Document:

exv10w26

Exhibit 10.26

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

LICENSE AND COLLABORATION AGREEMENT

     This LICENSE AND COLLABORATION AGREEMENT (this “Agreement”), is entered into as of
July 8, 2007 (the “Execution Date”), by and among F. Hoffmann-La Roche Ltd, a Swiss
corporation (“Roche Basel”), having a place of business at Grenzacherstrasse 124, CH-4070
Basel, Switzerland, and Hoffmann-La Roche Inc., a New Jersey corporation (“Roche Nutley”),
having a place of business at 340 Kingsland Street, Nutley, New Jersey 07110, U.S.A. (Roche Basel
and Roche Nutley, collectively, “Licensee”), and Alnylam Pharmaceuticals, Inc., a Delaware
corporation, having a place of business at 300 Third Street, 3rd Floor, Cambridge, Massachusetts
02142, U.S.A. (“Alnylam”), and, solely for the purposes set forth in Section 9.15 of this
Agreement, Alnylam Europe AG, a German stock corporation, with a registered office in Kulmbach,
Germany (“Alnylam Europe AG”).

INTRODUCTION

     1. Licensee is engaged in the business of Discovering, Developing, Commercializing and
Manufacturing therapeutic products (each as defined below).

     2. Alnylam has developed, acquired and licensed technology useful for the Discovery,
Development, Manufacture, characterization and use of therapeutic products that function through
the mechanism of RNA interference (“RNAi”).

     3. Alnylam desires to grant licenses to such technology to Licensee, and the Parties desire to
collaborate on certain research and development activities, in each case upon the terms and
conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the respective representations, warranties, covenants and
agreements contained herein, and for other valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Alnylam and Licensee agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Definitions. For the purpose of this Agreement, the following terms, whether used in
singular or plural form, shall have the respective meanings set forth below:

     “Accounting Period” shall have the meaning set forth in Section 5.8.

     “Additional Field” shall mean the treatment or prophylaxis of all Indications in any
Supplemental Therapeutic Area, where such treatment or prophylaxis comprises an RNAi Compound
complementary to, and functional in mediating the RNAi of, a Target known or believed to be
primarily implicated in such Supplemental Therapeutic Area.

     “Affiliate” shall mean any Person who directly or indirectly controls or is controlled
by or is under common control with another Person. For purposes of this definition, “control” or
“controlled” shall mean ownership directly or through one or more

 

 

Affiliates, of fifty percent (50%) or more of the shares of stock entitled to vote for the
election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity
interest in the case of any other type of legal entity, status as a general partner in any
partnership, or any other arrangement whereby a Party controls or has the right to control the
Board of Directors or equivalent governing body of a corporation or other entity, or the ability to
direct the management or policies of a corporation or other entity. The Parties acknowledge that
in the case of certain entities organized under the laws of certain countries outside of the United
States, the maximum percentage ownership permitted by law for a foreign investor may be less than
fifty percent (50%), and that in such case such lower percentage shall be substituted in the
preceding sentence, provided that such foreign investor has the power to direct the
management and policies of such entity. For purposes of this Agreement, [**], each shall not be
deemed an “Affiliate” of Licensee; provided, however, that if Licensee were
to assume day-to-day control of either [**], then Licensee shall have the right, at its sole
option, to designate [**], as applicable, to be an Affiliate. For purposes of Sections 6.1, 6.2,
9.8, 9.12 (the second sentence only), and 9.14, Alnylam’s Affiliates shall not include [**], any
Affiliates of [**] (other than Alnylam and Persons “controlled” by Alnylam on the Execution Date)
or any Person that becomes an Affiliate of Alnylam as a result of a [**].

     “Agreement” shall have the meaning set forth in the Preamble, and shall include, for
the avoidance of doubt, all Exhibits and Schedules attached hereto.

     “Alnylam Change of Control” shall be deemed to occur upon the closing of (a) a merger,
reorganization or consolidation involving Alnylam in which its shareholders immediately prior to
such transaction would hold less than fifty percent (50%) of the securities or other ownership or
voting interests representing the equity of the surviving entity immediately after such merger,
reorganization or consolidation, or (b) a sale to a Third Party of all or substantially all of
Alnylam’s assets or business relating to this Agreement.

     “Alnylam Third Party Obligations” shall mean (a) Alnylam’s obligations to, and the
rights of, Pre-Existing Alliance Parties and Listed Counterparties with respect to the Licensed
Intellectual Property under Pre-Existing Alliance Agreements and Listed Alnylam Third Party
Agreements, respectively, and (b) Alnylam Europe AG’s obligations to, and the rights of, Max Planck
with respect to certain Architecture and Chemistry Patent Rights under the Max Planck European
License Agreement; including without limitation Listed Alnylam Third Party Payment obligations.

     “Annual Net Sales” shall mean, with respect to a Licensed Product, the Net Sales of
such Licensed Product during a calendar year.

     “Architecture and Chemistry Intellectual Property” shall mean Architecture and
Chemistry Know-How and Architecture and Chemistry Patent Rights.

     “Architecture and Chemistry Know-How” shall mean Know-How Controlled by Alnylam as of
the Effective Date that relates to (a) the general structure, architecture, or design of
double-stranded oligonucleotide molecules which engage RNAi mechanisms in a cell; (b) chemical
modifications of double-stranded oligonucleotides (including any modification to the base, sugar or
internucleoside linkage, nucleotide mimetics, and any end

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modifications) which do not abolish the RNAi activity of the double-stranded oligonucleotides
in (a); (c) manufacturing techniques for the double-stranded oligonucleotide molecules or chemical
modifications of (a) and (b); or (d) all uses or applications of double-stranded oligonucleotide
molecules or chemical modifications in (a) or (b); but excluding (i) Know-How to
the extent specifically related to Blocked Targets, and (ii) Delivery Know-How.

     “Architecture and Chemistry Patent Rights” shall mean the Patent Rights listed on
Schedule C Controlled by Alnylam or, solely in the case of Patent Rights licensed under the
Max Planck European License Agreement, by Alnylam Europe AG, each as of the Effective Date,
together with any future Patent Rights that claim priority to or common priority with any of the
aforementioned Patent Rights, that Cover (a) the general structure, architecture, or design of
double-stranded oligonucleotide molecules which engage RNAi mechanisms in a cell; (b) chemical
modifications of double-stranded oligonucleotides (including any modification to the base, sugar or
internucleoside linkage, nucleotide mimetics, and any end modifications) which do not abolish the
RNAi activity of the double-stranded oligonucleotides in (a); (c) manufacturing techniques for the
double-stranded oligonucleotide molecules or chemical modifications of (a) and (b); or (d) all uses
or applications of double-stranded oligonucleotide molecules or chemical modifications in (a) or
(b); but excluding (i) Patent Rights which specifically relate to Blocked Targets,
and (ii) Delivery Patent Rights. Notwithstanding anything in this Agreement to the contrary,
should it be reasonably determined after the Effective Date that (x) any omitted Patent Rights
which Alnylam Controlled as of the Effective Date disclose any Valid Claims that Cover any of
clause (a) through (d) above, but excluding any Patent Rights which specifically relate to Blocked
Targets and Patent Rights licensed under the [**] Agreement (except as set forth in Section
2.3(b)(ii)), or (y) in the course of prosecution of any Valid Claims under any of the Patent Rights
listed on Schedule C, any such Valid Claim either no longer Covers any of clause (a)
through (d) above or specifically relates to Blocked Targets, Schedule C shall be amended
to reflect the inclusion or deletion, as the case may be, of such Patent Right, to the extent that
it does not conflict with the terms of any Listed Alnylam Third Party Agreement or Pre-Existing
Alliance Agreement to do so. For the avoidance of doubt, any Patent Rights which are subsequently
included on Schedule C pursuant to clause (x) above shall be deemed “Architecture and
Chemistry Patent Rights” for all purposes hereunder.

     “Blocked Target” shall mean any Target that is subject to a contractual obligation of
a Pre-Existing Alliance Agreement that would be breached by the inclusion of such Target as a
Designated Target under this Agreement.

     “Blocked Target List” shall mean a list of Blocked Targets maintained by the
Gatekeeper, as such list may be updated from time to time.

     “Business Day” shall mean a day on which banking institutions in Boston, Massachusetts
are open for business.

     “[**] Agreement” shall have the meaning set forth in Section 2.3(b)(ii).

     “Collaboration Target” shall have the meaning set forth in Section 4.1.

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     “Combination Product” shall mean a Licensed Product combined with any other clinically
active therapeutic or prophylactic ingredient, mechanism or device.

     “Commercialization” or “Commercialize” shall mean any and all activities
directed to marketing, promoting, detailing, distributing, importing, having imported, exporting,
having exported, selling or offering to sell, or seeking to obtain reimbursement for, a product,
whether before or after Regulatory Approval for such product has been obtained.

     “Common Stock Purchase Agreement” shall mean the Common Stock Purchase Agreement
entered into by Licensee and Alnylam on the Execution Date.

     “Confidential Information” shall mean the terms of this Agreement and all Know-How or
other information, including proprietary information and materials (whether or not patentable)
regarding a Party’s technology, products, business information or objectives, that is treated as
confidential by the disclosing Party in the regular course of business or is otherwise designated
as confidential by the disclosing Party. For the avoidance of doubt, the identity of any
Designated Targets, Submitted Targets and Blocked Targets shall be deemed the Confidential
Information of both Parties.

     “Control” or “Controlled” shall mean, with respect to any intellectual
property right or other intangible property, the possession by a Party (whether by ownership or
license) (other than a license granted pursuant to this Agreement), or “control” (as defined in the
definition of “Affiliate” above) over an Affiliate having possession (by ownership or license), of
the ability to grant access to, or a license or sublicense of, such rights or property as
contemplated under this Agreement.

     “Cover”, “Covered” or “Covering” shall mean, with respect to a Patent
Right, that, in the absence of a license granted to a Person under a Valid Claim included in such
Patent Right, the practice by such Person of an invention claimed in such Patent Right would
infringe such Valid Claim (or, in the case of a Patent Right that is a patent application, would
infringe a Valid Claim in such patent application if it were to issue as a patent).

     “Delivery Intellectual Property” shall mean Delivery Know-How and Delivery Patent
Rights.

     “Delivery Know-How” shall mean Know-How Controlled by Alnylam as of the Effective Date
that relates to (a) delivery technologies which may be necessary or useful for delivery of
double-stranded oligonucleotide molecules; or (b) manufacturing techniques for the delivery
technologies of (a); but excluding Know-How to the extent specifically related to
Blocked Targets.

     “Delivery Patent Rights” shall mean Patent Rights listed on Schedule C
Controlled by Alnylam as of the Effective Date (or, solely with respect to the Patent Rights
covered by any option under Section 2.3(b)(ii) below, as of the effective date of Licensee’s
exercise of such option), together with any future Patent Rights that claim priority to or common
priority with any of the aforementioned Patent Rights, that Cover (a) delivery technologies
necessary or useful for delivery of double-stranded oligonucleotide molecules; or (b) manufacturing
techniques for the delivery technologies of (a); but excluding Patent

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Rights which relate specifically to Blocked Targets. Notwithstanding anything in this
Agreement to the contrary, should it be reasonably determined after the Effective Date that (x) any
omitted Patent Rights which Alnylam Controlled as of the Effective Date disclose any Valid Claims
that Cover any of clause (a) through (b) above, but excluding any Patent Rights which specifically
relate to Blocked Targets and Patent Rights licensed under the [**] Agreement (except as set forth
in Section 2.3(b)(ii)), or (y) in the course of prosecution of any Valid Claims under any of the
Patent Rights listed on Schedule C, any such Valid Claim either no longer Covers any of
clause (a) through (b) above or specifically relates to Blocked Targets, Schedule C shall
be amended to reflect the inclusion or deletion, as the case may be, of such Patent Right, to the
extent that it does not conflict with the terms of any Listed Alnylam Third Party Agreement or
Pre-Existing Alliance Agreement to do so. For the avoidance of doubt, any Patent Rights which are
subsequently included on Schedule C pursuant to clause (x) above shall be deemed “Delivery
Patent Rights” for all purposes hereunder.

     “Designated Target” shall mean (a) at any time during the Novartis Exclusivity Term,
any Target which is (i) selected by Licensee pursuant to Section 2.4(a) of this Agreement which is
not a Blocked Target, (ii) submitted to Novartis pursuant to Licensee’s exercise of the Designated
Target Option pursuant to Section 2.6 of this Agreement, and (iii) rejected or waived by Novartis,
as evidenced by Alnylam’s written notice to Licensee pursuant to Section 2.6 of this Agreement; and
(b) at any time following the end of the Novartis Exclusivity Term, any Target selected by Licensee
pursuant to Section 2.4(a) of this Agreement which is not a Blocked Target. For the avoidance of
doubt, (x) if Licensee selects any Target prior to the end of the Novartis Exclusivity Term for
submission to Novartis, but such Target is not submitted to Novartis until after the end of the
Novartis Exclusivity Term, or (y) if Licensee selects any Target prior to the end of the Novartis
Exclusivity Term for submission to Novartis and such Target is submitted to Novartis prior to the
end of the Novartis Exclusivity Term, but the time period during which Novartis is obligated to
reply does not end until after the end of the Novartis Exclusivity Term, then such Target shall not
be deemed a “Designated Target” hereunder until such Target has been rejected or waived by Novartis
pursuant to the terms of the Novartis Agreement.

     “Designated Target Option” shall have the meaning set forth in Section 2.6.

     “[**]” shall have the meaning set forth in Section 5.5.

     “Develop” or “Development” shall mean any and all preclinical and clinical
drug development activities, including test method development and stability testing, toxicology,
animal efficacy studies, formulation, quality assurance/quality control development, statistical
analysis, clinical studies, clinical trials and testing, regulatory affairs, product approval and
registration, chemical development and Manufacturing development, packaging development and
Manufacturing and development documentation efforts in support of development activities anywhere
in the world.

     “Discover” or “Discovery” shall mean any and all research or discovery
activities.

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     “Discovery Collaboration” shall mean collaboration between the Parties regarding the
Discovery and/or Development of potential RNAi Compounds directed to a Designated Target [**],
pursuant to the terms of Article IV.

     “Discovery Collaboration Opportunity” shall have the meaning set forth in Section 4.1.

     “Effective Date” shall mean the latest of (a) HSR Clearance Date, (b) if no filing is
to be made pursuant to the HSR Act, the Execution Date, and (c) the Closing Date as defined in the
Share Purchase Agreement (such date being referred to as the “Scheduled Date”), it being
understood that the Closing Date of the Share Purchase Agreement and the Effective Date of this
Agreement shall occur simultaneously; provided, however, that if between
the Execution Date and the Scheduled Date there occurs an event or series of events that result in
a material adverse impact upon the Licensed Patent Rights, taken as a whole, (including, for
example, the termination of any of the Listed Alnylam Third Party Agreements, or Alnylam’s receipt
of written notice of termination from a party to a Listed Alnylam Third Party Agreement (i) that
has not been cured prior to the Scheduled Date, or (ii) cannot be cured within the applicable cure
period under the Listed Alnylam Third Party Agreement), then Licensee shall have the unilateral
right to cause this Agreement not to become effective resulting in no Effective Date;
provided, further, that, notwithstanding anything in the parenthetical
above to the contrary, if between the Execution Date and the Scheduled Date, Alnylam receives a
written notice of termination from a party to a Listed Alnylam Third Party Agreement that results
in a material adverse impact upon the Licensed Patent Rights, taken as a whole, and such notice of
termination can be cured within the applicable cure period under such Listed Alnylam Third Party
Agreement, but such cure period ends after the Scheduled Date, then Licensee shall have the
unilateral right (x) to delay the effectiveness of this Agreement until Alnylam has effected the
cure, at which time the Effective Date shall be deemed to have occurred, or (y) if the applicable
cure period has lapsed without a cure having been effected, to cause this Agreement not to become
effective following the end of such cure period, resulting in no Effective Date.

     “Execution Date” shall have the meaning set forth in the preamble to this Agreement.

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

     “Field” shall mean the Primary Field and, subject to the exercise by Licensee of a
Field Option with respect to any Additional Field(s) pursuant to Section 2.5, any such Additional
Field(s).

     “Field Definition Panel” shall have the meaning set forth in Section 2.5(a)(iv).

     “Field Extension Opportunity” shall have the meaning set forth in Section 2.5(b)(i).

     “Field Option” shall have the meaning set forth in Section 2.5(b)(ii).

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     “Field Option Fee” shall have the meaning set forth in Section 5.6.

     “First Commercial Sale” shall mean the first sale of a Licensed Product by or on
behalf of Licensee or any of its Affiliates or Licensee Partners to a Third Party in a country
following Regulatory Approval of such Licensed Product in that country or, if no such Regulatory
Approval or similar marketing approval is required, the date upon which such Licensed Product is
first commercially launched in such country.

     “Future Technology Patent Rights” shall mean Patent Rights Controlled by a Party after
the Effective Date that Cover (a) delivery technologies which may be necessary or useful for
delivery of double-stranded oligonucleotide molecules; or (b) manufacturing techniques for the
delivery technologies of (a); but excluding (i) Patent Rights which specifically
relate to Blocked Targets, and (ii) Licensed Patent Rights.

     “Gatekeeper” shall have the meaning set forth in Section 2.4(b).

     “GLP Toxicology Study” shall mean a toxicology study that is conducted in compliance
with GLP and is required to meet the requirements for filing an IND.

     “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (15 U.S.C. Sec. 18a), and the rules and regulations promulgated thereunder.

     “HSR Clearance Date” shall mean the earlier of (a) the second Business Day after the
date on which the United States Federal Trade Commission shall notify Licensee and Alnylam of early
termination of the applicable waiting period under the HSR Act, or (b) the second Business Day
after the date on which the applicable waiting period under the HSR Act expires.

     “IND” shall mean an application submitted to a Regulatory Authority to initiate human
clinical trials, including (a) an Investigational New Drug application or any successor application
or procedure filed with the FDA, or any foreign equivalent thereof, and (b) all supplements and
amendments that may be filed with respect to the foregoing.

     “IND-Enabling Studies” shall mean pharmacokinetic and toxicology studies required to
meet the requirements for filing an IND, including without limitation any GLP Toxicology Study.

     “Indication” shall mean any disease or condition, or sign or symptom of a disease or
condition.

     “Initial Discovery Collaboration Opportunity Period” shall have the meaning set forth
in Section 4.1.

     “Joint Future Technology Committee” shall have the meaning set forth in Section 3.2.

     “Know-How” shall mean any information, inventions, trade secrets or technology,
whether or not proprietary or patentable and whether stored or transmitted in oral,

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documentary, electronic or other form. Know-How shall include ideas, concepts, formulas,
methods, procedures, designs, compositions, plans, documents, data, discoveries, developments,
techniques, protocols, specifications, works of authorship, biological materials, and any
information relating to research and development plans, experiments, results, compounds,
therapeutic leads, candidates and products, clinical and preclinical data, clinical trial results,
and Manufacturing information and plans (but excluding any scientific, regulatory, pre-clinical or
clinical information or data regarding specific Indications and any marketing, financial,
commercial, personnel and other business information and plans).

     “Kulmbach Facility” shall have the meaning set forth in Section 3.1(a).

     “Law” shall mean any law, statute, rule, regulation, ordinance or other pronouncement
having the effect of law of any federal, national, multinational, state, provincial, county, city
or other political subdivision, domestic or foreign.

     “Licensed Collaboration Product” shall mean any Licensed Product directed to a
Designated Target for which the Parties have entered into a Discovery Collaboration pursuant to
Article IV.

     “Licensed Intellectual Property” shall mean the Licensed Know-How and Licensed Patent
Rights.

     “Licensed Know-How” shall mean (a) the Architecture and Chemistry Know-How, and (b)
the Delivery Know-How.

     “Licensed Patent Rights” shall mean (a) the Architecture and Chemistry Patent Rights,
and (b) the Delivery Patent Rights.

     “Licensed Product” shall mean any RNAi Product (a) whose manufacture, use or sale
would, but for the licenses granted pursuant to this Agreement, infringe one or more Valid Claims
of the Licensed Patent Rights, or (b) which embodies Licensed Know-How. All references to Licensed
Product in this Agreement shall be deemed to include Combination Product, to the extent applicable.

     “Licensee Partner” shall mean any Third Party to which a sublicense is granted by
Licensee in accordance with Section 2.1(b), including without limitation Third Party distributor
whose obligations to Licensee or its Affiliates include responsibility for sales, marketing and/or
distribution efforts in a country on behalf of Licensee or its Affiliates, excluding wholesale
distributors who purchase Licensed Products from Licensee or its Affiliates in an arm’s length
transaction and who have no other obligation to Licensee or its Affiliates.

     “Listed Alnylam Third Party Agreement” shall mean an agreement listed on Schedule
D-1.

     “Listed Alnylam Third Party Payment” shall have the meaning set forth in Section
5.4(d).

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     “Listed Counterparties” shall mean the Third Party counterparties to Listed Alnylam
Third Party Agreements and their respective successors in interest.

     “Major Market Countries” shall have the meaning set forth in Section 2.1(b).

     “Manufacture” or “Manufacturing” shall mean any and all activities and
operations involved in or relating to the manufacturing, quality control testing (including
in-process, release and stability testing), releasing or packaging, for pre-clinical, clinical or
commercial purposes.

     “Max Planck” shall mean Max Planck Innovation GmbH (formerly Garching Innovation
GmbH).

     “Max Planck European License Agreement” shall mean Co-Exclusive License Agreement
between Max Planck and Alnylam Europe AG (formerly Ribopharma AG), dated July 30, 2003, as amended
by the Requirement Amendment effective June 15, 2005.

     “NDA” shall mean an application submitted to a Regulatory Authority for marketing
approval of a product, including (a) a New Drug Application, Product License Application or
Biologics License Application filed with FDA or any successor applications or procedures, or any
foreign equivalent thereof, and (b) all supplements and amendments that may be filed with respect
to the foregoing.

     “Net Sales” shall mean the amount calculated by subtracting from the amount of
Adjusted Gross Sales (as defined below) the following:

     (a) With respect to Net Sales in the United States, a lump sum deduction of [**] percent
([**]%) of Adjusted Gross Sales in lieu of those sales-related deductions which are not accounted
for by Licensee, its Affiliates and Licensee Partners on a product-by-product basis (e.g. outward
freights, postage charges, transportation insurance, packaging materials for dispatch of goods,
custom duties, bad debt expense, discounts granted later than at the time of invoicing);

     (b) With respect to Net Sales in the Major Market Countries (other than the U.S.) and Canada,
a lump sum deduction of [**] percent ([**]%) of Adjusted Gross Sales in lieu of those sales-related
deductions which are not accounted for by Licensee, its Affiliates and Licensee Partners on a
product-by-product basis (e.g. outward freights, postage charges, transportation insurance,
packaging materials for dispatch of goods, custom duties, bad debt expense, discounts granted later
than at the time of invoicing); and

     (c) With respect to Net Sales in all territories other than those set forth in subsections (a)
and (b) above, a lump sum deduction of [**] percent ([**]%) of Adjusted Gross Sales in lieu of
those sales-related deductions which are not accounted for by Licensee, its Affiliates and Licensee
Partners on a product-by-product basis (e.g. outward freights, postage charges, transportation
insurance, packaging materials for dispatch of goods, custom duties, bad debt expense, discounts
granted later than at the time of invoicing).

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     For purposes of this definition of “Net Sales”, “Adjusted Gross Sales” shall mean the
amount of gross sales of the Licensed Product invoiced by Licensee, its Affiliates and its Licensee
Partners to Third Parties less deductions of returns and return reserves (including allowances
actually given for spoiled, damaged, out-dated, rejected, returned Licensed Product sold,
withdrawals and recalls), rebates and rebate reserves (to the extent consistently applied by
Licensee to its products), price reductions, rebates to managed care organizations or social and
welfare systems, charge backs or reserves for chargebacks, cash sales incentives (but only to the
extent it is a sales related deduction which is accounted for within Licensee on a
product-by-product basis), cash discounts, government mandated rebates and similar types of rebates
(e.g., Pharmaceutical Price Regulation Scheme, Medicaid, each as consistently applied by Licensee
to its products), volume (quantity) discounts, taxes (value added or sales taxes, government
mandated exceptional taxes and other taxes directly linked to the gross sales amount).

     In the case where a Licensed Product is a Combination Product, the Parties shall meet
approximately [**] prior to commercial launch of such Combination Product to negotiate in good
faith and agree to an appropriate adjustment to Net Sales to reflect the relative significance of
the RNAi Compound and the other pharmaceutically active agent(s) contained in the Combination
Product. If the Parties are unable to agree upon such adjustment to Net Sales, royalties with
respect to a Combination Product in a country shall be equal to the rates set forth in Section
5.4(a), multiplied by a fraction whose numerator is Licensee’s published sales price in such
country for an equivalent dosage of RNAi Compound contained in a given Combination Product, and
whose denominator is Licensee’s published sale prices in such country for an equivalent dosage of
all active pharmaceutical ingredients contained therein. If the numerator or denominator cannot be
determined in the manner set forth above within ninety (90) days following the meeting between the
Parties described in the first sentence of this paragraph, then such matter shall be determined by
binding arbitration conducted by one (1) arbitrator in accordance with the rules of Judicial
Arbitration and Mediation Services, Inc. (JAMS). The arbitration shall be held in the State of
Delaware and shall not last for a period longer than six (6) months. In such arbitration, the
arbitrator shall be an independent expert in worldwide marketing in the pharmaceutical industry
mutually acceptable to the Parties or, if the Parties are unable to agree upon such arbitrator,
shall be selected by the President of the JAMS office located in the State of Delaware.

     “Novartis” shall mean Novartis Institutes for BioMedical Research, Inc.

     “Novartis Agreement” shall mean the Research Collaboration and License Agreement,
effective as of October 12, 2005, by and between Alnylam and Novartis, as amended by the Addendum
Re: Influenza Program effective as of December 13, 2005, Amendment No. 1 to such Addendum effective
as of March 14, 2006, and Amendment No. 2 to such Addendum effective as of May 5, 2006, and as the
same may be amended from time to time after the Execution Date in accordance with Section 2.7(c).

     “Novartis Exclusivity Term” shall mean the “Exclusivity Term” as defined in the
Novartis Agreement.

     “[**]” shall have the meaning set forth in Section 2.7(b).

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     “[**]” shall have the meaning set forth in Section 2.7(b)(ii).

     “Option Term” shall mean the period commencing on the Effective Date and ending on the
fifth (5th) anniversary thereof.

     “Other Transaction Documents” shall mean (a) the Common Stock Purchase Agreement, and
(b) the Share Purchase Agreement.

     “Party” shall mean Alnylam or Licensee, as the case may be; “Parties” shall
mean both Alnylam and Licensee.

     “Patent Rights” shall mean all patents (including all reissues, extensions,
substitutions, confirmations, re-registrations, re-examinations, invalidations, supplementary
protection certificates and patents of addition) and patent applications (including all provisional
applications, continuations, continuations-in-part and divisionals), and foreign equivalents of any
of the foregoing.

     “Person” shall mean any corporation, limited or general partnership, limited liability
company, joint venture, trust, unincorporated association, governmental body, authority, bureau or
agency, any other entity or body, or an individual.

     “Phase I Study” shall mean a human clinical trial in any country that would satisfy
the requirements of 21 C.F.R. § 312.21(a), as amended from time to time, and the foreign equivalent
thereof.

     “Phase II Study” shall mean a human clinical trial, for which the primary endpoints
include a determination of dose ranges and/or a preliminary determination of efficacy in patients
being studied as described in 21 C.F.R. § 312.21(b), or similar clinical study in a country other
than the United States.

     “Phase III Study” shall mean a human clinical trial that is prospectively designed to
demonstrate statistically whether a product is safe and effective for use in humans in a manner
sufficient to obtain regulatory approval to market such product in patients having the disease or
condition being studied as described in 21 C.F.R. § 312.21(c), or a similar clinical study in a
country other than the United States.

     “Pre-Existing Alliance Agreements” shall mean the agreements set forth on Schedule
E.

     “Pre-Existing Alliance Parties” shall mean the Third Party counterparties to
Pre-Existing Alliance Agreements and their respective successors in interest.

     “Primary Field” shall mean the treatment or prophylaxis of all Indications in the
Primary Therapeutic Areas, where such treatment or prophylaxis comprises an RNAi Compound
complementary to, and functional in mediating the RNAi of, a Target known or believed to be
primarily implicated in one or more Primary Therapeutic Areas.

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     “Primary Therapeutic Area” shall mean each of the disease area fields set forth on
Schedule A to this Agreement.

     “Product Liability Claim” shall mean, with respect to a product, any Third Party
claim, suit, action, proceeding, liability or obligation involving any actual or alleged death or
bodily injury arising out of or resulting from the use of such product.

     “Regulatory Approval” shall mean, with respect to a product in a country, the approval
of the applicable Regulatory Authority necessary for the marketing and sale of such product in such
country.

     “Regulatory Authority” shall mean any federal, national, multinational, state,
provincial or local regulatory agency, department, bureau or other governmental entity with
authority over the marketing, pricing or sale of a pharmaceutical product in a country, including
the FDA.

     “Required Third Party Payments” shall mean royalty payments to a Third Party made by
Licensee under Third Party agreements (other than Listed Alnylam Third Party Agreements or
Pre-Existing Alliance Agreements) to license Patent Rights Covering such Third Party’s technology
if, in the absence of such license, the licensed use by Licensee of the Licensed Patent Rights
licensed by Alnylam under Section 2.1(a) would infringe such Patent Rights; provided,
however, that Required Third Party Payments shall not include any royalties or
other amounts payable to obtain access to (a) a specific Target or Targets so that such Target or
Targets can be the subject of research and development efforts, or (b) Third Party delivery
technologies (other than Delivery Patent Rights) which may be necessary or useful for delivery of
double-stranded oligonucleotide molecules, or manufacturing techniques for such delivery
technologies.

     “RNAi Compound” shall mean any compound that, in vitro or otherwise, functions through
the mechanism of RNAi and consists of or encodes double-stranded oligonucleotides, and which
double-stranded oligonucelotides optionally may be chemically modified to contain modified
nucleotide bases or non-RNA nucleotides, and optionally may be administered in conjunction with a
delivery vehicle or vector.

     “RNAi Product” shall mean any product that contains one or more RNAi Compounds as an
active ingredient.

     “Royalty Term” shall mean, separately with respect to each Licensed Product in each
country, the period commencing on the First Commercial Sale of such Licensed Product in such
country (provided that either (x) such Licensed Product is Covered by a Valid Claim of a Licensed
Patent Right in such country at the time of such First Commercial Sale in such country, or (y) the
Manufacture of such Licensed Product is Covered by a Valid Claim of a Licensed Patent Right in the
country or countries in which such Licensed Product is Manufactured) and concluding on the
expiration of the later of (a) the last to expire Licensed Patent Right containing a Valid Claim
Covering the Development, Commercialization or Manufacture of such Licensed Product in that
country, (b) the last to expire Licensed Patent Right containing a Valid Claim Covering the
Manufacture of such Licensed Product in the

12

 

country or countries in which such Licensed Product was Manufactured, or (c) ten (10) years
from the date of First Commercial Sale of such Licensed Product in such country. For the avoidance
of doubt, if (x) a Licensed Product is not Covered by a Valid Claim of a Licensed Patent Right in a
country at the time of such First Commercial Sale in such country, and (y) the Manufacture of such
Licensed Product is not Covered by a Valid Claim of a Licensed Patent Right in the country or
countries in which such Licensed Product is Manufactured at the time of First Commercial Sale, but
at any time following First Commercial Sale, the Licensed Product, or the Manufacture thereof, is
Covered by a Valid Claim of any patent under the Licensed Patent Rights that issues following the
time of such First Commercial Sale, then the Royalty Term shall commence with respect to such
Licensed Product at the time of such issuance.

     “Share Purchase Agreement” shall mean the Share Purchase Agreement entered into by and
among Licensee, Licensee’s Affiliate, Alnylam and Alnylam Europe AG on the Execution Date.

     “Submitted Target” shall have the meaning set forth in Section 2.6.

     “Supplemental Therapeutic Area” shall mean each of the disease area fields set forth
on Schedule B to this Agreement.

     “Target” shall mean (a) a polypeptide or entity comprising a combination of at least
one polypeptide and other macromolecules, that is a site or potential site of therapeutic
intervention by a therapeutic agent; or a nucleic acid which is required for expression of such
polypeptide; (b) variants of a polypeptide (including any splice variant thereof), cellular entity
or nucleic acid described in clause (a); or (c) a defined non-peptide entity, including a
microorganism, virus, bacterium or single cell parasite; provided that the entire
genome of a virus shall be regarded as a single Target.

     “Technology Transfer Period” shall have the meaning set forth in Section 3.1(a).

     “Technology Transfer Plan” shall have the meaning set forth in Section 3.1(a).

     “Terminated Patent Rights” shall have the meaning set forth in Section 5.4(f).

     “Third Party” shall mean any Person other than Alnylam or Licensee and their
respective Affiliates.

     “Third Party Infringement Claim” shall have the meaning set forth in Section
2.8(a)(i).

     “UBC” shall mean the University of British Columbia.

     “UBC Sublicense Agreement” shall mean the Sublicense Agreement between Tekmira
Pharmaceuticals Corporation (formerly INEX Pharmaceuticals Corporation) and Alnylam
Pharmaceuticals, Inc., dated January 8, 2007.

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

ARTICLE II

GRANT OF RIGHTS;

INTELLECTUAL PROPERTY MATTERS

     2.1 License Grants.

     (a) License Grants to Licensee.

          (i) Alnylam hereby grants to Licensee and its Affiliates a non-exclusive, worldwide,
perpetual, irrevocable, royalty-bearing right and license, subject to the terms and conditions of
this Agreement and to Alnylam Third Party Obligations, under the Licensed Intellectual Property to
engage in any and all Discovery, Development, Commercialization and Manufacturing activities in the
Field (and, to the extent expressly permitted in Section 2.5(a), any Additional Field), including
to make, have made, use, offer for sale, sell and import Licensed Products in the Field (and, to
the extent expressly permitted in Section 2.5(a), any Additional Field).

          (ii) Alnylam Europe AG hereby grants to Licensee and its Affiliates a non-exclusive,
worldwide, perpetual, irrevocable, royalty-bearing right and license, subject to the terms and
conditions of this Agreement and to Alnylam Third Party Obligations, under Alnylam Europe AG’s
rights to the Architecture and Chemistry Patent Rights licensed to Alnylam Europe AG pursuant to
the terms of the Max Planck European License Agreement, to engage in any and all Discovery,
Development, Commercialization and Manufacturing activities in the Field (and, to the extent
expressly permitted in Section 2.5(a), any Additional Field), including to make, have made, use,
offer for sale, sell and import Licensed Products in the Field (and, to the extent expressly
permitted in Section 2.5(a), any Additional Field).

     (b) Sublicense Rights. Subject to Alnylam Third Party Obligations, Licensee shall
have the right to grant sublicenses within the scope of the licenses granted to it in Section
2.1(a), on a Licensed Product-by-Licensed Product basis, to a Third Party in the Field (and, to the
extent expressly permitted in Section 2.5(a), any Additional Field) solely for purposes of
Developing and/or Commercializing a Licensed Product which has achieved the appropriate stage of
Development (as determined by Licensee using its reasonable business judgment in the management of
such Licensed Product within its portfolio of products, but in no event [**] other than to Third
Party contractors, including contract research organizations, contract employees, consultants,
contract manufacturers and the like in connection with the licensed activities); provided,
however, that in no event shall Licensee grant any sublicense of

14

 

any right granted to Licensee under Section 2.1(a) for the Development and/or
Commercialization of any Third Party product unless such product is licensed by Licensee from such
Third Party and Licensee and such Third Party are collaborating on the Development and/or
Commercialization of such Third Party product. Each such sublicense agreement shall be consistent
with the terms and conditions of this Agreement. Licensee shall remain liable to Alnylam and
Alnylam Europe AG for each of its sublicensees’ failure to comply with all applicable restrictions,
limitations and obligations under the sublicense agreement and this Agreement. No sublicense
granted by Licensee hereunder may be assigned, transferred or further sublicensed to any Third
Party without the prior written consent of Alnylam or Alnylam Europe AG, as the case may be.
Licensee shall provide a redacted copy of such sublicense agreement to Alnylam (such redactions to
exclude only the financial terms of such sublicense and other information normally redacted from a
document filed with the U.S. Securities and Exchange Commission), (x) if such sublicense impacts
upon one or more of the following countries: USA, Germany, France, United Kingdom, Italy, Spain,
and Japan (“Major Market Countries”), and (y) upon request by Alnylam, in any country other
than those listed under clause (x) above.

     2.2 No Other Rights. Only the licenses granted to Licensee under Section 2.1(a) hereof shall
be of legal force and effect and are limited to the scope expressly granted. Accordingly, except
for the rights expressly granted under Section 2.1(a) hereof, no license, right, title or interest
of any nature whatsoever is granted hereunder by implication, estoppel, reliance or otherwise, by
Alnylam or Alnylam Europe AG to Licensee, and any of Alnylam’s or Alnylam Europe AG’s rights to
Licensed Intellectual Property not specifically licensed to Licensee under Section 2.1(a) hereof
shall be retained by Alnylam or Alnylam Europe AG, as the case may be. For purposes of clarity,
nothing contained in this Agreement shall prevent or restrict Alnylam or Alnylam Europe AG from (a)
granting to any Third Party any non-exclusive licenses under Alnylam’s or Alnylam Europe AG’s
rights, as the case may be, in any Licensed Intellectual Property, or (b) subject to the provisions
of Section 2.5(b)(i), granting to any Third Party any exclusive licenses under Alnylam’s or Alnylam
Europe AG’s rights in any Licensed Intellectual Property outside of the then-current Field.

     2.3 Certain License Limitations.

     (a) Pre-Existing Alliance Agreements.

          (i) The grants by Alnylam and Alnylam Europe AG under Licensed Intellectual Property set forth
in Section 2.1(a) are subject to, and are limited to the extent of, the rights that Alnylam has
previously granted and is required to grant under Licensed Intellectual Property to Pre-Existing
Alliance Parties under the terms of the Pre-Existing Alliance Agreements. As and to the extent
that such rights previously granted to Pre-Existing Alliance Parties under Licensed Intellectual
Property (whether such rights are previously or subsequently exercised) lapse, terminate or
otherwise revert to Alnylam, they shall be automatically included in the non-exclusive rights under
Licensed Intellectual Property granted to Licensee in the Field under Section 2.1(a).

          (ii) Licensee acknowledges that a Pre-Existing Alliance Party may from time to time request
rights under Licensed Intellectual Property with respect to a

15

 

particular Target that Alnylam is required, pursuant to the terms of a Pre-Existing Alliance
Agreement, to grant such rights to such Pre-Existing Alliance Party with respect to such Target.

     (b) Contractual Obligations under Listed Alnylam Third Party Agreements.

          (i) For the avoidance of doubt, the grants by Alnylam under Licensed Intellectual Property set
forth in Section 2.1(a) include, subject to Section 2.3(b)(ii), the sublicense of Licensed
Intellectual Property that is not owned by Alnylam or Alnylam Europe AG. Licensee’s rights and
licenses under such Licensed Intellectual Property are limited to the rights granted by Listed
Counterparties to Alnylam under the Listed Alnylam Third Party Agreements and by Max Planck to
Alnylam Europe AG under the Max Planck European License Agreement, and Licensee shall comply, and
cause its Affiliates and Licensee Partners to comply, with those restrictions and other terms
applicable to sublicensees under such agreements, certain of which restrictions and terms are
summarized on Schedule D-2. Without limiting the generality of the foregoing, Licensee
acknowledges that certain obligations are imposed on sublicensees of certain of the sublicensed
Licensed Intellectual Property, and agrees to comply (to the extent access to obligations and
requirements have been made available to Licensee in unredacted form), and to require its
Affiliates and Licensee Partners to comply, with such obligations and requirements.
Notwithstanding the above, at the request of Licensee, which request shall be made within the [**]
period prior to First Commercial Sale of the first Licensed Product, Alnylam shall use commercially
reasonable efforts to seek to harmonize the accounting and royalty reporting provisions under the
Listed Third Party Agreements with the accounting and royalty reporting provisions set forth in
this Agreement.

          (ii) Notwithstanding anything to the contrary herein, the licenses to Licensed Patent Rights
hereunder initially shall not include licenses to Patent Rights licensed by Alnylam or its
Affiliates under the Non-Exclusive License Agreement between [**] and Alnylam, dated [**] (the
“[**] Agreement”), which Patent Rights Licensee shall have the option, exercisable upon
written notice to Alnylam hereunder, to license, on a Licensed Collaboration Product-by-Licensed
Collaboration Product basis, upon commencement of a Discovery Collaboration hereunder. Upon such
election, (x) the license granted to Licensee under Alnylam’s rights to Delivery Patent Rights
pursuant to Section 2.1(a) shall include such Patent Rights with respect to the designated Licensed
Collaboration Product(s), (y) Schedule C shall be amended to include such Patent Rights,
and (z) the [**] Agreement shall be deemed a Listed Alnylam Third Party Agreement and Schedule
D-1 and Schedule D-2 shall be amended accordingly.

     2.4 Blocked Targets; Gatekeeper.

     (a) Blocked Targets.

          (i) From time to time during the term of this Agreement but no more frequently than [**]
(except as set forth in clause (ii) of this Section 2.4(a)), following an affirmative decision by
Licensee to initiate a program directed to the Discovery, Development or Commercialization of RNAi
Compounds directed to a particular Target,

16

 

Licensee may inquire of the Gatekeeper in writing whether or not such Target is on the Blocked
Target List by virtue of being subject to a then-current exclusive or co-exclusive grant, option,
right of first refusal or similar right under a Pre-Existing Alliance Agreement. The Gatekeeper
shall, within [**] days following the Gatekeeper’s receipt of such complete written request from
Licensee, notify Licensee in writing whether or not such Target is on the Blocked Target List;
provided, however, that in no event will the Gatekeeper directly or indirectly
notify or communicate to any other Alnylam employee or consultant or any Alnylam Affiliate or Third
Party the contents or the existence of Licensee’s inquiry hereunder without Licensee’s prior
written consent, which may be withheld at Licensee’s sole discretion.

          (ii) If Alnylam becomes aware of the removal of any Target from the Blocked Target List,
Alnylam shall notify Licensee of such removal (but not the identity of the Target which was
removed) and Licensee shall have the right to inquire of the Gatekeeper pursuant to, and in
compliance with, clause (i) above whether or not a Target is on the Blocked Target List;
provided, however, that the [**] limit set forth in clause (i) above on the
frequency of inquiries which may be made of the Gatekeeper shall not apply with respect to an
inquiry made under this Section 2.4(a)(ii), nor shall an inquiry made under this Section 2.4(a)(ii)
be counted towards such [**] limit.

