Document:

Exhibit 10.2

 

AKCEA THERAPEUTICS, INC.

 

2015 EQUITY INCENTIVE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS:  DECEMBER 16, 2015

APPROVED BY THE STOCKHOLDERS:  DECEMBER 16, 2015

TERMINATION DATE:  DECEMBER 15, 2025

 

AMENDED:  (Amendment and Restatement approved by Board on

July 15, 2016 and by the Stockholders on July 15, 2016)

 

1.                                      GENERAL.

 

(a)                                 Eligible Stock Award Recipients.  The persons eligible to receive Stock Awards are Employees, Directors and Consultants.

 

(b)                                 Available Stock Awards.  The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, and (v) Stock Appreciation Rights.

 

(c)                                  Purpose.  The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Stock Awards as set forth in Section 1(a), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.

 

2.                                      ADMINISTRATION.

 

(a)                                 Administration by Board.  The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee, as provided in Section 2(c).

 

(b)                                 Powers of Board.  The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

(i)                                    To determine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award.

 

(ii)                                To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in

 

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any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective.

 

(iii)                            To settle all controversies regarding the Plan and Stock Awards granted under it.

 

(iv)                             To accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

 

(v)                                 To suspend or terminate the Plan at any time.  Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

 

(vi)                             To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 9(a) relating to Capitalization Adjustments, to the extent required by applicable law, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of Stock Awards available for issuance under the Plan.  Except as provided above, rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.

 

(vii)                         To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding Incentive Stock Options.

 

(viii)                     To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that, the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.  Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without the affected Participant’s consent, the Board may amend the terms of any one or more Stock Awards if necessary to maintain the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code and the related guidance thereunder.

 

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(ix)                             Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.

 

(x)                                 To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States.

 

(xi)                             To effect, at any time and from time to time, with the consent of any adversely affected Optionholder, (1) the reduction of the exercise price of any outstanding Option under the Plan, (2) the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of (A) a new Option under the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (B) a Restricted Stock Award, (C) a Stock Appreciation Right, (D) Restricted Stock Unit, (E) cash and/or (F) other valuable consideration (as determined by the Board, in its sole discretion), or (3) any other action that is treated as a repricing under generally accepted accounting principles; provided, however, that no such reduction or cancellation may be effected if it is determined, in the Company’s sole discretion, that such reduction or cancellation would result in any such outstanding Option becoming subject to the requirements of Section 409A of the Code.

 

(c)                                  Delegation to Committee.  The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

 

(d)                                 Delegation to an Officer.  The Board may delegate to one or more Officers of the Company the authority to do one or both of the following: (i) designate Officers (other than Officers of a Vice President level or senior thereto) and Employees of the Company or any of its Subsidiaries to be recipients of Options (and, to the extent permitted by applicable law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Officers and Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself.  Notwithstanding the foregoing, the Board may not delegate authority to an Officer to determine the Fair Market Value of the Common Stock pursuant to Section 13(t) below.

 

(e)                                  Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

 

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(f)                                   Arbitration.  Any dispute or claim concerning any Stock Awards granted (or not granted) pursuant to the Plan or any disputes or claims relating to or arising out of the Plan shall be fully, finally and exclusively resolved by binding and confidential arbitration conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association in San Diego, California.  The Company shall pay all arbitration fees.  In addition to any other relief, the arbitrator may award to the prevailing party recovery of its attorneys’ fees and costs.  By accepting a Stock Award, Participants and the Company waive their respective rights to have any such disputes or claims tried by a judge or jury.

 

3.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                 Share Reserve.  Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock of the Company that may be issued pursuant to Stock Awards after the Effective Date shall not exceed 16,200,000 shares.  For clarity, the limitation in this Section 3(a) is a limitation in the number of shares of Common Stock that may be issued pursuant to the Plan.  Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).

 

(b)                                 Reversion of Shares to the Share Reserve.  If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares which are forfeited shall revert to and again become available for issuance under the Plan.  Also, any shares reacquired by the Company pursuant to Section 8(g) or as consideration for the exercise of an Option shall again become available for issuance under the Plan.  Furthermore, if a Stock Award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the Stock Award receives cash rather than stock), such expiration, termination or settlement shall not reduce (or otherwise offset) the number of shares of Common Stock that may be issued pursuant to the Plan.  Notwithstanding the provisions of this Section 3(b), any such shares shall not be subsequently issued pursuant to the exercise of Incentive Stock Options.

 

(c)                                  Incentive Stock Option Limit.  Notwithstanding anything to the contrary in this Section 3(c), subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be twice the number of shares that may be issued pursuant to all Stock Awards as set forth in Section 3(a) above.

 

(d)                                 Source of Shares.  The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

 

4.                                      ELIGIBILITY.

 

(a)                                 Eligibility for Specific Stock Awards.  Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof

 

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(as such terms are defined in Sections 424(e) and (f) of the Code).  Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

 

(b)                                 Ten Percent Stockholders.  A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

 

(c)                                  Consultants.   A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of the Securities Act (“Rule 701”) because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.

 

5.                                      OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option.  If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall include (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions:

 

(a)                                 Term.  Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement.

 

(b)                                 Exercise Price.  Subject to the provisions of Section 4(b) regarding Incentive Stock Options granted to Ten Percent Stockholders, the exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code (whether or not such options are Incentive Stock Options).

 

(c)                                  Consideration.  The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.  The Board shall have the authority to grant Options that do not permit all of the

 

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following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment.  The permitted methods of payment are as follows:

 

(i)                                    by cash, check, bank draft or money order payable to the Company;

 

(ii)                                pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

 

(iii)                            by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

 

(iv)                             by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations;

 

(v)                                 according to a deferred payment or similar arrangement approved by the Board between the Company and the Optionholder; provided, however, that interest shall compound at least annually and shall be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or

 

(vi)                             in any other form of legal consideration that may be acceptable to the Board.

 

(d)                                 Transferability of Options.  The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine.  In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:

 

(i)                                    Restrictions on Transfer.  An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; provided, however, that the Board may, in its sole discretion, permit transfer of the Option to such extent as permitted by Rule 701 of the Securities Act at the time of the grant of the Option and in a manner consistent with applicable tax and securities laws upon the Optionholder’s request.

 

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(ii)                                Domestic Relations Orders.  Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided, however, that an Incentive Stock Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

 

(iii)                            Beneficiary Designation.  Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be the beneficiary of an Option with the right to exercise the Option and receive the Common Stock or other consideration resulting from the Option exercise.

 

(e)                                  Vesting of Options Generally.  The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal.  The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options may vary.  The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.

 

(f)                                   Termination of Continuous Service.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability or termination for Cause prior to the Company’s initial public offering), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than thirty (30) days) unless such termination is for Cause, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

 

(g)                                 Extension of Termination Date.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability or termination for Cause prior to the Company’s initial public offering) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

 

(h)                                 Disability of Optionholder.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event

 

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that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

 

(i)                                    Death of Optionholder.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated as the beneficiary of the Option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months), or (ii) the expiration of the term of such Option as set forth in the Option Agreement.  If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.  If the Optionholder designates a third party beneficiary of the Option in accordance with Section 5(d)(iii), then upon the death of the Optionholder such designated beneficiary shall have the sole right to exercise the Option and receive the Common Stock or other consideration resulting from the Option exercise.

 

(j)                                    Non-Exempt Employees.  No Option granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option.  The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

 

(k)                                 Early Exercise.  The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option.  Subject to the “Repurchase Limitation” in Section 8(l), any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate.  Provided that the “Repurchase Limitation” in Section 8(l) is not violated, the Company shall not be required to exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid classification of the Option as a liability for financial

 

 

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accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement.

 

(l)                                    Right of Repurchase.  Subject to the “Repurchase Limitation” in Section 8(l), the Option may include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Optionholder pursuant to the exercise of the Option.

 

(m)                             Right of First Refusal.  The Option may include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option.  Such right of first refusal shall be subject to the “Repurchase Limitation” in Section 8(l).  Except as expressly provided in this Section 5(m) or in the Option Agreement, such right of first refusal shall otherwise comply with any applicable provisions of the Bylaws of the Company.

 

6.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)                                 Restricted Stock Awards.  Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical; provided, however, that each Restricted Stock Award Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration. A Restricted Stock Award may be awarded in consideration for (A) past or future services actually or to be rendered to the Company or an Affiliate, or (B) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

 

(ii)                                Vesting.  Subject to the “Repurchase Limitation” in Section 8(l), shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

 

(iii)                            Termination of Participant’s Continuous Service.  In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

 

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(iv)                             Transferability.  Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

 

(b)                                 Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, provided, however, that each Restricted Stock Unit Award Agreement shall include (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration.  At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award.  The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

 

(ii)                                Vesting.  At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

 

(iii)                            Payment.  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

 

(iv)                             Additional Restrictions.  At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

 

(v)                                 Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.  At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

 

(vi)                             Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the

 

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Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

 

(vii)                         Compliance with Section 409A of the Code.   Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the Code.  Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award.  For example, such restrictions may include, without limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined schedule.

 

(c)                                  Stock Appreciation Rights.  Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock Awards.  The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical; provided, however, that each Stock Appreciation Right Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Term.  No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of grant or such shorter period specified in the Stock Appreciation Right Agreement.

 

(ii)                                Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents.  The strike price of each Stock Appreciation Right granted as a stand-alone or tandem Stock Award shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.

 

(iii)                            Calculation of Appreciation.  The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that will be determined by the Board on the date of grant.

 

(iv)                             Vesting.  At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate.

 

(v)                                 Exercise.  To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the

 

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provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

 

(vi)                             Non-Exempt Employees.  No Stock Appreciation Right granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Stock Appreciation Right.  The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise of a Stock Appreciation Right will be exempt from his or her regular rate of pay.

 

(vii)                         Payment.  The appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

 

(viii)                     Termination of Continuous Service.  Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates (other than upon the Participant’s death or Disability or termination for Cause prior to the Company’s initial public offering), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (A) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement, which period shall not be less than thirty (30) days unless such termination is for Cause), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(ix)                             Disability of Participant.  Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (A) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement, which period shall not be less than six (6) months), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(x)                                 Death of Participant.  Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the

 

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Company, in the event that (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Appreciation Right Agreement after the termination of the Participant’s Continuous Service for a reason other than death, then the Stock Appreciation Right may be exercised (to the extent the Participant was entitled to exercise such Stock Appreciation Right as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Stock Appreciation Right by bequest or inheritance or by a person designated as the beneficiary of the Stock Appreciation Right upon the Participant’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Stock Appreciation Right Agreement, which period shall not be less than six (6) months), or (ii) the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after the Participant’s death, the Stock Appreciation Right is not exercised within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(xi)                             Compliance with Section 409A of the Code.   Notwithstanding anything to the contrary set forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Stock Appreciation Rights will comply with the requirements of Section 409A of the Code.  Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.  For example, such restrictions may include, without limitation, a requirement that a Stock Appreciation Right that is to be paid wholly or partly in cash must be exercised and paid in accordance with a fixed pre-determined schedule.

 

7.                                      COVENANTS OF THE COMPANY.

 

(a)                                 Availability of Shares.  During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock reasonably required to satisfy such Stock Awards.

 

(b)                                 Securities Law Compliance.  The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.

 

(c)                                  No Obligation to Notify.  The Company shall have no duty or obligation to any holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock Award.  Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in

 

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which the Stock Award may not be exercised.  The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

 

8.                                      MISCELLANEOUS.

 

(a)                                 Use of Proceeds from Sales of Common Stock.  Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

 

(b)                                 Corporate Action Constituting Grant of Stock Awards.  Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.

 

(c)                                  Stockholder Rights.  No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms and the Participant shall not be deemed to be a stockholder of record until the issuance of the Common Stock pursuant to such exercise has been entered into the books and records of the Company.

 

(d)                                 No Employment or Other Service Rights.  Nothing in the Plan, any Stock Award Agreement or any other instrument executed thereunder or in connection with any Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

 

(e)                                  Incentive Stock Option $100,000 Limitation.  To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

 

(f)                                   Investment Assurances.  The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or

 

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she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

 

(g)                                 Withholding Obligations.  To the extent provided by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii)  withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding payment from any amounts otherwise payable to the Participant; (iv) withholding cash from a Stock Award settled in cash; or (v) by such other method as may be set forth in the Stock Award Agreement.

 

(h)                                 Electronic Delivery.  Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

 

(i)                                    Deferrals.  To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee.  The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

 

(j)                                    Compliance with Section 409A.  To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award

 

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Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code.  To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date.  Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Stock Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Stock Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (1) exempt the Stock Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

 

(k)                                 Compliance with Exemption Provided by Rule 12h-1(f).  If: (i) the aggregate of the number of Optionholders and the number of holders of all other outstanding compensatory employee stock options to purchase shares of Common Stock equals or exceeds five hundred (500), and (ii) the assets of the Company at the end of the Company’s most recently completed fiscal year exceed $10 million, then the following restrictions shall apply during any period during which the Company does not have a class of its securities registered under Section 12 of the Exchange Act and is not required to file reports under Section 15(d) of the Exchange Act: (A) the Options and, prior to exercise, the shares of Common Stock acquired upon exercise of the Options may not be transferred until the Company is no longer relying on the exemption provided by Rule 12h-1(f) promulgated under the Exchange Act (“Rule 12h-1(f)”), except: (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Optionholder, or (3) to an executor upon the death of the Optionholder (collectively, the “Permitted Transferees”); provided, however, the following transfers are permitted: (i) transfers by the Optionholder to the Company, and (ii) transfers in connection with a change of control or other acquisition involving the Company, if following such transaction, the Options no longer remain outstanding and the Company is no longer relying on the exemption provided by Rule 12h-1(f); provided further, that any Permitted Transferees may not further transfer the Options; (B) except as otherwise provided in (A) above, the Options and shares of Common Stock acquired upon exercise of the Options are restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” as defined by Rule 16a-1(h) promulgated under the Exchange Act, or any “call equivalent position” as defined by Rule 16a-1(b) promulgated under the Exchange Act by the Optionholder prior to exercise of an Option until the Company is no longer relying on the exemption provided by Rule 12h-1(f); and (C) at any time that the Company is relying on the exemption provided by Rule 12h-1(f), the Company shall deliver to Optionholders (whether by physical or electronic delivery or written notice of the availability of the information on an internet site) the information required by Rule 701(e)(3), (4), and (5) promulgated under the Securities Act every six (6) months, including financial statements that are not more than one hundred eighty (180) days old;

 

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provided, however, that the Company may condition the delivery of such information upon the Optionholder’s agreement to maintain its confidentiality.

 

(l)                                    Repurchase Limitation.  The terms of any repurchase option shall be specified in the Stock Award Agreement.  The repurchase price for vested shares of Common Stock shall be the Fair Market Value of the shares of Common Stock on the date of repurchase.  The repurchase price for unvested shares of Common Stock shall be the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase or (ii) their original purchase price.  However, the Company shall not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time necessary to avoid classification of the Stock Award as a liability for financial accounting purposes) have elapsed following delivery of shares of Common Stock subject to the Stock Award, unless otherwise specifically provided by the Board.

 

9.                                      ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

 

(a)                                 Capitalization Adjustments.  In the event of a Capitalization Adjustment, the Board shall proportionately and appropriately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards.  The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

 

(b)                                 Dissolution or Liquidation.  Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

 

(c)                                  Corporate Transaction.   The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.

 

(i)                                    Stock Awards May Be Assumed.  Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock

 

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awards for Stock Awards outstanding under the Plan (including but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction.  A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award.  The terms of any assumption, continuation or substitution shall be set by the Board in accordance with the provisions of Section 2.

 

(ii)                                Stock Awards Held by Current Participants.  Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”), the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the effectiveness of the Corporate Transaction).

 

(iii)                            Stock Awards Held by Persons other than Current Participants.  Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.

 

(iv)                             Payment for Stock Awards in Lieu of Exercise.  Notwithstanding the foregoing, in the event a Stock Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may not exercise such Stock Award but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (A) the value of the

 

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property the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise.

 

(d)                                 Change in Control.  A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement approved by the Board between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall occur.

 

10.                               TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)                                 Plan Term.  The Board may suspend or terminate the Plan at any time.  Unless sooner terminated by the Board pursuant to Section 2, the Plan shall automatically terminate on December 15, 2025.  No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

(b)                                 No Impairment of Rights.  Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

 

11.                               EFFECTIVE DATE OF PLAN.

 

This Plan shall become effective on the Effective Date.

 

12.                               CHOICE OF LAW.

 

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

 

13.                               DEFINITIONS.   As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

 

(a)                                 “Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act.  The Board shall have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.

 

(b)                                 “Board” means the Board of Directors of the Company.

 

(c)                                  “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company).  Notwithstanding the foregoing, the conversion of any

 

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convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

 

(d)                                 “Cause” means with respect to a Participant, the occurrence of any of the following events:  (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv)  such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion.  Any determination by the Company that the Continuous Service of a Participant was terminated by reason of dismissal without Cause for the purposes of outstanding Stock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

 

(e)                                  “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)                                    any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

 

(ii)                                there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger,

 

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consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

 

(iii)                            the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation; or

 

(iv)                             there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries (in each case as determined by the Board in its sole discretion), other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition.

 

Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.

 

(f)                                   “Code” means the Internal Revenue Code of 1986, as amended.

 

(g)                                 “Committee” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

 

(h)                                 “Common Stock” means the common stock of the Company.

 

(i)                                    “Company” means Akcea Therapeutics, Inc., a Delaware corporation.

 

(j)                                    “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services.  However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

 

(k)                                 “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director, or Consultant or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service

 

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with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate.  For example, a change in status from an employee of the Company to a consultant of an Affiliate or to a Director shall not constitute an interruption of Continuous Service.  To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.  Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

 

(l)                                    “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)                                    the consummation of a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

 

(ii)                                the consummation of a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

 

(iii)                            the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

(iv)                             the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

 

(m)                             “Director” means a member of the Board.

 

(n)                                 “Disability” means the inability of a Participant to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

(o)                                 “Effective Date” means the effective date of this Plan, which is the earlier of (i) the date that this Plan is first approved by the Company’s stockholders, or (ii) the date this Plan is adopted by the Board.

 

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(p)                                 “Employee” means any person employed by the Company or an Affiliate.  However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

 

(q)                                 “Entity” means a corporation, partnership, limited liability company or other entity.

 

(r)                                  “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(s)                                   “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date of the Plan as set forth in Section 11, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

 

(t)                                    “Fair Market Value” means, as of any date, the value of the Common Stock determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.

 

(u)                                 “Incentive Stock Option” means an Option that qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

 

(v)                                 “Nonstatutory Stock Option” means an Option that does not qualify as an Incentive Stock Option.

 

(w)                               “Officer” means any person designated by the Company as an officer.

 

(x)                                 “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

 

(y)                                 “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant.  Each Option Agreement shall be subject to the terms and conditions of the Plan.

 

(z)                                  “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

 

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(aa)                          “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

 

(bb)                          “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

 

(cc)                            “Plan” means this Akcea Therapeutics, Inc. 2015 Equity Incentive Plan.

 

(dd)                          “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

 

(ee)                            “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award.  Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.

 

(ff)                              “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

 

(gg)                          “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

 

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

 

(ii)                                “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6(c).

 

(jj)                                “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

 

(kk)                          “Stock Award” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, or a Stock Appreciation Right.

 

(ll)                                “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant.  Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

 

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(mm)                  “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the 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, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) .

 

(nn)                          “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.

