may make a
written request that the Dispute be referred for resolution to the chief
executive officers of each Party (or their designees) (the “Executives”).  Within sixty (60) days of either Party’s
written request that the Dispute be referred to the Executives, the Executives
will meet in person at a mutually acceptable time and location or by means of
telephone or video conference to negotiate a settlement of a Dispute.  Each Party may elect to have such Party’s JDC
representatives participate in such meeting, if desired, provided that it
provides the other Party with reasonable 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

73

 

advance notice of such
intent so as to enable the other Party to have its JDC representatives also
participate in such meeting, if desired. 
If the Executives fail to resolve the Dispute within such sixty (60) day
period and the Dispute concerns any matter that this Agreement delegates to the
JDC for determination, then Genzyme will be entitled to resolve the Dispute in
its sole discretion. For all other Disputes, in the event that the Executives
fail to resolve the Dispute within such sixty (60) day period the Dispute will
be referred to mediation under Section 13.2 (Mediation).

 

13.2.        Mediation.

 

13.2.1.     Mediation Generally.  If a Dispute cannot be resolved pursuant to Section 13.1
(Escalation), the Parties agree to try in good faith to resolve any such
Dispute by non-binding mediation administered by JAMS End Dispute  in accordance with its commercial mediation rules.  The mediation will be conducted by a single
mediator appointed by agreement of the Parties who will have previous judicial
experience, or failing such agreement by JAMS End Dispute in accordance with
its commercial mediation rules.  Unless
otherwise mutually agreed upon by the Parties, the mediation proceedings will
be conducted in Chicago.  The Parties
agree that they will share equally the cost of the mediation, including filing
and hearing fees, and the cost of the mediator(s).  Each Party will bear its own attorneys’ fees
and associated costs and expenses.

 

13.2.2.     Mediation of Setoff Dispute.

 

(a)           If Genzyme has exercised its setoff right under Section 11.4.2
(Genzyme’s Right of Setoff) and there is a Dispute regarding whether Isis is in
material breach of the Agreement or the proper amount of the setoff that the
Parties are unable to resolve in mediation pursuant to Section 13.2.1
(Mediation Generally), then at the completion of such mediation the mediator
will decide the following issues, which decision will be binding on the Parties
pending final resolution of the Dispute by a court of competent jurisdiction:

 

(i)            Whether the amount placed in escrow by Genzyme pursuant to Section 11.4.2
exceeds the mediator’s objective good faith estimate of the amount of any
losses, damages and expenses incurred or likely to be incurred by Genzyme as a
result of Isis’ breach of this Agreement;

 

(ii)           What amount (if any) may Genzyme setoff against future payments to Isis
under Section 11.4.2, which amount will represent the mediator’s objective
good faith estimate of the amount of any losses, damages and expenses incurred
or likely to be incurred by Genzyme as a result of Isis’ breach of this
Agreement.

 

(b)           If the mediator determines that the amount placed in escrow by Genzyme
pursuant to Section 11.4.2 exceeds the mediator’s objective good faith
estimate of he amount of any losses, damages and expenses incurred or likely to
be incurred 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

74

 

by Genzyme as a result of Isis’ breach of this Agreement, the Parties
will promptly cause the escrow agent to release to Isis the amount of such
excess, plus interest accruing on such amount in the escrow account.  The Parties will promptly cause the remaining
amount in the account to be returned to Genzyme.

 

(c)           If the mediator determines an appropriate amount that Genzyme may setoff
against future payments to Isis under Section 11.4.2, Genzyme may setoff
such amount directly, and will not be required to pay such amounts into any
escrow account.

 

(d)           The decisions rendered by
mediator with respect to the distribution of funds from the escrow account and
amount Genzyme may setoff going forward will be binding on the Parties pending
resolution of the Dispute by the agreement of the Parties or by a court of
competent jurisdiction in accordance with this Agreement.

 

13.2.3.     Legal Remedies.  If the Parties fail to reach an amicable
agreement pursuant to the non-binding mediation process set forth in Section 13.2
(Mediation) within sixty (60) days of the matter being referred to Mediation,
then either Party may pursue a legal remedy in accordance with Section 13.3
(Jurisdiction, Venue, Service of Process).

 

13.3.        Jurisdiction; Venue; Service
of Process.

 

13.3.1.     Jurisdiction.  Each Party by its execution hereof, (a) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court located in Chicago, Illinois for the purpose of any Dispute arising
between the Parties in connection with this Agreement (each, an “Action”)
and (b) hereby waives to the extent not prohibited by Applicable Law, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
Action, any claim that it is not subject personally to the jurisdiction of the
above-named court, that its property is exempt or immune from attachment or
execution, that any such Action brought in the above-named court should be
dismissed on grounds of forum non conveniens,
should be transferred or removed to any court other than the above-named court,
or should be stayed by reason of the pendency of some other proceeding in any
other court other than the above-named court, or that this Agreement or the
subject matter hereof may not be enforced in or by such court and (c) hereby
agrees not to commence any such Action other than before the above-named
court.  Notwithstanding the previous
sentence a Party may commence any Action in a court other than the above-named
court solely for the purpose of enforcing an order or judgment issued by the
above-named court.

 

13.3.2.     Venue.  Each Party agrees that for any Action between
the Parties arising in whole or in part under or in connection with this
Agreement, such Party bring Actions only in the federal courts of the United
States of America located in Chicago, Illinois and any appellate court having
jurisdiction over appeals from 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

75

 

such courts.  Each Party further waives any claim and will
not assert that venue should properly lie in any other location within the
selected jurisdiction.

 

13.3.3.     Service of Process.  Each Party hereby agrees that service of
process made by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 14.5 (Notices), will
constitute good and valid service of process in any such Action and (c) waives
and agrees not to assert (by way of motion, as a defense, or otherwise) in any
such Action any claim that service of process made in accordance with clause (a) or
(b) does not constitute good and valid service of process.

 

Article 14.

MISCELLANEOUS

 

14.1.        Change of Control of Isis.

 

14.1.1.     Termination of Committees
and Information Sharing.  In
the event of a Change of Control of Isis, Genzyme will have the right,
exercisable by written notice to Isis or its successor in interest within
ninety (90) days of the public announcement of the completion of such Change of
Control, to do any or all of the following in Genzyme’s discretion: (a) terminate
Isis’ right to participate in the JDC and JPC and any other subcommittees or
working groups established pursuant to this Agreement, each of which will be
disbanded; (b) terminate the participation of the successor to Isis in any
ongoing research and development programs and Genzyme’s funding obligations
associated therewith, (c) make all decisions required to be made by such
committees or the Parties collectively under this Agreement in connection with
the development and commercialization of the Product, (d) exclude Isis or
its successor from all discussions with Regulatory Authorities regarding Isis
Products, (e) require Isis to assign to Genzyme all of Isis’ right, title
and interests in any IND or other Regulatory Materials then held by Isis
pertaining to Products and any agreements with Third Parties related to the
development or supply of the Product; (f) require Isis to enable Genzyme
or a Third Party manufacturer to manufacture clinical and initial commercial
quantities of the Product in lieu of Isis, with such transition occurring on a
commercially reasonable timetable; (g) terminate Genzyme’s obligation to
make further disclosures of Know-How or other information to Isis pursuant to
this Agreement (including pursuant
to Section 5.4.2 (Transfer from Genzyme to Isis) and Section 6.4
(Isis Safety Database)), other than reports required by Section 8.6
(Periodic Reporting and Reconciliation) and as reasonably required to permit
Isis to perform its remaining obligations under this Agreement.  In addition, if Isis has not completed the
development activities that are its responsibility under this Agreement, then
Genzyme may, but will not be obligated to, assume all responsibility for all
such development activities and setoff against amounts payable by Genzyme to
Isis under this Agreement any expense incurred by Genzyme in connection with
such development activities that would have been Isis’ responsibility under the
Agreement had the Change of Control not occurred.  

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

76

 

Isis or its successor will
cooperate with the foregoing and provide to Genzyme and its Third Party
contractors all Know-How, assistance, assignments and other support reasonably
requested to assist Genzyme in assuming complete responsibility for the
development and manufacture of the Product in an efficient and orderly
manner.  For purposes of clarification,
all Confidential Information of Genzyme in Isis’ or its successor’s possession
following Genzyme’s exercise of its rights under this Section 14.1
(Change of Control of Isis) will continue to be subject to all applicable
provisions of this Agreement (including, without limitation, Article 12
(Confidentiality).

 

14.1.2.     Purchase of Product
Economics.  In addition
to the rights set forth in Section 14.1.1 (Termination of
Committees and Information Sharing), in the event of a Change of Control of
Isis, Genzyme will have the right to purchase all of Isis’ rights to receive
payments under the Agreement.  If Genzyme
elects to pursue this right, which election may be made by written notice to
Isis or its successor of such election within one hundred and eighty (180) days
of the public announcement of the completion of such Change of Control, the
Parties will, for a period of sixty (60) days following notice of such
election, negotiate in good faith a mutually acceptable fair market value.  If the Parties cannot agree on a purchase
price, Genzyme will have the option to have a Third Party determine the
then-applicable fair market value of Isis’ rights to receive payments under the
Agreement (the “Valuation Price”). 
The Parties will select a mutually agreeable independent investment
banking firm of national reputation to ascertain the Valuation Price.  If the Parties are unable to agree on such
identity of such investment banking firm within a sixty (60) day period, then
each Party will select an independent investment banking firm of national
reputation and the two designated firms will select a mutually agreeable third
investment banking firm who will ascertain the Valuation Price.  If Genzyme elects to purchase all of Isis’
rights to receive payments under the Agreement at the price mutually agreed by
the Parties or the Valuation Price, as applicable, such purchase will render
the rights granted to Genzyme under this Agreement fully-paid and irrevocable,
and the Parties will enter into a mutually satisfactory amendment to this
Agreement effecting this simultaneously with the payment of such price.  If Genzyme does not exercise the right to
purchase all of Isis’ rights to receive payments under the Agreement under this
Section 14.1.2, the successor’s economic rights under this
Agreement will be unchanged.

 

14.2.        Specific Performance.  Each Party acknowledges and agrees that, in
the event of any breach of this Agreement by such Party or any of its
Affiliates, the non-breaching Party may be irreparably and immediately harmed
and may not be able to be made whole by monetary damages.  Without prejudice to any rights and remedies
otherwise available, and notwithstanding Section 13.1 (Dispute
Resolution Mechanism), the non-breaching Party will be entitled to seek
equitable relief by way of injunction, specific performance or otherwise if the
breaching Party or any of its Affiliates breaches any provision of this
Agreement.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

77

 

14.3.        Governing Law.  This Agreement will be governed by and
interpreted in accordance with the laws of the State of New York without
reference to its choice of laws or conflicts of laws provisions.

 

14.4.        Waiver; Remedies Cumulative.  The failure by either Party to take any
action or assert any right hereunder will in no way be construed to be a waiver
of such right, nor in any way be deemed to affect the validity of this
Agreement or any part hereof, or the right of a Party to thereafter enforce
each and every provision of this Agreement. 
Except as expressly provided in this Agreement, the rights and remedies
provided for in this Agreement are cumulative and not exclusive, and the
exercise of any right or remedy under this Agreement will in no way prejudice
or be construed to be a waiver of any other right or remedy a Party may have
under this Agreement or otherwise.

 

14.5.        Notices.  Any consent or notice required or permitted
to be given or made under this Agreement by one of the Parties hereto to the
other will be in writing and delivered by hand or sent by nationally recognized
overnight delivery service, prepaid registered or certified air mail, or by
facsimile confirmed by prepaid, registered or certified mail letter, and will
be deemed to have been properly served to the addressee upon receipt of such
written communication, in any event to the following addresses (or any updated
address provided to the notifying Party in writing in accordance with this Section 14.5):

 

	
  If to Genzyme:

  	
   

  	
  Genzyme Corporation

  
	
   

  	
   

  	
  500 Kendall Street

  
	
   

  	
   

  	
  Cambridge, Massachusetts
  02142

  
	
   

  	
   

  	
  Attn:       General Manager,

  
	
   

  	
   

  	
                  Cardiovascular Business
  Unit

  
	
   

  	
   

  	
  Fax: (617) 252-7553

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Genzyme Corporation

  
	
   

  	
   

  	
  500 Kendall Street

  
	
   

  	
   

  	
  Cambridge, Massachusetts
  02142

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
  Fax: (617) 252-7553

  
	
   

  	
   

  	
   

  
	
  If to Isis:

  	
   

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
  Attn: COO and CFO

  
	
   

  	
   

  	
  Fax: (760) 603-4650

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
  Fax: (760) 268-4922

  

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

78

 

14.6.        Entire Agreement.  This Agreement and all Exhibits and Schedules
attached hereto (the terms of which are incorporated herein by reference) sets
forth all the covenants, promises, agreements, warranties, representations,
conditions and understandings between the Parties hereto with respect to the
subject matter hereof and, as of the Execution Date, supersedes and terminates
all prior agreements and understandings between the Parties (including the
Prior Agreement and the Confidential Disclosure and Standstill Agreement dated
as of September 19, 2007) and constitutes the entire agreement between the
Parties with respect to the subject matter hereof.  All Exhibits and Schedules referred to herein
and other attachments hereto are intended to be, and hereby are, specifically
incorporated herein and made a part of this Agreement.  No subsequent alteration, amendment or
modification to this Agreement will be binding upon the Parties unless in writing
and duly executed by authorized representatives of both Parties.