          (iii) Notwithstanding the foregoing, the Parties acknowledge that a Pre-Existing Alliance
Party may subsequently request exclusive or co-exclusive rights from Alnylam with respect to a
particular Target as described in Section 2.3(a)(ii) and the provisions of Section 2.3(a)(ii) shall
control.

     (b) Gatekeeper. Subject to the provisions of Section 2.7(b), the inquiries and
responses made by one Party to the other in connection with Section 2.4(a) shall be made in writing
to the attention of a designated employee of Alnylam mutually agreeable to both Parties (the
“Gatekeeper”) who will be bound by confidentiality obligations to both Parties. Each Party
agrees to provide the Gatekeeper with full and complete copies of all records and information
(including un-redacted copies of the relevant Third Party agreements) that are necessary for the
Gatekeeper to render his or her determination.

     2.5 Additional Fields; Field Option.

     (a) Additional Fields.

          (i) Licensee shall initially conduct Discovery, Development, Commercialization and
Manufacturing activities directed to Targets only with respect to Indications in the Field. After
Licensee’s completion of a Phase II Study with respect to any Licensed Product directed to a
specific Target in the Field, Licensee may engage in Discovery, Development, and/or Manufacturing
activities directed to such Target for any Indication (each, an “Additional Indication”) in
any Additional Field (if such Additional Field has not been the subject of Licensee’s exercise of a
Field Option) without having to pay a Field Option Fee; provided, however,
that (A) Licensee shall notify Alnylam of its extension of Discovery, Development and/or
Manufacturing activities directed to such Target for such Additional Indication in such Additional
Field, and (B) Licensee shall pay Alnylam the

17

 

following amounts (which shall be in addition to any event payments which may be owed under
Section 5.3 below and except as provided in clause (ii) below) upon achievement of the following
events by Licensee, its Affiliates or Licensee Partners with respect to each such Additional
Indication:

	 	 	 	 	 
	 	 	Payment for
	 	 	Licensed Products
	Development Event:	 	(in [**]):
	Initiation of Phase III for each Additional Indication
	 	$	[**]	 
	Filing of an NDA for each Additional Indication
	 	$	[**]	 
	Regulatory Approval for each Additional Indication
	 	$	[**]	 

          (ii) Notwithstanding the foregoing provisions of clause (i) above, Licensee shall pay Alnylam
the following amounts (which shall be in addition to any event payments which may be owed under
Section 5.3 below and in lieu of any amounts which may otherwise be owed under clause (i) above)
upon achievement of the following events by Licensee, its Affiliates or Licensee Partners solely
with respect to a Licensed Product with respect to which Licensee extends its activities for the
first time to an Additional Indication in a given Additional Field:

	 	 	 	 	 
	 	 	Payment for
	 	 	Licensed Products
	Development Event:	 	(in [**]):
	Initiation of Phase III for a Licensed Product for the
first Additional Indication in a given Additional Field
	 	$	[**]	 
	Filing of an NDA for a Licensed Product for the first
Additional Indication in a given Additional Field
	 	$	[**]	 
	Regulatory Approval for a Licensed Product for the first
Additional Indication in a given Additional Field
	 	$	[**]	 

          (iii) The amounts paid under subsections (i) and (ii) of this Section 2.5(a) for Additional
Indications within a given Additional Field shall be fully creditable against Field Option Fees
which may be paid by Licensee pursuant to Section 5.6 for such Additional Field. In no event shall
the total event payments made under this provision exceed $50 million for a given Additional Field.

          (iv) For the avoidance of doubt, in no event shall Licensee conduct Discovery, Development,
Commercialization and Manufacturing activities directed to any Target in any Additional Field other
than as permitted in this Section 2.5. In the event that the

18

 

Parties are unable to agree on
whether or not Licensee’s activities fall within or outside the Primary Field or any Additional
Field in a manner prohibited by this Agreement, the Parties shall submit such dispute to a panel
(the “Field Definition Panel”) consisting of three (3) independent experts in clinical
development, with each Party having the right to select a single expert and the two (2) selected
experts selecting the third expert by mutual agreement. Such third expert shall serve as the
chairperson of the Field Definition Panel. The selection of the experts for the Field Definition
Panel shall occur within thirty (30) days following the Parties’ decision to submit such dispute to
such a panel, and the Parties shall consult with such Field Definition Panel for a period not to
exceed thirty (30) days from the selection of such experts. The Field Definition Panel shall
render a decision with respect to such dispute, based on a majority vote, with each expert having
one (1) vote, within ten (10) days following the end of such consultation period, which decision
shall be binding on the Parties. In the event that the Field Definition Panel determines that
Licensee’s Discovery, Development, Commercialization or Manufacturing activities are being
conducted in any Additional Field in a manner which is prohibited hereunder, Licensee shall, within
ten (10) Business Days after such determination by the Field Definition Panel, cease such
proscribed activity.

     (b) Field Option.

          (i) During the Option Term, if Alnylam intends to grant to any Third Party (other than Listed
Counterparties or Pre-Existing Alliance Parties, subject to the terms of the applicable Listed
Alnylam Third Party Agreements or Pre-Existing Alliance Agreements, as the case may be) an
exclusive license to any Additional Field(s) which is not included in the then-current Field,
Alnylam shall notify Licensee thereof (“Field Extension Opportunity”). Licensee shall have
the right to extend the licenses granted under Section 2.1(a) to include the Additional Field(s)
covered by such Field Extension Opportunity by notifying Alnylam in writing of such intent within
sixty (60) days after Alnylam’s notice and paying the Field Option Fee for each such Additional
Field pursuant to Section 5.6. For the avoidance of doubt, Alnylam and Alnylam Europe AG shall
have the right to grant to any Third Party any exclusive licenses under Alnylam’s or Alnylam Europe
AG’s rights, as the case may be, in any Licensed Intellectual Property in any Additional Field to
which Licensee has not extended its licenses granted under Section 2.1(a) pursuant to Licensee’s
exercise of the Field Option under this Section 2.5(b).

          (ii) From time to time during the Option Term, Licensee shall have the right, upon written
notice to Alnylam, to request the extension of the license granted under Section 2.1(a) to include
one or more Additional Field(s) (“Field Option”) in which Licensee has a good faith
intention to seek to Discover, Develop, Commercialize and Manufacture RNAi Compounds or RNAi
Products, which right shall be subject to any agreement which Alnylam may have entered into with a
Third Party with respect to such Additional Field(s) following Licensee’s rejection of, or failure
to pay the Field Option Fee for, any Field Extension Opportunity pursuant to clause (i) above.
Upon Licensee’s payment of the Field Option Fee for each such Additional Field pursuant to Section
5.6, the licenses granted to Licensee under Section 2.1(a) shall include such Additional Field(s).

     2.6 Designated Target Option. From time to time during the Novartis Exclusivity Term,
Licensee shall have the right, upon written notice to Alnylam, to select any

19

 

Target in the Field
which is not a Blocked Target for submission by Alnylam to Novartis pursuant to the terms of the
Novartis Agreement (a “Submitted Target”). Alnylam shall promptly provide notice to
Novartis of the Submitted Target(s) in accordance with the provisions of the Novartis Agreement,
and Licensee shall cooperate with Alnylam in providing any information reasonably requested by
Novartis (but not the identity of Licensee or any of Licensee’s RNAi Compounds) in order for
Novartis to determine whether or not to pursue Discovery, Development and/or Commercialization
activities directed to such Submitted Target. If Novartis notifies Alnylam that it wishes (as such
term is used in the Novartis Agreement) to pursue Discovery, Development and/or Commercialization
activities directed to such Submitted Target, then Alnylam shall so notify Licensee promptly upon
Alnylam’s receipt of such notification, and such Target shall be deemed a Blocked Target for
purposes of this Agreement. If Alnylam receives notice from Novartis that Novartis has no interest
in pursuing Discovery, Development and/or Commercialization activities directed to such Submitted
Target, or if Novartis otherwise waives its right to such Submitted Target under the terms of the
Novartis Agreement, then Alnylam shall notify Licensee promptly upon Alnylam’s receipt of such
notification or waiver. In such event, such rejected or waived Submitted Target shall be deemed a
“Designated Target” for all purposes under this Agreement, Licensee shall be deemed to have
exercised its option with respect to such Submitted Target (each, a “Designated Target Option”),
and Licensee shall be free, upon [**] pursuant to Section 5.5, to Discover, Develop, Commercialize
or Manufacture RNAi Compounds and RNAi Products directed to such Designated Target in accordance
with the terms hereof without further risk of such Target becoming a Blocked Target.

     2.7 Special Provisions Relating to Novartis.

     (a) Compliance with Novartis Agreement. It is the intent of the Parties that this
Agreement be construed in a manner which is consistent with and in compliance with the terms of the
Novartis Agreement in all respects.

     (b) Alnylam Change of Control. In the event that, at any time during the [**], an
Alnylam Change of Control occurs in which [**] (other than [**] or any controlled [**]) is the
acquiring entity (a “[**]”), it shall be a condition precedent to such [**] that:

          (i) Section 2.4(b) of this Agreement shall be amended to provide that the “Gatekeeper” shall
not be a designated employee of Alnylam but instead (A) shall be a Third Party who shall have no
material relationship (other than as Gatekeeper) with Alnylam, [**], (B) shall be mutually
agreeable to both Parties and (C) shall be bound by confidentiality obligations to both Parties,
and to the extent that the consent of [**] shall be required for such amendment, such consent shall
have been obtained; and

          (ii) [**], to the extent required, shall have agreed [**] that the[**] contained therein
(i.e., [**] thereof) shall terminate upon such [**] and that [**] as a result of any obligations
under the [**] or as a result of any other actions [**] in connection with [**] hereunder after the
date of the agreement providing for such [**] or, if there is no [**], after the date of such [**].

20

 

Alnylam agrees that the [**] shall include the consent of [**], as applicable, required by clause
(i) above and the agreement of [**], as applicable, to the amendment required by clause (ii) above.
If, notwithstanding the foregoing, the [**] shall occur without the amendment and consent
contemplated by clause (i) above or without the agreement and amendment contemplated by clause (ii)
above, then (A) [**] and (B) Alnylam shall pay to Licensee an amount equal to [**]. Each Party
agrees that if the [**] shall occur without the amendment and consent contemplated by clause (i)
above or without the agreement and amendment contemplated by clause (ii) above, the damages that
Licensee and its Affiliates would suffer would be irreparable and difficult to calculate with
certainty but in such event the amounts payable by Alnylam pursuant to the immediately preceding
sentence shall constitute fair and reasonable amounts and not penalties.

     (c) No Adverse Amendments. Alnylam agrees not to enter into any amendment or
modification to the [**] which would have an adverse impact on Licensee’s rights under this
Agreement, without the prior written consent of Licensee. Without limiting the foregoing, the
Parties acknowledge and agree that the following amendments/modifications would have an adverse
impact on Licensee’s rights under this Agreement: [**]; (iv) any amendment that would require
Alnylam to provide to [**] any Confidential Information of Licensee; and (v) any provision that is
inconsistent with the obligations of Alnylam to Licensee hereunder.

     (d) Specific Performance. The Parties hereto agree that irreparable damage would
occur if any provision of this Section 2.7 were not performed in accordance with the terms hereof
and that Licensee shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement or to enforce specifically the performance of the terms and provisions hereof in any
federal court located in the State of Delaware or any Delaware state court, in addition to any
other remedy to which they are entitled at law or in equity.

     2.8 Certain Intellectual Property Matters

     (a) Claimed Infringement.

          (i) In the event that a Third Party at any time asserts a claim, or brings an action, suit or
proceeding against a Party or any of its Affiliates or, with respect to Licensee, Licensee
Partners, claiming infringement of such Third Party’s Patent Rights or unauthorized use or
misappropriation of such Third Party’s Know-How, based upon an assertion or claim arising out of
any of the activities taken in respect of the Discovery, Development, Commercialization or
Manufacture of Licensed Products, where such claim, action, suit or proceeding and/or the defense
thereof involves, or is likely to involve, the validity, scope and/or enforceability of the
Licensed Intellectual Property (“Third Party Infringement Claim”), such Party shall
promptly notify the other Party in writing of the claim or the commencement of such action, suit or
proceeding, enclosing a copy of the claim and all papers served.

          (ii) Within thirty (30) days after delivery of the notification required to be delivered under
clause (i) above, as between Alnylam and Licensee and subject to Alnylam Third Party Obligations,
Alnylam shall, upon written notice thereof to Licensee,

21

 

assume control of the defense of those aspects of any such Third Party Infringement Claim
which involve the validity, scope and/or enforceability of Licensed Intellectual Property (either
alone or in combination with any other Patent Rights or Know-How), and Licensee shall, upon written
notice thereof to Alnylam, assume control of the defense of any other Third Party Infringement
Claim or aspect thereof, as the case may be. Licensee and Alnylam, subject to Alnylam Third Party
Obligations, shall keep the other Party advised of the status of such action, suit, proceeding or
claim and the defense thereof and shall consider recommendations made by the other Party with
respect thereto.

          (iii) The Party controlling the action, suit, proceeding, claim or defense under Section
2.8(a) shall not agree to any settlement of such action, suit, proceeding, claim or defense without
the prior written consent of the other Party, which shall not be unreasonably withheld, conditioned
or delayed; provided, that Alnylam may settle or compromise any action, suit,
proceeding, claim or defense relating to Licensed Intellectual Property without the prior written
consent of Licensee.

     (b) Trademarks. Each Party and its Affiliates shall retain all right, title and
interest in and to its and their respective corporate names and logos. Licensee shall not acquire
any rights under this Agreement in any trademark, service mark or Internet domain name including
the word “Alnylam” or any other trademarks or trade dress of Alnylam or its Affiliates, and Alnylam
shall not acquire any rights under this Agreement in any trademark, service mark or Internet domain
name including the word “Roche” or any other trademarks or trade dress of Licensee or its
Affiliates.

     (c) Enforcement of Licensed Intellectual Property. Alnylam shall take reasonable
measures to protect and, to the extent Alnylam has such a right, to enforce the Licensed
Intellectual Property in the Field, consistent with prudent commercial practices in the
biotechnology industry.

     (d) Notice of Changes. Within sixty (60) days after each anniversary of the Effective
Date, Alnylam shall provide to Licensee an updated Schedule C that reflects any changes to
the list of Licensed Patent Rights set forth on Schedule C which have occurred during the
prior year.

     2.9 Obligation to Maintain Listed Alnylam Third Party Agreements. Alnylam shall use
commercially reasonable efforts to maintain the Listed Alnylam Third Party Agreements in full force
and effect as they relate to the Licensed Patent Rights. If a Listed Alnylam Third Party Agreement
provides Alnylam with the opportunity to assume prosecution of any Licensed Patent Right or risk
that such right will be abandoned, then Alnylam shall take reasonable measures to prosecute such
Licensed Patent Right in the Field, consistent with prudent commercial practices in the
biotechnology industry.

22

 

ARTICLE III

TECHNOLOGY TRANSFER;

JOINT FUTURE TECHNOLOGY COMMITTEE

     3.1 Technology Transfer.

     (a) Initial Technology Transfer.

          (i) Within a period of [**] months following the Effective Date (“Technology Transfer
Period”), Alnylam shall complete the activities assigned to Alnylam as set forth on the
technology transfer plan attached hereto as Schedule F (as it may be amended from time to
time by mutual agreement of the Parties, the “Technology Transfer Plan”), at no additional
cost to Licensee (subject to subsection 3.1(d) below), to effect the transfer to Licensee (or its
designated Affiliate(s)) of Licensed Intellectual Property that is reasonably necessary for the
exercise of Licensee’s rights under the licenses granted pursuant to Section 2.1(a) and for the
operation of the facility in Kulmbach, Germany which is being transferred to Licensee pursuant to
the terms of the Share Purchase Agreement (“Kulmbach Facility”). Alnylam shall make
available to Licensee such number of technical personnel as may be set forth in the Technology
Transfer Plan to answer any questions or provide instruction as reasonably requested by Licensee
concerning the items delivered pursuant to this Section 3.1(a), in connection with Licensee’s
Discovery, Development, Commercialization and Manufacture of Licensed Products hereunder and the
operation of the Kulmbach Facility.

          (ii) During the Technology Transfer Period, Licensee shall conduct, and shall cause Licensee’s
applicable Affiliate(s) to conduct, the activities assigned to Licensee (and/or its Affiliates) as
set forth on the Technology Transfer Plan, at no additional cost to Alnylam, to effect the transfer
to Alnylam (or its designated Affiliate(s)) of Know-How which is reasonably necessary to enable
Alnylam (or its Affiliate(s)) to transfer the performance of the activities conducted at the
Kulmbach Facility prior to the Effective Date to an alternate facility in Cambridge, MA, U.S.A,
designated by Alnylam.

     (b) Technology Transfer to Alnylam After Technology Transfer Period. Without limiting
Licensee’s obligations under Section 3.1(a), following the end of the Technology Transfer Period,
Licensee shall conduct, and shall cause Licensee’s applicable Affiliates to conduct, the activities
assigned to Licensee and/or its Affiliates as set forth in the Technology Transfer Plan, at no
additional cost to Alnylam, to effect the transfer to Alnylam (or its designated Affiliate(s)) of
Know-How associated with, or arising from, the Discovery, Development, Commercialization and/or
Manufacturing activities performed by Licensee (and/or its Affiliate(s)) and its or its Affiliates’
employees and subcontractors at the Kulmbach Facility on behalf of Alnylam and/or its Affiliates
before and/or during the Transition Period (as defined in the Share Purchase Agreement). Licensee
shall make available to Alnylam such number of technical personnel as may be set forth in the
Technology Transfer Plan to answer any questions or provide instruction as reasonably requested by
Alnylam concerning the items delivered pursuant to this Section 3.1(b).

23

 

     (c) Management of Transition Activities. Each Party shall designate personnel to the
Joint Transition Team (as defined in the Share Purchase Agreement) who shall be responsible for
coordinating the technology transfer activities under the Technology Transfer Plan. Each Party
shall cooperate with the other Party in such other Party’s conduct of technology transfer
activities under the Technology Transfer Plan.

     (d) Additional Services. If Licensee desires that Alnylam continue to provide
technology transfer services with respect to Licensed Intellectual Property (i) beyond the scope of
the Technology Transfer Plan, or (ii) following the end of the Technology Transfer Period, Alnylam
shall, at its discretion and upon mutual agreement of the Parties on the terms of such services
(including, as necessary, an amended Technology Transfer Plan), continue to provide such services
on terms to be agreed upon by the Parties.

     3.2 Joint Future Technology Committee. Within thirty (30) days after the Effective Date, the
Parties shall establish a “Joint Future Technology Committee”, comprised of at least one
(1) representative from each of Licensee and Alnylam, to exchange information and facilitate
discussions concerning any Future Technology Patent Rights which may arise during the Option Term.
Unless otherwise agreed by the Parties, the Joint Future Technology Committee shall remain in
effect during the Option Term and shall meet on a bi-annual basis, in a manner and at a location
mutually agreed by the Parties (including via telephone). During the Option Term, either Party may
notify the other Party of its interest in obtaining a license under such other Party’s rights to
any Future Technology Patent Rights. Upon such notification and subject to any rights of Third
Parties to such Future Technology Patent Rights, the Parties shall negotiate in good faith for a
period not to exceed one hundred twenty (120) days the terms of any license to such Future
Technology Patent Rights, provided that neither Party shall be obligated to grant
any licenses to the other Party. For the avoidance of doubt, the Joint Future Technology Committee
shall have no decision-making authority with respect to the acquisition or grant of any licenses
under any Future Technology Patent Rights.

ARTICLE IV

DISCOVERY COLLABORATION

     4.1 Discovery Collaboration. Within [**] months following the Effective Date during the
Option Term (“Initial Discovery Collaboration Opportunity Period”), Licensee shall propose
to Alnylam at least [**] Targets which are not Blocked Targets with respect to which Licensee has
an interest in entering into a Discovery Collaboration with Alnylam (“Discovery Collaboration
Opportunity”), and shall provide to Alnylam any available information concerning such Targets
which Licensee reasonably believes may be material to Alnylam in its evaluation of such Discovery
Collaboration Opportunity and the rationale for pursuing an RNAi Compound directed to such Target.
If Alnylam has an interest in pursuing any such Discovery Collaboration Opportunity with Licensee
with respect to one or more of the proposed Targets (each, a “Collaboration Target”), then
Alnylam shall so respond within thirty (30) days of Licensee’s notice. If any such Collaboration
Target is not already a Designated Target at the time of Licensee’s proposal of the Discovery
Collaboration Opportunity directed to such Collaboration Target, then Licensee shall submit such

24

 

Collaboration Target(s) to Novartis during the Novartis Exclusivity Term in accordance with
Section 2.6 hereof. In the event that Novartis rejects or waives such Collaboration Target and
such Collaboration Target becomes a Designated Target hereunder, [**], and the Parties shall
negotiate in good faith, for a period not to exceed six (6) months, the terms of a Discovery
Collaboration Opportunity directed to such Designated Target in accordance with Section 4.2. If
the Parties are unable to negotiate the terms of a Discovery Collaboration Opportunity within such
six (6) month period, the Parties shall refer the matter(s) under negotiation to the Chief
Executive Officer of Alnylam and the Global Head of Pharma Research of Licensee, for discussion and
resolution within a thirty (30) day period. Licensee shall have no obligation to pursue more than
[**]; provided, that, the Parties shall enter into at least [**] directed to at least [**] within
the Option Term.

     4.2 Minimum Terms. The terms of any Discovery Collaboration negotiated between the Parties
pursuant to Section 4.1 shall include, at a minimum, the following: (a) each Party shall be
responsible for the costs of its own employees who perform work under the Discovery Collaboration,
(b) Licensee shall pay to Alnylam event payments and royalties with respect to Licensed
Collaboration Product(s) which shall be in addition to those which would have been payable by
Licensee with respect to such Licensed Collaboration Product(s) had Licensee independently
Discovered, Developed, Commercialized and/or Manufactured such Licensed Collaboration Product(s) as
Licensed Product(s) outside of any Discovery Collaboration, which shall be commensurate with
Alnylam’s contributions to the Discovery Collaboration (taking into account, at a minimum, the
Patent Rights referred to in subsection (c) below which shall be licensed to Licensee in connection
with such Discovery Collaboration in addition to the Licensed Patent Rights); (c) the grant of
licenses under each Party’s rights to Patent Rights and Know-How developed by such Party, its
Affiliates and/sublicensees, either individually or jointly with each other, during and in the
performance of the Discovery Collaboration; (d) the rights and obligations of each Party with
respect to prosecution, maintenance and enforcement of the intellectual property rights set forth
in the immediately preceding clause (c); and (e) termination rights. Upon finalization of the
terms of any Discovery Collaboration pursuant to this Section 4.2, the Parties shall (x) develop a
research plan in accordance with which each Party shall perform activities specified under such
Discovery Collaboration, and (y) establish a joint steering committee made up of an equal number of
representatives from each Party to oversee, review and coordinate the activities of the Parties
under such Discovery Collaboration. Notwithstanding the foregoing, if there is an Alnylam Change
of Control, then Licensee shall have the right not to (i) begin, or continue, to propose Discovery
Collaboration Opportunities pursuant to Section 4.1, (ii) begin, or continue to engage in, any
negotiations with Alnylam with respect to any such Discovery Collaboration Opportunity, or (iii)
continue with any ongoing Discovery Collaboration.

ARTICLE V

FINANCIAL PROVISIONS

     5.1 Equity Investment. As of the Execution Date, the Parties have entered into the Common
Stock Purchase Agreement pursuant to which Licensee has agreed to purchase shares of Alnylam’s
Common Stock (as defined in the Common Stock Purchase

25

 

Agreement) for a total consideration of Forty-Two Million Four Hundred Sixty-Two Thousand Five
Hundred dollars ($42,462,500).

     5.2 License Grant Consideration. In consideration of the rights granted to Licensee under
this Agreement as of the Effective Date, Licensee shall pay, or cause to be paid, to Alnylam Two
Hundred Seventy-Three Million Five Hundred Five Thousand Five Hundred dollars ($273,505,500) within
ten (10) Business Days following the Effective Date.

     5.3 Event Payments.

     (a) Development Events. In connection with the Discovery and Development of Licensed
Products that are Covered by a Valid Claim of Licensed Patent Rights, or the Manufacture of which
Licensed Products is Covered by a Valid Claim of a Licensed Patent Right, and directed against a
given Target hereunder, Licensee shall pay, or cause to be paid, to Alnylam the following payments
upon the achievement of the events set forth below:

	 	 	 	 	 
	 	 	Payment for
	 	 	Licensed Products
	Development Event:	 	(in [**]):
	Initiation of GLP Toxicology Studies
	 	$	[**]	 
	Initiation of the first Phase I Study
	 	$	[**]	 
	Initiation of the first Phase II Study
	 	$	[**]	 
	Initiation of the first Phase III Study for the first Indication
	 	$	[**]	 
	Initiation of first Phase III Study for a second Indication
	 	$	[**]	 
	First filing of an NDA in the U.S. for the first Indication
	 	$	[**]	 
	First filing of an NDA in the EU for the first Indication
	 	$	[**]	 
	First filing of an NDA in Japan for the first Indication
	 	$	[**]	 
	First filing of an NDA in the U.S. or EU for a second Indication
	 	$	[**]	 
	Regulatory Approval in the U.S. for the first Indication
	 	$	[**]	 
	Regulatory Approval in the EU for the first Indication
	 	$	[**]	 
	Regulatory Approval in Japan for the first Indication
	 	$	[**]	 
	Regulatory Approval in the U.S. or EU for a second Indication
	 	$	[**]	 

26

 

     (b) Sales Events. With respect to each Target, Licensee shall pay, or cause to be
paid, to Alnylam the following payments based on Net Sales of Licensed Products that are Covered by
a Valid Claim of Licensed Patent Rights, or the Manufacture of which Licensed Products is Covered
by a Valid Claim of a Licensed Patent Right, upon the achievement of the events set forth below:

	 	 	 	 	 
	 	 	Payment for
	 	 	Licensed Products
	Sales Event:	 	(in [**]):
	Aggregate worldwide Annual Net Sales of all Licensed
Product(s) directed to such Target reach or exceed $[**]
(≥$[**])
	 	$[**]
	Aggregate worldwide Annual Net Sales of all Licensed
Product(s) directed to such Target reach or exceed $[**]
(≥$[**])
	 	$[**]

     (c) Achievement of Events. Licensee shall notify Alnylam within thirty (30) days
following achievement or occurrence of an event under Section 2.5(a) and this Section 5.3, and
Alnylam shall deliver to Licensee an invoice for such event. Each event payment under Section
2.5(a) and this Section 5.3 shall be deemed earned as of the achievement or occurrence of the
related event and shall be paid by Licensee within sixty (60) days following such achievement or
occurrence.

     (d) Event Payments Payable Only Once. Each event payment under this Section 5.3 shall
be payable only once in relation to each Target. By way of example, in the event that Licensee
elects not to proceed with the Development or Commercialization of a Licensed Product directed to a
Target for which one or more of the foregoing event payments have been paid, Licensee shall not be
required to make any event payments previously paid under this Section 5.3 with respect to any
back-up Licensed Product(s) directed at such Target. In addition, if, with respect to the
Development of a Licensed Product, Licensee satisfies an event under this Section 5.3, Licensee
shall pay to Alnylam all earlier event payments under this Section 5.3 that have not otherwise been
paid with respect to such Target (regardless of whether such earlier events have been satisfied).

     5.4 Royalties.

     (a) Royalty Rate. Subject to subsections (b)-(g) of this Section 5.4, during each
relevant Royalty Term, Licensee shall pay, or cause to be paid, to Alnylam the following royalties
on Annual Net Sales of each Licensed Product:

27

 

	 	 	 	 	 
	 	 	Royalty Rate
	Annual Net Sales of a Licensed Product (on a	 	Applicable to Such
	Target-by-Target basis) during the applicable	 	Annual Net Sales
	calendar year:	 	of Such Licensed Product:
	Less than or equal to $[**]:
	 	 	[**]	%
	Greater than $[**], but less than or
equal to $[**]:
	 	 	[**]	%
	Greater than $[**], but less than or
equal to $[**]:
	 	 	[**]	%
	Greater than $[**], but less than or
equal to $[**]
	 	 	[**]	%
	Greater than $[**], but less than or
equal to $[**]:
	 	 	[**]	%
	Greater than $[**], but less than or
equal to $[**]
	 	 	[**]	%
	Greater than $[**]:
	 	 	[**]	%

By way of example, if Annual Net Sales of a Licensed Product are [**] dollars and no deductions
were to apply under Sections 5.4(b)-(g), then the royalty payable by Licensee to Alnylam would be
as follows:

	 	 	 	 	 
	$[**] million at [**]%
	 	=   $[**] million
	$[**] million at [**]%
	 	=  $[**] million
	$[**] million at [**]%
	 	=  $[**] million
	$[**] million at [**]%
	 	=  $[**] million
	$[**] million at [**]%
	 	=  $[**] million
	$[**] million at [**]%
	 	=  $[**] million
	$[**] million at [**]%
	 	=  $[**] million
	Total Royalty Due
	 	=  $[**] million

For the avoidance of doubt, Licensee’s obligation to pay royalties under this Section 5.4 is
imposed only once with respect to the same unit of Licensed Product, including by reason of such
Licensed Product being Covered by more than one Valid Claim of Licensed Patent Rights.

     (b) Expiration of Patent Coverage. If no Valid Claim of Licensed Patent Rights Covers
a Licensed Product in a given country, and the Manufacture of such Licensed
Product is not Covered by a Valid Claim of Licensed Patent Rights in the country of
manufacture, then the royalty rate applicable to such Licensed Product in such country shall be
reduced to [**] percent ([**]%) of the rate set forth in Section 5.4(a) above for any

28

 

remaining
portion of the Royalty Term which applies to such Licensed Product in such country.

     (c) Royalty Stacking. Licensee shall be entitled to deduct, from the royalty payments
payable by Licensee under Section 5.4(a) for a reporting period, [**] percent ([**]%) of Required
Third Party Payments paid by Licensee with respect to Licensed Products during the applicable
reporting period; provided that in no event shall a deduction under this subsection
(c) reduce any royalty payment payable by Licensee under Section 5.4(a) by more than [**] percent
([**]%).

     (d) Payments in Respect of Alnylam In-Licenses. In addition to any royalty set forth
in Section 5.4(a) during the Royalty Term, Licensee shall reimburse Alnylam for [**] percent
([**]%) of all royalty payments payable (each such payment, a “Listed Alnylam Third Party
Payment,” collectively, the “Listed Alnylam Third Party Payments”) to Third Parties
pursuant to Listed Alnylam Third Party Agreements in respect of Net Sales of Licensed Products;
provided that in no event shall the royalty payments payable by Licensee hereunder
in respect of such Listed Alnylam Third Party Payments in any reporting period exceed in the
aggregate [**] percent ([**]%) of Net Sales of Licensed Products for such reporting period. The
Parties shall cooperate to coordinate such reimbursements by Licensee in a manner that ensures all
amounts payable by Licensee hereunder pursuant to Listed Alnylam Third Party Agreements are paid in
a timely manner and otherwise in compliance with such Listed Alnylam Third Party Agreements.
Licensee shall have the right to have an independent public accountant reasonably acceptable to
Alnylam audit Alnylam’s books and records solely for purposes of verifying such Listed Alnylam
Third Party Payments, which right shall be exercisable [**] per year solely with respect to records
covering up to the [**] calendar years prior to audit notification, upon reasonable advance notice
and during Alnylam’s business hours, subject to the confidentiality provisions of Article VI
hereof. Audit results and findings shall be shared by Licensee and Alnylam. If the audit reveals
an overpayment by Licensee under this Section 5.4(d), the amount of such overpayment shall be
credited towards any future reimbursement amounts payable by Licensee under this Section 5.4(d),
subject to Section 5.4(e). If the audit reveals an underpayment by Licensee, Licensee shall make
up such underpayment within thirty (30) days. The failure of Licensee to request verification of
any Listed Alnylam Third Party Payments hereunder within the [**] calendar year period set forth
above shall be deemed acceptance of the calculation of such Listed Alnylam Third Party Payments.

     (e) Deductions. Notwithstanding anything in this Agreement to the contrary, in no
event shall total deductions under Sections 5.4(b) and 5.4(c) reduce any quarterly royalty payment
by Licensee in respect of Net Sales of a given Licensed Product to less than [**]. Alnylam shall
have the burden of demonstrating the amount of royalty payments payable to Third Parties pursuant
to Listed Alnylam Third Party Agreements. Any deductions allowable under Sections 5.4(b) and
5.4(c) which cannot be used against any quarterly royalty payment due to the foregoing limitation
may be carried forward and used against future quarterly royalty payments, subject to the
limitation set forth above.

     (f) Loss of Listed Alnylam Third Party Agreements. If Alnylam ceases to be a licensee
of Licensed Patent Rights (as such, “Terminated Patent Rights”) under any

29

 

Listed Alnylam
Third Party Agreement (other than as a result of any action or omission by Licensee) and Licensee
directly licenses such Terminated Patent Rights from that Third Party, then Licensee may deduct the
full amount of any [**] paid to such Third Party for such license(s) that is attributable to
Licensed Products Covered by such Terminated Patent Rights from any royalties otherwise payable to
Alnylam hereunder; provided, that prior to Licensee entering into any such license of such
Terminated Patent Rights from such Third Party, Licensee shall notify Alnylam of its intent to do
so and shall provide to Alnylam an opportunity to explain its rationale for ceasing to license such
Terminated Patent Rights and Licensee shall consider in good faith such rationale. If Licensee
does not agree with Alnylam’s rationale, then, at Licensee’s request, Alnylam shall use
commercially reasonable efforts to reinstate the license for such Terminated Patent Rights within a
sixty (60) day period; provided, however, that Alnylam shall not be required to continue to
undertake such efforts if the Third Party requires payments which are incremental to what would
otherwise be owed to such Third Party had such Terminated Patent Rights not been terminated, or the
imposition of additional terms and conditions. If Alnylam is unable to reinstate the license, then
Licensee may obtain a direct license for such Terminated Patent Rights from such Third Party;
provided, that in no event shall total deductions under this Section 5.4(f) reduce any quarterly
royalty payment by Licensee in respect of Net Sales of a given Licensed Product to less than [**].

     (g) Duration of Royalty Payments; First Commercial Sale. The royalties payable under
Section 5.4(a) shall be paid on a country-by-country basis on each Licensed Product commencing upon
the occurrence of the First Commercial Sale of such Licensed Product until the expiration of the
applicable Royalty Term for such Licensed Product. Licensee shall notify Alnylam of the occurrence
of First Commercial Sale of each Licensed Product within fifteen (15) days of its occurrence.

     5.5 [**]. If Licensee exercises the [**] with respect to a Target pursuant to Section 2.6,
and such Target is deemed a [**] hereunder, then Licensee shall pay Alnylam a fee (the [**]) of (a)
[**] Dollars ($[**]) for each of the first [**] Targets to be [**] pursuant to Licensee’s exercise
of the [**] in any calendar year, (b) following the [**] of the [**] Target as a [**] hereunder in
any calendar year, [**] Dollars ($[**]) for each of the next [**] Targets [**] pursuant to
Licensee’s exercise of the [**] hereunder; (c) following the [**] of the [**] Target as a [**]
hereunder in any calendar year, [**] Dollars ($[**]) for each of the next [**] Targets [**]
pursuant to Licensee’s exercise of the [**] hereunder; and (d) following the [**] of the [**]
Target as a [**] hereunder in any calendar year, [**] Dollars ($[**]) for each Target [**] pursuant
to Licensee’s exercise of the [**] hereunder. Licensee shall pay such [**] within thirty (30) days
following receipt of Alnylam’s invoice with respect to the [**] hereunder.

     5.6 Field Option Fee. If Licensee exercises the Field Option with respect to any Additional
Field pursuant to Section 2.5, Licensee shall pay Alnylam a fee (the “Field Option Fee”) of
Fifty Million Dollars ($50,000,000) for each such Additional Field. Licensee shall pay such Field Option Fee
within thirty (30) days following receipt of Alnylam’s invoice therefor.

     5.7 Most Favored Licensee. During the Option Term, in the event that Alnylam grants to a
Third Party (other than Listed Counterparties or Pre-Existing Alliance

30

 

Parties) rights including a
non-exclusive, worldwide license under the Licensed Intellectual Property to Discover, Develop,
Manufacture and Commercialize Licensed Products, at a royalty rate (taking into account any
obligations to make payments to Third Parties) that is more favorable to such Third Party than the
royalty rate (taking into account any obligations to make payments to Third Parties) set forth in
Section 5.4 of this Agreement with respect to such license grant, then the royalty rate (taking
into account any obligations to make payments to Third Parties) under this Agreement shall be
reduced or adjusted to such more favorable Third Party royalty rate on a prospective basis from the
effective date of Alnylam’s agreement with such Third Party with respect to such rights.
Notwithstanding the foregoing, if (a) the Third Party has paid cash or other consideration, or
there are other elements of the overall transaction with such Third Party, that justifies a royalty
rate below the rate set forth in Section 5.4 of this Agreement, or (b) the license has been granted
as part of a joint venture or similar collaborative agreement, then such royalty rate reduction
shall not apply. For the avoidance of doubt, such more favorable royalty rate shall have no
retroactive effect and shall not apply to any royalties which have been paid by Licensee or which
have otherwise accrued under this Agreement prior to the date of such reduction or adjustment.

     5.8 Payment of Royalty. Licensee shall calculate royalties on Net Sales quarterly as of March
31, June 30, September 30 and December 31 (each being the last day of an “Accounting
Period”) and shall pay royalties on Net Sales within the sixty (60) days after the end of each
Accounting Period in which such Net Sales occur. Royalties on Net Sales shall be paid by Licensee
in U.S. Dollars.

     5.9 Currency Computation. Whenever calculating royalties requires conversion from any
currency, Licensee shall make such conversion as follows: When calculating the Adjusted Gross
Sales for countries other than the United States of America, Licensee shall convert the amount of
such sales in currencies other than Swiss Francs into Swiss Francs using for internal foreign
currency translation Licensee’s then current standard practices actually used on a consistent basis
in preparing its audited financial statements. Upon converting the amount of Adjusted Gross Sales
into Swiss Francs, Licensee shall convert into US Dollars (or other currency), using the daily rate
(Reuters) at the last working day for the applicable period.

     5.10 Reporting. With each payment Licensee shall provide in writing for the relevant
Accounting Period the following information split by U.S., each of the Major Market Countries, and
rest of world (a) Adjusted Gross Sales; (b) Net Sales; (c) the total royalties payable for the
applicable period; and (d) any other information necessary for Alnylam to comply with its reporting
and payment obligations to Third Parties under Alnylam Third Party Obligations, subject to
Alnylam’s obligations under Section 2.3(b)(i).

     5.11 Withholding Taxes. Any tax required to be withheld by Licensee under the laws of any
country for the account of Alnylam shall be promptly paid by Licensee for and on behalf of Alnylam
to the appropriate governmental authority, and Licensee shall furnish Alnylam with proof of payment
of such tax. Any such tax actually paid on Alnylam’s behalf shall be deducted from royalty
payments due to Alnylam hereunder. Licensee shall
assist Alnylam in minimizing the withholding taxes applicable to any payment made by Licensee
and in claiming tax refunds at Alnylam’s request.

31

 

     5.12 Financial Records. Licensee shall keep, and shall require its Affiliates and Licensee
Partners to keep, for [**] years, full, true and accurate books of account containing all
particulars that may be necessary for the purpose of calculating all amounts payable under this
Agreement or to verify compliance with this Agreement. Such books of accounts shall be kept at
their principal place of business.

     5.13 Audits by Alnylam. At the expense of Alnylam, Alnylam has the right to engage an
independent public accountant reasonably acceptable to Licensee to perform, on behalf of Alnylam,
an audit of such books and records of Licensee and its Affiliates and Licensee Partners, that are
deemed necessary by Alnylam’s independent public accountant to verify amounts paid or payable under
this Agreement for the period or periods requested by Alnylam and the correctness of any report or
payments made under this Agreement. Upon timely request and at least thirty (30) Business Days’
prior written notice from Alnylam, such audit shall be conducted in the countries specifically
requested by Alnylam, during regular business hours in such a manner as to not unnecessarily
interfere with Licensee’s (or its Affiliates’ or Licensee Partners’, as the case may be) normal
business activities, and shall be limited to results in the [**] calendar years prior to audit
notification. Such audit shall not be performed more frequently than [**] per calendar year nor
more frequently than [**]with respect to records covering any specific period of time. All
information, data documents and abstracts herein referred to shall be used only for the purpose of
verifying royalty statements and other amounts payable under this Agreement, or compliance with
this Agreement, shall be treated as Confidential Information of Licensee subject to the obligations
of this Agreement and need neither be retained more than [**] year after completion of an audit
hereof, if an audit has been requested; nor more than [**] years from the end of the calendar year
to which each shall pertain; nor more than [**] year after the date of termination of this
Agreement. Audit results and findings shall be shared by Licensee and Alnylam. If the audit
reveals an overpayment, Alnylam shall reimburse Licensee for the amount of the overpayment within
thirty (30) days. If the audit reveals an underpayment, Licensee shall make up such underpayment
within thirty (30) days with interest as set forth in Section 5.14 below. In addition, if the
underpayment is equal to or greater than five percent (5%) of the amount that was otherwise due,
Licensee shall pay all of the costs of such audit. The failure of Alnylam to request verification
of any royalty calculation within the period during which corresponding records must be maintained
shall be deemed acceptance of the royalty reporting.

     5.14 Late Payments. Licensee shall pay interest to Alnylam on the aggregate amount of any
payments that are not paid on or before the date such payments are due under this Agreement at a
rate per annum equal to the lesser of the one month London Interbank Offering Rate of interest plus
one percent (1%), as reported by The Wall Street Journal for the applicable period, or the highest
rate permitted by applicable law, calculated on the number of days such payment is delinquent.