 

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AKCEA THERAPEUTICS, INC.

2015 EQUITY INCENTIVE PLAN

 

OPTION AGREEMENT 
 (INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, including all appendices hereto (this “Agreement”), Akcea Therapeutics, Inc. (the “Company”) has granted you an option under its 2015 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock (the “Option”) indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan, or in the Grant Notice, as applicable.

 

The terms of your option are as follows:

 

1.                                      VESTING.  Subject to the limitations contained herein, your Option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

 

2.                                      NUMBER OF SHARES AND EXERCISE PRICE.  The number of shares of Common Stock subject to your Option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

 

3.                                      EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES.  In the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise your Option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your Option.

 

4.                                      METHOD OF PAYMENT.  Payment of the exercise price is due in full upon exercise of all or any part of your Option.  You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

 

(a)                                 Bank draft, wire transfer or money order payable to the Company.

 

(b)                                 Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

 

(c)                                  for U.S. taxpayers only, provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value

 

 

on the date of exercise.  Notwithstanding the foregoing, you may not exercise your Option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

 

(d)                                 By a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your Option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from you to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided further, however, that shares of Common Stock will no longer be outstanding under your Option and will not be exercisable thereafter to the extent that (1) shares are used to pay the exercise price pursuant to the “net exercise,” (2) shares are delivered to you as a result of such exercise, and (3) shares are withheld to satisfy tax withholding obligations.

 

5.                                      WHOLE SHARES.  You may exercise your Option only for whole shares of Common Stock.

 

6.                                      SECURITIES LAW COMPLIANCE.  Notwithstanding anything to the contrary contained herein, you may not exercise your Option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act.  The exercise of your Option also must comply with other applicable laws and regulations governing your Option, and you may not exercise your Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

 

7.                                      TERM.  You may not exercise your Option before the commencement or after the expiration of its term.  The term of your Option commences on the Date of Grant and expires upon the earliest of the following:

 

(a)                                 immediately upon the termination of your Continuous Service for Cause if such termination occurs prior to the Company’s initial public offering, where in such case you will be prohibited from exercising your Option from and after the time of such termination of Continuous Service;

 

(b)                                 three (3) months after the termination of your Continuous Service for any reason (other than Cause prior to the Company’s initial public offering or your Disability or death); provided, however, that (i) if during any part of such three (3) month period your Option is not exercisable solely because of the condition set forth in Section 6, your Option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service and (ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service within six (6) months after the Date of Grant specified in your Grant Notice, and (z) you have vested in a portion of your Option at the time of your termination of Continuous Service, your Option shall not expire until the earlier of (A) the later of the date that is seven (7) months after the Date of Grant specified in your Grant Notice or the date that is three (3) months after the termination of your Continuous Service or (B) the Expiration Date;

 

(c)                                  twelve (12) months after the termination of your Continuous Service due to your Disability;

 

 

(d)                                 eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason;

 

(e)                                  the Expiration Date indicated in your Grant Notice; or

 

(f)                                   the day before the tenth (10th) anniversary of the Date of Grant.

 

If your option is an Incentive Stock Option, note that to obtain the U.S. federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your Option and ending on the day three (3) months before the date of your Option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or your permanent and total disability, as defined in Section 22(e) of the Code.  (The definition of disability in Section 22(e) of the Code is different from the definition of Disability under the Plan).  The Company has provided for extended exercisability of your Option under certain circumstances for your benefit but cannot guarantee that your Option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your Option more than three (3) months after the date your employment with the Company or an Affiliate terminates.

 

8.                                      EXERCISE.

 

(a)                                 You may exercise the vested portion of your Option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

 

(b)                                 By exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your Option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.

 

(c)                                  If your option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your Option that occurs within two (2) years after the date of your Option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your Option.

 

(d)                                 By exercising your Option you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale with respect to, any shares of Common Stock or other securities of the Company held by you, for a period of one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act or such longer period, not to exceed 34 days, as necessary to permit compliance with NASD Rule 2711 and similar or successor regulatory rules and regulations (the “Lock-Up Period”); provided, however, that nothing contained in this section shall prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock-Up Period.  You further agree to execute and deliver such other

 

 

agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period.  The underwriters of the Company’s stock are intended third party beneficiaries of this Section 8(d) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

9.                                      TRANSFERABILITY.

 

(a)                                 Restrictions on Transfer.  Your Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during your lifetime only by you; provided, however, that if you reside in the United States, the Board may, in its sole discretion, permit you to transfer your Option in a manner consistent with applicable tax and securities laws upon your request.  Additionally, if your option is an Incentive Stock Option, the Board may permit you to transfer your Option only to the extent permitted by Sections 421, 422 and 424 of the Code and the regulations and other guidance thereunder.

 

(b)                                 Domestic Relations Orders.  Notwithstanding the foregoing, your Option may be transferred pursuant to a domestic relations order issued by a court in the United States; provided, however, that if your Option is an Incentive Stock Option, your Option shall be deemed to be a Nonstatutory Stock Option as a result of such transfer.

 

(c)                                  Beneficiary Designation.  Notwithstanding the foregoing, you may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Option and receive the Common Stock or other consideration resulting from an Option exercise.  In the absence of such designation, the executor or administrator of your estate shall be entitled to exercise the Option and receive the Common Stock or other consideration resulting from an Option exercise.  If you reside outside the United States, the Company will not permit beneficiary designation unless it is valid under applicable law; if not valid, then any right to exercise your Option shall be in accordance with Section 9(a) above.

 

10.                               EXERCISE PRIOR TO VESTING (“EARLY EXERCISE”).  If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise” of your Option is permitted) and subject to the provisions of your Option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your Option, to exercise all or part of your Option, including the non-vested portion of your Option; provided, however, that:

 

(a)                                 a partial exercise of your Option shall be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;

 

(b)                                 any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;

 

(c)                                  you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and

 

 

(d)                                 if your Option is an Incentive Stock Option, then, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the shares of Common Stock with respect to which your Option plus all other Incentive Stock Options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your Option(s) or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.

 

11.                               RIGHT OF FIRST REFUSAL.  Shares of Common Stock that you acquire upon exercise of your Option are subject to any right of first refusal that may be described in the Company’s bylaws in effect at such time the Company elects to exercise its right; provided, however, that if your Option is an Incentive Stock Option and the right of first refusal described in the Company’s bylaws in effect at the time the Company elects to exercise its right is more beneficial to you than the right of first refusal described in the Company’s bylaws on the Date of Grant, then the right of first refusal described in the Company’s bylaws on the Date of Grant shall apply.  The Company’s right of first refusal shall expire on the Listing Date.  For purposes of this Agreement, Listing Date shall mean the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on a national securities exchange or traded on any established market.

 

12.                               RIGHT OF REPURCHASE.  To the extent provided in the Company’s bylaws in effect at such time the Company elects to exercise its right, the Company shall have the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to the exercise of your Option.

 

13.                               OPTION NOT A SERVICE CONTRACT.  Your Option is not an employment or service contract, and nothing in your Option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment.  In addition, nothing in your Option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

 

14.                               WITHHOLDING OBLIGATIONS.

 

(a)                                 At the time you exercise your Option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, and local tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Option.

 

(b)                                 Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such other amount (up to a maximum rate) as may withheld without resulting in liability award accounting).  If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your Option, share withholding pursuant to the preceding sentence shall not be permitted if you are subject to U.S. taxation unless you make a proper and timely

 

 

election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your Option.  Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

 

(c)                                  You may not exercise your Option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied.  Accordingly, you may not be able to exercise your Option when desired even though your Option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

 

15.                               NOTICES.  Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

 

16.                               GOVERNING PLAN DOCUMENT.  Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan shall control.

 

17.                               ENTIRE AGREEMENT.  The Plan and the Grant Notice are incorporated herein by reference.  This Agreement, the Grant Notice, and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior undertakings and agreements with respect to such subject matter.

 

18.                               GOVERNING LAW.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding the choice-of-law principles of the State of Delaware and any other state requiring the application of a jurisdiction’s laws other than the State of Delaware.

 

19.                               WAIVER.  A waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or any subsequent breach by you or any other person.

 

20.                               SEVERABILITY.  In the event that any provision of this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of this Agreement.

 

21.                               ELECTRONIC DELIVERY AND ACCEPTANCE.  The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means.  You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.

 

 

22.                               NO ADVICE REGARDING GRANT.  The Company is not providing any tax, legal, or financial advice, nor is the Company making recommendations regarding your participation in the Plan or your acquisition or sale of the underlying shares of Common Stock.  You understand and agree that you should consult with your own personal tax, legal, and financial advisors regarding participation in the Plan before taking any action related to the Option.

 

 

	
OPTIONEE
    	
 
    	
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APPENDIX A

 

Special Provisions for Optionees Based Outside the United States

 

Akcea Therapeutics, Inc.

 

2015 Equity Incentive Plan

 

This Appendix A to the Option Agreement includes additional or different terms and conditions that govern the grant of Options to you if you are based outside the U.S.  Moreover, if you have received the Option Agreement with this Appendix A while inside the U.S. and  subsequently relocate outside of the U.S., the terms and conditions set forth in this Appendix A will apply, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons.

 

If you are a citizen or resident of a country other than the one in which you are currently working, or if you transfer employment or residency to another country after being granted the Option, the country-specific terms and conditions contained herein may not be applicable in the same manner.  The Company, in its discretion and in accordance with applicable law, will determine whether and how the country-specific terms and conditions will apply to you in such a case.

 

Capitalized terms not defined in this Appendix A shall have the meaning ascribed to them in the Plan, the Option Agreement, or the Grant Notice, as applicable.

 

ALL COUNTRIES OUTSIDE THE UNITED STATES

 

1.                                      TERMINATION.  This provision supplements Sections 1 and 7 of the Option Agreement:

 

For purposes of this Option, your termination of Continuous Service will be the date you are no longer actively providing services to the Company or a Subsidiary or Affiliate (regardless of the reason for the termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or engaged or the terms of your employment or service agreement, if any) and, unless otherwise expressly provided in this Option Agreement or determined by the Company, (a) your right to vest in this Option, if any, will terminate as of the date of your termination of Continuous Service and will not extend into any notice period or “garden leave” or similar period, and (b) your right to exercise this Option after termination, if any, will be measured from the date of your termination of Continuous Service and will not be extended by any notice period or “garden leave” or similar period, in each case even if a contractual notice period or “garden leave” or similar period established under employment laws or statutes in the jurisdiction where you are employed or engaged or the terms of your employment or service agreement, if any.  The Board or chief executive officer of the Company will have the sole discretion to determine when your Continuous Services ends for purposes of the Option (including whether you may still be considered to be providing services while on a leave of absence).

 

2.                                      TAX OBLIGATIONS.  This provision supplements Section 14 of the Option Agreement:

 

i.                                         Responsibility for Taxes:  You acknowledge that, regardless of any action taken by the Company, or if different, your employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”) is and

 

 

remains your responsibility and may exceed the amount (if any) withheld by the Company or the Employer.  You further acknowledge that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of the Option and the application of any Tax-Related Items, and (b) do not commit to structure the terms of the grant or any aspect of the Option to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result.  Further, if you are subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

 

ii.                                     Withholding.  Prior to the relevant taxable or tax withholding event, you will pay or make arrangements satisfactory to the Company and/or the Employer to fulfill all obligations for Tax-Related Items.  In this regard, you authorize the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by any of the following or a combination thereof:

 

a)                                     withholding from payroll and any other amounts payable to you by the Company, the Employer, or any Subsidiary or Affiliate;

 

b)                                     withholding from proceeds of the sale of shares of Common Stock in connection with a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company;

 

c)                                      requiring you to tender a cash payment to the Company, the Employer, or any Subsidiary or Affiliate;

 

d)                                     withholding in shares of Common Stock to be issued upon exercise of the Option (in which case you will be deemed to have been issued the full number of shares of Common Stock subject to the exercised portion of the Option, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items) pursuant to the terms of Section 14(a) of the Option Agreement; and/or

 

e)                                      any other method acceptable to the Company and permitted under applicable laws;

 

Depending on the withholding method, the Company may withhold for Tax-Related Items by considering the minimum statutory rate, or, provided it does not result in the classification of the Option as a liability for financial accounting purposes, up to the maximum statutory rate for the applicable tax jurisdiction (in the latter case, you may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent amount in shares of Common Stock).

 

The Company may refuse to honor the exercise of the Option or refuse to issue or deliver the shares of Common Stock or the proceeds from the sale of shares of Common Stock if you fail to comply with your obligations in connection with the Tax-Related Items as described in this Section.

 

3.                                      NATURE OF GRANT.  In accepting the Option, you acknowledge, understand, and agree that:

 

i.                                         the Plan is established voluntarily by the Company, it is discretionary in nature, and may be modified, amended, altered, or discontinued by the Company at any time to the extent

 

 

permitted by the Plan;

 

ii.                                     the grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;

 

iii.                                 all decisions with respect to future option or other grants, if any, will be at the sole discretion of the Board;

 

iv.                                  You are voluntarily participating in the Plan;

 

v.                                      The Option and the shares of Common Stock subject to the Option are not intended to replace any pension rights or compensation;

 

vi.                                  the Option and the shares of Common Stock subject to the Option, and the income and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

 

vii.                              unless otherwise agreed with the Company, the Option and the shares of Common Stock subject to the Option, and the income and value of same, are not granted as consideration for, or in connection with, services you may provide as a director of a Subsidiary or Affiliate;

 

viii.                          no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from your termination of Continuous Service (regardless of the reason for the termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or engaged or the terms of your employment or service agreement, if any);

 

ix.                                  the future value of the shares of Common Stock underlying the Option is unknown, indeterminable, and cannot be predicted with certainty; if the shares of Common Stock underlying the Option do not increase in value, the Option will have no value; if you exercise the Option and acquire shares of Common Stock, the value of the shares may increase or decrease, even below the exercise price; and

 

x.                                      neither the Company nor any Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the U.S. dollar that may affect the value of the Option or the value of any amount due to you pursuant to the exercise of the Option or the subsequent sale of any shares of Common Stock acquired upon exercise.

 

xi.                                  .

 

4.                                      DATA PRIVACY.  You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Subsidiary or Affiliate for the purpose of implementing, administering, and managing the Plan.

 

You understand that the Company and the Employer may hold certain personal information

 

 

about you, including, but not limited to, your name, home address, email address and telephone number, date of birth, social insurance number or passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all stock options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested, or outstanding in your favor (“Data”), for the purpose of implementing, administering and managing the Plan.

 

You understand that Data may be transferred to a stock plan service provider, bank or other financial institution, escrow agent or other third party selected by the Company to assist the Company with the implementation, administration and management of the Plan, presently or in the future.  You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipients’ country may have different data privacy laws and protections than your country.  You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative.  You authorize the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering, or managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of implementing, administering and managing the Plan.

 

You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.  You understand that you may, at any time, view Data, request information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative.  Further, you understand that you are providing the consents herein on a purely voluntary basis.  If you do not consent, or if you later seek to revoke your consent, your employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing your consent is that the Company may not be able to grant options to you or administer or maintain such options.  Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan.  For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

 

5.                                      LANGUAGE.  If you have received this Agreement or any other document related to the Option or the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.

 

6.                                      FOREIGN ASSET/ACCOUNT, EXCHANGE CONTROL AND TAX REPORTING.  Depending on your country, you may be subject to foreign asset/account, exchange control and/or tax reporting and payment requirements in connection with the Option, the acquisition, holding and/or transfer of shares of Common Stock or cash resulting from participation in the Plan and/or the opening and maintaining of a brokerage or bank account in connection with the Plan.  You may be required to report such assets, accounts, account balances and values, and/or related transactions to the applicable authorities in his or her country.  You may also be required to repatriate any funds received in connection with the Option to your country and you may be required to use a specific account for doing so and/or to convert the funds to local currency.  You acknowledge that you are responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax requirements.  You further understand that you should consult your personal legal advisor on these matters.

 

7.                                      INSIDER TRADING/MARKET ABUSE LAWS.  Depending on your country, you may be

 

 

subject to insider trading restrictions and/or market abuse laws which may affect your ability to acquire or sell shares of Common Stock or rights to shares of Common Stock (e.g., the Option) during such times when you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of the Company.  You acknowledge that you are responsible for ensuring compliance with any applicable restrictions and understand that you should consult your personal legal advisor on these matters.

 

8.                                      CHOICE OF VENUE.  For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Suffolk County, Massachusetts, or the federal courts for the United States for the District of Massachusetts, and no other courts, where this grant is made and/or is to be performed.

 

9.                                      IMPOSITION OF OTHER REQUIREMENTS.  The Company reserves the right to impose other requirements on the Option and any shares of Common Stock underlying or acquired upon exercise of the Option, to the extent the Company determines it necessary or advisable for legal or administrative reasons, and to require you to sign additional agreements or undertakings that may be necessary to accomplish the foregoing.

 

CANADA

 

Terms and Conditions

 

Method of Payment and Tax Obligations.  The following provision limits the available methods of payment of the exercise price and Tax-Related Items withholdings as set forth in Section 4 of the Option Agreement and Section 2 of this Appendix A.

 

Due to tax considerations in Canada, you will not be permitted to pay the exercise price or any Tax-Related Items with a “net exercise” pursuant to Section 4(d) of the Option Agreement or by delivering to the Company shares of Common Stock that have been previously owned by you.

 

Termination Date.  The following provision replaces Section 1 of this Appendix A:

 

For purposes of this Option, your termination of Continuous Services will be the date which is earliest of: (i) the date that your employment or service with the Company or a Subsidiary or Affiliate is terminated; (ii) the date that you receive written notice of termination of employment or service, regardless of any notice period or period of pay in lieu of such notice required under any employment law in the country where you reside (including, but not limited to, statutory law, regulatory law and/or common law), even if such law is otherwise applicable to your employment benefits from the Employer; or (iii) the date that you are no longer actively providing services to the Company or a Subsidiary or Affiliate (the “Termination Date”).  Your right to vest in the Option, if any, will terminate effective as of, and your right to exercise this Option after termination, if any, will be measured from the Termination Date, regardless of the reason for termination, whether involuntary or voluntary, and whether or not for Cause, and whether or not such termination may later be found to be lawful or in breach of the employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any.  The Board or the chief executive officer of the Company shall have the exclusive discretion to determine when your Continuous Service has ended for purposes of the Option (including whether you may still be considered to be providing services while on a leave of absence).

 

 

The following provisions apply to your Options if you are a resident of Quebec:

 

Language Consent.  The parties acknowledge that it is their express wish that the Agreement, including this Appendix, as well as all documents, notices, and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

 

Consentement Relatif à la Langue Utilisée.  Les parties reconnaissent avoir expressément souhaité que la convention («Agreement») ainsi que cette Annexe, ainsi que tous les documents, avis et procédures judiciares, éxécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à la présente convention, soient rédigés en langue anglaise.

 

Data Privacy.  The following provision supplements Section 4 of this Appendix A:

 

You hereby authorize the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration of the Plan.  You further authorize the Company, the Employer and the Board to disclose and discuss the Plan with their advisors and to record all relevant information and keep such information in your employee or personnel file.

 

Notifications

 

Securities Law Information.  The sale or other disposal of the shares of Common Stock acquired upon exercise of the Option may not take place within Canada.  You should consult your personal legal advisor prior to selling shares of Common Stock.