 

14.7.        Binding Effect; Assignment.  This Agreement will inure to the benefit of
and be binding upon the Parties and their respective successors and permitted
assigns.  Neither Party will assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other Party; provided, however, that (a) either
Party may assign this Agreement or its rights or obligations hereunder to any
of its Affiliates or to a purchaser or successor of substantially all the
assets to which this Agreement relates, and (b) Isis may enter into one or
more financial factoring arrangements with Genzyme’s prior written consent,
such consent not to be unreasonably withheld, delayed or conditioned.

 

14.8.        Severability.  If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstance, to any
extent, is invalid or unenforceable, then (a) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is invalid or unenforceable, will
not be affected thereby and each term, covenant or condition of this Agreement
will be valid and be enforced to the fullest extent permitted by law; and (b) the
Parties hereto covenant and agree to renegotiate any such term, covenant or
application thereof in good faith in order to provide a reasonably acceptable
alternative to the term, covenant or condition of this Agreement or the
application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.

 

14.9.        Further Assurances.  Each Party will execute such other
instruments, give such further assurances and perform such acts which are or
may become necessary or appropriate to effectuate and carry out the provisions
and intent of this Agreement.

 

14.10.      Independent Contractors.  The status of the Parties under this
Agreement will be that of independent contractors.  No Party will have the right to enter into
any agreements on behalf of the other Party, nor will it represent to any Third
Party that it has any such right or authority. 
Nothing in this Agreement will be construed as establishing a partnership
or joint venture relationship between the Parties hereto.

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

79

 

14.11.      Interpretation.  The article and section headings herein are
for reference purposes only and will not affect the meaning or interpretation
hereof.  The term “including” (or any
variation thereof such as “include”) will be without limitation.

 

14.12.      Counterparts.  This Agreement may be executed in one or more
counterpart copies, and by facsimile signature, each of which will be deemed an
original and all of which taken together will be deemed to constitute one and
the same instrument.

 

14.13.      Rights in Bankruptcy.  All rights and licenses now or hereafter
granted under or pursuant to this Agreement, including Section 2.1
of this Agreement, are rights to “intellectual property” (as defined in Section 101(35A)
of Title 11 of the United States Code, as amended (such Title 11, the “Bankruptcy
Code”)).  Isis hereby grants to
Genzyme and all Affiliates of Genzyme a right of access and to obtain
possession of and to benefit from (a) copies of research data, (b) laboratory
samples, (c)  samples of Product, (d) formulas, (e) laboratory
notes and notebooks, (f) data and results related to clinical trials, (g) regulatory
filings and approvals, (h) rights of reference in respect of regulatory
filings and approvals, (i) pre-clinical research data and results, (j) marketing,
advertising and promotional materials, all of which constitute “embodiments” of
intellectual property pursuant to Section 365(n) of the Bankruptcy
Code and (k) all other embodiments of such intellectual property, in each
case, solely in connection with Genzyme’s rights under this Agreement, whether
any of the foregoing are in Isis’ possession or control or in the possession
and control of Third Parties.  Isis
agrees not to interfere with Genzyme’s and its Affiliates’ exercise of rights
and licenses to intellectual property licensed hereunder and embodiments
thereof in accordance with this Agreement and agrees to use Commercially
Reasonable Efforts to assist Genzyme and its Affiliates to obtain such intellectual
property and embodiments thereof in the possession or control of Third Parties
as reasonably necessary or desirable for Genzyme or its Affiliates to exercise
such rights and licenses in accordance with this Agreement.  The Parties hereto acknowledge and agree that
all payments by Genzyme to Isis under this Agreement, other than the commercial
milestones payable pursuant to Section 8.2.2 and the sharing of Net
Profits pursuant to Section 8.5.2, do not constitute “royalties”
within the meaning of Bankruptcy Code §365(n) or relate to licenses of
intellectual property hereunder.

 

[remainder of page intentionally
left blank]

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of this
exhibit has been filed separately with the Commission.

 

80

 

IN
WITNESS WHEREOF, the Parties have caused this License and Co-Development
Agreement to be executed by their officers thereunto duly authorized as of the
date first written above.

 

 

	
   

  	
   

  	
  Genzyme Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Henri A. Termeer

  
	
   

  	
   

  	
  Name:

  	
   Henri A. Termeer

  
	
   

  	
   

  	
  Title:

  	
   Chairman, President

  
	
   

  	
   

  	
   

  	
   and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ B. Lynne Parshall

  
	
   

  	
   

  	
  Name:

  	
   B. Lynne Parshall

  
	
   

  	
   

  	
  Title:

  	
   Chief Operating Officer and

  
	
   

  	
   

  	
   

  	
   Chief Financial Officer

  
					

 

 

[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.  An unredacted version of
this exhibit has been filed separately with the Commission.

 

81

 

SCHEDULE 1.35

 

ISIS METHODOLOGY FOR DETERMINING ITS COST OF MANUFACTURE

 

[**]

 

SCHEDULE 1.49

 

EXAMPLE CALCULATION OF INTERNAL DEVELOPMENT EXPENSES

 

[**]

 

SCHEDULE 1.52

 

ISIS CORE TECHNOLOGY PATENTS

 

[**]

 

SCHEDULE 1.56

 

ISIS MANUFACTURING & ANALYTICAL PATENTS

 

[**]

 

SCHEDULE 1.99

 

PRODUCT-SPECIFIC PATENTS

 

[**]

 

SCHEDULE 1.113

 

SPECIAL ISIS CORE TECHNOLOGY PATENTS

 

[**]

 

SCHEDULE 2.1

 

LICENSES TO THIRD PARTIES

 

[**]

 

SCHEDULE 10.2.2

 

THIRD PARTY AGREEMENTS

 

[**]

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

 

EXHIBIT A

 

DEVELOPMENT PLAN

 

[**]

 

EXHIBIT B

 

DEVELOPMENT BUDGET

 

[**]

 

EXHIBIT C

 

FORM OF
SUPPLY AGREEMENT

 

MANUFACTURING AND SUPPLY AGREEMENT

 

This
Manufacturing and Supply Agreement (the “Supply Agreement”)
is entered into as of the 24th day of June, 2008 (the “Effective Date”) by and
between Isis Pharmaceuticals, Inc. (“Isis”)
and Genzyme Corporation (“Genzyme”).  Genzyme and Isis may each be referred to
herein as a “Party” or together as the “Parties”.  Capitalized terms not defined herein will
have the meaning given to such terms in the License and Co-Development
Agreement between the Parties dated June 24, 2008 (the “Agreement”).  The Parties agree as follows:

 

WHEREAS, the Parties have
entered the Agreement to provide for the further development and
commercialization of one or more Products, including Mipomersen;

 

WHEREAS, the Agreement
provides that Isis will be responsible for the manufacture of the active
pharmaceutical ingredient (API) of Mipomersen (“API”) for the phase II clinical trials, the Pivotal Trial(s) and
the initial commercial launch of Mipomersen;

 

WHEREAS, the Parties agree
that the terms of this Supply Agreement will apply to all manufactured lots of
API made and supplied under the Agreement and this Supply Agreement.

 

NOW, THEREFORE in consideration of
the premises and mutual covenants herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree to this Supply Agreement as follows:

 

1.              Scope; Second Manufacturing Suite –  Isis
will produce the bulk API for Mipomersen under cGMP conditions and in accordance
with the Quality Agreement between the Parties and referencing this Supply
Agreement (the “Quality Agreement”), in the amount specified in the applicable
Firm Order for use for the phase II clinical trials, the Pivotal Trial(s) and
the initial commercial launch of Mipomersen.

 

Isis
will use commercially reasonable efforts to have [**].

 

2.              Supply as of Effective Date.        As of the Effective Date, Isis has in its inventory the quantities of
API, placebo, drug product and clinical trial material set forth on Exhibit B
attached hereto (the “Existing Material”).

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

 

3.              Supply through the end of
2008.  After the Execution date until the [**] in 2008, Isis will manufacture
and supply the API consistent with the needs of the Development Plan, which are
approximately [**] kilograms (the “2008 API”).

 

4.              Supply after 2008; Forecasting Before
NDA Filing.

 

(a)   After January 1, 2009
until the NDA Filing under the Agreement, Isis and Genzyme will establish an 8
calendar quarter rolling forecast (the “Clinical Rolling
Production Forecast”) that sets forth a good faith estimate of
the quantity of API for the Mipomersen Genzyme expects to receive from Isis
within the following 8 calendar quarter period. 
This Clinical Rolling Production Forecast will be updated on the first
business day of each subsequent calendar quarter by Genzyme.  The first 4 calendar quarters of the Clinical
Rolling Production Forecast constitute a firm order (each “Clinical
Firm Order”).  Genzyme
will provide one or more purchase orders for Clinical Firm Orders not
previously submitted with each new Clinical Rolling Production Forecast.  The fifth (5th) calendar quarter
of any Clinical Rolling Production Forecast shall be binding solely to the
extent that Genzyme shall be required to order (and Isis shall only be required
to supply) not more than [**]% and not less that [**]% of the API forecast
therein once such calendar quarter becomes the first (1st) calendar
quarter for the Clinical Rolling Production Forecast.  Quarters 6 through 8 are estimated quantities
to be used for planning purposes only. 
Not later than 30 days after the Effective Date, Genzyme will provide
Isis with the first Clinical Rolling Production Forecast, which will initially
cover the 8 quarter period beginning January 1, 2009.  The quantities set forth in a Clinical Firm
Order will be binding on both parties, and Genzyme will be obligated to
purchase from Isis, and Isis will be obligated to supply, the specified
quantities of API.

 

(b)   Notwithstanding the
foregoing, each Clinical Firm Order is subject to the following conditions:

 

·                  Isis
will not be required to supply during a calendar quarter more than an aggregate
of [**] kilograms of API, unless agreed to in advance by Isis and further that
the batch size is no larger than [**] kilograms unless agreed to in advance by
Isis.

 

·                  The
minimum order size is [**] kilograms per calendar quarter unless agreed to in
advance by Isis.

 

(c)   Isis agrees to use commercially reasonable
efforts to supply Genzyme, upon request, with quantities in excess of the
quantity restrictions described in this Section 4(b) above.

 

5.              Supply; Forecasting After NDA
Filing.

 

(a)   After the NDA Filing under
the Agreement, Genzyme will establish an eight (8) calendar quarter
rolling forecast (the “Commercial Rolling
Production Forecast”) that sets forth a good faith estimate of
the quantity of API for the Mipomersen Genzyme expects to receive from Isis
within the following eight (8) calendar quarter period.  This Commercial Rolling Production Forecast
will be updated not later than the first business day of each subsequent
calendar quarter by Genzyme.  The first
[**] calendar quarters of the Commercial Rolling Production Forecast will
constitute a firm order (“Commercial Firm Order”).  Genzyme will provide one or more purchase
orders for Commercial Firm Orders not previously submitted with each new
Commercial Rolling Production Forecast. 
The [**] and [**] calendar quarters of any Commercial Rolling Production
Forecast shall be binding solely to the extent that Genzyme shall be required
to order (and Isis shall be required to supply) not more than [**]% and not
less than [**]% of the API forecast therein once those calendar quarters become
the first [**] quarters for the Commercial Rolling Production Forecast.  Quarters [**] through [**] are estimated
quantities to be used for planning purposes only.  Not later than 30 days after the NDA Filing,
Genzyme will provide Isis with the first Commercial Rolling Production
Forecast.  The quantities set forth in a
Commercial Firm Order will be binding on both parties, and Genzyme will be
obligated to purchase from Isis, and Isis will be obligated to supply, the
specified quantities of API.  Clinical
Firm Orders and Commercial Firm Orders may each be referred to herein as “Firm Orders”.

 

(b)   Notwithstanding the
foregoing, each Commercial Firm Order is subject to the following conditions:

 

·                  Isis
will not be required to supply during a calendar quarter more than an aggregate
of 50 kilograms of API, unless agreed to in advance by Isis and further that
the batch size is no 

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-2

 

larger than [**] kilograms
unless agreed to in advance by Isis. The minimum
order size is [**] kilograms per order.

 

(c)   Isis agrees to use
commercially reasonable efforts to supply Genzyme, upon request, with
quantities in excess of the quantity restrictions described in this Section 5(b) above.