32

 

ARTICLE VI

CONFIDENTIAL INFORMATION

     6.1 Confidential Information. All Confidential Information disclosed by a Party to the other
Party in connection with the activities contemplated by this Agreement shall not be used by the
receiving Party except in connection with the activities and licenses contemplated by this
Agreement, shall be maintained in confidence by the receiving Party, and shall not otherwise be
disclosed by the receiving Party to any other Person, without the prior written consent of the
disclosing Party, except to the extent that the Confidential Information (as determined by
competent documentation):

     (a) was known or used by the receiving Party or its Affiliates prior to its date of disclosure
to the receiving Party; or

     (b) either before or after the date of the disclosure to the receiving Party or its
Affiliates, is lawfully disclosed to the receiving Party or its Affiliates by sources other than
the disclosing Party who are rightfully in possession of the Confidential Information and not
subject to an obligation of confidentiality or non-use owed to the disclosing Party; or

     (c) either before or after the date of the disclosure to the receiving Party or its
Affiliates, becomes published or generally known to the public other than through the wrongful act
or default of the receiving Party or its Affiliates or its or its Affiliates’ representatives; or

     (d) is independently developed by the receiving Party or its Affiliates without reference to
or reliance upon the Confidential Information.

     Notwithstanding anything set forth herein to the contrary, this Article VI shall not prohibit
the receiving Party from disclosing Confidential Information of the disclosing Party to defend or
prosecute litigation; provided that, to the extent practicable, the receiving Party
provides prior written notice of such disclosure to the disclosing Party and assists the disclosing
Party in its reasonable and lawful efforts to avoid or minimize the degree of such disclosure.
Notwithstanding the foregoing provisions of this Section 6.1, either Party may only disclose the
terms of this Agreement if such Party reasonably determines, based on advice from its counsel, that
it is required to make such disclosure by applicable Law, regulation or legal process, including
without limitation by the rules or regulations of the United States Securities and Exchange
Commission or similar regulatory agency in a country other than the United States or of any stock
exchange or NASDAQ, or pursuant to relevant accounting standards, such as IFRS or GAAP, in which
event such Party shall provide prior notice of such intended disclosure to the other Party
sufficiently in advance to enable the other Party to seek confidential treatment or other
protection for such information unless the disclosing Party is prevented by Law from providing such
advance notice and shall disclose only such terms of this Agreement as such disclosing Party
reasonably determines, based on advice from its counsel, are required by applicable Law or legal
process to be disclosed. Alnylam shall be permitted to disclose in confidence (pursuant to a
written agreement with confidentiality obligations no less restrictive than set forth herein) the
terms of this Agreement

33

 

to the extent Alnylam is contractually obligated to do so pursuant to Alnylam Third Party
Obligations and to potential and existing investors, lenders and acquirors; provided,
that Alnylam shall redact such portions as Licensee reasonably requests.

     6.2 Employee and Advisor Obligations. Each Party agrees that it may provide Confidential
Information received from the other Party (including the terms of this Agreement) only to its and
its Affiliates’ (a) employees, consultants, advisors and contractors who have a need to know such
information in order for the receiving Party to exercise its rights or perform its obligations
under this Agreement, and (b) potential and existing investors, lenders and acquirors, in each case
who have an obligation to treat such information and materials as confidential under terms no less
restrictive than those set forth herein.

     6.3 Publicity. Upon execution of this Agreement, the Parties shall jointly issue a press
release announcing the execution of this Agreement in form and substance substantially as set forth
on Schedule G hereto. Thereafter, neither Party shall issue any press release or public
announcement relating to this Agreement or any Discovery Collaboration without the prior written
approval of the other Party, which approval shall not be unreasonably withheld, conditioned or
delayed, except that a Party may issue a press release or public announcement if required by Law,
including by the rules or regulations of the United States Securities and Exchange Commission or
similar regulatory agency in a country other than the United States or of any stock exchange or
NASDAQ or pursuant to relevant accounting standards, such as IFRS or GAAP; provided
that the other Party has received prior notice of such intended press release or public
announcement if practicable under the circumstances and the Party subject to the requirement
includes in such press release or public announcement only such information relating to this
Agreement as is necessary to comply with applicable Law. Alnylam shall not issue any press release
or public announcement relating to Licensed Products without the prior written approval of
Licensee. The rights of approval and notice granted to a Party in accordance with the preceding
sentence shall only apply for the first time that specific information is to be disclosed, and
shall not apply to the subsequent disclosure of substantially similar information that has
previously been made public other than through a breach of this Agreement by the issuing Party or
its Affiliates.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

     7.1 Mutual Representations and Warranties.

     (a) Representations of Authority. Each Party represents and warrants to the other
Party that, as of the Effective Date, it has full corporate right, power and authority to enter
into this Agreement and to perform its obligations under this Agreement.

     (b) Consents. Each Party represents and warrants to the other Party that all
necessary consents, approvals and authorizations of all government authorities and other Persons
required to be obtained by it as of the Effective Date in connection with the execution, delivery
and performance of this Agreement have been obtained.

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     (c) No Conflict. Each Party represents and warrants to the other Party that the
execution and delivery of this Agreement and the performance of its obligations hereunder (i) does
not violate or conflict with the provisions of its certificate of incorporation or by-laws, (ii)
does not conflict with or violate any requirement of applicable Laws effective as of the Effective
Date, and (iii) does not and will not conflict with, violate, breach or constitute a default under
any contractual obligations of it or any of its Affiliates existing as of the Effective Date.

     (d) Authorization and Binding Nature. Each Party represents and warrants to the other
Party that the execution, delivery and performance of this Agreement and the performance of all
obligations hereunder have been duly authorized by all requisite corporate action on the part of
such Party and this Agreement constitutes valid and legally binding obligations of such Party,
limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the enforcement of creditors’ rights generally and (ii) as may be limited by
laws relating to the availability of specific performance, injunctive relief or other equitable
remedies.

     (e) Employee Obligations. Each Party represents and warrants that all of its
employees, officers and consultants have executed agreements or have existing obligations under Law
requiring assignment to such Party of all intellectual property and proprietary rights made during
the course of and as the result of their association with such Party, and obligating such
individuals to maintain as confidential the Confidential Information of such Party and of a Third
Party which such Party may receive.

     7.2 Representations and Warranties of Alnylam. Alnylam represents and warrants to Licensee
that, as of the Effective Date:

     (a) Organization and Good Standing. Alnylam is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware.

     (b) Non-Infringement. To Alnylam’s knowledge, (i) no Third Party is currently
infringing or misappropriating any Licensed Intellectual Property, it being understood that there
may be Third Parties that are conducting research or clinical development under the “safe harbor”
exemption from patent infringement under 35 USC 271(e)(1) or similar exemptions in other
jurisdictions, and (ii) the practice of the Licensed Intellectual Property as contemplated under
this Agreement does not violate the intellectual property rights of any Third Party.

     (c) Validity. All Licensed Intellectual Property that is owned by Alnylam, and, to
the best of Alnylam’s knowledge, all Licensed Intellectual Property that is licensed by Alnylam
pursuant to Listed Alnylam Third Party Agreements, is in full force and effect and all necessary
registration, maintenance, and renewal fees for such Licensed Intellectual Property have been paid
on time. Except for those oppositions or challenges which are publicly disclosed in Alnylam’s
filings with the U.S. Securities and Exchange Commission, no Third Party has initiated a suit or
other proceedings to challenge the validity of the Licensed Patent Rights. Alnylam has no reason
to believe that the Licensed Patent Rights are other than valid and enforceable.

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     (d) Litigation. Alnylam and its Affiliates are not aware of any pending or threatened
claim or litigation (nor has Alnylam received notice of a potential claim or litigation) (i) which
alleges that any issued patents of a Third Party would be infringed by the Development and
Commercialization of any Licensed Product hereunder or (ii) that questions the validity of this
Agreement or the right of Alnylam to enter into this Agreement, or to consummate the transactions
contemplated hereby. To Alnylam’s knowledge, there are no legal actions or investigations pending
or threatened involving the employment by or with Alnylam of any of Alnylam’s current or former
officers, their use in connection with Alnylam’s business or any information or techniques
allegedly proprietary to any of their former employers, or their obligations under any agreements
with prior employers or alleging a violation of Law. Alnylam is not a party to any order, writ,
injunction, judgment or decree of any court. There is no action, suit, proceeding or investigation
by Alnylam currently pending or that Alnylam intends to initiate.

     (e) Authority. Alnylam and its Affiliates have the right and authority to grant the
licenses to Licensee set forth in Section 2.1(a) of this Agreement as contemplated under this
Agreement.

     (f) Certain Exclusive Rights. Alnylam has granted exclusive licenses under Licensed
Intellectual Property to Third Parties, or options to acquire exclusive licenses under Licensed
Intellectual Property, for an aggregate of no more than [**] Targets.

     (g) Listed Alnylam Third Party Agreements. Schedule D-1 identifies all Listed
Alnylam Third Party Agreements existing as of the Effective Date, and Schedule D-2
summarizes certain relevant Alnylam Third Party Obligations under such Listed Alnylam Third Party
Agreements, including without limitation Listed Alnylam Third Party Payment obligations. All
Listed Alnylam Third Party Agreements are in full force and effect, and no dispute presently exists
between Alnylam and such Listed Counterparties and Pre-Existing Alliance Parties that would place
in jeopardy any of the licenses granted by Alnylam under this Agreement.

     (h) Pre-Existing Alliance Agreements. Schedule E identifies all Pre-Existing
Alliance Agreements existing as of the Effective Date.

     (i) Isis. Alnylam, through its Affiliate or a Third Party collaborator, has commenced
an IND-Enabling Study for [**] product candidate as set forth in Section 5.2(b) of the Listed
Alnylam Third Party Agreement with Isis Pharmaceuticals, Inc. Alnylam presently has the exclusive
right under the “Isis Patents” (as defined on Schedule C) and the right to grant
sublicenses under the Listed Alnylam Third Party Agreement with Isis Pharmaceuticals, Inc.

     (j) Protecting IP Rights. Alnylam and its Affiliates have taken reasonable measures
to protect the Licensed Intellectual Property, consistent with prudent commercial practices in the
biotechnology industry.

     (k) Completeness. Schedule C provides a complete listing of the Licensed
Patent Rights as of the Effective Date. Alnylam does not Control as of the Effective Date any

36

 

Patent Rights other than the Licensed Patent Rights that Cover (a) the general structure,
architecture, or design of double-stranded oligonucleotide molecules which engage RNAi mechanisms
in a cell; (b) chemical modifications of double-stranded oligonucleotides (including any
modification to the base, sugar or internucleoside linkage, nucleotide mimetics, and any end
modifications) which do not abolish the RNAi activity of the double-stranded oligonucleotides in
(a); (c) manufacturing techniques for the double-stranded oligonucleotide molecules or chemical
modifications of (a) and (b); or (d) all uses or applications of double-stranded oligonucleotide
molecules or chemical modifications in (a) or (b); (e) delivery technologies necessary or useful
for delivery of double-stranded oligonucleotide molecules; or (f) manufacturing techniques for the
delivery technologies in clause (e); but excluding Patent Rights which specifically relate to
Blocked Targets.

     (l) Forthrightness. Alnylam has not intentionally withheld or omitted any information
from Licensee which Alnylam believes would be material in Licensee’s decision to enter into this
Agreement.

     7.3 Representations and Warranties of Licensee. Licensee represents and warrants to Alnylam
that, as of the Effective Date, Licensee is not engaged in a dispute with UBC.

     7.4 No Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTIONS 7.1, 7.2 or 7.3, OR IN
THE COMMON STOCK PURCHASE AGREEMENT, OR IN THE SHARE PURCHASE AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, TO THE OTHER
PARTY, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE VIII

TERM AND TERMINATION

     8.1 Term. This Agreement shall be effective as of the Effective Date and shall continue,
subject to Sections 8.2, 8.3 and 8.4, in accordance with its terms until, with respect to a
Licensed Product in a particular country, the expiration of such Licensed Product’s Royalty Term in
such country. Without prejudice to any other rights or remedies available at law or in equity,
neither Party shall have the right to terminate any right or obligation under this Agreement except
pursuant to Section 8.2, 8.3 or 8.4. Notwithstanding the foregoing, in the event that the
Effective Date does not occur on or before December 15, 2007, this Agreement shall terminate
automatically on December 15, 2007 and be of no further force or effect, unless otherwise agreed
upon by the Parties.

     8.2 Termination for Cause.

     (a) Licensee may terminate this Agreement upon sixty (60) calendar days’ prior written notice
to Alnylam upon the material breach by Alnylam of any of its representations, warranties or
obligations under this Agreement; provided that such

37

 

termination shall become effective only if (i) Alnylam fails to remedy or cure the breach
within such sixty (60) day period, or (ii) if such breach cannot be remedied or cured through the
application of commercially reasonable efforts within such sixty (60) day period, and Alnylam has
(within such time period) submitted a plan for cure as promptly as is reasonably practicable (but
in no event beyond an additional sixty (60) day period) through the application of commercially
reasonable efforts with a remedy or cure period reasonably acceptable to Licensee, then after the
earlier of the remedy or cure date accepted by Licensee or the date Alnylam ceases to use
commercially reasonable efforts to remedy or cure such breach.

     (b) Alnylam may terminate this Agreement upon sixty (60) calendar days’ prior written notice
to Licensee upon the material breach by Licensee of any of its representations, warranties or
obligations under this Agreement; provided that such termination shall become
effective only if (i) Licensee fails to remedy or cure the breach within such sixty (60) day
period, or (ii) if such breach cannot be remedied or cured through the application of commercially
reasonable efforts within such sixty (60) day period, and Licensee has (within such time period)
submitted a plan for cure as promptly as is reasonably practicable (but in no event beyond an
additional sixty (60) day period) through the application of commercially reasonable efforts with a
remedy or cure period reasonably acceptable to Alnylam, then after the earlier of the remedy or
cure date accepted by Alnylam or the date Licensee ceases to use commercially reasonable efforts to
remedy or cure such breach.

     8.3 Termination for Patent Challenge. If Licensee or any of its Affiliates or Licensee
Partners initiates, maintains or supports any action to (a) oppose the grant of a patent, or (b)
challenge the validity, patentability, enforceability and/or scope of an issued patent, in each
case under the Licensed Patent Rights, then Alnylam shall have the right, upon thirty (30) days’
prior written notice to Licensee, to terminate this Agreement; provided, however,
that if Licensee or any of its Affiliates or Licensee Partners, as relevant, cease such
opposition or challenge within such thirty (30) day period, then Alnylam shall not have the right
to terminate this Agreement.

     8.4 Termination At Will. Licensee shall have the right to terminate this Agreement on a
Licensed Product-by-Licensed Product, Licensed Patent Right-by-Licensed Patent Right, and
country-by-country basis after the first (1st) anniversary of the Effective Date for any
reason upon one hundred and eighty (180) days prior written notice to Alnylam; provided,
however, that if royalties were payable for any of the prior four (4) Accounting
Periods or are currently payable hereunder with respect to such Licensed Product in such country,
Licensee shall continue to comply with the terms of this Agreement with respect to such Licensed
Product in such country as if the Agreement had not terminated hereunder, as such terms relate to
the payment of royalties and event payments with respect to such Licensed Product in such country,
and the related accounting provisions of this Agreement.

     8.5 Effect of Expiration or Termination. Unless otherwise expressly set forth herein, all
rights and obligations of the Parties hereunder shall terminate as of the effective date of such
expiration or termination.

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     (a) Termination by Licensee For Alnylam Breach. If Licensee terminates this Agreement
pursuant to Section 8.2(a), then the licenses granted to Licensee under Section 2.1(a) shall
continue subject only to the restrictions set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 and
2.7, and Licensee’s obligation to pay to Alnylam the royalties and event payment amounts due under
Sections 2.5(a), 5.3 and 5.4 and under any applicable terms of the Discovery Collaboration as they
become due; provided, however, that Licensee may withhold [**] percent
([**]%) of each event and royalty payment due hereunder until the actual amount of damages owed by
Alnylam to Licensee with respect to the breach of this Agreement resulting in such termination is
determined, whereupon such withheld amount shall be credited against such damages and any amount
remaining shall be paid to Alnylam within thirty (30) days after such determination.

     (b) Termination by Alnylam For Licensee Breach or Patent Challenge; Termination by
Licensee For Convenience. If (i) Alnylam terminates this Agreement pursuant to Section 8.2(b)
or 8.3, or (ii) Licensee terminates this Agreement, in its entirety or with respect to certain
Licensed Products or Licensed Patent Rights, pursuant to Section 8.4, then all provisions of this
Agreement, including the licenses granted under Section 2.1(a) by Alnylam to Licensee hereunder,
shall terminate with respect to the Agreement in its entirety or, solely with respect to a
termination of a Licensed Product or Licensed Patent Right by Licensee under the immediately
preceding clause (ii), with respect to such terminated Licensed Product or Licensed Patent Right.

     (c) Paid-Up License. Upon the expiration of the Royalty Term applicable to any
Licensed Product in a country, subject to Alnylam Third Party Obligations, Licensee’s and its
Affiliates’ licenses under Section 2.1(a) with respect to such Licensed Product in such country
shall become a fully paid-up, royalty-free license, with the right to sublicense, to Discover,
Develop, Commercialize or Manufacture such Licensed Product in such country.

     (d) Survival. The expiration or termination of any right or obligation under this
Agreement for any reason will not affect obligations, including the payment of any royalties and
event payments, that have accrued as of the date of such expiration or termination, as the case may
be, and the provisions set forth in Sections 2.5(a), 5.3-5.6 and 5.8-5.14 (with respect to each of
the foregoing Sections, solely to the extent that any amounts are due but unpaid thereunder),
Section 8.4, this Section 8.5, and Articles VI and IX hereof, shall survive such expiration or
termination.

ARTICLE IX

MISCELLANEOUS

9.1 Indemnification.

     (a) By Alnylam. Alnylam shall defend, indemnify and hold harmless Licensee, its
Affiliates and their respective directors, officers, employees and agents, at Alnylam’s cost and
expense, from and against any liabilities, losses, costs, damages, fees or expenses (including
reasonable fees and expenses of legal counsel) arising out of any Third Party claim based on (i)
any breach by Alnylam of any of its representations, warranties or

39

 

obligations pursuant to this Agreement, or (ii) the negligence or willful misconduct of
Alnylam or its Affiliates or sublicensees, or any of their respective directors, officers,
employees and agents, in the performance of obligations or exercise of rights under this Agreement;
except to the extent that such claims arise out of any negligence or willful misconduct of Licensee
or its Affiliates, Licensee Partners or sublicensees, or any of their respective directors,
officers, employees and agents.

     (b) By Licensee. Licensee shall defend, indemnify and hold harmless Alnylam, its
Affiliates and their respective directors, officers, employees and agents at Licensee’s cost and
expense, from and against any liabilities, losses, costs, damages, fees or expenses (including
reasonable fees and expenses of legal counsel) arising out of any Third Party claim based on (i)
any breach by Licensee of any of its representations, warranties or obligations pursuant to this
Agreement, or (ii) the negligence or willful misconduct of Licensee or its Affiliates, Licensee
Partners or sublicensees, or any of their respective directors, officers, employees and agents, in
the performance of obligations or exercise of rights under this Agreement, or (iii) any Product
Liability Claim relating to a Licensed Product; except to the extent that such claims arise out of
any negligence or willful misconduct of Alnylam or its Affiliates or sublicensees, or any of their
respective directors, officers, employees and agents.

     (c) Claims for Indemnification with respect to Third Parties.

          (i) With regard to any Third Party claim for which indemnification may be sought under this
Section 9.1 against a person entitled to indemnification under this Section 9.1 (an
“Indemnified Party”), the Indemnified Party shall give prompt written notification to the
person from whom indemnification is sought (the “Indemnifying Party”) of the commencement
of any action, suit or proceeding relating to such Third Party claim or, if earlier, upon the
assertion of any such claim by a Third Party (it being understood and agreed, however, that the
failure by an Indemnified Party to give notice of a Third Party claim as provided in this Section
9.1(c) shall 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).

          (ii) Within thirty (30) days after delivery of such notification, the Indemnifying Party may,
upon written notice thereof to the Indemnified Party, assume control of the defense of such action,
suit, proceeding or claim with counsel reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party does not assume control of such defense, the Indemnified Party shall control
such defense.

          (iii) The Party not controlling such defense may participate therein at its own expense;
provided that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party
and the Indemnified Party have conflicting interests with respect to such action, suit, proceeding
or claim, the Indemnifying Party shall be responsible for the reasonable fees and expenses of
counsel to the Indemnified Party solely in connection therewith; provided further,
however, that in no event shall the Indemnifying Party be

40

 

responsible for the fees and expenses of more than one counsel in any one jurisdiction for all
Indemnified Parties.

          (iv) The Party controlling such defense shall keep the other Party advised of the status of
such action, suit, proceeding or claim and the defense thereof and shall consider recommendations
made by the other Party with respect thereto.

          (v) The Indemnified Party shall not agree to any settlement of such action, suit, proceeding
or claim without the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld. The Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, agree to any settlement of such claim or consent to any judgment in respect
thereof that does not include a complete and unconditional release of the Indemnified Party from
all liability with respect thereto or that imposes any liability or obligation on the Indemnified
Party.

     9.2 Choice of Law. This Agreement shall be governed by and interpreted under the laws in
effect in the State of Delaware, excluding its conflicts of laws principles.

     9.3 Notices. Any notice or report required or permitted to be given or made under this
Agreement by one of the Parties to the other shall be in writing and shall be deemed to have been
delivered upon personal delivery or (a) in the case of notices provided between Parties in the
continental United States, four (4) days after deposit in the mail or the next Business Day
following deposit with a reputable overnight courier and (b) in the case of notices provided by
telecopy (which notice shall be followed immediately by an additional notice pursuant to clause (a)
above if the notice is of a default hereunder), upon completion of transmissions to the addressee’s
telecopier, as follows (or at such other addresses or facsimile numbers as may have been furnished
in writing by one of the Parties to the other as provided in this Section 9.3):

	 	 	 
	 

	 	If to Alnylam:
	 
	 	 
	 

	 	Alnylam Pharmaceuticals, Inc.
	 

	 	300 Third Street, 3rd Floor
	 

	 	Cambridge, Massachusetts 02142
	 

	 	Attention: Vice President — Legal
	 

	 	Fax: (617) 551-8101
	 
	 	 
	 

	 	With a copy (which shall not constitute notice) to:
	 
	 	 
	 

	 	WilmerHale LLP
	 

	 	60 State Street
	 

	 	Boston, MA 02109
	 

	 	Attention: Steven D. Singer, Esq.
	 

	 	Fax: (617) 526-5000
	 
	 	 
	 

	 	If to Licensee:
	 
	 	 
	 

	 	F. Hoffmann-La Roche Ltd

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	 	Grenzacherstrasse 124
	 

	 	4070 Basel
	 

	 	Switzerland
	 

	 	Attention: Legal Department
	 

	 	Fax: 41 61 688 1396
	 
	 	 
	And:

	 	Hoffmann-La Roche Inc.
	 

	 	340 Kingsland Street
	 

	 	Nutley, New Jersey 07110
	 

	 	USA
	 

	 	Attention: Corporate Secretary
	 

	 	Fax: (973) 235-3500
	 
	 	 
	 

	 	With a copy (which shall not constitute notice) to:
	 
	 	 
	 

	 	F. Hoffmann-La Roche Ltd
	 

	 	Grenzacherstrasse 124
	 

	 	4070 Basel
	 

	 	Switzerland
	 

	 	Attention: Pharma Partnering
	 

	 	Fax: 41 61 688 7990

     9.4 Severability. If, under applicable Law any provision hereof is invalid or unenforceable,
or otherwise directly or indirectly affects the validity of any other material provision(s) of this
Agreement (“Severed Clause”), then, it is mutually agreed that this Agreement shall endure
except for the Severed Clause. The Parties shall consult and use their best efforts to agree upon
a valid and enforceable provision which shall be a reasonable substitute for such Severed Clause in
light of the intent of this Agreement.

     9.5 Interpretation. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word “will”
shall be construed to have the same meaning and effect as the word “shall.” The word “or” shall be
construed to have the same meaning and effect as “and/or.” Unless the context requires otherwise,
(a) any definition of or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein or therein), (b) any reference to any Laws herein
shall be construed as referring to such Laws as from time to time enacted, repealed or amended, (c)
any reference herein to any Person shall be construed to include the Person’s successors and
assigns, (d) the words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular provision hereof,
and (e) all references herein to Articles, Sections, Exhibits or Schedules shall be construed to
refer to Articles, Sections, Exhibits and Schedules of this Agreement. The titles and subtitles
used in this Agreement are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

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     9.6 Integration. This Agreement constitutes the entire agreement between the Parties with
respect to the within subject matter and supersedes all previous agreements, whether written or
oral; provided, that the Parties acknowledge the contemporaneous execution and
delivery of the Other Transaction Documents, which shall not be superseded by this Agreement. This
Agreement may be amended only in writing signed by properly authorized representatives of each of
the Parties.

     9.7 Independent Contractors; No Agency. Neither Party shall have any responsibility for the
hiring, firing or compensation of the other Party’s employees or for any employee benefits. No
employee or representative of a Party shall have any authority to bind or obligate the other Party
to this Agreement for any sum or in any manner whatsoever, or to create or impose any contractual
or other liability on the other Party without said Party’s written approval. For all purposes, and
notwithstanding any other provision of this Agreement to the contrary, each Party’s legal
relationship under this Agreement to the other Party shall be that of independent contractor. The
Parties agree and acknowledge that neither owes any fiduciary duties to the other.

     9.8 Assignment; Successors. Neither Alnylam nor Licensee may assign this Agreement in whole
or in part without the prior written consent of the other Party and such attempted assignment shall
be deemed null and void; provided, however, that either Party may assign this
Agreement without the prior written consent of the other Party (a) to an Affiliate of such Party,
provided that the assigning Party shall remain primarily liable hereunder for the performance of
all obligations by the assignee, or (b) to a Third Party in connection with a merger, sale or
transfer of all or substantially all of the assigning Party’s business (in the case of Licensee,
its pharmaceutical business related to RNAi technology and in the case of an assignment from
Alnylam to [**] to which this Agreement relates, provided that such assignee shall agree in writing
to be bound by the terms and conditions of this Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, all permitted successors and assigns.

     9.9 Execution in Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an
original, and all of which counterparts, taken together, shall constitute one and the same
instrument even if both Parties have not executed the same counterpart. Signatures provided by
facsimile transmission shall be deemed to be original signatures.

     9.10 Waivers. No failure on the part of Licensee or Alnylam to exercise and no delay in
exercising any right, power, remedy or privilege under this Agreement, or provided by statute or at
law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right,
power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or
privilege preclude any other or further exercise thereof or the exercise of any other right, power,
remedy or privilege.

     9.11 No Consequential or Punitive Damages. NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL,

43

 

SPECIAL, EXEMPLARY OR MULTIPLE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS
RIGHTS HEREUNDER, OR FOR LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF, OR OTHERWISE
UNDER, THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 9.11 IS
INTENDED TO LIMIT OR RESTRICT (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY WITH
RESPECT TO THIRD PARTY CLAIMS UNDER SECTION 9.1 OR (B) REMEDIES AVAILABLE TO EITHER PARTY WITH
RESPECT TO A BREACH OF ARTICLE VI.

     9.12 Actions of Affiliates. Except as set forth in Section 9.15 below, each Party shall be
liable for any failure by its Affiliates to comply with the restrictions, limitations and
obligations set forth in this Agreement. Each Party may perform its obligations hereunder
personally or through one or more Affiliates, although each Party shall nonetheless be solely
responsible for the performance of its Affiliates. Neither Party shall permit any of its
Affiliates to commit any act (including any act of omission) that such Party is prohibited
hereunder from committing directly. To the extent that the rights granted to a Party hereunder may
be and are exercised by an Affiliate of such Party, such Affiliate shall be bound by the
corresponding obligations of such Party.

     9.13 Expenses. Except as otherwise expressly set forth in this Agreement, each Party shall be
solely responsible for the expenses it incurs in connection with its performance of the activities
contemplated by this Agreement.

     9.14 No Third Party Beneficiaries. Except as expressly set forth in this Agreement, no Person
other than the Parties and their respective Affiliates and permitted assignees hereunder shall be
deemed an intended third party beneficiary hereunder or have any right to enforce any obligation of
this Agreement. Notwithstanding the foregoing, the Parties agree that UBC shall be deemed a third
party beneficiary of, and shall have the right to enforce directly against Licensee, its Affiliates
and/or Licensee Partners, certain terms of this Agreement as set forth in the UBC Sublicense
Agreement.

     9.15 Alnylam Europe AG. Solely for the limited purposes of Sections 2.1, 2.2 and 2.3 hereof,
Alnylam Europe AG shall be a party to this Agreement. Alnylam Europe AG shall have no other right
or obligation other than as set forth under the aforementioned provisions of this Agreement.

     9.16 Bankruptcy. All licenses (and to the extent applicable rights) granted under or pursuant
to this Agreement by Alnylam and its Affiliates to Licensee are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of Title 11, US Code (the “Bankruptcy Code”) licenses of rights
to “intellectual property” as defined under Section 101(60) of the Bankruptcy Code. Unless
Licensee elects to terminate this Agreement, the Parties agree that Licensee shall retain and may
fully exercise all of its rights and elections under the Bankruptcy Code, subject to the continued
performance of its obligations under this Agreement.

[Remainder of This Page Intentionally Left Blank]

44

 

     IN WITNESS WHEREOF, Alnylam, Alnylam Europe AG and Licensee have caused this License and
Collaboration Agreement to be duly executed by their authorized representatives, as of the date
first written above.

	 	 	 	 	 
	 	F. HOFFMANN-LA ROCHE LTD

 	 
	 	By:  	/s/
Nigel Sheeil	 
	 	 	Name:  	Nigel Sheeil	 
	 	 	Title:  	Vice President	 
	 
	 	Global Head Licensing
HOFFMANN-LA ROCHE INC.

 	 
	 	By:  	/s/
Warwick S. Bedwell	 
	 	 	Name:  	Warwick S. Bedwell	 
	 	 	Title:  	Vice President	 
	 
	 	Global Head of Business Development
ALNYLAM PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/
John Maraganore	 
	 	 	Name:  	John Maraganore	 
	 	 	Title:  	President & CEO	 
	 
	 	Solely for purposes of Sections 2.1, 2.2 and 2.3

hereof:

ALNYLAM EUROPE AG

 	 
	 	By:  	/s/
Kreutzer Bossko
	 
	 	 	Name:  	Kreutzer Bossko	 
	 	 	Title:  	 	 
	 

45

 

Schedule A

Primary Therapeutic Areas

Cancer: Targets principally involved in [**], excluding Targets involved in [**], including,
without limitation, [**], but excluding Targets of [**].

Hepatic:
Targets principally involved in diseases of the liver, including, without limitation, [**], but excluding
Targets of [**].

Metabolic Disease: Targets principally involved in diseases of metabolism, including, without
limitation, [**], but excluding Targets of [**].

Pulmonary Disease: Targets principally involved in diseases of the pulmonary system, including,
without limitation, [**], but excluding Targets of [**].

Page 1 of 1, Schedule A

 

Schedule B

Supplemental Therapeutic Areas

Autoimmune Disease: Targets principally involved in [**]. Such disorders include, without
limitation[**], but excluding Targets of [**].

Bacterial Infection: Targets principally involved in bacterial infection [**], including, without
limitation, Targets [**].

Cardiovascular: Targets principally involved in diseases of the heart or of the vascular system,
including, without limitation, [**], but excluding Targets of [**].

Oral: Targets principally involved in diseases of the oral cavity, including, without limitation,
[**], but excluding Targets of [**].

Dermatology: Targets principally involved in diseases of the skin, including, without limitation,
[**], but excluding Targets of [**].

Endocrine: Targets principally involved in diseases of the endocrine system, including, without
limitation, [**], but excluding [**] and excluding Targets of [**].

Ex Vivo Therapy: Genes that are targeted as part of ex vivo therapy, including, without
limitation, [**] including, without limitation, [**].

Gastrointestinal: Targets principally involved in diseases of the gastrointestinal system,
including, without limitation, [**], but excluding Targets of [**].

Genitourinary: Targets principally involved in diseases of the genitourinary system, including,
without limitation, [**], but excluding Targets of [**].

Hematology: Targets principally involved in [**], including, without limitation, [**], but
excluding Targets of [**].

Inflammatory Disease: Targets principally involved in [**]. Such disorders include, without
limitation, those [**], including [**], but excluding Targets of [**].

Musculoskeletal Disease: Targets principally involved in diseases of the muscles, ligaments or
bone, including, without limitation, [**], but excluding targets of [**].

Neurological Disease: Targets principally involved in [**], including, without limitation, [**],
but excluding those [**].

Ophthalmic Disease: Targets principally involved in diseases of the eye, including, without
limitation, [**], but excluding Targets of [**].

Parasitic Disease: Targets principally involved in parasitic [**], including, without limitation,
Targets [**].

Page 1 of 3, Schedule B

 

Renal Disease: Targets principally involved in diseases of the kidney, including, without
limitation, [**], but excluding Targets of [**].

Transplantation Medicine: Targets principally involved in [**], but excluding Targets of [**].

Viral Disease: Targets principally involved in viral [**], including, without limitation, Targets
[**].

Page 2 of 3, Schedule B

 

Schedule C

Licensed Patent Rights

[**]

 

 

Schedule C(1)

[**]

 

 

Alnylam Pharmaceutical, Inc.

Core Patents

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CaseNumber	 	InvTitle	 	 	Country	 	 	CaseType	 	 	AppNumber	 	 	FilDate	 	 	PubNumber	 	 	PubDate	 	 	PatNumber	 	 	IssDate	 	 	ApplicationStatus	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

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

[**]

A total of 5
pages have been omitted pursuant to a request for confidential
treatment.

 

 

PATENT RIGHTS CONTROLLED BY TEKMIRA (INEX) THROUGH AN OWNERSHIP INTEREST

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Inex File Number	 	Title	 	 	Serial/ Patent Numbers	 	 	Inventors	 	 	Owner	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

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

[**]

A total of 9
pages have been omitted pursuant to a request for confidential
treatment.

 

 

PATENT RIGHTS CONTROLLED BY TEKMIRA (INEX) UNDER A LICENSE FROM A THIRD PARTY

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Inex File Number	 	Title	 	 	Serial/ Patent Numbers	 	 	Inventors	 	 	Owner	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

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

[**]

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

 

 

M.I.T. Patent Rights

M.I.T. Case No. [**]

I. United States Patents and Applications

[**]

II. International (non-U.S.) Patents and Applications

[**]

M.I.T. Case No. [**]

I. United States Patents and Applications

[**]

 

 

CANCER RESEARCH/STANFORD

PATENT RIGHTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CaseNumber	 	InvTitle	 	 	Country	 	 	CaseType	 	 	AppNumber	 	 	FilDate	 	 	ApplicationStatus	 	 	PubNumber	 	 	PubDate	 	 	PatNumber	 	 	IssDate	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

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

[**]

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

 

 

Schedule C(2)

PATENTS AND PATENT APPLICATIONS LICENSED FROM ISIS PHARMACEUTICALS INC.

Schedule C(2)(a): Isis Chemistry Patents

 

 

Isis Current Chemistry Patents

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Isis
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Docket
	 	Country
	 	 	 	Patent
	 	Grant
	 	 	 	 	 	3rd
	Number
	 	Name
	 	Status
	 	Number
	 	Date
	 	Title
	 	3rd Party
	 	Party

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

[**]

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

 

 

Isis Current Chemistry Patents (June 2007 Updates)

	 	 	 	 	 	 	 	 	 	 	 
	Isis Docket	 	 	 	 	 	 	 	 	 	 
	Number
	 	Country
	 	Status
	 	Serial Number
	 	Filing Date
	 	Title
	 
	 	 
	 	 
	 	 
	 	 
	 	 

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

[**]

 

 

Isis Current Chemistry Patents (as at June 27, 2007)

	 	 	 	 	 	 	 	 	 	 	 
	Isis Docket	 	 	 	 	 	 	 	 	 	 
	Number
	 	Country
	 	Status
	 	Serial Number
	 	Filing Date
	 	Title
	 
	 	 
	 	 
	 	 
	 	 
	 	 

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

[**]

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

 

 

Schedule C(2)(b): Isis Motif and Mechanism Patents

 

 

 

 

Isis Current Motif and Mechanism Patents (June 2007 Updates)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Patent
	 	Grant
	 	 	 	3rd
	 	3rd
	Isis Docket Number
	 	Country
	 	Status
	 	Number
	 	Date
	 	Title
	 	Party
	 	Party

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

[**]

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

 

 

Isis Current Mechanism and Motif Patents (June 2007 Updates)

	 	 	 	 	 	 	 	 	 	 	 
	Isis Docket
	 	 	 	 	 	 	 	Filing	 	 
	Number
	 	Country
	 	Status
	 	Serial Number
	 	Date
	 	Title
	 
	 	 
	 	 
	 	 
	 	 
	 	 

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

[**]

 

 

Isis Future Motif and Mechanism Patents (as at June 2007)

	 	 	 	 	 	 	 	 	 	 	 
	Isis Docket
	 	 	 	 	 	 	 	Filing	 	 
	Number
	 	Country
	 	Status
	 	Serial Number
	 	Date
	 	Title
	 
	 	 
	 	 
	 	 
	 	 
	 	 

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

[**]

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

 

 

Schedule D-1

Listed Alnylam Third Party Agreements

Copies of the following agreements, some in redacted form, have been, or shall be, made available
to Licensee as of the Effective Date:

	 	1.	 	Co-Exclusive License Agreement between Max Planck Innovation GmbH (formerly
Garching Innovation GmbH) and Alnylam Pharmaceuticals, Inc., dated December 20, 2002,
as amended by Amendment dated July 2, 2003, and the Requirements Amendment effective
June 15, 2005
	 
	 	2.	 	Co-Exclusive License Agreement between Max Planck Innovation GmbH (formerly
Garching Innovation GmbH) and Alnylam Europe AG (formerly Ribopharma AG), dated July
30, 2003, as amended by the Requirements Amendment effective June 15, 2005
	 
	 	3.	 	Licence Agreement between Cancer Research Technology Ltd. and Alnylam
Pharmaceuticals, Inc., dated July 18, 2003
	 
	 	4.	 	Agreement between the Board of Trustees of the Leland Stanford Junior
University and Alnylam Pharmaceuticals, Inc., dated September 17, 2003
	 
	 	5.	 	Strategic Collaboration & License Agreement between Isis Pharmaceuticals,
Inc., and Alnylam Pharmaceuticals, Inc., dated March 11, 2004, as supplemented or
amended by letter agreements dated March 9, 2004 (as amended by letter agreement dated
October 28, 2005), March 11, 2004, and June 10, 2005
	 
	 	6.	 	Amended and Restated Exclusive Patent License Agreement between Alnylam
Pharmaceuticals, Inc. and Massachusetts Institute of Technology, dated May 9, 2007
	 
	 	7.	 	License and Collaboration Agreement between Tekmira Pharmaceuticals
Corporation (formerly INEX Pharmaceuticals Corporation) and Alnylam Pharmaceuticals,
Inc., dated January 8, 2007
	 
	 	8.	 	The Sublicense Agreement between Tekmira Pharmaceuticals Corporation
(formerly INEX Pharmaceuticals Corporation) and Alnylam Pharmaceuticals, Inc., dated
January 8, 2007

Page 1 of 1, Schedule D-1

 

Schedule D-2

Certain Alnylam Third Party Obligations

     This Schedule D-2 highlights certain obligations of, or restrictions on, Alnylam
and/or its sublicensees of Licensed Intellectual Property under Listed Alnylam Third Party
Agreements, including without limitation Listed Third Party Payment obligations, which are
applicable to Licensee under this Agreement, in each case subject to the terms and conditions of
such Listed Alnylam Third Party Agreements. The summaries set forth in this Schedule D-2
are not intended to be comprehensive or inclusive of all obligations or restrictions which may be
applicable to sublicensees of Licensed Intellectual Property under such Listed Alnylam Third Party
Agreements.

     Unless otherwise expressly stated, capitalized terms not otherwise defined in this
Schedule D-2 shall have the meanings ascribed to them in the applicable Listed Alnylam
Third Party Agreement, and references to sections, articles, schedules or exhibits made in this
Schedule D-2 shall be to sections, articles, schedules or exhibits, as the case may be, in
or to such applicable Listed Alnylam Third Party Agreement.

Page 1 of 37, Schedule D-2

 

MAX PLANCK (US)

	1.	 	Co-Exclusive License Agreement between Max Planck Innovation (formerly Garching Innovation
GmbH) (“Max Planck”) and Alnylam Pharmaceuticals, Inc. (“Alnylam”), dated
December 20, 2002, as amended by Amendment dated July 2, 2003 and the Requirement Amendment
(“Requirement Amendment”) effective June 15, 2005 (as amended, “Max Planck US
License Agreement”)

Limitations on License Grant (Section 2.1)

	•	 	Alnylam’s co-exclusive license is limited to a
license to develop, make, have made, use, sell
and import Licensed Products in the Field.

	•	 	Owners retain the right to practice under the
Patent Rights for research, teaching, education,
non-commercial collaboration and publication
purposes. The German and the U.S. federal
government retain a royalty-free, non-exclusive,
non-transferable license to practice any
government-funded invention claimed in any Patent
Rights for government purposes.

Certain Sublicense Terms (Sections 2.4 and 11.8)

	•	 	Immediately after the signature of each
sublicense granted under the Max Planck US
License Agreement, Alnylam is required to provide
Max Planck with a copy of the signed sublicense
agreement.

	•	 	Sublicensees are required to perform their
sublicense agreement in accordance with the Max
Planck US License Agreement. If Max Planck
determines that Alnylam or any of its
Sublicencees has failed to fulfill any of its
obligations under Section 4 (including without
limitation diligence and reporting obligations),
then Max Planck may treat such failure as a
material breach in accordance with Section 11.7.

	•	 	In the event that any license granted to Alnylam
under the Max Planck US License Agreement is
terminated, any sublicense under such license
granted prior to termination of said license
shall remain in full force and effect, provided
that (i) the Sublicensee is not then in breach of
its sublicense agreement; and (ii) the
Sublicensee agrees to be bound to Max Planck as
licensor under the terms and conditions of the
sublicense agreement, provided that Max Planck
shall have no other obligation than to leave the
sublicense granted by Alnylam in place.

Diligence and Reporting (Sections 4.1 and 4.2; Sections 1 and 3 of Requirement Amendment)

	•	 	Sublicensees are required to use commercially reasonable efforts
to develop and to introduce into the commercial market Licensed
Products at the earliest practical date.