 

Foreign Asset / Account Reporting Information.  Canadian residents are required to report foreign property, including shares of Common Stock and rights to receive shares of Common Stock (e.g., Options), on form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time in the year.  Options must be reported (generally at a nil cost) if the C$100,000 cost threshold is exceeded because of other foreign property held by the resident.  When shares of Common Stock are acquired, their cost generally is the adjusted cost base (“ACB”) of the shares.  The ACB would ordinarily equal the fair market value of the shares at the time of acquisition, but if other shares of Common Stock are owned, this ACB may have to be averaged with the ACB of the other shares.  You should consult your personal legal advisor to ensure compliance with applicable reporting obligations.

 

FRANCE

 

Terms and Conditions

 

Type of Option.  The Option is not intended to qualify for specific tax or social security treatment in France.

 

Language Consent.  By accepting the Agreement providing for the terms and conditions of your grant, you confirm having read and understood the documents relating to this grant (the Plan and this Agreement) which were provided in English language.  You accept the terms of those documents accordingly.

 

Consentement Relatif à la Langue Utilisée.  En acceptant le Contrat décrivant les termes et conditions de l’attribution, vous confirmez avoir lu et compris les documents relatifs à cette attribution (le Plan et

 

 

ce Contrat) qui ont été communiqués en langue anglaise.  Vous acceptez les termes de ces documents en connaissance de cause.

 

Notifications

 

Foreign Asset/Account Reporting Information.  If you are a French resident and hold shares of Common Stock outside of France or maintain a foreign bank account, you are required to declare all foreign securities, bank, and brokerage accounts, whether open, current, or closed during the tax year, in your annual income tax return.  Failure to comply could trigger significant penalties.

 

GERMANY

 

Notifications

 

Exchange Control Information.  Cross-border payments in excess of €12,500 must be reported to the German Federal Bank (Bundesbank).  The report must be filed electronically and the form of report (Allgemeine Meldeportal Statistik) can be accessed via the Bundesbank’s website (www.bundesbank.de).

 

ITALY

 

Terms and Conditions

 

Plan Document Acknowledgement.  In accepting the Option, you acknowledges that you have received a copy of the Plan, have reviewed the Plan and the Agreement in their entirety and fully understand and accept all provisions of the Plan and the Agreement.

 

You further acknowledge that you have read and specifically and expressly approve the following clauses in the Agreement: Section 9: Transferability; Section 18: Governing Law, and the following clauses in Appendix A: Section 2: Tax Obligations; Section 3: Nature of Grant; Section 8: Choice of Venue; and the Data Privacy notification below.

 

Data Privacy.  The following provision replaces Section 4 of this Appendix A:

 

You understand that the Employer, the Company, and any Subsidiary or Affiliate may hold certain personal information about you, including your name, home address and telephone number, email address, date of birth, passport number, social insurance number, other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all stock options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor (“Data”) for the exclusive purpose of implementing, administering and managing your participation in the Plan.

 

You also understand that providing the Company with Data is necessary for the performance of the Plan and that your refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect your ability to participate in the Plan.  The Controller of personal data processing is Akcea Therapeutics, Inc., with its principal operating offices at 55 Cambridge Parkway, Cambridge, MA, 02142, USA, and its representative in Italy is Akcea Therapeutics UK Ltd. (registered number 10304488), with its principal offices at Office 32, 19-21 Crawford Street, London W1P 1PJ, United Kingdom.

 

 

You understand that Data will not be publicized, but it may be transferred to banks, escrow agents, other financial institutions or brokers involved in the management and administration of the Plan.  You further understand that the Company and any Subsidiary or Affiliate will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan, and that the Company and any Subsidiary or Affiliate may each further transfer Data to third parties assisting the Company in the implementation, administration and management of the Plan, including any requisite transfer to a broker or another third party with whom you may elect to deposit any shares of Common Stock acquired under the Plan.  Such recipients may receive, possess, use, retain and transfer the Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan.  You understand that these recipients may be located in the European Economic Area, or elsewhere, such as the United States.  Should the Company exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, you understand that the Company will delete Data as soon as it has accomplished all the necessary legal obligations connected with the management and administration of the Plan.

 

You understand that Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.

 

The processing activity, including communication, the transfer of Data abroad, including outside of the European Economic Area, as herein specified and pursuant to applicable laws and regulations, does not require your consent thereto as the processing is necessary to performance of contractual obligations related to implementation, administration and management of the Plan.  You understand that, pursuant to Section 7 of the Legislative Decree no. 196/2003, you have the right to, including but not limited to, access, delete, update, ask for rectification of the Data and cease, for legitimate reason, any processing of the Data.  Furthermore, you are aware that the Data will not be used for direct marketing purposes.  In addition, the Data provided may be reviewed and questions or complaints can be addressed by contacting your local human resources department.

 

Notifications

 

Foreign Asset/Account Reporting Information.  Italian residents who, at any time during the fiscal year, hold foreign financial assets (including cash and shares of Common Stock) that may generate taxable income in Italy are required to report these assets on their annual tax returns (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax is due.  These reporting obligations will also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions.

 

NETHERLANDS

 

There are no country-specific provisions for the Netherlands.

 

 

SPAIN

 

Terms and Conditions

 

Nature of Grant.  The following provision supplements Section 3 of this Appendix A:

 

In accepting the Option, you acknowledge that you consent to participation in the Plan and have received a copy of the Plan.

 

You understand that the Company has unilaterally, gratuitously, and in its sole discretion decided to grant options under the Plan to Employees, Directors and Consultants throughout the world.  The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Company or any Subsidiary or Affiliate on an ongoing basis.  Consequently, you understand that the Option is granted on the assumption and condition that the Option and any shares of Common Stock acquired under the Plan are not part of any employment contract (either with the Company or any Subsidiary or Affiliate) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation), or any other right whatsoever.  In addition, you understand that this grant would not be made but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that, should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant of or right to the Option shall be null and void.

 

You understand and agree that, as a condition of the grant of the Option, the termination of your Continuous Service as an Employee, Director or Consultant for any reason (including the reasons listed below) will automatically result in the loss of the Option to the extent the Option has not vested and become exercisable as of the date you cease to provide Continuous Service to the Company and/or a Subsidiary or Affiliate.  In particular, you understand and agree that any unvested portion of the Option as of the date you are no longer actively providing services and any vested portion of the Option not exercised within the post-termination exercise period set out in Section 7 of the Option Agreement will be forfeited without entitlement to the underlying shares of Common Stock or to any amount of indemnification in the event of a termination of your status as an Employee, Director or Consultant by reason of, but not limited to, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without good cause (i.e., subject to a “despido impordente”), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer and under Article 10.3 of the Royal Decree 1382/1985.

 

Notifications

 

Securities Law Information.  No “offer of securities to the public,” within the meaning of Spanish law, has taken place or will take place in the Spanish territory in connection with the Option.  The Plan, the Agreement and any other documents evidencing the grant of the Option have not been, nor will they be, registered with the Comisión Nacional del Mercado de Valores (the Spanish securities regulator), and none of those documents constitutes a public offering prospectus.

 

Exchange Control Information.  The acquisition, ownership and disposition of stock in a foreign company (including shares of Common Stock) must be declared for statistical purposes to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”), the Bureau for Commerce and Investments, which is a department of the Ministry of Economy and Competitiveness.  Generally, the

 

 

declaration must be made in January for shares of Common Stock acquired or disposed of during the prior year and/or for Shares owned as of December 31 of the prior year.

 

In addition, you may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any shares of Common Stock acquired under the Plan) and any transactions with non-Spanish residents (including any payments of shares of Common Stock made to you by the Company) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year.

 

Foreign Asset/Account Reporting Information.  You are required to report rights or assets deposited or held outside of Spain (including shares of Common Stock acquired under the Plan or cash proceeds from the sale of such shares) as of December 31 of each year, if the value of such rights or assets exceeds €50,000 per type of right or asset.  After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of any previously-reported rights or assets increases by more than €20,000 or if the ownership of the assets is transferred or relinquished during the year.

 

Exchange control and foreign asset / account reporting requirements in Spain are complex.  You should consult your personal legal and tax advisors to ensure compliance with the applicable requirements.

 

SWEDEN

 

There are no country-specific provisions for Sweden.

 

UNITED KINGDOM

 

Terms and Conditions

 

Tax Obligations.  This provision supplements Section 2 of this Appendix A:

 

If withholding of income tax is required in connection with the Option and the withholding has not been done and the income tax has not been paid by you to the Employer within ninety (90) days after the end of the U.K. tax year in which the income tax liability arises or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected income tax will constitute a loan owed by you to the Employer, effective on the Due Date.  You agree that the loan will bear interest at then-current Official Rate of HM Revenue and Customs (“HMRC”), it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in Section 2 of this Appendix A.

 

Notwithstanding the foregoing, if you are or become a Director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), you will not be eligible for such a loan to cover the income tax due as described above. In the event that you are such a Director or executive officer and the income tax is not collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable.  You are responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime.  You are responsible for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contribution due on this additional benefit and you acknowledge that the Company or the Employer may recover such amount from you by any of the means referred to in

 

 

Section 2 of this Appendix A.

 

NIC Joint Election.  As a condition of participation in the Plan and the exercise of the Option at a time when the shares of Common Stock are considered readily convertible assets under U.K. tax law, you agree to accept any liability for secondary Class 1 National Insurance Contributions that may be payable by the Company or the Employer (or any successor to the Company or the Employer) in connection with the Option and any event giving rise to Tax-Related Items in relation to the Option (the “Employer NICs”).

 

Without limitation to the foregoing, by accepting this Agreement, you agree to execute the attached joint election with the Company and/or the Employer to satisfy the obligation for Employer NICs in relation to the Option (the “NIC Joint Election”).  You further agree to execute such other elections as may be required between you and any successor to the Company or the Employer for the purpose of continuing the effectiveness of the NIC Joint Election.  You agree that the Employer NICs may be collected by the Company or the Employer using any of the methods described in Section 2 of this Appendix A.

 

If the shares of Common Stock are considered readily convertible assets under U.K. tax law and you do not enter into an NIC Joint Election prior to the exercise of the Option, you will not be entitled to exercise the Option unless and until you enter into an NIC Joint Election, and no shares of Common Stock will be issued to you under the Plan, without any liability to the Company, the Employer or any Subsidiary or Affiliate.

 

Section 431 Election.  As a condition of participation in the Plan and the exercise of the Option, you agree, jointly with the Employer, that you shall enter into the attached joint election within Section 431 of the U.K. Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”) in respect of computing any tax charge on the acquisition of “Restricted Securities” (as defined in Sections 423 and 424 of ITEPA 2003) (the “Section 431 Election”), and that you will not revoke such election at any time.  The effect of the Section 431 Election will be to treat the shares of Common Stock acquired pursuant to the exercise of the Option as if such shares were not Restricted Securities (for U.K. tax purposes only).  You must enter into the Section 431 Election concurrent with the execution of the Agreement or at such later time agreed to by the Company or the Employer but in no event later than 14 days after the date the Option is exercised.

 

 

Akcea Therapeutics, Inc.

Attachment to U.K. Section of Appendix A

Option Agreement under 2015 Equity Incentive Plan

(For U.K. Optionees)

 

Election To Transfer the Employer’s National Insurance Liability to the Employee

 

1.                                      PARTIES

 

This Election is between:

 

(A)                               You, the individual who has gained access to this Election (the “Employee”), who is employed by Akcea Therapeutics UK Ltd. (registered number 10304488) whose registered office is at 32 19-21 Crawford Street, London, W1H 1PJ (the “Employer”) and who is eligible to receive options (“Options”) granted by Akcea Therapeutics, Inc. pursuant to the terms and conditions of the Akcea Therapeutics, Inc. 2015 Equity Incentive Plan, as amended from time to time (the “Plan”), and

 

(B)                               Akcea Therapeutics, Inc. of 55 Cambridge Parkway, Cambridge, Massachusetts 02142, United States (the “Company”), which may grant Options under the Plan and is entering into this Form of Election on behalf of the Employer.

 

2.                                      PURPOSE OF ELECTION

 

2.1                               This Election relates to Options granted by the Company under the Plan on or after September 1, 2016.

 

2.2                               In this Election, the following words and phrases have the following meanings:

 

“Chargeable Event” means, in relation to the Options:

 

(i)                                     the acquisition of securities upon exercise of the Options (within section 477(3)(a) of ITEPA); and/or

 

(ii)                                  the assignment or release of the Options in return for consideration (within section 477(3)(b) of ITEPA); and/or

 

(iii)                               the receipt of a benefit in connection with the Options, other than a benefit within (i) or (ii) above (within section 477(3)(c) of ITEPA); and/or

 

(iv)                              post-acquisition charges relating to shares acquired upon exercise of the Options (within section 427 of ITEPA); and/or

 

(v)                                 post-acquisition charges relating to shares acquired upon exercise of the Options (within section 439 of ITEPA).

 

“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003.

 

“SSCBA” means the Social Security Contributions and Benefits Act 1992.

 

 

2.3                               This Election relates to the Employer’s secondary Class 1 National Insurance Contributions (the “Employer’s Liability”) which may arise on the occurrence of a Chargeable Event in respect of the Options pursuant to section 4(4)(a) and/or paragraph 3B(1A) of Schedule 1 of the SSCBA.

 

2.4                               This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations being given retrospective effect by virtue of section 4B(2) of either the SSCBA or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

 

2.5                               This Election does not apply to the extent that it relates to relevant employment income which is employment income of the earner by virtue of Chapter 3A of Part VII of ITEPA (employment income: securities with artificially depressed market value).

 

3.                                      THE ELECTION

 

The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability on the Chargeable Event is hereby transferred to the Employee.  The Employee understands that by signing this Election, he or she will become personally liable for the Employer’s Liability covered by this Election.  This Election is made in accordance with paragraph 3B(1) of Schedule 1 to SSCBA.

 

4.                                      PAYMENT OF THE EMPLOYER’S LIABILITY

 

4.1                               The Employee hereby authorises the Company and/or the Employer to collect the Employer’s Liability from the Employee at any time after the Chargeable Event:

 

(i)                                     by deduction from salary or any other payment payable to the Employee at any time on or after the date of the Chargeable Event; and/or

 

(ii)                                  directly from the Employee by payment in cash or cleared funds; and/or

 

(iii)                               by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is entitled to receive in respect of the Option; and/or

 

(iv)                              by any other means specified in the Option Agreement.

 

4.2                               The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities in respect of the Option to the Employee until full payment of the Employer’s Liability is received.

 

4.3                               The Company agrees to procure the remittance by the Employer of the Employer’s Liability to HM Revenue and Customs on behalf of the Employee within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days after the end of the UK tax month during which the Chargeable Event occurs, if payments are made electronically).

 

5.                                      DURATION OF ELECTION

 

5.1                               The Employee and the Company agree to be bound by the terms of this Election regardless of

 

 

whether the Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability becomes due.

 

5.2                               Any reference to the Company and/or the Employer shall include that entity’s successors in title and assigns as permitted in accordance with the terms of the Plan and relevant award agreement.  This Election will continue in effect in respect of any options which replace the Options in circumstances where section 483 of ITEPA applies.

 

5.3                               This Election will continue in effect until the earliest of the following:

 

(i)                                     the Employee and the Company agree in writing that it should cease to have effect;

 

(ii)                                  on the date the Company serves written notice on the Employee terminating its effect;

 

(iii)                               on the date HM Revenue and Customs withdraws approval of this Election; or

 

(iv)                              after due payment of the Employer’s Liability in respect of the entirety of the Option to which this Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.

 

ACCEPTANCE BY THE EMPLOYEE

 

The Employee acknowledges that by signing this Election, the Employee agrees to be bound by the terms of this Election.

 

	
Name
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date
    	
 
    	
 
    

 

ACCEPTANCE BY THE COMPANY

 

The Company acknowledges that by arranging for the signature of an authorised representative to appear on this Election, the Company agrees to be bound by the terms of this Election.

 

	
 
    	
 
    	
         /         /
    
	
 
    	
 
    	
 
    
	
Signature (for and on behalf of the Company)
    	
 
    	
Date
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Position in Company
    	
 
    	
 
    

 

 

Akcea Therapeutics, Inc.

Attachment to U.K. Section of Appendix A

Option Agreement under 2015 Equity Incentive Plan

(U.K. Optionees)

 

Joint Election under section 431(1) of the ITEPA 2003

for full disapplication of Chapter 2 of the ITEPA 2003

 

Two Part Election

 

Part A - To be completed by the Employee

 

1.              Between

 

the Employee who has obtained authorized access to the joint election

 

and

 

Akcea Therapeutics UK Ltd., of Company Registration Number 10304488 (who is the Employee’s employer).

 

2.              Purpose of Election

 

This joint election is made pursuant to section 431(1) Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) and applies where employment-related securities, which are restricted securities by reason of section 423 ITEPA, are acquired.

 

The effect of an election under section 431(1) is that, for the relevant income tax and National Insurance contribution (“NICs”) purposes, the employment-related securities and their market value will be treated as if they were not restricted securities and that sections 425 to 430 ITEPA do not apply.  Additional income tax will be payable (with PAYE and NICs where the securities are Readily Convertible Assets).

 

Should the value of the securities fall following the acquisition, it is possible that Income Tax/NICs that would have arisen because of any future chargeable event (in the absence of an election) would have been less than the Income Tax/NICs due by reason of this election.  Should this be the case, there is no income tax/NICs relief available under Part 7 of ITEPA 2003; nor is it available if the securities acquired are subsequently transferred, forfeited or revert to the original owner.

 

3.              Application

 

This joint election is made not later than 14 days after the date of acquisition of the securities by the employee and applies to:

	
 
    	
 
    	
 
    
	
Number of securities
    	
 
    	
All securities
    
	
 
    	
 
    	
 
    
	
Description of securities
    	
 
    	
Shares of common stock of Akcea Therapeutics, Inc.
    
	
 
    	
 
    	
 
    
	
Name of issuer of securities
    	
 
    	
Akcea Therapeutics, Inc.
    

 

 

To be acquired by the Employee on or after the date of this Election under the terms of the Akcea Therapeutics, Inc. 2015 Equity Incentive Plan.

 

4.              Extent of Application

 

This election disapplies S.431(1) ITEPA: All restrictions attaching to the securities.

 

5.              Declaration

 

This election will become irrevocable upon the later of its execution or the acquisition (and each subsequent acquisition) of employment-related securities to which this election applies.

 

In signing this joint election, I agree to be bound by its terms as stated above.

 

 

	
 
    	
 
    	
         /         /
    
	
 
    	
 
    	
 
    
	
Signature   (Employee)
    	
 
    	
Date
    
	
 
    	
 
    	
 
    

 

Note:                  Where the election is in respect of multiple acquisitions, prior to the date of any subsequent acquisition of a security it may be revoked by agreement between the employee and employer in respect of that and any later acquisition.

 

 

AKCEA THERAPEUTICS, INC.
 OPTION GRANT NOTICE
 (2015 EQUITY INCENTIVE PLAN)

 

Akcea Therapeutics, Inc. (the “Company”), pursuant to its 2015 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

 

	
Optionholder:
    	
 
    
	
Date of Grant:
    	
 
    
	
Vesting Commencement Date:
    	
 
    
	
Number of Shares Subject to Option:
    	
 
    
	
Exercise Price (Per Share):
    	
 
    
	
Expiration Date:
    	
 
    

 

	
Type of Grant:
    	
 
    	
o   Incentive Stock Option(1)
    	
 
    	
o   Nonstatutory Stock Option
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exercise Schedule:
    	
 
    	
o   Same as Vesting Schedule
    	
 
    	
o   Early Exercise Permitted
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Vesting Schedule:
    	
 
    	
1/4th of the shares vest one year   after the Vesting Commencement Date.
    