 

6.              Delivery

 

(a)   Isis will deliver the
Existing Material and the 2008 API as directed by the JDC.

 

(b)   Each order submitted in
satisfaction of a Firm Order obligation set forth in Section 4 or 5 above
shall set forth Genzyme’s proposed delivery date, which date shall not be less
than 90 days after the submission of the order in question.  Within 10 business days of receipt of an
order from Genzyme, Isis will either (i) confirm Genzyme’s proposed
delivery date or (ii) enter into discussions with Genzyme about a mutually
agreeable delivery date (each, a “Delivery Date”).  Isis will use commercially reasonable efforts
to deliver the API ordered in each Firm Order by the applicable Delivery Date
(but in any event Isis will deliver the API within thirty (30) days of the
Delivery Date); provided, however, that Isis may
deliver any quantities requested in a Firm Order thirty (30) days early. Isis
will not be required to supply, nor will Genzyme be required to purchase, API
in a quantity exceeding the Firm Order. 
The quantity of API specified in each Firm Order, invoiced and paid for
will be the as-is gross mass of the API after lyophilization (i.e. including
such amounts of water, impurities, salt, heavy metals, etc not exceeding limits
permitted in the Specifications).  In
addition, so long as Isis supplies the quantity of API specified in the
applicable Firm Order for Mipomersen within plus or minus [**]%, Isis will be
deemed to have satisfied the amount specified in the Firm Order but Genzyme will
nonetheless pay for the quantity of API specified in the Firm Order, whether it
is less than or greater than the amount ordered.

 

7.              Shortfall

 

(a)   In the event that at any
time Isis anticipates that it will be unable to supply at least [**]% (as
permitted by Section 6 above) of the quantities of API set forth in an
agreed-upon Firm Order in satisfaction of its obligation under Section 4
or 5 for any reason, including without limitation force majeure, Isis will
notify Genzyme in writing as soon as possible upon the prediction or occurrence
of such non-supply.

 

(b)   If Isis cannot Manufacture
as set forth in (a) above, upon written request by Genzyme Isis will
transfer to Genzyme all documentation and information, and permit Genzyme to
reference and use any regulatory filings, and otherwise fully cooperate with
Genzyme to enable Genzyme to make or have made API for use by Genzyme in
accordance with the Agreement.

 

8.              Specifications; CofA

 

(a)   For the API supplied by Isis under this
Supply Agreement, Isis and Genzyme will mutually agree on the specifications
for such API and will attach and/or reference such specifications in the
applicable Firm Order (the “Specifications”).  If no Specifications are attached to or
referenced in a Firm Order the Specifications for the Firm Order will be the
same Specifications that applied to the previous Firm Order.  The Specifications as of the effective date
of this Supply Agreement are attached hereto as Exhibit A and will apply
to 2008 API and the API that is part of the Existing Material.

 

(b)   Prior to shipment of API, Isis shall provide
Genzyme with a certificate from Isis’ quality assurance department, or Isis’
equivalent thereof, that includes the results of quality control tests that
were performed on each batch of API manufactured in accordance with the
Specifications and that indicates that the API contained in the shipment: (i) meets
the Specifications and (ii) was manufactured in compliance with cGMPs and
all other applicable laws and regulations (a “CofA”).

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-3

 

9.              API Pricing - The purchase price for API manufactured
under this Agreement in 2008 is $[**] per kilogram, except
the purchase price for Lot # CA301012-015 will be the [**] $[**] per kilogram
and the purchase price set for API manufactured in 2009 under this
Section.  The purchase price for API
manufactured in each subsequent calendar year in the Term shall be determined
as follows: In September of each year, starting September of 2008,
Isis will provide Genzyme a nonbinding, good faith estimate of the purchase
price for API for the following year.  By
November 15 of each year, starting November 15, 2008, Isis will
provide Genzyme the final purchase price (each, a “Purchase
Price”) applicable to the manufacture and supply of API
scheduled for delivery in the following year. 
Such Purchase Prices will be binding on both Parties; provided, however, that such price will (i) not exceed
$[**] per kilogram of API and (ii) represent Isis’ good faith estimate of
its fully-burdened cost to manufacture such API.  This price includes all direct and indirect
costs of manufacturing the API, including the cost of analytical work, raw
materials, storing stability and retain samples, and, unless otherwise
specifically stated in the applicable Firm Order, all other activities
specified in the Specifications; provided, however,
this price does not include stability testing, CMC work, process validation or
other work to support regulatory filings. 
All payments are in US Dollars.

 

10.       Terms of Payment –

 

(a)   On the Execution Date, Isis will apply $[**]
towards External Development Expenses under Section 8.3.1 of the Agreement
for the Existing Material.

 

(b)   For the 2008 API, Genzyme shall not be
required to pay for the 2008 API, but rather upon transfer of such 2008 API
Isis shall report the purchase price for the 2008 API as its Fully Absorbed
Cost of Goods in reports submitted to Genzyme in accordance with Section 8.6
of the Agreement and such Fully Absorbed Cost of Goods shall be credited
against Isis’s obligations to fund the first one hundred and twenty-five
million ($125 million) in External Development Expenses as contemplated by Section 8.3.1(b) of
the Agreement.

 

(c)   Until the earlier of (i) the first
calendar quarter in which Net Revenue (as that term is defined in the
Agreement) exceeds the aggregate Purchase Price for API in that calendar
quarter and (ii) the date Isis has fully satisfied its obligation to fund
the first one hundred and twenty-five million dollars ($125 million) of
External Development Expenses in accordance with Section 8.3.1(b) of
the Agreement, Genzyme shall not be required to pay the Purchase Price for
Product ordered and transferred hereunder, but rather Isis shall report such
Purchase Price as its Fully Absorbed Cost of Goods in reports submitted to
Genzyme in accordance with Section 8.6 of the Agreement and such Fully
Absorbed Cost of Goods shall be credited against Isis’s obligations to fund the
first one hundred and twenty-five million ($125 million) in External
Development Expenses as contemplated by Section 8.3.1(b) of the
Agreement.

 

(d)   Once the condition described in either clause
(i) or (ii) of Section 10(c) above has been satisfied, then
the following payment terms shall apply to Product supplied hereunder:

 

·                  A
pre-payment of 50% of the Purchase Price from Genzyme is payable in cash upon
delivery of the applicable Firm Order.

 

·                  The
remaining 50% of the Purchase Price is due in cash to Isis by wire transfer or
other customary means within 30 days from the date of receipt of invoice,
following title transfer from Isis to Genzyme or its designee of the API (in
accordance with Section 12 below).

 

·                  In
addition to the price stated in this Supply Agreement, Genzyme will pay to Isis
all taxes and duties (except income tax) imposed upon Isis, in connection with
the API and will reimburse Isis for the insurance and freight expenses
discussed in Section 12 below.

 

11.       Term – This Supply
Agreement will remain in effect as long as Isis and Genzyme mutually agree for
Isis to supply Mipomersen API as described in the Agreement.

 

12.       Title & Transportation for Existing Material:   Title
to the Existing Material will transfer to Genzyme EXW (Incoterms 2000) Isis’
facility following Isis’ receipt of an Authorization to Ship letter from the 

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-4

 

Genzyme’s Quality Assurance Department authorizing shipment of the
applicable Existing Material.  Isis will
insure against the replacement cost of the Existing Material until title
transfers. The Parties will share the Risk of loss related to the Existing Material.

 

Isis will ship the Existing Material in accordance
with the applicable Authorization to Ship letter from Genzyme’s Quality
Assurance Department.  Isis will pay all
freight for such transportation and include such costs as part of Isis’ Fully
Absorbed Cost of Goods.

 

13.       Title & Transportation for other API:   Title
to the API supplied under Section 3, 4 or 5 above will transfer to Genzyme
upon the earlier of (i) 15 days following the receipt by Genzyme of the
CofA, a copy of the batch record and the QC release testing for the applicable
order (unless Genzyme initiates formal dispute resolution regarding the API’s
failure to meet the warranty set forth in Section 17), (ii) EXW
(Incoterms 2000) Isis’ facility following Isis’ receipt of an Authorization to
Ship letter from the Genzyme’s Quality Assurance Department authorizing
shipment of the applicable API order, and (iii) the date pursuant to the
dispute resolution it is determined that the API did meet the warranty set
forth in Section 17.  Isis will insure
against the replacement cost of the API until title transfers.    Risk of loss passes simultaneously with the
title.  Isis may deliver the applicable
invoice to Genzyme for API contemporaneously with title transfer.

 

Isis
will ship the API to Genzyme EXW (Incoterms 2000) upon the earlier of (i) the
date such API is released by Isis’ Quality Assurance Department and accepted by
Genzyme’s Quality Assurance Department via an Authorization to Ship letter, and
(ii) 60 days following title transfer of such API.  Transportation arrangements will be made by
Isis as specified by Genzyme.  Isis will
pay all freight for such transportation and add such costs to the invoice as a
separate line item.

 

14.       Intellectual Property: The
ownership and treatment of any intellectual property generated in the course of
Isis’ performance of this Supply Agreement will be governed by the Agreement.

 

15.       CMC Work, Regulatory Support & Stability Testing –Genzyme will be responsible for all CMC work
and regulatory filings associated with the API and drug product.  Isis will not be responsible for CMC work,
process validation or other work to support regulatory filings under this
Supply Agreement.  If Genzyme wishes to
engage Isis to perform such work the Parties will mutually agree upon an
appropriate plan and budget for executing such work.

 

Isis
will manage the stability testing of any API manufactured under this Supply
Agreement per Isis’ current stability protocol (whether performed by Isis or an
independent contractor).  If performed by
Isis, the price for the stability testing of the API will be $7,000 per time
point per lot of API.  If performed by a
contractor, the price fro the stability testing of the API will be the price
charged by the contractor.  In either
case, the price for the stability testing will be treated as Program Costs
under the Agreement.

 

16.       Hazards; Risk Sharing

 

If
Isis encounters any difficulties or hazards during the manufacturing of a batch
of API such that the delivery of API to Genzyme from that batch would
constitute a breach of this Supply Agreement (including but not limited to the
failure of such API to conform to the warranty set forth in Section 17),
Isis will use commercially reasonable efforts to manufacture a replacement
batch of API, such that Genzyme receives such API as close to the
originally-scheduled delivery date as possible.

 

If the difficulty or hazard that causes the breach was not caused by
Isis’ gross negligence, the cost of the manufacture of the replacement batch
will be shared by Genzyme and Isis as follows: 
Isis will be responsible for the [**] components for such batch of API;
and, to the extent not reimbursable under Isis’ insurance policies, Genzyme
will be responsible for the [**] component and [**] expenses.  In any year in which Net Profit is achieved
under the Agreement, [**] components (and Genzyme’s expenses for [**] and [**]
expenses) for such replacement batch of API will be included as Program Costs
under the Agreement with [**] included using the methodology referred to in the
definition of Fully Absorbed Cost of Goods in the Agreement.  For purposes of clarity and assuming none of
the loss is covered 

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-5

 

by Isis’ insurance, the total price payable for such API will equal the
price for such API originally specified above under Section 9 above or
quoted in the Firm Order plus the [**]
component and [**] expenses attributable to such replacement batch.  However, if the difficulty or hazard that
causes the breach was caused by Isis’ gross negligence, the cost of the
manufacture of the replacement batch will be solely Isis’ responsibility and
the price payable upon delivery of such API will equal the price for such API
originally quoted in the Firm Order without any additional costs or expenses
required to produce the replacement batch.

 

17.       Limited Warranty:  SUBJECT TO THE LIMITATIONS OF PARAGRAPHS, 18,
19 AND 21, Isis warrants, with respect to all the API, that, at the time of
delivery, any API supplied by Isis will (a) meet the Specifications; (b) meet
the standards of cGMP (for the API) and the requirements set forth in the
Quality Agreement and (c) be conveyed with good title, free from any
lawful security interest, lien or encumbrance.

 

18.       Disclaimer Of Warranties:  THE EXPRESS WARRANTIES CONTAINED IN PARAGRAPH
17 OF THIS SUPPLY AGREEMENT (AND THOSE MADE UNDER AND AS OF THE EFFECTIVE DATE
OF THE AGREEMENT) ARE THE SOLE WARRANTIES WITH RESPECT TO THE API AND ARE MADE
EXPRESSLY IN LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER EXPRESS OR IMPLIED
REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW OR STATUTE.

 

19.       Limitation Of Remedies:
GENZYME’S EXCLUSIVE REMEDY AND ISIS’ TOTAL LIABILITY TO GENZYME UNDER THIS
SUPPLY AGREEMENT FOR CLAIMS BASED UPON SUPPLY OF THE API (OR FAILURE TO SUPPLY)
(INCLUDING, WITHOUT LIMITATION, THOSE ARISING OUT OF STRICT LIABILITY, BREACH
OF WARRANTY AND NEGLIGENCE) IS EXPRESSLY LIMITED TO THE REMEDY SET FORTH IN
SECTIONS 7 AND 16 ABOVE.

