Document:

Exhibit 10.2

 

December 3, 2008

 

VIA HAND DELIVERY

 

B. Lynne
Parshall

COO and
CFO

Isis Pharmaceuticals, Inc.

1896 Rutherford Road

Carlsbad, CA  92008

 

Dear Lynne:

 

As you know, in light of
your contribution to Isis Pharmaceuticals, Inc. (“Isis”), Isis offered you
certain severance benefits under the letter dated April 8, 2003, as
amended (the “Original Agreement”).

 

To ensure compliance with
Section 409A of the Internal Revenue Code (“409A”), we now wish to amend
and restate the Original Agreement with the terms of this letter agreement.

 

In the event that your
employment is involuntarily terminated without “cause” (as defined herein) by
Isis, you will be eligible to receive a lump sum severance payment equal to
eighteen (18) months of your then current base salary, less payroll deductions
and withholdings.  For purposes of this
letter agreement, “cause” will be defined as follows: (i) engaging or in
any manner participating in any activity which is competitive with or
intentionally injurious to Isis or which violates any provision of the
Proprietary Information and Inventions Agreement; (ii) commission of any
fraud against Isis or use or appropriation for personal use or benefit of any
funds or properties of Isis not authorized by the Isis to be so used or appropriated;
(iii) conviction of a crime involving dishonesty or moral turpitude; (iv) conduct
by you which in the good faith and reasonable determination of Isis
demonstrates gross unfitness to serve in your then current capacity at Isis.

 

However, if your employment
is involuntarily terminated by Isis as a result of a Change in Control (as
defined herein), instead of the 18-month payment described above, you will be
eligible to receive a lump sum severance payment equal to thirty (30) months of
your then current base salary, less payroll deductions and withholdings.

 

In order to be eligible to
receive the severance payment described herein, you will be required to execute
an Employee Separation Agreement substantially in the form attached hereto as Exhibit A
within the applicable time period set forth therein, but in no event

 

 

later
than forty-five (45) days following your termination.  Your severance payment will be due and
payable on or before the fifth (5th) business day following the
effective date of the Employee Separation Agreement.

 

For purposes of
this letter agreement, Change in Control will be defined as follows:  (i) a sale of all or substantially all
of the assets of Isis; (ii) a merger or consolidation in which Isis is not
the surviving corporation and in which beneficial ownership of securities of
Isis representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of Directors has changed; (iii) a reverse
merger in which Isis is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, and in which beneficial ownership of securities of Isis representing
at least fifty percent (50%) of the combined voting power entitled to vote in
the election of Directors has changed; or (iv) an acquisition by any
person, entity or group within the meaning of Section 13(d) or 14(d) of
the Exchange Act, or any comparable successor provisions (excluding any
employee benefit plan, or related trust, sponsored or maintained by Isis or
subsidiary of Isis or other entity controlled by Isis) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act, or comparable successor rule) of securities of Isis representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of Directors.

 

Notwithstanding the
foregoing, you will only be entitled to receive the severance payment if the
termination of your employment constitutes a “separation from service” (as such
term is defined in Treasury Regulation Section 1.409A-1(h)).  For the avoidance of doubt, it is intended
that the severance payment satisfy the exemption from the application of Section 409A
provided under Treasury Regulation Section 1.409A-1(b)(4).

 

Please keep in mind that
this letter agreement is not intended to change your status as an at-will
employee with Isis.  As with all
employees at Isis, you or Isis may terminate your employment at any time, for
any reason whatsoever, with or without cause or advance notice subject to the
provisions set forth herein.

 

If you have any questions
or comments regarding the terms and conditions of this letter, please do not
hesitate to contact me.

 

Very truly yours,

 

Isis Pharmaceuticals, Inc.

 

 

	
  /s/ Spencer R.
  Berthelsen, M.D.

  	
   

  
	
  /s/ Spencer R.
  Berthelsen, M.D.

