Document:

Exhibit 10.5

 

CONFIDENTIAL TREATMENT
REQUESTED

UNDER 17 C.F.R. §§
200.80(b)4, AND 240.24b-2

 

EXECUTION COPY

 

 

 

 

AMENDED AND
RESTATED 

RESEARCH AND DEVELOPMENT AGREEMENT

 

among

 

ISIS
PHARMACEUTICALS, INC.,

 

 

SYMPHONY GENISIS HOLDINGS LLC

 

 

and

 

 

SYMPHONY GENISIS, INC.

 

 

 

Dated as of April
7, 2006

 

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Assignment

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Overview
  of Development

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Development
  Committee

  	
  2

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Development
  Plan and Development Budget

  	
  2

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Generally

  	
  2

  
	
   

  	
  4.2

  	
  Amendments

  	
  3

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Regulatory
  Matters

  	
  4

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  FDA
  Sponsor

  	
  4

  
	
   

  	
  5.2

  	
  Correspondence

  	
  5

  
	
   

  	
  5.3

  	
  Inspections
  and Meetings

  	
  5

  
	
   

  	
  5.4

  	
  Transfer
  of FDA Sponsorship

  	
  5

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Isis’
  Obligations

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Generally

  	
  6

  
	
   

  	
  6.2

  	
  Subcontracting

  	
  7

  
	
   

  	
  6.3

  	
  Reports

  	
  7

  
	
   

  	
  6.4

  	
  Staffing

  	
  8

  
	
   

  	
  6.5

  	
  QA Audit

  	
  8

  
	
   

  	
  6.6

  	
  Financial
  Audit

  	
  8

  
	
   

  	
  6.7

  	
  Insurance.

  	
  9

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Symphony
  GenIsis’ Obligations

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Generally

  	
  11

  
	
   

  	
  7.2

  	
  Subcontracting

  	
  11

  
	
   

  	
  7.3

  	
  Insurance

  	
  11

  
	
   

  	
  7.4

  	
  Staffing

  	
  12

  
	
   

  	
  7.5

  	
  Audit

  	
  12

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Funding
  and Payments

  	
  12

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Use of
  Proceeds

  	
  12

  
	
   

  	
  8.2

  	
  Reimbursement

  	
  13

  
	
   

  	
  8.3

  	
  Budget
  Allocation and Deviations

  	
  13

  
	
   

  	
  8.4

  	
  Employee
  Benefits

  	
  13

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Covenants

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Mutual
  Covenants

  	
  13

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Confidentiality

  	
  14

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Confidentiality
  Agreement

  	
  14

  
	
   

  	
  10.2

  	
  Permitted
  Disclosure of Information

  	
  15

  
					

 

 

i

 

	
  11.

  	
  Discontinuation
  Option

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Discontinuation
  Option

  	
  15

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Representations
  and Warranties

  	
  16

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Isis
  Representations and Warranties

  	
  16

  
	
   

  	
  12.2

  	
  Symphony
  GenIsis Representations and Warranties

  	
  17

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Relationship
  Between Isis and Symphony GenIsis

  	
  19

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Change
  of Control

  	
  19

  
	
   

  	
   

  	
   

  
	
  15.

  	
  No
  Restrictions; Indemnification

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  No
  Restrictions

  	
  20

  
	
   

  	
  15.2

  	
  Indemnification

  	
  20

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Limitation
  of Liabilities

  	
  23

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Between
  the Parties

  	
  23

  
	
   

  	
  16.2

  	
  Pursuant
  to the RRD Services Agreement

  	
  23

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Term and
  Termination

  	
  24

  
	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Term

  	
  24

  
	
   

  	
  17.2

  	
  Termination
  for Isis’ Breach

  	
  24

  
	
   

  	
  17.3

  	
  Termination
  for Symphony GenIsis’ Breach

  	
  24

  
	
   

  	
  17.4

  	
  Termination
  of License Agreement

  	
  25

  
	
   

  	
  17.5

  	
  Survival

  	
  25

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Miscellaneous

  	
  25

  
	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  No
  Petition

  	
  25

  
	
   

  	
  18.2

  	
  Notices

  	
  25

  
	
   

  	
  18.3

  	
  Governing
  Law; Consent to Jurisdiction and Service of Process

  	
  27

  
	
   

  	
  18.4

  	
  WAIVER
  OF JURY TRIAL

  	
  27

  
	
   

  	
  18.5

  	
  Entire
  Agreement

  	
  27

  
	
   

  	
  18.6

  	
  Amendment;
  Successors; Assignment; Counterparts

  	
  27

  
	
   

  	
  18.7

  	
  Severability

  	
  28

  
	
   

  	
  18.8

  	
  Third
  Party Beneficiary.

  	
  28

  

 

Annex A – Certain Definitions

 

Annex B – Development
Committee Charter

Annex C – Development
Plan

Annex D – Development Budget

Annex E – Payment Terms

 

Schedule 6.4 – Isis Key
Personnel

Schedule 12.1(f) –
Material Disclosed Contracts

 

ii

 

AMENDED AND
RESTATED

RESEARCH AND DEVELOPMENT AGREEMENT

 

This AMENDED AND RESTATED RESEARCH AND DEVELOPMENT
AGREEMENT (this “Agreement”)
is entered into as of April 7, 2006 (the “Closing Date”) by and among ISIS
PHARMACEUTICALS, INC., a Delaware corporation (“Isis”),
SYMPHONY GENISIS, INC., a Delaware corporation (“Symphony GenIsis”) (each of Isis and
Symphony GenIsis being a “Party,”
and collectively, the “Parties”),
and SYMPHONY GENISIS HOLDINGS LLC, a Delaware limited liability company (“Holdings”) (which
shall be a Party to this Agreement solely with respect to Articles 1 and
14 and Sections 5.3, 6.3, 6.4, 6.7 and 7.5). Capitalized terms
used herein and not defined herein shall have the meanings assigned to such
terms in Annex A attached hereto.

 

PRELIMINARY
STATEMENT

 

Isis and Holdings have entered into that certain
Research and Development Agreement, dated as of April 7, 2006 (the “Research and Development Agreement”).
Pursuant to this Agreement, Holdings desires to assign all of its rights and
delegate its obligations under the Research and Development Agreement to
Symphony GenIsis, and Isis and Symphony GenIsis desire to amend and restate the
terms and conditions of the Research and Development Agreement.

 

In the Novated and Restated Technology License
Agreement, Isis grants Symphony GenIsis an exclusive license to develop and
commercialize certain compounds. Symphony GenIsis wishes for Isis to continue
to develop such compounds. Symphony GenIsis and Isis desire to establish, and
agree on the responsibilities of, a Development Committee to oversee such
development. Isis and Symphony GenIsis further desire to comply with and
perform certain agreements and obligations related thereto.

 

The Parties hereto agree as follows:

 

1.                                      Assignment.
The Parties agree that from and after the Closing Date, all of the rights
and obligations of Holdings under the Research and Development Agreement will
be assigned and transferred to, and assumed by, Symphony GenIsis.

 

2.                                      Overview of
Development.

 

(a)           The Parties shall develop the
Programs in a collaborative and efficient manner. Representatives of the
Parties shall engage in joint decision-making for the Programs as set forth in Articles
3 and 4 hereof. Symphony GenIsis shall have overall responsibility
for all matters set forth in the Development Plan (pursuant to Article 7
hereof), and shall engage Isis (pursuant to Article 6 hereof), RRD
International LLC (“RRD”)
(pursuant to the RRD Services Agreement), and such independent contractors and
agents as RRD and Isis may retain on Symphony GenIsis’ behalf, to act on behalf
of Symphony GenIsis and carry out the duties set forth therein and herein,
including management, supervisory and accounting functions, pre-clinical and
clinical

 

1

 

development, scientific
and technical services associated with such development, and patent work under
the Programs.

 

(b)           Isis
hereby acknowledges and agrees to Symphony GenIsis’ engagement of RRD to act on
its behalf and to carry out the duties set forth herein and in the RRD Services
Agreement, including, but not limited to (i) the management and administration
of Symphony GenIsis, (ii) providing personnel and support to the Development
Committee and the Symphony GenIsis Board, (iii) hiring, on Symphony GenIsis’
behalf, independent contractors and vendors, (iv) supervising and monitoring
the development of the Programs, and (v) such other development-related work as
Symphony GenIsis may reasonably delegate to RRD.

 

(c)           With
respect to the ApoB Program, the GCGR Program and the GCCR Program, Isis shall
be responsible for the execution of all pre-clinical and clinical development,
all scientific and technical services associated with such development, and all
patent work, including all related matters set forth in the Development Plan
for such Programs.

 

(d)           Nothing
in clause (c) shall in any way limit the authority of the Development
Committee (as defined below) or the Symphony GenIsis Board hereunder, and the
engagements and delegations set forth therein shall be subject to the terms and
conditions of this Agreement and the RRD Services Agreement, and the
satisfactory performance by RRD and Isis of their obligations pursuant hereto
and thereto. The allocations of responsibility described in this Article 2
shall remain subject to further modification in accordance with the terms and
conditions of this Agreement and the RRD Services Agreement.

 

3.                                      Development
Committee.   The Parties shall
establish and maintain a committee (the “Development Committee”) to oversee the
development of the Programs (including the continued development and refinement
of the Development Plan and the Development Budget). The Development Committee
shall be established, operated and governed in accordance with the policies and
procedures set forth in Annex B hereto (the “Development Committee Charter”).
The Development Committee Charter may be amended only with the unanimous
approval of the Development Committee Members and the consent of the Symphony
GenIsis Board and Isis. In no event shall the Development Committee have the
power to amend the terms of any Operative Document.

 

4.                                      Development
Plan and Development Budget.

 

4.1          Generally.
  The Parties have agreed, as of the
Closing Date, to an Initial Development Plan and an Initial Development Budget,
which are attached hereto and incorporated herein as Annex C and Annex
D, respectively, and which shall be further developed and refined from time to
time in accordance herewith. The Initial Development Plan consists (and
the Development Plan shall consist) of detailed provisions governing all
pre-clinical, clinical, scientific, technical, regulatory and patent work to be
performed under the Operative Documents. Following the Closing Date, the
Development Committee shall, on an ongoing basis, further develop the
Development

 

2

 

Plan to include, without limitation, (i) an
outline of the plan for the development of each Program; (ii) detailed
Protocols for each Program; and (iii) outlines of non-clinical activities, key
regulatory and quality activities, and CMC activities for each Program. The
Initial Development Budget consists (and the Development Budget shall consist)
of two (2) components: (x) a budget for the Development Plan (the “Clinical Budget Component”),
and (y) a budget for the management and administrative functions of Symphony
GenIsis, as set forth in Section 1(a) of the RRD Services Agreement (the “Management Budget Component”).
The Clinical Budget Component shall be further divided into separate budgets
for each Program, and, following the Closing Date, the Development Committee
shall further develop and refine the Clinical Budget Component to include,
without limitation, (1) budget spreadsheets summarizing anticipated costs of
engaging third party service providers for each Protocol and the scope of
Protocol-related work to be performed by such third parties; and (2) the number
of full-time equivalents (“FTEs”)
to be dedicated to the Programs (by function and work responsibilities, on a
Program-by-Program basis). All presently anticipated or actual expenditures of
Symphony GenIsis, including without limitation, compensation of members of the
Symphony GenIsis Board, are included in the Initial Development Budget attached
hereto as Annex D, and will continue to be included in any amendments
thereof. The Development Committee shall, at the request of the Symphony
GenIsis Board, submit the Development Plan and the Development Budget (as each
shall have been developed and refined up to such point) to the Symphony GenIsis
Board for its review at the first meeting of the Symphony GenIsis Board. Following
the Symphony GenIsis Board’s review, the Development Committee shall work
diligently to incorporate the comments generated by the Symphony GenIsis Board’s
review and update the Development Plan and the Development Budget as soon as
practicable, and submit the updated Development Plan and the Development Budget
to the Symphony GenIsis Board for further review; provided that (x) in
no event shall the aggregate total amount of the Development Budget be
increased to an amount that is greater than [***]. without the consent of Isis
(such consent to be given or withheld in Isis’ sole discretion), and (y) any
amendments to or revisions of the Development Budget shall be made in
accordance with Paragraph 14 of the Development Committee Charter and Section 2
of the Research Cost Sharing and Extension Agreement.

 

4.2          Amendments.

 

(a)           All
amendments of and, all material deviations from, the Development Plan and
Development Budget (including amendments or deviations made at the request of
Isis or RRD, in accordance with Section 8.3 hereof or Section 2(b) of
the  RRD Services Agreement,
respectively) shall be made in accordance with the procedures described in this
Article 4 and in the Development Committee Charter, including obtaining
the approval of the Symphony GenIsis Board, as may be required by the
Development Committee Charter.

 

(b)           The
Development Committee shall review the Development Plan and Development Budget
in their entirety on an annual basis to determine whether any changes are
required, and shall comply with all procedures required to amend the
Development Plan or Development Budget to implement such changes. Furthermore,

 

3

 

following the Closing
Date, the Development Committee shall, on an ongoing basis, continue to develop
the Development Plan, including, without limitation, as set forth in Section
4.1 and in response to requests, proposals or reports from Isis and RRD to
the Development Committee.

 

(c)           A
Program may only be discontinued in the event that either (i) the Parties mutually
agree to discontinue such Program based on (A) a Medical Discontinuation Event,
or (B) scientific evidence (regardless of whether such evidence is generated by
a Party or a third party) that the likelihood of success for a particular
Program is not enough to warrant further development (a “Scientific Discontinuation Event”)
that arises in the course of developing such Program; or (ii) the Symphony
GenIsis Board by (x)
if the Symphony GenIsis Board
shall have less than five (5) members, the unanimous consent of all the members
of the Symphony GenIsis Board,
or (B) if the Symphony GenIsis Board shall have five (5) members, an affirmative
vote of four-fifths (4/5ths) of
the members of the Symphony GenIsis Board, resolves to discontinue such Program.
The Development Committee shall promptly thereafter amend the Development Plan
to reflect such discontinuation and amend the Development Budget to reallocate
to any or all of the remaining Programs the funds previously allocated to the
discontinued Program (with any funds not then allocated to be held for
reallocation by the Development Committee).

 

(d)           The
Development Plan shall never be amended in any manner that would require Isis
or Symphony GenIsis (or any Person acting on behalf of Isis or Symphony GenIsis
(including RRD and its RRD Personnel)) to perform any assignments or tasks in a
manner that would violate any applicable law or regulation. In the event of a
change in any applicable law or regulation, the Development Committee shall
consider amending the Development Plan to enable Isis or Symphony GenIsis (or
any Person acting on behalf of Isis or Symphony GenIsis (including RRD and its
RRD Personnel)), as the case may be, to comply fully with such law or
regulation. If such amendment is not approved, the affected Party shall be
excused from performing any activity specified herein or in the Development
Plan that would violate or result in a violation of any applicable law or
regulation.

 

5.                                      Regulatory
Matters.

 

5.1          FDA Sponsor.
  Notwithstanding any governance
provision contained herein or in any Operative Document, the Parties agree
that, until the termination or unexercised expiration of the Purchase Option,
Isis shall be the FDA Sponsor for the Programs (except any Programs which were
the subject of a Discontinuation Option that was not exercised by Isis). Isis
shall have the responsibility and the authority to act as the sponsor and make
those decisions and take all actions necessary to assure compliance with all
regulatory requirements. Isis agrees to be bound by, and perform all
obligations set forth in, 21 C.F.R. § 312 related to its role as the FDA
sponsor for the Programs (the “FDA Sponsor”). Notwithstanding anything to the contrary
in Article 4 or the Development Committee Charter, Isis, in its capacity as FDA
Sponsor, may discontinue or modify any Program without the approval of the
Development Committee or the Symphony GenIsis Board in the event such actions
are: (a) triggered by an event that is reportable to the

 

4

 

 

FDA; and (b) reasonably necessary to avoid
the imposition of criminal or civil liability; provided, however,
that to the extent commercially reasonable, Isis shall (i) pursuant to Section
5.2, advise and consult with the Development Committee prior to taking such
action and (ii) forward a copy of all such correspondence to the members of the
Symphony GenIsis Board.

 

5.2          Correspondence.   Each
Party hereto acknowledges that Isis, in its capacity as FDA Sponsor, shall be
the Party responding to any regulatory correspondence or inquiry. Each Party
shall: (a) notify the other Parties promptly of any FDA or other governmental
or regulatory inspection or inquiry concerning any study or project under the
Programs, including, but not limited to, inspections of investigational sites
or laboratories; and (b) forward to the other Parties copies of any
correspondence from any regulatory or governmental agency relating to such a
study or project, including, but not limited to, Form FD-483 notices and FDA
refusal to file, action or warning letters, even if they do not specifically
mention the other Parties. Symphony GenIsis shall obtain the written consent of
Isis, which consent will not be unreasonably withheld, before referring to Isis
or its Affiliates in any regulatory correspondence, except to the extent that
such reference is required by law or simply refers to the existence of this
Agreement or any of the other Operative Documents. Furthermore, Isis shall be
the Party responsible for responding to or handling any FDA or regulatory
inspection; provided, that Isis shall notify the Development Committee
(i) within twenty-four (24) hours of the commencement of a clinical hold for
any Protocol, and (ii) concurrently with its submission to the FDA of any IND
safety reports for the Programs.