 

GENZYME WAIVES ALL OTHER CLAIMS BY GENZYME AGAINST ISIS UNDER THIS
SUPPLY AGREEMENT WITH RESPECT TO SUPPLY OF THE API.  NEITHER PARTY WILL BE UNDER ANY LIABILITY TO
THE OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR
PUNITIVE DAMAGES ARISING FROM THIS SUPPLY AGREEMENT.

 

THE LIMITATIONS IN THIS SECTION 19 DO NOT APPLY TO ANY CLAIM FOR
INDEMNIFICATION UNDER SECTION 23.

 

20.       Quality Systems.  If Genzyme requests changes to Isis’ quality
systems or standard operating procedures, Isis and Genzyme will mutually agree
on the scope and form of such changes and Genzyme will pay Isis to implement
such changes at the then applicable Isis FTE Rate.  Isis will be responsible to implement and pay
for any modifications that either a Regulatory Authority requires or the Parties
mutually agree are necessary to remain compliant with GMP or applicable ICH
guidelines to manufacture API and Genzyme will pay for such modifications
specific to the manufacturing of API that are not required by GMP or applicable
ICH guidelines.  The costs of
implementation will include out of pocket costs as well as for the FTEs to
implement such changes at the then applicable Isis FTE Rate.

 

21.       Inspection And Notice Of Claims: 
Promptly upon receipt
of each shipment of API, Genzyme will inspect and/or test (or cause to be
inspected and tested if API is shipped to a third party) such API for any
damage, defect or shortage.  ALL CLAIMS
(INCLUDING, WITHOUT LIMITATION, THOSE ARISING OUT OF STRICT LIABILITY, BREACH
OF WARRANTY AND NEGLIGENCE) BY GENZYME WILL BE DEEMED WAIVED UNLESS MADE BY GENZYME
IN WRITING AND RECEIVED BY ISIS WITHIN THIRTY (30) DAYS OF THE RECEIPT OF THE
API.

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-6

 

22.       Force Majeure: Neither
Party will be liable for failures or delays in performance of any obligation
under this Supply Agreement, other than for payment for API already
transferred, to the extent that such failure or delay is caused by force
majeure, being any event, occurrence or circumstance beyond the control of that
Party (a “Force Majeure Event”), including but not limited to the following:
failure or delay caused by or resulting from acts of God, strikes, earthquakes,
fires, floods, accidents, wars, riots, acts of terrorism, restrictions imposed
by any governmental authority (including allocations, priorities, requisitions
quotas and price controls).  The Party
whose performance is affected by a Force Majeure Event will give prompt notice
to the other Party stating the details and expected duration of the event.

 

23.       Indemnity.  Section 10.3 of the Agreement will apply
to this Supply Agreement and the matters covered by this Supply Agreement.

 

24.       Assignment:  This Supply Agreement is not assignable or
transferable by either Party without the prior written consent of the other
Party; provided that a Party may assign the
Supply Agreement to its successor in interest pursuant to the acquisition,
merger or sale of all or substantially all of the assets of such Party, so long
as such successor assumes in writing all of the assigning Party’s obligations
under this Supply Agreement.

 

25.       Governing Law:  The interpretation, validity, and performance
of this document will be governed by New York law, without regard to any
conflict-of-law rules.

 

26.       Termination.  Either Party will have the right to terminate
this Supply Agreement if the other Party materially breaches its obligations
under this Supply Agreement in accordance with Article 13 of the
Agreement.

 

27.       Survival:  Sections 14 through 19,
and 21 through 38 will survive expiration or termination of the Agreement.  Any expiration or early termination of this
Supply Agreement will be without prejudice to the rights of either Party
against the other accrued or accruing under this Supply Agreement prior to
termination.  No expiration of this
Supply Agreement will relieve a Party of its obligation to pay fees.

 

28.       Inspections.  Genzyme shall have the right to visit and
inspect Isis’ facility as further specified in the Quality Agreement. Isis’s
quality assurance department, or its equivalent, shall cooperate with Genzyme,
as is reasonably necessary and useful at Genzyme’s discretion, in any
inspection conducted pursuant to this Section 28.

 

29.       Notices:  Any notice required or permitted to be given
under this Supply Agreement by any Party will be in writing and will be (a) delivered
personally, (b) sent by registered mail, return receipt requested, postage
prepaid, (c) sent by a nationally-recognized courier service guaranteeing
next-day or second day delivery, charges prepaid, or (d) delivered by
facsimile (with the original promptly sent by any of the foregoing manners), to
the addresses or facsimile numbers of the other Parties set forth below, or at
such other addresses as may from time to time be furnished by similar notice by
any Party. The effective date of any notice under this Supply Agreement will be
the date of receipt by the receiving Party.

 

Notices will be sent to the following addresses or facsimile numbers:

In the case of Isis,

 

Isis
Pharmaceuticals, Inc.

1896 Rutherford
Road

Carlsbad, CA
92008

Attention:  VP, Manufacturing/Operations

Facsimile:  760-603-4655

 

With a copy to:

1.   General Counsel (fax: 
760.268.4922); and

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-7

 

2.   Executive Vice President & CFO (fax:  760.603.4650)

 

In the Case of Genzyme:

 

Genzyme
Corporation

200 Crossing
Blvd.

Framingham,
MA  01792

Attention:  Senior VP, Materials Management

Facsimile:  (508) 661-8538

 

With copy to:

 

Genzyme Corporation

500 Kendall Street

Cambridge, MA  02142

Attn:  General Counsel

Facsimile: (617) 252-7553

 

30.       Waiver:  No waiver of any term, provision or condition
of this Supply Agreement whether by conduct or otherwise in any one or more
instances will be deemed to be or construed as a further or continuing waiver
of any such term, provision or condition or of any other term, provision or
condition of this Supply Agreement.

 

31.       Counterparts:  This Supply Agreement and any amendment
hereto may be executed in any number of counterparts, each of which will for
all purposes be deemed an original and all of which will constitute the same
instrument. This Supply Agreement will be effective upon full execution by
facsimile or original, and a facsimile signature will be deemed to be and will
be as effective as an original signature

 

32.       Attachments:  All attachments referred to herein form an
integral part of this Supply Agreement and are incorporated into this Supply
Agreement by such reference.

 

33.       Inadvertent or Involuntary Omissions:  The Parties acknowledge that
they have expended substantial effort in preparing this Supply Agreement and
attempting to describe in the Attachments, as thoroughly and precisely as
possible, certain specifications and other information. However, despite these
efforts, the Parties acknowledge the possibility of involuntary or inadvertent
omissions from the Attachments.  The
Parties will agree in writing to the changes to be made to the Attachments to
add these inadvertent or involuntary omissions and any such written agreement
executed by the Parties will serve as an amendment to this Supply Agreement.

 

34.       Construction:  Each Party to this Supply Agreement and its
counsel have reviewed and revised this Supply Agreement.  The rule of construction to the effect
that any ambiguities are to be resolved against the drafting Party will not be
employed in the interpretation of this Supply Agreement or any amendment or
Attachment to this Supply Agreement. 
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to them in the Agreement.

 

35.       Time:  Time is of the essence in this Supply
Agreement.

 

36.       Preference:  Unless otherwise specifically provided for in
the Attachment, the terms of this Supply Agreement will prevail in the event of
a conflict between this Supply Agreement and any such Attachments or the
Quality Agreement.

 

37.       Dispute Resolution: Article 13
of the Agreement will apply to any dispute under this Supply Agreement.

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-8

 

38.       Entire Agreement: This
Supply Agreement and the Quality Agreement constitute the full understanding of
the Parties, and is the final, complete and exclusive statement of the terms
and conditions of their agreement regarding the subject matter hereof.  All representations, offers, and
undertakings, of the Parties made prior to the signing of this Supply Agreement
are hereby superseded.  All amendments or
modifications to this Supply Agreement must be in writing, identified as an
Amendment to this Supply Agreement and signed by an authorized representative
of each Party.

 

[remainder of this page intentionally
left blank]

 

The Parties executing this
Supply Agreement:

 

	
  ISIS PHARMACEUTICALS, INC.

  	
   

  	
  GENZYME CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NAME:

  	
  B. Lynne Parshall

  	
   

  	
  NAME: Henri A. Termeer

  
	
   

  	
   

  	
   

  
	
  TITLE:

  	
  Chief Operating Officer
  and

  	
   

  	
  TITLE: Chairman, President
  and CEO

  
	
   

  	
  Chief Financial Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNATURE:

  	
  /s/ B. Lynne Parshall

  	
   

  	
  SIGNATURE:

  	
  /s/ Henri A. Termeer

  
						

 

[**]

 

[**] = Portions of this exhibit
have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

C-9

 

EXHIBIT D

 

FORM OF QUALITY AGREEMENT

 

QUALITY AGREEMENT

Isis Pharmaceuticals and Genzyme Corporation.

 

The
purpose of this Quality Agreement is to establish, clarify and communicate
quality expectations for the manufacture and testing of API performed by Isis
Pharmaceuticals, Inc., a Delaware corporation located in Carlsbad,
California (“Isis”) for Genzyme Corporation, a Massachusetts corporation with
offices in Cambridge, Massachusetts (“Genzyme”) for use in clinical trials or
for launch supplies.  For contractual
responsibilities, refer to the Manufacturing and Supply Agreement dated June 24,
2008 (the “Supply Agreement”).

 

WHEREAS,
the Parties have signed the Supply Agreement contemporaneous with the present
Quality Agreement;

 

WHEREAS,
the Parties agree that the terms of this Quality Agreement will apply to all
manufactured lots of active pharmaceutical ingredient (API) made and supplied
under the Supply Agreement and this Quality Agreement.   All changes to this Quality Agreement must
be documented as an addendum to the original Quality Agreement, reviewed and
approved by both parties’ Quality Assurance representatives; and

 

NOW,
THEREFORE in consideration of the premises and mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree to this
Agreement as follows:

 

1.               Unless
otherwise specified in this Agreement, the terms used in this Agreement shall
have the meaning given to such terms in the Supply Agreement.

 

2.               Isis will
manufacture, produce and test the API in accordance with U.S. current Good
Manufacturing Practices regulations (cGMP), ICH guidelines, and EMEA
guidelines, and all such operations will be fully documented.  Specific expectations are detailed in the
Responsibility Checklist attached as Schedule 1.  Genzyme will notify Isis if it is conducting
a clinical trial that will require API to be manufactured in accordance with
international guidelines that are more stringent than or different from cGMP or
ICH Guidelines and the Parties will mutually agree on how to manufacture such
API in accordance with such more stringent or different standards.

 

3.               Isis will
maintain adequately trained staff and appropriate records of training and competence.  Isis will monitor and maintain records
respecting its compliance with cGMP, including the process of establishment and
implementation of the operating procedures and the training of staff as
necessary to assure such compliance.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-1

 

4.               Isis will
retain, in accordance with cGMP, full records (such as manufacturing batch
records, analytical testing methods, analytical test results and appropriate
reports) related to the API being manufactured and supplied.

 

5.               Isis will
provide approval/audit of the API using routine Quality Assurance (QA)
procedures and will keep all appropriate records of such approval/audit
processes conducted.

 

6.               Isis will
provide Genzyme with a copy of batch records, and a certificate of analysis
(COA) which will contain (i) analytical results from Isis and any
associated contract laboratories and (ii) a statement of compliance with
cGMP, and signed by Isis QA.  Isis will
be responsible for the review, approval, and release of the API, and Genzyme
retains full responsibility for the final release of the API for use in
manufacturing Drug Product for use in clinical trials or commercially.

 

7.               Isis will
provide Genzyme with samples of the API including the appropriate
documentation, if requested by Genzyme.

 

8.               Original
production and laboratory data and records will be retained and made available
for review by Genzyme or its designees on-site at Isis.

 

9.               Material
changes to master batch records, specifications, test methods, and stability
protocols (in each case as they apply to the API) will be agreed and approved
by both parties.

 

10.         Any raw
material and component, which Isis will use for the production of API, will be
tested and released utilizing Isis’ cGMP compliant and approved specifications,
sampling, testing and release procedures.

 

11.         Isis will
document and notify Genzyme of all significant changes to or deviations from
the process or testing procedures and the investigations thereof. Documentation
on process changes and deviations will be part of the batch record.  A “Significant” change is understood as
anything that deviates from the approved regulatory filing and/or anything
reasonably likely to materially affect Safety, Identity, Strength, Purity or
Quality (SISPQ).  (This would not include
changes such as use of a different but equivalent room, “like for like”
equipment changes, etc.).  In the event
of an out of specification (OOS) result, Isis will promptly (within 2 business
days) notify Genzyme on first confirmation of the OOS result.