  	
   

  
	
  Chairman of the
  Compensation Committee

  

 

 

Acknowledged and Agreed:

 

 

	
  /s/ B. Lynne Parshall

  	
   

  
	
   

  B. Lynne Parshall

  	
   

  

 

 

EXHIBIT A

SEPARATION
AGREEMENT

 

This
SEPARATION AGREEMENT (“Agreement”) is
made and entered into by and between                                         
(“Employee”) and                                               
(“the Company”) as of the Effective Date of this Agreement, as defined in
paragraph 10 below.

 

WHEREAS, the
Company wishes to provide Employee with certain benefits in consideration of
Employee’s service to the Company and the promises and covenants of Employee as
contained herein;

 

NOW, THEREFORE,
in consideration of the mutual promises and covenants contained herein, it is
hereby agreed by and between the parties hereto as follows:

 

1.             SEVERANCE PAYMENTS.  On                                     
(“Separation Date”), Employee shall cease to be an employee or officer of the
Company for all purposes.  In return for
executing this Agreement, Employee will receive a lump sum severance payment
equal to [          ] months
of your then current base salary, less payroll deductions and withholdings.  This severance payment will be due and
payable on or before the fifth (5th) business day following the
Effective Date.

 

2.             ACCRUED SALARY AND
PAID TIME OFF.  On or about the Separation Date, the Company
will pay Employee all accrued salary, and all accrued and unused vacation,
subject to standard payroll deductions and withholdings.  Employee is entitled to these payments
regardless of whether or not Employee signs this Agreement.

 

3.             EMPLOYMENT SEARCH SUPPORT. 
Commencing on the Separation Date, the Company will provide Employee
offsite employment search support through Right Management Associates as
outlined in Exhibit A attached hereto.

 

4.             HEALTH
INSURANCE.  To the extent
permitted by law and by the Company’s current group health insurance policies,
after the Separation Date, Employee will be eligible to continue receiving
health insurance benefits under the federal or state COBRA law at Employee’s
own expense and later to convert to an individual policy if desired.  Employee will be provided with a separate
notice regarding COBRA benefits.  If
Employee elects continued coverage under COBRA, the Company will reimburse
Employee’s COBRA premiums for one (1) month as part of this
Agreement.  In addition, to the extent
permitted by law and by the Company’s current vision and dental insurance
policies, after the Separation Date, the Company will reimburse Employee’s
vision and dental benefit premiums for one (1) month.

 

5.             STOCK
OPTIONS. Pursuant to the Company’s 199_ Equity Incentive Plan (the “Plan”)
and Employee’s Stock Option Agreement (a copy of which is attached hereto as Exhibit B),
vesting of Employee’s stock options will cease on the Separation Date.  Employee’s rights to exercise Employee’s
option as to any vested shares will be as set forth in the Plan and Employee’s
Stock Option Agreement.

 

 

6.             OTHER BENEFITS.  Except
as expressly provided herein, Employee acknowledges that Employee will not
receive (nor is entitled to receive) any additional compensation or benefits.

 

7.             RETURN OF COMPANY
PROPERTY.  By three (3) days after the Separation
Date, Employee will return to the Company all Company documents (and all copies
thereof) and other Company property and materials in Employee’s possession, or
control, including, but not limited to, Company files, notes, memoranda,
correspondence, lists, drawings, records, plans and forecasts, financial
information, personnel information, customer and customer prospect information,
sales and marketing information, product development and pricing information,
specifications, computer-recorded information, tangible property, equipment,
credit cards, entry cards, identification badges and keys; and any materials of
any kind which contain or embody any proprietary or confidential information of
the Company (and all reproductions thereof).

 

8.             PROPRIETARY
INFORMATION OBLIGATIONS.  Employee acknowledges that nothing herein
shall impair the covenants and obligations set forth in Employee’s Proprietary
Information and Inventions Agreement, a copy of which is attached hereto as Exhibit C.