 

5.3          Inspections and
Meetings.   Each Party agrees that, during an
inspection by the FDA or other Regulatory Authority concerning any study or
project under the Programs, it will not disclose information and materials (including
but are not limited to (x) financial data and pricing data including, but not
limited to, budget and payment schedules, (y) sales data (other than shipment
data), and (z) personnel data (other than data as to qualification of technical
and professional persons performing functions subject to regulatory
requirements)) to such agency without the prior consent of the other Parties,
which consent shall not be unreasonably withheld or delayed, except to
the extent that such Party may be required to disclose such information and
materials or such Party determines, in its reasonable judgment, that it is
prudent to disclose such materials or information at such time. Furthermore,
each Party shall promptly inform each other Party of any meetings concerning
the Programs between its personnel and any Regulatory Authority or other
outside personnel or agencies, and shall, upon a request from such other Party
or Parties, and to the extent reasonably possible, facilitate the attendance at
such meetings of a Development Committee Member nominated (x) by Holdings if
Isis was the notifying Party, or (y) by Isis if Holdings or Symphony GenIsis
was the notifying Party.

 

5.4          Transfer of FDA Sponsorship.

 

(a)           On
or prior to the thirtieth (30th) day after the unexercised
expiration or termination of the Purchase Option, Isis shall cease to act as
the FDA sponsor for the Programs for which Isis has not exercised the
Discontinuation Option, and Isis and

 

5

 

Symphony GenIsis shall,
at Symphony GenIsis’ expense, take all actions necessary to effect the transfer
of (x) the Regulatory Files solely related to such Programs to Symphony GenIsis
or its designee in accordance with Section 2.7 of the Novated and Restated
Technology License Agreement, and (y) any and all materials necessary for
Symphony GenIsis to practice or exploit the license granted to it under the
Novated and Restated Technology License Agreement, by such date. In conjunction
with such transfer, Isis hereby assigns to Symphony GenIsis or its designee, as
of the date specified in the first sentence of this Section 5.4(a), all
of the material agreements to which Isis is a Party and that: (i) are related
to such Programs; (ii) provide Isis with goods and services (clinical and
manufacturing) from third party suppliers and subcontractors; and (iii) are
assignable to Symphony GenIsis or its designee. Isis shall provide copies of
all such contracts to Symphony GenIsis in connection with such transfer. Isis
shall use commercially reasonable efforts to cause the transfer of any
non-assignable material agreements meeting the criteria set forth in (i) and
(ii) above, or if such agreements are not assignable, Isis shall act as agent
of Symphony GenIsis in processing all goods and services under such agreements.
Isis agrees to take such commercially reasonable actions as Symphony GenIsis
may request in furtherance of the foregoing at the expense of Symphony
GenIsis  Such efforts shall not include
any obligation for Isis to incur any out-of-pocket costs in connection with
such transfer.

 

(b)           Upon
the discontinuation of any of the Programs pursuant to Section 4.2(c),
Isis shall have no further obligations with respect to such Programs under the
Operative Documents. If such Programs are transferred or licensed to a third
party in accordance with Section 11.1 (such third party, the “Transferee”), then
Isis shall cooperate with Symphony GenIsis and the Transferee to effect the
assignment to the Transferee of the sponsorship to the Regulatory Files with
respect to the Program for which Transferee has acquired rights; provided,
however, that Isis shall not be obligated to take any action pursuant to
this Section 5.4(b) for which it will not receive full reimbursement
from Symphony GenIsis or another party. The assignment of such Regulatory Files
to the Transferee does not include an assignment of any Licensed Intellectual
Property.

 

6.                                      Isis’
Obligations.

 

6.1          Generally.

 

(a)           Isis
shall be responsible for (i) the execution of all matters set forth in the
Development Plan for the ApoB Program, the GCGR Program and the GCCR Program,
and (ii) the execution of all other matters set forth in the Development Plan
that have been delegated to Isis by Symphony GenIsis (collectively, the “Isis Obligations”); provided,
however that, following the Closing Date, the Development Committee
shall be responsible for any decision to delegate additional matters or
responsibilities to Isis.

 

(b)           Isis
agrees that it will work diligently and use commercially reasonable efforts to
discharge the Isis Obligations in a good scientific manner and in accordance
with the Development Plan, the Development Budget, and the terms of this
Agreement. In the event that Isis is unable to execute any of the
aforementioned development

 

6

 

activities which comprise
the Isis Obligations in accordance with the standard established in the
preceding sentence, as determined by the Development Committee, Symphony
GenIsis shall re-assign such development activities in a manner to be
determined by the Development Committee, and Isis shall transfer and deliver to
Symphony GenIsis (or RRD on behalf of Symphony GenIsis) any and all materials,
documents, files and other information relating to such development activities;
provided, that Isis shall be permitted to retain copies of such
transferred materials, documents, files and other information relating to such
development activities as necessary in order to comply with any requirements of
a Governmental Authority.

 

6.2          Subcontracting.
  All
agreements between Isis and third parties (including without limitation
clinical research organizations and contract manufacturers) for such third
parties to perform any Isis Obligations (each such third party, an “Isis Subcontractor”
and each such agreement, a “Subcontracting Agreement”) entered into by Isis prior to
the Closing Date (except for those master service agreements executed prior to
the Closing Date that, only through the subsequent addition of a new work order,
change order, project or the like after the Closing Date, become Subcontracting
Agreements) shall be deemed to be acceptable to the Parties in all respects. Following
the Closing Date, Isis shall obtain the approval of the Development Committee
prior to entering into any Subcontracting Agreement or amending or terminating
any Subcontracting Agreement. Isis shall provide the Development Committee with
a copy of each draft Subcontracting Agreement at a monthly Development
Committee meeting, or at such other time as may be agreed among the Parties,
prior to the execution of such Subcontracting Agreement. The terms of any such
Subcontracting Agreements shall be deemed the Confidential Information of Isis
and be subject to the rights and obligations set forth in the Confidentiality
Agreement. Isis shall monitor the performance of its Isis Subcontractors and
shall promptly notify the Development Committee with respect to any Isis
Subcontractor performance issues that may have a material adverse effect on the
Programs. The Development Committee shall have the authority to direct Isis to
terminate any Subcontracting Agreement pursuant to the terms thereof.

 

6.3          Reports.
  Isis
shall keep the Development Committee informed of its activities under the
Development Plan through regular reports. At each Scheduled Meeting of the
Development Committee, Isis shall, to the extent reasonably required by the
Development Committee, provide the Development Committee with a summary of Isis’
activities and developments with respect to the Programs for the period
following the most recent preceding Scheduled Meeting. Such summary shall
include: (i) a copy of each new Protocol for the Programs being drafted by
Isis; (ii) a copy of each standard clinical study progress report for the
Programs received by Isis during the preceding month from any of the clinical
research organizations engaged by Isis pursuant to any Subcontracting
Agreements; (iii) updates regarding (A) CMC status, non-clinical program
status, regulatory and quality program status, communications with regulatory
agencies, results of meetings of Isis’ Clinical Advisory Board for a particular
Program, and results of meetings with consultants for the Programs, all to the
extent related to Isis’ activities under the Development Plan, and (B) patient
enrollment, any adverse events (to the extent Isis has been notified of such
adverse events) or serious adverse events, any added or terminated clinical
trial sites, any significant Protocol deviation and any interim

 

7

 

analyses or statistical reports, all to the
extent relating to clinical trials under the Development Plan; (iv) a financial
report, in a format agreed upon by the Development Committee, itemizing actual
spending under the Development Plan as well as any variation from planned
spending; (v) if the portion of the Development Budget related to a particular
Program is altered to the extent that available funding for such Program no
longer appears to be adequate to complete the Program, an updated budget
forecast; and (vi) such other information as the Development Committee may
reasonably request.

 

6.4          Staffing.
  Isis
shall provide such sufficient and competent staff and Personnel (including,
without limitation, such employees or agents of, or independent contractors
retained by, Isis) that have the skill and expertise necessary to perform the
Isis Obligations. Isis shall notify Symphony GenIsis in advance, if
practicable, and in any event promptly thereafter, of any change in Key
Personnel involved in the Programs.

 

6.5          QA Audit.
  During
the Term, Isis will permit Symphony GenIsis’ representatives, such
representatives to be identified by Symphony GenIsis in advance and reasonably
acceptable to Isis, to examine and audit the work performed by Isis hereunder
and the Isis facilities at which such work is conducted to determine that the
project assignment is being conducted in accordance with the agreed upon
services (“QA Audits”)
during regular business hours. Symphony GenIsis shall give Isis reasonable
advance notice of such QA Audits specifying the scope of the audit. Symphony
GenIsis shall reimburse Isis for its time associated with QA Audits; provided,
however, that should a particular QA Audit reveal a material deficiency,
then Symphony GenIsis will not be responsible for costs associated with such QA
Audit, the work to be re-performed or the costs or expenses associated with
curing any material deficiencies. Symphony GenIsis and Isis shall meet to
discuss the results of the QA Audit and, if required, jointly agree upon any
actions that will be required as a result of such audits including defining
material deficiencies to be addressed. Isis shall make commercially reasonable
efforts to reconcile all such deficiencies found by Symphony GenIsis during
such QA Audit.

 

6.6          Financial Audit.
  During
the Term, Isis will permit Symphony GenIsis’ representatives (such
representatives to be identified by Symphony GenIsis in advance and reasonably
acceptable to Isis), to verify Isis’ invoices, other receipts, and FTE records
that are related to Isis’ performance of the work under the Programs (“Financial Audits”),
which review shall be conducted during regular business hours will take place
no more than once per year, unless otherwise agreed to by the Parties. Symphony
GenIsis shall give Isis reasonable advance notice of such Financial Audits
specifying the scope of the audit, which shall not include work that has
previously undergone Financial Audits. Symphony GenIsis shall reimburse Isis
for its time associated with Financial Audits; provided, however,
that should a particular Financial Audit reveal an aggregate variance of more
than 5% between such financial records and the reports submitted by Isis to
Symphony GenIsis for reimbursement purposes, then Symphony GenIsis will not be
responsible for costs associated with such Financial Audit. Symphony GenIsis
and Isis shall meet to discuss the results of the Financial Audit and, if
required, jointly agree upon any actions that will be required as a result of
such audits including defining material discrepancies to be addressed. Isis
shall make commercially reasonable efforts to reconcile all such discrepancies
found by Symphony GenIsis during such Financial 

 

8

 

Audit. In addition, Isis shall, during
regular business hours, cooperate with, and promptly respond to inquiries from,
the Symphony GenIsis Auditors, if the Symphony GenIsis Auditors shall
reasonably conclude that they require additional information or clarification
regarding any invoices, other receipts or FTE records submitted by Isis.

 

6.7          Insurance.

 

(a)           Subject
to Section 6.7(b), Isis shall, at all times and at Isis’ own expense,
cause, to the extent available on a commercially reasonable basis, clinical
trials and product liability insurance with respect to bodily injury or
property damage, and with respect to such other risks as are covered by
insurance maintained by Isis in connection with other medical technology, in an
amount not less than [***] per occurrence and [***] in the aggregate, to be
carried and maintained with financially sound insurers of recognized standing; provided,
that, following the submission by Isis of the applicable invoices for such
coverage, Symphony GenIsis shall reimburse Isis for [***] of the cost of
obtaining and maintaining such insurance. The deductible for the insurance
policy shall not exceed [***] per occurrence and [***] in the aggregate. Subject
to Section 6.7(d), the terms and conditions of such liability insurance
shall be no less favorable to Symphony GenIsis than the liability insurance
maintained by Isis as of the Closing Date.

 

(b)           Isis shall not be required to
maintain the liability insurance required by this section if and to the extent that
Isis furnishes to each of Symphony GenIsis and Holdings a written report of an
independent insurance advisor of recognized national standing acceptable to
Symphony GenIsis and Holdings confirming in reasonable detail that such
insurance, in respect of amount or scope of coverage, is not available on a
commercially reasonable basis. In such event Isis shall maintain liability
insurance to the extent it is available on a commercially reasonable basis. If
the insurance which was previously discontinued because of its commercial
unavailability later becomes available on a commercially reasonable basis, Isis
shall reinstate such insurance.

 

(c)           Prior to the expiration of the
liability insurance required to be carried hereunder, Isis shall make a good
faith effort to renew or replace such policy, and furnish to each of Symphony
GenIsis and Holdings a certificate of insurance evidencing that such insurance
has been replaced or renewed in compliance with this Section 6.7.

 

(d)           Each insurance policy required
by this Section 6.7 shall, to the extent available on a commercially
reasonable basis:

 

(i)            name
Symphony GenIsis, along with Symphony GenIsis’ affiliates, subsidiaries,
directors, officers, partners, employees, advisers and any other individual or
organization for which Symphony GenIsis is obligated to provide insurance, and
RRD, along with RRD’s affiliates, subsidiaries, directors, officers, partners,
employees, advisers and any other individual or organization for which RRD is
obligated to provide insurance, to the extent that such parties are engaged in
activities contemplated by the Development Plan, as the only additional
insureds (the “Additional Insureds”). Symphony
GenIsis may also add other entities or individuals as additional insureds in
good faith as part of the

 

9

 

continued development of the Programs as contemplated
by the Development Plan;

 

(ii)           exclusively
cover Symphony GenIsis’ participation in the transactions and activities set
forth in the Operative Documents to which Symphony GenIsis is a party;

 

(iii)          require
thirty (30) days prior notice to Symphony GenIsis and Holdings of cancellation
for any reason;

 

(iv)          not require
contributions from other policies held by the Additional Insureds;

 

(v)           waive any
right of set-off, counterclaim, deduction or subrogation of the insurers
against the Additional Insureds;

 

(vi)          continue to
cover the Additional Insureds regardless of any breach or violation of any
warranty, declaration or condition contained in such policy by Isis;

 

(vii)         waive
any right to claim any premium or commissions against the Additional Insureds;

 

(viii)        require
that the exclusions are reasonably acceptable to Symphony GenIsis and Holdings;

 

(ix)           require
that a copy of the insurance policy, all policy amendments, and any notices of
cancellation or non-renewal, be sent to each of Symphony GenIsis and Holdings;

 

(x)            have an
order of payments provision requiring the insurer to pay any covered loss of
the Additional Insureds first; and

 

(xi)           require
that the Additional Insureds shall also have the right to purchase the extended
reporting period that is available in such policy.

 

(e)           If Isis is
in default of its obligation to obtain or maintain the insurance coverage
specified herein when such coverage is available on a commercially reasonable
basis, Symphony GenIsis may, at its option, but shall not be required to,
provide such insurance, and in such event, Isis shall, upon demand from time to
time, reimburse Symphony GenIsis for any incremental costs incurred by Symphony
GenIsis in obtaining insurance coverage to replace the insurance coverage which
Isis shall have failed to maintain.

 

(f)            Isis
shall provide each of Symphony GenIsis and Holdings with a blind copy of all
material correspondence between Isis, the insurer and/or the insurance broker
relating to the insurance policies discussed in this Section 6.7.

 

10

 

(g)           Isis shall
provide each of Symphony GenIsis and Holdings with a copy of the insurance
policy upon receipt from the insurer.

 

(h)           In the
event of a circumstance, occurrence, claim or suit that may be covered under
the insurance policy, Isis shall promptly provide notice of such event to each
of Symphony GenIsis and Holdings.

 

(i)            Nothing
in this Section 6.7 shall prohibit Symphony GenIsis from obtaining
insurance for its own account as contemplated in the Operative Documents, and
any proceeds payable thereunder shall be as provided in the insurance policy
relating thereto.

 

(j)            Once in
any twelve (12) month period, at Symphony GenIsis’ request, Isis shall provide
certificates of insurance to each of Symphony GenIsis and Holdings, evidencing
that the insurance required by this Section 6.7 is in effect.

 

(k)           If for any
reason Isis cancels or fails to renew any liability insurance policy required
by this Section 6.7, then Symphony GenIsis shall have the option to
purchase the longest extended reporting period that is available on a
commercially reasonable basis under such policy.

 

7.                                      Symphony
GenIsis’ Obligations.

 

7.1          Generally.   Symphony
GenIsis shall have overall responsibility for all matters set forth in the
Development Plan, and shall be responsible for (i) executing or delegating its
management and administration responsibilities; and (ii) executing or
delegating the clinical development activities set forth in the Development
Plan. Symphony GenIsis shall, and shall instruct all Persons whom it engages
pursuant to Section 2 hereof to, perform its obligations hereunder and
under Development Plan acting in good faith and in accordance with the
applicable provision of the Development Plan, the Development Budget, and the
terms of this Agreement.

 

7.2          Subcontracting.   Symphony
GenIsis is subcontracting, and will in the future subcontract, certain of its
responsibilities under the Development Plan to RRD (pursuant to the RRD
Services Agreement), to Isis (pursuant hereto) and to other vendors and service
providers (pursuant to subcontracting agreements to be approved by the
Development Committee); provided, that Symphony GenIsis shall remain
responsible for the performance of its obligations hereunder notwithstanding
any such arrangement. Any subcontracting agreement entered into by Symphony
GenIsis (including such contracts as RRD may negotiate on its behalf) shall
include a provision permitting assignment at any time of the subcontracting
agreement from Symphony GenIsis to Isis without the subcontractor’s consent.