	
 
    	
 
    	
1/48th of the shares vest monthly thereafter over   the next three years.
    
	
 
    	
 
    	
 
    
	
Payment:
    	
 
    	
By one or a combination of the following items   (described in the Option Agreement):
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
o
    	
By cash or check
    
	
 
    	
 
    	
o
    	
By bank draft or money order payable to the Company
    
	
 
    	
 
    	
o
    	
Pursuant to a Regulation T program if the Shares are   publicly traded
    
	
 
    	
 
    	
o
    	
By delivery of already-owned shares if the Shares   are publicly traded
    
	
 
    	
 
    	
o
    	
By net exercise if the Company has established a   procedure for net exercise at the time of such exercise
    
						

 

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Option Agreement and the Plan.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

 

OTHER AGREEMENTS:

 

* * *

 

(1)                                 If this is an Incentive Stock Option, it (plus other outstanding incentive stock options granted to Optionholder by the Company) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year.  Any excess over $100,000 is a Nonstatutory Stock Option.

 

 

	
AKCEA THERAPEUTICS, INC.    
    	
OPTIONHOLDER:    
    
	
 
    	
 
    
	
By: 
    	
 
    	
 
    	
 
    
	
Signature
    	
Signature
    
	
 
    	
 
    	
 
    	
 
    
	
Title: 
    	
Duly authorized on   behalf of the Board of Directors
    	
 
    	
 
    
					

 

ATTACHMENTS:  Option Agreement, 2015 Equity Incentive Plan and Notice of Exercise

 

 

NOTICE OF EXERCISE

 

AKCEA THERAPEUTICS, INC.

 

Date of Exercise:

 

Ladies and Gentlemen:

 

This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

 

	
Type of option (check   one):
    	
Incentive  o
    	
Nonstatutory  o
    
	
 
    	
 
    	
 
    
	
Stock option dated:
    	
               
    	
 
    
	
 
    	
 
    	
 
    
	
Number of shares as
   to which option is
   exercised:
    	
               
    	
 
    
	
 
    	
 
    	
 
    
	
Certificates to be
   issued in name of:
    	
               
    	
 
    
	
 
    	
 
    	
 
    
	
Total exercise price:
    	
$              
    	
 
    
	
 
    	
 
    	
 
    
	
Value   of payment delivered
   herewith:
    	
$              
    	
 
    
	
 
    	
 
    	
 
    
	
Form of   payment:
    	
 ̈  By cash or check
     ̈  By bank draft or money order payable to the   Company
     ̈  Pursuant to a Regulation T program if the   Shares are publicly traded
   By delivery of already-owned shares if the Shares are publicly traded

 ̈  By net exercise if the Company has   established a procedure for net exercise at the time of such exercise
    
	
 
    

 

By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the 2015 Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such shares of Common Stock are issued upon exercise of this option.

 

I am aware of the Company’s business affairs and financial condition and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the shares of Common Stock of the Company listed above (the “Shares”).  I hereby make the following certifications and representations with respect to the Shares, which are being acquired by me for my own account upon exercise of this Option as set forth above:

 

 

I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and Rule 144 promulgated under the Securities Act.  I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws.  I understand that (i) the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available and (ii) the Company has no obligation to register the Shares.

 

I further acknowledge that I will not be able to resell the Shares for at least ninety (90) days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.

 

I further acknowledge that all certificates representing any of the Shares subject to the provisions of this Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Certificate of Incorporation, Bylaws and/or applicable securities laws.

 

I further agree that I will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale with respect to, any shares of Common Stock or other securities of the Company held by me, for a period of one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act or such longer period, not to exceed 34 days, as necessary to permit compliance with NASD Rule 2711 and similar or successor regulatory rules and regulations (the “Lock Up Period”); provided, however, that nothing contained in this paragraph shall prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock Up Period.  I further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to my shares of Common Stock until the end of such period.

 

	
 
    	
Very truly yours,Exhibit 10.4

 

***TEXT OMITTED AND FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED

UNDER 17 C.F.R. SECTIONS 200.80(B)(4)

AND RULE 406 OF THE SECURITIES ACT OF 1933,

AS AMENDED

 

	
CONFIDENTIAL
    	
EXECUTION
    

 

	
 
    	
 
    

DEVELOPMENT, COMMERCIALIZATION AND LICENSE AGREEMENT

between

ISIS PHARMACEUTICALS, INC.

and

 AKCEA THERAPEUTICS, INC.

 

	
 
    	
 
    

 

DEVELOPMENT, COMMERCIALIZATION AND LICENSE AGREEMENT

 

THIS DEVELOPMENT, COMERCIALIZATION AND LICENSE AGREEMENT (the “Agreement”) is made and entered into effective as of December 18, 2015 (the “Effective Date”), by and between AKCEA THERAPEUTICS, INC., a Delaware corporation (“Akcea”), and ISIS PHARMACEUTICALS, INC., a Delaware corporation (“Isis”).  Akcea and Isis each may be referred to herein individually as a “Party,” or collectively as the “Parties.”

 

WHEREAS, Isis has created and developed the following lipid drugs:  ISIS-APOCIIIRx (ISIS304801),  ISIS-APOCIII-LRx (ISIS678354),  ISIS-APO(a)Rx (ISIS494372),  ISIS-APO(a)-LRx (ISIS681257),  ISIS-ANGPTL3Rx (ISIS563580), or ISIS-ANGPTL3-LRx (ISIS703802) (each a “Lipid Drug” or collectively the “Lipid Drugs”);

 

WHEREAS, Isis formed Akcea, a Delaware corporation, as a wholly-owned subsidiary to serve as the development and commercialization entity for the Lipid Drugs;

 

WHEREAS,  Isis and Akcea have been, since January 1, 2015, sharing the responsibilities necessary to Develop the Lipid Drugs and this Agreement applies to the activities conducted by the Parties to Develop and Commercialize the Lipid Drugs since January 1, 2015;

 

WHEREAS,  Isis and Akcea have contemporaneously also entered into a Services Agreement under which Isis will provide business support services to Akcea and Akcea will compensate Isis for providing such services (the “Services Agreement”);

 

WHEREAS,  Isis and Akcea desire to enter into a license agreement to grant Akcea an exclusive license under Isis Product-Specific Patents and a non-exclusive license under Isis Core Technology Patents and the Isis Manufacturing Patents to Develop and Commercialize the Lipid Drugs;

 

WHEREAS, under this Agreement, Akcea will be responsible for the Development and Commercialization of the Lipid Drugs, in accordance with the Strategic Plan and on the terms set forth in this Agreement, with the goal of maximizing the value of the Lipid Drug franchise; and

 

WHEREAS, under this Agreement,  Isis will transition Development and Commercialization activities to Akcea under a mutually agreed Transition Plan.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, the Parties do hereby agree as follows.

 

ARTICLE 1
 DEFINITIONS

 

The terms used in this Agreement with initial letters capitalized, whether used in the singular or the plural, will have the meaning set forth in Appendix 1, or if not listed in Appendix 1, the meaning designated in places throughout the Agreement.

 

 

ARTICLE 2

AGREEMENT OVERVIEW

 

The Parties intend that under this agreement (i) the Parties will create a Strategic Plan both providing a strategic vision for the Lipid Drugs as well as detailing the Parties’ activities in support of the Development and Commercialization of the Lipid Drugs, (ii)  Isis will provide to Akcea the right to Develop and Commercialize the Lipid Drugs, creating a suite of Products for lipid-associated disorders, (iii)  Isis and Akcea share responsibilities for Developing each of the Lipid Drugs according to the Strategic Plan, and (iv) Akcea will assume responsibilities, as agreed to by the Parties, related to Developing and Commercializing the Lipid Drugs pursuant to the Transition Plan as Akcea builds the necessary capabilities and capacity to take over such responsibilities.  The Joint Steering Committee will approve all Material Changes in the Strategic Plan and the Joint Steering Committee will delegate all decisions related to regulatory strategy for the Lipid Drugs to the Regulatory Sub-Committee.  The purpose of this ARTICLE 2 is to provide a high-level overview of the roles and responsibilities and rights and obligations of each Party under this Agreement and therefore this ARTICLE 2 is qualified in its entirety by the more detailed provisions of this Agreement set forth below.

 

ARTICLE 3

DEVELOPMENT AND COMMERCIALIZATION - STRATEGY AND MANAGEMENT

 

Section 3.1                                   STRATEGIC PLAN.

 

3.1.1                     The Strategic Plan. Subject to and in accordance with the terms of this Agreement, Akcea will Develop and Commercialize Products in accordance with a global strategic Development and Commercialization plan (the “Strategic Plan”). The Strategic Plan will cover both the long-term global strategy for each of the Products separately, and as a suite of products, as well as, on a rolling basis, the more detailed activities Akcea and Isis will perform over the course of the next 24 months.  The Parties have agreed to (i) an initial Strategic Plan as of the Effective Date, which is comprised of the published development plans for each of the Lipid Drugs, and (ii) meet in person or hold a telephone conference at least Quarterly to discuss the Strategic Plan.  In addition, Akcea and Isis will meet more often as mutually agreed on an ad-hoc basis to address any urgent matters that arise with respect to the Products. The Strategic Plan is intended to evolve over time and become more detailed (particularly with regard to Commercialization and pre- Commercialization activities) as each of the Products moves closer to market.  The Strategic Plan will include, as appropriate, the following:

 

i.                       Indications Akcea will pursue for each Product (which indications will be added to and/or refined over time) and the on-going pre-clinical Research, including registries and natural history studies, in support of such indications;

 

ii.                    Timing and launch sequence of initial and subsequent indications for each Product;

 

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iii.                 Clinical Trials, including patient populations, study designs, primary and secondary endpoints, length and size of study, associated timelines and budgets, that the Parties will conduct for each Product;

 

iv.                Safety data delivery procedures governing the collection, investigation, reporting, and delivery of information between the Parties concerning any adverse experiences, and any product quality and product complaints involving adverse experiences related to, or class effects that could impact, the Products, sufficient to enable the Parties to comply with its legal and regulatory obligations and internal processes, as applicable;

 

v.                   Global regulatory strategy, including timing and key implementation items to support each targeted indication;

 

vi.                Timing, budget and design of all non-clinical studies supporting the Development of the Products;

 

vii.             Upcoming scientific, development or commercial events of Akcea or competitors that may impact the Products;

 

viii.          Publication plan (including scientific publications and presentations at medical meetings) and key messaging for Products on a rolling 12-month basis;

 

ix.                Key elements of the manufacturing planning and strategy, including raw material supply, manufacturing scale-up, process validation, and inventory build plan to support Development, Product Approvals and Commercialization; and

 

x.                   Key elements of the global Commercialization strategy for each Product, including, for example, high level pricing and reimbursement plans, market access strategy, Product positioning, sales forecasts (with supportive core assumptions), launch sequence, and other key Commercialization plans and goals.

 

3.1.2                     Updating the Strategic Plan. The Parties will review, evaluate progress, augment, and/or update the Strategic Plan with any changes as needed (but at least once every year), through the Joint Steering Committee, taking into consideration a number of relevant factors, including emerging data, and any changes in the regulatory, medical environment and the competitive landscape. Akcea has primary responsibility for preparing each proposed updated Strategic Plan. Akcea will submit such proposed updated plan to Isis at least fifteen days prior to the next JSC meeting. Any changes to the Strategic Plan altering a Product’s target patient population, key end points or approximate size of the key Clinical Studies, timelines for approval, budget or timing of Product approvals for each patient population (each, a “Material Change”) must be mutually agreed to by the Parties via the JSC.

 

3

 

3.1.3                     Implementation of the Strategic Plan. Subject to the terms of this Agreement, Akcea will have the final decision-making authority regarding the conduct and implementation of Akea’s activities under the Strategic Plan so long as such decisions are consistent with such plan.   Isis will have the final decision-making authority regarding Isis’ conduct of the Isis activities under the Strategic Plan and the Parties will mutually agree, through the JSC, to any Material Changes to such Isis activities.

 

Section 3.2                                   TRANSITION PLAN

 

3.2.1                     Transition Plan. The Parties will formulate a mutually agreed-upon plan to delineate the Development responsibilities between the Parties related to the Products and the manner in which Development and pre-commercial responsibilities for the Products will shift from Isis to Akcea (the “Transition Plan”). The Parties envision that many responsibilities will be initially shared between Isis and Akcea.  Overtime, as Akcea builds the capabilities, and capacity, and as the Parties agree it is appropriate to do so,  Isis will transition more and more responsibilities to Akcea, taking into account Akcea’s hiring and infrastructure plans to build the necessary capabilities and capacity to transfer such Development and pre-commercialization responsibilities to Akcea.  Prior to transitioning any role or responsibility under the Strategic Plan from Isis to Akcea, Isis must agree that Akcea has built sufficient capability and capacity to assume such role or responsibility, such agreement will not be unreasonably withheld.  The initial Transition Plan that has been agreed to by the Parties is attached as SCHEDULE 3.2.1.

 

Section 3.3                                   DILIGENCE. Akcea will use Commercially Reasonable Efforts to Develop and Commercialize Products, including conducting the activities assigned to Akcea as set forth in the Strategic Plan in accordance with the timelines specified therein. Isis will use Commercially Reasonable Efforts to conduct the activities assigned to Isis as set forth in the Strategic Plan in accordance with the timelines specified therein.

 

Section 3.4                                   DEVELOPMENT AND COMMERCIALIZATION MANAGEMENT.

 

3.4.1                     Joint Steering Committee. The Parties will establish a Joint Steering Committee (the “JSC”) to provide advice and make recommendations on the conduct of activities related to the Development and Commercialization of each of the Products. The JSC will consist of two representatives appointed by Isis and two representatives appointed by Akcea each with Development and/or Commercialization expertise. The JSC will determine the JSC operating procedures at its first meeting, including the JSC’s policies for replacement of JSC members, policies for participation by additional representatives or consultants invited to attend JSC meetings, and the timing and location of meetings, which will be codified in the written minutes of the first JSC meeting.

 

3.4.2                     Role of the JSC. Without limiting any of the foregoing, the JSC will perform the following functions, some or all of which may be addressed directly at any given JSC meeting:

 

(a)                                 review Isis’ and Akcea’s progress on performing the development and commercialization activities under the Strategic Plan;

 

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(b)                                 review and provide advice on the Strategic Plan as it applies to each Product;

 

(c)                                  amend the Strategic Plan, subject to Section 3.1.2;

 

(d)                                 approve material increases to the scope of work assigned to Isis and the budget for such work to conduct Development and Commercialization activities under the Strategic Plan;

 

(e)                                  review and provide advice on clinical trial designs for each Product;

 

(f)                                   discuss progress under the Transition Plan, including Akcea’s capabilities and capacity to assume responsibility for conducting various tasks under the Strategic Plan;

 

(g)                                 establish subcommittees as necessary to conduct the Strategic Plan and the Transition Plan, including, as determined necessary by the JSC, a Regulatory Sub-Committee, Clinical Development Sub-Committee, a Manufacturing Sub-Committee and Clinical Operations Sub-Committee, with the expectation that such Sub-Committees will evolve as required by the status of Development or Commercialization of the Products; and

 

(h)                                 such other review and advisory responsibilities as may be assigned to the JSC pursuant to this Agreement.

 

3.4.3                     Term of the JSC. Akcea’s obligation to participate in the JSC will continue for the Term of this Agreement.

 

3.4.4                     Briefing the JSC. At each regularly scheduled meeting of the JSC, each Party will provide to the JSC a progress update on each Party’s activities related to each Product as detailed in the Strategic Plan, such progress update can take the form of a Powerpoint presentation.

 

3.4.5                     Advisory Boards.

 

(a)                                 Akcea will form and maintain an advisory board (the “Cardio-Metabolic Advisory Board” or “CAB”) comprised of key opinion leaders and experts in development of cardiovascular drugs with specific expertise in developing antisense therapeutics and/or specific expertise in the roles of the Lipid Targets in cardio-metabolic disease.  SCHEDULE 3.4.5 sets forth the initial composition of the CAB.  The CAB will advise the JSC on all matters related to the Development of the Products and the JSC will consider all advice from the CAB in good faith in making its decisions. Any changes to the composition of the CAB, including the removal or appointment of the chairperson, will be approved by Isis and subject to any other requirements provided in the CAB charter.

 

(b)                                 During the Term of the Agreement, Akcea will provide reasonable notice to Isis of all meetings of Akcea’s advisory boards that advise on matters related to the

 

5

 

Development or Commercialization of the Products, including the CAB, the agenda for each meeting and the ability to attend any of such meetings.

 

3.4.6                     Alliance Managers. Each Party will appoint a representative to act as its alliance manager.

 

3.4.7                     Dispute Resolution.  The Parties will resolve all disputes of the JSC related to the Development and Commercialization of the Lipid Drugs pursuant to Section 13.4, except for those disputes related to Regulatory strategy, which will be mutually agreed upon by the Parties through the Regulatory Sub-Committee.

 

Section 3.5                                   INTERACTIONS WITH, AND SUBMISSIONS TO, REGULATORY AUTHORITIES.

 

3.5.1                     Regulatory Strategy and Communication Management.  The Parties will, through the JSC, establish a Regulatory Sub-Committee comprised of two members from each of Akcea and Isis with requisite experience in Regulatory strategy and communications. The Parties acknowledge that (i) Isis and Akcea will share responsibilities related to devising and implementing Regulatory strategy under this Agreement, and (ii) Regulatory responsibilities for the Products will transition upon mutual agreement after Akcea has demonstrated that it has sufficient capabilities and capacity for such responsibilities. The Regulatory Sub-committee will be responsible for determining by mutual agreement:

 

(a)                                 The overall Regulatory strategy for each of the Products;

 

(b)                                 The content of each submission to a Regulatory Authority related to the Products;

 

(c)                                  The attendees, roles and responsibilities of such attendees and strategy for all important interactions with Regulatory Authorities related to the Development of the Products; and

 

(d)                                 The strategy and content of all material correspondence with Regulatory Authorities related to the Development of the Products.

 

3.5.2                     Submissions to Regulatory Authorities.  The Parties will mutually agree on the content of all important written submissions to Regulatory Authorities for the Products, including, but not limited to, INDs, Investigator Brochures, CTDs and NDAs. The Regulatory Sub-committee will mutually develop and agree to a detailed plan for coordination and preparation of Regulatory filings for market approval for the Products (including establishing responsibilities for provision of all sections of the electronic common technical document (“eCTD”) modules, and plan activity timelines) to accelerate eCTD completion and facilitate rapid completion of Regulatory filings for market approval. Once the Parties mutually agree upon such a plan, each Party will use Commercially Reasonable Efforts to execute its respective tasks and responsibilities under such plan in the time frames set forth in such plan.  Akcea will bear all costs related to preparing and filing all regulatory submissions, including reimbursing Isis for any costs, including FTE costs, associated with any activities that Isis performs in support

 

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of the preparation of Regulatory Documentation in accordance with the scope of work and budget for such activities approved by the JSC.