 

9.             EMPLOYEE’S
RELEASE OF CLAIMS. Except as
otherwise set forth in this Agreement, in exchange for consideration under this
Agreement to which Employee would not otherwise be entitled, Employee hereby
releases, acquits and forever discharges the Company, its parents and
subsidiaries, and their officers, directors, agents, servants, employees,
attorneys, shareholders, successors, assigns and affiliates, of and from any
and all claims, liabilities, demands, causes of action, costs, expenses,
attorneys fees, damages, indemnities and obligations of every kind and nature,
in law, equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising out of or in any way related to agreements,
events, acts or conduct at any time prior to and including the execution date
of this Agreement, including but not limited to:  all such claims and demands directly or
indirectly arising out of or in any way connected with Employee’s employment
with the Company or the termination of that employment; claims or demands
related to salary, bonuses, commissions, stock, stock options, or any other
ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law, statute, or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Americans with Disabilities Act of 1990; the federal Age
Discrimination in Employment Act of 1967, as amended (“ADEA”); the California
Fair Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; harassment; fraud; defamation; emotional distress;
and breach of the implied covenant of good faith and fair dealing.

 

10.           ADEA WAIVER. Employee acknowledges that Employee knowingly
and voluntarily waives and releases any rights Employee may have under the
ADEA, as amended.  Employee also
acknowledges that the consideration given for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which
Employee was already entitled.  Employee
further acknowledges that Employee has been advised by this writing, as
required by the ADEA, that:  (a) Employee’s
waiver and release do not apply to any rights or claims that may arise after
the execution date of this Agreement; (b) Employee has the right to
consult with an attorney prior to executing this Agreement; (c) Employee
has forty-five (45) days 

 

 

to consider this Agreement (although Employee may choose to voluntarily
execute this Agreement earlier); (d) Employee has seven (7) days
following the execution of this Agreement by the parties to revoke the
Agreement; and (e) this Agreement shall not be effective until the date
upon which the revocation period has expired, which shall be the eighth day
after this Agreement is executed by Employee, provided that the Company has
also executed this Agreement by that date (“Effective Date”).

 

11.           SECTION 1542
WAIVER.  Employee acknowledges reading and
understanding Section 1542 of the Civil Code of the State of California:

 

A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.

 

Employee
hereby expressly waives and relinquishes all rights and benefits under that
section and any law or legal principle of similar effect in any jurisdiction
with respect to the release of unknown and unsuspected claims granted in this
Agreement.

 

12.           ARBITRATION.  To ensure rapid and economical resolution of
any and all disputes that may arise in connection with the Agreement, the
parties agree that any and all disputes, claims, causes of action, in law or
equity, arising from or relating to this Agreement or its enforcement,
performance, breach, or interpretation, with the sole exception of those
disputes that may arise from Employee’s Proprietary Information and Inventions
Agreement, will be resolved by final and binding confidential arbitration held
in San Diego, California and conducted by the American Arbitration Association
(“AAA”) under its then-existing Rules and Procedures.  Nothing in this paragraph is intended to prevent
either party from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration.

 

13.           ENTIRE AGREEMENT.  This
Agreement, including all exhibits, constitutes the complete, final and
exclusive embodiment of the entire agreement between Employee and the Company
with regard to the subject matter hereof. 
It supersedes any and all agreements entered into by and between
Employee and the Company where such other agreement may conflict with this
agreement.  It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein.  It may not
be modified except in a writing signed by Employee and a duly authorized officer
of the Company.  The parties have carefully
read this Agreement, have been afforded the opportunity to be advised of its
meaning and consequences by their respective attorneys, and signed the same of
their own free will.

 

14.           MISCELLANEOUS.  This
Agreement shall bind the heirs, personal representatives, successors, assigns,
executors and administrators of each party, and inure to the benefit of each
party, its heirs, successors and assigns. This Agreement shall be deemed to
have been entered into and shall be construed and enforced in accordance with
the laws of the State of California as applied to contracts made and to be
performed entirely within California.  If
an arbitrator or court of competent jurisdiction determines that any term or
provision of this Agreement is invalid or unenforceable, in whole or in part,
then the remaining terms and provisions hereof shall be unimpaired, the invalid
or unenforceable term or provision shall be modified or replaced so as to
render it valid and enforceable in a manner which represents the 

 

 

parties’ intention with respect to the invalid or
unenforceable term or provision insofar as possible. This Agreement may be
executed in two counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties have duly authorized and caused this Agreement to be
executed as follows:

 

 

	
  EMPLOYEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:Exhibit 10.3

 

Section VII.