 

7.3          Insurance.   Symphony
GenIsis shall maintain insurance with creditworthy insurance companies against
such risks and in such amounts as are usually maintained or insured against by
other companies of established repute engaged in the same or a similar
business.

 

11

 

7.4          Staffing.   Symphony
GenIsis shall use commercially reasonable efforts to provide, or cause to be
provided on its behalf (including Personnel retained by RRD), sufficient and
competent staff and Personnel that have the skill and expertise necessary to
perform Symphony GenIsis’ obligations under this Agreement, the RRD Services
Agreement, the Development Plan and the Development Budget, including, but not
limited to, (i) carrying out its management and administrative functions
pursuant to the RRD Services Agreement, and (ii) and carrying out its clinical
development duties in accordance with this Agreement, the Development Plan and
the Development Budget.

 

7.5          Audit.   Symphony
GenIsis shall permit each of Isis, Holdings, Investors and each Symphony Fund
and their duly authorized representatives at all reasonable business hours to
inspect (1) Symphony GenIsis’ books, records and other reasonably requested
materials and (2) any and all properties of Symphony GenIsis, and it shall
provide to each of Isis, Holdings, Investors and each Symphony Fund all books,
records and other materials related to any meeting of the Symphony GenIsis
Board and to permit Holdings, Investors and each Symphony Fund to make copies
or extracts therefrom; provided, that each aforementioned party may
conduct one such inspection in each calendar year without cost to such party,
and that any party conducting additional inspections shall reimburse the
Manager for its reasonable costs and expenses in facilitating such inspection. Symphony
GenIsis and Isis shall meet to discuss the results of the audit and, if
required, jointly agree upon any actions that will be required as a result of
such audits including defining material discrepancies to be addressed. Symphony
GenIsis shall make commercially reasonable efforts to reconcile all such
discrepancies found by Isis, Holdings, Investors or any Symphony Fund during
such audit.

 

8.                                      Funding and
Payments.

 

8.1          Use of Proceeds.   Symphony
GenIsis shall use any and all (x) net proceeds received by Symphony GenIsis as
a result of the Financing, (y) indemnity payments received by Symphony GenIsis,
and (z) payments received by Symphony GenIsis pursuant to first and third party
covered insurance claims, for the development of the Programs and general
corporate purposes, including the payment of all fees and expenses in
accordance with the Development Plan and the Development Budget, as may be
modified from time to time pursuant to Section 4.2 and the payment of
any indemnification obligations of Symphony GenIsis under the Operative
Documents and agreements with third party contractors. Notwithstanding the
foregoing, Symphony GenIsis agrees that any agreement under which Symphony
GenIsis indemnifies any Person shall contain appropriate provisions to cause such
Person who receives payments from Symphony GenIsis as a result of Symphony
GenIsis’ indemnification obligations under the Operative Documents, and who is
subsequently reimbursed from insurance proceeds with respect to such losses,
costs, interest, awards, judgments, fees liabilities, damages and expenses for
which such Person received the indemnity payments from Symphony GenIsis, to
then reimburse Symphony GenIsis the amounts paid to such Person by Symphony
GenIsis to the extent of the insurance proceeds. Symphony GenIsis further
agrees to use all commercially reasonable means to enforce such provisions.

 

12

 

8.2          Reimbursement.   Symphony
GenIsis shall compensate Isis and RRD fully for their respective Development
Plan-associated activities, including without limitation its research, clinical
and manufacturing services, and any other activities delegated to Isis or RRD
by Symphony GenIsis or the Development Committee. Such compensation shall be
made to (a) Isis in accordance with the provisions of this Article 8 and
the payment terms attached hereto as Annex E (the “Payment Terms”), the
terms of which are hereby adopted and incorporated herein, and (b) RRD in
accordance with the payments terms of Section 6 of the RRD Services Agreement
and Annex C thereto.

 

8.3          Budget
Allocation and Deviations.   Isis shall have the discretion to incur
out-of-pocket fees, expenses and costs and allocate Isis resources in a manner
consistent with the Development Plan and the Development Budget. If Isis
reasonably anticipates that the actual cost for any particular activity will
exceed the greater of (i) [***] of that portion of the Development Budget
allocated for such activity, and (ii) [***] of that portion of the Development
Budget allocated for such activity (or such greater amount as the Symphony
GenIsis Board may subsequently determine), then Isis may request that the
Development Committee amend the Development Budget, either at its next
Scheduled Meeting or at an Ad Hoc Meeting, to reflect such cost increase. Isis
shall not be reimbursed for such additional expenditure without the prior
approval of the Development Committee.

 

8.4          Employee
Benefits.   Symphony GenIsis shall not be responsible
for providing or paying any benefits (including, but not limited to,
unemployment, disability, insurance, or medical, and any pension or profit
sharing plans) to Isis or to any employees of Isis or any persons retained or
used by Isis to perform activities pursuant to the Development Plan, including
independent contractors, Subcontractors and agents (collectively, “Isis Personnel”). As
to Isis or any Isis Personnel, Symphony GenIsis shall not be responsible for:
(a) any federal, state or local income tax withholding; (b) “FICA”
contributions; (c) contributions to state disability funds or liability funds
or similar withholdings; (d) payment of any overtime wages; (e) workers’
compensation; or (f) compliance with any laws, rules or regulations governing
employees. Isis agrees that, as between Symphony GenIsis and Isis, Isis is and
will continue to be solely responsible for: (i) all matters relating to the
payment of compensation and provision of benefits to Isis Personnel; and (ii)
compliance with all applicable laws, rules and regulations governing Isis’ employees.

 

9.                                      Covenants.

 

9.1          Mutual
Covenants.   Each of Isis and Symphony GenIsis
covenants and agrees that, with respect to the Programs and any other rights
and obligations set forth in the Operative Documents, it shall:

 

(a)           perform
all of its obligations pursuant to this Agreement in material compliance with:
(i) all applicable federal and state laws, statutes, rules, regulations and
orders (including all applicable approval and qualification requirements
thereunder), including, without limitation, the Federal Food, Drug and Cosmetic
Act and the regulations promulgated pursuant thereto; (ii) all applicable good
clinical practices and

 

13

 

guidelines; (iii) all
applicable standard operating procedures; (iv) all applicable Protocols; and
(v) the provisions of this Agreement;

 

(b)           keep
complete, proper and separate books of record and account, including a record
of all costs and expenses incurred, all charges made, all credits made and
received, and all income derived in connection with the operation of its
business, all in accordance with GAAP;

 

(c)           not
employ (or, to the best of its knowledge without further duty of inquiry, shall
not use any contractor or consultant that employs) any individual or entity debarred
by the FDA (or subject to a similar sanction of any other Regulatory
Authority), or, to the best of its knowledge without further duty of inquiry,
any individual who or entity which is the subject of an FDA debarment
investigation or proceeding (or similar proceeding of any other Regulatory
Authority), in the conduct of the Programs;

 

(d)           promptly
deliver to the other, upon receipt thereof, notice of all actions, suits,
investigations, litigation and proceedings before any Governmental Authority,
which would reasonably be expected to affect such Party’s ability to perform
its obligations under this Agreement;

 

(e)           upon
it receiving Knowledge of (i) a material event or development with respect to
any Program or (ii) a breach of any covenant or representation of such Party in
any material respect, such Party shall notify the other Party in writing within
three (3) Business Days of the receipt of such Knowledge by any executive
officer of such Party, provided that the failure to provide such notice
shall not impair or otherwise be deemed a waiver of any rights any Party may
have arising from such material event or breach; and

 

(f)            with
reasonable promptness, deliver to the other such data and information relating
to the ability of such Person to perform its obligations hereunder as from time
to time may be reasonably requested by the other (subject to the maintenance of
the confidentiality of any such information by the receiving Party). For the
avoidance of doubt, this Section 9.1(f) includes Isis’ obligations to
provide financial and other necessary information to Symphony GenIsis and RRD
to enable Symphony GenIsis to fulfill its obligations to Isis under Section
5(d) of the Purchase Option Agreement, and to enable RRD to fulfill its
obligations to Symphony GenIsis and Isis under Sections 5(a) and 5(b)
of the RRD Services Agreement.

 

10.                               Confidentiality.

 

10.1        Confidentiality
Agreement.   It is understood that during the course of
this Agreement each of the Parties shall be bound by the terms of the Confidentiality
Agreement. In addition, the Parties’ employees, subcontractors and agents shall
be bound by terms substantially similar to the Confidentiality Agreement. The
foregoing shall not be construed to (a) require Isis to amend or supplement any
of the agreements it entered into prior to the Closing Date, or (b) apply to
future agreements Isis may enter into with any Isis Accounting Advisor, even if
the confidentiality provisions in such agreements do not satisfy the foregoing
requirement.

 

14

 

10.2        Permitted
Disclosure of Information.   The Parties agree that Isis shall have
access to, and may use and disclose the Development Plan and any existing or
newly generated data or intellectual property developed with respect to the
Programs (i) to obtain the assistance of one or more third parties to develop
and/or commercialize the Programs subject to the terms of this Agreement, the
other Operative Documents and appropriate confidentiality agreements pursuant
to Section 10.1 or as approved by Symphony GenIsis, (ii) to use such
intellectual property for all purposes not licensed exclusively to Symphony
GenIsis under the Novated and Restated Technology License Agreement, and (iii)
through press releases, in public presentations or as part of other appropriate
public disclosures; provided that all such disclosure under this Section
10.2 shall be subject to the terms of the Confidentiality Agreement.

 

11.                               Discontinuation
Option.

 

11.1        Discontinuation
Option.

 

(a)           A
Program may only be discontinued in accordance with Section 4.2(c). In
the event of such a Program discontinuation during the Term, (i) Symphony
GenIsis shall so notify Isis promptly and in writing of such discontinuation,
and (ii) Isis shall have the right and option (a “Discontinuation Option”), exercisable
for [***] days after receipt of such written notice from Symphony GenIsis of
such discontinuation, to buy back the Licensed Intellectual Property related to
such discontinued Program for a price 
(payable by wire transfer to Symphony GenIsis) that is the sum of (x)
the funds expended on such discontinued Program and (y) a share of all
non-Program-specific expenditures that is in the same proportion to the total
of all non-Program-specific expenditures as the amount in clause (x) of
this sentence is to the aggregate of all Program-specific expenditures (the “Discontinuation Price”),
to be reasonably determined between the Parties, or, if the Parties are unable
to come to a resolution, for a Discontinuation Price determined in accordance
with Section 11.1(c) hereof. If the Discontinuation Price is determined
in accordance with Section 11.1(c), then such [***] day period shall be
extended by the time needed by the Experts for such determination. Any
Discontinuation Price paid to Symphony GenIsis under this Section 11.1(a)
and subsequently dividended or otherwise distributed to Holdings shall reduce
the Purchase Option Exercise Price in the amount of such dividends or other
distributions.

 

(b)           Following
the expiration of the Discontinuation Option without exercise by Isis, if
Symphony GenIsis transfers or licenses such Program rights to a third party
before the termination of the Term, all payments and other consideration that Holdings
receives directly from such third party or that Symphony GenIsis receives from
such third party in connection with such transfer or license prior to the
termination of the Term, and subsequently dividends or otherwise distributes to
Holdings, shall reduce the Purchase Option Exercise Price in the amount of such
dividends or other distributions. During the Term, under no circumstances may
Symphony GenIsis or Isis (unless Isis has exercised a Discontinuation Option in
respect of such Program) reinitiate work on a discontinued Program.

 

15

 

(c)           If
Isis and Symphony GenIsis cannot agree on the Discontinuation Price, with
respect to Section 11.1(a), Isis and Symphony GenIsis shall each appoint
a nationally recognized expert in the field of pharmaceutical technology and
licensing (each, an “Expert”)
(that, in each case, has had no prior dealings with either of Isis and Symphony
GenIsis in the preceding twelve (12) months), and such two (2) Experts shall
appoint a third Expert. In accordance with this Section 11.1(c), such
three (3) Experts shall jointly determine, or, if all three (3) Experts shall
not be able to agree on such Discontinuation Price as applicable, two (2) of
such three (3) Experts shall jointly determine, the Discontinuation Price, which
determination shall be made within thirty (30) days of the appointment of the
third Expert and, absent manifest error, shall be (i) binding and conclusive
and (ii) the Discontinuation Price at which the Discontinuation Option shall be
exercised by Isis. All costs and expenses incurred in appointing the Experts
shall be shared equally between Isis and Symphony GenIsis.

 

12.                               Representations
and Warranties.

 

12.1        Isis
Representations and Warranties.   Isis hereby represents and warrants to
Symphony GenIsis and Holdings that, as of the Closing Date:

 

(a)           Organization. Isis is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware.

 

(b)           Authority and Validity. Isis has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Novated and Restated Technology
License Agreement and to consummate the transactions contemplated thereby. The
execution, delivery and performance by Isis of this Agreement and the Novated
and Restated Technology License Agreement and the consummation of the
transactions contemplated thereby have been duly and validly authorized by all
necessary action required on the part of Isis, and no other proceedings on the
part of Isis are necessary to authorize this Agreement or the Novated and
Restated Technology License Agreement or for Isis to perform its obligations
under this Agreement or the Novated and Restated Technology License Agreement. This
Agreement and the Novated and Restated Technology License Agreement constitute
the lawful, valid and legally binding obligations of Isis, enforceable in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.

 

(c)           No Violation or Conflict. The
execution, delivery and performance of this Agreement and the Novated and
Restated Technology License Agreement and the transactions contemplated thereby
do not and will not (i) violate, conflict with or result in the breach of any
provision of the Organizational Documents of Isis, (ii) conflict with or
violate any law or Governmental Order applicable to Isis or any of its assets,
properties or businesses, or (iii) conflict with, result in any breach of,
constitute a default (or event that with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration,

 

16

 

suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of Isis, pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which Isis is a party except, in the case of
clauses (ii) and (iii), to the extent that such conflicts,
breaches, defaults or other matters would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Isis or
a material adverse effect on the Programs.

 

(d)           Governmental Consents and Approvals.
The execution, delivery and performance of this Agreement and the Novated and
Restated Technology License Agreement by Isis do not, and the consummation of
the transactions contemplated thereby do not and will not, require any
Governmental Approval which has not already been obtained, effected or
provided, except with respect to which the failure to so obtain, effect or
provide would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Isis or a material adverse effect on the
Programs.

 

(e)           Litigation. Except as disclosed
on the Isis 2005 10-K, there are no actions by or against Isis pending before
any Governmental Authority or, to the knowledge of Isis, threatened to be
brought by or before any Governmental Authority, that would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on Isis.
There are no pending or, to the knowledge of Isis, threatened actions, to which
Isis is a party (or is threatened to be named as a party) to set aside,
restrain, enjoin or prevent the execution, delivery or performance of this
Agreement or the Operative Documents or the consummation of the transactions
contemplated hereby or thereby by any party hereto or thereto. Isis is not
subject to any Governmental Order (nor, to the knowledge of Isis, is there any
such Governmental Order threatened to be imposed by any Governmental Authority)
that would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Isis or a material adverse effect on the Programs.

 

(f)            No Contracts. Except as
disclosed on Schedule 12.1(f) hereto, there are no material contracts
between Isis and any third party (other than licenses of intellectual property
that is in turn licensed to Symphony GenIsis under the Novated and Restated
Technology License Agreement), including contractors, manufacturers or
suppliers, used with or otherwise necessary for the Programs, and all such
contracts are assignable to Symphony GenIsis. With respect to the contracts
disclosed on Schedule 12.1(f) hereto, the absence of such contracts (due
to the inability or impracticability of assigning such contracts to Symphony
GenIsis following a termination of this Agreement without the exercise of the
Purchase Option) would not have a material adverse effect on any of the
Programs or on Symphony GenIsis’ rights under the Novated and Restated
Technology License Agreement.

 

12.2        Symphony
GenIsis Representations and Warranties. 
 Symphony GenIsis hereby
represents and warrants to Isis that, as of the Closing Date:

 

(a)           Organization. Symphony GenIsis is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware.

 

17

 

(b)           Authority and Validity. Symphony
GenIsis has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and the Novated and Restated
Technology License Agreement and to consummate the transactions contemplated
thereby. The execution, delivery and performance by Symphony GenIsis of this
Agreement and the Novated and Restated Technology License Agreement and the
consummation of the transactions contemplated thereby have been duly and
validly authorized by all necessary action required on the part of Symphony
GenIsis, and no other proceedings on the part of Symphony GenIsis are necessary
to authorize this Agreement or the Novated and Restated Technology License
Agreement or for Symphony GenIsis to perform its obligations under this
Agreement or the Novated and Restated Technology License Agreement. This
Agreement and the Novated and Restated Technology License Agreement constitute
the lawful, valid and legally binding obligations of Symphony GenIsis,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.

 

(c)           No Violation or Conflict. The
execution, delivery and performance of this Agreement and the Novated and
Restated Technology License Agreement and the transactions contemplated thereby
do not and will not (i) violate, conflict with or result in the breach of any
provision of the Organizational Documents of Symphony GenIsis, (ii) conflict
with or violate any law or Governmental Order applicable to Symphony GenIsis or
any of its assets, properties or businesses, or (iii) conflict with, result in
any breach of, constitute a default (or event that with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of Symphony GenIsis, pursuant
to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to
which Symphony GenIsis is a party except, in the case of clauses (ii)
and (iii), to the extent that such conflicts, breaches, defaults or
other matters would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Symphony GenIsis.