Page 2 of 37, Schedule D-2

 

	•	 	Sublicensees are required to furnish information to Alnylam for
inclusion in its reports to Max Planck, which reports are due
within 30 days after the end of each calendar quarter with
Alnylam’s standard R&D report, on the progress of its efforts
during the immediately preceding calendar quarter to develop and
commercialize Licensed Products for each indication and
sub-indication within the Field. The report shall also contain a
discussion of intended R&D efforts for the calendar quarter in
which the report is submitted.

	•	 	Under the Requirement Amendment, Alnylam is required to comply
with certain operational and reporting obligations relating to
Alnylam Europe AG.

Royalty Payment Obligation (Sections 5.2 and 5.3)

	•	 	The following running royalties are payable to
Max Planck on Net Sales of therapeutic and
prophylactic Licensed Products by Alnylam and
its Sublicensees:

	 	(i)	 	[**]% ([**] percent) of the first US$[**] US Dollars) of annual accumulated
Net Sales of all Licensed Products;
	 
	 	(ii)	 	[**]% ([**] percent) of annual accumulated Net Sales of all Licensed Products
between US$[**] US Dollars) and US$[**] US Dollars);
	 
	 	(iii)	 	[**]% ([**] percent) of annual accumulated Net Sales of all Licensed
Products between US$[**] US Dollars) and US$[**] US Dollars);
	 
	 	(iv)	 	[**]% ([**] percent) of annual accumulated Net Sales of all Licensed Products
between US$[**] US Dollars) and US$[**] US Dollars);
	 
	 	(v)	 	[**]% ([**] percent) of annual accumulated Net Sales of all Licensed Products
between US$[**] US Dollars) and US$[**] US Dollars); and
	 
	 	(vi)	 	[**]% ([**] percent) of annual accumulated Net Sales of all Licensed
Products above US$[**] US Dollars).

	•	 	If the sale of any Licensed Product is covered by more than one of
the Patent Rights, multiple royalties shall not be due.

	•	 	Non-cash consideration shall not be accepted by any Sublicensee
for Licensed Products without the prior written consent of Max
Planck.

	•	 	In the event any Sublicensee takes, for objective commercial
and/or legal reasons, a license from any third party under any
patent applications or patents that dominate the Patent Rights or
is dominated by the Patent Rights in order to develop, make, use,
sell or import any Licensed Product (explicitly excluding, without
limitation, any third party patents and patent applications for
formulation, stabilization and delivery), then up to [**]% of any
additional running royalties to be paid to such third party may be
deducted, up to [**]% ([**] percent) of the running royalties
stated in Section 5.2, from the date such running royalties must

Page 3 of 37, Schedule D-2

 

	 	 	be paid to such third party. However, the running royalties stated in Section
5.2 shall not be reduced to less than a minimum of [**]% ([**] percent) of Net
Sales in any case. For avoidance of doubt, if a Sublicensee takes a license to
a third party target, in no event is a deduction allowed on any license fees
for such target from running royalties due to Max Planck under the Max Planck
US License Agreement.

	•	 	If (i) Sublicensees sell a Licensed Product in a
country where no Patent Rights are issued and no
patent applications that are part of the Patent
Rights are pending that have not been pending
for less than [**] years after filing national
patent applications in the country in question,
and (ii) such Licensed Product is manufactured
in a country where Patent Rights are issued or
patent applications that are part of the Patent
Rights are pending that have not been pending
for more than [**] years after filing national
patent applications in the country in question,
the royalties stated in Section 5.2 will be
reduced by [**]% ([**] percent) for such
Licensed Product, until the expiration or
abandonment of all issued patents and filed
patent applications within the Patent Rights in
the country in which the Licensed Product is
manufactured.

Royalty Payment and Reports (Sections 5.4 and 5.5)

	•	 	Within 30 days after the end of each calendar
half year, Alnylam is required to deliver a
detailed report to Max Planck for the
immediately preceding calendar half year showing
at least (i) the number of Licensed Products
sold by Alnylam and its Sublicensees in each
country, (ii) the gross price charged by Alnylam
and its Sublicensees for each Licensed Products
in each country, (iii) the calculation of Net
Sales, and (iv) the resulting running royalties
due to Max Planck according to those figures.
If no running royalties are due to Max Planck,
the report shall so state.

	•	 	Running royalties shall be payable for each
calendar half year, and shall be due to Max
Planck within 60 days after the end of each
calendar half year.

Bookkeeping and Auditing (Sections 5.6 and 5.7)

	•	 	Sublicensees are obliged to keep complete and
accurate books on any reports and payments due to
Max Planck under the Max Planck US License
Agreement, which books shall contain sufficient
information to permit Max Planck to confirm the
accuracy of any reports and payments made to Max
Planck. Upon Max Planck’s request, Alnylam, or
agents appointed by Max Planck for Alnylam, shall
check the books of its Sublicensees for Max
Planck, once a year. This right of auditing by
Max Planck shall expire five years after each
report or payment has been made. Alnylam shall
have the right to check the books of its
Sublicensees according to Section 5.6. All
payments made by Sublicensees under the Max
Planck US License Agreement are nonrefundable and
noncreditable against each other.

Page 4 of 37, Schedule D-2

 

Compliance with Laws (Section 10.1)

	•	 	Alnylam is required to use commercially
reasonable efforts to comply with all local,
state, federal, and international laws and
regulations relating to the development,
manufacture, use and sale of Licensed Products.

Non-Use of Owners Names (Section 10.2)

	•	 	Sublicensees are prohibited from using the name
of “Massachusetts Institute of Technology”,
“University of Massachusetts”, “Whitehead
Institute”, “Max Planck Institute”, “Max Planck
Society”, “Garching Innovation” or any variation,
adaptation, or abbreviation thereof, or of any of
its trustees, officers, faculty, students,
employees, or agents, or any trademark owned by
any of the Owners, in any promotional material or
other public announcement or disclosure without
the prior written consent of the Owners or in the
case of an individual, the consent of that
individual.

Termination for Patent Challenge (Section 11.5)

	•	 	To the extent legally enforceable, if any
Sublicensee attacks, or has attacked or supports
an attack through a third party, the validity of
any of the Patent Rights, Alnylam shall have the
right to terminate the sublicense agreement
immediately; upon request of Max Planck, Alnylam
shall have the obligation to terminate such
sublicense agreement.

Page 5 of 37, Schedule D-2

 

MAX PLANCK (EUROPEAN)

	2.	 	Co-Exclusive License Agreement between Max Planck and Alnylam Europe AG (formerly Ribopharma
AG), dated July 30, 2003, as amended by the Requirement Amendment effective June 15, 2005 (as
amended, “Max Planck European License Agreement”)

Limitations on License Grant (Sections 2.1 and 11.9)

	•	 	Alnylam Europe AG’s co-exclusive license is
limited to a license to develop, make, have
made, use, sell and import Licensed Products in
the Field.

	•	 	The Approving Owners retain the right to
practice under the Patent Rights for research,
teaching, education, non-commercial
collaboration and publication purposes. The
German and the U.S. federal government retain a
royalty-free, non-exclusive, non-transferable
license to practice any government-funded
invention claimed in any Patent Rights for
government purposes.

	•	 	In countries where it is legally impossible to
grant license to jointly owned patent rights
without the approval of all joint owners,
Max-Planck-Gesellschaft zur Foerderung der
Wissenschaften e.V. (“Max Planck Gesellschaft”)
has agreed to partially assign its ownership
position in the Joint Patent Rights in such
countries to Alnylam Europe AG, restricted to
develop, make, have made, use, sell and import
Licensed Products in the Field, whereby Alnylam
Europe AG is allowed to further assign such
ownership position, restricted to develop,
make, have made, use, sell and import Licensed
Products in the Field in such countries to
Third Parties and Sublicensees only with the
prior written approval of Max Planck (formerly
Garching Innovation GmbH), which shall not
unreasonably be withheld. In any event, the
ownership position assigned to Alnylam Europe
AG and, as the case may be, sub-assigned by
Alnylam Europe AG to its assignees, shall
entitle neither Alnylam Europe AG nor its
assignees to any actions, claims or anything
which exceed the rights granted to them under
the Patent Rights by the Max Planck European
License Agreement.

	•	 	If Max Planck Gesellschaft has partially
assigned its ownership position in the Joint
Patent Rights in certain countries to Alnylam
Europe AG according to Section 2.1, Alnylam
Europe AG is obligated to cost-free re-assign
such ownership position in such countries to
Max Planck Gesellschaft on or before the
effective date of termination of the Max Planck
European License Agreement. In the event that
Alnylam Europe AG has further assigned its
ownership position in certain countries in
accordance with Section 2.1, such further
assignment shall remain in full force and
effect, provided that (a) the sub-assignee is
not then in breach of its sub-assignment
agreement; and (b) the sub-assignee agrees to
be bound to Max Planck as assignor under the
terms and conditions of the sub-assignment
agreement, provided that Max Planck shall have
no other obligation than to leave the
sub-assignment granted by Alnylam Europe AG in
place.

Page 6 of 37, Schedule D-2

 

Royalty Payment Obligation (Section 5.2 and 5.3)

	•	 	The same royalty rates and substantially
similar deductions apply with respect to Net
Sales of Licensed Products as those set forth
under the Max Planck US License Agreement.
Alnylam or Alnylam Europe AG shall only pay
royalties on sales of such Licensed Products to
a Third Party.

	•	 	Notwithstanding the foregoing, in no event
shall royalties be due under both the Max
Planck European License Agreement and the Max
Planck US License Agreement on the Net Sale of
a particular Licensed Product.

Other Obligations and Restrictions

	•	 	Other obligations and restrictions under the
Max Planck European License Agreement are
substantially similar to those set forth in the
summary above with respect to the Max Planck US
License Agreement.

	•	 	Section 12.7 states that in the event of any
discrepancies between the Max Planck European
License Agreement and Max Planck US License
Agreement due to the fact that the Max Planck
US License Agreement does not reflect, among
other things, that UMASS’ ownership position in
the Joint Patent Rights is excluded from the
Joint Patent Rights with respect to the Max
Planck US License Agreement and the Max Planck
European License Agreement, the Max Planck
European License Agreement shall prevail.

Page 7 of 37, Schedule D-2

 

CANCER RESEARCH TECHNOLOGY

	3.	 	Licence Agreement between Cancer Research Technology Ltd. (“CRT”) and Alnylam, dated
July 18, 2003 (“CRT Agreement”)

Limitations on License Grants (Sections 2.1 and 2.3)

	•	 	Alnylam’s license is limited to the Field under
the CRT Patent Rights to research, develop,
have developed, use, keep, make, have made,
import, have imported, sell, have sold and
otherwise dispose of Licensed Products. Except
as necessary for the development and/or sale of
Licensed Products in the Field, Alnylam does
not have rights to make use of the CRT Patent
Rights for any diagnostic application, as
research tools or reagents, for target
validation, or for small molecule drug
discovery.

	•	 	CRT and Cancer Research UK shall have the right
to use, and CRT shall have the right to consent
to the use by academic research institutions
(including for the sake of clarity those in
receipt of Cancer Research UK funding) of, the
CRT Patent Rights in the Field for internal, or
in collaboration with another academic research
institution, non-commercial, non-commercially
sponsored research. For the sake of clarity,
Cancer Research UK-funded Researchers shall be
permitted under the CRT Patent Rights to
conduct clinical trials of potential dsRNA
therapeutic agents as part of their Cancer
Research UK-funded academic research.

Certain Sublicense Terms (Section 2.4)

	•	 	Any Sub-license entered into by Alnylam must be
limited to the Field and contain restrictions
in equivalent terms to those set out in Clause
2.1.

	•	 	Any Sub-license shall terminate automatically
on the expiry or termination for whatever
reason of the CRT Agreement. If the CRT
Agreement is terminated pursuant to Clause 10,
CRT has agreed to enter into a direct licensing
arrangement with any Sub-licensee on terms
substantially similar to those contained in the
CRT Agreement save that any license granted by
CRT to any Sub-licensee shall be consistent
with the terms of the Sub-license granted by
Alnylam (or its Affiliate) in relation to
field, territory, exclusivity, rights to
sub-license and payment provisions. However,
if the CRT Agreement is terminated by Alnylam
pursuant to Clause 10.2, the foregoing shall
apply save that the granting of such license by
CRT shall be subject to CRT’s consent. Nothing
in Clause 2.4 shall confer upon CRT any
obligation to enter into a direct licensing
arrangement with the Sub-licensee where the
Sub-licensee is in default of its obligations
under the Sub-license. CRT shall not be
expected to take any responsibility for any
disputes between Alnylam (or its Affiliate) and
its Sub-licensees relating to the terms of the
Sub-license(s) and notwithstanding the
foregoing, CRT shall not be obliged to enter
into a direct license with a Sub-licensee in
circumstances in which the Sub-licensee
reserves any right to maintain a claim against
CRT where such claim was previously maintained
against

Page 8 of 37, Schedule D-2

 

	 	 	Alnylam (or its Affiliate).
	 
	 	 	Sublicensees are required to undertake to CRT directly to allow the same access
to the books and records as CRT has to Alnylam’s books and records under the
CRT Agreement.

	•	 	Sublicensees are restricted with respect to
rights to assign in equivalent terms to those
set out in Clause 15 and any further
sublicensing must be subject to the terms of
Clause 2.4.

Royalty Payment Obligation (Sections 3.2.1 and 3.3)

	•	 	Royalties of [**]% of Net Sales of Royalty
Licensed Products in the Field are payable to
CRT.

	•	 	If at any time prior to or during the period
for the payment of royalties under the CRT
Agreement in relation to any particular
territory, a Sub-licensee elects in its
reasonable opinion to take a license from a
Third Party to any Blocking IP to develop,
make, sell, or otherwise dispose of Licensed
Products, the royalties set forth in Clause
3.2.1 shall be reduced by [**]% of the amount
paid to such Third Party to access said
Blocking IP. In no event shall the royalty
payable to CRT be reduced below [**]%.

Royalty Reports and Payment (Sections 4.2.1 and 5.1)

	•	 	Royalty payments are required to be made to CRT
within 30 days of the end of the Quarter in
which sales of the relevant Licensed Products
took place.

	•	 	Following the earlier of first commercial sale
of a Licensed Product in the Field by Alnylam
or its Affiliate or the grant of a Sub-license,
Alnylam is required to prepare an annual
statement showing all monies due to CRT under
the CRT Agreement for the previous calendar
year, on a country by country basis. The
statement shall include the number of units of
each Royalty Licensed Product sold in each
country in which sales occurred, and shall be
submitted to CRT within 60 Business Days of
March 31st of each year. If CRT gives notice
pursuant to the CRT Agreement that it does not
accept the statement, Alnylam shall make
available to an independent accountant all
books and records required for the purpose of
certifying such statement.

Books and Records (Section 5.2)

	•	 	Sub-licensees are required to keep true and
accurate records and books of account
containing all data necessary for calculating
amounts payable to CRT. Such records and books
of account shall be kept for 5 years following
the end of the calendar year to which they
relate, and shall, upon reasonable notice
having been given by CRT, be open at all
reasonable times on Business Days for
inspection by an independent firm of
accountants.

Page 9 of 37, Schedule D-2

 

Diligence and Reporting (Article 6)

	•	 	Alnylam shall use reasonable efforts to
develop, make, market, sell, and otherwise
dispose of Licensed Products in all therapeutic
areas within the Field and market each Licensed
Product in the Field throughout the United
States, Europe and Japan.

	•	 	If CRT believes that Alnylam has failed to meet
the diligence requirements set forth in Clause
6, but Alnylam fails to reestablish diligence
within [**] of receipt of notice from CRT,
CRT’s remedy is limited to, at CRT’s
discretion, termination of Alnylam’s license
under the CRT Patent Rights in the particular
territory or therapeutic area or, with respect
to Clause 6.2, indication within the cancer
therapeutic area for which Alnylam has failed
to meet the diligence requirements. For the
sake of clarity, should Alnylam’s license be
terminated in respect of a therapeutic area or
territory pursuant to Clause 6.3, CRT shall be
free to offer such therapeutic area or
territory to a potential licensee.

	•	 	Within 30 days of the end of each Year, Alnylam
shall provide CRT with a written report of the
steps taken by Alnylam, its Affiliates and
Sub-licensees to comply with the performance
obligations of Clause 6.1 and Clause 6.2.
Alnylam’s annual statement shall also include a
detailed description of therapeutic areas and
territories under development and an overview
of Alnylam’s development plans for the
forthcoming year (itself or through Affiliates
or Sub-licensees).

	•	 	If Alnylam intends to undertake a Phase I
Clinical Trial of any Licensed Product in the
UK, Alnylam shall, at its option, notify CRT
with the particulars of the proposed
investigation, and allow Cancer Research UK the
opportunity of conducting or procuring the
conduct of the investigation on behalf of
Alnylam or participate in such an
investigation, subject to the agreement of
terms acceptable to Alnylam, CRT and Cancer
Research UK.

Claimed Infringement (Sections 7.4 and 7.5)

	•	 	Alnylam shall, at its option and at its own
cost, defend and enforce or shall procure the
defence or enforcement of the rights under the
CRT Patent Rights. If Alnylam opts not to
defend or enforce the relevant CRT Patent
Rights, Alnylam shall grant to CRT (if CRT so
requests) any and all rights that would be
necessary for CRT to undertake the enforcement
or defence. If Alnylam is unable to grant such
rights, then it shall, at CRT’s request, grant
to CRT the right to conduct such an action in
its name. Alnylam shall provide, at CRT’s
request and CRT’s reasonable expense, such
reasonable assistance as CRT may reasonably
request in any such proceedings.

Page 10 of 37, Schedule D-2

 

Limitation of Liability (Section 8.6)

	•	 	It is agreed that CRT shall not be liable to
Alnylam’s Sub-licensees in contract, tort,
negligence, breach of statutory duty or
otherwise for any loss, damage, cost or expense
of an indirect or consequential nature
(including any economic loss or other loss of
turnover, profits, business or goodwill)
arising out of or in connection with the CRT
Agreement or the subject matter thereof.

Termination for Patent Challenge (Section 10.5)

	•	 	CRT may terminate the CRT Agreement upon 30
days’ written notice to Alnylam if Alnylam or
its Affiliate commences legal proceedings, with
the exception of interference proceedings
declared by the USPTO or any other patent
office, contesting the validity of the CRT
Patent Rights; or commences itself, or provides
any material assistance to a Third Party in
relation to, legal proceedings contesting the
ownership of the CRT Patent Rights. Any
actions taken concerning determination of
priority of invention under US patent law
between a CRT Patent Right and claims in a
patent or patent application which is owned by
or licensed by Alnylam or its Affiliate shall
not be considered a contest of validity or
ownership under Clause 10.5.

Page 11 of 37, Schedule D-2

 

STANFORD

	4.	 	Agreement between the Board of Trustees of the Leland Stanford Junior University
(“Stanford”) and Alnylam, dated September 17, 2003 (“Stanford Agreement”)

Limitations on License Grant (Articles 3 and 4)

	•	 	Alnylam’s license is limited to a license in the
Licensed Field of Use to make, have made, use,
have used, sell, have sold, import, and have
imported Licensed Product in the Licensed
Territory.
	 
	•	 	Stanford may practice the Invention and use the
Technology for its own bona fide research,
including sponsored research and collaborations.
Stanford has the right to publish any information
included in Technology and Licensed Patents.
	 
	•	 	The Stanford Agreement is subject to all of the
terms and conditions of Title 25 USC 200-204,
including an obligation that Licensed Product
sold or produced in the U.S. be “manufactured
substantially in the U.S.” Alnylam shall take
all reasonable action necessary on its part as
licensee to enable Stanford to satisfy its
obligations to the U.S. Government under Title
35.

Diligence and Reporting (Article 5)

	•	 	Alnylam is required to use all commercially
reasonable efforts and diligence to develop,
manufacture, and sell or lease Licensed Product
and to diligently develop markets for the
Licensed Product. In particular, Alnylam is
required to meet the milestones shown in Appendix
A to the Stanford Agreement, which shall satisfy
Alnylam’s diligence obligations. If Alnylam in
good faith fails to meet a milestone set forth on
Appendix A, and Alnylam fails to reestablish
diligence within [**], Stanford may terminate the
Stanford Agreement.
	 
	•	 	Stanford may terminate the Stanford Agreement if
Alnylam or a sublicensee has not sold Licensed
Product for any [**] period after Alnylam’s or a
sublicensee’s first commercial sale of Licensed
Product.
	 
	•	 	On or before September 30 of each year until
Alnylam markets a Licensed Product, Alnylam is
required to make a written annual report covering
the preceding year ending June 30, regarding
progress toward commercialization of Licensed
Product. The report must include, as a minimum,
information (e.g., summary of work completed, key
scientific discoveries, summary of work in
progress, current schedule of anticipated events
or milestones and market plans for introduction
of Licensed Product) sufficient to enable
Stanford to satisfy reporting requirements of the
U.S. Government, and for Stanford to ascertain
progress by Alnylam toward meeting the diligence
requirements of Article 5.

Page 12 of 37, Schedule D-2

 

Royalty Payment Obligation (Article 6)

	•	 	On each anniversary of the Effective Date, a
minimum yearly royalty of $[**]must be paid to
Stanford, which payments are non-refundable but
creditable against earned royalties to the extent
provided in Section 6.4.
	 
	•	 	Earned royalties of [**]% of Net Sales for
Licensed Product are payable to Stanford, subject
to the following:

	 	(i)	 	Royalty Payments are reduced up to [**]% (from [**]% of Net Sales down to
[**]% of Net Sales) by the amount of royalty paid to access additional intellectual
property necessary in order to sell Licensed Products (“Additional Earned
Royalties”).
	 
	 	(ii)	 	Such royalty payments shall be reduced as follows:

	 	(1)	 	[**]% if Additional Earned Royalties are [**]% or less.
	 
	 	(2)	 	[**]% if Additional Earned Royalties are greater than [**]%
but less than [**]%.
	 
	 	(3)	 	[**]% if Additional Earned Royalties are equal to or greater
than [**]% but less than [**]%.
	 
	 	(4)	 	[**]% if Additional Earned Royalties are equal to or greater
than [**]% but less than [**]%.
	 
	 	(5)	 	[**]% if Additional Earned Royalties are equal to or higher
than [**]%.

	 	(iii)	 	Only one royalty is due on each Licensed Product, regardless of whether its
manufacture, use, importation, or sale is covered by more than one patent or patent
application included in Licensed Patents, and no further royalties will be due for use
of such Licensed Product by Alnylam or its sublicensee’s customers.

	•	 	Creditable payments under the Stanford Agreement
will be an offset against each earned royalty
payment which is required to be paid under Section
6.3 until the entire credit is exhausted.
	 
	•	 	If the Stanford Agreement is not terminated in
accordance with other provisions, royalties must
continue to be paid on all Licensed Products that
are either sold or produced under the license
granted in Article 3, whether or not such Licensed
Products are produced before the Effective Date or
sold after the Licensed Patents have expired.

Page 13 of 37, Schedule D-2

 

Certain Sublicense Terms (Sections 13.3-13.5)

	•	 	Any sublicense granted by Alnylam under the
Stanford Agreement must be subject and subordinate
to the terms and conditions of the Stanford
Agreement.
	 
	•	 	Sublicensees may not further sublicense, except
that Sublicensees may further sublicense rights
under Licensed Patents only as needed or implied
in the course of distribution or performance of
service as required for the sale to an end user of
Licensed Products.
	 
	•	 	Any sublicense will expressly include the
provisions of Articles 7, 8 and 9 for the benefit
of Stanford.
	 
	•	 	If a sublicensee desires that its sublicense
survive the termination of the Stanford Agreement,
Stanford has agreed that the sublicense will
revert to Stanford subject to the transfer of all
obligations, including the payment of royalties
specified in the sublicense, to Stanford or its
designee, if the Stanford Agreement is terminated.
	 
	•	 	Alnylam will provide Stanford in confidence a copy
of all relevant portions of any sublicenses
granted pursuant to Article 13.

Royalty Reports, Payments, and Accounting (Article 7)

	•	 	Beginning with the first sale of a Licensed
Product, Alnylam is required to make written
reports (even if there are no sales) and
earned royalty payments within 30 days after
the end of each calendar quarter. The report
must be in the form of Appendix B to the
Stanford Agreement and state the number,
description, and aggregate Net Sales of
Licensed Product during the completed calendar
quarter, and calculation of earned royalty
payment due. With each report, royalty
payments due for the completed calendar
quarter must be paid.
	 
	•	 	A written report is due within 90 days after
the license expires under Section 3.2.
Alnylam is required to continue to make
reports after the license has expired, until
all Licensed Product produced have been sold
or destroyed. Royalty payments must also
continue to be made, concurrent with the
submittal of each post-termination report.
	 
	•	 	Records must be kept and maintained for 3
years showing the manufacture, sale, use, and
other disposition of products sold or
otherwise disposed of under the license,
including general-ledger records of cash
receipts and expenses, as well as other
information sufficient to determine royalties
due, including production records, customers,
and serial numbers, and related information in
sufficient detail to enable Alnylam to
determine the royalties payable under the
Stanford Agreement.

Page 14 of 37, Schedule D-2

 

	•	 	An independent certified public accountant
selected by Stanford and acceptable to Alnylam
is permitted to examine such books and records
from time to time (but no more than once a
year) to the extent necessary to verify the
royalty and termination reports as detailed in
the Stanford Agreement.

Negation of Warranties (Article 8)

	•	 	Stanford has represented and warranted to
Alnylam that, to the best of Stanford’s OTL
knowledge, Stanford is the sole owner of
Stanford Licensed Patents and has the right to
enter into the Stanford Agreement and to grant
the rights and licenses set forth therein.
	 
	•	 	Notwithstanding the foregoing, nothing in the
Stanford Agreement or any sublicense agreement
shall be construed as:

(i) Stanford’s warranty or representation as to the validity or scope of any Licensed
Patent;

(ii) A warranty or representation that anything made, used, sold, or otherwise disposed of
under any license granted under the Stanford Agreement or any sublicense agreement is or
will be free from infringement of patents, copyrights, and other rights of third parties;

(iii) An obligation to bring suit against third parties for infringement, except as
described in Article 12 of the Stanford Agreement;

(iv) Granting by implication, estoppel, or otherwise any licenses or rights under patents
or other rights of Stanford or other persons other than Licensed Patents, regardless of
whether the patents or other rights are dominant or subordinate to any Licensed Patents; or

(v) An obligation to furnish any technology or technological information.

Except as expressly set forth in the Stanford Agreement, it is acknowledged and agreed that
Stanford makes no representations and extends no warranties of any kind, either express or
implied. There are no express or implied warranties of merchantability or fitness for a
particular purpose, or that Licensed Products will not infringe any patent, copyright,
trademark, or other rights, or any other express or implied warranties.

	•	 	Nothing in the Stanford Agreement or any sublicense
agreement grants any sublicensee any express or
implied license or right under or to U.S. Patent
4,656,134 entitled “Amplification of Eucaryotic
Genes” or any patent application corresponding
thereto.

Page 15 of 37, Schedule D-2

 

Indemnification and Insurance (Article 9)

	•	 	Alnylam is required to indemnify, hold harmless,
and defend Stanford and Stanford Hospitals and
Clinics, and their respective trustees, officers,
employees, students, and agents against all claims
for death, illness, personal injury, property
damage, and improper business practices arising out
of the manufacture, use, sale, or other disposition
of Invention, Licensed Patents, Licensed Products,
by Alnylam or any sublicensee, or their customers
except to the extent such claims are due to the
gross negligence or willful misconduct of Stanford.
Upon notification to Alnylam in writing of any
such claim, Alnylam shall manage and control, at
its own expense, the defense of such claim and its
settlement. Alnylam agrees not to settle any such
claim against Stanford without Stanford’s written
consent where such settlement would include any
admission of liability on the part of Stanford,
where the settlement would impose any restriction
on the conduct by Stanford of any of its
activities, or where the settlement would not
include an unconditional release of Stanford from
all liability for claims that are the subject
matter of such claim.
	 
	•	 	Subject to Section 9.1, neither Stanford nor
Alnylam shall be liable to each other for any loss
profit, expectation, punitive or other indirect,
special, consequential, or other damages
whatsoever, in connection with any claim arising
out of or related to the Stanford Agreement whether
grounded in tort (including negligence), strict
liability, contract, or otherwise.
	 
	•	 	Alnylam shall at all times comply, through
insurance or self-insurance, with all statutory
workers’ compensation and employers’ liability
requirements covering all employees with respect to
activities performed under the Stanford Agreement.
	 
	•	 	Alnylam shall maintain, during the term of the
Stanford Agreement, Comprehensive General Liability
Insurance, including Product Liability Insurance
prior to commercialization, with a reputable and
financially secure insurance carrier to cover the
activities of Alnylam and its sublicensees. Upon
initiation of human clinical trials of any Licensed
Product, such insurance will provide minimum limits
of liability of Five Million Dollars and will
include Stanford and Stanford Hospitals and
Clinics, and their respective trustees, directors,
officers, employees, students, and agents as
additional insureds. Insurance will be written to
cover claims incurred, discovered, manifested, or
made during or after the expiration of the Stanford
Agreement and must be placed with carriers with
ratings of at least A- as rated by A.M. Best.
Alnylam will furnish a Certificate of Insurance
evidencing primary coverage and additional insured
requirements and requiring thirty (30) days prior
written notice of cancellation or material change
to Stanford. Alnylam will advise Stanford, in
writing, that it maintains excess liability
coverage (following form) over primary insurance
for at least the minimum limits set forth above.
All insurance of Alnylam will be primary coverage;
insurance of Stanford and Stanford Hospitals and
Clinics will be excess and noncontributory.

Page 16 of 37, Schedule D-2

 

Marking (Article 10)

	•	 	Before the issuance of Licensed Patents, Licensed
Products made, sold, or otherwise disposed of under
the license grant must be marked with the words
“Patent Pending,” and following the issuance of one
or more patents, with the numbers of the Licensed
Patents.

Use of Stanford Names and Marks (Article 11)

	•	 	Stanford’s prior written consent is required for
the use of its name or the names of faculty,
students, employees or, or any trademark, service
mark, trade name, or symbol of Stanford or Stanford
Hospitals and Clinics, or any that is associated
with any of them. Any use of Stanford’s name will
be limited to statements of fact and will not imply
endorsement of Alnylam’s products or services.

Page 17 of 37, Schedule D-2

 

ISIS

	5.	 	Strategic Collaboration & License Agreement between Isis Pharmaceuticals, Inc.
(“Isis”), and Alnylam, dated March 11, 2004, as supplemented or amended by letter
agreements dated March 9, 2004 (as amended by letter agreement dated October 28, 2005), March
11, 2004, and June 10, 2005 (as amended, “Isis Agreement”)

Limitations on License Grant (Section 5.1)

	•	 	Alnylam’s licenses are limited to a license to research, develop, make, have made, use, import, offer to
sell and sell Double Stranded RNA and Double Stranded RNA Products.
	 
	•	 	The license excludes any right to practice the Isis Excluded Technology.
	 
	•	 	Isis retains its rights in the Isis Patent Rights and in the Joint Patents (x) exclusively for the Isis
Exclusive Targets and (y) exclusively for the Isis Encumbered Targets.
	 
	•	 	Licenses to Isis Patent Rights that are joint patents with Third Parties (i.e., invented by one or more
Isis inventors and one or more non-Isis inventors) are licensed subject to the retained rights of any
non-Isis inventors and their assignees and licensees. Any such retained rights of non-Isis inventors and
their assignees and licensees existing as of the Effective Date are set forth in Exhibit 5.3(c) attached
to the Addendum Transmittal to the Isis Agreement.
	 
	•	 	Licenses to Isis Patent Rights that are subject to contractual obligations between Isis and Third Parties
in effect as of the Effective Date are licensed subject to the restrictions and other terms described in
Exhibit 5.3(d) attached to the Addendum Transmittal to the Isis Agreement.
	 
	•	 	The license to Licensed Know-How under the Isis Agreement is subject to the non-disclosure obligations
set forth in Article 12 of the Isis Agreement.

Certain Sublicense Terms (Sections 5.2, 5.3 and 14.4)

	•	 	Alnylam cannot sublicense its right to grant
Naked Sublicenses under the Isis Agreement
except that Alnylam may permit its
sublicensees to grant further sublicenses in
connection with an Alnylam Product.
	 
	•	 	The rights of any sublicensee under any
permitted sublicense granted in accordance
with Section 5.2 will survive the termination
of the Isis Agreement.

Royalty Payment Obligations (Section 7.2)

	•	 	Royalties are payable to Isis on sales of Alnylam
Products, equal to [**]% of Net Sales.

Page 18 of 37, Schedule D-2

 

	•	 	The royalty may be reduced by [**]% of any
additional royalties that Alnylam owes to Third
Parties on such Alnylam Product that arise from
Alnylam acquiring access to new technologies after
the Effective Date (as defined in the Isis
Agreement); provided, however that (a) the royalty
due under this section can never be less than a
floor of [**]% and (b) additional royalties arising
as the result of the addition, pursuant to Section
11.8, of Isis Future Chemistry Patents or Isis
Future Motif and Mechanism Patents to the Isis
Patent Rights licensed to Alnylam cannot be used to
reduce the royalty.

Payment Terms (Section 9.1)

	•	 	Royalties payable under the Isis Agreement are
payable on a quarterly basis within 45 days after
the end of each calendar quarter. Alnylam is
required to provide Isis with a report setting forth
(i) gross sales of Alnylam Products by Alnylam, its
Affiliates and sublicensees, (ii) all deductions
from such gross sales taken in calculating Net
Sales, (iii) Net Sales of Alnylam Products by
Alnylam, its Affiliates and sublicensees, (iv)
royalties payable based on such Net Sales and (v)
all other information relevant to the calculation of
such royalties, on a product-by-product and
country-by-country basis, for each calendar quarter
within [**] after the end of such calendar quarter.

Page 19 of 37, Schedule D-2

 

MIT

	6.	 	Amended and Restated Exclusive Patent License Agreement between Massachusetts Institute of
Technology (“MIT”) and Alnylam, dated May 9, 2007 (“MIT Agreement”)

Limitations on License Grant (Sections 2.1 and 2.5)

	•	 	Alnylam’s license is limited to a license to
develop, make, have made, use and import
Library Products and Licensed Processes to
develop, make, have made, use, sell, offer to
sell, lease, and import Licensed Products in
the Field in the Territory and to develop and
perform Licensed Processes in the Field in the
Territory.
	 
	•	 	Alnylam may permit third parties (i) to use
Library Products and Licensed Processes for the
purpose of research with academic or nonprofit
institutions and contract research, including
for the conduct of clinical trials of a
Licensed Product, and (ii) to sell Licensed
Products under an agency, consignment or
equivalent arrangement, wherein such rights are
not sublicense rights.
	 
	•	 	Alnylam does not have the right to sell or
offer for sale the Library Products separately
from a sale or offer for sale of a Licensed
Product.
	 
	•	 	MIT retains the right to practice under the
Patent Rights for research, teaching, and
educational purposes.
	 
	•	 	The U.S. federal government retains a
royalty-free, non-exclusive, non-transferable
license to practice any government-funded
invention claimed in any Patent Rights as set
forth in 35 USC 201-211, and the regulations
promulgated thereunder, as amended, or any
successor statutes or regulations.
	 
	•	 	The Patent Rights shall not be asserted against
non-for-profit research institutions that
practice the Patent Rights for research funded
by (i) the institutions themselves, (ii)
not-for profit foundations, or (iii) any
federal, state or municipal government. If
Alnylam wants to assert the Patent Rights
against not-for-profit research institutions it
may only do so if the infringement activity of
the not-for-profit research institution was
performed in the fulfillment of research
sponsored by a for-profit entity and the
assertion of infringement must be limited to
those specific activities.

Certain Sublicense Terms (Section 2.3)

	•	 	Alnylam may grant sublicenses under
commercially reasonable terms and conditions
during the Exclusive Period.
	 
	•	 	The sublicense must incorporate terms and
conditions sufficient to enable Alnylam and its
Affiliates to comply with the MIT Agreement.
Such sublicenses

Page 20 of 37, Schedule D-2

 

	 	 	shall also include provisions to provide that if Sublicensee brings a Patent
Challenge against MIT (except as required under a court order or subpoena),
Alnylam may terminate the sublicense.
	 
	•	 	Alnylam shall promptly furnish MIT with a fully
signed photocopy of any sublicense agreement, which
copy may be redacted except with respect to terms
directly relevant to Alnylam’s obligations under
the MIT Agreement.
	 
	•	 	Upon termination of the MIT Agreement, any
Sublicensee not then in default shall have the
right to seek a license from MIT, and MIT agrees to
negotiate such licenses in good faith under
reasonable terms and conditions.

U.S. Manufacturing Requirement (Section 2.4)

	•	 	Library Products, whether or not part of Licensed
Products, used or sold in the U.S. shall be
manufactured substantially in the U.S.

Diligence and Reporting (Sections 3.1 and 3.2)

	•	 	Sublicensees are required to use diligent efforts
to develop Library Products and Licensed Products
and to introduce Licensed Products into the
commercial market; thereafter Sublicensees are
required to make Licensed Products reasonably
available to the public. Specifically, the
following obligations must be fulfilled:

(i) Written reports are due within [**] days after the end of each calendar year on the
progress of efforts during the immediately preceding calendar year to develop and
commercialize Licensed Products. Such reports shall include the number of [**], a
description of [**], and the [**] that have been tested. The report shall also contain a
discussion of intended efforts and sales projections for the year in which the report is
submitted.

(ii) Within [**] after the Effective Date, [**] shall be evaluated for use in [**] of RNAi
Products.

(iii) Prior to [**], at least [**] shall be advanced to [**] studies in support of [**] for
[**] studies.

(iv) Filing of [**] for Licensed Product [**] by [**].

(v) Commencement of [**] for a Licensed Product within [**] for such Licensed Product.

(vi) First Commercial Sale of a Licensed Product within [**] for each such Licensed
Product.

	•	 	If any Sublicensee is determined to have failed to fulfill any obligation under Sections
3.1(a) and 3.1(c) — (g), MIT may treat such failure as a material breach in

Page 21 of 37, Schedule D-2

 

	 	 	accordance with Section 12.3(b), subject to any mutually-agreed upon changes to
such diligence requirements pursuant to Section 3.2.

Royalty Payment Obligations (Section 4.1)

	•	 	Royalties of [**]% of Net Sales of Licensed Products
and Licensed Processes are due within [**] days of
the end of each calendar quarter.
	 
	•	 	If Alnylam or an Affiliate is legally required to
pay royalties to one or more third parties in order
to obtain a license or similar right necessary to
practice the Patent Rights, Alnylam shall be
entitled to a credit up to [**] percent ([**]%) of
the amounts payable to such third parties against
the royalties due to MIT for the same Reporting
Period; provided, however, that (i) in no event will
royalties due to MIT under Section 4.1(c), when
aggregated with any other offsets and credits
allowed under the MIT Agreement, be less than [**]%
of Net Sales in any Reporting Period, and (ii)
royalties due to third parties with respect to [**]
patents (see Appendix B to MIT Agreement) shall not
qualify for purposes of the offset against royalties
under Section 4.1(d).
	 
	•	 	Multiple royalties are not due if the manufacture,
use, lease, or sale of any Licensed Product or the
performance of any Licensed Process is covered by
more than one of the Patent Rights.

Royalty Payment and Reports (Sections 5.1 and 5.2)

	•	 	Royalties are payable for each Reporting Period
and are due to MIT within [**] days of the end
of each Reporting Period.
	 
	•	 	Prior to the First Commercial Sale of a Licensed
Product or first commercial performance of a
Licensed Process, Alnylam is required to deliver
annual reports within [**] days of the end of
each calendar year, containing information
concerning the immediately preceding year, as
further described in Section 5.2.
	 
	•	 	The date of First Commercial Sale of a Licensed
Product or commercial performance of a Licensed
Process must be reported to MIT within [**] days
of its occurrence.
	 
	•	 	After First Commercial Sale of a Licensed
Product or commercial performance of a Licensed
Process, reports are required to be delivered to
MIT within [**] days of the end of each
Reporting Period containing information
concerning the immediately preceding Reporting
Period, as further described in Section 5.2.
	 
	•	 	Section 5.2 states that reports must include,
among other things, information concerning the
number of Licensed Products sold, leased, or
distributed, the number of [**], a description
of Licensed Processes performed in each country
as may be pertinent to a royalty accounting,
gross price charged in each country, calculation
of Net Sales in each country (including a
listing of applicable

Page 22 of 37, Schedule D-2

 

	 	 	deductions), total royalty payable on Net Sales, the exchange rate used for
conversion, [**] categorized by rights relating to [**], and the [**]. If no
amounts are due to MIT for any Reporting Period, the report shall so state.

Recordkeeping and Audit Rights (Section 5.4)

	•	 	Sublicensees are required to maintain complete and
accurate records reasonably relating to (i) the
rights and obligations under the MIT Agreement,
and (ii) any amounts payable to MIT in relation to
the MIT Agreement, which records shall contain
sufficient information to permit MIT to confirm
the accuracy of any reports and payments delivered
to MIT and compliance in other respects with the
MIT Agreement. Such records shall be retained for
at least [**] years following the end of the
calendar year to which they pertain, during which
time a certified public accountant selected by MIT
may inspect such records upon advance notice and
during normal business hours solely for the
purpose of verifying any reports and payments or
compliance in other respects with the MIT
Agreement.

Claimed Infringement (Section 7.3)

	•	 	If a Patent Challenge is brought against Alnylam
by a third party, MIT, at its option, shall have
the right within 20 days after commencement of
such action to take over the sole defense of the
action. If MIT does not exercise this right,
Alnylam may take over the sole defense of such
action, subject to Sections 7.4 and 7.5.

Compliance with Laws (Sections 11.1 and 11.2)

	•	 	Alnylam is required to use reasonable commercial
efforts to comply with all commercially material
laws and regulations relating to development,
manufacture, use, and sale of Library Products,
Licensed Products, and Licensed Processes.
	 
	•	 	Sublicensees are required to comply with all
United States laws and regulations controlling the
export of certain commodities and technical data.

Non-Use of MIT Name (Section 11.3)

	•	 	Sublicensees are prohibited from using the
name of “Massachusetts Institute of
Technology”, “Lincoln Laboratory” or any
variation, adaption or abbreviation thereof,
or of any of MIT’s trustees, officers,
faculty, students, employees or agents, or
any trademark owned by MIT, or any terms of
the MIT Agreement in any promotional material
or other public announcement or disclosure
without MIT’s prior written consent, which
may be withheld in MIT’s sole discretion.