 

Isis Policy and
Procedures Manual

 

CODE OF ETHICS AND& BUSINESS CONDUCT

 

Reviewed & Approved – 12/2008

Next Review – 12/2009March 2008

Document Owner – LegalCFO

 

ISIS PHARMACEUTICALS, INC.

1896 Rutherford Road

Carlsbad, CA 92008

 

1

 

Code of Ethics and Business Conduct

Table of Contents

 

	
  SECTION VII. CODE OF
  ETHICS AND BUSINESS CONDUCT

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  PHILOSOPHY OF ISIS CODE
  OF ETHICS AND BUSINESS CONDUCT

  	
   

  	
  3

  
	
  COMPLIANCE WITH LAWS
  AND REGULATIONS

  	
   

  	
  3

  
	
  ETHICAL CONDUCT

  	
   

  	
  3

  
	
  YOUR
  RESPONSIBILITY

  	
   

  	
  3

  
	
  BUSINESS
  PRACTICES

  	
   

  	
  4

  
	
  Interaction
  with Competitors

  	
   

  	
  4

  
	
  Bribes,
  Kickbacks and Similar Payments

  	
   

  	
  4

  
	
  Books,
  Records and Information Management

  	
   

  	
  4

  
	
  Retention
  of Records

  	
   

  	
  5

  
	
  Audit
  Integrity

  	
   

  	
  5

  
	
  CONFLICTS
  OF INTEREST

  	
   

  	
  5

  
	
  PRE-CLEARANCE
  PROCEDURE

  	
   

  	
  5

  
	
  CERTAIN
  PRE-CLEARED BUSINESS ACTIVITIES

  	
   

  	
  6

  
	
  DISHONESTY
  AND THEFT

  	
   

  	
  6

  
	
  INSIDER
  TRADING

  	
   

  	
  6

  
	
  WAIVERS FOR EXECUTIVE
  OFFICERS AND DIRECTORS

  	
   

  	
  7

  
	
  REPORTING SUSPECTED
  VIOLATIONS

  	
   

  	
  7

  
	
  CONSEQUENCES OF
  VIOLATING ISIS’ CODE OF ETHICS

  	
   

  	
  8

  
	
  APPENDIX A – The
  Foreign Corrupt Practices Act

  	
   

  	
  9

  

 

2

 

PHILOSOPHY OF ISIS CODE OF ETHICS AND BUSINESS CONDUCT

 

Approved
– Drafting

Next
Review – 12/07

Document
Owner – COO

 

Isis
Pharmaceuticals, Inc. (hereinafter referred to as “Isis” or the “Company”)
will adhere to high legal and ethical standards.  As such, this Code of Ethics and Business
Conduct (hereinafter referred to as the “Code of Ethics”) applies to each of
Isis’ employees (including its executive officers) and each member of the Isis
Board of Directors.

 

COMPLIANCE WITH LAWS AND REGULATIONS

 

Approved
–

Next
Review –

Document
Owner –

 

As a U.S. company, Isis
is governed by and required to comply with U.S. federal law.  In addition to complying with federal law,
Isis will conduct all its activities in compliance with all applicable
national, state and local laws, regulations and judicial decrees wherever it
conducts business.

 

At no time will you take
any action on behalf of the Company that you know, or reasonably should know,
violates any law or regulation.  Whenever
possible, you will strive to comply with the spirit of the law as well as its
letter.

 

No code of conduct can
cover all circumstances or anticipate every situation.  When you encounter situations not addressed
specifically by this Code of Ethics, you should apply its overall philosophy
and concepts to the situation.  You
should also refer to specific Company policies on the subject in question or
similar subjects.  If you still have a
question about the appropriateness of an action, you should review the
particular circumstances with Isis’ COOExecutive Vice President, CEO or the
Audit Committee of the Board of Directors.