 

(d)           Governmental Consents and Approvals.
The execution, delivery and
performance of this Agreement and the Novated and Restated Technology License
Agreement by Symphony GenIsis do not, and the consummation of the transactions
contemplated thereby do not and will not, require any Governmental Approval
which has not already been obtained, effected or provided, except with respect
to which the failure to so obtain, effect or provide would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Symphony GenIsis.

 

(e)           Litigation. There are no actions
by or against Symphony GenIsis pending before any Governmental Authority or, to
the knowledge of Symphony GenIsis, threatened to be brought, by or before any
Governmental Authority that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse

 

18

 

Effect on Symphony
GenIsis. There are no pending or, to the knowledge of Symphony GenIsis,
threatened actions to which Symphony GenIsis is a party (or is threatened to be
named as a party) to set aside, restrain, enjoin or prevent the execution,
delivery or performance of this Agreement or the Operative Documents or the
consummation of the transactions contemplated hereby or thereby by any party
hereto or thereto. Symphony GenIsis is not subject to any Governmental Order
(nor, to the knowledge of Symphony GenIsis, is there any such Governmental
Order threatened to be imposed by any Governmental Authority) that would,
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect on Symphony GenIsis or a material adverse effect on the
Programs.

 

13.                               Relationship
Between Isis and Symphony GenIsis. 
 Nothing contained in this
Agreement or any acts or omissions hereunder shall constitute or be construed
so as to create any joint venture or partnership relationship between Isis and
Symphony GenIsis, and the Parties acknowledge and agree that Isis is acting as
an independent contractor in the performance of its obligations under this
Agreement.

 

14.                               Change of
Control.   Isis will not, at any time during the
Term, undergo a Change of Control, unless:

 

(a)           the
Surviving Entity remains Isis; or

 

(b)           such Surviving Entity shall (i) have
executed and delivered to Symphony GenIsis and Holdings instruments, in form
and substance reasonably acceptable to Symphony GenIsis and Holdings, expressly
assuming all of the obligations of Isis hereunder and under each other
Operative Document to which Isis is a party; and (ii) have provided to Symphony
GenIsis and Holdings an opinion of nationally recognized outside counsel to the
effect that (A) the instruments referred to in clause (i) above are
valid and binding obligations of such Surviving Entity, enforceable in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally or general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity, and except as may be set forth in any express representation and
warranty of Isis in this Agreement, and (B) such Change of Control does not
violate any material term of the Operative Documents; (iii) ensure that all
material applications and filings have been made to, and all material consents
have been received from, the United States Food and Drug Administration, and
any applicable foreign equivalent thereof, necessary for the Surviving Entity
to satisfy all of its material obligations under the Operative Documents,
except to the extent that failure to make such applications or filings or
receive such consents would not reasonably be expected to have a material
adverse effect on the Programs or Symphony GenIsis’ rights under the Operative
Documents; and (iv) have arranged for an appropriate senior executive of the
Surviving Entity to discuss in good faith and reasonable detail with a
representative of the Symphony GenIsis Board the Surviving Entity’s ongoing
operations, including, but not limited to, the Surviving Entity’s commitment to
Isis’ obligations under the Operative Documents, Holdings’ Put Option pursuant
to Section 2A of the Purchase Option Agreement, and the strategic importance of
the Programs to the Surviving Entity.

 

19

 

15.                               No
Restrictions; Indemnification.

 

15.1        No Restrictions.
  Nothing
in this Agreement shall limit or restrict the right of any director, officer or
employee of Isis or any director, officer, or employee of any of its
subsidiaries or its Affiliates to engage in any other business or to devote his
or her time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of Isis or any of its affiliates to engage in any other business or to
render services of any kind to any other Person.

 

15.2        Indemnification.

 

(a)           To the greatest extent permitted by
applicable law, Isis shall indemnify and hold harmless Symphony GenIsis and RRD
and each of their respective Affiliates, officers, directors, employees,
agents, members, managers, successors and assigns (each, a “Symphony Indemnified Party”),
and Symphony GenIsis shall indemnify and hold harmless Isis, and its Affiliates
and each of their respective officers, directors, employees, agents (other than
Isis Subcontractors), members, managers, successors and assigns (each, an “Isis Indemnified Party”),
from and against any and all claims, losses, costs, interest, awards,
judgments, fees (including reasonable fees for attorneys and other
professionals), court costs, liabilities, damages and expenses with an
aggregate value of at least [***] (as determined by the applicable Indemnified
Party acting in good faith), incurred by any Symphony Indemnified Party or Isis
Indemnified Party (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought)
(hereinafter, a “Loss”)
to the extent resulting from, arising out of, or relating to any and all third
party suits, claims, actions, proceedings or demands based upon:

 

(i)            in the case of Isis being the
Indemnifying Party, (A) any breach of any representation or warranty made by
Isis herein or in any other Operative Document, (B) any breach of any covenant,
agreement or obligation of Isis contained herein or in any other Operative
Document, except to the extent such covenant, agreement or obligation relates
to Isis’ performance under the Development Plan, (C) any gross negligence or
willful misconduct of Isis (and not that of any Isis Subcontractors) in
connection with Isis’ performance of its obligations under this Agreement
(including the Development Plan), (D) any action undertaken or performed by or
on behalf of Isis prior to, and including, the Closing Date that relates to the
Programs or the Products, or (E) in the event Isis exercises a Discontinuation
Option for a Program, any action undertaken and/or performed by or on behalf of
Isis after the Discontinuation Closing Option Date and relating to the Product
that was the subject of such Program (including the development, manufacture,
use, handling, storage, sale or other disposition of such Product); in each
case, except (1) with respect to Losses for which Isis is entitled to
indemnification under this Article 15 or (2) to the extent such Loss
arises from the gross negligence or willful misconduct of a Symphony
Indemnified Party; and

 

(ii)           in the case of Symphony GenIsis being
the Indemnifying Party, (A) any breach of any representation or warranty made
by Symphony GenIsis herein  or in any
other Operative Document, (B) any breach of any covenant, agreement or

 

20

 

obligation of Symphony
GenIsis contained herein  or in any other
Operative Document, (C) any gross negligence or willful misconduct of Symphony
GenIsis (and not that of its direct subcontractors) in connection with Symphony
GenIsis’ performance of its obligations under this Agreement, or (E) the
development, manufacture, use, handling, storage, sale or other disposition of
the Products (including in the course of conducting the Programs) during the
Term (except with respect to the development, manufacture, use, handling,
storage, sale or other disposition, after Isis’ exercise of the Discontinuation
Option, of Products covered under Section 15.2(a)(i)(E)); in each case,
except (1) with respect to Losses for which Symphony GenIsis is entitled to
indemnification under this Article 15, or (2) Losses deemed to have
arisen from the breach by Isis of any covenant, agreement or obligation under
this Agreement that relates to Isis’ performance under the Development Plan, as
determined by a court, arbitrator or pursuant to a settlement agreement, or (3)
to the extent such Loss arises from the gross negligence or willful misconduct
of an Isis Indemnified Party.

 

To the extent that the foregoing undertaking by Isis
or Symphony GenIsis may be               unenforceable
for any reason, such Party shall make the maximum contribution to the    payment and satisfaction of any Loss that is
permissible under applicable law.

 

(b)           Notice of Claims. Any Indemnified
Party that proposes to assert a right to be indemnified under this Section
15.2 shall notify Isis or Symphony GenIsis, as applicable (the “Indemnifying Party”),
promptly after receipt of notice of commencement of any action, suit or
proceeding against such Indemnified Party (an “Indemnified Proceeding”) in respect of
which a claim is to be made under this Section 15.2, or the incurrence
or realization of any Loss in respect of which a claim is to be made under this
Section 15.2, of the commencement of such Indemnified Proceeding or of
such incurrence or realization, enclosing a copy of all relevant documents,
including all papers served and claims made, but the omission so to notify the
applicable Indemnifying Party promptly of any such Indemnified Proceeding or
incurrence or realization shall not relieve (x) such Indemnifying Party from
any liability that it may have to such Indemnified Party under this Section
15.2 or otherwise, except, as to such Indemnifying Party’s liability under
this Section 15.2, to the extent, but only to the extent, that such
Indemnifying Party shall have been prejudiced by such omission, or (y) any
other indemnitor from liability that it may have to any Indemnified Party under
the Operative Documents.

 

(c)           Defense of Proceedings. In case
any Indemnified Proceeding shall be brought against any Indemnified Party, it
shall notify the applicable Indemnifying Party of the commencement thereof as
provided in Section 15.2(b), and such Indemnifying Party shall be
entitled to participate in, and provided such Indemnified Proceeding
involves a claim solely for money damages and does not seek an injunction or
other equitable relief against the Indemnified Party and is not a criminal or
regulatory action, to assume the defense of, such Indemnified Proceeding with
counsel reasonably satisfactory to such Indemnified Party. After notice from
such Indemnifying Party to such Indemnified Party of such Indemnifying Party’s
election so to assume the defense thereof and the failure by such Indemnified
Party to object to such counsel within ten (10) Business Days following its
receipt of such notice, such Indemnifying Party shall not be

 

21

 

liable to such
Indemnified Party for legal or other expenses related to such Indemnified
Proceedings incurred after such notice of election to assume such defense
except as provided below and except for the reasonable costs of investigating,
monitoring or cooperating in such defense subsequently incurred by such
Indemnified Party reasonably necessary in connection with the defense thereof. Such
Indemnified Party shall have the right to employ its counsel in any such
Indemnified Proceeding, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless:

 

(i)            the
employment of counsel by such Indemnified Party at the expense of the
applicable Indemnifying Party has been authorized in writing by such
Indemnifying Party;

 

(ii)           such
Indemnified Party shall have reasonably concluded in its good faith (which
conclusion shall be determinative unless a court determines that such
conclusion was not reached reasonably and in good faith) that there is or may
be a conflict of interest between the applicable Indemnifying Party and such
Indemnified Party in the conduct of the defense of such Indemnified Proceeding
or that there are or may be one or more different or additional defenses,
claims, counterclaims, or causes of action available to such Indemnified Party (it
being agreed that in any case referred to in this clause (ii) such
Indemnifying Party shall not have the right to direct the defense of such
Indemnified Proceeding on behalf of the Indemnified Party);

 

(iii)          the
applicable Indemnifying Party shall not have employed counsel reasonably
acceptable to the Indemnified Party, to assume the defense of such Indemnified
Proceeding within a reasonable time after notice of the commencement thereof; provided,
however, that (A) this clause
(iii) shall not be deemed to constitute a waiver of any conflict of
interest that may arise with respect to any such counsel, and (B) an
Indemnified Party may not invoke this clause (iii) if such Indemnified
Party failed to timely object to such counsel pursuant to the first paragraph
of this Section 15.2(c) above (it
being agreed that in any case referred to in this clause (iii) such
Indemnifying Party shall not have the right to direct the defense of such
Indemnified Proceeding on behalf of the Indemnified Party); or

 

(iv)          any
counsel employed by the applicable Indemnifying Party shall fail to timely
commence or reasonably conduct the defense of such Indemnified Proceeding and
such failure has prejudiced (or is in immediate danger of prejudicing) the
outcome of such Indemnified Proceeding (it being agreed that in any case
referred to in this clause (iv) such Indemnifying Party shall not have
the right to direct the defense of such Indemnified Proceeding on behalf of the
Indemnified Party);

 

in each of which cases
the fees and expenses of counsel for such Indemnified Party shall be at the
expense of such Indemnifying Party. Only one counsel shall be retained by all
Indemnified Parties with respect to any Indemnified Proceeding, unless counsel
for any Indemnified Party reasonably concludes in good faith (which conclusion
shall be 

 

22

 

determinative unless a
court determines that such conclusion was not reached reasonably and in good
faith) that there is or may be a conflict of interest between such Indemnified
Party and one or more other Indemnified Parties in the conduct of the defense
of such Indemnified Proceeding or that there are or may be one or more
different or additional defenses, claims, counterclaims, or causes or action
available to such Indemnified Party.

 

(d)           Settlement. Without the prior
written consent of such Indemnified Party, such Indemnifying Party shall not
settle or compromise, or consent to the entry of any judgment in, any pending
or threatened Indemnified Proceeding, unless such settlement, compromise,
consent or related judgment (i) includes an unconditional release of such
Indemnified Party from all liability for Losses arising out of such claim,
action, investigation, suit or other legal proceeding, (ii) provides for the
payment of money damages as the sole relief for the claimant (whether at law or
in equity), (iii) involves no finding or admission of any violation of law or
the rights of any Person by the Indemnified Party, and (iv) is not in the
nature of a criminal or regulatory action. No Indemnified Party shall settle or
compromise, or consent to the entry of any judgment in, any pending or
threatened Indemnified Proceeding (A) in respect of which any payment would
result hereunder or under any other Operative Document, (B) which includes an
injunction that will adversely affect any Indemnifying Party, (C) which
involves a finding or admission of any violation of law or the rights of any
Indemnifying Party, or (D) which is in the nature of a criminal or regulatory
action, without the prior written consent of the Indemnifying Party, such
consent not to be unreasonably conditioned, withheld or delayed.

 

16.                               Limitation of
Liabilities.

 

16.1        Between the
Parties.   TO THE GREATEST EXTENT PERMITTED BY
APPLICABLE LAW, NEITHER PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
MEMBERS, MANAGERS, EMPLOYEES, INDEPENDENT CONTRACTORS OR AGENTS (INCLUDING RRD
AND ITS MEMBERS, MANAGERS, EMPLOYEES, INDEPENDENT CONTRACTORS AND AGENTS) SHALL
HAVE ANY LIABILITY OF ANY TYPE (INCLUDING, BUT NOT LIMITED TO, CLAIMS IN
CONTRACT, NEGLIGENCE AND TORT LIABILITY) FOR ANY SPECIAL, INCIDENTAL, INDIRECT
OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, THE LOSS OF
OPPORTUNITY, LOSS OF USE OR LOSS OF REVENUE OR PROFIT IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR THE SERVICES PERFORMED HEREUNDER, EVEN IF SUCH
DAMAGES MAY HAVE BEEN FORESEEABLE. THE FOREGOING SHALL NOT LIMIT EITHER PARTY’S
INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTION 15.2 AND SHALL NOT APPLY
TO BREACHES OF ITS CONFIDENTIALITY OBLIGATIONS PURSUANT TO ARTICLE 10.

 

16.2        Pursuant to the
RRD Services Agreement.   Each Party hereby acknowledges and agrees
that, pursuant to Sections 9(f) and (g) of the RRD Services Agreement, RRD has
expressly disclaimed all liability for (a) any claim arising out of, or
allegedly arising out of the activities carried out by (or within the authority
of) Isis (and such Isis

 

23

 

Subcontractors and vendors it may retain)
hereunder, or for any liability arising under the Novated and Restated
Technology License Agreement with respect to any license or sublicense
thereunder in relation to the activities carried out by (or within the
authority of) Isis (and such Isis Subcontractors and vendors it may retain)
hereunder, and (b) supervising, compensating or discharging, or any other
liability to or with respect to, any vendor retained by Isis (or, in the case
of a vendor engaged by both RRD and Isis, to and for such vendor to the extent
that such vendor performs services for Isis), except that RRD shall make
payments from Symphony GenIsis’ funds to reimburse Isis, in accordance with Article
8 and Annex E of this Agreement, for costs and expenses incurred by
Isis in connection with the engagement of such vendors by Isis for the
performance of services contemplated under the Development Plan.

 

17.                               Term and
Termination.

 

17.1        Term.   This
Agreement shall be effective as of the Closing Date and shall expire on the
last day of the Term, unless the Agreement is earlier terminated as specified
in this Article 17.

 

17.2        Termination for Isis’ Breach.

 

(a)           Symphony GenIsis may terminate this
Agreement at any time upon written notice to Isis if Isis is in material
default or breach of this Agreement, and such material default or breach
continues unremedied for a period of sixty (60) days after written notice
thereof is delivered to Isis. Such cure period may be extended if (i) Isis
reasonably believes such breach can be cured within ninety (90) days of Isis’
receipt of Symphony GenIsis’ written notice of such breach (and notifies
Symphony GenIsis in writing of such belief and the basis for such belief), and
(ii) Symphony GenIsis, acting reasonably, agrees. If Isis fails to remedy the
default or breach within the applicable cure period, Symphony GenIsis may by
final notice of termination to Isis terminate this Agreement.

 

(b)           In the event that Symphony GenIsis
terminates this Agreement pursuant to Section 17.2(a) above, Isis may
exercise its Purchase Option, pursuant to Section 1(c)(v) of the Purchase
Option Agreement, within five (5) Business Days of receiving such notice of
termination from Symphony GenIsis; provided, that if such termination
occurs after a Change of Control with respect to Isis has occurred, and if the
successor entity chooses not to exercise its Purchase Option, then Holdings may
exercise its Put Option pursuant Section 2A of the Purchase Option Agreement.