 

3.5.3                     Meetings with Regulatory Authorities.  The Parties will mutually agree on the strategy for all meetings with Regulatory Authorities, including, but not limited to pre-IND meetings, end of Phase 2 meetings, scientific advice in the EU and the preparatory sessions therefor.  The Regulatory Sub-Committee will mutually agree on the attendees (with Isis having up to three representatives and the goal of equal representation from Akcea andIsis), each attendee’s role and responsibilities and the strategy for addressing the issues to be discussed with the Regulatory Authority for such meeting.

 

3.5.4                     Regulatory Communications for Products. As soon as reasonably practicable,  all important documents and communications received from Regulatory Authorities in Major Market countries that impact the Development of Products will be provided by the receiving party to the other party for their review.  Akcea and Isis will mutually agree on the content of all responses to such documents and communications from the Regulatory Authorities in all Major Market countries.

 

3.5.5                     Class Generic Claims for Products. To the extent Akcea intends to make any claims in a Product label or regulatory filing that are class generic to ASOs, Isis’ generation 2.0 or 2.5 chemistry platform(s), conjugate technology, or any other Isis technology included in a Product, the Regulatory Sub-Committee will adopt Isis’ language for such class generic claim.

 

3.5.6                     Safety Reporting, Pharmacovigilence and Regulatory Coordination. The Parties acknowledge and agree that Isis and Akcea will coordinate their respective clinical trials and pre-clinical, and regulatory activities, including the collection and reporting of adverse events involving the Products and pharmacovigilence.

 

3.5.7                     Disputes Related to Regulatory Matters.  If the Parties cannot, through the Regulatory Steering Committee, come to a mutual agreement on an issue related to regulatory matters, the Parties will submit such issue to a neutral, mutually-agreed upon regulatory expert to choose one of the Parties’ proposals.  The Parties will share the costs associated with such regulatory expert.  The decision of the regulatory expert will be binding upon the Parties.

 

Section 3.6                                   DEVELOPMENT COSTS.

 

3.6.1                     Development Costs Incurred by Akcea.  Akcea will be responsible for all costs associated with the Development of the Products except as provided for in this Section 3.6.

 

3.6.2                     Development Budget.  The Parties will agree, on an annual basis, through the JSC on a scope of work and budget for the Development activities assigned to Isis.  This budget will include both costs associated with Isis FTEs and out of pocket expenses necessary for Isis to conduct its activities under the scope of work.

 

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3.6.3                     Development Costs Incurred by Isis. Isis will contribute its FTEs who are conducting the Isis Development activities free-of-charge through December 31, 2015 (the “FTE Cutoff Date”), and Akcea will reimburse Isis for any out-of-pocket expenses incurred by Isis (“Isis-Incurred Development Costs”) to conduct the Development of the products, including those Isis-Incurred Development Costs that have occurred from January 1, 2015 through the Effective Date.  Isis will invoice Akcea directly for any such Isis-Incurred Development Costs and Akcea will pay the invoices submitted pursuant to this Section 3.6.3 for such Isis activites within 45 days after receipt of the applicable invoice by Akcea.

 

3.6.4                     Development Costs Incurred by Isis After the FTE Cutoff Date. The Parties understand that Isis will conduct Development activities for the Lipid Drugs after the FTE Cutoff Date (the “Isis Post-FTE Cutoff Date Development Activities”), including activities related to clinical development, clinical operations, regulatory and regulatory operations as delineated in the Transition Plan. Akcea will reimburse Isis for (i) Isis’ Development FTE Costs related to conducting the Isis Post-FTE Cutoff Date Development Activities and (ii) Isis-Incurred Development Costs necessary for Isis to conduct the Isis Post-FTE Cutoff Date Development Activities.

 

3.6.5                     G&A and R&D Support Services.  Akcea will also be responsible for costs related to G&A and R&D Support Services necessary to support the Isis activities under the Strategic Plan conducted before and after the FTE Cutoff Date.

 

Section 3.7                                   SUBCONTRACTING. Subject to the terms of this Section 3.7, each Party will have the right to engage Third-Party subcontractors to perform certain of its obligations under this Agreement. Any subcontractor to be engaged by a Party to perform a Party’s obligations set forth in the Agreement will meet the qualifications typically required by such Party for the performance of work similar in scope and complexity to the subcontracted activity and will enter into such Party’s standard nondisclosure agreement consistent with such Party’s standard practices. Any Party engaging a subcontractor hereunder will remain responsible and obligated for such activities and will not grant rights to such subcontractor that interfere with the rights of the other Party under this Agreement.

 

Section 3.8                                   MANUFACTURING, SUPPLY AND CMC.

 

3.8.1                     Supply Chain and Drug Product Strategy. The Parties will include an initial supply chain strategy in the Strategic Plan to ensure adequate supply of (i) Clinical Supplies for any Clinical Trials to be conducted through December 31, 2017, and (ii) API and Commercial Supplies for Isis-APOCIIIRx.  Such supply chain strategy will be updated by the Parties through the Manufacturing Sub-Committee as the Products progress toward Commercialization.  Akcea will have the right to select one or more CMOs to manufacture Clinical Supplies for any Clinical Trials and Commercial Supplies and enter into Manufacturing Agreements with such CMO(s) in accordance with the terms set forth in SCHEDULE 3.8.1.

 

3.8.2                     Supplies under the Strategic Plan. Isis will supply the following API and finished Drug Product to Akcea:

 

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(a)                                 finished Drug Product (using API made by Isis or Isis’ CMO) to Akcea necessary to conduct Clinical Trials under the Strategic Plan through December 31, 2017 in a quantity mutually agreed by the Parties that is reasonably sufficient for each Clinical Trial, on the terms applicable to finished Drug Product set forth in SCHEDULE 3.8.2; and

 

(b)                                 clinical supplies for the Clinical Trials under the ISIS-APOCIIIRx Strategic Plan and finished Drug Product (using API made by Isis or Isis’ CMO) for Commercialization (“Commercial Supplies”) under the ISIS-APOCIIIRx Strategic Plan for the ISIS-APOCIIIRx Initial Registration only (not to exceed two (2) years from First Commercial Sale).

 

Except as provided above, from January 1, 2018 forward, Akcea will manage at its cost all API and finished Drug Product to support Clinical Trials and Commercial Supplies under the Strategic Plan (which may include contracting with Isis or another CMO to make such supply).

 

3.8.3                     ISIS-APOCIIIRx CMC. Isis will be responsible for conducting activities related to CMC including API and Drug Product process validation, registration lots, stability testing, launch supplies and NDA preparation to support the APOCIIIRx Initial Registration at Akcea’s expense.  As a part of the Strategic Plan for ISIS-APOCIIIRx, Isis and Akcea will mutually agree on a detailed proposal including the timing of all CMC activities to support the APOCIIIRx Initial Registration.  Akcea will reimburse Isis for the costs of such activities under this Section 3.8.3 in accordance with Section 3.6.

 

Section 3.9                                   ISIS INTERNAL OLIGONUCLEOTIDE SAFETY DATABASE.

 

3.9.1                     Isis maintains an internal database that includes information regarding the tolerability of its drug compounds, individually and as a class, including information discovered during pre-clinical and clinical development (the “Isis Internal Oligonucleotide Safety Database”). In an effort to maximize understanding of the safety profile and pharmacokinetics of Isis’ compounds, Akcea will reasonably cooperate in connection with populating the Isis Internal Oligonucleotide Safety Database. To the extent collected by Akcea and in the form in which Akcea uses/stores such information for its own purposes, Akcea will provide Isis with information concerning toxicology, pharmacokinetics, safety pharmacology study(ies), serious adverse events and other safety information related to a Product reasonably promptly following the date such information is available to Akcea (but not later than 90 days after Akcea’s receipt of such information). In connection with any reported serious adverse event, Akcea will provide Isis all serious adverse event reports, including initial, interim, follow-up, amended, and final reports. In addition, with respect to a Product, Akcea will provide Isis with copies of annual safety updates filed with each IND and the safety sections of any final Clinical Trial reports within 90 days following the date such information is filed or is available to Akcea, as applicable. Furthermore, Akcea will promptly provide Isis with reasonable supporting data and answers to follow-up questions requested by Isis. All such information disclosed by Akcea to Isis will be Akcea Confidential Information; provided, however, that Isis may disclose any such Akcea Confidential Information to (i) Isis’ other partners if such information is regarding class generic properties of oligonucleotides pursuant to Section 3.5.5 above or (ii) any Third Party, in each case, so long as Isis does

 

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not disclose the identity of a Product or Akcea or any information from which the identity of a Product or Akcea can be derived. Akcea will deliver all such information to Isis for the Isis Internal Oligonucleotide Safety Database to:

 

Isis Pharmaceuticals, Inc.

2855 Gazelle Court

Carlsbad, California 92010

Attention: Head of Drug Safety Monitoring

 

(or to such other address/contact designated in writing by Isis). Akcea will also require its Affiliates and Sublicensees to comply with this Section 3.9.

 

3.9.2                     From time to time, Isis utilizes the information in the Isis Internal Oligonucleotide Safety Database to conduct analyses to keep Isis and its partners informed regarding class generic properties of oligonucleotides, including with respect to safety, without compromising the confidential information of the contributing partners. As such, if and when Isis identifies safety or other related issues that may be relevant to a Product (including any potential class-related toxicity), Isis will promptly inform Akcea of such issues and, if requested, provide the data supporting Isis’ conclusions.

 

ARTICLE 4
 GRANT OF RIGHTS

 

Section 4.1                                   LICENSE GRANT FROM ISIS TO AKCEA.  Subject to the terms and conditions of this Agreement, including the conditions and limitations set forth in Section 4.5 below, Isis hereby grants to Akcea:

 

4.1.1                     an exclusive, world-wide, royalty-bearing, license, with the right to grant sublicenses as set forth in Section 4.2 below, under Isis’ rights in the Isis Product-Specific Patents and Isis Product-Specific Know-How to Research, Develop, make, have made, use, sell, have sold, offer for sale, import and otherwise Commercialize Products;

 

4.1.2                     a non-exclusive, world-wide, royalty-bearing, license, with the right to grant sublicenses as set forth in Section 4.2 below, under the Isis Core Technology Patents and Isis Core Technology Know-How to Research, Develop, make, have made, use, sell, have sold, offer for sale, import and otherwise Commercialize Products; and

 

4.1.3                     a non-exclusive, world-wide, royalty-bearing, license, with the right to grant sublicenses as set forth in Section 4.2 below, under the Isis Manufacturing Patents and Isis Manufacturing and Analytical Know-How to Manufacture Products either (a) by Akcea in Ackea’s own manufacturing facility, (b) a CMO previously granted licenses to practice the Isis Manufacturing Patents, or (c) in the facility of a CMO nominated by Akcea subsequently granted licenses to practice the Isis Manufacturing Patents. Isis will offer to grant a license to a CMO named by Akcea under similar terms that Isis grants to other CMOs.

 

Section 4.2                                   SUBLICENSES.  The licenses granted to Akcea under Section 4.1 are sublicensable only in connection with the license of a Product to any Third Party or Affiliate, in each

 

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case for the continued Development and Commercialization of such Product in accordance with the terms of this Agreement.  Akcea will not enter any agreement with a Third Party without Isis’ consent that sublicenses, transfers, grants a security interest in or otherwise encumbers any of the Products, including the IP Covering such Products, licensed to Akcea under this Agreement.  In each case, Isis and Akcea will mutually agree upon all substantive terms of such agreement with a Third Party.  Notwithstanding the foregoing, Akcea may enter agreements with Third Parties without Isis’ consent, if such agreements are distribution agreements in countries outside of the Major Market countries that are consistent with industry standards for similar products in such country.

 

Section 4.3                                   ENFORCING SUBLICENSE AGREEMENTS. If Akcea fails to take any action to enforce the sublicense terms of a sublicense granted pursuant to Section 4.2, which failure, in Isis’ good faith determination, could cause a material adverse effect on Isis, Isis’ technology or this Agreement, Akcea hereby grants Isis the right to enforce such sublicense terms on Akcea’s behalf and will cooperate with Isis (which cooperation will be at Akcea’s sole expense and will include, Akcea joining any action before a court or administrative body filed by Isis against such Sublicensee if and to the extent necessary for Isis to have legal standing before such court or administrative body) in connection with enforcing such terms. Akcea will provide Isis with written notice of any sublicense granted pursuant to Section 4.2 that grants a Third Party rights to Commercialize or manufacture a Product, within 30 days after the execution thereof, and if requested by Isis, a true and complete copy of any such sublicense or any sublicense within 10 days of Isis’ request, subject to Akcea being entitled to make appropriate redaction for commercially sensitive information provided it is not relevant to enforcement or is not reasonably necessary for Isis to determine Akcea’s compliance with the terms of this Agreement.

 

Section 4.4                                   EFFECT OF TERMINATION ON SUBLICENSES. If this Agreement terminates for any reason, any Sublicensee will, from the effective date of such termination, automatically become a direct licensee of Isis with respect to the rights sublicensed to the Sublicensee by Akcea; so long as (i) such Sublicensee is not in breach of its sublicense agreement, (ii) such Sublicensee agrees in writing to comply with all of the terms of this Agreement to the extent applicable to the rights originally sublicensed to it by Akcea, and (iii) such Sublicensee agrees to pay directly to Isis such Sublicensee’s payments under this Agreement to the extent applicable to the rights sublicensed to it by Akcea.  Akcea agrees that it will confirm clause (i) of the foregoing in writing at the request and for the benefit of Isis and if requested, the Sublicensee.

 

Section 4.5                                   LICENSE LIMITATIONS.

 

4.5.1                     The licenses granted under this ARTICLE 4 are subject to and limited by the (i) Prior Agreements, (ii) Existing In-License Agreements, (iii) Third Party Obligations and (iv) Permitted Licenses.

 

Section 4.6                                   TECHNOLOGY TRANSFER. Isis will promptly deliver to Akcea or one or more designated Affiliates:

 

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4.6.1                     Isis Know-How. In accordance with the Transition Plan, Isis will transfer all Know-How in Isis’ possession related to the Products that has not previously been provided hereunder, for use solely in accordance with the licenses granted under Section 4.1 and Section 4.1.2, including all Know-How related to the Products, provide copies of all Regulatory Documentation (including drafts) related the Products and transfer all INDs for the Products pursuant to the Regulatory plan. Akcea will reimburse Isis for the use of Isis’ personnel and Isis’ direct costs necessary to complete this transfer of Isis Know-How.

 

4.6.2                     Isis Manufacturing and Analytical Know-How. Solely for use by Akcea, its Affiliates or a Third Party acting on Akcea’s behalf to Manufacture API, or to any mutually agreed upon contract manufacturers, all Isis Manufacturing and Analytical Know-How in Isis’ Control relating to Products, which is necessary for the exercise by Akcea, its Affiliates or a Third Party of the Manufacturing rights granted under Section 4.1.3. Upon Akcea’s request, and provided such request is consistent with the supply chain strategy set under Section 3.8.1, Isis will provide personnel to transfer such Manufacturing and Analytical Know-How under this Section 4.6.2 to any Third Party Manufacturing API or finished Product on Akcea’s behalf solely to Manufacture API or finished Product in accordance with the terms of this Agreement.

 

Section 4.7                                   NO IMPLIED LICENSE.  Except as expressly provided in this Agreement no Party will be deemed by estoppel or implication to have granted the other Party any license or other right with respect to any intellectual property.  All rights in and to Isis Patent Rights and Isis Know-How not expressly licensed to Akcea under this Agreement are hereby retained by Isis or its Affiliates.

 

ARTICLE 5

EXCLUSIVITY COVENANTS

 

Section 5.1                                   EXCLUSIVITY; LIMITATIONS.

 

5.1.1                     So long as Akcea is using Commercially Reasonable Efforts to Develop and Commercialize the applicable Product, except in the performance of its obligations or exercise of its rights under this Agreement and except as set forth in Section 5.1.2, Isis nor Akcea, nor their respective Affiliates and, with respect to Akcea, Akcea’s Sublicensees, will work independently or for or with any Third Party (including the grant of any license to any Third Party) with respect to (a) the discovery, research, or development of an ASO that is designed to bind to a Lipid Target; and (b) on a country-by-country basis, commercializing an ASO that is designed to bind to a Lipid Target until Akcea ceases to commercialize a Product designed to bind such Lipid Target in such country, or termination of this Agreement.

 

5.1.2                     Notwithstanding anything to the contrary in this Agreement, Isis’ practice of the following will not violate Section 5.1.1:

 

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(a)                                 any activities pursuant to the Prior Agreements as in effect on the Effective Date; and

 

(b)                                 the granting of, or performance of obligations under, Permitted Licenses.

 

ARTICLE 6
 FINANCIAL PROVISIONS

 

Section 6.1                                   MILESTONE PAYMENTS.

 

6.1.1                     On a Product-by-Product basis Akcea will pay Isis the milestone payments set forth in TABLE 1 below when a milestone event (each, a “Milestone Event”) listed in TABLE 1, is first achieved by Akcea, its Affiliates or Sublicensees with a Product; provided further that each such milestone payment shall become payable no more than one time, per Product:

 

	
TABLE 1
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Milestone Event
    	
 
    	
Milestone Payment
    
	
Annual Net Sales > $500M
    	
 
    	
$50M
    
	
Annual Net Sales > $1.0B
    	
 
    	
$50M
    
	
Annual Net Sales > $2.0B
    	
 
    	
$50M
    

 

6.1.2                     Akcea will notify Isis promptly upon achievement of a Milestone Event. Each milestone payment in TABLE 1 will be payable in 12 equal payments, the first of such payments is due within 30 days after the date Akcea, its Affiliate or its Sublicensee, individually or together, achieves the applicable Milestone Event and the subsequent 11 payments will be due on a quarterly basis, within thirty (30) days of the first day of the calendar quarter (i.e. January 1, April 1, July 1, October 1).

 

Section 6.2                                   ROYALTY PAYMENTS FOR PRODUCTS SOLD BY AKCEA AND ITS AFFILIATES.

 

6.2.1                     Royalty Payments by Akcea. On a country-by-country basis, Akcea will pay Isis royalties on Net Sales of Products sold by Akcea and its Affiliates in accordance with TABLE 2 below.  Akcea will make payments to Isis with respect to Products sold by its Sublicensees under Section 6.3 below. The royalty rate payable with respect to each Product sold by Akcea or its Affiliates will be based on whether the Product gains Approval for, and Akcea sells such Product for, the treatment of a Rare Disease Indication or a Broad Patient Population Indication. The royalty rate is based upon the

 

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Product and indication for which the Product gains Approval and is set forth in TABLE 2 below.  The Parties’ will designate which diseases will be included in each of the Rare Disease Indication and Broad Patient Population Indication category for each Product in the Strategic Plan.  For the United States and Europe, on a region-by-region basis, the Rare Disease Indication royalty rate will apply to Akcea’s Net Sales of a Product in the applicable region until Akcea gains Approval, and makes a First Commercial Sale, for the treatment of a Broad Patient Population Indication of such Product in such region.  For all other countries that are not in the United States or Europe, the Rare Disease Indication royalty rate will apply to Akcea’s Net Sales of a Product in such country until such Product achieves Approval in both the United States and Europe for a Broad Patient Population Indication (in which case the Broad Patient Population Indication royalty rate will apply to all Net Sales related to such Product).