 

ETHICAL CONDUCT

 

Approved
–

Next
Review –

Document
Owner –

 

You should strive to act
in a manner using good judgment, high ethical standards and honesty in your
business dealings on behalf of the Company. 
Unethical practices and activities do not serve the interests of the Company
or the community, even if they do not technically violate the law.

 

Your Responsibilities

 

·                  Know
and comply with the Isis Code of Ethics and Company policies that apply to
business activities.

 

·                  Be
honest, fair and trustworthy in all business activities and relationships.

 

·                  Provide
and support a culture that values integrity and ethical conduct.

 

·                  Avoid
all conflicts of interest between work and personal affairs.

 

·                  Report suspected
violations of law, the Isis Code of Ethics or Company Policies.

 

·                  Cooperate in any
investigation into possible violations of law, the Isis Code of Ethics or
Company Policies.

 

3

 

Business Practices

 

It is Isis’ policy to deal with its business
associates, partners, suppliers, competitors and any governments or
governmental agencies with which it interacts in an ethical manner.  As such, you will comply with the principles
outlined below and will take steps to ensure similar compliance by the persons
you directly manage.

 

Interaction with
Competitors

 

As a vigorous
competitor in the marketplace, Isis will seek economic knowledge about our
competitors.  However, you will not
engage in illegal or improper acts to acquire any competitor information.  In addition, you will not hire competitors’
employees for the purpose of obtaining confidential information, urge
competitors’ personnel, customers or suppliers to disclose confidential
information, or seek such information from competitors’ employees subsequently
hired by the Company.

 

Bribes, Kickbacks
and& Similar Payments

 

You are prohibited from
paying or receiving any bribe, kickback or other similar payment to or from any
public official, or government, or other individual, to secure any concession,
contract or other favorable treatment for Isis or you.  This prohibition extends to the payment or
receipt of money or anything else of substantial value when you have reason to
believe that some part of the payment or “fee” will be used for a bribe,
kickback or other similar activity.

 

Because Isis is a global
company and does business worldwide, you must comply with the United States
Foreign Corrupt Practices Act of 1977. 
For more detail, please read a definition of the “Foreign Corrupt
Practices Act,” attached as Appendix A.

 

Books, Records
and& Information Management

 

Isis’ books of account
and records must be accurately maintained and fully disclose the nature of
transactions reflected in them. Penalties for violating the laws and
regulations in this area could be severe for the Company and the employees
involved.  Isis will maintain these books
according to the following record-keeping requirements and in compliance with
the spirit and letter of applicable laws and regulations:

 

·                  All books, records and accounts must
be kept in reasonable detail and must accurately and fairly reflect all
transactions and dispositions of the Company’s assets.

 

·                  All disbursements of funds and all
receipts must be properly and promptly recorded.

 

·                  No undisclosed or unrecorded fund or
account may be established for any purposes.

 

·                  False or artificial entries must
never be made in any of the books or records of the Company, or in any public
record for any reason, nor should the Company’s records be falsely altered in
any way.

 

You will not take any
action, for the purpose of rendering the Company’s financial statements
materially misleading, or to fraudulently influence, coerce, manipulate, or
mislead any independent accountant engaged in the performance of an audit of
the Company’s financial statements.

 

4

 

Retention of
Records

 

Legal practice requires
the retention of certain records for various periods of time, particularly
those relating to taxes, personnel, contracts and corporate structure.  When litigation or a government investigation
or audit is pending or imminent, you must not destroy any relevant records
until the matter is closed.  Destruction
of records to avoid disclosure in a legal proceeding or investigation may
constitute a criminal offense.

 

Audit Integrity

 

No officer or director of
Isis, or any other person acting under their direction, will take any action to
fraudulently influence, coerce, manipulate, or mislead any independent
accountant engaged in the performance of an audit of the Company’s financial
statements for the purpose of rendering the Company’s financial statements
materially misleading.