Marking of Library and Licensed Products (Section 11.4)

	•	 	To the extent commercially feasible and
consistent with prevailing business
practices, Sublicensees are required to mark
all Library Products (whether or not sold as
part of Licensed Products) that are
manufactured or sold under the MIT

Page 23 of 37, Schedule D-2

 

	 	 	Agreement with the number of each issued patent under the Patent Rights that
applies to such Library Product.

Termination for Patent Challenge (Section 12.5)

	•	 	If a Sublicensee brings a Patent Challenge
(except as required under a court order or
subpoena), MIT may send a written demand to
Alnylam to terminate the sublicense. If Alnylam
fails to so terminate such sublicense within 30
days of MIT’s demand, MIT may immediately
terminate the MIT Agreement and/or the license
granted thereunder.

Effect of Early Termination (Section 12.6)

	•	 	Upon any early termination of the MIT Agreement,
Sublicensees may complete and sell any
work-in-progress and inventory of Licensed
Products that exist as of the date of
termination, provided that such Sublicensees
shall continue to pay applicable royalties, and
shall complete and sell all work-in-progress and
inventory of Licensed Products within six months
of the date of termination.

Page 24 of 37, Schedule D-2

 

TEKMIRA

	7.	 	License and Collaboration Agreement between Tekmira Pharmaceuticals Corporation (formerly
INEX Pharmaceuticals Corporation) (“Tekmira”) and Alnylam, dated January 8, 2007
(“Tekmira Agreement”)

Limitations on License Grant (Sections 6.1 and 6.4)

	•	 	Alnylam’s licenses are limited to a license to
Develop, Manufacture and Commercialize Alnylam
Royalty Products in the Alnylam Field and in
and for the Territory.
	 
	•	 	Section 6.4 states that all licenses and other
rights granted to Alnylam with respect to INEX
Technology under Article 6 are subject to (i)
the rights granted to Tekmira, and to Tekmira’s
ability to grant rights to Alnylam under the
INEX In-Licenses, and (ii) the provisions of
the UBC Sublicense Documents governing or
relating to the rights sublicensed to Alnylam.

Certain Sublicense Terms (Sections 6.2 and 14.4(b))

	•	 	Alnylam may grant sublicenses to Third Parties
to Develop, Manufacture and Commercialize
Alnylam Royalty Products; provided, that (i)
with respect to any sublicense of Alnylam’s
rights under Section 6.1.1(a) in respect of any
Alnylam Royalty Product for which Tekmira has
not initiated Manufacturing of batches of
finished dosage form for GLP toxicology
studies, Alnylam is required to use
Commercially Reasonable Efforts to facilitate a
business discussion between Tekmira and
Alnylam’s Sublicensee (other than Tekmira or
its Affiliates) with respect to the provision
of manufacturing services by Tekmira to such
Sublicensee; and (ii) with respect to any
sublicense of Alnylam’s rights under Section
6.1.1(a) in respect of any Alnylam Royalty
Product for which Tekmira has initiated
Manufacturing of batches of finished dosage
form for GLP toxicology studies, Alnylam’s
Sublicensee (other than Tekmira or its
Affiliates) shall be required to obtain its
requirements of the bulk finished dosage form
of such Alnylam Royalty Product from Tekmira on
the terms set forth in Article 5, however,
Tekmira agrees to negotiate in good faith with
Alnylam and/or Alnylam’s Sublicensee either an
alternate or modified supply arrangement or the
release of such Sublicensee from such exclusive
supply obligation in return for reasonable
compensation to Tekmira.
	 
	•	 	Each license and/or sublicense granted by
Alnylam pursuant to Section 6.2.2 must be
subject and subordinate to the terms and
conditions of the Tekmira Agreement and must
contain terms and conditions consistent with
those in the Tekmira Agreement, including,
without limitation, the requirements of Section
6.4. Commercializing Sublicensees are required
to: (i) submit applicable sales or other
reports consistent with those required under
the Tekmira Agreement; (ii) comply with an
audit requirement similar to the requirement
set forth in Section 7.6; and (iii) comply with
the confidentiality and non-use provisions of
Article 8 with

Page 25 of 37, Schedule D-2

 

	 	 	respect to both Parties’ Confidential Information. If Alnylam becomes aware of
a material breach of any sublicense by a Third Party Sublicensee, Alnylam is
required to promptly notify Tekmira of the particulars of same and take all
Commercially Reasonable Efforts to enforce the terms of such sublicense.
	 
	•	 	Any sublicense granted by Alnylam shall survive
termination of the licenses or other rights granted
to Alnylam under the Tekmira agreement in accordance
with Article 6, and be assumed by Tekmira as long as
(i) the Sublicensee is not then in breach of its
license and/or sublicense agreement, (ii) the
Sublicensee agrees in writing to be bound to Tekmira
as a licensor under the terms and conditions of the
license and/or sublicense agreement, and (iii) the
Sublicensee agrees in writing that in no event shall
Tekmira assume any obligations or liabilities, or be
under any obligation or requirement of performance,
under any such license and/or sublicense extending
beyond Tekmira’s obligations and liabilities under
the Tekmira Agreement.

Diligence and Annual Reports (Section 6.7)

	•	 	Alnylam is required to use Commercially Reasonable
Efforts to Develop and Commercialize an Alnylam
Royalty Product in the Territory.
	 
	•	 	Alnylam is required to deliver to Tekmira an annual
report, due no later than December 31 of each
Contract Year during the Agreement Term, which
summarizes the major activities undertaken by
Alnylam during the preceding twelve (12) months to
Develop and Commercialize its Royalty Products in
the Territory in the applicable field. The report
will include an outline of the status of any such
Royalty Products in clinical trials and the
existence of any sublicenses with respect to such
Royalty Products which have not been previously
disclosed.

Compliance with Laws (Section 6.8)

	•	 	Alnylam is required to conduct its obligations under
the Tekmira Agreement in accordance with all
applicable laws, rules and regulations, including
without limitation current governmental regulations
concerning good laboratory practices, good clinical
practices and cGMP, as applicable.

Royalty Payment Obligations (Sections 7.3 and 7.4; Section 6.1.3)

	•	 	Royalties are payable to Tekmira on Net
Sales of Alnylam Royalty Products in the
Territory as follows:

	 	 	 
	Aggregate Calendar Year Net Sales of the	 	Royalty
	Alnylam Royalty Product in the Territory	 	(as a percentage of Net Sales)
	on the first $[**] — $[**]
	 	[**]%
	On the subsequent $[**] — $[**]
	 	[**]%
	Greater than $[**]
	 	[**]%

Page 26 of 37, Schedule D-2

 

	•	 	Notwithstanding the foregoing, in the event that an Alnylam Royalty Product is comprised of
a formulation Covered by or employing any Third Party Liposome Patent Rights then subject to
the terms and conditions of the Tekmira Agreement, royalties on Net Sales of Alnylam Royalty
Products in the Territory shall be calculated as follows:

	 	 	 
	Aggregate Calendar Year Net Sales of the	 	Royalty
	Alnylam Royalty Product in the Territory	 	(as a percentage of Net Sales)
	on the first $[**] — $[**]
	 	[**]%
	On the subsequent $[**] — $[**]
	 	[**]%
	Greater than $[**]
	 	[**]%

	•	 	Royalties on Alnylam Royalty Products at the rates set forth above are payable on a
country-by-country and product-by-product basis commencing on the date of First Commercial
Sale of such Alnylam Royalty Product in a country and continuing until the later of the
expiration of the last Valid Claim Covering the Manufacture or Commercialization of such
Alnylam Royalty Product in the country of sale, subject to the following conditions:

	 	(i)	 	only one royalty shall be due with respect to the same unit of Alnylam
Royalty Product;
	 
	 	(ii)	 	no royalties shall be due upon the sale or other transfer among a Party and
its Related Parties, but in such cases the royalty shall be due and calculated upon
such Party’s or its Related Party’s Net Sales to the first independent Third Party;
	 
	 	(iii)	 	no royalties shall accrue on the sale or other disposition of the Alnylam
Royalty Product by a Party or its Related Parties for use in a clinical study
sponsored by such Party or under an IND prior to Regulatory Approval of such Alnylam
Royalty Product in the applicable jurisdiction; and
	 
	 	(iv)	 	no royalties shall accrue on the disposition of an Alnylam Royalty Product in
reasonable quantities by a Party or its Related Parties as samples (promotion or
otherwise) or as donations (for example, to non-profit institutions for a
non-commercial purpose).

	•	 	If the Development, Manufacture or Commercialization of an Alnylam Royalty Product in
accordance with the Tekmira Agreement infringes Necessary Third Party IP, the applicable
royalties in each country in the Territory payable to Tekmira will be reduced by [**] percent
([**]%) of the amount paid by Alnylam of any royalties under all licenses of such Necessary
Third Party IP that are reasonably allocable to the Development, Manufacture and
Commercialization of the Alnylam Royalty Product in or for such country in the Alnylam Field;
provided, however, that, on a country-by-country basis, in no event shall the
royalties payable to Tekmira with respect to Net Sales in a country for any Calendar Quarter
be reduced below the greater of: (i) [**] percent ([**]%) of the

Page 27 of 37, Schedule D-2

 

	 	 	royalties otherwise payable to Tekmira for such Calendar Quarter as calculated
pursuant to Section 7.3, and (ii) the amount of any royalties payable under the
In-licenses of Alnylam that are reasonably allocable to the Commercialization
or Manufacture of the Alnylam Royalty Product in or for such country in the
Field (where the royalties are calculated by adding one percentage point to the
applicable royalty rate(s) in the applicable In-License(s)).
	 
	•	 	In the event that Alnylam is required to make any
payments to UBC in respect of the INEX Technology
or INEX Collaboration IP licensed to Alnylam
pursuant to the UBC Sublicense Agreement, then
Alnylam shall be entitled to offset any amounts
payable by Alnylam to Tekmira under the Tekmira
Agreement by the amount of Alnylam’s payments to
UBC until such amounts have been credited in
full.

Royalty Reports; Payment (Section 7.3.4)

	•	 	During the Agreement Term, commencing upon the
First Commercial Sale of an Alnylam Royalty
Product, Alnylam is required to provide to
Tekmira a quarterly written report showing the
quantity of Alnylam Royalty Products sold in each
country (as measured in saleable units of
product), the gross sales of such Alnylam Royalty
Product in each country, total deductions for
such Alnylam Royalty Product for each country
included in the calculation of Net Sales, the Net
Sales in each country of such Alnylam Royalty
Product subject to royalty payments sold by
Alnylam and its Related Parties during the
reporting period and the royalties payable with
respect to such Alnylam Royalty Product under the
Tekmira Agreement. Quarterly reports are due no
later than the twenty-fifth (25th) day following
the close of each Calendar Quarter. Royalties
shown to have accrued by each royalty report are
due and payable on the date such royalty report
is due.
	 
	•	 	Complete and accurate records must be kept in
sufficient detail to enable the royalties and
other payments payable under the Tekmira
Agreement to be determined.

Audit Rights (Section 7.6)

	•	 	Upon the written request of Tekmira and not more
than once in each Calendar Year, a Sublicensee
must permit an independent certified public
accounting firm of nationally recognized standing
selected by Tekmira and reasonably acceptable to
such Sublicensee to have access during normal
business hours to such of the records of
Sublicensee as may be reasonably necessary to
verify the accuracy of the royalty and other
financial reports required to be delivered under
the Tekmira Agreement for any Calendar Year
ending not more than [**] months prior to the
date of such request, for the sole purpose of
verifying the basis and accuracy of payments made
under Article 7.

Page 28 of 37, Schedule D-2

 

Claimed Infringement (Section 10.4)

	•	 	Alnylam may, if it so desires, defend any
Infringement Claim brought against either Alnylam
or Tekmira or its Affiliates or Sublicensees
arising out of the Development, Manufacture or
Commercialization of any Alnylam Royalty Product
in the Alnylam Field in the Territory. Alnylam
must keep Tekmira informed, and from time to time
consult with Tekmira regarding the status of any
such claims and provide Tekmira with copies of
all documents filed in, and all written
communications relating to, any suit brought in
connection with such claims. Tekmira also has
the right to participate and to be presented in
any such claim or related suit. If Alnylam fails
to exercise its right to assume such defense
within thirty (30) days following written notice
of such Infringement Claim, Tekmira has the sole
and exclusive right to control the defense of
such Infringement Claim.

	Patent Certification (Section 10.8)

	•	 	To the extent required or permitted by law,
Alnylam is required to use Commercially
Reasonable Efforts to maintain with the
applicable Regulatory Authorities during the
Agreement Term correct and complete listings of
applicable Patent Rights for Alnylam Royalty
Products being commercialized, including all so
called “Orange Book” listings required under the
Hatch-Waxman Act.

Termination for Patent Challenge (Section 11.5)

	•	 	If any Sublicensee asserts in any court or other
governmental agency of competent jurisdiction
that an INEX Patent Right or a Patent Right
Controlled by Tekmira by virtue of the INEX-UBC
License Agreement and sublicensed to Alnylam
pursuant to the UBC Sublicense (in either case,
an “INEX Patent”) is invalid, unenforceable, or
that no issued Valid Claim embodied in such INEX
Patent excludes a Third Party from making, having
made, using, selling, offering for sale,
importing or having imported an Alnylam Royalty
Product in such jurisdiction, then Tekmira shall
be entitled, upon written notice to Alnylam, to
terminate all licenses granted to Alnylam for
such Alnylam Royalty Product(s) covered by such
INEX Patent that is under challenge in the
applicable jurisdiction; provided however, that
Tekmira shall not terminate such license if
within thirty (30) days of Alnylam’s receipt of
Tekmira’s notification under the Tekmira
Agreement:

	 	(i)	 	it is confirmed by written notice to Tekmira that Sublicensee no longer
intends to challenge the validity or enforceability of such INEX Patent; or
	 
	 	(ii)	 	documentation is provided to Tekmira to confirm Sublicensee’s withdrawal of
its filing, submission, or other process commenced in any

Page 29 of 37, Schedule D-2

 

	 	 	 	court or other governmental agency of competent jurisdiction to challenge the
validity or enforceability of any such INEX Patent.

Page 30 of 37, Schedule D-2

 

TEKMIRA/UBC

	8.	 	The Sublicense Agreement between Tekmira and Alnylam, dated January 8, 2007 (“UBC
Sublicense Agreement”)

Limitations on License Grant (Sections 3.1 and 16.1)

	•	 	Alnylam’s sublicense is limited to a license to
research, develop, manufacture, have made,
distribute, import, use, sell and have sold
Products in and for the Alnylam Field.
	 
	•	 	University retains the right to use the
Technology without charge in any manner
whatsoever for non-commercial research,
scholarly publication, educational or other
non-commercial use.
	 
	•	 	The UBC Sublicense Agreement and the license
granted thereunder terminates on the expiration
of a term of 20 years from the Date of
Commencement or the expiration of the last
Patent, whichever event shall last occur,
unless earlier terminated as a result of the
termination of Alnylam’s rights to INEX
Technology (as that term is defined in the
Tekmira Agreement) under the Tekmira Agreement.
Upon expiry of the UBC Sublicense Agreement,
the licenses become perpetual, fully-paid up,
worldwide licenses to use and sublicense the
Technology and to manufacture, have made,
distribute, import, use and sell Products in
the Alnylam Field, without further payment of
Royalties to Tekmira.

Certain Sublicense Terms (Section 4.2)

	•	 	Alnylam may grant sublicenses to third parties
with respect to the Technology upon written
notice to Tekmira and the University, provided
that the Sublicensee agree (i) to perform the
terms of the UBC Sublicense Agreement as if
such Sublicensee were Alnylam under the UBC
Sublicense Agreement; (ii) to represent that
Sublicensee is not, as of the effective date of
the relevant sublicense agreement, engaged in a
dispute with the University; and (iii) to be
subject to a written sublicense agreement that
contains terms consistent with “the terms of
this Agreement” described in Section 4.2(c) and
that provides that the University is a third
party beneficiary of, and has the right to
enforce directly against the sublicensee, the
terms in such sublicense agreement that are
consistent with the terms listed in Section
4.2(c)(ii).
	 
	•	 	Section 4.2(c)(ii) states that the “terms of
this Agreement” means (i) the terms set forth
in the UBC Sublicense Agreement; (ii) terms in
such sublicense agreement consistent with
Sections 1.3, 1.7, 2.1, 2.2, 2.3, 2.4, 2.5,
2.6, 2.7, 2.8 and 2.13 of the Consent Agreement
among Alnylam, Tekmira and the University of
even date with the UBC Sublicense Agreement
(“Consent Agreement”); and (iii) other
customary and reasonable terms, including but
not limited to terms relating to breach and
termination, that are consistent with Alnylam’s
obligations to Tekmira under the UBC Sublicense
Agreement and the Tekmira Agreement.

Page 31 of 37, Schedule D-2

 

The terms of the Consent Agreement referenced in clause (ii) above are set forth below:

	 	1.3	 	Alnylam Consent to Certain Disclosures to the University. Alnylam consents
to Tekmira disclosing to the University: (i) Alnylam’s report to Tekmira made pursuant
to Article 10.8 of the UBC Sublicense Agreement; and (ii) copies of Alnylam’s
sublicenses provided to Tekmira pursuant to Article 4.3 of the UBC Sublicense
Agreement; solely for the purposes of calculation of royalties under the UBC License,
determining compliance with Section 10.8 of the License Agreement between Tekmira and
University dated July 1, 1998, as amended by an Amendment Agreement dated July 11,
2006, and a Second Amendment Agreement dated January 8, 2007 (as amended, the “UBC
License”) and determining compliance with Article 5 of the UBC Sublicense
Agreement, and the University shall use reasonable efforts to ensure that all
information provided to the University or its representatives pursuant to this Section
1.3 remains confidential and is treated as such by the University.
	 
	 	1.7	 	Rights of the University. In consideration of the University providing its
consent in the Consent Agreement, Tekmira and Alnylam agree that the University shall
be entitled to rely upon any rights provided to the University pursuant to the terms
of the UBC Sublicense Agreement, notwithstanding that the University is not a party to
the UBC Sublicense Agreement.
	 
	 	2.1	 	Limited Warranties. Alnylam and its Affiliates expressly acknowledge and
agree that:

(a) Except as expressly set out in Section 2.1(c) of the Consent Agreement,
the University makes no representations, conditions, or warranties, either express
or implied, with respect to the Technology, Improvements, Patents or any Products.
Without limiting the generality of the foregoing, the University specifically
disclaims any implied warranty, condition, or representation that the Technology,
Improvements, Patents or Products: (i) shall correspond with a particular
description; (ii) are of merchantable quality; (iii) are fit for a particular
purpose; or (iv) are durable for a reasonable period of time.

(b) Except as expressly set out in Section 2.1(c) of the Consent Agreement,
nothing in the UBC License, the Consent Agreement, or the UBC Sublicense Agreement
shall be construed as: (i) a warranty or representation by the University as to
title to the Technology, the Patents or any improvement or that anything made,
used, sold or otherwise disposed of under the license granted in the Consent
Agreement is or will be free from infringement of patents, copyrights, trademarks,
industrial design or other intellectual property rights, (ii) an obligation by the
University to bring or prosecute or defend actions or suits against third

Page 32 of 37, Schedule D-2

 

parties for infringement of patents, copyrights, trademarks, industrial
designs or other intellectual property or contractual rights, or (iii) the
conferring by the University of the right to use in advertising or publicity the
name of the University or UBC Trademarks.

(c) The University agrees that the warranty set forth in Section 7.4 of the
UBC License will inure to the benefit of Alnylam and its sublicensees. For
avoidance of doubt, such warranty is exactly as stated in the UBC License and its
inclusion in the Consent Agreement will not change its terms in any way including,
but not limited to, changing the date of such warranty from June 30, 2001.

	 	2.2	 	Disclaimer of Product Liability. Alnylam and its Affiliates expressly
acknowledge and agree that the University shall not be liable for any damages, or any
other loss, whether direct, indirect consequential, incidental, or special which
Alnylam or its Affiliates, or any further sublicense under any sublicense agreements
between Alnylam and such further sublicensee, suffer, arising from any defect, error,
fault, or failure to perform with respect to the Technology, Patents, Improvements or
any Products, even if the University has been advised of the possibility of such
defect, error, fault, or failure. Alnylam and its Affiliates acknowledge that they
have been advised by the University to undertake their own due diligence with respect
to the Technology, Patents, Improvements and Products.
	 
	 	2.3	 	Indemnification of the University. Alnylam and its Affiliates indemnify,
hold harmless and defend the University, its Board of Governors, officers, employees,
faculty, students, invitees and agents (the “UBC Indemnitees”) against any and
all claims (including all legal fees and disbursements incurred in association
therewith) arising out of the exercise of any rights under the Consent Agreement, the
UBC License or the UBC Sublicense Agreement, including, without limiting the
generality of the foregoing, against any damages or losses, consequential or
otherwise, arising from or out of the use of the Technology, Patents, Improvements or
Product(s) sublicensed under the UBC Sublicense Agreement by Alnylam or its Related
Parties, or their respective customers or end-users howsoever the same may arise. For
greater clarity, it is confirmed that, without limiting the generality of the
foregoing, the indemnification by Alnylam and its Affiliates of the UBC Indemnitees
set out in the Consent Agreement shall include an obligation to indemnify the UBC
Indemnitees against any and all subrogated claims which may be brought against the UBC
Indemnitees by any person(s) or entities (including without limitation Alnylam, its
Related Parties, their respective customers or end-users, or their respective
insurers) which may not have waived their rights of subrogation against the UBC
Indemnitees, and shall also include, without limiting any of the foregoing, an
obligation to indemnify the UBC Indemnitees against any and all claims relating to any
injury or death to any person or damage to

Page 33 of 37, Schedule D-2

 

	 	 	 	any property caused by any Product, whether claimed by reason of breach of
warranty, negligence, product defect or otherwise, and regardless of the form in
which any such claim is made.
	 
	 	2.4	 	Monetary Cap Respecting UBC License. The University’s liability, whether
under the express or implied terms of the Consent Agreement, the UBC License or the
UBC Sublicense Agreement, in tort (including negligence), or at common law, for any
loss or damage suffered by Alnylam or its Related Parties, whether direct, indirect,
special, or any other similar or like damage, to the extent that such losses or damage
may arise or does arise from any breaches of the UBC License, the Consent Agreement or
the UBC Sublicense Agreement by UBC Indemnitees, shall be limited to the sum of $[**].
	 
	 	2.5	 	Disclaimer of Consequential Losses by the University. In no event shall the
University be liable for consequential or incidental damages arising from any breach
or breaches of the UBC License, the UBC Sublicense Agreement or the Consent Agreement.
	 
	 	2.6	 	Litigation. Provided that Tekmira has obtained the University’s consent
required by Article 7 of the UBC License, Tekmira’s right to prosecute litigation in
Article 7 of the UBC License may be exercised by Alnylam pursuant to Sections 7.5 and
7.6 of the UBC Sublicense Agreement.
	 
	 	2.7	 	UBC Trademarks. Alnylam shall not use any of the University’s trademarks or
make reference to the University or its name in any advertising or publicity
whatsoever, without the prior written consent of the University, except as required by
law. Nothing in the Consent Agreement shall prevent Alnylam from making or issuing
factual statements to the public regarding its business or use of the Patent. If
Alnylam is required by law to act in contravention of this provision, Alnylam shall
provide the University with sufficient advance notice in writing to permit the
University to bring an application or other proceeding to contest the requirement.
	 
	 	2.8	 	Confidentiality of Terms. Alnylam requires of the University, and the
University agrees insofar as it may be permitted to do so at law, that the Consent
Agreement, the UBC Sublicense Agreement and each part of each of them, is confidential
and shall not be disclosed to third parties, as Alnylam claims that such disclosure
would or could reveal commercial, scientific or technical information and would
significantly harm Alnylam’s competitive position and/or interfere with Alnylam’s
negotiations with prospective sublicensees. Notwithstanding anything contained in
this Section 2.8, the parties to the Consent Agreement acknowledge and agree that the
University may identify the title of the Consent Agreement and/or the UBC Sublicense
Agreement, the parties to the Consent Agreement and/or the UBC Sublicense Agreement,
the inventors of the Technology,

Page 34 of 37, Schedule D-2

 

	 	 	 	the term of the Consent Agreement and/or the UBC Sublicense Agreement, and the
consideration actually paid to the University pursuant to the Consent Agreement
and/or the UBC Sublicense Agreement.
	 
	 	2.13	 	Alnylam Warranties. Alnylam warrants and represents to the University that:

(a) Alnylam is a corporation duly organized, existing, and in good standing
under the laws of Delaware and has the power, authority, and capacity to enter into
the Consent Agreement and to carry out the transactions contemplated by the Consent
Agreement, all of which have been duly and validly authorized by all requisite
corporate proceedings;

(b) the execution, delivery and performance by Alnylam of the Consent
Agreement and the UBC Sublicense Agreement do not contravene or constitute a
default under any provision of applicable law or its articles or by-laws (or
equivalent documents) or of any judgment, injunction, order, decree or other
instrument binding upon Alnylam; and

(c) the Consent Agreement constitutes a valid and binding agreement of
Alnylam, enforceable against Alnylam in accordance with its terms.

	•	 	Alnylam is required to furnish Tekmira with a copy of
each sublicense granted within 30 days after execution.
Any such copy may contain reasonable redactions as
Alnylam may make, provided that such redactions do not
include provisions necessary to demonstrate compliance
with the requirements of the UBC Sublicense Agreement.
If University requests of Tekmira that a less redacted
version of any sublicense be provided to University,
Alnylam agrees to discuss in good faith with Tekmira and
the University the University’s concerns.
	 
	•	 	Sublicensee is required to observe and perform similar
terms and conditions to those in the UBC Sublicense
Agreement and those terms set forth in Section 4.2(c),
including, without limitation, a restriction on the
grant of further sublicenses without notice to Tekmira
and the University.
	 
	•	 	Any sublicense granted by Alnylam under the UBC
Sublicense Agreement shall survive termination of the
licenses or other rights granted to Alnylam under the
UBC Sublicense Agreement, and be assumed by Tekmira, as
long as (i) the sublicensee is not then in breach of its
sublicense agreement, (ii) the sublicensee agrees in
writing to be bound to Tekmira as a sublicensor and to
the University under the terms and conditions of the UBC
Sublicense Agreement, and (iii) the sublicensee agrees
in writing that in no event shall Tekmira assume any
obligations or liabilities, or be under any obligation
or requirement of performance, under any such sublicense
extending beyond Tekmira’s obligations and liabilities
under the UBC Sublicense Agreement.

Page 35 of 37, Schedule D-2

 

Royalty Obligations (Section 5.0)

	•	 	The consideration for the rights granted to Alnylam to
the Technology under the UBC Sublicense Agreement, and
the consideration for the rights granted by Tekmira to
Alnylam to other technologies under the Tekmira
Agreement, is the payment by Alnylam of milestones and
royalties in accordance with the terms of Article 7 of
the Tekmira Agreement.

Claimed Infringement (Section 7.7)

	•	 	If any complaint alleging infringement or violation of
any patent or other proprietary rights is made against
Alnylam (or a sublicensee of Alnylam) with respect to
the manufacture, use or sale of Product, the following
procedure shall be adopted:

	 	(i)	 	Alnylam shall promptly notify Tekmira upon receipt of any such complaint and
shall keep Tekmira fully informed of the actions and positions taken by the
complainant and taken or proposed to be taken by Tekmira (on behalf of itself or a
sublicensee);
	 
	 	(ii)	 	all costs and expenses incurred by Alnylam (or any sublicensee of Alnylam) in
investigating, resisting, litigating and settling such a complaint, including the
payment of any award or damages and/or costs to any third party, shall be paid by
Alnylam (or any sublicensee of Alnylam, as the case may be); and
	 
	 	(iii)	 	if as a result of such suit it is decided that a Product infringes any valid
claim on a patent owned by another, Tekmira shall consider fair distribution of
Royalty Income.

Use of Trademarks (Section 10.1)

	•	 	No use of or reference to the UBC Trade-marks or the
University or its name is allowed in any advertising
or publicity whatsoever, without the prior written
consent of the University, except as required by law.

Diligence and Reporting (Section 10.2)

	•	 	Alnylam is required to use its reasonable commercial
efforts to promote, market and sell the Products and
utilize the Technology and to meet or cause to be met
the market demand for the Products and the utilization
of the Technology.
	 
	•	 	Alnylam is required to deliver to Tekmira an annual
report, due on December 31 of each year during the
term of the UBC Sublicense Agreement, which summarizes
the major activities Alnylam has undertaken in the
course of the preceding 12 months to develop and
commercialize and/or market the Technology. The
report must include an outline of the status of any
Products in clinical trials and the existence of any
sublicenses of the Technology.

Page 36 of 37, Schedule D-2

 

Compliance with Laws (Section 18.0)

	•	 	Alnylam is required to comply with all laws,
regulations and ordinances, whether Federal,
Provincial, Municipal or otherwise with respect to the
Technology and/or the UBC Sublicense Agreement.

Page 37 of 37, Schedule D-2

 

Schedule E

Pre-Existing Alliance Agreements

Copies of the following agreements, some in redacted form, have been, or shall be, made available
to Licensee as of the Effective Date:

	 	1.	 	Strategic Collaboration & License Agreement between Isis Pharmaceuticals,
Inc., and Alnylam Pharmaceuticals, Inc., dated March 11, 2004, as supplemented or
amended by letter agreements dated March 9, 2004 (as amended by letter agreement dated
October 28, 2005), March 11, 2004, and June 10, 2005
	 
	 	2.	 	License and Collaboration Agreement between Tekmira Pharmaceuticals
Corporation (formerly INEX Pharmaceuticals Corporation) and Alnylam Pharmaceuticals,
Inc., dated January 8, 2007
	 
	 	3.	 	The Research Collaboration and License Agreement, effective as of October 12,
2005, by and between Alnylam and Novartis, as amended by the Addendum Re: Influenza
Program effective as of December 13, 2005, Amendment No. 1 to such Addendum effective
as of March 14, 2006, and Amendment No. 2 to such Addendum effective as of May 5, 2006
	 
	 	4.	 	Amended and Restated Research Collaboration and License Agreement between
Merck & Co., Inc, Alnylam Pharmaceuticals, Inc. and Alnylam Holding Co., dated July 3,
2006
	 
	 	5.	 	Amended and Restated Collaboration Agreement by and between Alnylam Pharmaceuticals, Inc. and
Medtronic, Inc., dated July 27, 2007
	 
	 	6.	 	Collaboration and License Agreement by and between Alnylam Pharmaceuticals,
Inc. and Biogen Idec MA Inc., dated September 20, 2006

Page 1 of 1, Schedule E

 

Schedule F

Technology Transfer Plan

The Technology Transfer Plan outlined below between Licensee and Alnylam is designed to ensure that
all capabilities and know-how related to the discovery and development of RNAi Therapeutics are
efficiently and rapidly exchanged between both sites. The list of information and technologies to
be transferred is divided into RNAi Pharmaceutics [**] and RNAi Platform [**]. This will ensure
that both Licensee and Alnylam will have acquired the knowledge and skills required in the
development of RNAi Therapeutics from both a theoretical and practical standpoint.

The Technology Transfer Plan, as well as the Transition Services Plan (see Schedule A of Share
Purchase Agreement) will be overseen and managed by the Joint Transitional Team (JTT), as outlined
in the Share Purchase Agreement.

It is envisioned that the Technology transfer will take place in three stages:

	 	1)	 	Plan roll-out (from Execution Date to Effective Date). This stage would
involve establishing contact with technology transfer counterparts in Licensee,
Kulmbach Facility and Alnylam and begin writing SOPs. A preliminary list of Licensee,
Kulmbach Facility and Alnylam contacts is shown in Table 1; this will be finalized
during the plan roll-out period.
	 
	 	2)	 	Technology Transfer Period (as defined in Section 3.1). This stage would
involve finalization and transfer of SOPs between Licensee and Alnylam. This would
involve frequent email and videoconference interactions. Face to face meetings will
be utilized as required to ensure efficient transfer of technologies and
capabilities. Ideally all technology transfer would be completed by this end of this
phase.
	 
	 	3)	 	Additional technology transfer phase (up to [**] after end of Technology
Transfer Period). Any additional technology transfer will be performed as required.

Page 1 of 9, Schedule F

 

Table 1: Initial Proposed list of Contacts

Involved in Licensee/ Kulmbach Facility/Alnylam Technology Transfer

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Licensee	 	Kulmbach	 	 
	Technology	 	Contact	 	Facility Contact	 	Alnylam Contact
	Alnylam to Licensee/Kulmbach Facility (RNAi Therapeutics)	 	 	 	 
	1. Drug Substance
Information
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	2.1. Drug Product
Information: Overall
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	 
	2.2 Drug Product
Information: Safety/tox
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	3. Drug Substance
Manufacturing
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Alnylam to Licensee/ Kulmbach Facility (RNAi Platform)	 	 	 	 
	4. Mid Scale Synthesis
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	5. Large Scale Synthesis
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	6. Conjugation Chemistry
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	7. Liposomal
Formulations
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	8. Pulmonary
Formulations
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	9. Analytic Methods
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	10. 5’RACE Assay
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	11. In vivo Models
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Licensee/ Kulmbach Facility to Alnylam (RNAi Platform)	 	 	 	 
	12. Bioinformatics and
Database Systems
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	13. Small-scale
Synthesis
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	14. Conjugation
Chemistry
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	15. Peptide Formulations
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	16. Bioanalytics and
Analytics
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	17. IFN and TNF Assays
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	18. In vitro Models
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 
	19. In vivo Models
	 	 	[**]	 	 	 	[**]	 	 	 	[**]	 

Page 2 of 9, Schedule F

 

RNAi Therapeutics Transfer from Alnylam to Licensee

	1.	 	Drug Substance Information: Alnylam shall provide to Licensee the
following test information for typical siRNA drug substance used in [**] studies and
those used in [**] studies. Alnylam shall also provide to Licensee analogous
information for typical reference standards.

	 	 	 	 	 
	 	 	 Typical Method
	General Test	 	(alternate if available)
	Appearance, solubility, pH of solution, molecular
weight
	 	 	[**]	 
	Identity (individual strands and duplex)
	 	 	[**]	 
	Purity
	 	 	[**]	 
	Assay (%w/v)
	 	 	[**]	 
	Moisture content (if powder)
	 	 	[**]	 
	Organic volatiles
	 	 	[**]	 
	Heavy metals (if any)
	 	 	 	 
	Sterility/bioburden
	 	 	[**]	 
	Bacterial endotoxins
	 	 	[**]	 
	Stability indicating test method
	 	 	[**]	 
	Other tests as relevant for the molecule depending on the chemical
modifications involved

	2.	 	Drug Product Information (2.1 Overall, and 2.2 Safety/Tox): Alnylam shall
provide to Licensee the following information about siRNA drug products that have
been subjected to more detailed characterization [**]. The information that will be
provided for the drug product is:

	 	a.	 	Formulation composition
	 
	 	b.	 	Formulation manufacturing procedure with in-process
control specifications. Terminal sterilization procedure (if applicable) or
in-process controls that are typically relevant of the dosage form [**]
	 
	 	c.	 	If new/novel formulation excipient(s) ([**]) involved
then Alnylam shall provide to Licensee the following additional information
about that excipient(s):

	 	i.	 	Analytical profile
	 
	 	ii.	 	Physico-chemical characterization
	 
	 	iii.	 	Synthesis procedure
	 
	 	iv.	 	Analytical release specification
	 
	 	v.	 	Storage condition

Page 3 of 9, Schedule F

 

	 	vi.	 	Safety/toxicity data supporting its
human use on a chronic basis and any associated genotoxicity and
immunostimulation.
	 
	 	vii.	 	Justification for the use of the
desired excipient

	 	d.	 	Experience with different batch sizes and batch record
information if available
	 
	 	e.	 	Equipment train (and specific parts if applicable)
	 
	 	f.	 	In addition to the above information, subject to
availability, Alnylam will supply the following test information for drug
product batches, their release specifications, and their stability (ICH
protocol)

	 	 	 	 	 
	 	 	 Typical Method
	General Test	 	(alternate if available)
	Appearance
	 	 	 	 
	Assay for siRNA (%w/v)
	 	 	[**]	 
	Moisture content (if powder)
	 	 	 	 
	Particle size of the dosage form (if applicable)
	 	 	[**]	 
	Osmolarity (if applicable)
	 	 	 	 
	Sterility/bioburden
	 	 	[**]	 
	Bacterial endotoxins
	 	 	[**]	 
	Stability indicating test method
	 	 	[**]	 
	Other test methods and experience with other dosage forms [**]
	For dispersed systems [**], Alnylam shall provide to Licensee additional
information about [**] for the stability batches and their physico-chemical
stability.
	Alnylam shall provide to Licensee information on the impact of [**] on the
product’s in vivo performance, [**]
	Alnylam shall provide to Licensee other applicable dosage form experience that
would enable Licensee to transition/integrate the technology within Licensee
and/or to third party contract manufacturer.

	3.	 	Drug Substance Manufacturing:

	 	a.	 	Synthesis/manufacturing technology

	 	i.	 	Overview on technology landscape:
existing technologies, IP, CMO’s
	 
	 	ii.	 	Technology used at Alnylam for small
and large scale production
	 
	 	iii.	 	License terms for any IP covering
synthesis and manufacturing technology
	 
	 	iv.	 	Preferred partners

Page 4 of 9, Schedule F

 

	 	v.	 	Knowledge of commercial suppliers and
capacity of main players

	 	b.	 	Raw materials incl. solid support, HPLC columns

	 	i.	 	Specifications
	 
	 	ii.	 	Suppliers
	 
	 	iii.	 	Costs
	 
	 	iv.	 	Solid supports: screened/tested?
Advantages/disadvantages, regeneration/recycling?
	 
	 	v.	 	HPLC columns: technologies available,
handling, containment, life times, costs, suppliers
	 
	 	vi.	 	Any animal-derived raw materials?

	 	c.	 	Process

	 	i.	 	Description of chemistry involved
	 
	 	ii.	 	Detailed process flow and step description
	 
	 	iii.	 	Equipment/capacities/equipment suppliers
	 
	 	iv.	 	Overall and step yields, processing time
	 
	 	v.	 	Reproducibility
	 
	 	vi.	 	Critical steps, intermediates
	 
	 	vii.	 	Scale-up issues
	 
	 	viii.	 	Process validation
	 
	 	ix.	 	Safety, health and environmental issues

	 	d.	 	Analytics

	 	i.	 	Description of analytical methods for
API characterization [**], single strand and duplex
	 
	 	ii.	 	Specifications and release methods
	 
	 	iii.	 	IPC methods
	 
	 	iv.	 	API stability, storage conditions, issues
	 
	 	v.	 	Impurity profiles: what is
acceptable, characterization of product-related compounds
	 
	 	vi.	 	Endotoxin, adventitious agents
control
	 
	 	vii.	 	Comparability strategy
	 
	 	viii.	 	History of difficulties with
analytical methodologies

	 	e.	 	Costs

	 	i.	 	Experience to date with typical
manufacturing costs per development phase, at pre-commercial scale

	 	f.	 	API CMC development

	 	i.	 	Typical development times, costs
	 
	 	ii.	 	Typical API supply requirements per
phase
	 
	 	iii.	 	Supply outsourcing: typical lead
times, technical transfer issues

RNAi Platform Transfer from Alnylam to Licensee

	4.	 	Mid-scale Synthesis

	 	a.	 	Sourcing of raw materials and reagents
	 
	 	b.	 	SOP for synthesis and purification

Page 5 of 9, Schedule F

 

	 	c.	 	SOP for analytic characterization
	 
	 	d.	 	List of equipment required

	5.	 	Large-scale synthesis

	 	a.	 	Sourcing of raw materials and reagents
	 
	 	b.	 	SOP for synthesis and purification
	 
	 	c.	 	SOP for analytic characterization
	 
	 	d.	 	List of equipment required

	6.	 	Conjugation chemistry

	 	a.	 	Overview of [**] conjugates synthesized

	 	i.	 	Sourcing of raw materials and reagents
	 
	 	ii.	 	Detailed synthesis schemes
	 
	 	iii.	 	Analytic characterization
	 
	 	iv.	 	Summary of Issues/Difficulties
	 
	 	v.	 	Summary of in vitro and in vivo results
to date with [**] conjugates

	b.	 	Overview of [**] conjugates synthesized

	 	i.	 	Sourcing of raw materials and reagents
	 
	 	ii.	 	Detailed synthesis schemes
	 
	 	iii.	 	Analytic characterization
	 
	 	iv.	 	Summary of Issues/Difficulties
	 
	 	v.	 	Summary of in vitro and in vivo results
to date with [**] conjugates

	c.	 	Overview of [**] conjugates synthesized

	 	i.	 	Sourcing of raw materials and reagents
	 
	 	ii.	 	Detailed synthesis schemes
	 
	 	iii.	 	Analytic characterization
	 
	 	iv.	 	Summary of Issues/Difficulties
	 
	 	v.	 	Summary of in vitro and in vivo results
to date with [**] conjugates

	7.	 	Liposomal formulations

	 	a.	 	Overview of [**] formulations tested

	 	i.	 	Sourcing of raw materials and reagents
	 
	 	ii.	 	Detailed synthesis schemes
	 
	 	iii.	 	Analytic characterization
	 
	 	iv.	 	Summary of Issues/Difficulties

	 	b.	 	Summary of in vitro and in vivo results to date with [**]
	 
	 	c.	 	SOP for synthesis of [**]
	 
	 	d.	 	SOP for preparing [**] formulations
	 
	 	e.	 	SOP for analytic characterization methods for [**] formulations
	 
	 	f.	 	List of formulation and analytic equipment required

	8.	 	[**] formulations

	 	a.	 	List of equipment required
	 
	 	b.	 	SOP for preparing [**] formulations
	 
	 	c.	 	Analytic characterization methods

	9.	 	Analytic methods

Page 6 of 9, Schedule F

 

	 	a.	 	Summary of analytic methods tried and results

	10.	 	5’ RACE assay for evaluation of RNAi-mediated silencing

	 	a.	 	Primer design
	 
	 	b.	 	Sourcing of reagents and kits
	 
	 	c.	 	Experimental SOP

	11.	 	In vivo models for evaluation of RNAi delivery and activity

	 	a.	 	Animal models for delivery of siRNA to liver [**]

	 	i.	 	Typical experimental design
	 
	 	ii.	 	Experimental SOP for in vivo [**]
studies in rodent and non-human primate (where performed)
	 
	 	iii.	 	Experimental SOP for in vitro
[**] activity assays in rodent and non-human primate (where
performed).