 

TABLE 2

 

	
 
    	
 
    	
ISIS-
   APOCIIIRx
    	
 
    	
ISIS-APOCIII-LRx
   (LICA)
    	
 
    	
ISIS- APO(a)-LRx
    (LICA)
    	
 
    	
ISIS-ANGPTL3-LRx
   (LICA)
    	
 
    
	
Rare Disease   Indication
    	
 
    	
25
    	
%
    	
20
    	
%
    	
20
    	
%
    	
20
    	
%
    
	
Broad Patient   Population Indication
    	
 
    	
25
    	
%
    	
15
    	
%
    	
15
    	
%
    	
15
    	
%
    

 

Akcea will pay Isis royalties on Net Sales of Products sold by Akcea or its Affiliates arising from named patient and other similar programs under Applicable Laws, and Akcea will provide reports and payments to Isis consistent with this ARTICLE 6.

 

6.2.2                     Royalty Period. Subject to Section 9.3.3, Akcea’s obligation to pay Isis the royalties described in Section 6.2.1 are payable as long as Akcea, its Affiliates or its Sublicensee is selling a Product.

 

Section 6.3                                   SUBLICENSE REVENUE SHARING. Akcea will pay Isis 50% of the Sublicense Revenue; provided, however, for a Sublicensee royalty under a co-promote or co-detail, Akcea may deduct from Sublicense Revenue the Sales & Marketing Expenses Akcea (i) actually incurs, (ii) is contractually obligated to contribute under the applicable co-promote or co-detail agreement and (iii) has not otherwise been reimbursed to Akcea by such Sublicensee under the applicable co-promote or co-detail agreement.  If Akcea enters into a series of agreements with a Third Party or any of such Third Party’s Affiliates pursuant to which Akcea grants such Third Party or its Affiliates a Sublicense under at least one of such agreements, then, such agreements will be aggregated together and treated as a single Sublicense for purposes of calculating Sublicense Revenue under this Agreement;

 

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Section 6.4                                   THIRD PARTY PAYMENT OBLIGATIONS.  Akcea will be responsible for, and will pay for, all payments to Third Parties that arise from Akcea’s practice of in-licensed technology necessary to Commercialize a Product; provided, however, for in-licenses executed by Akcea after the Effective Date that are necessary to Commercialize a Product in its current formulation and in the manner currently delivered, Akcea will be entitled to deduct fifty percent (50%) of any royalties on Products paid by Akcea to a Third Party under such agreement in a particular Calendar Quarter against the royalties that would otherwise be due under Section 6.2 with respect to such Product in such country in the same Calendar Quarter; provided, further, that in no event shall the foregoing deduction (i) reduce the amount of royalties payable hereunder with respect to such Product in such country in a Calendar Quarter to less than fifty percent (50%) of the royalty amounts that would otherwise be due under Section 6.2.

 

Section 6.5                                   REPORTS AND PAYMENTS. All payments due under Section 6.2 or Section 6.3 will be paid within 45 days after the close of each Calendar Quarter beginning with the First Commercial Sale of a Product or transaction that gives rise to Sublicense Revenue. Each payment will be accompanied by a report summarizing Net Sales of Products and Sublicense Revenue during the relevant Calendar Quarter and the calculation of royalties or Sublicense Revenue due thereon, including country and the exchange rate used. If no royalties are payable in respect of a given Calendar Quarter, Akcea will submit a written royalty report to Isis so indicating together with an explanation as to why no such royalties are payable. In addition, beginning with the Calendar Quarter in which the First Commercial Sale for a Product is made and for each Calendar Quarter thereafter, within fifteen (15) days following the end of each such calendar quarter, Akcea will provide Isis a preliminary, non-binding report estimating the total projected Net Sales of Products and the royalties and Sublicense Revenue payable to Isis for such Calendar Quarter.

 

Section 6.6                                   MODE OF PAYMENT. All payments under this Agreement will be (i) payable in full in U.S. dollars, regardless of the country(ies) in which sales are made, (ii) made by wire transfer of immediately available funds to an account designated by Isis in writing, and (iii) non-creditable, irrevocable and non-refundable. Whenever for the purposes of calculating the royalties or Sublicense Revenue payable under this Agreement conversion from any foreign currency will be required, all amounts will first be calculated in the currency of sale and then converted into United States dollars by applying the monthly average rate of exchange calculated by using the foreign exchange rates published in Bloomberg during the applicable month starting two Business Days before the beginning of such month and ending two Business Days before the end of such month.

 

Section 6.7                                   RECORDS RETENTION. Commencing with the First Commercial Sale of a Product or transaction giving rise to Sublicense Revenue, Akcea will keep, and will require its Affiliates and Sublicensees to keep (all in accordance with GAAP, consistently applied), complete and accurate records pertaining to Net Sales, Sublicense Revenue and any other payment due pursuant to this ARTICLE 6 for a period of three (3) Calendar Years after the year in which such Net Sales, Sublicense Revenue and any other payment due pursuant to this ARTICLE 6, and in sufficient detail to permit Isis to confirm the accuracy of the Net Sales or Sublicense Revenue paid by Akcea hereunder.

 

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Section 6.8                                   AUDITS OF ROYALTY AND SUBLICENSE REVENUE REPORTS.  Isis will have the right to have an independent certified public accounting firm of internationally recognized standing, reasonably acceptable to Akcea, have access during normal business hours, and upon reasonable prior written notice, to Akcea’s records as may be reasonably necessary to verify the accuracy of Net Sales, Sublicense Revenue and any other payment due pursuant to this ARTICLE 6, as applicable, for any Calendar Quarter or Calendar Year within the preceding 36 months; provided, however, that Isis will not have the right to conduct more than one such audit in any Calendar Year except as provided below. The accounting firm will disclose to Isis only whether the reported Net Sales, Sublicense Revenue and any other payments due pursuant to this ARTICLE 6 are correct and details of any discrepancies.  Isis will bear the cost of such audit unless the audit reveals an underreporting of more than 5% of amounts payable to Isis over an applicable Calendar Year, in which case Akcea will bear the cost of the audit.  If, based on the results of such audit, additional payments are owed by Akcea under this Agreement, Akcea will make such additional payments, with interest as set forth in Section 6.11, within 30 days after the date on which such accounting firm’s written report is delivered to Akcea. Isis will treat the financial information subject to review under this Section 6.8 in accordance with the confidentiality provisions of ARTICLE 8.

 

Section 6.9                                   TAXES.

 

6.9.1                     Taxes on Income. Each Party will be solely responsible for the payment of all taxes imposed on its share of income arising directly or indirectly from the activities of the Parties under this Agreement.

 

6.9.2                     Withholding Tax. The Parties agree to cooperate with one another and use reasonable efforts to lawfully avoid or reduce tax withholding or similar obligations in respect of royalties, milestone payments, and other payments made by Akcea to Isis under this Agreement. To the extent Akcea is required to deduct and withhold taxes, interest or penalties on any payment, Akcea will pay the amounts of such taxes to the proper governmental authority for the account of Isis and remit the net amount to Isis in a timely manner. Akcea will promptly furnish Isis with proof of payment of such taxes. If documentation is necessary in order to secure an exemption from, or a reduction in, any withholding taxes, the Parties will provide such documentation to the extent they are entitled to do so.

 

6.9.3                     Tax Cooperation. Isis will provide Akcea with any and all tax forms that may be reasonably necessary in order for Akcea to lawfully not withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Following Akcea’s timely receipt of such tax forms from Isis, Akcea will not withhold tax or will withhold tax at a reduced rate under the applicable bilateral income tax treaty, if appropriate under the applicable laws.  Isis will provide any such tax forms to Akcea upon request and in advance of the due date. Each Party will provide the other with reasonable assistance to determine if any taxes are applicable to payments under this Agreement and to enable the recovery, as permitted by applicable law, of withholding taxes resulting from payments made under this Agreement, such recovery to be for the benefit of the Party who would have been entitled to receive the money but for the application of withholding tax under this Section 6.9.

 

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6.9.4                     The provisions of this Section 6.9 are to be read in conjunction with the provisions of Section 13.1 below.

 

Section 6.10                            BLOCKED CURRENCY.  In each country where the local currency is blocked and cannot be removed from the country, royalties accrued in that country will be paid to Isis in the country in local currency by deposit in a local bank designated by Isis, unless the Parties otherwise agree.

 

Section 6.11                            INTEREST.  If Akcea fails to make any payment due to Isis under this Agreement by the deadline specified in this ARTICLE 6, interest will accrue on a daily basis thereafter at an annual rate equal to 1.0% above the then-applicable prime commercial lending rate of CitiBank, N.A. San Francisco, California, or at the maximum rate permitted by Applicable Law, whichever is lower.

 

ARTICLE 7
 PRESS RELEASES AND PUBLICATIONS

 

Section 7.1                                   PRESS RELEASES; PUBLIC DISCLOSURE.  All press releases or public disclosures under this Agreement related to (i) this Agreement, or (ii) any of the Products (including any discussion of clinical data related to a Product), will be mutually agreed upon by the Parties and issued as a joint press release, provided however, that each Party may make disclosures permitted by, and in accordance with, ARTICLE 8. The contents of any announcement or similar publicity can be re-released by either Party without a requirement for re-approval.

 

7.1.1                     Significant Events. Each party will immediately notify the other Party of any event materially-related to a Product including any starting/stopping of a Clinical Trial, any Clinical Hold, clinical data or results, material regulatory discussions, filings, Approval or Akcea’s sales projections (each a “Significant Event”) so the Parties may analyze the need for or desirability of publicly disclosing or reporting such event and mutually agree on a communications strategy for such Significant Event.

 

7.1.2                     Scientific or Clinical Presentations.  The Parties agree to use Commercially Reasonable Efforts to control public scientific disclosures of results of the Development activities under this Agreement to prevent any potential adverse effect of any premature public disclosure of such results.  The Parties will establish a procedure for publication review and each Party will first submit to the other Party through the Joint Patent Committee an early draft of all such publications or presentations, whether they are to be presented orally or in written form.

 

7.1.3                     Acknowledgment. Akcea will acknowledge in any press release, public presentation or publication regarding the Product that the Product is under license from Ionis and Ionis’ stock ticker symbol (e.g., Nasdaq: IONS).  Isis may include any Product in Isis’ drug pipeline.  Akcea will acknowledge Ionis by name and include the Ionis logo on the Akcea website, each Product website and each Product clinical trial website.

 

7.1.4                     Not Limiting; No Conflict. With respect to communications by Akcea, this ARTICLE 7 will not modify or amend any separate agreement between Isis and Akcea

 

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regarding public communications.  In case of a conflict between this ARTICLE 7 and such other agreement the stricter standard will apply.

 

ARTICLE 8
 CONFIDENTIALITY

 

Section 8.1                                   DISCLOSURE AND USE RESTRICTION.  Each Party agrees that, for so long as this Agreement is in effect and for a period of five years thereafter, a Party (the “Receiving Party”) receiving Confidential Information of the other Party (the “Disclosing Party”) will (i) maintain in confidence such Confidential Information, (ii) not disclose such Confidential Information except to the Receiving Party’s employees having a need-to-know such Confidential Information, (iii) not disclose such Confidential Information to any Third Party without the prior written consent of the Disclosing Party, except for disclosures expressly permitted by this Agreement, and (iv) not use such Confidential Information for any purpose except those expressly permitted by this Agreement.

 

Section 8.2                                   AUTHORIZED DISCLOSURE.  To the extent that it is reasonably necessary or appropriate to fulfill its obligations or exercise its rights under this Agreement, a Party may disclose Confidential Information belonging to the other Party in the following instances:

 

(a)                                 filing or prosecuting patent applications in accordance with this Agreement;

 

(b)                                 communicating with Regulatory Authorities as necessary for the Development or Commercialization of a Product in a country, in accordance with this Agreement and as required in connection with any filing, application or request for Approval; provided, however, that reasonable measures will be taken to assure confidential treatment of such information;

 

(c)                                  prosecuting or defending litigation;

 

(d)                                 complying with applicable laws and regulations (including the rules and regulations of the Securities and Exchange Commission or any national securities exchange, and compliance with tax laws and regulations) and with judicial process, if (i) in the reasonable opinion of the Receiving Party’s counsel, such disclosure is necessary for such compliance and (ii) such disclosure is made in accordance with Section 8.3 or Section 8.4 as applicable;

 

(e)                                  disclosure, in connection with the performance of this Agreement and solely on a need-to-know basis, to Affiliates, potential or actual collaborators (including potential Sublicensees), potential or actual investment bankers, investors, lenders, or acquirers, or employees, independent contractors or agents, each of whom prior to disclosure must be bound by written obligations of confidentiality and non-use no less restrictive than the obligations set forth in this ARTICLE 8; provided, however, that the Receiving Party will remain responsible for any failure by any Person who receives Confidential Information pursuant to this ARTICLE 8 to treat such Confidential Information as required under this ARTICLE 8; and

 

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(f)                                   in the case of Akcea, its Affiliates and Sublicensees, use and disclosure of Isis Know-How in the ordinary course of the exercise of the rights and licenses granted to Akcea hereunder.

 

If Confidential Information is disclosed in accordance with this Section 8.2, such disclosure will not cause any such information to cease to be Confidential Information except to the extent that such permitted disclosure results in a public disclosure of such information (other than by breach of this Agreement).  Where reasonably possible and subject to Section 8.3 and Section 8.4, the Receiving Party will notify the Disclosing Party of the Receiving Party’s intent to make such disclosure pursuant to clauses (a) through (d) of this Section 8.2 prior to making such disclosure to allow the Disclosing Party adequate time to take whatever action it may deem appropriate to protect the confidentiality of the information.

 

Section 8.3                                   REQUIRED DISCLOSURE. A Receiving Party may disclose Confidential Information pursuant to interrogatories, requests for information or documents, subpoena, civil investigative demand issued by a court or governmental agency or as otherwise required by Law; provided however, that, unless legally prohibited from doing so, the Receiving Party will notify the Disclosing Party promptly upon receipt thereof, giving (where practicable) the Disclosing Party sufficient advance notice to permit it to oppose, limit or seek confidential treatment for such disclosure, and to file for patent protection if relevant; and provided, further, that the Receiving Party will furnish only that portion of the Confidential Information which it is advised by counsel is legally required whether or not a protective order or other similar order is obtained by the Disclosing Party.

 

Section 8.4                                   SECURITIES FILINGS.  If either Party proposes to file with the Securities and Exchange Commission or the securities regulators of any state or other jurisdiction a registration statement, periodic report, or any other disclosure document which describes or refers to this Agreement under the Securities Act of 1933, as amended, the Securities Exchange Act, of 1934, as amended, or any other applicable securities Law, the Party will notify the other Party of such intention and will provide such other Party with a copy of relevant portions of the proposed filing not less than five Business Days prior to such filing, and will seek to obtain confidential treatment of any information concerning the Agreement that such other Party requests be kept confidential (except to the extent advised by counsel that confidential treatment is not available for such information), and will only disclose Confidential Information which it is advised by counsel is legally required to be disclosed.  No such notice will be required under this Section 8.4 if the substance of the description of or reference to this Agreement contained in the proposed filing has been included in any previous filing made by either Party hereunder or otherwise approved by the other Party.

 

Section 8.5                                   INJUNCTIVE RELIEF.  The Parties understand and agree that remedies at law may be inadequate to protect against any breach of any of the provisions of this ARTICLE 8 by either Party.  Accordingly, each Party is entitled to seek injunctive relief by a court of competent jurisdiction against any action that constitutes a breach of this ARTICLE 8.

 

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ARTICLE 9
 PATENTS

 

Section 9.1                                   JOINT PATENT COMMITTEE

 

9.1.1                     The Parties will establish a joint patent committee that will serve as the primary contact and forum for discussion between the Parties with respect to intellectual property matters arising under this Agreement (the “Joint Patent Committee” or “JPC”), and will cooperate with respect to the activities set forth in this ARTICLE 9.  A strategy will be discussed with regard to prosecution, maintenance, defense and enforcement of Isis Product-Specific Patents that are licensed to Akcea under Section 4.1 in connection with a Product, defense against allegations of infringement of Third Party Patents, and licenses to Third Party Patents or Know-How. The JPC will also be responsible for identifying new inventions related to Products, determining the inventorship thereof in accordance with United States patent law and setting a filing strategy for such inventions.

 

9.1.2                     The JPC will comprise an equal number of members from each Party.  The Joint Patent Committee will meet as often as agreed by them (and at least semi-Annually), to discuss matters arising out of the activities set forth in this ARTICLE 9.  The JPC will determine the JPC operating procedures at its first meeting, including the JPC’s policies for replacement of JPC members, and the location of meetings, which will be codified in the written minutes of the first JPC meeting.  If either Party deems it reasonably advisable, the Parties will enter into a mutually agreeable common interest agreement covering the intellectual property matters contemplated by this Agreement.  The JPC composition will include a designee from Akcea’s Sublicensee on a Product-by-Product basis, at such time that Akcea sublicenses a Product; provided, however, the JPC purpose and responsibilities will not change with the addition of a Sublicensee designee

 

Section 9.2                                   PROSECUTION AND MAINTENANCE OF PATENTS.

 

9.2.1                     Patents Owned or Controlled by a Party.  Each Party will have the right, at its cost and expense and at its discretion, to obtain, prosecute, maintain, and enforce throughout the world any Patents owned or Controlled by such Party; provided, however, Isis will have the first right, at its cost and expense and at its discretion, to obtain, prosecute, maintain, and enforce throughout the world the Isis Core Technology Patents and the Joint Core Technology Patents.

 

9.2.2                     Product-Specific Patents. Subject to Section 9.2.4, Akcea, either directly or through its Affiliates and Sublicensees, will have the first right, at its expense, to file, prosecute, and maintain throughout the world all Product-Specific Patents.  Until such time that Akcea hires in-house patent counsel or engages outside patent counsel, Isis will provide to Akcea, under the Services Agreement, patent management services, including preparation and prosecution of all Product-Specific Patents world-wide and management of outside patent counsel world-wide.  After Akcea retains its own patent counsel, Akcea will provide Isis with an update of the filing, prosecution and maintenance status for each such Product-Specific Patent on a periodic basis and will reasonably consult with and cooperate with Isis with respect to the preparation, filing, prosecution, and maintenance of such Product-Specific Patents, including providing Isis with drafts of material filings

 

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in sufficient time to allow Isis’ review and comment before such filings are due.  Akcea, or its outside counsel, will provide to Isis copies of any material papers relating to the filing, prosecution, and maintenance of such Product-Specific Patents promptly upon their being filed or received. Akcea may cease prosecuting or maintaining particular applications or patents within such Product-Specific Patents in selected jurisdictions, if Akcea determines that it is not commercially reasonable to continue such efforts (in which case the terms of Section 9.2.4 will apply).

 

9.2.3                     Notice of Disputes. Each Party will notify the other Party within a reasonable period of time if any action, suit, claim, dispute, or proceeding concerning the Isis Product-Specific Patents licensed hereunder or a Product has been initiated, which, if determined adversely to a Party, would have a material adverse effect on the licenses granted by Isis to Akcea under this Agreement, or that would have a material adverse effect on or would materially impair either Party’s rights under this Agreement.  Any information communicated pursuant to this Section 9.2.3 will be treated as Confidential Information subject to the terms of ARTICLE 8.