 

Conflicts of Interest

 

As an employee
youYou cannot without the Company’s express written consent, engage in any
employment or business activity other than for the Company.  Unless expressly consented to in writing by
the Company, your personal activities should not involve the use of Company
property, facilities, influence or other resources, and should not reflect
discredit upon the Company.

 

You will not engage in
any activity through which you stand to benefit personally from any sale or
purchase of goods and services by the Company. This provision does not apply to
benefits arising out of your employment with the Company, or to ownership of
equity in a publicly traded company which was purchased on the open  market and represents (i) less than 1%
of such company’s outstanding equity and (ii) less than 5% of your equity
portfolio.

 

You must promptly
disclose in writing any actual or potential conflicts of interest to Isis’ COO,
CEO or General Counsel.  Isis will review
the matter, as set forth above, and communicate its position in writing.

 

Pre-Clearance
Procedure

 

All
employees must pre-clear any employment or business activity other than for the
Company.  To do so, you should contact
either (i) the CEO, (ii) COO or (iii) General Counsel and
explain to them the proposed business activity you wish to engage in.  If you are an executive officer, the
Nominating, Governance and Review Committee will evaluate the proposed business
activity and will notify you whether such activity has been approved.  For all other employees, the CEO or COO will
evaluate the proposed business activity and will notify you whether such
activity has been approved.  In some
cases, the individual(s) reviewing your request may discuss your request
with other members of the Isis management team. 
Remember, just because you have to pre-clear a certain activity, does
not mean that Isis will prevent you doing it.

 

Members
of the Board of Directors must request and receiveWithout a determination from the Board of Directors (for executive officers
and Directors) or the CEO or Executive Vice President (for non-executive
officers) that no conflict from the
Nominating, Governance and Review Committee before engaging inof
interest exists, you will not engage in
any activity, including acting as an employee or , director, or advisor for any entity that directly or indirectly
competes with Isis.

 

5

 

Certain
Pre-Cleared Business Activities

 

Isis’ management has already
pre-cleared certain business activities that should not cause a conflict of
interest.  For these activities,
employees generally do not need to obtain written permission from the Company.  However, please use your common sense because
even with pre-cleared activities, conflicts of interest can arise.  If you are ever in doubt, you should follow
the pre-clearance procedures outlined above. 
The pre-cleared business activities include:

 

·                  Working
in the food service or hospitality industry after normal business hours;

·                  Owning
rental property (unless Isis rents the property);

·                  Philanthropic
or pro bono activities;

·                  Farming;

·                  Home-based
retail (e.g. Amway, Tupperware, cosmetics), provided you do not solicit sales
during Isis business hours or at the Isis workplace; and

·                  Fitness
instructor.

 

You must promptly
disclose in writing any actual or potential conflicts of interest to Isis’
Executive Vice President, CEO or Vice President Human Resources.  Isis will review the matter, as set forth
above, and communicate its position in writing.

 

Dishonesty and Theft

 

You will not knowingly:

 

·                  Engage in fraud or embezzlement
affecting Company property, funds, securities or other assets; or

 

·                  Willfully damage or destroy property
or materials belonging to the Company, its employees or customers.

 

In addition, without
proper supervisory authorization, you will not knowingly:

 

·                  Remove property, material or money
from the Company, its employees, or its customers for personal gain, personal
use, resale or to give to another party;

 

·                  Receive
property, materials or money belonging to the Company, its employees or its
customers for personal gain, personal use, resale or to give to another party;

 

·                  Access, remove,
publish, destroy or alter private or confidential information existing in
physical Company records or electronically stored information;

 

·                  Remove, publish, destroy or alter
other physical Company records or electronically stored information affecting
the Company, its employees or corporate partners; or

 

·                  Copy, reprint, duplicate, or recreate
in whole or in part, computer programs or related systems developed or modified
by Isis personnel, or acquired from outside vendors.