 

17.3        Termination for
Symphony GenIsis’ Breach.   Isis may terminate this Agreement at any time
upon written notice to Symphony GenIsis if Symphony GenIsis is in material
default or breach of this Agreement, and such material default or breach
continues unremedied for a period of sixty (60) days after written notice
thereof is delivered to Symphony GenIsis. Such cure period may be extended if
(i) Symphony GenIsis reasonably believes such breach can be cured within ninety
(90) days of Symphony GenIsis’ receipt of Isis’ written notice of such breach
(and notifies Isis in writing of such belief and the basis for such belief),
and (ii) Isis, acting reasonably,

 

24

 

agrees. If Symphony GenIsis fails to remedy
the default or breach within the applicable cure period, Isis may by final
notice of termination to Symphony GenIsis terminate this Agreement.

 

17.4        Termination of
License Agreement.   This Agreement shall automatically
terminate upon the termination of the Novated and Restated Technology License
Agreement.

 

17.5        Survival.

 

(a)           The agreements and covenants of the
Parties set forth in Articles 10, 11, 15, 16 and 18,
and Sections 6.7 and 17.5 shall survive the expiration or
termination of this Agreement. In addition, Section 8.2 shall, to the
extent that the costs and expenses reimbursable thereunder have been incurred
or become uncancellable prior to such termination, also survive such
expiration.

 

(b)           If Isis does not exercise the Purchase
Option, in addition to the provisions specified in Section 17.5(a), then
Section 5.4 shall also survive such unexercised expiration.

 

18.                               Miscellaneous.

 

18.1        No Petition.   Isis
covenants and agrees that, prior to the date which is one (1) year and one (1)
day after the expiration of the Term, Isis will not institute or join in the
institution of any bankruptcy, insolvency, reorganization or similar proceeding
against Symphony GenIsis. The provisions of this Section 18.1 shall
survive the termination of this Agreement.

 

18.2        Notices.   Any
notice, request, demand, waiver, consent, approval or other communication which
is required or permitted to be given to any Party shall be in writing and shall
be deemed given only if delivered to the Party personally or sent to the Party
by facsimile transmission (promptly followed by a hard-copy delivered in
accordance with this Section 18.2), by next Business Day delivery by a
nationally recognized courier service, or by registered or certified mail
(return receipt requested), with postage and registration or certification fees
thereon prepaid, addressed to the Party at its address set forth below:

 

Isis:

Isis Pharmaceuticals, Inc.

1896 Rutherford Road

Carlsbad, CA 92008-7208

Attn:  B. Lynne Parshall

Facsimile:  (760) 603-4652

 

25

 

With a
copy to:

Isis Pharmaceuticals, Inc.

1896 Rutherford Road

Carlsbad, CA 92008-7208

Attn:  General Counsel

Facsimile:  (760) 268-4922

 

Symphony
GenIsis:

Symphony GenIsis, Inc.

7361 Calhoun Place, Suite 325

Rockville, MD  20850

Attn:  Charles W. Finn, Ph.D.

Facsimile:  (301) 762-6154

 

Holdings:

Symphony GenIsis Holdings LLC

7361 Calhoun Place, Suite 325

Rockville, MD  20850

Attn:  Joseph P. Clancy

Facsimile:  (301) 762-6154

 

with
copies to:

Symphony Capital Partners, L.P.

875 Third Avenue

18th Floor

New York, NY  10022

Attn: Mark Kessel

Facsimile:  (212) 632-5401

 

and

Symphony Strategic Partners, LLC

875 Third Avenue

18th Floor

New York, NY  10022

Attn: Mark Kessel

Facsimile:  (212) 632-5401

 

or to such other address
as such Party may from time to time specify by notice given in the manner
provided herein to each other Party entitled to receive notice hereunder.

 

26

 

18.3        Governing Law;
Consent to Jurisdiction and Service of Process.

 

(a)           This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

 

(b)           Each of the Parties hereby irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in The City of New York, Borough of Manhattan, and any
appellate court from any jurisdiction thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the Parties hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the fullest extent
permitted by law, in such federal court. Each of the Parties 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. Nothing in this Agreement shall affect any right that any
Party may otherwise have to bring any action or proceeding relating to this
Agreement.

 

(c)           Each of the Parties irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any New York State or federal court. Each of the Parties hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

 

18.4        WAIVER OF JURY
TRIAL.   EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT.

 

18.5        Entire
Agreement.   This Agreement (including any Annexes,
Schedules, Exhibits or other attachments hereto) constitutes the entire
agreement between the Parties with respect to the matters covered hereby, and
no oral or written statement may be used to interpret or vary the meaning of
the terms and conditions hereof. This Agreement supersedes all prior agreements
and understanding with respect to such matters between the Parties, including
the Research and Development Agreement but excluding the Operative Documents.

 

18.6        Amendment; Successors; Assignment; Counterparts.

 

(a)           The terms of this
Agreement shall not be altered, modified, amended,      waived or supplemented in any manner whatsoever except by a written
instrument signed by each of the Parties.

 

(b)           Nothing expressed
or implied herein is intended or shall be construed to confer upon or to give to any Person, other than the Parties (and,
to the extent of Section 18.8, RRD), any right, remedy or claim under or
by reason of this Agreement or of any 

 

27

 

term, covenant or condition hereof, and all the terms,
covenants, conditions, promises and agreements contained herein shall be for
the sole and exclusive benefit of the Parties (and, to the extent of Section
18.8, RRD) and their successors and permitted assigns.

 

(c)           This Agreement may
not be assigned by either Party hereto without the prior written consent of the
other part; provided that, in the event Isis undergoes a Change of
Control in compliance with Article 14 hereof, Isis may assign this
Agreement to its Successor Entity.

 

(d)           This Agreement may
be executed in one or more counterparts, each of which, when executed, shall be
deemed an original but all of which taken together shall constitute one and the
same Agreement.

 

18.7        Severability.   If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in a manner materially adverse to either party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.

 

18.8        Third Party
Beneficiary.  Each of the
Parties agrees that RRD shall be a third party beneficiary of Articles 2,
8 and 16, and Sections 4.1, 4.2(a), 4.2(b), 7.1,
7.4, 9.1(f), 15.2 and 18.6(b) of this Agreement.

 

[SIGNATURES FOLLOW ON NEXT PAGE]

 

28

 

IN WITNESS WHEREOF, the Parties hereto have caused
this Agreement to be executed as of the day and year above written.

 

SYMPHONY GENISIS HOLDINGS LLC

	
  By:

  	
  Symphony Capital Partners, L.P.,

  	
   

  
	
   

  	
  its Manager

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Symphony Capital GP, L.P.,

  	
   

  
	
   

  	
  its general partner

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Symphony GP, LLC,

  	
   

  
	
   

  	
  its general partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Mark Kessel

  	
   

  
	
   

  	
  Name:

  	
  Mark Kessel

  
	
   

  	
  Title:

  	
  Managing Member

  
						

 

 

	
  SYMPHONY GENISIS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ Neil J. Sandler

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Neil J. Sandler

  
	
   

  	
  Title:

  	
  Chairman of the Board

  
	
   

  	
   

  
	
   

  
	
  ISIS PHARMACEUTICALS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ B. Lynne Parshall, J.D.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  B. Lynne Parshall, J.D.

  
	
   

  	
  Title:

  	
  Executive Vice President, Chief Financial Officer
  and Secretary

  
								

 

 

ANNEX A

 

CERTAIN DEFINITIONS

 

CERTAIN DEFINITIONS

 

“$”
means United States dollars.

 

“Accredited
Investor” has the meaning set forth in Rule 501(a) of Regulation
D promulgated under the Securities Act of 1933, as amended.

 

“Act”
means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq.

 

“Ad Hoc Meeting”
has the meaning set forth in Paragraph 6 of Annex B of the Amended and Restated
Research and Development Agreement.

 

“Additional
Party” has the meaning set forth in Section 13 of the Confidentiality
Agreement.

 

“Additional
Regulatory Filings” means such Governmental Approvals as
required to be made under any law applicable to the purchase of the Symphony
GenIsis Equity Securities under the Purchase Option Agreement.

 

“Adjusted Capital Account Deficit”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Affected Member”
has the meaning set forth in Section 27 of the Investors LLC Agreement.

 

“Affiliate”
means, with respect to any Person (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any
officer, director, general partner, member or trustee of such Person, or (iii)
any Person who is an officer, director, general partner, member or trustee of
any Person described in clauses (i) or (ii) of this sentence.  For purposes of this definition, the terms “controlling,”
“controlled by” or “under common control with” shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the management
and policies of a Person or entity, whether through the ownership of voting
securities, by contract or otherwise, or the power to elect at least 50% of the
directors, managers, general partners, or persons exercising similar authority
with respect to such Person or entities.

 

“Amended and
Restated Research and Development Agreement” means the Amended
and Restated Research and Development Agreement dated as of the Closing Date,
among Isis, Holdings and Symphony GenIsis.

 

“ApoB” means apolipoprotein B.

 

 

“ApoB Product” means a
pharmaceutical composition comprising an ASO that targets ApoB.

 

“ApoB Program” means the
identification, development, manufacture and/or use of any ApoB Product in
accordance with the Development Plan.

 

“ASO” means an oligonucleotide
or analog, mimic or mimetic thereof having a sequence that selectively
modulates protein synthesis via the binding, partially or wholly, of such
oligomeric compound to a complementary nucleic acid sequence encoding, directly
or indirectly, said protein.

 

“Asset Value”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Auditors”
means an independent certified public accounting firm of recognized national
standing.

 

“Balance Sheet Deficiency Date”
has the meaning set forth in Section 1(c)(iii) of the Purchase Option
Agreement.

 

“Bankruptcy Code”
means the United States Bankruptcy Code.

 

“Business Day”
means any day
other than Saturday, Sunday or any other day on which commercial banks in The
City of New York or the City of San Francisco are authorized or required by law
to remain closed.

 

“Capital
Contributions” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

 

“Capitalized
Leases” means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.

 

“Cash Available
for Distribution” has the meaning set forth in Section 1.01 of
the Holdings LLC Agreement.

 

“Chair”
has the meaning set forth in Paragraph 4 of Annex B to the Amended and Restated
Research and Development Agreement.

 

“Change of
Control” means and includes the occurrence of any of the
following events, but specifically excludes (i) acquisitions of capital
stock directly from Isis for cash, whether in a public or private offering,
(ii) sales of capital stock by stockholders of Isis, and
(iii) acquisitions of capital stock by or from any employee benefit plan
or related trust:

 

(a)           the
merger, reorganization or consolidation of Isis into or with another
corporation or legal entity in which Isis’ stockholders holding the right to
vote with respect to matters generally immediately preceding such merger,
reorganization or consolidation, own less than fifty percent (50%) of the
voting securities of the surviving entity; or

 

 

(b)           the
sale of all or substantially all of Isis’ assets or business.

 

“Class A Member”
means a holder of a Class A Membership Interest.

 

“Class A
Membership Interest” means a Class A Membership Interest in
Holdings.

 

“Class B Member”
means a holder of a Class B Membership Interest.

 

“Class B Membership
Interest” means a Class B Membership Interest in Holdings.

 

“Class C Member”
means a holder of a Class C Membership Interest.

 

“Class C
Membership Interest” means a Class C Membership Interest in
Holdings.

 

“Client
Schedules” has the meaning set forth in Section 5(b) of the RRD
Services Agreement.

 

“Clinical Budget
Component” has the meaning set forth in Section 4.1 of the
Amended and Restated Research and Development Agreement.

 

“Closing Date”
means April 7, 2006.

 

“CMC”
means the chemistry, manufacturing and controls documentation as required for
filings with Regulatory Authority relating to the manufacturing, production and
testing of drug products.

 

“Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

“Committed Capital” means $75,000,000.00.

 

“Common Stock”
means the common stock, par value $0.01 per share, of Symphony GenIsis.

 

“Company
Expenses” has the meaning set forth in Section 5.09 of the
Holdings LLC Agreement.

 

“Company
Property” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

 

“Confidential
Information” has the meaning set forth in Section 2 of the
Confidentiality Agreement.

 

“Confidentiality Agreement” means the
Confidentiality Agreement, dated as of the Closing Date, among Symphony GenIsis,
Holdings, Isis, SCP, SSP, Investors, Symphony Capital and RRD, as such
agreement may be amended or amended and restated from time to time.

 

 

“Conflict Transaction” has the
meaning set forth in Article X of the Symphony  GenIsis Charter.

 

“Control” means, with respect
to any material, information or intellectual property right, that a Party owns
or has a license to such item or right, and has the ability to grant the other
Party access, a license or a sublicense (as applicable) in or to such item or
right as provided in the Operative Documents without violating the terms of any
agreement or other arrangement with any third party.

 

“Debt” of any
Person means, without duplication:

 

(a)           all
indebtedness of such Person for borrowed money,

 

(b)           all
obligations of such Person for the deferred purchase price of property or
services (other than any portion of any trade payable obligation that shall not
have remained unpaid for 91 days or more from the later of (A) the original due
date of such portion and (B) the customary payment date in the industry and
relevant market for such portion),

 

(c)           all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments,

 

(d)           all
obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person (whether or not the rights and remedies of the seller or lender under
such agreement in an event of default are limited to repossession or sale of
such property),

 

(e)           all
Capitalized Leases to which such Person is a party,

 

(f)            all
obligations, contingent or otherwise, of such Person under acceptance, letter
of credit or similar facilities,

 

(g)           all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Equity Securities of such Person,

 

(h)           the
net amount of all financial obligations of such Person in respect of Hedge
Agreements,

 

(i)            the
net amount of all other financial obligations of such Person under any contract
or other agreement to which such Person is a party,

 

(j)            all
Debt of other Persons of the type described in clauses (a) through (i)
above guaranteed, directly or indirectly, in any manner by such Person, or in
effect guaranteed, directly or indirectly, by such Person through an agreement
(A) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (B) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss, (C) to supply funds to or in any other

 

 

manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or
(D) otherwise to assure a creditor against loss, and

 

(k)           all
Debt of the type described in clauses (a) through (i) above secured by (or
for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including accounts
and contract rights) owned or held or used under lease or license by such
Person, even though such Person has not assumed or become liable for payment of
such Debt.

 

“Development
Budget” means the budget (comprised of the Management Budget
Component and the Clinical Budget Component) for the implementation of the
Development Plan (the initial form of which was agreed
upon by Isis and Symphony GenIsis as of the Closing Date and attached to
the Amended and Restated Research and Development Agreement as Annex D
thereto), as may be further developed and revised from time to time in
accordance with the Development Committee Charter and the Amended and Restated
Research and Development Agreement.

 

“Development
Committee” has the meaning set forth in Article 3 of the
Amended and Restated Research and Development Agreement.

 

“Development
Committee Charter” has the meaning set forth in Article 3
of the Amended and Restated Research and Development Agreement.

 

“Development Committee Member” has the
meaning set forth in Paragraph 1 of Annex B to the Amended and Restated
Research and Development Agreement.

 

“Development Plan” means the development
plan covering all the Programs (the initial form of which was agreed upon by Isis and Symphony GenIsis as of the Closing Date and
attached to the Amended and Restated Research and Development Agreement as
Annex C thereto), as may be further developed and revised from time to time in
accordance with the Development Committee Charter and the Amended and Restated
Research and Development Agreement.

 

“Development
Services” has the meaning set forth in Section 1(b) of the RRD
Services Agreement.

 

“Director(s)”
means the Persons identified as such in the Preliminary Statement of the
Indemnification Agreement (including such Persons as may become parties thereto
after the date hereof).

 

“Disclosing
Party” has the meaning set forth in Section 3 of the
Confidentiality Agreement.

 

“Discontinuation
Closing Date” has the meaning set forth in Section 11.1 of the
Amended and Restated Research and Development Agreement.

 

 

“Discontinuation
Date” means any date designated by Symphony GenIsis which shall
occur on or after the 90th day following the receipt by Isis of
notice from Symphony GenIsis of Symphony GenIsis’ intent to discontinue a
Program in accordance with the terms of the Amended and Restated Research and
Development Agreement.

 

“Discontinuation
Option” has the meaning set forth in Section 11.1 of the Amended
and Restated Research and Development Agreement.

 

“Discontinuation
Price” has the meaning set forth in Section 11.1 of the Amended
and Restated Research and Development Agreement.

 

“Discontinued
Program” has the meaning set forth in Section 2.12 of the
Novated and Restated Technology License Agreement.

 

“Disinterested
Directors” has the meaning set forth in Article IX of the
Symphony GenIsis Charter.

 

“Distribution”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Early Purchase Option Exercise” has
the meaning set forth in Section 1(c)(iv) of the Purchase Option Agreement.

 

“Effective
Registration Date” has the meaning set forth in Section 1(b) of
the Registration Rights Agreement

 

“Encumbrance”
means (i) any security interest, pledge, mortgage, lien (statutory or other),
charge or option to purchase, lease or otherwise acquire any interest, (ii) any
adverse claim, restriction, covenant, title defect, hypothecation, assignment,
deposit arrangement, license or other encumbrance of any kind, preference or
priority, or (iii) any other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement).

 

“Enhancements”
means findings, improvements, discoveries, inventions, additions,
modifications, enhancements, derivative works, clinical development data, or
changes to the Licensed Intellectual Property and/or Regulatory Files, in each
case whether or not patentable.