Page 7 of 9, Schedule F

 

RNAi Platform Transfer From Kulmbach Facility to Alnylam

	12.	 	Bioinformatics and database systems

	 	a.	 	Transfer of bioinformatic search capability at Alnylam

	 	i.	 	Detailed information around the IT
programs and sequence databases required to perform bioinformatic
searches
	 
	 	ii.	 	Detailed SOP for carrying out and
analyzing bioinformatic searches

	 	b.	 	[**] siRNA chemical compound information storage database at
Alnylam

	13.	 	Small–scale synthesis

	 	a.	 	Overview of equipment requirements and small-scale process
procedures
	 
	 	b.	 	Detailed SOP for synthesis, annealing, and QC

	14.	 	Conjugation chemistry

	 	a.	 	Overview of [**] conjugates synthesized

	 	i.	 	Sourcing of raw materials and reagents
	 
	 	ii.	 	Detailed synthesis schemes
	 
	 	iii.	 	Analytic characterization
	 
	 	iv.	 	Summary of Issues/Difficulties
	 
	 	v.	 	Summary of in vitro and in vivo results
to date

	 	b.	 	Experimental design and SOP for in vitro and in vivo screening

	 	i.	 	[**] conjugates
	 
	 	ii.	 	[**] conjugates

	15.	 	[**] formulations

	 	a.	 	Overview of [**] investigated
	 
	 	b.	 	Synthesis and/or sourcing of [**]
	 
	 	c.	 	Formulation studies (including physico-chemical characterization
and SOP)
	 
	 	d.	 	Summary of in vitro and in vivo results to date
	 
	 	e.	 	Experimental design and SOP for in vitro and in vivo screening

	16.	 	Bioanalytics and analytics

	 	a.	 	Summary of analytic methods tried and results
	 
	 	b.	 	Summary of bioanalytic methods tried and results

	17.	 	IFN/[**] Assays

	 	a.	 	SOP for [**] interferon [**] induction assay
	 
	 	b.	 	Knowledge of specific siRNA sequence motifs that are known
immunostimulators
	 
	 	c.	 	Summary on the role of chemical modifications in abrogating
immunostimulation

	18.	 	In vitro models for evaluation of RNAi delivery and activity

	 	a.	 	In vitro [**] screening model

	 	 i.	 	[**] design
	 
	 	 ii.	 	[**] construction

Page 8 of 9, Schedule F

 

	 	iii.	 	Design of typical siRNA screen
	 
	 	iv.	 	Experimental SOP

	 	b.	 	In vitro cell line-based screen of [**] target

	 	i.	 	Cell transfection optimization procedure
	 
	 	ii.	 	mRNA assay readout [**] – design and
optimization
	 
	 	iii.	 	Design of typical siRNA screen
	 
	 	iv.	 	Experimental SOP

	19.	 	In vivo models for evaluation of RNAi delivery and activity

	 	a.	 	[**] model to analyse silencing in multiple tissues

	 	i.	 	Typical experimental design
	 
	 	ii.	 	Experimental SOP

	 	b.	 	[**] lung model [**]

	 	i.	 	Typical experimental design
	 
	 	ii.	 	Experimental SOP

Page 9 of 9, Schedule F

 

Schedule G

Press Release

			
	 	 	 
	Media release
	 	

Basel, 9 July 2007

Roche and Alnylam form major alliance on RNAi therapeutics

	–	 	Roche accesses Nobel Prize winning technology for drug
discovery and development
	 
	–	 	Alnylam’s site in Germany to become Roche’s Center of
Excellence for RNAi therapeutics
	 
	–	 	Alnylam to receive 331 million US dollars in upfront payments
and equity investment

Roche and the US-based biopharmaceutical company Alnylam Pharmaceuticals, Inc. (Nasdaq: ALNY)
announced today that they have entered into a major alliance in which Roche obtains a non-exclusive
license to Alnylam’s technology platform for developing RNAi (RNA interference) therapeutics. The
alliance will initially cover four therapeutic areas: oncology, respiratory diseases, metabolic
diseases, and certain liver diseases. Alnylam and Roche also will collaborate on RNAi drug
discovery for one or more disease targets in these therapeutic areas. In addition, Roche will
acquire Alnylam’s European research site located in Kulmbach, Germany (Bavaria), subject to
regulatory approval. This site will become Roche’s Center of Excellence for RNAi therapeutics
discovery.

RNAi is a potential foundation for a whole new class of human therapeutic products. RNAi is a
natural mechanism that the body uses to inhibit expression of certain genes.

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Harnessing the activity of RNAi creates a direct opportunity to develop specific and potent drugs
against diseases that are difficult to treat.

“Alnylam has made significant advances in RNAi therapeutics, one of the most promising approaches
to tomorrow’s healthcare technology. Working together with Alnylam provides us with new
capabilities to target complex diseases within our focus areas,” said Lee E. Babiss, Head of Roche
Global Pharma Research. “Our mission is to find novel solutions for patients who suffer from
difficult to treat diseases and we will be fully committed to this goal, together with our new
colleagues located at the acquired site in Kulmbach.”

“We are pleased to form this new alliance with Roche, which is widely recognised for its commitment
to innovation in biotechnology. We look forward to working together to advance our transformative
technology into a whole new class of drugs,” said John Maraganore, Ph.D., President and Chief
Executive Officer of Alnylam. “Such significant support from Roche will also strengthen Alnylam’s
efforts to build a leading innovation-based biopharmaceutical company. Indeed, together with our
demonstrated commitment to scientific excellence, advancement of our pipeline and unparalleled
intellectual property estate, we believe that this new alliance greatly extends our leadership
position in the discovery and development of RNAi therapeutics.”

Alnylam-Roche Collaboration

Alnylam has granted to Roche a non-exclusive license providing Roche access to broad Alnylam
intellectual property (IP) and know-how, including fundamental, chemistry and delivery IP.
Indications will initially include oncology, respiratory disease, metabolic disease and certain
liver diseases. Alnylam maintains the right to non-exclusively license its IP to additional
partners in potential future agreements. In addition, Alnylam and Roche will collaborate on one or
more disease targets to be identified in the future in exchange for milestone and royalty payments.

The transaction includes Roche’s acquisition of Alnylam’s European research site in Kulmbach,
Germany (Bavaria), with about 40 employees. The team in Kulmbach will remain dedicated to RNAi
therapeutics discovery as a new Center of Excellence for RNAi therapeutics within Roche’s global
research organisation.

The alliance could be valued at over 1 billion US dollars in consideration of upfront payments,
potential product milestone payments for multiple products and field expansion payments, excluding
potential royalties on future sales of commercial products. Under the terms of the agreement, Roche
will pay Alnylam 331 million US dollars in upfront cash payments and equity investment, including
1.975 million shares of Alnylam common stock the Roche Venture Fund agreed to purchase at 21.50 US
dollars per share, representing just less than five percent of Alnylam’s outstanding common stock.
Roche will also pay Alnylam milestones on products as they advance in development and
commercialisation as well as royalties on future sales of commercial products. Further, Roche may
pay Alnylam field expansion payments to increase the number of therapeutic areas.

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The close of the agreements, including Roche’s purchase of Alnylam shares and purchase of Alnylam’s
site in Germany, is subject to certain regulatory approvals and is expected to occur within
approximately 30 days.

About RNAi

RNAi (RNA interference) is a revolution in biology, representing a breakthrough in understanding
how genes are turned on and off in cells, and a completely new approach to drug discovery and
development. Its discovery has been heralded as “a major scientific breakthrough that happens once
every decade or so,” and represents one of the most promising and rapidly advancing frontiers in
biology and drug discovery today which was awarded the Nobel Prize in October 2006. RNAi is a
natural process of gene silencing that occurs in organisms ranging from plants to mammals. By
harnessing the natural biological process of RNAi occurring in our cells, the creation of a major
new class of medicines, known as RNAi therapeutics, is on the horizon. RNAi therapeutics target the
cause of diseases by potently silencing specific messenger RNAs (mRNAs), thereby preventing
disease-causing proteins from being made. RNAi therapeutics have the potential to treat disease and
help patients in a fundamentally new way.

About Alnylam Pharmaceuticals

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

About the Roche Venture Fund

The Roche Venture Fund makes investments in early stage biotech and diagnostics companies to
support innovative technologies and medicines. Based in Basel, Switzerland, the Roche Venture Fund
manages a portfolio of over 25 companies in 10 countries.

About Roche

Headquartered in Basel, Switzerland, Roche is one of the world’s leading research-focused
healthcare groups in the fields of pharmaceuticals and diagnostics. As one of the

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world’s biggest biotech companies and an innovator of products and services for the early
detection, prevention, diagnosis and treatment of diseases, the Group contributes on a broad range
of fronts to improving people’s health and quality of life. Roche is one of the world leaders in
in-vitro diagnostics and drugs for cancer and transplantation, a market leader in virology and
active in other major therapeutic areas such as autoimmune diseases, inflammation, metabolism and
central nervous system. In 2006 sales by the Pharmaceuticals Division totalled 33.3 billion Swiss
francs, and the Diagnostics Division posted sales of 8.7 billion Swiss francs. Roche employs
roughly 75,000 people worldwide and has R&D agreements and strategic alliances with numerous
partners, including majority ownership interests in Genentech and Chugai. Additional information
about the Roche Group is available on the Internet at www.roche.com.

Roche Group Media Office

Phone: +41 61 688 8888 / e-mail: basel.mediaoffice@roche.com

	–	 	Daniel Piller (Head of Roche Group Media Office)
	 
	–	 	Katja Prowald (Head of Science Communications)
	 
	–	 	Martina Rupp
	 
	–	 	Baschi Dürr
	 
	–	 	Claudia Schmitt

Page 4 of 4, Schedule Gexv10w1

Exhibit 10.1

EXECUTION VERSION

TERM LOAN FACILITY AGREEMENT

     TERM LOAN FACILITY AGREEMENT, dated as of February 25, 2009 (as the same may be amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), between THE
TALBOTS, INC., a corporation duly organized and validly existing under the laws of the State of
Delaware (the “Borrower”) and AEON CO., LTD., a corporation organized and existing under
the laws of Japan (the “Lender”).

     WHEREAS, the Borrower has asked the Lender to extend credit to the Borrower, and the Lender
has agreed to extend such credit, consisting of a Term Loan (as defined below) in the aggregate
principal amount of $200,000,000, subject to the terms and conditions set forth herein;

     WHEREAS, the proceeds of the Term Loan shall be used solely to refinance the Existing Credit
Facility (as defined below) and to pay fees and expenses related to this Credit Agreement; and

     WHEREAS, the Lender is willing to extend such credit to the Borrower, subject to the terms and
conditions hereinafter set forth.

     NOW, THEREFORE, the Borrower and the Lender hereby agree as follows:

     1. Definitions. (a) As used in this Credit Agreement, unless otherwise defined herein, the
following terms shall have the following meanings (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):

     “Affiliate” shall mean, as to any Person, any corporation or other entity that,
directly or indirectly, controls, is controlled by or is under common control with such Person.
For purposes of this definition, the term “control” (including “controlling,” “controlled by” and
“under common control with”) of a Person means the possession, direct or indirect, of the power to
vote 10% or more of the voting stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting stock, by contract
or otherwise. For the purposes of Section 3 and Section 4 of this Credit Agreement, the Lender and
its Affiliates (other than any Person constituting an Affiliate of the Borrower solely by virtue of
the Lender’s ownership of voting stock of the Borrower) shall not constitute an Affiliate of the
Borrower.

     “Applicable Spread” shall mean a rate per annum equal to 6.00%.

     “Asset Disposition” shall mean any Disposition of property or series of related
Dispositions of property, including any Capital Stock, by the Borrower or any of its Subsidiaries
(excluding any such Disposition permitted by clause (i), (ii), (iii), (iv) or (v) of Section
4.1(w)).

     “Assignee” is defined in Section 8.3(a).

 

 

     “Board” shall mean the Board of Governors of the Federal Reserve System of the United
States of America.

     “Borrower” is defined in the preamble of this Credit Agreement.

     “Borrower’s Account” shall mean the bank account established by the Borrower, at a
financial institution designated by the Lender prior to the Closing Date, for the purposes of this
Credit Agreement (or such other bank account as the parties hereto may mutually agree).

     “Business Day” shall mean any day other than a Saturday, Sunday or other day on which
commercial banks are required or authorized to be closed in New York, New York or Tokyo, Japan;
provided, however, that when used in connection with the payment or prepayment of
any amounts accruing interest at such rate or providing notices in connection with such rate,
“Business Day” shall mean any Business Day in New York, New York or Tokyo, Japan in which dealings
in Dollars are carried on in the London interbank market; provided, further, that
when used in connection with the calculation or determination of LIBOR, “Business Day” shall mean
any Business Day in London, in which dealings in Dollars are carried on in the London interbank
market.

     “Capital Expenditures” shall mean for any period, with respect to any Person, the
aggregate of all expenditures (whether paid in cash or other consideration or accrued as a
liability and including that portion of Capital Lease Obligations which is capitalized on the
consolidated balance sheet of such Person) by such Person and its Subsidiaries during such period
for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or
additions to equipment (including capitalized replacements, capitalized repairs and improvements
during such period) that, in conformity with GAAP, are included in “additions to property, plant or
equipment” or comparable items reflected in the consolidated statement of cash flows of such Person
and its Subsidiaries.

     “Capital Stock” shall mean (i) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents (however designated and whether or
not voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership or other equity interests of such Person, in each case including
any warrants, options or other rights entitling the holder thereof to purchase or acquire any of
the foregoing.

     “Capitalized Lease Obligations” shall mean obligations for the payment of rent for any
real or personal property under leases or agreements to lease that, in accordance with GAAP, have
been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of
any such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

     “Closing Date” shall mean the date on which the Term Loan is made by the Lender in
favor of the Borrower, which shall be the later to occur of (i) February 27, 2009 and (ii) the
first Business Day after the conditions precedent set forth in Section 5 hereof have been satisfied
or waived in accordance with the terms hereof.

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     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and
the regulations and published interpretations thereof.

     “Consolidated EBITDA” shall mean, with respect to any Person for any period, (i) the
Consolidated Net Income of such Person and its Subsidiaries for such period, plus without
duplication, (ii) the sum of the following amounts of such Person and its Subsidiaries for such
period and to the extent deducted in determining Consolidated Net Income of such Person for such
period: (A) Consolidated Interest Expense, net of consolidated interest income for such period,
(B) income tax expense, (C) depreciation expense, (D) amortization expense, (E) any extraordinary,
unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income for such period,
non-cash losses on sales of assets not in the ordinary course of business), excluding any such
non-cash charges to the extent that it represents an accrual or reserve for potential cash charges
in any future period and (F) any other non-cash charges in excess of $500,000.00, reducing
Consolidated Net Income (excluding any such non-cash charges to the extent that it represents an
accrual or reserve for potential cash charges in any future period).

     “Consolidated Excess Cash Flow” means, with respect to any fiscal period and with
respect to Borrower and its Subsidiaries determined on a consolidated basis in accordance with
GAAP, an amount, if positive, equal to (a) Consolidated EBITDA, minus (b) the sum of (i)
the cash portion of Consolidated Interest Expense paid during such fiscal period, (ii) current
taxes based on income of Borrower and its Subsidiaries and paid in cash with respect to such
period, (iii) all scheduled or voluntary principal payments made in respect of the Term Loan during
such period and (iv) the cash portion of Capital Expenditures incurred during such period.

     “Consolidated Interest Expense” shall mean, with respect to any Person for any period,
gross interest expense of such Person and its Subsidiaries for such period determined on a
consolidated basis and in accordance with GAAP (including, without limitation, interest expense
paid to Affiliates of such Person), plus the upfront costs or fees for such period associated with
Hedging Agreements (to the extent not included in gross interest expense), in each case, determined
on a consolidated basis and in accordance with GAAP.

     “Consolidated Net Income” means, with respect to any Person for any period, the net
income (loss) of such Person and its Subsidiaries for such period, determined on a consolidated
basis and in accordance with GAAP, but excluding from the determination of Consolidated Net Income
(without duplication) (a) any extraordinary gains or losses or gains or losses from Dispositions
(excluding any sales of Inventory in the ordinary course of business on ordinary business terms),
(b) restructuring charges and (c) effects of discontinued operations.

     “Default” shall mean any event or circumstance that with the giving of notice, the
lapse of time or both would constitute an Event of Default.

     “Default Rate” is defined in Section 2.5.

     “Dispose” or “Disposition” shall mean any transaction, or series of related
transactions, pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers or
otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other

3

 

Person, in each case, whether or not the consideration therefor consists of cash, securities
or other assets owned by the acquiring Person.

     “Dollars” and the symbol “$” shall mean lawful money of the United States of
America.

     “Domestic Subsidiary” shall mean, with respect to any Person, each Subsidiary of such
Person organized under the laws of the United States of America, any State thereof or the District
of Columbia.

     “EMAIL” is defined in Section 8.6.

     “Environmental Action” shall mean any complaint, summons, citation, notice, directive,
order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or
other communication from any governmental agency, department, bureau, office or other authority, or
any third party involving violations of Environmental Laws or releases of Hazardous Materials from
(i) any assets, properties or businesses of the Borrower or any of its Subsidiaries or any
predecessor in interest; (ii) from adjoining properties or businesses; or (iii) from or onto any
facilities which received Hazardous Materials generated by the Borrower or any of its Subsidiaries
or any predecessor in interest.

     “Environmental Law” shall mean any present or future statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding determination of any
Governmental Authority imposing liability or establishing standards of conduct for protection of
the environment as the same may be amended or supplemented from time to time.

     “Environmental Liabilities and Costs” shall mean all liabilities, monetary
obligations, remedial actions, losses, damages, punitive damages, consequential damages, treble
damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of (i) any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition or a release of
Hazardous Materials or (ii) any breach by the Borrower or any of its Subsidiaries of any
Environmental Law.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time.

     “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that,
together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

     “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which
the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated
funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with

4

 

respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by
the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to
an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the
Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
(or that could reasonably be expected to result in Withdrawal Liability) or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA.

     “Event of Default” is defined in Section 6.1 hereof.

     “Excess Cash Flow Application Date” is defined in Section 2.7(a) hereof.

     “Excluded Subsidiary” shall mean each non wholly-owned Subsidiary of the Borrower and
each Subsidiary of the Borrower that is not a Guarantor.

     “Excluded Taxes” means, (i) any Taxes imposed on the recipient’s overall net income,
or franchise or other taxes imposed in lieu of Taxes on overall net income (however denominated),
by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient
is organized or in which its principal office is located (or, in the case of the Lender, in which
its applicable lending office is located) or otherwise as a result of a present or former
connection between the recipient and the jurisdiction imposing such Tax, other than a connection
arising from such recipient having executed, received a payment under or enforced this Credit
Agreement and (ii) any branch profits taxes imposed by the United States; it being understood, for
the avoidance of doubt, that Excluded Taxes shall not include any withholding tax, including,
without limitation, a withholding tax imposed by the United States on payments to a non-US, person
who is not otherwise subject to tax in the United States on a net income basis, other than any
withholding tax that would apply to amounts payable to a recipient at the time the recipient
becomes a party to this Agreement or is attributable to the recipient’s failure to comply with
Section 7.2(f).

     “Existing Credit Facility” shall mean the Term Loan Agreement, dated as of July 24,
2006, as amended through the date hereof, among the Borrower, each of the Existing Lenders and
Mizuho Corporate Bank Ltd, as agent.

     “Existing Lenders” shall mean the lenders party to the Existing Credit Facility.

     “Fair Market Value” shall mean, with respect to any asset or property, the price which
could be negotiated in an arm’s length, free market transaction, for cash, between a willing seller
and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value will be determined in good faith by the board of directors of the
Borrower, and, upon the Lender’s request, shall be evidenced by a certificate (together with
supporting calculation) of the Borrower to the Lender.

     “FAX” is defined in Section 8.6.

5

 

     “Federal Funds Rate” shall mean (i) for any Business Day, the rate on overnight
federal funds transactions with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day by the Federal Reserve Bank of New York, or, if such rate is not
published for any Business Day, the average of the quotations for such day on such transactions
received by the Lender from three Federal funds brokers of recognized standing selected by the
Lender, and (ii) for any day which is not a Business Day, the Federal Funds Rate for the preceding
Business Day.

     “GAAP” shall mean generally accepted accounting principles in effect from time to time
in the United States, applied on a consistent basis.

     “Guaranty” means the Guaranty, in the form of Exhibit C hereto, to be executed
and delivered by each Guarantor in favor of the Lender.

     “Guarantors” means (a) the Initial Guarantors and (b) each other Person that becomes a
Guarantor after the Closing Date pursuant to Section 4.1(z), and “Guarantor” means any one
of them.

     “Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof and any department, commission, board, bureau, instrumentality,
agency or other entity exercising legislative, judicial regulatory or administrative functions of
or pertaining to government.

     “Hazardous Materials” shall mean (a) petroleum and petroleum products, byproducts or
breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls
and radon gas and (b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminate under any Environmental Law.

     “Hedging Agreements” shall mean any interest rate, commodity or equity swap, cap,
floor or forward rate agreement or collar arrangements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and other similar agreements or
arrangements designed to protect against fluctuations in interest rates or currency, commodity or
equity values, and any confirmation executed in connection with any such agreement or arrangement.

     “Indebtedness” shall mean with respect to any Person, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) all obligations of such Person for the
deferred purchase price of assets or services acquired by such Person which, in accordance with
GAAP, would be shown on the liability side of the balance sheet of such Person, (iii) all
obligations of such Person under or evidenced by bonds, debentures, notes or other similar
instruments or upon which interest payments are customarily made, (iv) all obligations and
liabilities, contingent or otherwise, of such Person in respect of letters of credit, acceptances
and similar facilities, including, without duplication, all drafts drawn thereunder, (v) all
obligations of the kind referred to in clauses (i) through (iv) and (vi) through (viii) of this
definition secured by any Lien on any property owned by such Person whether or not owing by such
Person and even though such Person has not assumed or become liable for payment thereof, (vi) all

6

 

Capitalized Lease Obligations of such Person, (vii) all obligations and liabilities of such
Person created or arising under any conditional sales or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights and remedies of the
lessor, seller and/or lender thereunder are limited to repossession or sale of such property, or
agreements to pay a specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (viii) solely for purposes of Section 6.1(e),
contingent obligations of such Person under any Hedging Agreements, as calculated in accordance
with accepted practice, (ix) all obligations referred to in clauses (i) through (viii) of this
definition of another Person (a) guaranteed directly or indirectly in any manner by such Person or
(b) secured by (or for which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in any property owned by such Person;
provided, however, that the term Indebtedness shall not include (y) trade payables
(including trade letters of credit issued for the account of such Person in the ordinary course of
its business, but excluding drafts drawn thereunder or any reimbursement obligations in respect
thereof) or accrued expenses, in each case arising in the ordinary course of business and not more
than 60 days delinquent or (z) gift cards and other customer liabilities arising in the ordinary
course of business of such Person. The Indebtedness of any Person shall include the Indebtedness
of any partnership of or joint venture in which such Person is a general partner or joint venturer.

     “Initial Guarantors” shall mean each Domestic Subsidiary of Borrower listed on
Schedule 1(a) hereto.

     “Interest Payment Date” shall mean the last day of February and August in each year.

     “Interest Period” shall mean (a) the period commencing on and including the Closing
Date and ending on but excluding the first Interest Payment Date occurring after the Closing Date,
and (b) thereafter, each period commencing on and including the immediately preceding Interest
Payment Date and ending on but excluding the next succeeding Interest Payment Date;
provided, however, that (i) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall end on the immediately preceding Business Day, and (ii) no
Interest Period shall end after the Maturity Date and any Interest Period which would, but for this
clause, end after the Maturity Date shall instead end on the Maturity Date.

     “J. Jill” shall mean the assets and business of the Borrower and its Subsidiaries
compromising the J. Jill brand.

     “Lender” is defined in the preamble of this Credit Agreement.

     “LIBOR” shall mean, with respect to any Interest Period pertaining to any portion of
the Term Loan:

               (a) the rate of interest per annum determined by the Lender on the basis of the rate for
deposits in Dollars for a period comparable to such Interest Period commencing on the first day of
such Interest Period appearing on Page 3750 of the Telerate screen or any successor thereto at
approximately 11:00 a.m. (London time) on the date two Business Days prior to the first day of such
Interest Period, or

7

 

               (b) if the rate in the preceding subsection (a) is not available, the rate of interest per
annum determined by the Lender to be the rate in the London interbank market at approximately 11:00
a.m. (London time) on the date two Business Days prior to the first day of such Interest Period for
the offering by Mizuho in the interbank market of deposits in Dollars for a period equal to such
Interest Period in amounts comparable to the principal amount of the outstanding Term Loan to which
such Interest Period applies, at the time as of which the Lender makes such determination.

     “Lien” shall mean any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential arrangement of any
nature whatsoever.

     “Loan Account” is defined in Section 2.9 hereof.

     “Loan Documents” shall mean each of this Credit Agreement, each Note, the Guaranty and
each other document, certificate, instrument and agreement executed and delivered pursuant to or in
connection herewith or therewith, as the same may be amended, supplemented or otherwise modified
from time to time.

     “Material Adverse Effect” shall mean a material adverse effect on any of (a) the
operations, business, assets, properties, or condition (financial or otherwise) of the Borrower and
its Subsidiaries, taken as a whole, (b) the ability of the Borrower or any of its Subsidiaries to
perform any of its obligations hereunder, under any Note or under any other Loan Document to which
it is a party and (c) the legality, validity or enforceability of this Credit Agreement, any Note
or any other Loan Document.

     “Maturity Date” shall mean the earlier of (i) August 31, 2009, or, if such day is not
a Business Day, the next succeeding Business Day; provided, that, the Borrower
shall be permitted, in its sole discretion, to extend such date for successive six-month periods
upon prior written notice to the Lender no later than five Business Days prior to the last day of
such six-month period; provided, further, that, in no event shall the
Maturity Date extend past February 27, 2012, and (ii) such earlier date on which the Term Loan
become due and payable (whether at stated maturity, by mandatory prepayment, by acceleration or
otherwise) in accordance with the terms hereof.

     “Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

     “Net Cash Proceeds” shall mean:

               (a) with respect to any Asset Disposition, the amount of cash proceeds actually received
(directly or indirectly) from time to time (whether as initial consideration or through the payment
of deferred consideration) by or on behalf of Borrower or its Subsidiaries, in connection therewith
after deducting therefrom only (i) the amount of any Indebtedness secured by any Permitted Lien on
any asset (other than Indebtedness assumed by the purchaser of such asset) which is required to be,
and is, repaid in connection with such Asset Disposition, (ii) reasonable fees, commissions, and
expenses related thereto and required to be paid by Borrower or such Subsidiary in connection with
such Asset Disposition (including lease

8

 

termination payments and employee compensation payments) and (iii) taxes paid or payable to
any taxing authorities by Borrower or such Subsidiary in connection with such Asset Disposition;
and

               (b) with respect to the issuance or incurrence of any Indebtedness by Borrower or any of its
Subsidiaries, or the issuance by Borrower or any of its Subsidiaries of any shares of its Capital
Stock, the aggregate amount of cash actually received (directly or indirectly) from time to time
(whether as initial consideration or through the payment or disposition of deferred consideration)
by or on behalf of Borrower or such Subsidiary in connection with such issuance or incurrence,
after deducting therefrom only (i) reasonable fees, commissions, underwriting discounts, and
expenses related thereto and required to be paid by Borrower or such Subsidiary in connection with
such issuance or incurrence and (ii) taxes paid or payable to any taxing authorities by Borrower or
such Subsidiary in connection with such issuance or incurrence.

     “Non-Cash Pay Preferred Stock” shall mean preferred Capital Stock of the Borrower that
(a) is not required to be prepaid, redeemed, repurchased or defeased, in whole or in part, whether
on one or more fixed dates, upon the occurrence of one or more events or at the option of any
holder thereof, and which do not require any payment of cash dividends or distributions, in each
case prior to the date that is six months after the Maturity Date and (b) is not exchangeable or
convertible into Indebtedness of the Borrower or any Subsidiary or any preferred stock or other
Capital Stock (other than common equity of the Borrower or other Non-Cash Pay Preferred Stock).

     “Note” shall mean a promissory note of the Borrower evidencing the Term Loan, payable
to the order of the Lender, substantially in the form of Exhibit A hereto, as the same may
be amended, supplemented and otherwise modified from time to time, or any substitute therefor.

     “Other Taxes” is defined in Section 7.2(b).

     “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

     “Permitted Indebtedness” shall mean:

               (a) any Indebtedness owing to the Lender under this Credit Agreement and the other Loan
Documents;

               (b) any other Indebtedness listed on Schedule 4.1(s) (including Indebtedness under
lines of credit and other credit facilities described on such Schedule, as in effect on the date
hereof), and the extension of maturity, refinancing or modification of the terms thereof;
provided, however, that after giving effect to such extension, refinancing or
modification: (A) the amount of such Indebtedness is not greater than the amount of Indebtedness
outstanding immediately prior to such extension, refinancing or modification and (B) such
Indebtedness does not have the benefit of covenants more restrictive in any material respect than
those set forth in this Credit Agreement;

               (c) Indebtedness evidenced by Capitalized Lease Obligations entered into in order to finance
Capital Expenditures made by the Borrower in accordance with the

9

 

provisions of this Credit Agreement, which Indebtedness, when aggregated with the principal
amount of all Indebtedness incurred under this clause (c) and clause (d) of this definition, does
not exceed $100,000,000 at any time outstanding;

               (d) Indebtedness permitted by clause (d) or (e) of the definition of “Permitted
Liens”;

               (e) Indebtedness permitted under Section 4.1(u);

               (f) Subordinated Debt; and

               (g) additional Indebtedness incurred by the Borrower or any Guarantor approved by the Lender.

     “Permitted Investments” shall mean (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case, maturing within six months
from the date of acquisition thereof; (b) commercial paper, maturing not more than 270 days after
the date of issue rated P-1 by Moody’s or A-1 by Standard & Poor’s; (c) certificates of deposit
maturing not more than 270 days after the date of issue, issued by commercial banking institutions
and money market or demand deposit accounts maintained at commercial banking institutions, each of
which is a member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000; (d) repurchase agreements having maturities of not
more than 90 days from the date of acquisition which are entered into with major money center banks
included in the commercial banking institutions described in clause (c) above and which are secured
by readily marketable direct obligations of the United States Government or any agency thereof;
(e) money market accounts maintained with mutual funds having assets in excess of $2,500,000,000;
and (f) tax exempt securities rated A or better by Moody’s or A+ or better by Standard & Poor’s
maturing within six months from the date of acquisition thereof.

     “Permitted Liens” shall mean:

               (a) Liens for taxes, assessments and governmental charges the payment of which is not required
under Section 4.1(i);

               (b) Liens imposed by law, such as carriers’, warehousemen’s, mechanics’,
materialmen’s and
other similar Liens arising in the ordinary course of business and securing obligations (other than
Indebtedness for borrowed money) that are not overdue by more than 30 days or are being contested
in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a
reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;

               (c) Liens described on Schedule 4.1(r), but not the extension of coverage thereof
to
other property or the extension of maturity, refinancing or other modification of the terms thereof
or the increase of the Indebtedness secured thereby;

10

 

               (d) (i) purchase money Liens on equipment acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of its business to secure the purchase price of such equipment
or Indebtedness incurred solely for the purpose of financing the acquisition of such equipment or
(ii) Liens existing on such equipment at the time of its acquisition; provided,
however, that (A) no such Lien shall extend to or cover any other property of the Borrower
or any of its Subsidiaries, (B) the principal amount of the Indebtedness secured by any such Lien
shall not exceed the lesser of 90% of the fair market value or the cost of the property so held or
acquired and (C) the aggregate principal amount of Indebtedness secured by any or all such Liens,
when aggregated with the principal amount of all Indebtedness incurred under this clause (d) and
clauses (c) and (d) of the definition of Permitted Indebtedness, shall not exceed at any one time
outstanding $100,000,000;

               (e) deposits and pledges of cash securing (i) obligations incurred in respect of
workers’
compensation, unemployment insurance or other forms of governmental insurance or benefits, (ii) the
performance of bids, tenders, leases, contracts (other than for the payment of money) and statutory
obligations, (iii) obligations on surety or appeal bonds, but only to the extent such deposits or
pledges are incurred or otherwise arise in the ordinary course of business and secure obligations
not past due or (iv) letters of credit or other extensions of credit extended for any of the
foregoing purposes;

               (f) easements, zoning restrictions and similar encumbrances on real property and minor
irregularities in the title thereto that do not (i) secure obligations for the payment of money or
(ii) materially impair the value of such property or its use by the Borrower or any of its
Subsidiaries in the normal conduct of such Person’s business;

               (g) Liens securing Indebtedness permitted by subsection (b) of the definition of Permitted
Indebtedness; provided, that, the Borrower provides, and causes its Subsidiaries to
provide, concurrently therewith, that the obligations under this Credit Agreement, the Note and
each other Loan Document are equally and ratably so secured.

               (h) Liens securing Indebtedness permitted by subsection (c) of the definition of Permitted
Indebtedness.

     “Person” shall mean a natural person, corporation, partnership, limited liability
company or partnership, association, joint-stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity.

     “Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

     “Recovery Event” shall mean any settlement of or payment in respect of any property or
casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or
any of its Subsidiaries.

11

 

     “Reinvestment Notice” means a written notice from the Borrower stating that no Default
has occurred and is continuing and that the Borrower or any Subsidiary intends and expects to use
all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire
assets useful in its business within six (6) months.

     “Restricted Payment” shall mean any dividend or other distribution (whether in cash,
securities or other property) with respect to any shares of any class of Capital Stock of the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such shares of Capital Stock of the
Borrower or any option, warrant or other right to acquire any such shares of Capital Stock of the
Borrower.

     “Solvent” shall mean, with respect to any Person on a particular date, that on such
date (a) the fair value of the property of such Person is not less than the total amount of the
liabilities of such Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such Person on its
existing debts as they become absolute and matured, (c) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature, and (e) such Person is not engaged in a business or a transaction, and
is not about to engage in a business or a transaction, for which such Person’s property would
constitute unreasonably small capital.

     “Subordinated Debt” shall mean any Indebtedness of the Borrower that (i) does not
mature prior to August 31, 2012, (ii) is not required to be repaid, prepaid, redeemed, amortized,
repurchased or defeased, in whole or in part, prior to August 31, 2012 (other than (x) pursuant to
an acceleration of the obligations thereunder by the lenders party thereto following an event of
default and (y) pursuant to customary asset sale or change in control provisions requiring
redemption or repurchase thereof, in each case only if and to the extent then permitted by this
Credit Agreement and the subordination provisions of such Indebtedness), (iii) is not secured by
any assets of the Borrower or any Subsidiary, (iv) is not exchangeable or convertible into
Indebtedness of the Borrower or any Subsidiary (except other Subordinated Debt) or any preferred
stock other than Non-Cash Pay Preferred Stock, (v) does not have the benefit of covenants more
restrictive in any material respect than those set forth in this Credit Agreement and (vi) is
subordinated to the obligations of the Borrower under this Credit Agreement pursuant to a written
agreement reasonably satisfactory in form and substance to and approved in writing by the Lender.

     “Subsidiary” shall mean, as to any Person, any corporation or other entity of which
Capital Stock or other ownership interests having (in the absence of contingencies) ordinary voting
power to elect at least a majority of the board of directors (or persons performing similar
functions) of such corporation or other entity which is, at the time of determination, owned
directly, or indirectly through one or more intermediaries, by such Person.

     “Taxes” is defined in Section 7.2(a).

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     “Term Loan” shall mean the loan made by the Lender to the Borrower on the Closing Date
pursuant to Section 2.1.

     “Term Loan Commitment” shall mean $200,000,000.

     “Threshold Amount” shall mean $10,000,000.

     “Tilton Property” shall mean that certain real property located in the Town of Tilton,
County of Belknap and State of New Hampshire owned by the Borrower, as further described in that
certain Mortgage, Assignment of Leases and Rents and Security Agreement dated March 1, 1999, by
mortgagor to mortgagee, and record in the Belknap County Registry of Deeds (the “Recorder’s
Office”) in Book 151 at Page 0596.

     “Uniform Commercial Code” is defined in Section 1(c).

     “USA Patriot Act” is defined in Section 4.1(p).

     “Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

               (b) Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise, (i) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the
words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer
to this Credit Agreement in its entirety and not to any particular provision hereof, (iv) all
references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Credit Agreement and (v) the words
“asset” and “property” shall be construed to have the same meaning and effect and to refer to any
right or interest in or to assets and properties of any kind whatsoever, whether real, personal or
mixed and whether tangible or intangible.

               (c) Accounting and Other Terms. Unless otherwise expressly provided herein, each
accounting term used herein shall have the meaning given it under GAAP applied on a basis
consistent with those used in preparing the financial statements referred to in Section 3(j). All
terms used in this Credit Agreement which are defined in Article 8 or Article 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the “Uniform
Commercial Code”) and which are not otherwise defined herein shall have the same meanings
herein as set forth therein, provided that terms used herein which are defined in the Uniform
Commercial Code as in effect in the State of New York on the date hereof shall

13

 

continue to have the same meaning notwithstanding any replacement or amendment of such statute
except as the Lender may otherwise determine.

               (d) Time References. Unless otherwise indicated herein, all references to time of
day refer to Eastern Standard Time or Eastern daylight saving time, as in effect in New York City
on such day. For purposes of the computation of a period of time from a specified date to a later
specified date, the word “from” means “from and including” and the words “to” and “until” each
means “to but excluding”; provided, however, that with respect to a computation of
fees or interest payable to the Lender, such period shall in any event consist of at least one full
day.

     2. The Term Loan

          2.1 The Term Loan Commitment. Upon satisfaction or waiver of all terms and conditions
precedent to borrowing (including absence of any Default) set forth herein, the Lender agrees to
make the Term Loan to the Borrower on the Closing Date, in aggregate principal amount not to exceed
the Term Loan Commitment. Any principal amount of the Term Loan which is repaid or prepaid may not
be reborrowed. The Lender’s Term Loan Commitment shall terminate on the Closing Date and,
thereafter, the Lender shall have no obligation whatsoever to make any Term Loan to the Borrower.

          2.2 Making the Term Loan. Upon fulfillment of the applicable conditions set forth in Section
5 hereof (or the waiver thereof by the Lender as herein prescribed), the Lender shall make its Term
Loan to be made by it hereunder on the Closing Date by wire transfer of immediately available funds
by 2:00 p.m., New York City time, to the Borrower’s Account (or as directed by the Borrower
pursuant to the pay-off letter for the Existing Facility).

          2.3 Interest.

               (a) The Term Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the sum of (a) LIBOR and (b) the Applicable Spread.

               (b) Subject to Section 2.5, interest shall be payable on each Term Loan (i) in
arrears on each
Interest Payment Date and (ii) on the date on which the principal amount of the Term Loan becomes
due and payable hereunder (whether at stated maturity, by mandatory prepayment, optional
prepayment, acceleration or otherwise).

               (c) Notwithstanding anything herein to the contrary, all accrued interest shall be payable on
each date principal is payable hereunder pursuant to Sections 2.4, 2.6 and 2.7 or such earlier date
as herein required.

               (d) Interest shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.

               (e) In the event, and on each occasion, that on the date two Business Days prior to the
commencement of any Interest Period during which any portion of the Term Loan accrues interest at a
rate based upon LIBOR, the Lender shall have in good faith

14

 

determined that Dollar deposits are generally not available in the London interbank market, or
that reasonable means do not exist for ascertaining LIBOR, or that the rates at which such Dollar
deposits are being offered will not adequately and fairly reflect the cost of making or maintaining
the Term Loan at LIBOR during such Interest Period, the Lender shall, as soon as practicable
thereafter, give written or telecopy notice of such determination to the Borrower. In the event of
any such determination, interest shall accrue with respect to such Term Loan during such Interest
Period at a rate equal to the Federal Funds Rate plus the Applicable Spread. Each determination by
the Lender hereunder shall be conclusive absent manifest error.

          2.4 Principal Repayment; Note.

               (a) The Borrower shall repay the aggregate principal amount of the outstanding Term Loan,
together with all other outstanding amounts due and owing hereunder or under the other Loan
Documents, on the Maturity Date.

               (b) The Lender may request that the Term Loan be evidenced by a Note. In such event, the
Borrower shall execute and deliver to the Lender a Note payable to the order of the Lender, in a
principal amount equal to the Lender’s Term Loan. Thereafter, the Lender’s Term Loan evidenced by
such Note and interest thereon shall at all times (including after assignment pursuant to Section
8.3) be represented by one or more Notes in such form payable to the order of the payee named
therein. The Lender is hereby authorized by the Borrower to endorse on the schedule attached to a
Note (or on a continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of the Term Loan made by the Lender, the date
and amount of each principal payment and prepayment with respect thereto and the interest rate
applicable thereto; provided, however, that the failure of the Lender to make any
such notation (or any error in such notation) shall not affect any obligations of the Borrower
hereunder or under any Note. The Notes and the books and records of the Lender shall be conclusive
evidence of the information set forth therein absent manifest error.

          2.5 Default Interest. If at any time any Event of Default occurs and is continuing, the
principal, interest, fees and all other amount payable hereunder or under any other Loan Document
shall bear interest, from the date such Event of Default occurred until such Event of Default is
fully cured or waived, payable on demand, at a rate equal at all times to 15.00% per annum (the
“Default Rate”).

          2.6 Optional Prepayments. The Borrower may, upon at least three (3) Business Days’ prior
written notice to the Lender, prepay all or any portion of the aggregate principal amount of the
Term Loan. Each such prepayment shall be in an amount not less than $10,000,000 or an integral
multiple thereof and any portion of the Term Loan may be designated by the Borrower to be prepaid
if and only to the extent that prepayment is made on an Interest Payment Date or subject to the
payment of amounts described in Section 7.1(d) and (e). Each prepayment made pursuant to this
Section shall be accompanied by the payment of (i) accrued interest to date of such prepayment on
the amount prepaid and (ii) any and all payments required pursuant to Section 7.1 in respect of
such prepayment. Any principal of the Term Loan that is prepaid may not be reborrowed.

15

 

          2.7 Mandatory Prepayments.

               (a) If, for any fiscal year of the Borrower, including the fiscal year ending January 30,
2010, there shall be Consolidated Excess Cash Flow, the Borrower shall, on the relevant Excess Cash
Flow Application Date, apply 50% of such Consolidated Excess Cash Flow toward the prepayment of the
Term Loan as set forth in Section 2.8. Each such prepayment shall be made on the first Interest
Payment Date occurring at least five Business Days (an “Excess Cash Flow Application Date”)
after the earlier of (i) the date on which the financial statements of the Borrower referred to in
Section 4.1(a)(i), for the fiscal year with respect to which such prepayment is made, are required
to be delivered to the Lenders and (ii) the date such financial statements are actually delivered.