 

12.         Isis will ship
or will arrange for third parties to ship all API to Genzyme or other
designated site(s) in accordance with the Supply Agreement and with
appropriate documentation and in suitable, labeled containers.  This will also include the use of temperature
monitoring devices if deemed by Genzyme necessary to ensure the quality of the
API.

 

13.         Isis will make
available to Genzyme at Isis’ facility, copies of all Isis Standard Operating
Procedures used by Isis in connection with the manufacture of the API.

 

14.         Isis will be
responsible for qualification and routine compliance auditing of suppliers and
subcontractors, in accordance with Isis’ current procedures.  Except for the subcontractors listed on
Appendix B attached hereto, Isis will discuss with Genzyme in advance if Isis
desires to use Subcontractors (Third Party) outside of Isis’ approved list of
subcontractors, and Genzyme will assess and approve, in advance, each
subcontractor, such approval not to be unreasonably withheld.

 

15.         Isis will
inform Genzyme within 2 business days of a notice and result of any regulatory
investigation by a Regulatory Authority (including any Genzyme documentation
requested)

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-2

 

relating
to any API or service being provided to Genzyme.  Genzyme will have the opportunity to review
and give input to the response to such investigations.

 

16.         If Regulatory
Authorities audit Genzyme, make investigations at Genzyme or ask questions of
Genzyme about the activities conducted at Isis or third parties retained by
Isis, then Isis will fully cooperate with Genzyme to provide adequate answers
to and documentation for the Regulatory Authorities.  Isis will have the opportunity to review and
give input to the response to such investigations.

 

17.         Once every 12
months, a maximum of 3 Genzyme representatives will be entitled to visit and
inspect (“audit”) the production, manufacturing, quality control and
warehousing facilities Isis is using in connection with the API, including the
corresponding documentation.  Such audit
may not exceed three (3) business days, unless Genzyme representatives
learn of a material deficiency that reasonably warrants an extension of the
audit.  Isis agrees to provide Genzyme
with the necessary assistance and information. Genzyme will provide Isis with
at least 4 weeks advanced notice of a requested inspection.  As necessary, the Parties will mutually agree
in good faith to additional inspections. 
In addition, with reasonable advance notice to Isis, Genzyme reserves
the right to have a Genzyme representative present during manufacture of
Genzyme product.  Isis may limit Genzyme’s
presence at times when proprietary or confidential information of a Third Party
unrelated to the Product could be observed.

 

18.         Subject to
applicable law, Isis will inform Genzyme within 2 business days, and vice-versa, on any matter which, in Isis’
reasonable judgment, may have a bearing on drug safety or pharmaceutical
quality in relation to the API, and supply all necessary information and
cooperation for the investigation of such events.  In cases where patient/subject safety may be
concerned, Isis must inform Genzyme by telephone and in writing as soon as
practicable, and vice-versa.

 

19.         Isis will
retain samples (initially at least 2X the amount needed to run all release
testing) for all API produced.

 

20.         Isis will
maintain the API stability program in accordance with ICH guidelines and
provide Genzyme with copies of all necessary documentation to establish API
shelf-life. This includes the requirement to add at least one commercial API
lot per year to the ongoing stability program as required under ICH guidelines.

 

21.         In event of an
out of specification (OOS) result encountered in release or stability testing,
Isis QA shall promptly (within 2 business days of confirmation) notify Genzyme
QA.

 

22.         All product
complaints, reported either from clinical studies, for example reported by
principle investigator entities, clinical monitoring bodies or international
authorities (e.g., customs) or product complaints related to commercial batches
of Drug Product will be handled principally by Genzyme and supported by Isis in
conjunction with Genzyme.  All complaint
events will be shared between both parties within 2 business days of receipt.

 

23.         All primary
data (or authenticated copies thereof) and result reports will be maintained in
the Isis archives through a date specified in writing by Genzyme, which such
date will not exceed 2 years after the final expiration date of the drug
product in which the API was used. 
Thereafter, Genzyme will make arrangements for continued storage of such
data at Genzyme’s expense as is necessary.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-3

 

24.         The names of
each responsible contact person(s) as of the Effective Date from Isis and
Genzyme are listed in Appendix A.

 

The
Parties Quality Assurance representatives executing this Agreement:

 

 

	
  ISIS
  PHARMACEUTICALS, INC.

  	
  GENZYME
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  NAME:
  Jeff Jones

  	
  NAME:
  Charles Thyne

  
	
   

  	
   

  
	
   

  	
   

  
	
  TITLE:
  Executive Vice President

  	
  TITLE:
  Vice President, Quality Operations

  
	
   

  	
   

  
	
   

  	
   

  
	
  SIGNATURE:

  	
  /s/
  Jeff Jones

  	
   

  	
  SIGNATURE:

  	
  /s/
  Charles Thyne

  
	
   

  	
   

  
	
   

  	
   

  
	
  DATE:
  [illegible]

  	
  DATE:
  June 20, 2008

  
					

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-4

 

Appendix
A

 

Key Contacts

 

Isis

 

	
  Department

  	
   

  	
  Primary Contact

  	
   

  	
  Secondary Contact

  
	
  Project
  Manager

  	
   

  	
  [**],
  Development 

  Chemistry & Manufacturing 

  Telephone: [**]

  	
   

  	
  [**],
  Development 

  Operations 

  Telephone: [**]

  
	
  Analytical
  

  Development/Quality 

  Control

  	
   

  	
  [**],
  ADQC 

  Telephone: [**]

  	
   

  	
  [**],
  ADQC 

  Telephone: [**]

  
	
  Quality
  

  Assurance/Compliance

  	
   

  	
  [**],
  QA/C 

  Telephone: [**]

  	
   

  	
  [**],
  QA/C 

  Telephone: [**]

  
	
  Regulatory
  Affairs

  	
   

  	
  [**],
  RA 

  Telephone: [**]

  	
   

  	
  [**].
  RA 

  Telephone: [**]

  

 

Genzyme

 

	
  Department

  	
   

  	
  Primary Contact

  	
   

  	
  Contact Information

  
	
  Quality
  Assurance

  	
   

  	
  [**]
  

  QA Director

  	
   

  	
   

  
	
  Quality
  Assurance

  	
   

  	
  [**]
  

  Sr. Director CQC

  	
   

  	
  [**]

  
	
  Regulatory
  Affairs

  	
   

  	
  [**]
  

  Associate Director Regulatory Affairs

  	
   

  	
  [**]

  
	
  Stability &
  Statistics

  	
   

  	
  [**]
  

  Sr. Director Stability & Statistics

  	
   

  	
  [**]

  
	
  Project
  Management

  	
   

  	
  [**]
  

  Sr. Project Manager

  	
   

  	
  [**]

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-5

 

Appendix B

Pre-Approved Subcontractors

 

API Release

 

	
  Test

  	
   

  	
  Subcontractor

  
	
  Bioburden

  	
   

  	
  [**]

  
	
  Endotoxin

  	
   

  	
  [**]

  
	
  Metals/Non-metals

  	
   

  	
  [**]

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-6

 

Schedule 1. 
Responsibility Checklist

 

	
   

  	
   

  	
  Responsibility

  	
   

  	
  Genzyme

  	
   

  	
  Isis

  
	
  1.0

  	
   

  	
  Regulatory
  Authorizations & cGMP Requirements

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Maintains all licenses,
  registrations and other authorizations required to operate a cGMP
  pharmaceutical manufacturing facility under the Applicable Laws and will
  inform Genzyme of any changes covering these aspects within two
  (2) Business Days.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.2

  	
   

  	
  Maintains and operates its
  Facilities in compliance with cGMPs and other Applicable Laws.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.3

  	
   

  	
  Supplies all agreed upon
  information related to the manufacture of the API so that Genzyme QA can make
  the final determination on whether to use the API in Drug Product for
  clinical trials and commercial use.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.4

  	
   

  	
  Processes the API in
  accordance with cGMPs and other Applicable Laws.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.5

  	
   

  	
  Complies with the
  applicable TSE requirements (e.g. EMEA/410/01 in its current version) for
  starting materials, synthesis materials and reagents.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.6

  	
   

  	
  Operates the facility in a
  manner to prevent contamination and/or cross-contamination in conformance
  with cGMPs and other applicable regulations and guidelines (e.g., FDA
  Guidance for Industry Quality Systems Approach to Pharma cGMPs, Sept 2006).

  	
   

  	
   

  	
   

  	
  x

  
	
  1.7

  	
   

  	
  Meets all Regulatory
  filing requirements for all API packaging configurations processed at its
  Facilities.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.8

  	
   

  	
  Performs annual Product
  Quality Review per applicable regulations

  	
   

  	
  x

  	
   

  	
   

  
	
  1.9

  	
   

  	
  Provides any API and (as applicable)
  Drug Product data needed to complete the annual Product Quality Review.
  Provides information to Genzyme in a timely manner, and in a format that
  facilitates review and inclusion in the Review prior to its due date.

  	
   

  	
   

  	
   

  	
  x

  
	
  1.10

  	
   

  	
  Provides Isis with copies
  of those portions of the Marketing Applications, Marketing Authorizations and
  Clinical Trial Applications that are applicable to the API and drug product
  processing prior to submission and after review and approval from the
  applicable Regulatory Authority.

  	
   

  	
  x

  	
   

  	
   

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-7

 

	
  1.11

  	
   

  	
  Responsible for
  maintaining those portions of the Marketing Applications, Marketing
  Authorizations and Clinical Trial Application that are applicable to the
  Processing of the API at the Facilities for inspectional purposes.

  	
   

  	
  x

  	
   

  	
   

  
	
  2.0

  	
   

  	
  Regulatory Actions & Inspections

  	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Permits inspections by the
  Regulatory Authorities of all relevant premises, procedures and
  documentation.

  	
   

  	
   

  	
   

  	
  x

  
	
  2.2

  	
   

  	
  Notifies the other party’s
  QA within two (2) business days of the first Day of any FDA or other
  Regulatory Authority inspection or notice of inspection (or other business,
  for example sample collection) of the Facilities directly relating to the
  API.

  	
   

  	
   

  	
   

  	
  x

  
	
  2.3

  	
   

  	
  Notifies the other party’s
  Quality Assurance department within two (2) business days of any FDA or
  other Regulatory Authority investigation relating to the API.

  	
   

  	
  x

  	
   

  	
  x

  
	
  2.4

  	
   

  	
  Reviews any issued
  regulatory findings that directly relate to the API and reviews formal
  responses to the Regulatory Agency.

  	
   

  	
  x

  	
   

  	
  x

  
	
  2.5

  	
   

  	
  Reviews any issued
  regulatory findings that directly relate to the Isis facility and/or systems
  and approves formal responses to the Regulatory Agency.

  	
   

  	
   

  	
   

  	
  x

  
	
  2.6

  	
   

  	
  Notifies the other Party
  within two (2) business days of any incident that causes the API or its
  labeling to be mistaken for, or applied to, another article or product and
  any information concerning any contamination or significant chemical,
  physical or other deterioration of shipped API.

  	
   

  	
  x

  	
   

  	
  x

  
	
  2.7

  	
   

  	
  Notifies the other party
  within two (2) business days of any Regulatory Authority request for API
  samples or API batch records prior to shipment.

  	
   

  	
  x

  	
   

  	
  x

  
	
  2.8

  	
   

  	
  Notifies the other party
  of any requests for information, notices of violation or other communication
  from a Regulatory Authority relating to environmental, occupational health
  and safety compliance relating directly to the API, within two
  (2) business days.

  	
   

  	
  x

  	
   

  	
  x

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-8

 

	
  3.0

  	
   

  	
  Audits

  	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Entitled to conduct one
  quality audit every 12 months to evaluate manufacturing, quality control and
  testing processes directly related to the API. Provides the other party with
  at least 4 weeks advanced notice of a requested inspection. 

  	
   

  	
  x

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  As necessary, the Parties
  will mutually agree in good faith to additional inspections.

  	
   

  	
  x

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Reserves the right to
  conduct additional audits in response to incidents/deviations associated with
  the manufacture/testing of the API.

  	
   

  	
  x

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Conducts each of the
  quality audits during normal business hours at mutually agreed upon times and
  by no more than three (3) audit tracks for three (3) days. Issues
  an audit report to the other party within 30 days of site audit.

  	
   

  	
  x

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Completes responses to
  audit findings within 30 days of receiving audit report.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Conducts internal audits
  of quality control and testing processes, in accordance with cGMPs and
  Applicable SOPs.

  	
   

  	
   

  	
   

  	
  x

  
	
  4.0

  	
   

  	
  Compliance of Specifications & Other Pertinent
  Controlled Documents & Change Control

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Prior to the
  implementation of any changes which may directly impact product quality and
  prior to the submission of any such changes to the Regulatory Authorities,
  submits in writing those proposed changes to the intermediate and final
  product specifications, validated methods, and master manufacturing batch
  records to the other party for review and incorporation into their respective
  quality systems.