 

“Equity Securities”
means, with respect to any Person, shares of capital stock of (or other
ownership or profit interests in) such Person, warrants, options or other
rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are authorized or otherwise existing on any
date of determination.

 

 

“ERISA”
means the United States Employee Retirement Income Security Act of 1974, as
amended.

 

“Excepted Debt” has the
meaning set forth in Section 5(c)(iii) of the Purchase Option Agreement.

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

“Exclusive Field” means human
therapeutics, but does not include the Nonexclusive Field.

 

“Existing NDA” has the
meaning set forth in Section 2 of the Confidentiality Agreement.

 

“Expert”
has the meaning set forth in Section 11.1(c) of the Amended and Restated
Research and Development Agreement.

 

“External Directors”
means, at any time, up to two (2) Persons elected to the Symphony GenIsis Board
after the Closing Date (who shall be neither employees of the Symphony Capital
nor of Isis) in accordance with the Symphony GenIsis Charter, the Symphony
GenIsis By-laws and Section 4(b)(iv) of the Purchase Option Agreement.

 

“FDA”
means the United States Food and Drug Administration or its successor agency in
the United States.

 

“FDA Sponsor”
has the meaning set forth in Section 5.1 of the Amended and Restated
Research and Development Agreement.

 

“Final Termination Date” has
the meaning set forth in Section 1(c)(iii) of the Purchase Option Agreement.

 

“Financial Audits” has
the meaning set forth in Section 6.6 of the Amended and Restated Research and
Development Agreement.

 

“Financing”
has the meaning set forth in the Preliminary Statement of the Purchase Option
Agreement.

 

“Fiscal Year”
has the meaning set forth in each Operative Document in which it appears.

 

“Form S-3”
means the Registration Statement on Form S-3 as defined under the Securities
Act.

 

“FTE” has the
meaning set forth in Section 4.1 of the Amended and Restated Research and Development Agreement.

 

 

“Funds
Termination Date” has the meaning set forth in Section 1(c)(iii)
of the Purchase Option Agreement.

 

“Funds Termination Notice” has the meaning set forth in
Section 1(c)(iii) of the Purchase Option Agreement.

 

“GAAP” means generally
accepted accounting principles in effect in the United States of America from
time to time.

 

“GCCR” means a glucocorticoid
receptor.

 

“GCCR Product” means a pharmaceutical
composition comprising an ASO that targets GCCR.

 

“GCCR Program” means the
identification, development, manufacture and/or use of any GCCR Product in
accordance with the Development Plan.

 

“GCGR” means a glucagon
receptor.

 

“GCGR Product” means a
pharmaceutical composition comprising an ASO that targets GCGR.

 

“GCGR Program” means the
identification, development, manufacture and/or use of any GCGR Product in
accordance with the Development Plan.

 

“GenIsis Relevant Action”
means an action against others in the courts, administrative agencies or
otherwise to prevent or terminate infringement, misappropriation, illegal use
or misuse of the Licensed Patent Rights or other Licensed Intellectual Property
due to the manufacture, use, sale or importation of an ASO that targets ApoB,
GCCR or GCGR, as applicable, in the Exclusive Field.

 

“Governmental
Approvals” means authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or expirations of waiting
periods imposed by any Governmental Authority.

 

“Governmental
Authority” means any United States or non-United States federal,
national, supranational, state, provincial, local, or similar government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body.

 

“Governmental
Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“Hedge Agreement”
means any interest rate swap, cap or collar agreement, interest rate future or
option contract, currency swap agreement, currency future or option contract or
other similar hedging agreement.

 

 

“Holdings”
means Symphony GenIsis Holdings LLC, a Delaware limited liability company.

 

“Holdings Claims”
has the meaning set forth in Section 5.01 of the Warrant Purchase Agreement.

 

“Holdings LLC
Agreement” means the Amended and Restated Limited Liability
Company Agreement of Holdings dated as of the Closing Date.

 

“HSR Filings”
means the pre-merger notification and report forms required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“IND”
means an Investigational New Drug Application, as described in 21 U.S.C. §
355(i)(1) and 21 C.F.R. § 312 in the regulations promulgated by the United
States Food and Drug Administration, or any foreign equivalent thereof.

 

“Indemnification
Agreement” means the Indemnification Agreement among Symphony
GenIsis and the Directors named therein, dated as of the Closing Date, as such
agreement may be amended or amended and restated from time to time.

 

“IND-Enabling Studies” means
the pharmacokinetic and toxicology studies required for filing an IND.

 

“Indemnified Party” has the
meaning set forth in each Operative Document in which it appears.

 

“Indemnified Proceeding” has
the meaning set forth in each Operative Document in which it appears.

 

“Indemnifying Party” has the
meaning set forth in each Operative Document in which it appears.

 

“Initial
Development Budget” means the initial development budget
prepared by representatives of Symphony GenIsis and Isis prior to the Closing
Date, and attached to the Amended and Restated Research and Development
Agreement as Exhibit D thereto.

 

“Initial
Development Plan” means the initial development plan prepared by
representatives of Symphony GenIsis and Isis prior to the Closing Date, and
attached to the Amended and Restated Research and Development Agreement as
Exhibit C thereto.

 

“Initial
Holdings LLC Agreement” means the Agreement of Limited Liability
Company of Holdings, dated March 8, 2006.

 

“Initial
Investors LLC Agreement” means the Agreement of Limited
Liability Company of Investors, dated March 8, 2006.

 

“Initial LLC
Member” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

 

 

“Interest
Certificate” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

 

“Investment
Company Act” means the Investment Company Act of 1940, as
amended.

 

“Investment
Overview” means the investment overview describing the
transactions entered into pursuant to the Operative Documents.

 

“Investment
Policy” has the meaning set forth in Section 1(a)(vi) of the RRD
Services Agreement.

 

“Investors”
means Symphony GenIsis Investors LLC.

 

“Investors LLC
Agreement” means the Amended and Restated Agreement of Limited
Liability Company of Investors dated as of the Closing Date

 

“IRS”
means the U.S. Internal Revenue Service.

 

“Isis”
means Isis Pharmaceuticals, Inc., a Delaware corporation.

 

“Isis 2005 10-K” means the
annual report for fiscal year 2005 filed by Isis on Form 10-K on March 16,
2006, pursuant to the Exchange Act.

 

“Isis Accounting
Advisor” means Ernst & Young LLP or Deloitte & Touche
USA LLP.

 

“Isis Common
Stock” means the common stock, par value $0.001 per share, of
Isis.

 

“Isis Commitment Amount” has
the meaning set forth in Paragraph 14 of Annex B to the Amended and Restated
Research and Development Agreement.

 

“Isis Common
Stock Valuation” has the meaning set forth in Section 2(e) of
the Purchase Option Agreement.

 

“Isis Funding Notice” has the
meaning set forth in Section 2 of the Research Cost Sharing and Extension
Agreement.

 

“Isis Obligations”
has the meaning set forth in Section 6.1 of the Amended and Restated Research
and Development Agreement.

 

“Isis Personnel”
has the meaning set forth in Section 8.4 of the Amended and Restated Research
and Development Agreement.

 

“Isis Subcontractor” has the meaning
set forth in Section 6.2 of the Amended and Restated Research and Development
Agreement.

 

 

“Key Personnel”
means those Isis Personnel listed on Schedule 6.4 to the Amended and Restated
Research and Development Agreement, as such schedule may be updated from time
to time by mutual agreement of the parties to the Amended and Restated Research
and Development Agreement.

 

“Knowledge”
means the actual (and not imputed) knowledge of the executive officers of Isis,
without the duty of inquiry or investigation.

 

“Law”
means any law, statute, treaty, constitution, regulation, rule, ordinance,
order or Governmental Approval, or other governmental restriction, requirement
or determination, of or by any Governmental Authority.

 

“License”
has the meaning set forth in the Preliminary Statement of the Purchase Option
Agreement.

 

“Licensed
Intellectual Property” means the Licensed Patent Rights,
Symphony GenIsis Enhancements, Licensor Enhancements and the Licensed Know-How.

 

“Licensed
Know-How” means any and all proprietary technology that is
Controlled by Licensor prior to the unexercised expiration or termination of
the Purchase Option that relates to, or is exploitable in connection with, the
Licensed Patent Rights, Regulatory Files, Products or the Programs, including
without limitation, manufacturing processes or protocols, know-how, writings,
documentation, data, technical information, techniques, results of
experimentation and testing, diagnostic and prognostic assays, specifications,
databases, any and all laboratory, research, pharmacological, toxicological,
analytical, quality control pre-clinical and clinical data, and other information
and materials, whether or not patentable.

 

“Licensed Patent Rights” means:

 

(a)           any
and all patents, patent applications and invention disclosures Controlled by
Licensor prior to the unexercised expiration or termination of the Purchase
Option and relating to, or exploitable in connection with, any Product and/or
any Program;

 

(b)           any
and all reissues, continuations, divisionals, continuations-in-part,
reexaminations, renewals, substitutes, extensions or foreign counterparts of
the patents, patent applications and invention disclosures described in (a)
filed prior to the unexercised expiration or termination of the Purchase
Option; and

 

(c)           any
and all reissues, continuations, divisionals, continuations-in-part,
reexaminations, renewals, substitutes, extensions or foreign counterparts of
the patents, patent applications and invention disclosures described in (a) or
(b) filed after the unexercised expiration or termination of the Purchase
Option but solely to the extent the subject matter in any such
continuation-in-part embodies Licensed Know-How or has been disclosed in the
patents or patent applications described in (a) or (b).

 

Licensed Patent Rights include any and all patents and
patent applications that claim Licensor Enhancements or Symphony GenIsis
Enhancements and Program-Specific Patents.

 

 

“Licensor”
means Isis.

 

“Licensor
Enhancements” means all findings, improvements, discoveries,
inventions, additions, modifications, enhancements, derivative works, clinical
development data, or changes to the Licensed Know-How, Regulatory Files,
Products or the Programs, in each case, developed by Licensor during the Term
(in each case whether or not patentable), to the extent such items do not
otherwise qualify as Symphony GenIsis Enhancements hereunder, regardless of
whether such work is funded by Symphony GenIsis or Isis.

 

“Lien”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Liquidating
Event” has the meaning set forth in Section 8.01 of the Holdings
LLC Agreement.

 

“LLC Agreements”
means the Initial Holdings LLC Agreement, the Holdings LLC Agreement, the
Initial Investors LLC Agreement and the Investors LLC Agreement.

 

“Loss”
has the meaning set forth in each Operative Document in which it appears.

 

“Major Market” means the
United States, Germany, the United Kingdom, Italy, Spain, Japan, India, France
and Canada.

 

“Management
Budget Component” has the meaning set forth in Section 4.1 of
the Amended and Restated Research and Development Agreement.

 

“Management Fee”
has the meaning set forth in Section 6(a) of the RRD Services Agreement.

 

“Manager”
means (i) for each LLC Agreement in which it appears, the meaning set forth in
such LLC Agreement, and (ii) for each other Operative Document in which it
appears, RRD in its capacity as manager of Symphony GenIsis.

 

“Management
Services” has the meaning set forth in Section 1(a) of the RRD
Services Agreement.

 

“Manager Event”
has the meaning set forth in Section 3.01(g) of the Holdings LLC Agreement.

 

“Material
Adverse Effect” means, with respect to any Person, a material
adverse effect on (i) the business, assets, property or condition (financial or
otherwise) of such Person or, (ii) its ability to comply with and satisfy its
respective agreements and obligations under the Operative Documents or, (iii)
the enforceability of the obligations of such Person of any of the Operative
Documents to which it is a party.

 

“Material Subsidiary”
means, at any time, a Subsidiary of Isis having assets in an amount equal to at
least 5% of the amount of total consolidated assets of Isis and its
Subsidiaries (determined as of the last day of the most recent reported fiscal
quarter of Isis) or revenues or net income in an amount equal to at least 5% of
the amount of total consolidated revenues or net

 

 

income of Isis and its Subsidiaries for the 12-month
period ending on the last day of the most recent reported fiscal quarter of
Isis.

 

“Medical
Discontinuation Event” means (a) as specified in each Protocol,
those data that, if collected in such Protocol, demonstrate that such Protocol
should not be continued or (b) a series of adverse events, side effects or
other undesirable outcomes that, when collected in a Protocol, would cause a
reasonable FDA Sponsor to discontinue such Protocol.

 

“Membership Interest”
means (i) for each LLC Agreement in which it appears, the meaning set forth in
such LLC Agreement, and (ii) for each other Operative Document in which it
appears, the meaning set forth in the Holdings LLC Agreement.

 

“MOE Gapmer” means a single
stranded antisense oligonucleotide of less than [***] nucleotides (i) wherein
all of the backbone linkages are modified by adding a sulfur at the
non-bridging oxygen (phosphorothioate) and (ii) comprising a region of at least
[***] unsubstituted 2′-deoxy nucleotides with the remaining nucleotides
contain a 2′-O-(methoxyethyl) substitution at the 2′ position.

 

“NASDAQ”
means the National Association of Securities Dealers Automated Quotation
System.

 

“NDA”
means a New Drug Application, as defined in the regulations promulgated by the
United States Food and Drug Administration, or any foreign equivalent thereof.

 

“Nonexclusive Field” means (i)
manufacturing (including analytical methods) ASOs, (ii) formulating ASOs, (iii)
conducting Research on ASOs and/or (iv) supplying ASOs solely to conduct
Research.

 

“Non-Isis
Capital Transaction” means any (i) sale or other disposition of
all or part of the Symphony GenIsis Shares or all or substantially all of the
operating assets of Symphony GenIsis, to a Person other than Isis or an
Affiliate of Isis or (ii) distribution in kind of the Symphony GenIsis Shares
following the expiration of the Purchase Option.

 

“Novated and Restated Technology License
Agreement” means the Novated and Restated Technology License
Agreement, dated as of the Closing Date, among Isis, Symphony GenIsis and
Holdings.

 

“Operative
Documents” means, collectively, the Indemnification Agreement,
the Holdings LLC Agreement, the Purchase Option Agreement, the Warrant Purchase
Agreement, the Registration Rights Agreement, the Subscription Agreement, the
Technology License Agreement, the Novated and Restated Technology License Agreement,
the RRD Services Agreement, the Research and Development Agreement, the
Research Cost Sharing and Extension Agreement, the Amended and Restated
Research and Development Agreement, the Confidentiality Agreement, and each
other certificate and agreement executed in connection with any of the
foregoing documents.

 

“Organizational
Documents” means any certificates or articles of incorporation
or formation, partnership agreements, trust instruments, bylaws or other
governing documents.

 

 

“Partial Stock
Payment” has the meaning set forth in Section 3(a)(iii) of the
Purchase Option Agreement.

 

“Party(ies)”
means, for each Operative Document or other agreement in which it appears, the
parties to such Operative Document or other agreement, as set forth
therein.  With respect to any agreement
in which a provision is included therein by reference to a provision in another
agreement, the term “Party” shall be read to refer to the parties to the
document at hand, not the agreement that is referenced.

 

“Payment Terms”
has the meaning set forth in Section 8.2 of the Amended and Restated Research
and Development Agreement.

 

“Percentage”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Permitted
Investments” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

 

“Permitted Lien”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Person”
means any individual, partnership (whether general or limited), limited
liability company, corporation, trust, estate, association, nominee or other
entity.

 

“Personnel”
of a Party means such Party, its employees, subcontractors, consultants,
representatives and agents.

 

“Prime Rate” means
the quoted “Prime Rate” at JPMorgan Chase Bank or, if such bank ceases to exist
or is not quoting a base rate, prime rate reference rate or similar rate for
United States dollar loans, such other major money center commercial bank in
New York City selected by the Manager.

 

“Products” means an ApoB
Product, a GCCR Product and/or a GCGR Product.

 

“Profit”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“Programs” means the ApoB
Program, the GCCR Program and/or the GCGR Program.

 

“Program-Specific Patents” means

 

(a)           any
and all patents, patent applications and invention disclosures Controlled by
Licensor prior to the unexercised expiration or termination of the Purchase
Option that claim any composition of matter comprising, or method of using, an
ASO targeting any of ApoB, GCCR or GCGR, including but not limited to, the
patents and patent applications listed on Annex C to the Novated and Restated
Technology License Agreement;

 

 

(b)           any
and all reissues, continuations, divisionals, continuations-in-part,
reexaminations, renewals, substitutes, extensions or foreign counterparts of
the patents, patent applications and invention disclosures described in (a)
filed prior to the unexercised expiration or termination of the Purchase
Option; and

 

(c)           any
and all reissues, continuations, divisionals, continuations-in-part,
reexaminations, renewals, substitutes, extensions or foreign counterparts of
the patents, patent applications and invention disclosures described in (a) or
(b) filed after the unexercised expiration or termination of the Purchase
Option but solely to the extent the subject matter in such any
continuation-in-part embodyies Licensed Know-How or has been disclosed in the
patents or patent applications described in (a) or (b).

 

“Protocol” means a
written protocol that meets the substantive requirements of Section 6 of the
ICH Guideline for Good Clinical Practice as adopted by the FDA, effective
May 9, 1997 and is included within the Development Plan or later modified
or added to the Development Plan pursuant to the Amended and Restated Research
and Development Agreement.

 

“Public
Companies” has the meaning set forth in Section 5(e) of the
Purchase Option Agreement.