 

9.2.4                     Discontinued Patents. If, under Section 9.2.2, the party responsible for prosecution and maintenance of the Product-Specific Patents (the “Prosecuting Party”) elects to not pursue or continue the filing, prosecution, or maintenance of any particular applications or patents, or subject matter included in the Product-Specific Patents, in any jurisdiction, the Prosecuting Party will give as much advance written notice as reasonably practicable (but in no event less than 30 days or, in the case of an applicable impending deadline, 45 days prior to such deadline) to the other party of any decision not to pursue or continue the preparation, filing, prosecution and maintenance of such Product-Specific Patent or subject matter included in such Product-Specific Patent (a “Discontinued Patent”). In such case, the other party may elect to continue preparation, filing, prosecution, or maintenance of the Discontinued Patent in the select jurisdiction at its expense.  The Prosecuting Party who is discontinuing prosecution or maintenance will execute such documents and perform such acts as may be reasonably necessary for the other party to continue prosecution or maintenance of the applicable Discontinued Patent.  If a party that continues the prosecution and maintenance of a Discontinued Patent wishes to cease prosecution, such party does not need to provide notice to the Prosecuting Party that originally decided to discontinue prosecution of such patent.

 

9.2.5                     Cooperation.  Each Party will cooperate reasonably in the preparation, filing, prosecution, and maintenance of the Product-Specific Patents and Joint Core Technology Patents. Such cooperation includes (a) promptly executing all papers and instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable such responsible Party, to file, prosecute, and maintain such Patents in any country; and (b) promptly informing such other Party of matters that may affect the preparation, filing, prosecution, or maintenance of any such Patents.

 

Section 9.3                                   ENFORCEMENT OF PATENTS.

 

9.3.1                     Notification of Competitive Infringement. If either Party learns of an infringement, unauthorized use, misappropriation or threatened infringement by a Third Party with respect to any Isis Product-Specific Patents by reason of the development,

 

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manufacture, use or commercialization of a product directed against the RNA that encodes a Lipid Target (“Competitive Infringement”), such Party will promptly notify the other Party in writing and will provide such other Party with available evidence of such Competitive Infringement; provided, however, that for cases of Competitive Infringement under Section 9.3.7 below, such written notice will be given within 10 days.

 

9.3.2                     Product-Specific Patents. With respect to the Product-Specific Patents, Akcea will have the first right, but not the obligation, at Akcea’s expense, to remove such infringement. If Isis requests that Akcea take action to remove infringement of a Product-Specific Patent, and Akcea believes it is not commercially appropriate to take such actions, the Parties will meet and discuss in good faith such circumstances and seek to reach agreement on what appropriate steps to take to cause such infringement to end in a commercially appropriate manner.

 

9.3.3                     Core Technology Patents. If the Parties learn that a Third Party is infringing one or more Valid Claims of a Core Technology Patent by selling an ASO that is designed to bind to the RNA that encodes a Lipid Target and such infringement is likely to have a material adverse effect on the Product, the Parties will cooperate to enforce such patents.

 

9.3.4                     Cooperation.  The Party not enforcing the applicable Patent will provide reasonable assistance to the other Party (at such other Party’s expense), including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action as a named party to the extent necessary to allow the enforcing Party to bring or maintain the action or establish damages.  If any Third Party asserts in writing or in any legal proceeding that any of the Isis Patent Rights are unenforceable based on any term or condition of this Agreement, the Parties shall amend this Agreement as may reasonably be required to effect the original intent of the Parties, including to preserve the enforceability of such Isis Patent Rights.

 

9.3.5                     Recovery.  Any damages or other monetary awards recovered with respect to any action contemplated by this Section 9.3 will be shared as follows:

 

(a)                                 the amount of such recovery will first be applied to the Parties’ reasonable out-of-pocket costs incurred in connection with such proceeding (which amounts will be allocated pro rata if insufficient to cover the totality of such expenses); then

 

(b)                                 any remaining proceeds will be (i) retained by Isis if Isis initiated the proceeding, or (ii) treated as if they were Net Sales hereunder if Akcea, its Affiliate or Sublicensee initiated the proceeding, and Akcea will pay Isis royalties on such amount in accordance with Section 6.2, as applicable, and will retain the remainder of such proceeds.

 

9.3.6                     Settlement.  Notwithstanding anything to the contrary under this ARTICLE 9, neither Party may enter a settlement, consent judgment or other voluntary final disposition of a suit under this ARTICLE 9 that disclaims, limits the scope of, admits the invalidity or unenforceability of, or grants a license, covenant not to sue or similar

 

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immunity under a Patent Right Controlled by the other Party without first obtaining the written consent of the Party that Controls the relevant Patent Right.

 

9.3.7                     35 USC 271(e)(2) Infringement.  Notwithstanding anything to the contrary in this Section 9.3, solely with respect to the Patents licensed to Akcea under this Agreement for a Competitive Infringement under 35 USC 271(e)(2), the time period set forth in Section 9.3.1 during which a Party will have the initial right to bring a Proceeding will be shortened to a total of 25 days, so that, to the extent the other Party has the right, pursuant to such Section to initiate a Proceeding if the first Party does not initiate a Proceeding, such other Party will have such right if the first Party does not initiate a Proceeding within 25 days after such first Party’s receipt of written notice of such Competitive Infringement.

 

Section 9.4                                   PATENT LISTING. Akcea will promptly, accurately and completely list, with the applicable Regulatory Authorities during the Agreement Term, all applicable Patent Rights that Cover a Product.  Prior to such listings, the Parties will meet, through the Joint Patent Committee, to evaluate and identify all applicable Patent Rights, and Akcea will have the right to review, where reasonable, original records relating to any invention for which Patent Rights are being considered by the Joint Patent Committee for any such listing.  Notwithstanding the preceding sentence, Akcea will retain final decision-making authority as to the listing of all applicable Product-Specific Patents that are not Isis Core Technology Patents.

 

Section 9.5                                   JOINT RESEARCH AGREEMENT UNDER THE LEAHY-SMITH AMERICA INVENTS ACT. If a Party intends to invoke its rights under 35 U.S.C. § 102(c) of the Leahy-Smith America Invents Act, once agreed to by the other Party, it will notify the other Party and the Parties will use reasonable efforts to cooperate and coordinate their activities with such Party with respect to any submissions, filings or other activities in support thereof. The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in 35 U.S.C. § 100(h).

 

Section 9.6                                   PATENT TERM EXTENSION.  The Parties will cooperate with each other in gaining patent term extension of the optimal patent licensed under this Agreement, wherever applicable to the Product.

 

Section 9.7                                   RIGHTS IN BANKRUPTCY.  All rights and licenses granted under this Agreement are, for purposes of Section 365(n) of the U.S. Bankruptcy Code (i.e., Title 11 of the U.S. Code) or analogous provisions of Applicable Law outside the United States, licenses of rights to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code or analogous provisions of Applicable Law outside the United States.  The Parties agree that each Party, as licensee of such rights under this Agreement, will retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code or any other provisions of Applicable Law outside the United States that provide similar protection for ‘intellectual property.’ The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the U.S. Bankruptcy Code or analogous provisions of Applicable Law outside the United States, the Party that is not subject to such proceeding will be entitled to a complete duplicate of (or complete access to, as appropriate) such intellectual property and all embodiments of

 

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such intellectual property, which, if not already in the non subject Party’s possession, will be promptly delivered to it upon the non subject Party’s written request therefor.  Any agreements supplemental hereto will be deemed to be “agreements supplementary to” this Agreement for purposes of Section 365(n) of the U.S. Bankruptcy Code.

 

ARTICLE 10

TERM AND TERMINATION

 

Section 10.1                            AGREEMENT TERM; EXPIRATION. This Agreement is effective as of the Effective Date and, unless earlier terminated pursuant to the other provisions of this ARTICLE 10, will continue in full force and effect until the expiration of all payment obligations under this Agreement with respect to the last Product (or Discontinued Product) in all countries. The period from the Effective Date until the date of expiration or earlier termination of this Agreement pursuant to this ARTICLE 10 is the “Agreement Term.”

 

Section 10.2                            TERMINATION OF THE AGREEMENT.

 

10.2.1              Termination for Material Breach.

 

(a)                                 Akcea’s Right to Terminate. If Akcea believes that Isis is in material breach of this Agreement (other than with respect to a failure to use Commercially Reasonable Efforts under the Transition Plan, which is governed by Section 10.2.2 below), then Akcea may deliver notice of such material breach to Isis. If the breach is curable, Isis will have sixty (60) days to cure such breach. If Isis fails to cure such breach within the sixty (60) day period, or if the breach is not subject to cure, Akcea may terminate this Agreement by providing written notice to Isis.

 

(b)                                 Isis’ Right to Terminate. If Isis believes that Akcea is in material breach of this Agreement (other than with respect to a failure to use Commercially Reasonable Efforts to Develop and Commercialize a Product under Section 3.3, which is governed by Section 10.2.2 below), then Isis may deliver notice of such material breach to Akcea. If the breach is curable, Akcea will have sixty (60) days to cure such breach (except to the extent such breach involves the failure to make a payment when due, which breach must be cured within thirty (30) days following such notice). If Akcea fails to cure such breach within the sixty (60) day or thirty (30) day period, as applicable, or if the breach is not subject to cure, Isis may terminate this Agreement by providing written notice to Akcea.

 

10.2.2              Remedies for Failure to Use Commercially Reasonable Efforts.

 

(a)                                 If Isis, in Akcea’s reasonable determination, fails to use Commercially Reasonable Efforts, on a country-by-country basis, to conduct the Isis activities contemplated in the Strategic Plan, Akcea will notify Isis and, within thirty (30) days thereafter, Isis and Akcea will meet and confer to discuss and resolve the matter in good faith, and attempt to devise a mutually agreeable plan to address any outstanding issues related to Isis’ use of Commercially Reasonable Efforts. Following such a meeting, if Isis fails to use Commercially Reasonable Efforts to conduct the mutually agreed cure plan, Akcea will have the right to terminate this Agreement by providing written notice to Isis.

 

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(b)                                 If Akcea, in Isis’ reasonable determination, fails to use Commercially Reasonable Efforts to to Develop and Commercialize a Product under Section 3.3, Isis will notify Akcea and, within thirty (30) days thereafter, Isis and Akcea will meet and confer to discuss and resolve the matter in good faith, and attempt to devise a mutually agreeable cure plan to address any outstanding issues related to Akcea’s use of Commercially Reasonable Efforts in execution of the Transition Plan.  Following such a meeting, if Akcea fails to use Commercially Reasonable Efforts as contemplated by the mutually agreeable cure plan, then Isis will have the right, at its sole discretion, to terminate this Agreement in total or on a Product-by-Product basis.

 

10.2.3              Termination for Patent Challenge. As a material inducement for Isis entering into this Agreement, Akcea covenants to Isis that during the Agreement Term, solely with respect to rights to the Isis Patent Rights that are included in a license granted to Akcea under ARTICLE 4, Akcea, its Affiliates or Sublicensees will not, in the United States or any other country, commence, directly or indirectly, or otherwise voluntarily determine to participate in any action or proceeding, challenging or denying the enforceability or validity of any claim within an issued patent or patent application within such Isis Patent Rights. If Isis provides notice to Akcea of such challenge of an Isis Patent Right and Akcea does not withdraw such challenge within 14 days, Isis may terminate this Agreement.

 

10.2.4              Disputes Regarding Material Breach. Notwithstanding the foregoing, if the Breaching Party in Section 10.2.1, Section 10.2.2 and Section 10.2.3 disputes in good faith the existence, materiality, or failure to cure of any such breach which is not a payment breach, and provides notice to the Non-Breaching Party of such dispute within such sixty (60) day period, the Non-Breaching Party will not have the right to terminate this Agreement in accordance with Section 10.2.1, Section 10.2.2 and Section 10.2.3, unless and until it has been determined in accordance with Section 13.4 that this Agreement was materially breached by the Breaching Party and the Breaching Party fails to cure such breach within thirty (30) days following such determination. It is understood and acknowledged that during the pendency of such dispute, all the terms of this Agreement will remain in effect and the Parties will continue to perform all of their respective obligations hereunder, including satisfying any payment obligations.

 

10.2.5              Termination for Insolvency. Either Party may terminate this Agreement if, at any time, the other Party files in any court or agency pursuant to any statute or regulation of any state or country a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of the Party or of substantially all of its assets; or if the other Party proposes a written agreement of composition or extension of substantially all of its debts; or if the other Party will be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition will not be dismissed within ninety (90) days after the filing thereof; or if the other Party will propose or be a party to any dissolution or liquidation; or if the other Party will make an assignment of substantially all of its assets for the benefit of creditors.

 

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Section 10.3                            CONSEQUENCES OF EXPIRATION OR TERMINATION OF THIS AGREEMENT.

 

10.3.1              Consequences of Termination of this Agreement. If this Agreement is terminated by a Party in accordance with this ARTICLE 10 in its entirety or on a Product-by-Product basis at any time and for any reason, the following terms will apply to any such termination, but only to the extent of any such termination (i.e., in total or on a Product-by-Product basis):

 

(a)                                 Licenses. The licenses granted by Isis to Akcea under this Agreement will terminate and Akcea, its Affiliates and Sublicensees will cease selling Products.

 

(b)                                 Return of Information and Materials. The Parties will return (or destroy, as directed by the other Party) all data, files, records and other materials containing or comprising the other Party’s Confidential Information. Notwithstanding the foregoing, the Parties will be permitted to retain one copy of such data, files, records, and other materials for archival and legal compliance purposes.

 

(c)                                  Accrued Rights. Termination of this Agreement for any reason will be without prejudice to any rights or financial compensation that will have accrued to the benefit of a Party prior to such termination. Such termination will not relieve a Party from obligations that are expressly indicated to survive the termination of this Agreement. For purposes of clarification, milestone payments under ARTICLE 6 accrue as of the date the applicable milestone event is achieved even if the payment is not due at that time.

 

(d)                                 Survival. The following provisions of this Agreement will survive the expiration or earlier termination of this Agreement: Section 6.7 (Records Retention); Section 6.8 (Audits of Royalties and Sublicensing Revenue Reports); ARTICLE 8 (Confidentiality); Section 9.7 (Rights in Bankruptcy);  Section 10.3 (Consequences of Expiration or Termination of this Agreement);  ARTICLE 11 (Indemnification Insurance); Section 13.3 (Governing Law); Section 13.4 (Dispute Resolution);  APPENDIX 1 (to the extent definitions are embodied in the following listed Articles and Sections).

 

10.3.2              Special Consequences of Certain Terminations. If (A) Isis terminates this Agreement under Section 10.2.1(b) (Isis’ Right to Terminate for Material Breach), Section 10.2.2(b) (Isis’ Right to Terminate for Failure to Use Commercially Reasonable Efforts), Section 10.2.5 (Termination for Insolvency) or Section 10.2.3 (Termination for Patent Challenge), then, in addition to the terms set forth in Section 10.3.1 (Consequences of Termination of this Agreement), the following additional terms will also apply:

 

(a)                                 Akcea will and hereby does grant to Isis a sublicensable, worldwide, non-exclusive license or sublicense, as the case may be, under all Akcea Technology Controlled by Akcea as of the date of such reversion that Covers the Discontinued Product solely as necessary to Develop, make, have made, use, sell, offer for sale, have sold, import and otherwise Commercialize the Discontinued Product;

 

(b)                                 Akcea will transfer to Isis for use with respect to the Development and Commercialization of the Discontinued Product, any Know-How, data, results, regulatory information, Regulatory Documentation (including the IND), and files in the possession

 

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of Akcea as of the date of such termination or reversion that relate to such Discontinued Product, and any other information or material specified in Section 4.6;

 

(c)                                  Akcea will provide Isis with copies of any internal or external market research reports and other market research documentation, including any meeting minutes and meeting materials from any meetings Akcea had with focus groups and payors regarding the Discontinued Product;

 

(d)                                 Akcea will grant to Isis a non-exclusive, royalty-free, fully paid up license under any trademarks that are specific to a Discontinued Product solely for use with such Discontinued Product; provided, however, that in no event will Akcea have any obligation to license to Isis any trademarks used by Akcea both in connection with the Product and in connection with the sale of any other product or service, including any Akcea- or Akcea-formative marks;

 

(e)                                  Akcea will pay within 30 days of receipt of the final invoice of all outstanding Isis-Incurred Development Costs incurred prior to termination; and

 

(f)                                   Upon Isis’ written request pursuant to a mutually agreed supply agreement, Akcea will sell to Isis any bulk API and finished Drug Product in Akcea’s possession related to the Discontinued Products that are the subject of the termination at the time of such termination, at a price equal to Akcea’s cost at the time such material was produced.

 

ARTICLE 11
 INDEMNIFICATION AND INSURANCE

 

Section 11.1                            INDEMNIFICATION.

 

11.1.1              By Akcea.  Akcea will indemnify, defend and hold harmless Isis and its Affiliates, and its or their respective directors, officers, employees and agents (each, an “Isis Indemnitee”), from and against any and all liabilities, damages, losses, costs, including the reasonable fees of attorneys and other professionals (collectively “Losses”) arising out of or resulting from any and all Third Party suits, claims, actions, proceedings or demands (“Claims”) based upon:

 

(a)  the negligence, recklessness or willful misconduct of Akcea, its Affiliates, and/or Sublicensees and its or their respective directors, officers, employees and agents, in connection with Akcea’s performance of its obligations or exercise of its rights under this Agreement;

 

(b)  the Development, Commercialization or manufacturing activities that are conducted by and/or on behalf of Akcea or its Affiliates or Sublicensees, including handling, storage, manufacture and sale by and/or on behalf of Akcea or its Affiliates or Sublicensees of any Products for the purpose of conducting Development or Commercialization by or on behalf of Akcea or its Affiliates or Sublicensees; or

 

(c)  any use by Akcea or its Affiliates or Sublicensees of any Isis Patent Rights;

 

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except, in each case above, to the extent such Losses arose out of or resulted from (i) the negligence, recklessness or willful misconduct of any Isis Indemnitee, (ii) any breach by Isis of any of its representations, warranties, or covenants in this Agreement, or (iii) any breach of Applicable Law by any Isis Indemnitee.

 

11.1.2              By Isis.  Isis will indemnify, defend and hold harmless Akcea and its Affiliates, and its or their respective directors, officers, employees and agents (each, an “Akcea Indemnitee”), from and against any and all Losses arising out of or resulting from any and all Claims based upon:

 

(a)  the negligence, recklessness or willful misconduct of Isis, its Affiliates and/or licensors and its or their respective directors, officers, employees and agents, in connection with Isis’ performance of its obligations or exercise of its rights under this Agreement; or

 

(b)  any breach of any representation or warranty or express covenant made by Isis in this Agreement;

 

11.1.3              except, in each case above, to the extent such Losses arose out of or resulted from (i) the negligence or willful misconduct of any Akcea Indemnitee, (ii) any breach by Akcea of any of its representations, warranties, or covenants in this Agreement, or (iii) any breach of Applicable Law by any Akcea Indemnitee.

 

Section 11.2                            Procedure. If a Person entitled to indemnification under Section 11.1.1 or Section 11.1.2 (an “Indemnitee”) seeks such indemnification, such Indemnitee will inform the indemnifying Party in writing of a Third Party Claim as soon as reasonably practicable after such Indemnitee receives notice of such Third Party Claim; provided, however, that the failure to so notify the indemnifying Party shall not relieve the indemnifying Party of its obligations hereunder except to the extent such failure shall have actually materially prejudiced the indemnifying Party.

 

11.2.1              Defense of Third Party Claim.

 

(a)                                 Control of the Defense.