  	
   

  	
   

  	
   

  	
  x

  
	
  4.2

  	
   

  	
  For any proposed changes
  related to the API and directly impacting product quality, approves in
  writing those changes to the intermediate and final product specifications,
  validated methods, master manufacturing batch records prior to the
  implementation of such changes and prior to the submission of any such
  changes to the Regulatory Authorities.

  	
   

  	
  x

  	
   

  	
  x

  
	
  4.3

  	
   

  	
  Notifies the other party
  prior to implementation of any proposed changes to the Facilities or to the
  processing equipment that directly impacts the API. Example: Introduction of
  new product sharing common equipment (e.g. freeze dryer).

  	
   

  	
   

  	
   

  	
  x

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-9

 

	
  4.4

  	
   

  	
  Acts as a liaison with
  Regulatory Authorities for the approval, maintenance and updating of API
  Specifications and other pertinent information regarding applicable Marketing
  Authorizations.

  	
   

  	
  x

  	
   

  	
   

  
	
  5.0

  	
   

  	
  Safety

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Maintains safety/hazard
  and handling data on the Raw Materials, intermediates, and API.

  	
   

  	
   

  	
   

  	
  x

  
	
  5.2

  	
   

  	
  Provides safety/hazard and
  handling data on the Raw Materials, intermediates, and API to Genzyme as
  requested.

  	
   

  	
   

  	
   

  	
  x

  
	
  6.0

  	
   

  	
  Complaints

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Notifies the other party
  within two (2) business days of any product complaints associated with
  manufacturing of the API.

  	
   

  	
  x

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Provides the other party
  with any information relating to the processing of the API that is necessary
  to address a product complaint and make any process changes necessary to
  address the complaint according to the Change Control procedures outlined in
  this document.

  	
   

  	
   

  	
   

  	
  x

  
	
  6.3

  	
   

  	
  Collects and logs all
  information relating to product complaints.

  	
   

  	
  x

  	
   

  	
   

  
	
  6.4

  	
   

  	
  Investigates all product
  complaints.

  	
   

  	
  x

  	
   

  	
  x

  
	
  6.5

  	
   

  	
  Provides the other party
  with an investigation or interim report within 30 days of receiving
  notification of any product complaint associated with manufacturing of the
  API.

  	
   

  	
   

  	
   

  	
  x

  
	
  6.6

  	
   

  	
  Issues all reports,
  customer responses and follow-up corrective actions relating to complaints
  and consults with the other party prior to any Recall or Product Withdrawal,
  provided Genzyme always maintains the final authority to make the decision.

  	
   

  	
  x

  	
   

  	
   

  
	
  7.0

  	
   

  	
  Recall & Product Withdrawal

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Notifies the other party
  within 2 business days of any events that could potentially result in a
  Recall or Product Withdrawal.

  	
   

  	
   

  	
   

  	
  x

  
	
  7.2

  	
   

  	
  Notifies the other party
  of any Recall or Product Withdrawal which may be attributable to the
  manufacture of the API.

  	
   

  	
  x

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Initiates and manages
  Recall or Product Withdrawal.

  	
   

  	
  x

  	
   

  	
   

  
	
  7.4

  	
   

  	
  Notifies appropriate
  Regulatory Authorities of Recall or Product Withdrawal.

  	
   

  	
  x

  	
   

  	
   

  
	
  8.0

  	
   

  	
  Materials

  	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Maintains Specifications for
  procurement of, storage of, sampling of, testing of and release of API Raw
  Materials and ensures such activities are conducted according to those
  Specifications.

  	
   

  	
   

  	
   

  	
  x

  
	
  8.2

  	
   

  	
  Keeps retain samples of
  API Starting Materials for one (1) year beyond last expiration date of
  drug product manufactured using such API.

  	
   

  	
   

  	
   

  	
  x

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-10

 

	
  8.3

  	
   

  	
  Keeps retain samples of
  API for three (3) years after either the completion of the last clinical
  trial or formal discontinuation of the last clinical trial in which the
  material was used.

  	
   

  	
   

  	
   

  	
  x

  
	
  8.4

  	
   

  	
  Disposes of API waste and
  any regulated waste related to the processing of the API per local, state,
  and federal guidelines.

  	
   

  	
   

  	
   

  	
  x

  
	
  8.5

  	
   

  	
  Executes a Vendor
  Qualification program for Raw Materials (including Starting Materials) that
  qualifies and confirms the Certificates of Analysis being relied upon.

  	
   

  	
   

  	
   

  	
  x

  
	
  8.6

  	
   

  	
  Stores API and Raw
  Materials in accordance with approved Specifications while at their
  Facilities.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.0

  	
   

  	
  Production & Validation

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Maintains, qualifies and
  validates the Facilities, equipment and processes associated with Processing
  the API, including cleaning validation or verification.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.2

  	
   

  	
  Reviews and approves
  validation of processes directly associated with manufacturing of the API.

  	
   

  	
  x

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Stores Validation
  Protocols and Reports, and upon request provides a copy of API related
  validation documentation to the other party. The other party must be informed
  before destruction of any Validation Protocols or Reports related to the API.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.4

  	
   

  	
  Manufactures and tests the
  API at the facilities in accordance with the Product Master Batch Records,
  the SOPs referenced therein and the Specifications.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.5

  	
   

  	
  Makes the final
  determination of whether to use the API in clinical trials or commercially.

  	
   

  	
  x

  	
   

  	
   

  
	
  9.6

  	
   

  	
  Uses appropriately
  validated or qualified analytical methods for routine API testing.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.7

  	
   

  	
  Maintains adequately
  trained staff and appropriate records of training and competence.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.8

  	
   

  	
  Generates Master Batch
  Record.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.9

  	
   

  	
  Approves Master Batch
  Record.

  	
   

  	
  x

  	
   

  	
  x

  
	
  9.10

  	
   

  	
  Generates Product
  Specifications.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.11

  	
   

  	
  Approves Product
  Specifications.

  	
   

  	
  x

  	
   

  	
  x

  
	
  9.12

  	
   

  	
  Supplies a Certificate of
  Analysis for the API to the other party reporting results versus the
  requirements of the Specifications.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.13

  	
   

  	
  Investigates, resolves and
  documents non-conformances and Deviations from the Master Batch Record
  directly relating to the API.

  	
   

  	
   

  	
   

  	
  x

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-11

 

	
   

  	
   

  	
  Responsibility

  	
   

  	
  Genzyme

  	
   

  	
  Isis

  
	
  9.14

  	
   

  	
  Informs the other party in
  writing within 2 business days of occurrence of any Significant Deviation
  that may affect quality, safety, efficacy, or compliance with any license or
  Clinical Trial use of the API.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.15

  	
   

  	
  Notifies other party’s QA,
  in writing of any API investigation and involves other party’s QA in any
  corrective and preventive actions for Significant Deviations.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.16

  	
   

  	
  Provides copies of
  investigation reports to other party relating to all Significant Deviations
  related to the API.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.17

  	
   

  	
  Notifies other party’s QA
  in writing before implementation of any planned Deviation: major,
  experimental, temporary or permanent, directly affecting any production of
  the API that may impact the IND, CTA, NDA or MAA.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.18

  	
   

  	
  Approves in writing any
  Planned Deviation: major, experimental, temporary or permanent, affecting any
  production of the API that may impact the IND, CTA, NDA or MAA.

  	
   

  	
  x

  	
   

  	
  x

  
	
  9.19

  	
   

  	
  Maintains all batch
  records for at least one (1) year after the expiry date. For APIs with
  retest dates, records should be retained for at least three (3) years
  after the batch is completely distributed.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.20

  	
   

  	
  Provides all documentation
  needed to maintain the Product Specification File in accordance with the
  applicable Regulatory Authorities for maintenance of the CTA, MAA.

  	
   

  	
   

  	
   

  	
  x

  
	
  9.21

  	
   

  	
  Maintains the Product
  Specification File in accordance with applicable Regulatory Authorities.

  	
   

  	
  x

  	
   

  	
   

  
	
  9.22

  	
   

  	
  Labels API in accordance
  with internal procedures and regulatory requirements.

  	
   

  	
   

  	
   

  	
  x

  
	
  10.0

  	
   

  	
  Lot Number Assignment

  	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Assigns lot numbers using
  internal procedures and communicates such lot numbers as soon as reasonable
  to facilitate tracking by the other party, as necessary.

  	
   

  	
   

  	
   

  	
  x

  
	
  11.0

  	
   

  	
  Samples

  	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Samples API according to
  cGMPs and internal procedures.

  	
   

  	
   

  	
   

  	
  x

  
	
  11.2

  	
   

  	
  Provides all non-USP
  reference standards required for testing API and drug product.

  	
   

  	
   

  	
   

  	
  x

  
	
  11.3

  	
   

  	
  Samples for required
  applicable retain samples per Regulations and approved procedures.

  	
   

  	
   

  	
   

  	
  x

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-12

 

	
  11.4

  	
   

  	
  Samples for required
  stability samples per approved procedures.

  	
   

  	
   

  	
   

  	
  x

  
	
  11.5

  	
   

  	
  Stores all required retain
  samples per approved procedures while at Isis facilities.

  	
   

  	
   

  	
   

  	
  x

  
	
  11.6

  	
   

  	
  As applicable, coordinates
  transfer of retain and/or stability samples for storage at other party’s
  facilities.

  	
   

  	
  x

  	
   

  	
   

  
	
  12.0

  	
   

  	
  Testing & Analysis

  	
   

  	
   

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Performs API release and
  stability testing according to all approved agreements, specifications and
  party’s applicable procedures.

  	
   

  	
   

  	
   

  	
  x

  
	
  12.2

  	
   

  	
  Within two
  (2) business days, notifies the other party of any apparent OOS result,
  which cannot be invalidated by an assignable laboratory cause, generated
  during release or stability testing.

  	
   

  	
   

  	
   

  	
  x

  
	
  12.3

  	
   

  	
  Provides a plan describing
  any proposed confirmatory or expanded testing of an apparent OOS result

  	
   

  	
   

  	
   

  	
  x

  
	
  12.4

  	
   

  	
  Within two
  (2) business days of receiving a confirmatory or expanded testing plan,
  provides QA authorization to perform such testing.

  	
   

  	
  x

  	
   

  	
  x

  
	
  12.5

  	
   

  	
  Ensures that any
  confirmatory or expanded testing is performed according to an approved plan

  	
   

  	
   

  	
   

  	
  x

  
	
  12.6

  	
   

  	
  Investigates all confirmed
  OOS results according to party’s applicable procedures

  	
   

  	
   

  	
   

  	
  x

  
	
  12.7

  	
   

  	
  Provides complete
  documentation of OOS investigation to other party, including final reported
  result(s), within two (2) business days of report completion.

  	
   

  	
   

  	
   

  	
  x

  
	
  13.0

  	
   

  	
  Stability Testing

  	
   

  	
   

  	
   

  	
   

  
	
  13.1

  	
   

  	
  Adheres to approved
  Stability Protocols.

  	
   

  	
   

  	
   

  	
  x

  
	
  13.2

  	
   

  	
  Maintains Stability
  Program and provides documentation to support storage temperature and
  shelf-life for the duration of the Product life cycle.

  	
   

  	
   

  	
   

  	
  x

  
	
  13.3

  	
   

  	
  Provides sample storage in
  temperature controlled stability chambers.

  	
   

  	
   

  	
   

  	
  x

  
	
  13.4

  	
   

  	
  Provides stability data
  updates for time points as specified in the stability protocol.

  	
   

  	
   

  	
   

  	
  x

  
	
  13.5

  	
   

  	
  Notifies the other party
  within 2 working days of confirmation of any initial stability failure of the
  API that has no assignable laboratory cause for the result.

  	
   

  	
   

  	
   

  	
  x

  
	
  13.6

  	
   

  	
  Trends and analyzes all
  stability data.

  	
   

  	
  x

  	
   

  	
  x

  
	
  13.7

  	
   

  	
  Reviews stability reports
  related to the API.

  	
   

  	
  x

  	
   

  	
  x

  
	
  14.0

  	
   

  	
  Release

  	
   

  	
   

  	
   

  	
   

  
	
  14.1

  	
   

  	
  Provides copies of
  documentation per section 15.0 pertaining to the manufacture of the API.

  	
   

  	
   

  	
   

  	
  x

  
	
  14.2

  	
   

  	
  Authorizes shipment of API
  upon review and acceptance 

  	
   

  	
  x

  	
   

  	
   

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-13

 

	
   

  	
   

  	
  of all required
  documentation and provides other party with written Authorization to Ship.

  	
   

  	
   

  	
   

  	
   

  
	
  14.3

  	
   

  	
  Provides all necessary API
  release documentation to approved designated Third Party.