 

“Purchase Option”
has the meaning set forth in Section 1(a) of the Purchase Option Agreement.

 

“Purchase Option
Agreement” means this Purchase Option Agreement dated as of the
Closing Date, among Isis, Holdings and Symphony GenIsis.

 

“Purchase Option Closing” has
the meaning set forth in Section 2(a) of the Purchase Option Agreement.

 

“Purchase Option
Closing Date” has the meaning set forth in Section 2(a) of the
Purchase Option Agreement.

 

“Purchase Option
Commencement Date” has the meaning set forth in Section
1(c)(iii) of the Purchase Option Agreement.

 

“Purchase Option
Exercise Date” has the meaning set forth in Section 2(a) of the
Purchase Option Agreement.

 

“Purchase Option
Exercise Notice” has the meaning set forth in Section 2(a) of
the Purchase Option Agreement.

 

“Purchase Option
Interim Date” has the meaning set forth in Section 2(b)(i) of
the Purchase Option Agreement.

 

“Purchase Option
Period” has the meaning set forth in Section 1(c)(iii) of the
Purchase Option Agreement.

 

 

“Purchase Price”
has the meaning set forth in Section 2(b) of the Purchase Option Agreement.

 

“Put Option” has the meaning
set forth in Section 2A of the Purchase Option Agreement.

 

“Put Option Exercise Notice”
has the meaning set forth in Section 2A of the Purchase Option Agreement.

 

“QA Audits”
has the meaning set forth in Section 6.5 of the Amended and Restated Research
and Development Agreement.

 

“Quarterly Price”
has the meaning set forth in Section 2(b)(i) of the Purchase Option Agreement.

 

“Registration
Rights Agreement” means the Registration Rights Agreement dated
as of the Closing Date, between Isis and Holdings.

 

“Registration Statement” has the meaning set forth in Section 1(b) of the
Registration Rights Agreement.

 

“Regulatory
Authority” means the United States Food and Drug Administration,
or any successor agency in the United States, or any health regulatory
authority(ies) in any other country that is a counterpart to the FDA and has
responsibility for granting registrations or other regulatory approval for the
marketing, manufacture, storage, sale or use of drugs in such other country.

 

“Regulatory
Allocation” has the meaning set forth in Section 3.06 of the
Holdings LLC Agreement.

 

“Regulatory
Files” means any IND, NDA or any other filings filed with any
Regulatory Authority with respect to the Programs.

 

“Representative”
of any Person means such Person’s shareholders, principals, directors,
officers, employees, members, managers and/or partners.

 

“Research” means research,
including gene function, gene expression and target validation research, which
may include small pilot toxicology studies but excludes IND-Enabling Studies or
dosing humans.  Research does not include
commercialization.

 

“Research Cost Sharing and Extension
Agreement” means the Research Cost Sharing and Extension
Agreement dated as of the Closing Date, among Isis, Holdings and Symphony
GenIsis, Inc..

 

“Research and
Development Agreement” means the Research and Development
Agreement dated as of the Closing Date, between Isis and Holdings.

 

“RRD”
means RRD International, LLC, a Delaware limited liability company.

 

 

“RRD FTE Budget” means the
budget attached to the RRD Services Agreement as Exhibit 3 thereto.

 

“RRD Indemnified
Party” has the meaning set forth in Section 10(a) of the RRD
Services Agreement.

 

“RRD Investment Personnel” has the
meaning set forth in Section 1(a)(v) of the RRD Services Agreement.

 

“RRD Loss”
has the meaning set forth in Section 10(a) of the RRD Services Agreement.

 

“RRD Personnel”
has the meaning set forth in Section 1(a)(ii) of the RRD Services Agreement.

 

“RRD Services
Agreement” means the RRD Services Agreement between Symphony
GenIsis and RRD, dated as the Closing Date, 2006.

 

“Schedule K-1”
has the meaning set forth in Section 9.02(a) of the Holdings LLC Agreement.

 

“Scheduled
Meeting” has the meaning set forth in Paragraph 6 of Annex B of
the Amended and Restated Research and Development Agreement.

 

“Scientific
Discontinuation Event” has the meaning set forth in Section
4.2(c) of the Amended and Restated Research and Development Agreement.

 

“SCP”
means Symphony Capital Partners, L.P., a Delaware limited partnership.

 

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

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“Selling Stockholder Questionnaire”
has the meaning set forth in Section 4(a) of the Registration Rights Agreement.

 

“Shareholder” means any Person who owns any
Symphony GenIsis Shares.

 

“Solvent”
has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.

 

“SSP”
means Symphony Strategic Partners, LLC, a Delaware limited liability company.

 

“Stock Payment
Date” has the meaning set forth in Section 2 of the Subscription
Agreement.

 

“Stock Purchase
Price” has the meaning set forth in Section 2 of the
Subscription Agreement.

 

 

“Subcontracting
Agreement” has the meaning set forth in Section 6.2 of the
Amended and Restated Research and Development Agreement.

 

“Sublicensed Intellectual Property”
has the meaning set forth in Section 3.2 of the Novated and Restated Technology
License Agreement.

 

“Sublicense Obligations” has
the meaning set forth in Section 3.2 of the Novated and Restated Technology
License Agreement.

 

“Subscription
Agreement” means the Subscription Agreement between Symphony
GenIsis and Holdings, dated as the Closing Date.

 

“Subsidiary”
of any Person means any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a)
the issued and outstanding capital stock having ordinary voting power to elect
a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency); (b) the interest in the capital or profits of such partnership,
joint venture or limited liability company; or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries.

 

“Surviving Entity” means
the surviving legal entity which is surviving entity to Isis after giving
effect to a Change of Control.

 

“Symphony
Capital” means Symphony Capital LLC, a Delaware limited
liability company.

 

“Symphony
Fund(s)” means Symphony Capital Partners, L.P., a Delaware
limited partnership, and Symphony Strategic Partners, LLC, a Delaware limited
liability company.

 

“Symphony
GenIsis” means Symphony GenIsis, Inc., a Delaware corporation.

 

“Symphony
GenIsis Auditors”
has the meaning set forth in Section 5(b) of the RRD Services Agreement.

 

“Symphony
GenIsis Board” means the board of directors of Symphony GenIsis.

 

“Symphony
GenIsis By-laws” means the By-laws of Symphony GenIsis, as
adopted by resolution of the Symphony GenIsis Board on the Closing Date.

 

“Symphony
GenIsis Charter” means the Amended and Restated Certificate of
Incorporation of Symphony GenIsis, dated as of the Closing Date.

 

“Symphony
GenIsis Director Event”
has the meaning set forth in Section 3.01(h)(i) of the Holdings LLC Agreement.

 

 

“Symphony
GenIsis Enhancements” means findings, improvements, discoveries,
inventions, additions, modifications, enhancements, derivative works, clinical
development data, or changes to the Licensed Know-How, Regulatory Files,
Products or the Programs, made by or on behalf of Symphony GenIsis during the
Term, in each case whether or not patentable, including any such findings,
improvements, discoveries, inventions, additions, modifications, enhancements,
derivative works, clinical development data, or changes related to data and
information generated or derived by RRD and assigned to Symphony GenIsis
pursuant to Section 12 of the RRD Services Agreement.

 

“Symphony GenIsis
Equity Securities” means the Common Stock and any other stock or
shares issued by Symphony GenIsis.

 

“Symphony
GenIsis Loss” has the meaning set forth in Section 10(b) of the
RRD Services Agreement.

 

“Symphony
GenIsis Shares” has the meaning set forth in Section 2.02 of the
Holdings LLC Agreement.

 

“Tangible
Materials” means any tangible documentation, whether written or
electronic, existing as of the Closing Date or during the Term, that is
Controlled by the Licensor, embodying or relating to the Licensed Intellectual
Property, Regulatory Files, Products or the Programs, including, but not
limited to, safety, efficacy or other data related to the Products or Programs,
documentation, patent applications and invention disclosures.

 

“Tax Amount”
has the meaning set forth in Section 4.02 of the Holdings LLC Agreement.

 

“Technology License Agreement”
means the Technology License Agreement, dated as of the Closing Date, between
Isis and Holdings.

 

“Term”
has the meaning set forth in Section 4(b)(iii) of the Purchase Option
Agreement, unless otherwise stated in any Operative Document.

 

“Territory”
means the world.

 

“Third Party IP”
has the meaning set forth in Section 2.9 of the Novated and Restated Technology
License Agreement.

 

“Third Party Licensor”
means a third party from which Isis has received a license or sublicense to
Licensed Intellectual Property.

 

“Transfer”
has for each Operative Document in which it appears the meaning set forth in
such Operative Document.

 

“Transferee”
has, for each Operative Document in which it appears, the meaning set forth in
such Operative Document.

 

 

“Voluntary
Bankruptcy” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

 

“Warrant Closing”
has the meaning set forth in Section 2.03 of the Warrant Purchase Agreement.

 

“Warrant Date”
has the meaning set forth in Section 2.02 of the Warrant Purchase Agreement.

 

“Warrant
Purchase Agreement” means the Warrant Purchase Agreement, dated
as of the Closing Date, between Isis and Holdings.

 

“Warrant Shares”
has the meaning set forth in Section 2.01 of the Warrant Purchase Agreement.

 

“Warrant
Surrender Price” has the meaning set forth in Section 7.08 of
the Warrant Purchase Agreement.

 

“Warrants”
has the meaning set forth in Section 2.01 of the Warrant Purchase Agreement.

 

 

ANNEX B

 

DEVELOPMENT
COMMITTEE CHARTER

 

[***]

 

 

ANNEX C

 

INITIAL
DEVELOPMENT PLAN

 

[***]

 

 

ANNEX D

 

INITIAL
DEVELOPMENT BUDGET

 

[***]

 

 

ANNEX E

 

PAYMENT TERMS

 

[***]

 

E-1

 

Schedule 6.4

 

KEY PERSONNEL OF ISIS

 

[***]

 

 

Schedule 12.1(f)

 

DISCLOSED
MATERIAL CONTRACTS

 

[***]Exhibit
10.6

 

NEITHER
THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN THE
SUBJECT OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE, AND THE SAME HAVE BEEN (OR WILL BE, WITH RESPECT
TO THE SECURITIES ISSUABLE UPON EXERCISE HEREOF) ISSUED IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. NEITHER
THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED
UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

 

THE WARRANT EVIDENCED BY THIS CERTIFICATE IS
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE WARRANT PURCHASE
AGREEMENT, DATED AS OF APRIL 7, 2006, COPIES OF WHICH ARE ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER OF THIS
WARRANT WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH
RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH.

 

ISIS
PHARMACEUTICALS, INC.

 

WARRANT
TO PURCHASE COMMON STOCK

 

	
  No.
  CW-SG001

  	
   

  	
  April 7, 2006

  

 

Void
After April 7, 2011

 

THIS CERTIFIES THAT, for value
received, SYMPHONY GENISIS HOLDINGS LLC, with its
principal office at 7361 Calhoun Place, Suite 325, Rockville, MD 20850, or its assigns
(the “Holder”),
is entitled to subscribe for and purchase at the Exercise Price (defined below)
from Isis Pharmaceuticals, Inc., a Delaware corporation, with its principal
office at 1896 Rutherford Road, Carlsbad, CA 92008-7208 (the “Company”) up to four
million two hundred fifty thousand (4,250,000) shares
of the Common Stock of the Company (the “Common Stock”), subject to adjustment as
provided herein. This Warrant is being issued pursuant to the terms of the Warrant
Purchase Agreement, dated April 7, 2006,
by and among the Company and the Holder (the “Warrant Purchase Agreement”). Capitalized terms not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Warrant Purchase Agreement.

 

1.             DEFINITIONS.
As used herein, the following terms shall have the following respective
meanings:

 

(a)           “Exercise Period”
shall mean the period commencing one hundred eighty (180) days after the date
hereof and ending April 7, 2011, unless sooner terminated as provided below.

 

(b)           “Exercise Price” shall
mean $8.93 per share, subject to
adjustment pursuant to Section 6 below.

 

 

(c)           “Exercise Shares”
shall mean the shares of the Company’s Common Stock issuable upon exercise of
this Warrant, subject to adjustment pursuant to the terms herein, including but
not limited to adjustment pursuant to Section 6 below.

 

2.             EXERCISE
OF WARRANT.

 

2.1          Method of Exercise. The rights
represented by this Warrant may be exercised in whole or in part at any time
during the Exercise Period, by delivery of the following to the Company at its
address set forth above (or at such other address as it may designate by notice
in writing to the Holder):

 

(a)           An
executed Notice of Exercise in the form attached hereto;

 

(b)           Payment
of the Exercise Price of the Exercise Shares purchased thereby (i) in cash
or by check or wire transfer of immediately available funds, (ii) pursuant
to a Cashless Exercise, as described below, or (iii) by a combination of (i)
and (ii); and

 

(c)           This
Warrant.

 

Upon the exercise of the rights represented by this
Warrant, shares of Common Stock shall be issued for the Exercise Shares so
purchased, and shall be registered in the name of the Holder or persons
affiliated with the Holder, if the Holder so designates, within a reasonable
amount of time following receipt by the Company of all of the items designated
in clauses (a), (b) and (c) above, but in no event later than thirty (30) days
after the date of exercise pursuant to this Section 2.1. The Company shall (i)
upon request of the Holder, if available and if allowed under applicable
securities laws, use commercially reasonable efforts to deliver Exercise Shares
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, or (ii) if requested by the
Holder, deliver to the Holder certificates evidencing the Exercise Shares.

 

The person in whose name any Exercise Shares are to be
issued upon exercise of this Warrant shall be deemed to have become the holder
of record of such shares on the date on which delivery of the Notice of
Exercise, delivery of this Warrant and payment of the Exercise Price were made,
irrespective of the date of issuance of the shares of Common Stock, except
that, if the date of such delivery and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open.

 

2.2          Cashless Exercise.   Notwithstanding
any provisions herein to the contrary, if, at any time during the Exercise
Period, the Current Market Price (as defined below) of one share of Common
Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant by payment of cash, the Holder
may exercise this Warrant in whole or part by a cashless exercise by surrender
of this Warrant at the principal office of the Company together with the properly
endorsed Notice of Exercise and the Company shall issue to the Holder a number
of shares of Common Stock computed using the following formula:

 

2

 

X =                             Y
(B-A)

B

 

Where:                                                         X
=          the number of shares of Common Stock to
be issued to the Holder.

 

Y =                              the
number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised (in each case subject to adjustment pursuant to the
terms herein, including but not limited to adjustment pursuant to Section 6
below).

 

A =         the
Exercise Price.

 

B =          the
Current Market Price of one share of Common Stock.

 

“Current Market Price”
means on any particular date:

 

(a)           if the Common
Stock is traded on the Nasdaq SmallCap Market or the Nasdaq National Market,
the average of the closing prices of the Common Stock of the Company on such
market over the five (5) trading days ending immediately prior to the
applicable date of valuation (in the case of a cashless exercise, the date of
valuation will be the exercise date);

 

(b)           if the Common
Stock is traded on any registered national stock exchange but is not traded on
the Nasdaq SmallCap Market or the Nasdaq National Market, the average of the
closing prices of the Common Stock of the Company on such exchange over the
five (5) trading days ending immediately prior to the applicable date of
valuation (in the case of a cashless exercise, the date of valuation will be
the exercise date).

 

(c)           if the Common
Stock is traded over-the-counter, but not on the Nasdaq SmallCap Market, the
Nasdaq National Market or a registered national stock exchange, the average of
the closing bid prices over the 30-day period ending immediately prior to the
applicable date of valuation (in the case of a cashless exercise, the date of
valuation will be the exercise date); and

 

(d)           if there is
no active public market for the Common Stock, the value thereof, as determined
in good faith by the Board of Directors of the Company upon due consideration
of the proposed determination thereof by the Holder.

 

2.3          Partial Exercise. If this Warrant
is exercised in part only, the Company shall, upon surrender of this Warrant,
execute and deliver, within ten (10) days of the date of exercise, a new
Warrant evidencing the rights of the Holder, or such other person as shall be
designated in the Notice of Exercise, to purchase the balance of the Exercise
Shares purchasable hereunder. In no event shall this Warrant be exercised for a
fractional Exercise Share, and the Company shall not distribute a Warrant
exercisable for a fractional Exercise Share. Fractional Exercise Shares shall
be treated as provided in Section 5 hereof.

 

3

 

2.4          Legend.

 

(a)           All
certificates evidencing the shares to be issued to the Holder may bear the
following legend (provided that no such legend shall be borne by Exercise Shares
issued following the valid disposition of such shares pursuant to a registration
statement which is effective under the Securities Act):

 

“THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND THE SAME HAVE BEEN
ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT
AND SUCH LAWS. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER SUCH SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.”