               (b) If on any date the Borrower or any Subsidiary shall receive Net Cash Proceeds from any
Asset Disposition (other than a Disposition of J. Jill) or Recovery Event then, unless a
Reinvestment Notice shall be delivered in respect thereof, an amount equal to 75% of such Net Cash
Proceeds shall be applied no later than the first Interest Payment Date occurring at least five
Business Days after the receipt of such Net Cash Proceeds toward the prepayment of the Term Loans
as set forth in Section 2.8; provided, that the Borrower may without penalty withhold
amounts owing pursuant to this Section 2.7(b) until such time as the amount of Net Cash Proceeds
received from all such Asset Dispositions and Recovery Events that would otherwise be required to
be applied toward the prepayment of Term Loans pursuant to this Section 2.7(b) shall exceed
$5,000,000 in the aggregate; provided, further, that, if the Net Cash
Proceeds subject to a Reinvestment Notice are not used within six (6) months of delivery of such
Reinvestment Notice for the purpose described therein, an amount equal to the Net Cash Proceeds not
so used shall be applied no later than the first Interest Payment Date occurring at least five
Business Days thereafter toward the prepayment of the Term Loan as set forth in Section 2.8.

               (c) If on any date the Borrower or any of its Subsidiaries shall receive Net Cash Proceeds
from a Disposition of J. Jill, an amount equal to 100% of the Net Cash Proceeds thereof shall be
applied no later than the first Interest Payment Date occurring at least five Business Days
following such Disposition, toward the prepayment of the Term Loan as set forth in Section 2.8.

               (d) If any Indebtedness shall be incurred by the Borrower or any of its Subsidiaries
(excluding Indebtedness permitted by clauses (a) through (e) of the definition of Permitted
Indebtedness), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied no later
than the first Interest Payment Date occurring at least five Business Days after the date of such
issuance or incurrence toward the prepayment of the Term Loan as set forth in Section 2.8.

               (e) No later than the first Interest Payment Date occurring at least five Business Days
following the date of the issuance by Borrower or any of its Subsidiaries of any shares of its or
their Capital Stock (other than (A) in the event that Borrower or any of its Subsidiaries forms any
Subsidiary in accordance with the terms hereof, the issuance by such Subsidiary of Capital Stock to
Borrower or such Subsidiary, as applicable and (B) the issuance of Capital Stock of Borrower to
directors, officers, and employees of Borrower and its Subsidiaries

16

 

pursuant to employee stock option plans (or other employee incentive plans or other
compensation arrangements) approved by the board of directors of the Borrower), an amount equal to
50% of the Net Cash Proceeds thereof shall be applied toward the prepayment of the Term Loan as
set forth in Section 2.8. The provisions of this Section 2.7(e) shall not be deemed to be implied
consent to any such issuance otherwise prohibited by the terms and conditions of this Credit
Agreement.

          2.8 Method of Payment.

               (a) Payments Generally. The Borrower shall make each payment required to be made by
it hereunder or under any other Loan Document (whether of principal, interest, fees or
reimbursement of amounts payable under Section 7.1, or otherwise) by the time expressly required
hereunder or under such other Loan Document for such payment (or, if no such time is expressly
required, by 12:00 p.m., New York City time), on the date when due, in immediately available funds,
without setoff or counterclaim. Any amounts received after such time on any date may, in the
discretion of the Lender, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. Any prepayments made pursuant to Section 2.6 or 2.7 made
on a date other than an Interest Payment Date shall subject to the amounts payable in Section
7.1(d) and (e). The Borrower will make each payment under this Credit Agreement to the Lender’s
Account in Dollars and in immediately available funds, except that payments pursuant to Section 7.1
shall be made directly to the Persons entitled thereto and payments pursuant to other Loan
Documents shall be made to the Persons specified therein. All payments under each Loan Document
shall be made in Dollars.

               (b) Any payments shall be applied first to default charges, indemnities, expenses and other
non-principal and interest amounts owed under any of the Loan Documents, if any, then to interest
due and payable on the Term Loan, and thereafter to the principal amount of the Term Loan due and
payable.

               (c) All computations of interest and fees shall be made by the Lender on the basis of a year
of 365/6 days for the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable; provided, however, that
if the Term Loan is repaid on the same day on which it is made, one day’s interest shall be paid on
such Term Loan.

               (d) Whenever any payment to be made hereunder or under any instrument delivered hereunder
shall be stated to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest; provided, however, that if such extension
would cause such payment to be made in a new calendar month or beyond the Maturity Date, such
payment shall be made on the immediately preceding Business Day.

          2.9 Loan Account. The Lender will maintain on its books a loan account in the Borrower’s
name (the “Loan Account”), showing the Term Loan, prepayments, the computation and payment
of interest, and any other amounts due and sums paid hereunder and under the other Loan Documents.
The entries made by the Lender in the Loan Account shall be

17

 

conclusive and binding on the Borrower as to the amount at any time due from the Borrower, absent manifest
error.

          2.10 Use of Proceeds. The Borrower shall apply the proceeds of the Term Loan solely to (a)
permanently repay and retire all existing Indebtedness of the Borrower under the Existing Credit
Facility and (b) pay fees and expenses in connection with the transactions contemplated hereby.

     3. Representations and Warranties. The Borrower hereby represents and warrants to the Lender
as follows:

          3.1 Organization. The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each Subsidiary of the Borrower is duly
organized and existing and in good standing under the laws of the jurisdiction of its organization.
Schedule 3.1 contains a true and complete list of the Subsidiaries of the Borrower as of
the date hereof.

          3.2 Power and Authority. Each of the Borrower and its Subsidiaries has all requisite
corporate power and authority to carry on its present business, to own its property and assets and
to execute, deliver and perform this Credit Agreement, each Note, if any, and each other Loan
Document to which it is a party. Each of the Borrower and its Subsidiaries is duly qualified or
licensed as a foreign corporation authorized to conduct its activities and is in good standing in
all jurisdictions in which the character of the properties owned or leased by it or the nature of
the activities conducted makes such qualification or licensing necessary, except where the failure
to be so qualified or licensed would not be reasonably likely to result in a Material Adverse
Effect.

          3.3 Authorization of Borrowing. All appropriate and necessary corporate, shareholder and
other actions and approvals have been taken or obtained by the Borrower and each of its
Subsidiaries to authorize the execution and delivery of this Credit Agreement, each Note, if any,
and the other Loan Documents to which it is a party and to authorize the performance and observance
of the terms of each.

          3.4 Agreement Binding; No Conflicts. This Credit Agreement constitutes, and each Note, if
any, and the other Loan Documents when executed and delivered pursuant hereto will constitute, the
legal, valid and binding obligations of the Borrower or its Subsidiaries, as the case may be,
enforceable against the Borrower or such Subsidiaries in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors’ rights generally, and by general principles of
equity (regardless of whether enforcement is considered in a proceeding at law or equity). The
execution, delivery and performance of this Credit Agreement, the Notes, if any, and the other Loan
Documents which the Borrower and its Subsidiaries are a party and the use of the proceeds of the
Term Loan do not and will not (i) violate or conflict with (A) any provisions of law or any order,
rule, directive or regulation of any court or other Governmental Authority, (B) the charter,
by-laws or other organizational documents of the Borrower or such Subsidiary or (C) except as would
not be reasonably likely to result in a Material Adverse Effect, any agreement, document or
instrument to which the

18

 

Borrower or any such Subsidiary is a party or by which its respective
assets or properties are bound, (ii) except as would not be reasonably
likely to result in a Material Adverse Effect, constitute a default or an event or
circumstance that with the giving of notice or the passing of time, or both, would constitute a
default under any such agreement, document or instrument, (iii) except as would not be reasonably
likely to result in a Material Adverse Effect, result in the creation or imposition of any Lien,
charge or encumbrance of any nature whatsoever upon any assets or properties of the Borrower or any
such Subsidiary, or (iv) except as would not be reasonably likely to result in a Material Adverse
Effect, result in any suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to its respective operations or any of its
properties.

          3.5 Compliance with Law. There does not exist any conflict with, or violation, or breach of,
any law or any regulation, order, writ, injunction or decree of any court or governmental
instrumentality, which conflict, violation or breach could reasonably be expected to result in a
Material Adverse Effect.

          3.6 Taxes. The Borrower and each of its Subsidiaries has filed all Tax returns required to
be filed and has paid all taxes, assessments, fees and other governmental charges due upon it with
respect to the conduct of its operations or otherwise the failure of which to file or to pay could
reasonably be expected to result in a Material Adverse Effect, except to the extent that the
Borrower or any Subsidiary is contesting in good faith its obligation to pay such taxes or charges
and the Borrower or any such Subsidiary has adequately accrued for such payments in accordance with
and to the extent required by GAAP. There are no tax audits presently being conducted in respect
of the Borrower or any of its Subsidiaries that could reasonably be expected to result in a
Material Adverse Effect.

          3.7 Governmental Consents. No consent, approval, authorization or order of, notice to or
declaration or filing with, any administrative body or agency or other Governmental Authority on
the part of the Borrower or any of its Subsidiaries is required for the valid execution, delivery
and performance by the Borrower or any of its Subsidiaries of this Credit Agreement, the Notes, if
any, or the other Loan Documents, except for such as have been obtained or made and are in full
force and effect.

          3.8 Litigation. There are no pending or, to the knowledge of the Borrower, threatened legal
actions, suits, claims or administrative, arbitration or other proceedings against the Borrower or
any of its Subsidiaries that if adversely determined could reasonably be expected to result in a
Material Adverse Effect.

          3.9 Other Obligations. None of the Borrower or any of its Subsidiaries is in default in any
material respect in the performance, observance or fulfillment of any obligation, covenant or
condition in any agreement, document or instrument to which it is a party or by which it is bound
which is reasonably likely to result in a Material Adverse Effect.

          3.10 Financial Information.

               (a) The Borrower has heretofore furnished to the Lender its consolidated balance sheets, its
consolidated statements of earnings, its consolidated statements of cash flows

19

 

and its consolidated
statements of stockholder’s equity as of and for the fiscal year ended February 2, 2008, reported
on by Deloitte & Touche LLP, independent registered public
accounting firm, and (B) as of and for the fiscal quarter and the portion of the fiscal year
ended November 2, 2008. Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements referred to in clause
(B) above.

               (b) All other financial information provided to the Lender by or on behalf of the Borrower and
its Affiliates has been prepared in accordance with GAAP and fairly presents, in accordance with
GAAP consistently applied, the financial position and results of operations for the periods therein
indicated, and, except as has been previously disclosed to Lender prior to or on the date hereof,
there has been no material adverse change in the financial condition, operations, business or
prospects since February 2, 2008.

          3.11 Accuracy of Information. All factual information heretofore or contemporaneously
furnished by or on behalf of the Borrower or any of its Subsidiaries to the Lender for purposes of
or in connection with this Credit Agreement, any other Loan Document or any transaction
contemplated hereby or thereby (true and complete copies of which were furnished to the Lender in
connection with its execution and delivery hereof) is, and all other factual information hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries to the Lender will be, true
and accurate in every material respect on the date as of which such information is dated or
certified and, in respect of such information heretofore or contemporaneously furnished to the
Lender, as of the date of the execution and delivery of this Credit Agreement by the Lender and
such information is not, or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading. With respect to any such factual
information pertaining to Persons other than the Borrower, its Subsidiaries or its Affiliates, the
foregoing representation is made to the best knowledge of the Borrower. All projections heretofore
or contemporaneously furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Lender for purposes of or in connection with this Credit Agreement or any transaction contemplated
hereby have been prepared by the Borrower or such Subsidiaries based upon estimates and assumptions
stated therein, all of which the Borrower believes to be reasonable and fair in light of current
conditions and current facts known to the Borrower and, as of the Closing Date, reflect the
Borrower’s good faith and reasonable estimates of the future financial performance of the Borrower
and its Subsidiaries and of the other information projected therein for the periods set forth
therein; provided, however, that any and all financial projections are subject to
uncertainties and contingencies, many of which are beyond the Borrower’s control and no assurance
is or can be given that any financial projections or other results contemplated therein will be
realized.

          3.12 Seniority. The obligations of the Borrower and the Guarantors under this Credit
Agreement and the other Loan Documents to which it is a party rank, and at all times shall rank, at
least pari passu in priority of payment and in all other respects with all other unsecured
Indebtedness of the Borrower and each of the Guarantors.

20

 

          3.13 Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an
“investment company” or an “affiliated person” or “promoter” of, or “principal underwriter” of or
for, an “investment company”, as such terms are defined in the Investment Company Act of 1940,
as amended.

          3.14 Permits, Etc. Each of the Borrower and its Subsidiaries has all permits, consents,
licenses, authorizations, approvals, entitlements and accreditations required for it lawfully to
own, lease, manage or operate, or to acquire each business currently owned, leased, managed or
operated, or to be acquired, by it, except for failures which are not reasonably likely to result
in an Material Adverse Effect. No condition exists or event has occurred which, in itself or with
the giving of notice or lapse of time or both, would result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such permit, consent, license, authorization,
approval, entitlement or accreditation and which is reasonably likely to result in a Material
Adverse Effect, a Default or an Event of Default and there is no written claim that any such
permit, consent, license, authorization, approval, entitlement or accreditation is not in full
force and effect.

          3.15 Environmental Matters. Except to the extent not reasonably likely to result in a
Material Adverse Effect, (i) none of the operations of the Borrower or any of its Subsidiaries
violate any Environmental Law, (ii) no Environmental Actions have been asserted against the
Borrower or any of its Subsidiaries in writing nor does the Borrower have any knowledge of any
threatened or pending Environmental Action against the Borrower, any of its Subsidiaries or any
predecessor in interest, (iii) neither the Borrower nor any of its Subsidiaries has incurred any
Environmental Liabilities and Costs and (iv) to the Borrower’s knowledge, neither the Borrower nor
any of its Subsidiaries has any contingent liability in connection with any release of any
Hazardous Material into the environment.

          3.16 Solvency. Each of the Borrower and its Subsidiaries will be Solvent after giving effect
to the transactions contemplated by this Credit Agreement and the other Loan Documents.

          3.17 ERISA; Margin Regulations. (a) No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which liability is
reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.
The present value of all accumulated benefit obligations under each Plan (based on the assumptions
used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed the fair market value of the
assets of such Plan by an amount that would reasonably be expected to have a Material Adverse
Effect, and the present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87)
did not, as of the date of the most recent financial statements reflecting such amounts, exceed the
fair market value of the assets of all such underfunded Plans by an amount that would reasonably be
expected to have a Material Adverse Effect.

               (b) None of the Borrower or any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the

21

 

purpose of buying or carrying
Margin Stock. No part of the proceeds of any Term Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, in any manner or for any purpose
that would result in a violation by the Lender, the Borrower or such Subsidiary of the regulations
of the Board, including Regulation U or X.

          3.18 Properties; Intellectual Property. (a) The Borrower and each Subsidiary has good title
to, or valid leasehold interests in, all its material real and personal property free and clear of
all Liens, except for Permitted Liens and defects in title, in each case that do not interfere with
its ability to conduct its business as currently conducted or to utilize such properties for their
intended purposes.

               (b) The Borrower and each Subsidiary owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business, and the use thereof
by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except,
in each case, for any matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

     4. Covenants. The Borrower hereby covenants to the Lender that, during the term of this
Credit Agreement, or so long as (a) any amounts owed hereunder or under any other Loan Document are
outstanding or (b) this Credit Agreement and the other Loan Documents have not been terminated, the
Borrower shall, and shall cause each of its Subsidiaries to, as applicable (unless the prior
written consent of the Lender has been obtained) perform the following obligations:

          4.1 Financial Statements. (a) The Borrower shall deliver to the Lender:

               (i) within 120 days after the end of each fiscal year of the Borrower its
consolidated balance sheets as of the end of such fiscal year and the related
consolidated statements of earnings, consolidated statements of cash flows and
consolidated statements of stockholder’s equity of the Borrower and its
Subsidiaries, which shall be in reasonable detail and shall be audited by
independent certified public accountants of nationally recognized standing selected
by the Borrower and reasonably satisfactory to the Lender, and as to which such
accountants shall have expressed a written opinion (without a “going concern” or
like qualification or exception and without any qualification or exception as to the
scope of such audit) that such statements fairly present the financial position of
the Borrower and its Subsidiaries for the period then ended and have been prepared
in accordance with GAAP, and that the examination of such accounts was made in
accordance with the Standards of Public Company Accounting Oversight Board (United
States) and accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary under the circumstances;

               (ii) as soon as available and in any event within 60 days after the end of
each
fiscal quarter of the Borrower commencing with the first fiscal quarter of the
Borrower ending after the Closing Date, consolidated balance sheets, consolidated
statements of earnings, consolidated statements of cash flows

22

 

and consolidated
statements of stockholder’s equity of the Borrower and its Subsidiaries as at the
end of such quarter, and for the period commencing at the end of the immediately
preceding fiscal year and ending with the end of such quarter, setting forth in each
case in comparative form the figures for the corresponding date or period of the
immediately preceding fiscal year, all in reasonable detail and certified by an authorized officer of the Borrower as
fairly presenting, in all material respects, the financial position of the Borrower
and its Subsidiaries as of the end of such quarter and the results of operations and
cash flows of the Borrower and its Subsidiaries for such quarter, in accordance with
GAAP applied in a manner consistent with that of the most recent audited financial
statements of the Borrower and its Subsidiaries furnished to the Lender, subject to
normal year-end adjustments;

               (iii) simultaneously with the delivery of the financial statements of the
Borrower and its Subsidiaries required by clauses (i) and (ii) of this Section
4.1(a), a certificate of an authorized officer of the Borrower (A) stating that such
authorized officer has reviewed the provisions of this Credit Agreement and the
other Loan Documents and has made or caused to be made under his or her supervision
a review of the condition and operations of the Borrower and its Subsidiaries during
the period covered by such financial statements with a view to determining whether
the Borrower and its Subsidiaries were in compliance with all of the provisions of
this Credit Agreement and such Loan Documents at the times such compliance is
required hereby and thereby, and that such review has not disclosed, and such
authorized officer has no knowledge of, the existence during such period of an Event
of Default or Default or, if an Event of Default or Default existed, describing the
nature and period of existence thereof and the action which the Borrower and its
Subsidiaries propose to take or have taken with respect thereto and (B) with respect
to financial statements delivered pursuant to clause (i) of this Section 4.1(a),
attaching a schedule showing the calculation of the Consolidated Excess Cash Flow
for such period; and

               (iv) Within 30 days after the end of each fiscal month during the Commitment
Period, receipt by the Lender of a financial report of the Borrower and its
consolidated subsidiaries for such month, in form and substance reasonably
satisfactory to the Lender.

               (b) Proxy Statements, etc. Promptly after the sending or filing thereof, the Borrower
will provide to the Lender copies of all proxy statements, financial statements, and reports which
the Borrower sends to its stockholders, and copies of all regular, periodic, and special reports,
and all registration statements which the Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or with any national
securities exchange.

               (c) Additional Information. The Borrower shall make available and provide to the
Lender such further information and documents concerning its business and affairs including,
without limitation, (i) the budgets and business plans of the Borrower and its

23

 

Subsidiaries and
(ii) using commercially reasonable efforts to provide to the Lender information with respect to
accountant’s letters, in each case as the Lender may from time to time reasonably request.

               (d) Notices. The Borrower shall promptly notify the Lender of:

               (i) any investigation by or proceeding in or before any court, arbitrator,
administrative body or agency or other Governmental Authority (other than routine
inquiries by a governmental agency), including, without limitation, any
Environmental Action, which investigation, proceeding or action is reasonably likely
to result in a Material Adverse Effect, Default or Event of Default and, upon
request, provide the Lender with all material documents and information furnished by
the Borrower or any Subsidiary in connection therewith;

               (ii) the occurrence of any Default or Event of Default or any other development
which is reasonably likely to result in a Material Adverse Effect, which notice
shall be provided to the Lender as soon as possible, but in no event later than five
(5) days after the Borrower or any Subsidiary becomes aware of the same and shall
include a statement as to what action the Borrower or such Subsidiary has taken
and/or proposes to take with respect thereto;

               (iii) any change in the Borrower’s key management personnel, including without
limitation, its President, Controller or Treasurer; and

               (iv) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect.

               (e) Compliance with Laws, Etc. The Borrower shall and shall cause each of its
Subsidiaries to comply in all material respects with the requirements of all applicable laws
(including, without limitation, any Environmental Law) and maintain and preserve its corporate
existence and, except to the extent that the failure to do so could not reasonably be expected to
have a Material Adverse Effect, rights and privileges.

               (f) Books and Records. The Borrower shall and shall cause each of its Subsidiaries to
keep and maintain adequate records and books of account, with complete entries made in accordance
with GAAP, consistently applied.

               (g) Inspection Rights. The Borrower shall and shall cause each of its Subsidiaries to
permit the Lender or any of its agents and representatives at any time and from time to time during
reasonable business hours and, provided no Default or Event of Default has occurred and is
continuing, on reasonable prior notice to the Borrower, to examine and make copies of and abstracts
from its records and books of account, to visit and inspect its properties, to conduct audits and
make examinations and discuss its affairs, finances and accounts with any of its directors,
officers, employees, accountants or other representatives.

               (h) Insurance. The Borrower shall maintain or cause to be maintained, and cause each
of its Subsidiaries to maintain or cause to be maintained (in each case in the

24

 

Borrower’s name or
in the name of such Subsidiary, as the case may be), with responsible, financially sound and
reputable insurance companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is customary in the case of
similar businesses.

               (i) Taxes. The Borrower shall and shall cause each of its Subsidiaries to timely pay
and discharge all material taxes, assessments, levies and governmental charges upon it or against
any of its properties, assets or income except to the extent that the Borrower or any Subsidiary,
as applicable, shall be contesting in good faith its obligation to pay such taxes or charges and
the Borrower or such Subsidiary, as applicable, has adequately accrued for such payments in
accordance with and to the extent required by GAAP.

               (j) Further Assurances. The Borrower shall do, and shall cause each of its
Subsidiaries to, execute, acknowledge and deliver at the sole cost and expense of the Borrower or
its Subsidiaries, all documents, instruments and agreements and take such further acts and deeds as
the Lender may reasonably require from time to time to carry out the intention or facilitate the
performance of the terms of this Credit Agreement or any other Loan Document.

               (k) Merger, Consolidation, etc. The Borrower shall not and shall cause each of its
Subsidiaries not to:

               (i) merge, consolidate or amalgamate with or into any other Person unless: (A)
the Borrower is the surviving entity, (B) the Borrower provides the Lender with at
least 30 days’ prior written notice thereof, (C) the documentation in connection
therewith is reasonably satisfactory in form and substance to the Lender, (D) the
Borrower provides the Lender with such documents, certificates and opinions as the
Lender may reasonably request, in form and substance reasonably satisfactory to the
Lender, including, without limitation, a legal opinion given by counsel reasonably
satisfactory to the Lender regarding the legal, valid and binding nature of the Loan
Documents and the enforceability thereof and such other matters as the Lender may
reasonably request, and (E) no Material Adverse Effect or any Default or Event of
Default shall occur and be continuing both immediately before and immediately after
such merger, consolidation or amalgamation;

               (ii) dissolve, wind-up or liquidate; provided, that, any
Subsidiary may be dissolved or liquidated if the board of directors of the Borrower
determines in good faith such liquidation or dissolution is in the best interests of
the Borrower and not materially disadvantageous to the Lender;

               (iii) purchase or otherwise acquire all or substantially all of the assets,
liabilities or properties of any other Person; provided, that, the
Borrower or any wholly-owned Guarantor may acquire all or substantially all of the
assets, liabilities or properties of any wholly-owned Guarantor; or

               (iv) Dispose of all or substantially all of its non-“Margin Stock” (as
defined
in Regulation U of the Board) assets or properties whether in

25

 

any single transaction
or one or more transactions in the aggregate; except to the Borrower or any
wholly-owned Guarantor.

               (l) Change in Nature of Business. The Borrower shall not and shall cause each of its
Subsidiaries not to make any material changes in the nature of its business
activities as presently conducted to the extent reasonably likely to result in a Material
Adverse Effect.

               (m) Transactions with Affiliates. The Borrower shall not and shall cause each of its
Subsidiaries not to enter into any transaction with any of its Affiliates (other than between or
among Borrower and/or one or more wholly-owned Guarantors), unless such transaction is otherwise
permitted hereunder or is in the ordinary course of business of the Borrower or such Subsidiary, as
applicable, and upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary, as applicable, than it would obtain in a comparable arm’s length transaction with a
Person which is not an Affiliate.

               (n) Corporate Documents. The Borrower shall not and shall cause each of its
Subsidiaries not to amend its certificate of incorporation in any manner which is reasonably likely
to materially adversely affect the Lender’s rights under any of the Loan Documents or the Lender’s
ability to enforce any such rights.

               (o) Fiscal Year. The Borrower shall not and shall cause each of its Subsidiaries not
to permit its fiscal year to end on a day other than the first Saturday between January 28th and
February 3rd of any given year.

               (p) USA PATRIOT Act Compliance. The Borrower shall provide, and shall cause each of
its Subsidiaries and Affiliates to provide, such information and take such actions as are
reasonably requested by the Lender in order to assist the Lender in maintaining compliance with the
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (as amended, the “USA Patriot Act”) or similar laws and the rules and
regulations promulgated thereunder, in each case, as the same may be in effect from time to time.

               (q) Seniority. The obligations of the Borrower and each of the Guarantors under this
Credit Agreement and the other Loan Documents to which it is a party shall at all times rank at
least pari passu in priority of payment and in all other respects with all other unsecured senior
Indebtedness of the Borrower and each of the Guarantors.

               (r) Liens, Etc. The Borrower shall not, and shall not permit its Subsidiaries to,
create, incur, assume or suffer to exist any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; file or suffer to exist under the Uniform Commercial Code
or any similar law or statute of any jurisdiction, a financing statement (or the equivalent
thereof) that names it or any of its Subsidiaries as debtor; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file such financing statement (or the
equivalent thereof); sell any of its property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales of accounts
receivable other than in connection with collection of defaulted accounts receivable) with

26

 

recourse
to it or any of its Subsidiaries or assign or otherwise transfer; or permit any of its Subsidiaries
to assign or otherwise transfer, any account or other right to receive income, other than, as to
all of the above, Permitted Liens.

               (s) Indebtedness. The Borrower shall not, and shall not permit its Subsidiaries to,
create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with
respect to, or permit any of its Subsidiaries to create, incur, assume, guarantee or suffer to
exist or otherwise become or remain liable with respect to, any Indebtedness other than Permitted
Indebtedness.

               (t) Restricted Payments. The Borrower shall not, and shall not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except (i) the Borrower may declare and pay dividends with respect to its Capital Stock
payable solely in additional shares of its common stock, (ii) any Subsidiary may declare and pay
dividends to the Borrower or, in the case of any Subsidiary that is wholly owned by another
Subsidiary, to such other Subsidiary, (iii) the Borrower may make Restricted Payments pursuant to
and in accordance with stock option plans or other benefit plans for management or employees of the
Borrower and its Subsidiaries, and (iv) netting shares under employee benefit plans to settle
option price payments owed by employees and directors with respect thereto and settling employees’
and directors’ federal, state and income tax liabilities (if any) related thereto.

               (u) Loans, Advances, Investments, Etc. The Borrower shall not, and shall not permit
its Subsidiaries to, make or commit or agree to make any loan, advance, guarantee of obligations,
other extension of credit or capital contributions to, or hold or invest in or commit or agree to
hold or invest in, or purchase or otherwise acquire or commit or agree to purchase or otherwise
acquire any shares of the Capital Stock, bonds, notes, debentures or other securities of, or make
or commit or agree to make any other investment in, any other Person, or purchase or own any
futures contract or otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or permit any of its Subsidiaries
to do any of the foregoing, except for:

               (i) investments existing on the date hereof, as set forth on
Schedule 4.1(u) hereto, but not any increase in the amount thereof as set
forth in such Schedule or any other modification of the terms thereof;

               (ii) loans, advances and other investments by the Borrower to any wholly-owned
Guarantor, by any such wholly-owned Guarantor to the Borrower or by any such
wholly-owned Guarantor to any other such wholly-owned Guarantor, made in the
ordinary course of business and, which such loans, advances or investments, when
aggregated with all loans, advances and investments made to Excluded Subsidiaries
under clause (iii) below, does not exceed in the aggregate for the Borrower and all
of its Subsidiaries at any one time outstanding $50,000,000 (calculated on the basis
of the actual amount of all such loans, advances and investments (net of any amounts
repaid to the Borrower or such Subsidiaries) and without regard to any increase or
decrease in the value thereof or to any write off, write down or other similar
reduction);

27

 

               (iii) loans, advances and other investments by the Borrower to any Excluded
Subsidiary, by any Excluded Subsidiary to the Borrower or by any such Excluded
Subsidiary to any other such Excluded
Subsidiary, made in the ordinary course of business and not exceeding in the
aggregate for the Borrower and all of the Excluded Subsidiaries at any one time
outstanding $10,000,000, plus the value of inventory advanced to such
Excluded Subsidiaries in the ordinary course of business (and receivables/payables
related to such inventory) (calculated on the basis of the actual amount of all such
loans, advances and investments (net of any amounts repaid to the Borrower or such
Excluded Subsidiaries) and without regard to any increase or decrease in the value
thereof or to any write off, write down or other similar reduction); and

               (iv) Permitted Investments.

               (v) Sale/Leaseback Transactions. Except for sale/leaseback transactions entered into
in the ordinary course of business with respect to a retail location, the Borrower will not, and
will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby it shall sell or transfer any property, real or personal, used in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property or other property that it
intends to use for substantially the same purpose or purposes as the property sold or transferred.

               (w) Asset Dispositions. The Borrower will not, and will not permit any of its
Subsidiaries to Dispose of any asset which has a Fair Market Value in excess of $1,000,000,
including any Capital Stock owned by it, nor will the Borrower permit any of its Subsidiaries to
issue any additional Capital Stock in such Subsidiary, except:

               (i) (A) sales of inventory in the ordinary course of business on ordinary
business terms and (B) sales, transfers, licenses, leases or other dispositions of
the Tilton Property or other used, surplus, obsolete or worn-out assets (including
real property) and Permitted Investments in the ordinary course of business;

               (ii) sales, transfers, licenses, leases or other dispositions of assets
(including Capital Stock) or issuances of any additional Capital Stock by Borrower
to any of its wholly-owned Subsidiaries, by any such wholly-owned Subsidiary to
Borrower, and by any such wholly-owned Subsidiary to any other such wholly-owned
Subsidiary; provided that any such dispositions to a Subsidiary shall be
made in compliance with Section 4.1(m);

               (iii) sales transfers, licenses, leases or other dispositions deemed to occur
as a result of the creation of Liens permitted by Section 4.1(r);

               (iv) sale/leasebacks permitted by Section 4.1(v); and

               (v) the termination, surrender or sublease of a real estate lease of the
Borrower or any of its Subsidiaries.

28

 

               (x) Capital Expenditures. The Borrower will not, nor will it permit any Subsidiary to
contract for, purchase or make any expenditure or commitments for Capital
Expenditures in any fiscal year in excess of the amount contained in a budget approved by the
Lender.

               (y) Subordinated Debt . The Borrower will not, nor will it permit any Subsidiary to,
make or agree to make, directly or indirectly, any payment or other distribution (whether in cash,
securities or other property) of or in respect of principal of or interest on any Subordinated Debt
or other Indebtedness expressly subordinated in right of payment to the obligations of the Borrower
hereunder, including any sinking fund or similar deposit with respect to any of them, or any
prepayment, purchase, redemption, retirement, acquisition, cancellation or termination of any such
Subordinated Debt or other Indebtedness prior to its scheduled maturity, except regularly scheduled
interest payments, as and when due (other than interest payments prohibited by the subordination
provisions thereof).

               (z) Formation of Subsidiaries. At the time that the Borrower forms any direct or
indirect Domestic Subsidiary or acquires any direct or indirect Domestic Subsidiary after the
Closing Date, the Borrower shall within 30 days of such formation or acquisition cause any such new
Subsidiary to become a party to the Guaranty by executing a Guaranty Agreement Supplement in the
form provided in the Guaranty. Notwithstanding the foregoing, if the Borrower does not Dispose of
J. Jill on or prior to December 31, 2009, then the Borrower shall cause each of J. Jill, GP, J.
Jill, LLC and Birch Pond Realty Corporation to become parties to the Guaranty within thirty days
thereafter.

               (aa) Negative Pledge Clauses. The Borrower shall not, and shall cause each of its
Subsidiaries not to, enter into or suffer to exist or become effective any agreement that prohibits
or limits the ability of any the Borrower or any Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, other
than (i) this Credit Agreement and the other Loan Documents, (ii) customary non-assignment
provisions in licenses or sublicenses of intellectual property and (iii) any agreements governing
any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case,
any prohibition or limitation shall only be effective against the assets financed thereby).

               (bb) Clauses Restricting Subsidiary Distributions. The Borrower shall not, and shall
cause each of its Subsidiaries not to, enter into or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (i) make
Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (ii) make loans or
advances to, or other investments in, the Borrower or any other Subsidiary of the Borrower or (iii)
transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such
encumbrances or restrictions existing under or by reason of (A) any restrictions existing under the
Loan Documents, (B) any restrictions with respect to a Subsidiary imposed pursuant to an agreement
that has been entered into in connection with the Disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary and (C) contractual encumbrances or restrictions in
effect on the Closing Date under Indebtedness existing on the Closing Date.

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               (cc) Amendment of Existing Indebtedness. No later than March 12, 2009, the Borrower
shall have delivered to the Lender the following agreements, each in form and substance
satisfactory to the Lender:

               (i) an amendment agreement under the Revolving Credit Agreement, dated as of
January 25, 1994 (as amended), between the Borrower and Sumitomo Mitsui Banking
Corporation (as successor to The Sakura Bank, Limited, New York Branch), deleting
Sections 10(f), 10(g) and 10(h) thereto, duly executed by the Borrower and Sumitomo
Mitsui Banking Corporation; and

               (ii) an amendment agreement under the Revolving Credit Agreement, dated as of
January 25, 1994 (as amended), between the Borrower and Norinchukin Bank, New York
Branch, amending Section 10(e) thereto to permit the Borrower to incur the Term Loan
without compliance thereto, duly executed by the Borrower and Norinchukin Bank.

     5. Conditions Precedent to the Term Loan . The obligation of the Lender to make the Term Loan
is subject to the prior fulfillment of the following conditions:

               (a) Documents. The Lender shall have received the following, each in form and
substance satisfactory to the Lender:

               (i) Executed Agreement. This Credit Agreement, duly executed by an
authorized officer of the Borrower.

               (ii) Note. To the extent requested by the Lender, the Lender (or its
counsel) shall have received a Note, in the amount of the Term Loan, duly executed
by an authorized officer of the Borrower.

               (iii) Officer’s Certificate. A certificate of an authorized officer of
each of the Borrower and each Guarantor, substantially in the form of Exhibit
B hereto, certifying, among other things, as to (w) the organizational documents
and by-laws of such Person, (x) resolutions of the board of directors of such Person
(or a committee of the board of directors authorized to approve this transaction)
authorizing such Person to execute, deliver and perform this Credit Agreement, each
Note, if any, and each other Loan Document to which it is a party; (y) the names and
signatures of the officers of such Person authorized to execute this Credit
Agreement, each Note, if any, and each other Loan Documents to which it is a party;
and (z) the absence of any amendment or modification to any of the attached
organizational documents or by-laws (or the equivalent thereof), if any, of such
Person since the date of the most recent certification thereof.

               (iv) Executed Guaranty. The Guaranty, duly executed by an authorized
officer of each of the Guarantors.

               (v) Opinion of Counsel to the Borrower. A favorable written opinion of
Dewey & LeBoeuf LLP, counsel for the Borrower, in form and

30

 

substance reasonably
satisfactory to the Lender and covering such matters relating to the Borrower, the
Loan Documents and such other matters reasonably requested by the Lender.

               (vi) Good Standing. A certificate of the appropriate official(s) of
the state of organization of the Borrower and each of the Guarantors certifying as
of a recent date not more than 30 days prior the Closing Date as to the subsistence
in good standing of, and the payment of taxes by, the Borrower and such Guarantor in
such states.

               (vii) Existing Credit Facility. A payoff letter, duly executed by the
Borrower and the Existing Lenders, in form and substance reasonably acceptable to
the Lender, evidencing that the Existing Credit Facility has been or concurrently
with the Closing Date are being terminated, all Indebtedness thereunder is being
paid in full, all commitments to make advances thereunder have been terminated, and
all Liens securing obligations under the Existing Credit Facility, if any, have been
or concurrently with the Closing Date are being released.

               (viii) Existing Indebtedness. Evidence that the Borrower’s
Indebtedness existing on the Closing Date is in full force and effect, without
amendment or modification thereto in a manner adverse to the Lender in any material
respect.

               (ix) Other Items. Such other agreements, instruments, approvals,
opinions and documents as the Lender may reasonably request.

               (b) Fees and Expenses. The Lender shall have received all of the fees, costs and
expenses that are then due and payable hereunder and under the other Loan Documents.

               (c) Legality. The making of the Term Loan and the consummation of the transactions
contemplated hereunder shall not contravene any law, rule or regulation applicable to the Lender,
the Borrower or any of its Subsidiaries.

               (d) Representations and Warranties. All of the representations and warranties
contained in Section 3 of this Credit Agreement, in each other Loan Document and in each
certificate and other writing delivered to the Lender pursuant hereto or thereto on or prior to the
Closing Date of the Term Loan shall be true and correct in all material respects as though made on
and as of such date. The acceptance by the Borrower of the proceeds of the Term Loan shall be
deemed to be a representation and warranty by the Borrower to the Lender to such effect.

               (e) Defaults; Material Adverse Effect. No Default or Event of Default shall have
occurred and be continuing on the date of the Term Loan or would result from making the Term Loan.
No Material Adverse Effect shall have occurred and be continuing since February 2, 2008 or would
result from making any Term Loan. The acceptance by the Borrower
of the proceeds of the Term Loan shall be deemed to be a representation and warranty by the
Borrower to the Lender to such effect.

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               (f) Proceedings. There shall not exist any threatened or pending action, proceeding
or counterclaim by or before any court or governmental, administrative or regulatory agency or
authority, domestic or foreign, (i) challenging the consummation of the transactions contemplated
hereby or which would restrain, prevent or impose burdensome conditions on any transaction
contemplated hereunder, which could reasonably be expected to have a Material Adverse Effect, (ii)
seeking to prohibit the ownership or operation by the Borrower of any of its Subsidiaries of all or
a material portion of its business or assets which could reasonably be expected to have a Material
Adverse Effect, or (iii) seeking to obtain, or having resulted in the entry of any judgment, order
or injunction that (A) would restrain, prohibit or impose adverse conditions on the ability of the
Lender to make its Term Loan, (B) could reasonably be expected to affect the legality, validity or
enforceability of any of the Loan Documents or the ability of any party thereto to perform its
obligations thereunder or (C) is seeking any material damages as a result thereof.

               (g) Approvals. All consents, authorizations and approvals of, and filings and
registrations with, and all other actions in respect of, any Governmental Authority or other Person
required in connection with the making of the Term Loan or the conduct of business of the Borrower
and its Subsidiaries shall have been obtained and shall be in full force and effect

               (h) Bank Account. The Borrower shall have opened the Borrower Account.

     6. Events of Default.

          6.1 Events of Default. Each of the following events and occurrences shall constitute an
“Event of Default” under this Credit Agreement:

               (a) The Borrower or any Subsidiary shall fail to pay when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) (i) any principal of any Term Loan or any
Note, or (ii) any interest on any Term Loan or any Note, any fee, any indemnity or any other amount
payable hereunder or under any other Loan Document and any such failure referred to in this clause
(ii) shall continue for three (3) Business Days; or

               (b) Any representation or warranty made or deemed made by the Borrower or any Subsidiary in
any Loan Document or any certificate, report or other document delivered to the Lender pursuant to
any Loan Document shall have been incorrect or misleading in any material respect when made or
deemed made; or

               (c) The Borrower or any Subsidiary shall fail to perform or shall violate any provision,
covenant, condition or agreement in Section 4.1 of this Credit Agreement (other than 4.1(a),
4.1(b), 4.1(c), 4.1(d), 4.1(e), 4.1(f), 4.1(g), 4.1(h), 4.1(i) and 4.1(j)) of this Credit
Agreement; or

               (d) The Borrower or any Subsidiary shall fail to perform or shall violate any provision,
covenant, condition or agreement of this Credit Agreement or any other Loan
Document on its part to be performed or observed (other than those set forth in paragraphs
(a), (b) and (c) of this Section 6.1) and such failure or violation is not remediable or, if
remediable,

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continues unremedied for a period of thirty (30) days after the earlier of (i) notice
from the Lender or (ii) such time as the Borrower or any Subsidiary becomes aware of the same; or

               (e) Any event or condition shall occur (i) that results in the acceleration of the
maturity of
any Indebtedness of the Borrower or any Subsidiary under any agreement, document or instrument with
respect to an aggregate amount of Indebtedness equal to or greater than the Threshold Amount (or
the equivalent thereof in any foreign currency), or (ii) that after any grace period provided for
therein enables the holder of such Indebtedness or any Person acting on such holder’s behalf to
accelerate the maturity thereof (other than such condition as would be remedied by the amendments
required by Section 4.1(cc)); or

               (f) The Borrower or any Subsidiary is adjudicated a bankrupt or insolvent, or admits in
writing its inability to pay its debts as they become due or makes an assignment for the benefit of
creditors, or ceases doing business as a going concern or applies for or consents to the
appointment of any receiver or trustee, or such receiver, trustee or similar officer is appointed
with the application or consent of the Borrower or any Subsidiary, or bankruptcy, dissolution,
liquidation or reorganization proceedings (or proceedings similar in purpose and effect) are
instituted by the Borrower or any Subsidiary or are instituted against (and not vacated or
discharged within 60 days) the Borrower or any Subsidiary; or

               (g) Any money judgment or warrant of attachment or similar process involving, individually or
in the aggregate, in excess of the Threshold Amount (or the equivalent thereof in any foreign
currency) shall be entered or filed against the Borrower or any Subsidiary and shall remain
undischarged, unvacated or unbonded for a period of 30 days; or

               (h) The validity or enforceability of this Credit Agreement or any other Loan Document shall
be contested by or on behalf of the Borrower or any Subsidiary; or a proceeding shall be commenced
by a Governmental Authority having jurisdiction over the Borrower or any Subsidiary seeking to
establish the invalidity thereof; or the Borrower or any Subsidiary shall deny that it has any
further liability or obligation under any Loan Document to which it is a party; or

               (i) The occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in a Material Adverse Effect.