  	
   

  	
   

  	
   

  	
  x

  
	
  15.0

  	
   

  	
  Records Required for Release

  	
   

  	
   

  	
   

  	
   

  
	
  15.1

  	
   

  	
  Provides quality
  documentation for each batch of API. The list of required documents includes,
  but is not limited to: 

  -  Certificate of Analysis
  for API 

  -  Certificate of Conformance
  for API 

  -  Manufacturing Batch
  Record(s) for API 

  -  Analytical Forms / Records
  

  -  Deviation/Investigation
  forms as part of the batch record 

  -  Signature of the QA
  representative who reviewed and approved the documentation and who is aware
  of any outstanding investigational issues with respect to the batch.

  	
   

  	
   

  	
   

  	
  x

  
	
  15.2

  	
   

  	
  Provides copies of all
  documentation necessary for the other party to respond to inquiries by
  Regulatory Authorities.

  	
   

  	
  x

  	
   

  	
  x

  
	
  16.0

  	
   

  	
  Storage & Transportation

  	
   

  	
   

  	
   

  	
   

  
	
  16.1

  	
   

  	
  Stores the API at the
  Facilities according to the Specifications pending API release.

  	
   

  	
   

  	
   

  	
  x

  
	
  16.2

  	
   

  	
  Will not ship the API to
  any other location without an Authorization to Ship from other party that may
  include specific conditions of insurance, packaging or courier service.

  	
   

  	
   

  	
   

  	
  x

  
	
  16.3

  	
   

  	
  Transports under correct
  transport conditions to other or designated Third Party site.

  	
   

  	
   

  	
   

  	
  x

  
	
  17.0

  	
   

  	
  Training

  	
   

  	
   

  	
   

  	
   

  
	
  17.1

  	
   

  	
  Employees engaged in the
  manufacture, filling, storage and testing of Product shall have education,
  training and experience or any combination thereof, to enable that person to
  perform the assigned functions. 

  —Training on the
  applicable procedures shall be conducted by qualified individuals on a
  continuing basis and with sufficient frequency to assure that employees
  remain familiar with requirements applicable to them. 

  —All training will be
  documented in a training record for each employee. Employees will be trained
  with respect to data integrity and fraud.

  	
   

  	
   

  	
   

  	
  x

  
	
  18.0

  	
   

  	
  Quality Agreements

  	
   

  	
   

  	
   

  	
   

  
	
  18.1

  	
   

  	
  Review Quality Agreements
  every two (2) years and update as necessary.

  	
   

  	
  x

  	
   

  	
  x

  

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

D-14

 

EXHIBIT E

 

FORM OF
PATENT ASSIGNMENT

 

PATENT ASSIGNMENT

 

WHEREAS, Isis
Pharmaceuticals, Inc. (“Assignor”), a Delaware corporation with an address
of 1896 Rutherford Road, Carlsbad, California 92008, is the owner of all
rights, title, and interests in and to the patents and patent applications
shown on the attached Exhibit 1
(the “Patents”); and

 

WHEREAS, Genzyme Corporation
(“Assignee”), a Massachusetts corporation with an address of 500 Kendall
Street, Cambridge, Massachusetts 02142, desires to acquire the entire right,
title, and interest in and to the Patents and all the inventions and
discoveries disclosed in the Patents (the “Inventions”);

 

NOW THEREFORE, be it known
that effective as of [    ], 2008, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor hereby sells, assigns, transfers, and sets over unto Assignee (1) the
entire right, title, and interest in all countries throughout the world in and
to said Patents and Inventions, including any renewals, revivals, reissues,
reexaminations, extensions, continuations, continuations-in-part, and divisions
of said Patents and any substitute applications therefor; (2) the entire
right to file patent applications (“New Applications”) in the name of Assignee
or its designee, or in the name of Assignor at Assignee’s or its designee’s
election, on the aforesaid Inventions in all countries of the world; (3) the
entire right, title, and interest in and to any patent which issued and may
issue on the Inventions in any country, and any renewals, revivals, reissues,
reexaminations, and extensions thereof, and any patents of confirmation,
registration, and importation of the same; (4) the right to sue and recover for, and the right to profits or damages
due or accrued in connection with, any and all past, present, or future
infringements of the Patents and Inventions; and (5) the entire
right, title, and interest in all convention and treaty rights of all kinds,
including without limitation all rights of priority in any country of the
world, in and to the above Patents and Inventions;

 

AND, Assignor hereby
authorizes and requests the competent authorities to grant and to issue any and
all patents on the Inventions throughout the world to Assignee, its successors,
or assigns, whose rights, title, and interests in such patents are the same as
would have been held and enjoyed by Assignor had this assignment, sale, and
transfer not been made.

 

[Remainder
of Page Left Blank]

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

 

IN WITNESS WHEREOF, the
Assignor has caused this Patent Assignment to be duly executed by its officer
thereunto duly authorized as of the [      ] day
of [      ], 2008.

 

 

	
   

  	
  ISIS PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

	
  STATE OF

  	
  )

  	
   

  
	
   

  	
  : ss.:

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On the
       day of
        , 200_, before me the
undersigned, personally appeared
                                                        ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.

 

 

	
   

  	
   

  
	
   

  	
  Notary Public

  

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

 

	
   

  	
  Acknowledgement of Assignee:

  
	
   

  	
  GENZYME CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

	
  STATE OF

  	
  )

  	
   

  
	
   

  	
  : ss.:

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On the
       day of
        , 200_, before me the
undersigned, personally appeared
                                                        ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.

 

 

	
   

  	
   

  
	
   

  	
  Notary Public

  

 

[**]

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.

 

 

EXHIBIT F

 

DISCLOSURE
SCHEDULE

 

[**]

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has
been filed separately with the Commission.QuickLinks
 -- Click here to rapidly navigate through this document

 

 
 

  Exhibit 10.3    
    

 
 

  CLARIENT, INC.
  
    2007 INCENTIVE AWARD PLAN
  
    STOCK OPTION GRANT NOTICE AND
  STOCK OPTION AGREEMENT    
    

        Clarient, Inc., a Delaware corporation (the "Company"), pursuant to its 2007
Incentive Award Plan (the "Plan"), hereby grants to the holder listed below ("Participant"), an option
to purchase the number of shares of the Company's common stock, par value $0.01 ("Stock"), set forth below (the
"Option"). This Option is subject to all of the terms and conditions set forth herein and in the Stock Option Agreement attached hereto as  Exhibit A (the "Stock Option Agreement") and the Plan, which are incorporated herein by
reference. Unless otherwise defined in this Grant Notice or in the Stock Option Agreement, the terms defined in the Plan shall have the same defined
meanings in this Grant Notice and the Stock Option Agreement. 

			
	

Participant:	

 	

Michael Pellini
	

Grant Date:	
 	

04/24/2008
	

Exercise Price per Share:	
 	

$1.62
	

Total Exercise Price:	
 	

$648,000
	

Total Number of Shares Subject to the Option:	
 	

400,000 Shares
	

Expiration Date:	
 	

04/24/2018

					
	Type of Option:	 	ý Incentive Stock Option	 	o Non-Qualified Stock Option
	

Vesting Schedule:	
 	

04/24/2009	
 	

25%
	 	 	04/24/2009-04/24/2012	 	Monthly
	 	 	04/24/2012	 	100%
	

 	
 	
The vesting outlined in the preceding schedule shall be subject to and conditioned upon the Participant's continued employment and shall cease upon the Participant's Termination of Employment. In addition to the
foregoing, if the Participant does not experience a Termination of Employment on or prior to April 24, 2009 or experiences a Severance Termination on or prior to such date and, in either case, within one year following the Participant's
Termination of Employment, either (A) a Change of Control occurs, or (B) (1) the Company enters into a definitive agreement pursuant to which, if consummated, a Change of Control would occur, and (2) no later than eighteen months
following the Termination of Employment, a Change of Control occurs, then, in any such case, the Option, to the extent not vested as of the date of such Termination of Employment, shall become fully vested and exercisable immediately prior to the
occurrence of any such Change of Control (unless any such Termination of Employment was a termination for Cause, in which case the vesting contemplated by this sentence shall not apply).

        By his or her signature, the Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and this Grant Notice. The Participant has
reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands
all provisions of this Grant Notice, the Stock Option Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee
upon any questions arising under the Plan or relating to the Option. 

							
	CLARIENT, INC.	 	PARTICIPANT
	

By:	
 	

 	
 	

By:	
 	

 
	 	 	

 	 	 	 	

 
	Print Name:	 	Ronnie A. Andrews	 	Print Name:	 	 
	 	 	

 	 	 	 	

 
	Title:	 	President & CEO	 	 	 	 
	 	 	

 	 	 	 	 
	Address:	 	31 Columbia, Aliso Viejo, CA	 	Address:	 	 
	 	 	

 	 	 	 	

 
	 	 	 	 	 	 	

 

 
 
 

  EXHIBIT A
  
    TO STOCK OPTION GRANT NOTICE
  
    STOCK OPTION AGREEMENT    
    

        Pursuant to the Stock Option Grant Notice (the "Grant Notice") to which this Stock
Option Agreement (this "Agreement") is attached, Clarient, Inc. a Delaware corporation (the
"Company"), has granted to the Participant an option under the Company's 2007 Incentive Award Plan (the
"Plan") to purchase the number of shares of Stock indicated in the Grant Notice. 

 
 

  ARTICLE I.
  
    GENERAL    
    

        1.1    Defined Terms.    Wherever the following terms are used in this Agreement they shall have the meanings
specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined in the Grant Notice or this Agreement shall have the meanings specified in the Plan. 

        (a)   "Administrator" shall mean the Board or the Committee responsible for conducting the general administration of the Plan
in accordance with Article 12 of the Plan; provided that if the Participant is an Independent Director, "Administrator" shall mean the Board. 

        (b)   "Cause" shall mean (a) the Participant's failure to adhere to any
lawful written policy of the Company (unless the Participant's failure to adhere is at the request of the Board) if the Participant has been given a reasonable opportunity to comply with such policy
and cure the Participant's failure to comply (which reasonable opportunity to cure must be granted for a period of at least ten days and up to thirty days, if reasonable); (b) the Participant's
appropriation (or attempted appropriation) of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on
behalf of the Company; (c) the Participant's misappropriation (or attempted misappropriation) of any of the Company's funds or property (including without limitation trade secrets and other
intellectual property); or (d) the Participant's conviction of, or Participant's entering of a guilty plea or plea of no contest with respect to, a felony or the equivalent thereof. 

        (c)   "Change of Control" shall have the meaning provided in the Plan, except
that for purposes of the vesting schedule contained in the Grant Notice and the definition of Severance Termination only, Change of Control shall mean (a) the issuance, sale, transfer or
acquisition of shares of capital stock of the Company (including a transfer as a result of death, disability, operation of law, or otherwise) in a single transaction or a group of related
transactions, as a result of which any entity, person, or group (other than Safeguard Scientifics, Inc. and/or its affiliates) acquires the beneficial ownership of newly issued, outstanding or
treasury shares of the capital stock of the Company having 50% or more of the combined voting power of the Company's then outstanding securities entitled to vote for at least a majority of the
authorized number of directors of the Company or (b) any merger, consolidation, sale of all or substantially all the assets or other comparable transaction as a result of which all or
substantially all of the assets and business of the Company are acquired directly or indirectly by another entity (except Safeguard Scientifics, Inc. and/or any of its affiliates). An
"affiliate" of an entity is an entity controlling, controlled by, or under common control with the entity specified, directly or indirectly through one or more intermediaries. "Group" shall have the
same meaning as in section 13(d) of the Securities Exchange Act of 1934, and "beneficial ownership" shall have the meaning set forth in Rule 13d-3 of the Securities and
Exchange Commission adopted under the Securities Exchange Act of 1934. 

A-1

 

        (d)   "Good Reason" shall mean (i) the Participant's assignment (without
the Participant's consent) to a position, title, responsibilities, or duties of a materially lesser status or degree of responsibility than the position, responsibilities, or duties of Chief Operating
Officer of the Company or removal from his position as an executive officer of the Company, (ii) the relocation of the Company's offices at which the Participant is principally employed to a
location which is more than thirty miles from the location of the Company's principal offices on the date of this Agreement, (iii) the reduction of the Participant's base salary or bonus
opportunity, except pursuant to a reduction which also applies to the Company's other senior executives or (iv) the requirement that the Participant report to any officer of the Company other
than its Chief Executive Officer; provided, however, that the Participant must have given the written notice to the Company that the Participant believes he has the right to terminate employment for
good reason, within ninety (90) days of the initial occurrence of such event, and the Company fails to eliminate the good reason within fifteen (15) days after receipt of the notice.
Further, the Participant's termination of employment must occur within 2 years from the initial occurrence of an event that constitutes good reason. 