 

Insider Trading

 

During the course of your
employment, you may receive important information which is not yet publicly
available (“inside information”) about Isis or about other publicly traded
companies with which the Company has business dealings.  Because of your access to this information,
you may be in a position to profit financially by buying or selling or in some
other way dealing in Company stock or the stock of another publicly traded
company.  Similarly,Or you may be in a
position to benefit financially or

 

6

 

otherwise by passing this
information on to some other person. 
Whether you personally benefit or another benefits, this is considered “insider
trading” and is illegal.

 

You may not disclose
inside information to anyone inside the Company who is not authorized to access
it or to anyone outside the Company. 
When you have access to inside information, you may not buy or sell Isis
stock regardless of the number of shares nor may you encourage or discourage
others from trading on Company stock.

 

WAIVERS FOR EXECUTIVE
OFFICERS AND DIRECTORS

 

Any waiver of this Code
of Ethics for executive officers or members of the Board of Directors must be
approved by the Nominating, Governance and Review CommitteeBoard of Directors
and must be promptly disclosed to the Company’s stockholders, including the
reasons for the waiver.

 

REPORTING SUSPECTED
VIOLATIONS

 

Isis is committed to complying with all applicable
securities laws and to filing fair and accurate disclosures with the SEC.  Each Employee who reports suspectedIf you
suspect accounting improprieties or , violations of the law or this Code of
Ethics or of any laws specifically including federal mail fraud, wire fraud, or
securities fraud statutes will be taken seriously and the allegations will be
thoroughly investigated.

 

An employee who suspects accounting improprieties or
violations of this Code of Ethics or of any laws specifically including federal
mail fraud, wire fraud, or securities fraud statutes should take the following
steps:

 

1.               The employee you
should immediately communicate his/heryour concern to the Vice President Human
Resources, the General Counsel, the COOExecutive Vice President or the
CEO.  To ensure the highest quality
response, employees should communicate directly with Any one of these
designated Isis officials.  However, any
concern may be made anonymously and will be taken seriously.

 

2.               Any officer
receivingofficers who receives such a complaint will immediately communicate
the complaint to the chairman of the Audit Committee or.  Alternatively, you may directly report a
suspected violation any such violations directly to the Chairmanchairman of the
Audit Committee.

 

3.               The Audit Committee
together with management will conduct, if appropriate, a confidential, but not
anonymous investigation which will involve talking to the complainant (if
known), the accused, and as circumstances warrant, any witnesses, and anyone
who may have similar complaints.

 

4.               Any concern may be
made anonymously and will be taken seriously. 
All parties involved in the investigation will be required to cooperate
fully, maintain complete confidentiality and take no action which might be
considered retaliatory.

 

5.               Once the
investigation is complete, the Audit Committee will make a determination as to
what happened, the level of severity and the appropriate remedial action, and
will take such action.

 

Isis will not discharge,
demote, suspend, threaten, harass, or in any other manner discriminate against
an employee because you (1) have provided information, caused information
to be

 

7

 

provided, or otherwise
assisted in an investigation regarding any conduct which you reasonably believe
constitutes a violation of this Code of Ethics or of the federal mail fraud,
wire fraud, or securities fraud statutes, any SEC rule or any provision of
federal law relating to fraud against stockholders, when the information or
assistance is provided to or the investigation is conducted by a federal
regulatory or law enforcement agency, any Member of Congress or Congressional
committee, or a person with supervisory authority over the employee or (2) have
filed, caused to be filed, testified, participated in or otherwise assisted in
a proceeding filed or about to be filed (with any knowledge of Isis) relating
to an alleged violation of the federal mail fraud, wire fraud, or securities
fraud statutes, any SEC rule or any provision of federal law relating to
fraud against stockholders.  An employee
who alleges such discharge or discrimination may file a civil complaint with
the Secretary of Labor.

 

CONSEQUENCES OF VIOLATING
ISIS’ CODE OF ETHICS

 

If you violate the law,
the Isis Code of Ethics or Isis’ policies, you may be subject to disciplinary
action, up to and including termination. 
If necessary, Isis may suspend your employment during an investigation
into an alleged breach.  Additional
actions may include reassignment of work duties and limitation in future job
opportunities.  Isis may refer violations
of law to local or federal law enforcement authorities for possible
prosecution.