          6.2 Consequence of Default . Upon the occurrence of any Event of Default (i) described in
subsection (f) of Section 6.1, the Term Loan and all other amounts payable hereunder, under any
Note and under any other Loan Document shall automatically become immediately due and payable,
without presentment, demand, protest or other requirement of any kind, all of which are hereby
expressly waived by the Borrower or (ii) described in any other subsection of Section 6.1 and
during the continuance thereof, the Lender may, by notice of default given to the Borrower, declare
all of the outstanding principal amount of the Term Loan and all other amounts payable hereunder,
under any Note and under any other Loan Document to be immediately due and payable, whereupon the
unpaid principal amount of any Note, together with accrued interest thereon, and all such other amounts, shall be immediately due and payable

33

 

without presentment, protest, demand or other requirement of any kind, each of which is
hereby expressly waived by the Borrower.

     7. Additional Costs and Expenses; Indemnity .

          7.1 (a) The Borrower shall pay to (x) the Lender on demand all reasonable out-of-pocket costs
and expenses of the Lender actually incurred in connection with the preparation, execution and
delivery of this Credit Agreement, each Note and any other Loan Documents or any amendment,
modification or waiver of the provisions hereof or thereof, and (y) the Lender all out-of-pocket
costs and expenses incurred in connection with: (i) the negotiation of any restructuring, work-out
or renegotiation of any terms of this Credit Agreement, any Note or any other Loan Documents or the
obligations of the Borrower hereunder or thereunder, (ii) the enforcement of the preservation or
protection of the Lender’ rights under this Credit Agreement and the other Loan Documents and (iii)
the response to any subpoena or similar process compelling the production of documents or other
response in connection with this Credit Agreement, any Note or any other Loan Documents, including
without limitation, in each case, the reasonable and actual fees and expenses of outside counsel
for the Lender, and the Borrower further agrees to indemnify the Lender and their respective
officers, directors and employees against any losses, damages, claims and expenses arising out of
the use or proposed use by the Borrower of any Term Loan hereunder. In addition, the Borrower
agrees to defend, indemnify and hold harmless the Lender and their respective officers, directors
and employees from and against any losses, damages, liabilities, obligations, penalties, fees,
costs and expenses, including without limitation, the reasonable and actual fees and expenses of
outside counsel for the Lender, arising out of or relating to the negotiation, preparation,
execution, delivery and performance and administration of this Credit Agreement and the other Loan
Documents, and the consummation of the transactions contemplated hereunder and thereunder and any
claim, litigation, investigation or proceeding relating to any of the foregoing including, without
limitation, all Environmental Liabilities and Costs arising from or in connection with: (i) the
past, present or future operations of the Borrower or any of its Subsidiaries involving any damage
to real or personal property or natural resources or harm or injury alleged to have resulted from
any release of Hazardous Materials, (ii) any Environmental Action or (iii) a breach by the Borrower
or any of its Subsidiaries of any Environmental Law; provided, however, that none
of the foregoing indemnity obligations of the Borrower shall extend to any liability, obligation,
loss, damage, penalty, claim, action, suit, cost, expense or disbursement to the extent resulting
from the willful misconduct or gross negligence of the Lender as determined by a final
non-appealable judgment of a court of competent jurisdiction.

               (b) If any future applicable law, regulation or directive, or any change of any existing law,
regulation or directive or in the interpretation thereof, or compliance by the Lender with any
request or requirement (whether or not having the force of law) of any relevant central bank or
other comparable agency, imposes, modifies or deems applicable any reserve, special deposit,
premium, assessment or similar requirement against assets held by, or deposits in or for the
account of, or advances or loans by, or any other acquisition of funds by the Lender, any capital
adequacy standard or other condition with respect to this Credit Agreement, any Note or any other
Loan Document, and the result of any of the foregoing is to increase the cost to the Lender of
maintaining advances or credit or to reduce any amount receivable in respect thereof,
then the Lender may notify the Borrower, and the Borrower shall pay within five (5) Business

34

 

Days of the date of such notice such amount as the Lender may specify to be necessary to compensate
the Lender for such reduced receipt, together with interest on such amount from the date demanded
until payment in full thereof at the same rate applicable to the Term Loan. The determination by
the Lender of any amount due under this Section 7.1(b) as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest error, be
conclusive evidence thereof.

               (c) If, after the date hereof, by reason of any applicable law or regulation or regulatory
requirement or the interpretation or application thereof, it shall become unlawful or otherwise
prohibited for the Lender to make or maintain its Term Loan or any portion thereof or give effect
to any of its obligations or benefits as contemplated by this Credit Agreement and the other Loan
Documents, the obligation of the Lender to make, fund and maintain its Term Loan or any portion
thereof under this Credit Agreement shall be suspended until the Lender shall notify the Borrower
that the circumstances causing such suspension no longer exist and the Borrower shall forthwith
prepay to the Lender the principal amount of the Term Loan owed to the Lender, together with
interest accrued thereon and all other amounts owed with respect thereto.

               (d) If, due to any prepayment pursuant to Section 2.6 or Section 2.7 hereof or any
acceleration of the maturity of the Term Loan pursuant to Section 6 hereof or any other prepayment
hereunder, the Lender is subject to a change of interest rate on the Term Loan or the Lender
receives payment of principal of the Term Loan other than as provided herein, the Borrower shall,
promptly after demand by the Lender, pay to the Lender any amounts required to compensate the
Lender for any additional losses, costs or expenses which it may reasonably incur as a result of
such change or payment, including, without limitation, any loss, cost or expense incurred by reason
of liquidation or reemployment of deposits or other funds acquired by the Lender to fund or
maintain the Lender’s Term Loan. A certificate setting forth the amount of such additional losses,
costs or expenses submitted to the Borrower by the Lender shall, in the absence of manifest error,
be conclusive evidence thereof.

               (e) If, due to any prepayment pursuant to Section 2.6 or Section 2.7 hereof or any
acceleration of the maturity of the Term Loan pursuant to Section 6 hereof or any other prepayment
hereunder other than on an Interest Payment Date, the Borrower shall, promptly after demand by the
Lender, pay to the Lender any amounts required to compensate the Lender for any additional losses,
costs or expenses which it may reasonably incur in connection with the termination of any Hedging
Agreements with respect to the Term Loan. A certificate setting forth the amount of such
additional losses, costs or expenses submitted to the Borrower by the Lender shall, in the absence
of manifest error, be conclusive evidence thereof.

               (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in this Section 7.1 shall survive the payment
in full of the principal, interest and all other amounts under this Credit Agreement and under any
other Loan Document and the termination of this Credit Agreement and each other Loan Document.

          7.2 Taxes.

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               (a) Any and all payments made by the Borrower hereunder shall be made free and clear of and
without deduction for any present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto (all such taxes, levies, imposts,
deductions, charges, withholdings and liabilities, being hereinafter referred to as
“Taxes”), except as otherwise required by law. If and to the extent that Taxes are
required to be withheld from any payment, (i) other than Excluded Taxes, the amount of such payment
shall be increased to the extent necessary to cause the Lender to receive (after the withholding of
such Taxes) an amount equal to the amount it would have received had the withholding of such Taxes
not been required, and (ii) the Borrower shall withhold such Taxes from such increased payment and
pay such Taxes to the relevant taxation authority or other authority for the account of the Lender
in accordance with applicable law.

               (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise from any payment made
hereunder or under any other Loan Document or from the execution, delivery or registration of, or
otherwise with respect to, this Credit Agreement or any other Loan Document, excluding taxes, for
the avoidance of doubt, on the overall net income of the Lender (hereinafter referred to as
“Other Taxes”).

               (c) The Borrower shall indemnify and agrees to hold harmless the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 7.2), other than Excluded Taxes, paid by the
Lender or any liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within five (5) days after the date the Lender makes written demand
therefor, specifying in reasonable detail the basis, calculation and amount of such Taxes or Other
Taxes and any liabilities arising therefrom.

               (d) Within 30 days after the date of the Borrower’s payment or a payment on behalf of
the
Borrower of any Taxes with respect to any payment due hereunder or under any other Loan Document,
the Borrower will furnish to the Lender, at its address referred to in Section 8.6 hereof, the
original or a certified copy of a receipt evidencing payment thereof.

               (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations contained in this Section 7.2 shall survive the payment in full of the
principal, interest and all other amounts under this Credit Agreement and under any other Loan
Document and the termination of this Credit Agreement and each other Loan Document until the
expiration of the statute of limitations applicable to the subject Taxes.

               (f) The Lender agrees that, at the request of the Borrower, it will deliver to the Borrower
two properly completed and duly executed copies of Internal Revenue Service form W-8BEN or any
subsequent version thereof or successor thereto, certifying that the Lender is entitled to a
reduced rate of withholding from United States backup withholding tax on payments pursuant to this
Credit Agreement (and shall deliver to the Borrower additional copies of the relevant forms on or
before the date that such form expires, and shall promptly notify the Borrower of any form or other
documentation previously submitted that becomes incorrect).

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               (g) The Borrower shall not be required to indemnify the Lender, or pay any additional amounts
to the Lender, in respect of Taxes and liabilities arising therefrom pursuant to this Section 7.2
to the extent that the obligation to pay such additional amounts would not have arisen but for a
failure by the Lender to comply with the provisions of clause (f) above.

               (h) If the Lender determines, in its sole discretion, that it has received a credit or refund
of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to
which the Borrower has paid additional amounts, in either case pursuant to this Section 7.2 it
shall pay to the Borrower an amount equal to such credit or refund recovered (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section
with respect to the Taxes or Other Taxes giving rise to such refund or recovery), net of all
out-of-pocket expenses of the Lender and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such credit, refund or recovery); provided,
however, that the Borrower shall promptly repay the amount paid over to the Borrower to the
Lender in the event in the event the Lender is required to repay such refund to the relevant
Governmental Authority. This Section 7.2(h) shall not be construed to require the Lender to make
available its tax returns (or any other information that it deems confidential) to the Borrower or
any other Person.

     8. Miscellaneous.

          8.1 Entire Agreement. This Credit Agreement, the other Loan Documents and the documents
referred to herein and therein constitute the entire obligation of the parties with respect to the
subject matter hereof and shall supersede any prior expressions of intent or understanding with
respect to the transactions herein and therein contemplated.

          8.2 No Waiver; Cumulative Rights. The failure or delay of the Lender to require performance
by the Borrower of any provision of this Credit Agreement shall not operate as a waiver thereof,
nor shall it affect the Lender’ rights to require performance of such provision at any time
thereafter, nor shall it affect or impair any of the remedies, powers or rights of the Lender with
respect to any other or subsequent failure, delay or default. Each and every right granted to the
Lender hereunder or under any other Loan Document or in connection herewith or therewith shall be
cumulative and may be exercised at any time.

          8.3 Assignment; Binding Effect.

               (a) Successors and Assigns. The provisions of this Credit Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and its successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and void), it being
understood that mergers, consolidations and other corporate changes permitted by Section 4.1 of
this Credit Agreement shall not be deemed to be assignments for purposes of this sentence, and
(ii) (1) the Lender may assign to one or more assignees (each, an “Assignee”) all or a
portion of its rights and obligations under this Credit Agreement with notice to the Borrower or
(2) the Lender may at any time, with notice to the Borrower, sell participations to any Person;
provided,

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that if no Default or Event of Default shall have occurred and be continuing, the prior
written consent of the Borrower (which shall not be unreasonably withheld) shall be required.

               (b) The Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Credit Agreement to secure obligations of the Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release the Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for the Lender as a party hereto.

          8.4 GOVERNING LAW; JURY TRIAL. THIS CREDIT AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH
ANY ACTION RELATED TO THIS CREDIT AGREEMENT, ANY NOTE EXECUTED PURSUANT HERETO OR ANY OTHER LOAN
DOCUMENT.

          8.5 Submission to Jurisdiction.

               (a) The Borrower hereby irrevocably agrees that any legal action or proceedings against it
with respect to this Credit Agreement, any Note or any other Loan Document may be brought in any
court of the State of New York or any Federal Court of the United States of America located in the
City or State of New York, or both, as the Lender may elect, and by execution and delivery of this
Credit Agreement the Borrower hereby submits to and accepts with regard to any such action or
proceeding service of process by the mailing of copies thereof by registered or certified airmail,
postage prepaid, to the Borrower at its address set forth in Section 8.6 hereof.

               (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to
the laying of the venue of any suit, action or proceeding arising out of or relating to this Credit
Agreement, any Note or any other Loan Document in the State of New York and hereby further
irrevocably waives any claim that the State of New York is not a convenient forum for any such
suit, action or proceeding.

               (c) To the extent that the Borrower has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself
or its property, the Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Credit Agreement and any other Loan Document to which it is a party.

          8.6 Notices. Any notice hereunder shall be in writing and shall be personally delivered,
transmitted by postage prepaid registered or certified mail or by overnight mail, or transmitted by
telephonic facsimile (“FAX”) and electronic mail (“EMAIL”)to the parties as
follows:

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          To the Borrower:

THE TALBOTS, INC.

175 Beal Street

Hingham, Massachusetts 02043

Telephone: (781) 749-7600

FAX: (781) 749-0865

EMAIL:

Attention: Michael Scarpa, CFO

          with a copy (which shall not constitute notice) to:

THE TALBOTS, INC.

211 South Ridge Street

Suite 100

Rye Brook, NY 10573

Attn: Richard T. O’Connell, Jr., Executive Vice President and General

Counsel

          To the Lender:

AEON CO., LTD.

5-1, 1-chome, Nakase

Mihama-ku, Chiba-shi

Chiba, 261-8515 Japan

Telephone: +81-043-212-6089

FAX: +81-043-212-6813

EMAIL: h_wakabaya@aeon.biz

Attention: International Division

All notices and other communications shall be deemed to have been duly given on (i) the date of
receipt if delivered personally, (ii) the date five (5) days after posting if transmitted by
registered or certified mail, (iii) on the Business Day after having been sent if transmitted by
overnight mail with a reputable courier, or (iv) the date of transmission if transmitted by FAX and
receipt is confirmed.

          8.7 Amendments, Etc. No amendment or waiver of any provision of this Credit Agreement and
the other Loan Documents, and no consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Lender and, in the case of
an amendment, the Borrower, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. Notwithstanding the foregoing, the
terms hereof may only be amended in accordance with the provisions of the Subordination Agreement.

          8.8 Usury . Anything in this Credit Agreement to the contrary notwithstanding, the obligation
of the Borrower to pay interest on the Term Loan and any Notes or any other amount due and owing
hereunder or under any other Loan Document shall be subject to the

39

 

limitation that no payment of such interest shall be required to the extent that receipt of such payment
would be contrary to applicable usury laws.

          8.9 Counterparts; Facsimile Signature. This Credit Agreement may be signed in any number of
counterparts. Either a single counterpart or a set of counterparts when signed by all the parties
hereto shall constitute a full and original agreement for all purposes. Delivery of any executed
signature page hereof or of any amendment, waiver or consent to this Credit Agreement by facsimile
transmission shall be as effective as delivery of a manually executed counterpart thereof.

          8.10 Severability. Any provision of this Credit Agreement or any other Loan Document that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision in any other
jurisdiction.

          8.11 No Party Deemed Drafter. The Borrower and the Lender agree that no party hereto shall
be deemed to be the drafter of this Credit Agreement.

          8.12 USA Patriot Act Notification. The following notification is provided to the Borrower
pursuant to Section 326 of the USA Patriot Act:

     IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government
fight the funding of terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify and record information that identifies each person or entity that
opens an account, including any deposit account, treasury management account, loan, other extension
of credit or other financial services product. WHAT THIS MEANS FOR THE BORROWER: When the
Borrower opens an account, the Lender will ask the Borrower for certain information, including,
without limitation, the Borrower’s name, tax identification number, business address and other
information that will allow the Lender to identify the Borrower. The Lender may also seek to see
the Borrower’s legal organizational documents or other identifying documents, among other things.
The Borrower agrees to cooperate with the Lender and provide true, accurate complete information to
the Lender in response to any such request.

[SIGNATURE PAGE FOLLOWS.]

40

 

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by
their duly authorized representatives as of the date first written above.

	 	 	 	 	 
	 	THE TALBOTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	 	 	 
	 	Signed
in:
	 
	 
	 	AEON CO., LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	 	 	 
	 	Signed
in:
	 

 

 

EXHIBIT A

NOTE

			
	US$200,000,000.00
	 	February                     , 2009

     FOR VALUE RECEIVED, The Talbots Inc. (the “Borrower”) unconditionally promises to pay
to the order of Aeon Co., Ltd. a corporation organized under the laws of Japan (the
“Lender”), to the Lender’s Account specified in the Credit Agreement described below, the
principal sum of Two Hundred Million Dollars ($200,000,000.00) or such lesser amount as may be
outstanding from time to time hereunder and to pay interest thereon at such rates and according to
such methods of calculation as are provided pursuant to the Term Loan Facility Agreement, dated as
of February 25, 2009, by and among the Borrower and the Lender (as the same may be amended,
supplemented, or otherwise modified from time to time, the “Credit Agreement”). The
Borrower hereby authorizes the Lender to enter on the schedule attached hereto the dates, amounts,
denomination, maturities, interest rates and interest periods applicable to each borrowing and
absent manifest error such notations shall be binding and conclusive upon the Borrower;
provided, however, that failure by the Lender to make any notation on such schedule
or any error in such notations shall in no way affect the Borrower’s obligation to repay
outstanding amounts on this Note.

     The outstanding principal of this Note and any accrued interest thereon shall be repaid as set
forth in the Credit Agreement, with final payment on the Maturity Date (as defined in the Credit
Agreement).

     All payments of principal and interest on this Note shall be payable in lawful money of the
United States of America in immediately available funds without set-off, defense or counterclaim.

     This Note is issued pursuant to the terms of the Credit Agreement and is subject to the terms
and conditions and entitled to the benefits therein provided. Upon the occurrence of an Event of
Default (as defined in the Credit Agreement), the principal of and the accrued interest on this
Note may become due and payable in the manner and with the same effect as provided in the Credit
Agreement, without presentment, demand, protest or notice of any kind unless otherwise expressly
required therein.

     Failure or delay of the holder of this Note to enforce any provision of this Note shall not be
deemed a waiver of any such provision, nor shall the holder of this Note be estopped from enforcing
any such provision at a later time. Any waiver of any provision hereof must be in writing. This
Note shall be governed by and interpreted in accordance with the laws of the State of New York
without regard to the conflict of law provisions thereof.

	 	 	 	 	 
	 	THE TALBOTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

A-1

 

SCHEDULE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Unpaid	 	 	 	 
	Date of	 	Amount	 	 	 	Amount	 	Principal	 	 	 	Notation
	Loan	 	of Loan	 	Interest	 	Paid/Prepaid	 	Balance	 	Maturity Date	 	Made By
	 
	 	 	 	 	 	 	 	 	 	 	 	 

A-2

 

EXHIBIT B

OFFICER’S CERTIFICATE

     I,                     , the
                     of [The Talbots, Inc., a Delaware
corporation (the “Borrower”)][                    , a
                     corporation (“Guarantor”)], do
hereby certify that:

	1.	 	[The Borrower has full corporate power and authority to execute, enter into and deliver the
Term Loan Facility Agreement, dated as of February ___, 2009, by and among the Borrower and
Aeon Co., Ltd., a corporation organized under the laws of Japan (the “Lender”) (the
“Credit Agreement”; terms defined in the Credit Agreement shall have the same meaning
in this certificate), together with each Note and each other Loan Document to which it is a
party.][The Guarantor has full corporate power and authority to execute, enter into and
deliver the Guaranty, dated as of February ___, 2009, pursuant to the Term Loan Facility
Agreement, dated as of February ___, 2009, by and among the Borrower and Aeon Co., Ltd., a
corporation organized under the laws of Japan (the “Lender”) (the “Credit
Agreement”; terms defined in the Credit Agreement shall have the same meaning in this
certificate), together with each other Loan Document to which it is a party.]
	 
	2.	 	All corporate action necessary to authorize the execution, delivery and performance of the
Credit Agreement, each Note and each other Loan Document to which the [Borrower][Guarantor] is
a party has been taken by resolutions of the Board of Directors of the [Borrower][Guarantor]
adopted by written consent by such Board of Directors and such resolutions have not been
modified or amended in any respect and are in full force and effect on the date hereof.
	 
	3.	 	Attached hereto as Exhibit A is a true, correct and complete copy of the
[Borrower][Guarantor]’s Certificate of Incorporation, together with all amendments there to,
as in effect on and as of the date hereof.
	 
	4.	 	Attached hereto as Exhibit B is a true, correct and complete copy of the
[Borrower][Guarantor]’s By-laws, together with all amendments thereto, as in effect on and as
of the date hereof.
	 
	5.	 	Attached hereto as Exhibit C is a true, correct and complete copy of the resolutions
of the Board of Directors of the [Borrower][Guarantor] (or a committee of the Board of
Directors authorized to approve this transaction) approving and authorizing the execution,
delivery and performance of the Credit Agreement, each Note and each other Loan Document to
which the [Borrower][Guarantor] is a party, which resolutions remain in full force and effect
without modification or amendment on and as of the date hereof.
	 
	6.	 	All representations and warranties contained in the Credit Agreement are true and correct in
all material respects on and as of the date hereof.
	 
	7.	 	No Default or Event of Default or any Material Adverse Effect has occurred and is continuing
on and as of the date hereof or would result from the Credit Agreement

B-1

 

	 	 	becoming effective in accordance with its terms, both immediately before and immediately
after giving effect to any Term Loan.
	 
	8.	 	The [Borrower][Guarantor] has performed in all material respects all agreements and satisfied
in all material respects all conditions, which the Credit Agreement provides shall be
performed by it on or before the date hereof.
	 
	9.	 	The following persons are, and have been at all times since a date prior to ___
___, 200___ duly qualified and acting officers of the [Borrower][Guarantor] duly
elected or appointed to the offices set forth opposite the name of such person, and each such
person who, as an officer of the [Borrower][Guarantor], signed the Credit Agreement, each Note
and any other Loan Documents was duly elected or appointed, qualified and acting as such
officer at the time of such signing and delivery, and the signature of each such person
appearing on such documents is such person’s genuine signature.

	 	 	 	 	 
	Name

	 	Office
	 	Signature
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 

	10.	 	No proceeding for the winding-up, liquidation, dissolution or sale of all substantially all
of the assets of the [Borrower][Guarantor] is pending or contemplated.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
[Borrower][Guarantor].

	 	 	 
	Dated:                       , 2009

	 	[                    ]
	 
	 

	 	By:
	 

	 	 

I,                     , the
               
      of [The Talbots, Inc.
(the “Borrower”)][                     (the “Guarantor”)] hereby certify that I am the duly
elected,
qualified and acting                      of the [Borrower][Guarantor] and that
                     is the duly elected, qualified and acting
                     of the
[Borrower][Guarantor] and such person’s signature above is the true and genuine signature of such
person.

                    

B-2

 

Exhibit C

GUARANTY AGREEMENT

     GUARANTY AGREEMENT, dated February ___, 2009 (this “Guaranty”), made by each of the
domestic Subsidiaries of The Talbots, Inc., a corporation duly organized and validly existing under
the laws of the State of Delaware (the “Borrower”) that are signatories hereto (together
with any other entity that may become a party hereto as provided herein, the “Guarantors”
and each, a “Guarantor”), in favor of Aeon Co., Ltd., a corporation organized and existing
under the laws of Japan (the “Lender”).

W I T N E S S E T H :

          WHEREAS, pursuant to that certain Credit Agreement (as the same may be amended, supplemented
or otherwise modified from time to time, the “Credit Agreement”), dated as of February ___,
2009, between the Borrower and the Lender, the Lender has agreed to extend a term loan (the
“Term Loan”) to the Borrower in an aggregate principal amount equal to the Term Loan
Commitment (as defined in the Credit Agreement) subject to the terms and conditions set forth
therein;

          WHEREAS, in order to induce the Lender to extend the credit to the Borrower, each Guarantor
will execute and deliver this Guaranty pursuant to which such Guarantor will guaranty, among other
things, payment of all of the Obligations under the Credit Agreement and the other Loan Documents
(as defined in the Credit Agreement);

          WHEREAS, the Borrower, each Guarantor and the other direct and indirect Subsidiaries of the
Borrower are mutually dependent on each other in the conduct of their respective businesses as an
integrated operation, with the credit needed from time to time by the Guarantors and such other
Subsidiaries often being provided through financing obtained by the Borrower and the Borrower’s
ability to obtain such financing being dependent on the successful operations of the Guarantors and
such other Subsidiaries; and

          WHEREAS, each Guarantor has determined that its execution, delivery and performance of this
Guaranty directly benefit, and are within the organizational purposes and in the best interests of,
such Guarantor.

          NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Lender to enter into the Credit Agreement and to make the Term Loan to the Borrower
provided for in the Credit Agreement, each Guarantor, jointly and severally with the other
Guarantors, hereby agrees with the Lender as follows:

     SECTION 1. Definitions. (a) Reference is hereby made to the Credit Agreement for a
statement of the terms thereof. All terms used in this Guaranty which are defined therein and not
otherwise defined herein shall have the same meanings herein as set forth therein.

C-1

 

               (b) The words “hereof,” “herein” and “hereunder” and words of
similar import when used in this
Guaranty shall refer to this Guaranty as a whole and not to any particular provision of this
Guaranty, and section and paragraph references are to this Guaranty unless otherwise specified.

               (c) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

     SECTION 2. Guaranty. Each Guarantor, jointly and severally, hereby (i) irrevocably,
absolutely and unconditionally guarantees the prompt payment by the Borrower, as and when due and
payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of
all amounts now or hereafter owing in respect of the Notes, the Credit Agreement and the other Loan
Documents, whether for principal, interest (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Borrower), reimbursement of
drawings, cash collateral for letters of credit, premiums, indemnities, fees, expenses or
otherwise, and whether accruing before or subsequent to the filing of a petition initiating a
bankruptcy, reorganization, liquidation or similar proceeding affecting the Borrower
(notwithstanding the operation of the automatic stay under Section 362(a) of the U.S. Bankruptcy
Code), and the due performance and observance by the Borrower of its other obligations now or
hereafter existing in respect of the Loan Documents; and (ii) agrees to pay any and all expenses
(including legal fees, costs and expenses) incurred by the Lender in enforcing its rights under
this Guaranty (the foregoing obligations described in clauses (i) and (ii) above are hereinafter
referred to as the “Obligations”). Without limiting the generality of the foregoing, the
Guarantors’ liability shall extend to all amounts that constitute part of the Obligations and would
be owed by the Borrower under the Credit Agreement or the other Loan Documents but for the fact
that such document is unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.

     SECTION 3. Guarantors’ Obligations Unconditional.

     (a) Each Guarantor hereby, jointly and severally, guarantees that the Obligations will be paid
strictly in accordance with the terms of the Loan Documents to which the Borrower is a party,
regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Lender with respect thereto. Each Guarantor agrees that this
Guaranty constitutes a guaranty of payment when due and not of collection and waives any right to
require that any resort be made by the Lender to any collateral. The joint and several liability of
the Guarantors hereunder shall be absolute, unconditional and irrevocable irrespective of: (i) any
lack of validity or enforceability of any Loan Document or any agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any
departure from any Loan Document (including, without limitation, any increase in the obligations of
the Borrower resulting from the extension of additional credit to the Borrower or otherwise); (iii)
any exchange or release of, or non-perfection of any Lien on or security interest in, any
collateral, or any release or amendment or waiver of or consent to any departure from any other
guaranty, for all or any of the Obligations; (iv) the existence of any claim, set off, defense or
other right that the Guarantors may have at any time against any Person,

C-2

 

including, without limitation, the Lender; or (v) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Borrower or any other Guarantor in
respect of the Obligations or any Guarantor in respect hereof, other than payment thereof in full.

     (b) This Guaranty (i) is a continuing guaranty and shall remain in full force and effect until
the satisfaction in full of the Obligations and the payment of the other expenses to be paid by the
Guarantors pursuant hereto; and (ii) shall continue to be effective or shall be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be
returned by the Lender upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made.

     SECTION 4. Waivers. Each Guarantor hereby waives (i) promptness and diligence; (ii)
notice of acceptance and notice of the incurrence of any Obligation by the Borrower; (iii) notice
of any actions taken by the Lender or the Borrower or any other party under any Loan Document or
any other agreement or instrument relating thereto; (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of the Obligations or of
the obligations of any Guarantor hereunder, the omission of or delay in which, but for the
provisions of this Section 4, might constitute grounds for relieving such Guarantor of its
obligations hereunder; (v) any right to compel or direct the Lender to seek payment or recovery of
any amounts owed under this Guaranty from any one particular fund or source; and (vi) any
requirement that the Lender protect, secure, perfect or insure any security interest or lien or any
property subject thereto or exhaust any right or take any action against the Borrower or any other
Person or any collateral. Each Guarantor agrees that the Lender shall have no obligation to
marshall any assets in favor of any Guarantor or against or in payment of any or all of the
Obligations.

     SECTION 5. Subrogation. No Guarantor will exercise any rights which it may acquire by
way of subrogation hereunder, by any payment made by it hereunder or otherwise, until such date on
which all of the Obligations and all other expenses to be paid by the Guarantors pursuant hereto
shall have been satisfied in full. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations and all such other expenses shall not
have been paid in full, such amount shall be held in trust for the benefit of the Lender, shall be
segregated from the other funds of such Guarantor and shall forthwith be paid over to the Lender to
be applied in whole or in part by the Lender against the Obligations, whether matured or unmatured,
in accordance with the terms of the Credit Agreement. If (i) any Guarantor shall make payment to
the Lender of all or any portion of the Obligations and (ii) all of the Obligations shall be paid
in full, the Lender will, at such Guarantor’s request, execute and deliver to such Guarantor
(without recourse, representation or warranty) appropriate documents necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Obligations resulting from such
payment by such Guarantor, such subrogation to be fully subject and subordinate, however, to the
collection by the Lender of all other amounts due to the Lenders by the Borrower and each other
party under the Credit Agreement and the other Loan Documents.

     SECTION 6. Representations and Warranties; Covenants and other Obligations. Each
Guarantor hereby, jointly and severally, affirms the representations and warranties made by the
Borrower under the Credit Agreement, and agrees, jointly and severally, that it shall not fail to

C-3

 

perform or observe any of the covenants, commitments or other obligations of the Borrower and its
Subsidiaries contained in the Credit Agreement.

     SECTION 7. Right of Set-off. Upon (i) the occurrence and during the continuance of any
Event of Default and (ii) the making of the request or the granting of the consent specified in
Section 6.2 of the Credit Agreement to authorize the Lender to declare the Term Loan due and
payable, the Lender may, and is hereby authorized to, at any time and from time to time, without
notice to the Guarantors (any such notice being expressly waived by the Guarantors) and to the
fullest extent permitted by law, set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other Indebtedness at any time owing by the
Lender to or for the credit or the account of any Guarantor against any and all obligations of the
Guarantors now or hereafter existing under this Guaranty, irrespective of whether or not the Lender
shall have made any demand under this Guaranty and although such obligations may be contingent or
unmatured. The Lender agrees promptly to notify the applicable Guarantor after any such set-off and
application made by the Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this Section 7 are in
addition to other rights and remedies (including, without limitation, other rights of set-off)
which the Lender may have.

     SECTION 8. Notices, Etc. All notices and other communications provided for hereunder
shall be delivered or transmitted in the manner set forth in Section 8.6 of the Credit Agreement,
if to a Guarantor, to the Borrower at the Borrower’s address set forth in Section 8.6 of the Credit
Agreement; and if to the Lender, to it at its set forth in Section 8.6 of the Credit Agreement.

     SECTION 9. Additional Costs and Expenses; Indemnity; Taxes. Sections 7.1 and 7.2 of
the Credit Agreement are hereby incorporated, mutatis mutandis, by reference as if such sections
were set forth herein, and each of the Guarantors agrees to observe and perform each of the terms
and conditions set forth in Sections 7.1 and 7.2 of the Credit Agreement to the same extent as the
Borrower would be required to do so.

     SECTION 10. Judgment. The specification under this Guaranty of Dollars and payment in
New York City is of the essence. If, for the purposes of obtaining or enforcing judgment in any
court, it is necessary to convert a sum due hereunder in Dollars into another currency (the
“Other Currency”), the rate of exchange used shall be that at which the Lender could, in
accordance with normal banking procedures, purchase Dollars with the Other Currency on the business
day preceding that on which final judgment is given. The obligation of the Guarantors in respect of
any such sum due from it to the Lender hereunder shall, notwithstanding any judgment in such Other
Currency, be discharged only to the extent that, on the business day immediately following the date
on which the Lender receives any sum adjudged to be so due in the Other Currency, the Lender may,
in accordance with normal procedures, purchase Dollars with the Other Currency. If the Dollars so
purchased are less than the sum originally due to the Lender in Dollars, the Guarantors agree, as a
separate obligation and notwithstanding any such judgment, to indemnify the Lender against such
loss, and if the Dollars so purchased exceed the sum originally due to the Lender in Dollars, the
Lender agree to remit to the Guarantors such excess.

C-4

 

     SECTION 11. Governing Law; Consent to Jurisdiction; Waiver of Immunities; Waiver of
Jury.

     (a) THIS GUARANTY SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE
OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. EACH GUARANTOR HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY ACTION RELATED TO THIS GUARANTY
OR ANY OTHER LOAN DOCUMENT.

     (b) Each Guarantor hereby irrevocably agrees that any legal action or proceedings against such
Guarantor with respect to this Guaranty or any other Loan Document may be brought in (and each
Guarantor hereby submits to the jurisdiction of) any court of the State of New York or any Federal
Court of the United States of America located in the City or State of New York, or both, as the
Lender may elect, and by execution and delivery of this Guaranty, each Guarantor hereby submits to
and accepts with regard to any such action or proceeding service of process by the mailing of
copies thereof by registered or certified airmail, postage prepaid, to such Guarantor at its
address set forth in Section 8 hereof. Each Guarantor agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

     (c) Nothing in this Section 11 shall affect the right of the Lender to serve legal process in
any other manner permitted by law or affect the right of the Lender to bring any action or
proceeding against any Guarantor or its property in the courts of any other jurisdictions.

     (d) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have
to the laying of the venue of any suit, action or proceeding arising out of or relating to this
Guaranty or any other Loan Document in the State of New York and hereby further irrevocably waives
any claim that the State of New York is not a convenient forum for any such suit, action or
proceeding.

     (e) To the extent that any Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself
or its property, such Guarantor hereby irrevocably waives such immunity in respect of its
obligations under this Guaranty and any other Loan Document to which it is a party.

     SECTION 12. Miscellaneous.

     (a) Each Guarantor will make each payment hereunder in lawful money of the United States of
America and in immediately available funds to the Lender at its address specified in Section 8
hereof or, to the Lender’s Account or to such other account in New York City as the Lender may from
time to time designate by notice to the Guarantors.

     (b) No amendment or waiver of any provision of this Guaranty, and no consent to any departure
by any Guarantor therefrom, shall in any event be effective unless the same shall be in

C-5

 

writing and signed by the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

     (c) No failure on the part of the Lender to exercise, and no delay in exercising, any right
hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Lender provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Lender under any Loan Document against any party thereto are not
conditional or contingent on any attempt by the Lender to exercise any of its rights under any
other Loan Document against such party or against any other Person.

     (d) Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

     (e) This Guaranty shall (i) be binding on each Guarantor and its successors and assigns, and
(ii) inure, together with all rights and remedies of the Lender hereunder, to the benefit of the
Lender and their respective successors, transferees and assigns. Without limiting the generality of
clause (ii) of the immediately preceding sentence, the Lender may assign or otherwise transfer the
Term Loan, and the Lender may assign or otherwise transfer its rights under any other Loan
Document, to any other Person, in accordance with the terms of the Credit Agreement. None of the
rights or obligations of the Guarantors hereunder may be assigned or otherwise transferred without
the prior written consent of the Lender.

     (f) Pursuant to Section 4.1(z) of the Credit Agreement, each Domestic Subsidiary that was not
in existence on the date of the Credit Agreement is required to enter in this Agreement as a party
upon becoming a Domestic Subsidiary. Upon execution and delivery by the Lender and a Domestic
Subsidiary of a Guaranty Agreement Supplement substantially in the form of Annex I hereto,
such Domestic Subsidiary shall become a party hereunder with the same force and effect as if
originally named as a party herein. The execution and delivery of any such instrument shall not
require the consent of any other party hereunder. The rights and obligations of each party
hereunder shall remain in full force and effect notwithstanding the addition of any new party as a
party to this Agreement.

     (g) This Guaranty may be signed in any number of counterparts. Either a single counterpart or
a set of counterparts when signed by all the parties hereto shall constitute a full and original
agreement for all purposes. Delivery of any executed signature page hereof or of any amendment,
waiver or consent to this Guaranty by facsimile transmission shall be as effective as delivery of a
manually executed counterpart thereof.

     (h) Any provision of this Guaranty or any other Loan Document that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions hereof or thereof
or affecting the validity or enforceability of such provision in any other jurisdiction.

C-6

 

     (i) The Guarantors and the Lender agree that no party hereto shall be deemed to be the drafter
of this Guaranty.

[signature pages follow]

C-7

 

          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by an officer
thereunto duly authorized, as of the date first above written.

	 	 	 	 	 
	 	AEON CO., LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TALBOTS CLASSICS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE TALBOTS GROUP, LIMITED PARTNERSHIP

 	 
	 	By:  	The Talbots, Inc., its sole general partner
 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TALBOTS IMPORT, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

C-8

 

	 	 	 	 	 

	 	 	 	 	 
	 	TALBOTS INTERNATIONAL RETAILING LIMITED, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TALBOTS CLASSICS FINANCE COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TALBOTS (U.K.) RETAILING LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TALBOTS (CANADA), INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

C-9

 

	 	 	 	 	 

Annex I

SUPPLEMENT TO GUARANTY AGREEMENT

     SUPPLEMENT NO. ___ dated as of
                    , ___ 20___(this “Supplement”), to the Guaranty
Agreement (as amended, restated, supplemented or otherwise modified from time to time, the
“Guaranty”), dated as of February ___, 2009, among the Guarantors (as defined in the
Guaranty) party thereto and the Lender (defined below).

	 	A.	 	Reference is made to the Credit Agreement (as the same may be amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
dated as of February ___, 2009, between THE TALBOTS, INC., a corporation duly organized
and validly existing under the laws of the State of Delaware (the “Borrower”)
and AEON CO., LTD., a corporation organized and existing under the laws of Japan (the
“Lender”).
	 
	 	B.	 	Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement or if not defined therein, in
the Guaranty.
	 
	 	C.	 	The Guarantors have entered into the Guaranty in order to induce the Lenders to
make Term Loan.                     , a
                     (the “New Subsidiary”) is executing
this Supplement in accordance with the requirements of the Credit Agreement to become a
Guarantor and party under the Guaranty as consideration for the premises hereof, the
Term Loan previously made and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged. Section 12(f) of the Guaranty provides
that additional Subsidiaries of the Borrower may become parties under the Guaranty by
execution and delivery of an instrument in the form of this Supplement.

     Accordingly, the Lender and the New Subsidiary agree as follows:

     SECTION 1. In accordance with Section 4.1(z) of the Credit Agreement and Section 12(f) of the
Guaranty, the New Subsidiary by its signature below becomes a party to the Guaranty and
accordingly, becomes a Guarantor with the same force and effect as if originally named therein as a
party and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Guaranty
applicable to it as a party and Guarantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Guarantor thereunder are true and correct on and as
of the date hereof. The Guaranty is hereby incorporated herein by reference.

     SECTION 2. The New Subsidiary represents and warrants to the Lender that this Supplement has
been duly authorized, executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.

C-10

 

     SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto
on different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall become effective when the Lender
shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary
and the Lender has executed a counterpart hereof. Delivery of an executed signature page to this
Supplement by facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.

     SECTION 4. Except as expressly supplemented hereby, the Guaranty shall remain in full force
and effect.

     SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.

     SECTION 6. In case any one or more of the provisions contained in this Supplement should be
held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and in the Guaranty shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in any other
jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.

     SECTION 7. All communications and notices hereunder shall be in writing and given as provided
in Section 8 of the Guaranty.

     SECTION 8. The New Subsidiary agrees to reimburse the Lender for its reasonable out-of-pocket
expenses in connection with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Lender.

[signature page follows]

C-11

 

     IN WITNESS WHEREOF, the New Subsidiary and the Lender have duly executed this Supplement to
the Guaranty as of the day and year first above written.

	 	 	 	 	 
	 	[NAME OF NEW SUBSIDIARY],	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	AEON CO., LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

C-12

 

Schedule 1(a)

Initial Guarantors

	 	 	 
	Guarantor	 	Jurisdiction
	Talbots Classics, Inc.

	 	Massachusetts
	The Talbots Group, Limited Partnership

	 	Massachusetts
	Talbots Import, LLC

	 	Delaware
	Talbots International Retailing Limited, Inc.

	 	Delaware
	Talbots Classics Finance Company, Inc.

	 	Delaware
	Talbots (U.K.) Retailing Limited

	 	Delaware
	Talbots (Canada), Inc.

	 	Delaware

 

 

Schedule 3.1

Borrower Subsidiaries

	 	 	 
	Subsidiary	 	Jurisdiction
	Talbots Classics, Inc.

	 	Massachusetts
	The Talbots Group, Limited Partnership

	 	Massachusetts
	J. Jill, GP

	 	Massachusetts
	J. Jill LLC

	 	New Hampshire
	Talbots Import, LLC

	 	Delaware
	Birch Pond Realty Corporation

	 	Delaware
	Talbots International Retailing Limited, Inc.

	 	Delaware
	Talbots Classics Finance Company, Inc.

	 	Delaware
	Talbots Classics National Bank

	 	Rhode Island
	Talbots (U.K.) Retailing Limited

	 	Delaware
	Talbots Charitable Foundation, Inc.

	 	Delaware
	Talbots (Canada), Inc.

	 	Delaware
	Talbots (Canada) Corporation

	 	Nova Scotia, Canada

 

 

Schedule 4.1(s)

Existing Indebtedness

 

 

Schedule 4.1(r)

Existing Liens

 

 

Schedule 4.1(u)

Existing Investments

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