        (e)   "Retirement" shall mean (i) with respect to an Independent
Director, a Termination of Directorship after the Independent Director has attained 55 years of age and completed at least three years of service on the Board and (ii) with respect to an
Employee or Consultant, a Termination of Employment or a Termination of Consultancy, as the case may be, after the Employee or the Consultant has attained 55 years of age and completed at least
five years of employment or consultancy service with the Company, as the case may be. 

        (f)    "Severance Termination" shall mean a Termination of Employment of the Participant by the Company without Cause, by the
Participant for Good Reason within twelve months after a Change of Control, or by reason of the Participant's death or disability. 

        (g)   "Termination of Consultancy" shall mean the time when the engagement of the Participant as a Consultant to the Company or
a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (a) terminations where
there is a simultaneous employment or continuing employment of the Participant by the Company or any Subsidiary, and (b) terminations where there is a simultaneous re-establishment
of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect
of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant's service at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. 

        (h)   "Termination of Directorship" shall mean the time when the Participant, if he or she is or becomes an Independent
Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors. 

        (i)    "Termination of Employment" shall mean the time when the employee-employer relationship between the Participant and the
Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but
excluding: (a) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any Subsidiary, and (b) terminations where there is a
simultaneous establishment of a consulting 

A-2

 

relationship
or continuing consulting relationship between the Participant and the Company or any Subsidiary, provided, that a Termination of Employment
shall only occur if such termination of the employee-employer relationship constitutes a "separation from service" (within the meaning of Section 409A(a)(2)(A)(i) of the Code). The
Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of
whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, if this Option is an Incentive Stock Option, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment
if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. 

        (j)    "Termination of Services" shall mean the Participant's Termination of Consultancy, Termination of Directorship or
Termination of Employment, as applicable. 

        1.2    Incorporation of Terms of Plan.    The Option is subject to the terms and conditions of the Plan which are
incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control, except that any definitions provided in the Grant Notice
or this Agreement with respect to capitalized terms shall supersede the definitions contained in the Plan. 

 
 

  ARTICLE II.
  
    GRANT OF OPTION    
    

        2.1    Grant of Option.    In consideration of the Participant's past and/or continued employment with or service to
the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the "Grant
Date"), the Company irrevocably grants to the Participant the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice,
upon the terms and conditions set forth in the Plan and this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option
to the maximum extent permitted by law. 

        2.2    Exercise Price.    The exercise price of the shares of Stock subject to the Option shall be as set forth in the
Grant Notice, without commission or other charge; provided, however, that the price per share of the
shares of Stock subject to the Option shall not be less than 100% of the Fair Market Value of a share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an
Incentive Stock Option and the Participant owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any
"subsidiary corporation" of the Company or any "parent corporation" of the Company (each within the meaning of Section 424 of the Code), the price per share of the shares of Stock subject to
the Option shall not be less than 110% of the Fair Market Value of a share of Stock on the Grant Date. 

        2.3    Consideration to the Company.    In consideration of the grant of the Option by the Company, the Participant
agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or
service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or
terminate the services of the Participant at any time for any reason whatsoever, with or without Cause, except to the
extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and the Participant. 

A-3

 
 
 

  ARTICLE III.
  
    PERIOD OF EXERCISABILITY    
    

        3.1    Commencement of Exercisability.    

        (a)   Subject
to Sections 3.2, 3.3, 5.8 and 5.10, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice. 

        (b)   Except
as expressly provided in the Grant Notice, no portion of the Option which has not become vested and exercisable at the date of the Participant's Termination of
Employment, Termination of Directorship or Termination of Consultancy shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in the
Plan or a written agreement between the Company and the Participant. 

        3.2    Duration of Exercisability.    The installments provided for in the vesting schedule set forth in the Grant
Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes
unexercisable under Section 3.3. 

        3.3    Expiration of Option.    Except as provided in Section 3.4 below, the Option may not be exercised to any
extent by anyone after the first to occur of the following events: 

        (a)   The
expiration of ten years from the Grant Date; 

        (b)   If
this Option is designated as an Incentive Stock Option and the Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was
granted, more than 10% of the total combined voting power of all classes of stock of the Company or any "subsidiary corporation" of the Company or any "parent corporation" of the Company (each within
the meaning of Section 424 of the Code), the expiration of five years from the Grant Date; 

        (c)   The
expiration of three months from the date of the Participant's Termination of Services, unless such termination occurs by reason of the Participant's death,
Disability or Retirement, or is by the Company for Cause; 

        (d)   The
expiration of three years from the date of the Participant's Termination of Services by reason of the Participant's Retirement (it being understood that the
Participant acknowledges that an Incentive Stock Option exercised more that three months after the Participant's Termination of Employment, other than by reason of death or Disability, will be taxed
as a Non-Qualified Stock Option); or 

        (e)   Immediately
upon the Participant's Termination of Services by the Company for Cause. 

        3.4   Notwithstanding
anything contained herein to the contrary, (i) in the event that the Participant experiences a Severance Termination, the Option shall remain
outstanding and exercisable until the earlier to occur of (A) the first anniversary of the date of termination, or (B) the expiration of ten years from the Grant Date,  provided, however, that
(ii) if the Option remains eligible to vest following the Participant's Termination of Employment in accordance with the
vesting schedule set forth in the Grant Notice (whether or not due to a Severance Termination), the Option shall remain outstanding and exercisable until the earlier to occur of (A) the
expiration of ten years from the Grant Date or (B) the first date on which the Option ceases to be eligible to vest following the Participant's Termination of Employment (it being understood
that the Participant acknowledges that an Incentive Stock Option exercised more than three months after the Participant's Termination of Employment, other than by reason of death or Disability, will
be taxed as a Non-Qualified Stock Option). 

        3.5    Special Tax Consequences.    The Participant acknowledges that, to the extent that the aggregate Fair Market
Value (determined as of the time the Option is granted) of all shares of Stock 

A-4

 

with
respect to which Incentive Stock Options, including the Option, are exercisable for the first time by the Participant in any calendar year exceeds $100,000, the Option and such other options
shall be Non-Qualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. The Participant further acknowledges that the rule
set forth in the preceding sentence shall be applied by taking the Option and other "incentive stock options" into account in the order in which they were granted, as determined under
Section 422(d) of the Code and the Treasury Regulations thereunder. 

 
 

  ARTICLE IV.
  
    EXERCISE OF OPTION    
    

        4.1    Person Eligible to Exercise.    During the lifetime of the Participant, only the Participant may exercise the
Option or any portion thereof. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be
exercised by the Participant's personal representative or by any person empowered to do so under the deceased the Participant's will or under the then applicable laws of descent and distribution. 

        4.2    Partial Exercise.    Any exercisable portion of the Option or the entire Option, if then wholly exercisable,
may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. 

        4.3    Manner of Exercise.    The Option, or any exercisable portion thereof, may be exercised solely by delivery to
the Secretary of the Company (or any third party administrator or other person or entity designated by the Company) of all of the following prior to the time when the Option or such portion thereof
becomes unexercisable under Section 3.3: 

        (a)   An
Exercise Notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Administrator; 

        (b)   The
receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised, including payment of any applicable
withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; 

        (c)   Any
other written representations as may be required in the Administrator's reasonable discretion to evidence compliance with the Securities Act or any other applicable
law rule, or regulation; and 

        (d)   In
the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Participant, appropriate proof of
the right of such person or persons to exercise the Option. 

Notwithstanding
any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from
time to time. 

        4.4    Method of Payment.    Payment of the exercise price shall be by any of the following, or a combination thereof,
at the election of the Participant: 

        (a)   Cash; 

        (b)   Check;

        (c)   With
the consent of the Administrator, delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then
issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of 

A-5

 

the
sale to the Company in satisfaction of the aggregate exercise price; provided, that payment of such proceeds is then made to the Company upon
settlement of such sale; provided further that executive officers of the Company may not pay the exercise price in the manner contemplated by this
clause (c)); 

        (d)   With
the consent of the Administrator, surrender of other shares of Stock which (A) in the case of shares of Stock acquired from the Company, have been owned by
the Participant for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal
to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised; 

        (e)   With
the consent of the Administrator, surrendered shares of Stock issuable upon the exercise of the Option having a Fair Market Value on the date of exercise equal to
the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised; or 

        (f)    With
the consent of the Administrator, property of any kind which constitutes good and valuable consideration. 

        4.5    Conditions to Issuance of Stock Certificates.    The shares of Stock deliverable upon the exercise of the
Option, or any portion thereof, may be either previously authorized but unissued shares of Stock or issued shares of Stock which have then been reacquired by the Company. Such shares of Stock shall be
fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions: 

        (a)   The
admission of such shares of Stock to listing on all stock exchanges on which such Stock is then listed; 

        (b)   The
completion of any registration or other qualification of such shares of Stock under any state or federal law or under rulings or regulations of the Securities and
Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; 

        (c)   The
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be
necessary or advisable; 

        (d)   The
receipt by the Company of full payment for such shares of Stock, including payment of any applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4; and 

        (e)   The
lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative
convenience. 

        4.6    Rights as Stockholder.    The holder of the Option shall not be, nor have any of the rights or privileges of, a
stockholder of the Company in respect of any shares of Stock purchasable upon the exercise of any part of the Option unless and until such shares of Stock shall have been issued by the Company to such
holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the
record date is prior to the date the shares of Stock are issued, except as provided in Section 11.1 of the Plan. 

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  ARTICLE V.
  
    OTHER PROVISIONS    
    

        5.1    Administration.    The Administrator shall have the power to interpret the Plan and this Agreement and to adopt
such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations
and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the Committee or the Board shall be
personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. 

        5.2    Option Not Transferable.    The Option may not be sold, pledged, assigned or transferred in any manner other
than by will or the laws of descent and distribution, unless and until the shares of Stock underlying the Option have been issued, and all restrictions applicable to such shares of Stock have lapsed.
Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence. 

        5.3    Adjustments.    The Participant acknowledges that the Option is subject to modification and termination in
certain events as provided in this Agreement and Article 11 of the Plan. 

        5.4    Notices.    Any notice to be given under the terms of this Agreement to the Company shall be addressed to the
Company in care of the Secretary of the Company at the address given beneath the signature of the Company's authorized officer on the Grant Notice, and any notice to be given to Participant shall be
addressed to Participant at the address given beneath Participant's signature on the Grant Notice. By a notice given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his
or her Option pursuant to Section 4.1 by written notice under this Section 5.4. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt
requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 

        5.5    Titles.    Titles are provided herein for convenience only and are not to serve as a basis for interpretation
or construction of this Agreement. 

        5.6    Governing Law; Severability.    The laws of the State of Delaware shall govern the interpretation, validity,
administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 

        5.7    Conformity to Securities Laws.    The Participant acknowledges that the Plan and this Agreement are intended to
conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder,
and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and
regulations. 

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        5.8    Amendments, Suspension and Termination.    To the extent permitted by the Plan, this Agreement may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided, that, except
as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely effect the Option in any material way without the prior written
consent of the Participant. 

        5.9    Successors and Assigns.    The Company may assign any of its rights under this Agreement to single or multiple
assignees, and this Agreement shall inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth in Section 5.2, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors
and assigns. 

        5.10    Notification of Disposition.    If this Option is designated as an Incentive Stock Option, Participant shall
give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two years from the
Grant Date with respect to such shares of Stock or (b) within one year after the transfer of such shares of Stock to him. Such notice shall specify the date of such disposition or other
transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer. 

        5.11    Limitations Applicable to Section 16 Persons.    Notwithstanding any other provision of the Plan or
this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule 

        5.12    Not a Contract of Employment.    Nothing in this Agreement or in the Plan shall confer upon the Participant
any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries. 

        5.13    Entire Agreement.    The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute
the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. 

        5.14    Section 409A.    Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice,
the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the U.S. Internal Revenue Code of
1986, as amended (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may
be issued after the date hereof, "Section 409A"). The Committee may, in its discretion, adopt such amendments to the Plan, this Agreement or the
Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or
appropriate to comply with the requirements of Section 409A. 

        5.15    Information Rights.    To the extent required by Section 260.140.46 of Title 10 of the California Code
of Regulations, the Company shall provide to Participant, not less frequently than annually during the period such Participant has one or more Awards outstanding, and, in the case of a Participant who
acquires Stock pursuant to the Plan, during the period such individual owns such Stock, copies of annual financial statements of the Company. Notwithstanding the preceding sentence, the Company
shall not be required to provide such statements to key persons whose duties in connection with the Company assure their access to equivalent information. 

A-8

QuickLinks

Exhibit 10.3

CLARIENT, INC. 2007 INCENTIVE AWARD PLAN STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

EXHIBIT A TO STOCK OPTION GRANT NOTICE STOCK OPTION AGREEMENT

ARTICLE I. GENERAL

ARTICLE II. GRANT OF OPTION

ARTICLE III. PERIOD OF EXERCISABILITY

ARTICLE IV. EXERCISE OF OPTION

ARTICLE V. OTHER PROVISIONS

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