 

8

 

APPENDIX A – The Foreign
Corrupt Practices Act

 

The
Foreign Corrupt Practices Act

 

The Foreign Corrupt
Practices Act (FCPA) prohibits U.S. companies from making improper payments or
gifts to foreign officials.  Company
policy requires that all directors, officers, employees, agents and consultants
of Isis comply with the FCPA.

 

A.                                   Definition
of Foreign Official

 

Under the FCPA,
the term “foreign official” includes elected and appointed governmental
officials, candidates for public office, foreign political parties, officers
and employees of government owned or controlled enterprises, and public
international organizations.  When in
doubt, Isis employees should consult the Company’s Legal Counsel for advice on
whether a potential recipient of a payment is a “foreign official.”

 

B.                                     Prohibited
Acts

 

The following acts are
prohibited by the FCPA:

 

1.                                       Authorizing,
paying, promising or delivering any payment, gift or favor intended to
influence any foreign official on a matter within that person’s
responsibilities.  For example, any
payment to any foreign official for the purposes of obtaining or retaining
sales of products or services to Isis, sales by Isis of Isis products or
services, to win a bid or contract, or to obtain more favorable tax treatment
is prohibited.

 

2.                                       Any
indirect payment to a third party if the payor knows that the third party may
make a prohibited payment.  For example,
any payment to an Isis agent or consultant where the payor is aware or has firm
belief that such agent or consultant may make an improper payment to a foreign
official is prohibited.  The Isis payor
may not avoid this prohibition by deliberately ignoring or purposefully
avoiding knowledge that a bribe may be paid.

 

3.                                       Establishing
any undisclosed or unrecorded “slush” funds or assets; making any false or
artificial entries in company books or records; failing to keep books, records
and accounts in reasonable detail to reflect accurately the handling of money
and other assets; and failing to maintain internal accounting controls
sufficient to verify that no improper payments have been made.

 

9

 

C.              Permissible Payments

 

The following payments may be made:

 

1.                                       Payments
to a foreign official for the purpose of expediting or securing the performance
of a routine governmental action. 
Payments for the following routine governmental actions are
permissible:  obtaining permits, licenses
or other official documents to qualify to do business in a foreign country;
processing governmental papers, such as visas and work orders; assuring police
protection, mail pickup and delivery, or scheduling inspections associated with
contract performance or inspections related to the transit of goods across
country; and providing phone service, power and water supply, loading and
unloading cargo or protecting perishable products or commodities from
deterioration.  Routine governmental
action does not include any decision by a foreign official to encourage, to
award, to continue or to modify the terms relating to any business with any
Isis entity.

 

2.                                       Any
payment that is lawful under the written laws and regulations of the foreign
country.

 

3.                                       Any
reasonable expenditure directly related to the promotion, demonstration or
explanation of Isis products or services or the execution or performance of a
contract with a foreign government or agency, such as the travel and lodging
expenses of a foreign official on a trip for such purposes.

 

D.              Penalties

 

Violations of the
anti-bribery provisions of the FCPA may result in criminal fines of up to
$2,000,000 for corporations and $100,000 and five years imprisonment for
individuals.  Violations of the
accounting provisions may result in fines of up to $2,500,000 for corporations
and $1,000,000 and ten years imprisonment for individuals.  Under alternative fine provisions, a violator
may be fined up to twice the amount of the gain or loss resulting from a
violation.

 

Payments and the FCPA

 

Neither Isis nor any
director, officer, employee, agent or consultant of the Company will directly
or indirectly make or promise illegal payments or contributions, or engage in
any other illegal conduct in order to influence customers, suppliers or
governmental entities, including their officials or employees, to secure or
retain business, to encourage any such employees or officials to fail to
perform or to perform improperly their official functions or to influence
legislation, nor undertake any of the acts prohibited by the FCPA, as
summarized above.  Neither Isis nor any
director, officer, employee, agent or consultant of the Company will submit to
extortion as a condition of doing business.

 

10

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