 

“THE SHARES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH
IN ARTICLE VI OF THE WARRANT PURCHASE AGREEMENT, DATED AS OF APRIL 7, 2006, BY
AND BETWEEN THE ISSUER HEREOF AND SYMPHONY GENISIS HOLDINGS LLC (COPIES OF
WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER HEREOF),
INCLUDING, BUT NOT LIMITED TO, A DAILY SHARE DISPOSITION LIMIT, WHICH IS THE
GREATER OF (X) [                ]
SHARES OR (Y) [      ]% OF THE AVERAGE DAILY
TRADING VOLUME OF ISIS COMMON STOCK OVER THE COURSE OF THE PREVIOUS MONTH (AS
REPORTED ON THE NASDAQ NATIONAL MARKET OR SUCH OTHER NATIONAL EXCHANGE
REPRESENTING THE PRIMARY EXCHANGE ON WHICH ISIS COMMON STOCK IS LISTED) PER DAY
IN RESPECT OF THE WARRANT SHARES OF THE HOLDER HEREOF. UPON A SALE OR OTHER
TRANSACTION RESULTING IN A DIVISION OF THE SHARES REPRESENTED HEREBY, SUCH
MAXIMUM DAILY DISPOSITION AMOUNT WILL BE DIVIDED PRO RATA
AMONG SUBSEQUENT HOLDERS OF THE WARRANT SHARES.”

 

(b)           If
the certificates representing shares include either or both of the legends set
forth in Section 2.4(a) hereof, the Company shall, upon a request from a
Holder, or subsequent transferee of a Holder, as soon as practicable but in no
event more than thirty (30) days after receiving such request, remove or cause
to be removed (i) if the shares cease to be restricted securities, the
securities law portion of the legend and/or (ii) in the event of a sale of the
shares subject to issuance following the transfer of the shares in compliance
with the transfer restrictions, the transfer restriction portion of the legend,
from certificates representing the shares delivered by a Holder (or a
subsequent transferee).

 

2.5          Charges, Taxes and Expenses. Issuance of the Exercise Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of any electronic or paper
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that
in the event Exercise Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly

 

4

 

executed
by the Holder; and the Company may require, as a condition thereto, the payment
of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

3.             COVENANTS
OF THE COMPANY.

 

3.1          Covenants
as to Exercise Shares. The Company covenants and agrees that all Exercise
Shares that may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized and validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant. If at any time during the Exercise Period the
number of authorized but unissued shares of Common Stock shall not be
sufficient to permit exercise of this Warrant, the Company will take such
corporate action as may, in the opinion of counsel, be necessary to increase
its authorized but unissued shares of Common Stock (or other securities as
provided herein) to such number of shares as shall be sufficient for such
purposes.

 

3.2          No Impairment. Except
and to the extent as waived or consented to by the Holder in accordance with
Section 10 hereof, the Company will not, by amendment of its Certificate of Incorporation (as such
may be amended from time to time), or through any means, avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith carry out of all
the provisions of this Warrant and take all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against such impairment.

 

3.3          Notices
of Record Date. If at any time:

 

(a)           the
Company shall take a record of the holders of Common Stock for the purpose of
entitling them to receive a dividend or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any other
right (other than with respect to any equity or equity equivalent security
issued pursuant to a rights plan adopted by the Company’s Board of Directors);

 

(b)           there
shall be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger of the Company, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company; or

 

(c)           there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company;

 

then, in any one
or more of such cases, the Company shall use commercially reasonable efforts to
give to the Holder, provided that such action is available and permitted
under the applicable securities laws, at least ten (10) days’ prior written
notice of the record date for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, recapitalization, consolidation, merger, sale, transfer,
disposition, dissolution,

 

5

 

liquidation or
winding up of the Company. Any notice provided hereunder shall specify the date
on which the holders of Common Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and the then
current estimated date for the closing of the transaction contemplated by any
proposed reorganization, reclassification, recapitalization, consolidation,
merger, sale, transfer, disposition, dissolution, liquidation or winding up of
the Company.

 

4.             REPRESENTATIONS
OF HOLDER.

 

4.1          Acquisition
of Warrant for Personal Account. The Holder represents and warrants that it
is acquiring the Warrant and the Exercise Shares solely for its account for
investment and not with a present view toward the public sale or public distribution
of said Warrant or Exercise Shares or any part thereof and has no intention of
selling or distributing said Warrant or Exercise Shares or any arrangement or
understanding with any other persons regarding the sale or distribution of said
Warrant or the Exercise Shares, except as would not result in a violation of
the Securities Act. The Holder will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) the Warrant except in accordance with
the provisions of Article VI of the Warrant Purchase Agreement and will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) the Exercise Shares except in accordance with the provisions of Article VI of
the Warrant Purchase Agreement or pursuant to and in accordance with the
Securities Act.

 

4.2          Securities
Are Not Registered.

 

(a)           The
Holder understands that the offer and sale of neither the Warrant nor the
Exercise Shares has been registered under the Securities Act.

 

(b)           The
Holder recognizes that the Warrant and the Exercise Shares must be held
indefinitely unless they are subsequently registered under the Securities Act
or an exemption from such registration is available. The Holder recognizes that
the Company has no obligation to register the Warrant or, except as provided in
the Warrant Purchase Agreement and the Registration Rights Agreement, the
Exercise Shares, or to comply with any exemption from such registration.

 

(c)           The
Holder is aware that neither the Warrant nor the Exercise Shares may be sold
pursuant to Rule 144 adopted under the Securities Act unless certain conditions
are met, including, among other things, the availability of certain current
public information about the Company and the expiration of the required holding
period under Rule 144.

 

4.3          Disposition
of Warrant and Exercise Shares.

 

(a)           The
Holder further agrees not to make any disposition of all or any part of the
Warrant or Exercise Shares in any event unless and until one of the following
occurs:

 

6

 

(i)            The Company shall
have received a letter secured by the Holder from the SEC stating that no
action will be recommended to the Commission with respect to the proposed
disposition;

 

(ii)           There is then in effect
a registration statement under the Securities Act covering such Warrant or
Exercise Shares and such disposition is made in accordance with said
registration statement; or

 

(iii)         The Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, for the Holder to the effect that such disposition will not
require registration of such Warrant or Exercise Shares under the Securities Act
or any applicable state securities laws; provided, that so
long as the Holder provides the Company with a
representation letter in customary form with respect to such Rule 144
disposition, no opinion shall be required for any
disposition made or to be made in accordance with the provisions of Rule 144.

 

5.             FRACTIONAL
SHARES. No fractional shares shall be issued upon the exercise of this
Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares
(including fractions) issuable upon exercise of this Warrant may be aggregated
for purposes of determining whether the exercise would result in the issuance
of any fractional share. If, after aggregation, the exercise would result in
the issuance of a fractional share, the Company shall, in lieu of issuance of
any fractional share, pay the Holder otherwise entitled to such fraction a sum
in cash equal to the product resulting from multiplying the then Current Market
Price (as of the applicable exercise date) of an Exercise Share by such
fraction.

 

6.             CERTAIN EVENTS.

 

6.1          Distribution
of Assets.   In case the Company
shall declare or make any distribution of its assets (or rights to acquire its
assets) to holders of Common Stock as a partial liquidating dividend, by way of
return of capital or otherwise (including any dividend or distribution to the
Company’s stockholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a “Distribution”),
at any time after the initial issuance of this Warrant, then the Holder shall
be entitled upon exercise of this Warrant for the purchase of any or all of the
shares of Common Stock subject hereto, to receive the amount of such assets (or
rights) which would have been payable to the Holder had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such Distribution.

 

6.2          Dividends,
Subdivisions, Combinations and Reclassifications.   The number and kind of securities
purchasable upon the exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issue any shares
of its capital stock in a reclassification of the Common Stock, then the number
of Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto

 

7

 

shall be adjusted so that
the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been
entitled to receive had such Warrant been exercised in advance thereof. Upon
each such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the Holder shall
thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting
from such adjustment. An adjustment made pursuant to this paragraph shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.

 

6.3          Corporate
Transactions. In the event that the Company enters into a merger or
acquisition in which the surviving or resulting “parent” entity is an entity
other than the Company, then the Holder shall either exercise the Warrant or
surrender the Warrant in exchange for a new warrant exercisable in return for
shares or common stock of the Surviving Entity (as defined in the Warrant
Purchase Agreement) (the “Replacement Warrant”),
provided that:

 

(a)           if
the terms of such merger or acquisition shall provide for consideration that
consists solely of stock of the Surviving Entity, and such Surviving Entity has
a class of common stock (x) registered under Section 12(b) or 12(g) of the
Exchange Act and traded on a major national exchange such as the NYSE or
NASDAQ, or (y) traded on a major foreign exchange such as the Deutsche Börse or
the London Stock Exchange (such a class of common shares, “Public
Common Shares”), then any Replacement Warrants issued to the
holders of the Warrants shall be solely for Public Common Shares of the
Surviving Entity, at an exchange ratio reflecting the stock consideration paid
by the Surviving Entity at the time of such change in control, and the holders
of the Replacement Warrants shall have the registration rights for Public
Common Shares issuable upon exercise of the Replacement Warrants as provided
under the Registration Rights Agreement; or

 

(b)           if the terms of such merger or
acquisition shall provide for consideration that consists of cash or a
combination of cash and Public Common Shares of the Surviving Entity, then any
Replacement Warrants issued to the holders of the Warrants shall be solely for Public Common Shares of the Surviving
Entity, at an exchange ratio reflecting the total consideration paid by the
Surviving Entity at the time of such change in control, as if the total
consideration (including cash) for each share of Isis Common Stock was instead
paid only in Public Common Shares of
the Surviving Entity at the time of such change of control (as illustrated on Exhibit
C to the Warrant Purchase Agreement), and the holders of the Replacement
Warrants shall have the registration rights for Public Common Shares issuable upon exercise of the Replacement
Warrants as provided under the Registration Rights Agreement; or

 

(c)           if
during the Term, such a merger or acquisition shall occur and the Surviving
Entity is a private corporation, closely held company or other entity that does
not have a class of Public Common Shares, then the holders of the Warrants
shall have the option to elect within twenty (20) Business Days of receiving
notice of the public announcement of the merger 

 

8

 

or acquisition, to either
(A) retain all then outstanding Warrants and exercise such Warrants in
accordance with the terms of the Warrants and this Agreement, effective
immediately prior to the consummation of such merger or acquisition; or (B)
surrender all outstanding Warrants to Isis in consideration of a cash payment
for each share of Isis Common Stock subject to purchase under the Warrants in
an amount equal to forty percent (40%) of the per share cash consideration to
be received by a holder of one share of Isis Common Stock to be tendered in the
merger or acquisition (the “Warrant Surrender Price”);
provided, further, that the aggregate total cash payments to all
holders of the Warrants shall not exceed twenty-two million dollars
($22,000,000). The Warrant Surrender Price shall be paid upon the surrender of
the Warrants promptly following the closing of a merger or acquisition
described in this clause (iii).

 

The foregoing
provisions of this Section 6.3 shall similarly apply to successive mergers,
acquisitions, consolidations or disposition of assets.

 

6.4          Adjustment
of Exercise Price.   The form of this
Warrant need not be changed because of any adjustment in the number, class, and
kind of shares subject to this Warrant. The Company shall promptly provide a
certificate from its principal accounting officer notifying the Holder in
writing of any adjustment in the Exercise Price and/or the total number, class,
and kind of shares (and other securities or property) issuable upon exercise of
this Warrant, which certificate shall specify the Exercise Price and number,
class and kind of shares (and other securities or property) under this Warrant
after giving effect to such adjustment and shall set forth a brief statement of
the facts requiring such adjustment and setting forth the computation by which
such adjustment was made.

 

7.             NO
STOCKHOLDER RIGHTS. Except to the extent specified in Section 6, this
Warrant in and of itself shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company. Upon the exercise of this Warrant
in accordance with Section 2, the Exercise Shares so purchased shall be and be
deemed to be issued to such Holder as the record owner of such shares as of the
close of business on the date of such exercise.

 

8.             TRANSFER
OF WARRANT. Subject to applicable laws, the restriction on transfer set
forth on the first page of this Warrant and the provisions of Article VI of the
Warrant Purchase Agreement, this Warrant and all rights hereunder are
transferable by the Holder, in person or by duly authorized attorney, upon
delivery of this Warrant, the Assignment Form attached hereto, to any
transferee designated by Holder. The transferee will sign and deliver to the
Company an investment letter in a form that is commercially reasonable, customary
for use in similar transactions and reasonably satisfactory to the Company. Upon
such delivery and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new holder
for the purchase of Exercise Shares without having a new Warrant issued.

 

9.             LOST,
STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen,
mutilated or destroyed, the Company may, on such terms as to indemnity or
otherwise as it may reasonably impose (which shall, in the case of a mutilated
Warrant, include the surrender

 

9

 

thereof), issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.

 

10.          MODIFICATIONS AND WAIVER. This
Warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the Company and the
Holder.

 

11.          NOTICES,
ETC. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the Company at the address listed on the signature page and to the Holder
at the addresses on the Company records, or at such other address as the
Company or Holder may designate by ten days’ advance written notice to the
other party hereto.

 

12.          ACCEPTANCE.
Receipt of this Warrant by the Holder shall constitute acceptance of and
agreement to all of the terms and conditions contained herein.

 

13.          GOVERNING
LAW. This Warrant and all rights, obligations and liabilities hereunder
shall be governed by the laws of the State of New York without regard to the
principles of conflict of laws. The Company and, by accepting this Warrant, the
Holder, each irrevocably submits and consents to the exclusive jurisdiction of
the courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this Warrant
and the transactions contemplated hereby. The Company and, by accepting this
Warrant, the Holder, each irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO
THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO
THIS WAIVER.

 

14.          DESCRIPTIVE HEADINGS. The
descriptive headings of the several paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The language in
this Warrant shall be construed as to its fair meaning without regard to which
party drafted this Warrant.

 

15.          SUCCESSORS AND ASSIGNS.
Subject to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the successors and permitted assigns of the Holder.

 

10

 

16.          SEVERABILITY. The invalidity or
unenforceability of any provision of this Warrant in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction, or affect any other provision of this Warrant, which shall remain
in full force and effect.

 

17.          REGISTRATION RIGHTS. The holder of
this Warrant and of the Exercise Shares shall be entitled to the registration
rights and other applicable rights as and to the extent set forth in the Warrant
Purchase Agreement and the Registration Rights Agreement.

 

18.          ENTIRE AGREEMENT. This Warrant
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and undertakings of the parties, whether oral or written, with
respect to such subject matter.

 

[Signature
Page Follows]

 

11

 

IN WITNESS WHEREOF, the Company
has caused this Warrant to be executed by its duly authorized officer as of April
7, 2006.

 

	
   

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  1896 Rutherford
  Road

  
	
   

  	
   

  	
  Carlsbad, CA
  92008-7208

  
	
   

  	
   

  	
  Attn: B. Lynne
  Parshall

  
	
   

  	
   

  	
  Facsimile: (760)
  603-4650

  
	
   

  	
   

  	
   

  
	
   

  	
  W/copy to:

  	
  General Counsel

  
	
   

  	
   

  	
  Facsimile: (760)
  268-4922

  
									

 

 

NOTICE OF EXERCISE

 

NOTICE
OF EXERCISE

 

TO:  ISIS
PHARMACEUTICALS INC.

 

(1)           The
undersigned hereby elects to (check one box only):

 

o            purchase
             shares
of the Common Stock of Isis Pharmaceuticals, Inc. (the “Company”) pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
exercise price in full for such shares.

 

o            purchase
the number of shares of Common Stock of the Company by cashless exercise
pursuant to the terms of the Warrant as shall be issuable upon cashless
exercise of the portion of the Warrant relating to
            
shares.

 

(2)           Please
issue a certificate or certificates representing said shares of Common Stock in
the name of the undersigned or in such other name as is specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  	
   

  

 

(3)           If
the Warrant is not being exercised in full, please issue a certificate
representing a new Warrant evidencing the right of the Holder to purchase the
balance of the Exercise Shares purchasable under the Warrant, such certificate
to be registered in the name of the undersigned or in such other name as is
specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  	
   

  

 

(4)           The
undersigned represents that (i) the aforesaid shares of Common Stock are being
acquired for the account of the undersigned not with a view to, or for resale
in connection with, the distribution thereof in violation of the Securities Act
of 1933, as amended (the “Securities
Act”) and that the undersigned has no present intention of
distributing or reselling such shares in violation of the Securities Act; (ii)
the undersigned is aware of the Company’s business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision regarding its investment in the Company;
(iii) the undersigned is experienced in making investments of this type and has
such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment
and protecting the undersigned’s own interests; (iv) the undersigned
understands that the shares of Common Stock issuable upon exercise of this
Warrant must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is

 

1

 

available, and (v) the undersigned agrees not to make any disposition
of all or any part of the aforesaid shares of Common Stock unless and until
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement, or the undersigned has provided the Company
with an opinion of counsel satisfactory to the Company, stating that such
registration is not required.

 

	
   

  	
   

  	
   

  	
   

  
	
  (Date)

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print name)

  
					

 

2

 

ASSIGNMENT
FORM

 

(To assign the foregoing
Warrant, subject to compliance with section 4.3 hereof, execute this form and
supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the
foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
  Name:

  	
   

  
	
   

  	
  (Please Print)

  
	
   

  
	
   

  
	
  Address:

  	
  (Please Print)

  
	
   

  
	
   

  
	
  Dated: 

  	
   

  	
  , 20

  	
   

  	
   

  
	
   

  
	
  Holder’s

  
	
  Signature:

  	
   

  	
   

  
	
   

  
	
  Holder’s

  
	
  Address:

  	
   

  	
   

  
								

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatever. Officers of corporations and
those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.

 

1

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