 

(i)                               If (y) both Parties are named as defendants in the Third Party Claim and at least one Party seeks indemnification hereunder, or (z) the Third Party Claim relates to a Product liability claim or a claim for the infringement of Third Party intellectual property by a Product, then, within 30 days after receipt of such notice, the Parties will use good faith efforts to mutually agree on which Party will assume control of the defense of such Third Party Claim. If the Parties cannot agree on which Party will assume such control, then Akcea will assume control of the defense of such Third Party Claim at Akcea’s expense. In all cases at the conclusion of the Third Party Claim, each Party will have the right to seek indemnification from the other Party, including the costs to defend such Third Party Claim, any damages awarded against the Parties

 

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from such Third Party Claim, or any settlements made in accordance with Section 11.2.2 from such Third Party Claim.

 

(ii)                           Unless covered by Section 11.2.1(a) above, if a Party is named as a defendant in the Third Party Claim and seeks indemnification hereunder, then, within thirty (30) days after receipt of such notice, the indemnifying Party may, upon written notice thereof to and prior written approval of the Indemnitee, assume control of the defense of the Third Party Claim. If the Indemnitee does not provide its written approval for the indemnifying Party to assume control of the defense of such Third Party Claim, then the indemnifying Party will be relieved of any obligation under this Agreement to indemnify and defend the Indemnitee for such Third Party Claim, unless both Parties agree in good faith after the final and binding decision of the court or other authority ruling upon such defense of the Third Party Claim, that such defense was duly conducted by the Indemnitee. If the indemnifying Party receives written approval from the Indemnitee to assume control of the defense but does not assume such control, then the Indemnitee shall control such defense and, at the conclusion of the Third Party Claim, will be entitled to recover from the other Party its defense costs, any damages awarded against such Indemnitee from such Third Party Claim, or any settlements made in accordance with Section 11.2.2 from such Third Party Claim.

 

(b)                                 Participation and Cooperation. The Party not controlling any such defense hereunder may participate therein at its own expense. The Party controlling such defense shall keep the other Party advised of the status of such Third Party Claim and the defense thereof and shall consider in good faith reasonable recommendations made by the other Party with respect thereto. The Party not controlling such defense shall, and shall cause each of its Affiliates and each of their respective directors, officers and employees to reasonably cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include reasonable retention by such Party of records and information that are reasonably relevant to such Third Party Claim, and making such Party, its Affiliates and its and their respective directors, officers and employees available on a mutually convenient basis to provide additional information and explanation of any records or information provided, and the Party controlling the defense of such Third Party Claim shall reimburse the respective other Party for all of its related reasonable out-of-pocket expenses.

 

11.2.2              Settlement of Third Party Claim. No Indemnitee shall agree to any settlement of any such Third Party Claim without the prior written consent of the indemnifying Party, which shall not be unreasonably withheld, delayed or conditioned. The indemnifying Party shall not agree to any settlement of such Third Party Claim or consent to any judgment in respect thereof that does not include a complete and unconditional

 

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release of the Indemnitee from all liability with respect thereto or that imposes any liability or obligation on the Indemnitee without the prior written consent of the Indemnitee which shall not be unreasonably withheld, conditioned or delayed.

 

Section 11.3                            INSURANCE.  Each Party will maintain at its sole expense, a liability insurance program (including clinical trials and product liability insurance) consistent with products that are at the stage of development as the Products licensed under this Agreement to protect against potential liabilities and risk arising out of activities to be performed under this Agreement and any agreement related hereto.

 

ARTICLE 12
 REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 12.1                            REPRESENTATIONS AND WARRANTIES OF THE PARTIES. The Parties hereby represent and warrant, as of the Effective Date, to the other Party that: (i) it has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, and that it has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; (ii) this Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity; and (iii) it has all necessary consents, approvals and authorizations of all government or regulatory bodies and other parties required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.

 

Section 12.2                            ISIS REPRESENTATIONS AND WARRANTIES. Isis hereby represents and warrants, as of the Effective Date, to Akcea that:

 

(a)                                 it has sufficient legal and/or beneficial title and ownership or right to license (or sublicense as the case may be) with respect to the Isis Patent Rights as is necessary to fulfill its obligations under this Agreement and to grant the licenses (or sublicenses as the case may be) to Akcea pursuant to this Agreement; and

 

(b)                                 to the best of its knowledge, has no actions, suits, claims, disputes, or proceedings concerning the Isis Patent Rights licensed hereunder are currently pending or are threatened in writing, that if determined adversely to Isis would have an adverse effect on Isis’ ability to grant the licenses to Akcea under this Agreement, or that would have an adverse effect on or would impair Akcea’s right to practice under the licenses granted under this Agreement by Isis to Akcea.

 

Section 12.3                            DISCLAIMER OF WARRANTY.  NEITHER PARTY WARRANTS THAT ANY PRODUCT WILL BE SUCCESSFULLY DEVELOPED OR COMMERCIALIZED HEREUNDER.  EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE 12, AKCEA AND ISIS MAKE NO

 

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REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND AKCEA AND ISIS EACH SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE 13
 MISCELLANEOUS

 

Section 13.1                            ASSIGNMENT AND SUCCESSORS.  Neither this Agreement nor any obligation of a Party hereunder may be assigned by either Party without the consent of the other, which will not be unreasonably withheld, delayed or conditioned, except that each Party may assign this Agreement and the rights, obligations and interests of such Party, in whole or in part, without the other Party’s consent, to any of its Affiliates, to any purchaser of all or substantially all of its business or assets to which this Agreement relates or to any successor corporation resulting from any merger, consolidation, share exchange or other similar transaction; provided, if Akcea or any of its Affiliates or Sublicensees transfers or assigns this Agreement or a Sublicense to one of its Affiliates that is incorporated in a jurisdiction that does not have a Bilateral Income Tax Treaty with the United States or in a jurisdiction where a Bilateral Income Tax Treaty requires withholding taxes on any payment described in this Agreement, then Akcea (or such Affiliate or Sublicensee), will increase (i.e., “gross up”) any payment due Isis under ARTICLE 6 for the Incremental Tax Cost such that Isis receives the amount Isis would have otherwise received under ARTICLE 6 but for such transfer or assignment. In addition, Isis may assign or transfer its rights to receive payments under this Agreement (but, subject to any right that Akcea may have under applicable law), without Akcea’s consent, to an Affiliate or to a Third Party in connection with a payment factoring transaction. Any purported assignment or transfer made in contravention of this Section 13.1 will be null and void.

 

The “Incremental Tax Cost” shall equal the amount of IRC Sec 901 (or successor provision) foreign withholding taxes withheld under ARTICLE 6 in each year in which such tax is paid and Isis cannot obtain a corresponding cash benefit from the foreign tax credit, grossed up by the applicable withholding tax rate based on a payment to a United States Person (unless the actual applicable treaty is lower, in which case the lower withholding tax rate shall be used) to equal the pre withholding tax payment.

 

To the extent Isis utilizes a foreign tax credit or claims a deduction in any year with respect to the taxes withheld in any year, Isis will refund to Akcea an amount equal to (i) 100% of the foreign tax credit utilized or (ii) the benefit realized by Isis resulting from the deduction, which benefit will be calculated as the sum of (a) the amount claimed as a deduction multiplied by the highest marginal statutory federal corporate tax rate applicable to Isis; plus (b) any state tax benefit of the deduction claimed by r. To assist Akcea in determining when a refund is due from Isis pursuant to the foregoing sentence, beginning with the first annual tax return for the year in which Akcea pays Isis an increased (i.e., “gross up”) payment under this Section 13.1, and each year thereafter

 

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(including, for clarity, all years in which Isis utilizes a tax credit or claims a deduction for any foreign tax that is withheld), Isis will provide Akcea with tax documentation reasonably required and requested by Akcea and, in years in which Isis utilizes the federal foreign tax credit, supporting documentation for such credit. Notwithstanding the foregoing, if the increase in the withholding tax is in any way a result of the transfer or assignment by Isis of any intellectual property or a portion of the rights under this license outside of the United States, Akcea will only be obligated to pay Isis such gross up to the extent such transfer or assignment by Isis did not cause such increase in the withholding tax.

 

Section 13.2                            SEVERABILITY.  If any provision of this Agreement is held to be illegal, invalid or unenforceable by a court of competent jurisdiction, such adjudication will not affect or impair, in whole or in part, the validity, enforceability, or legality of any remaining portions of this Agreement.  All remaining portions will remain in full force and effect as if the original Agreement had been executed without the invalidated, unenforceable or illegal part.  The Parties agree to use good faith, reasonable efforts to replace the illegal, invalid or unenforceable provision with a legal, valid and enforceable provision that achieves similar economic and non-economic effects as the severed provision.

 

Section 13.3                            GOVERNING LAW; JURISDICTION.  This Agreement will be governed by and construed and enforced in accordance with the laws of the State of New York, USA without reference to any rules of conflicts of laws. Subject to Section 13.4, each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any federal court of the United States of America sitting in Chicago, Illinois and any appellate court having jurisdiction thereover, in any action in aid of arbitration, and each of the Parties hereby irrevocably and unconditionally agrees that all actions in aid of arbitration may be heard and determined in any such federal court in Chicago, Illinois.  Notwithstanding the foregoing or anything to the contrary herein, any dispute relating to the scope, validity, enforceability or infringement of any Patents will be governed by and construed and enforced in accordance with the patent laws of the applicable jurisdiction.

 

Section 13.4                            DISPUTE RESOLUTION.

 

13.4.1              Resolution by Senior Representatives.  The Parties will seek to settle amicably any and all disputes, controversies or claims arising out of or in connection with this Agreement.  Any such dispute between the Parties will be promptly presented to the Chief Executive Officer of Akcea and the Chief Operating Officer of Isis (the “Senior Representatives”), or their respective designees, for resolution. Such Senior Representatives, or their respective designees, will meet in-person or by teleconference as soon as reasonably possible thereafter, and use their good faith efforts to agree upon the resolution of the dispute, controversy or claim.  If a dispute between the Parties arising out of or relating to the validity or interpretation of, compliance with, breach or alleged breach of or termination of this Agreement cannot be resolved within 30 days of presentation to the Senior Representatives, or their respective designees, for resolution, either Party may refer such dispute to binding arbitration to be conducted as set forth below in this Section 13.4.  For clarification, any dispute relating to the validity or scope of any Patent will not be subject to arbitration.

 

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13.4.2              Arbitration.

 

(a)                                 If the Parties fail to resolve the Dispute through Escalation, and a Party desires to pursue resolution of the Dispute, the Dispute will be submitted by either Party for resolution in binding arbitration pursuant to the then current CPR Non-Administered Arbitration Rules (“CPR Rules”) (www.cpradr.org), except where they conflict with these provisions, in which case these provisions control. The arbitration will be held in Chicago, Illinois. All aspects of the arbitration will be treated as confidential.

 

(b)                                 The arbitrators will be chosen from the CPR Panel of Distinguished Neutrals, unless a candidate not on such panel is approved by both Parties. Each arbitrator will be a lawyer with at least 15 years of experience with a law firm or corporate law department of over 25 lawyers or who was a judge of a court of general jurisdiction. To the extent that the Dispute requires special expertise, the Parties will so inform CPR prior to the beginning of the selection process.

 

(c)                                  The arbitration tribunal will consist of three arbitrators, of whom each Party will designate one in accordance with the “screened” appointment procedure provided in CPR Rule 5.4. The chair will be chosen in accordance with CPR Rule 6.4.

 

(d)                                 If, however, the aggregate award sought by the Parties is less than $5 million and equitable relief is not sought, a single arbitrator will be chosen in accordance with the CPR Rules.

 

(e)                                  Candidates for the arbitrator position(s) may be interviewed by representatives of the Parties in advance of their selection, provided that all Parties are represented.

 

(f)                                   The Parties agree to select the arbitrator(s) within 45 days of initiation of the arbitration. The hearing will be concluded within six months after selection of the arbitrator(s) and the award will be rendered within 60 days of the conclusion of the hearing, or of any post hearing briefing, which briefing will be completed by both sides within 45 days after the conclusion of the hearing. If the Parties cannot agree upon a schedule, then the arbitrator(s) will set the schedule following the time limits set forth above as closely as practical.

 

(g)                                 The hearing will be concluded in 10 hearing days or less. Multiple hearing days will be scheduled consecutively to the greatest extent possible. A transcript of the testimony adduced at the hearing will be made and will be made available to each Party.

 

(h)                                 The arbitrator(s) will be guided, but not bound, by the CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration (www.cpradr.org) (“CPR Protocol”). The Parties will attempt to agree on modes of document disclosure, electronic discovery, witness presentation, etc. within the parameters of the CPR Protocol. If the Parties cannot agree on discovery and presentation issues, the arbitrator(s) will decide on presentation modes and provide for discovery within the CPR Protocol, understanding that the Parties contemplate reasonable discovery.

 

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(i)                                    The arbitrator(s) will decide the merits of any Dispute in accordance with the law governing this Agreement, without application of any principle of conflict of laws that would result in reference to a different law. The arbitrator(s) may not apply principles such as “amiable compositeur” or “natural justice and equity.”

 

(j)                                    The arbitrator(s) are expressly empowered to decide dispositive motions in advance of any hearing and will endeavor to decide such motions as would a United States District Court Judge sitting in the jurisdiction whose substantive law governs.

 

(k)                                 The arbitrator(s) will render a written opinion stating the reasons upon which the award is based. The Parties consent to the jurisdiction of the United States District Court for the district in which the arbitration is held for the enforcement of these provisions and the entry of judgment on any award rendered hereunder. Should such court for any reason lack jurisdiction, any court with jurisdiction may act in the same fashion.

 

(l)                                    Each Party has the right to seek from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc. to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the Dispute. Rule 14 of the CPR Rules does not apply to this Agreement.

 

(m)                             EXCEPT IN THE CASE OF COURT ACTIONS PERMITTED BY SECTION 13.4.3, AND FOR CLAIMS NOT SUBJECT TO ARBITRATION PURSUANT TO SECTION 13.4.2 AS SET FORTH IN SECTION 13.4.3, EACH PARTY HERETO WAIVES: (1) ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY, (2) WITH THE EXCEPTION OF RELIEF MANDATED BY STATUTE, ANY CLAIM TO PUNITIVE, EXEMPLARY, MULTIPLIED, INDIRECT, CONSEQUENTIAL OR LOST PROFITS/REVENUES DAMAGES, AND (3) ANY CLAIM FOR ATTORNEY FEES, COSTS AND PREJUDGMENT INTEREST.

 

(n)                                 Each Party will bear its own attorneys’ fees, costs, and disbursements arising out of the arbitration, and will pay an equal share of the fees and costs of the arbitrator; provided, however, the arbitrator will be authorized to determine whether a Party is the prevailing party, and if so, to award to that prevailing party reimbursement for any or all of its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.), and/or the fees and costs of the administrator and the arbitrator.

 

13.4.3              Injunctive Relief; Court Actions. Notwithstanding anything to the contrary in this Agreement, each Party will be entitled to seek from any court of competent jurisdiction, in addition to any other remedy it may have at law or in equity, injunctive or other equitable relief in the event of an actual or threatened breach of this Agreement by the other Party, without the posting of any bond or other security, and such an action may be filed and maintained notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding.  The Parties agree that in the event of a threatened or actual material breach of this Agreement injunctive or equitable relief would be an appropriate remedy. In addition, either Party may bring an action in any court of competent jurisdiction to resolve disputes pertaining to the validity, construction, scope,

 

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enforceability, infringement or other violations of Patent Rights or other intellectual property rights, and no such claim will be subject to arbitration pursuant to Section 13.4.2.

 

Section 13.5                            FORCE MAJEURE. No Party will be held responsible to the other Party nor be deemed to be in default under, or in breach of any provision of, this Agreement for failure or delay in performing any obligation of this Agreement when such failure or delay is due to force majeure, and without the fault or negligence of the Party so failing or delaying. For purposes of this Agreement, force majeure means a cause beyond the reasonable control of a Party, which may include acts of God; acts, regulations, or laws of any government; war; terrorism; civil commotion; fire, flood, earthquake, tornado, tsunami, explosion or storm; pandemic; epidemic and failure of public utilities or common carriers. In such event the Party so failing or delaying will immediately notify the other Party of such inability and of the period for which such inability is expected to continue. The Party giving such notice will be excused from such of its obligations under this Agreement as it is thereby disabled from performing for so long as it is so disabled for up to a maximum of 90 days, after which time the Parties will negotiate in good faith any modifications of the terms of this Agreement that may be necessary to arrive at an equitable solution, unless the Party giving such notice has set out a reasonable timeframe and plan to resolve the effects of such force majeure and executes such plan within such timeframe.  To the extent possible, each Party will use reasonable efforts to minimize the duration of any force majeure.

 

Section 13.6                            NOTICES. Any notice or request required or permitted to be given under or in connection with this Agreement will be deemed to have been sufficiently given if in writing and personally delivered or sent by certified mail (return receipt requested), facsimile transmission (receipt verified), or overnight express courier service (receipt verified), prepaid, to the Party for which such notice is intended, at the address set forth for such Party below:

 

	
If to Isis, addressed to:
    	
Isis Pharmaceuticals, Inc.
    
	
 
    	
2855 Gazelle Court
    
	
 
    	
Carlsbad, CA 92010
    
	
 
    	
Attention: Chief Operating Officer
    
	
 
    	
Fax: 760-918-3592
    
	
 
    	
 
    
	
with a copy to:
    	
Isis Pharmaceuticals, Inc.
    
	
 
    	
2855 Gazelle Court
    
	
 
    	
Carlsbad, CA 92010
    
	
 
    	
Attention: General Counsel
    
	
 
    	
Fax: 760-268-4922
    
	
 
    	
 
    
	
If to Akcea, addressed to:
    	
Akcea Therapeutics, Inc.
    
	
 
    	
55 Cambridge Parkway, Suite 100,
    
	
 
    	
Cambridge, MA 02142
    
	
 
    	
Attention: Chief Executive Officer
    
	
 
    	
Fax:   [               ]
    

 

35

 

	
with a copy to:
    	
Akcea Therapeutics, Inc.
    
	
 
    	
55 Cambridge Parkway, Suite 100,
    
	
 
    	
Cambridge, MA 02142
    
	
 
    	
Attention: Chief Operating Officer
    
	
 
    	
Fax:   [               ]
    

 

or to such other address for such Party as it will have specified by like notice to the other Party; provided that notices of a change of address will be effective only upon receipt thereof.  If delivered personally or by facsimile transmission, the date of delivery will be deemed to be the date on which such notice or request was given.  If sent by overnight express courier service, the date of delivery will be deemed to be the next Business Day after such notice or request was deposited with such service.  If sent by certified mail, the date of delivery will be deemed to be the third Business Day after such notice or request was deposited with the U.S. Postal Service.

 

Section 13.7                            EXPORT CLAUSE. Each Party acknowledges that the laws and regulations of the United States restrict the export and re-export of commodities and technical data of United States origin.  Each Party agrees that it will not export or re-export restricted commodities or the technical data of the other Party in any form without the appropriate United States and foreign government licenses.

 

Section 13.8                            WAIVER. Neither Party may waive or release any of its rights or interests in this Agreement except in writing.  The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement will not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition.  No waiver by either Party of any condition or term in any one or more instances will be construed as a continuing waiver or subsequent waiver of such condition or term or of another condition or term.

 

Section 13.9                            ENTIRE AGREEMENT; MODIFICATIONS. This Agreement (including the attached Appendices and Schedules) sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof, and all prior agreements, understanding, promises and representations, whether written or oral, with respect thereto are superseded hereby except for those agreements listed in SCHEDULE 13.9 (the “Formation Agreements”). The Parties acknowledge that this Agreement is being executed and delivered simultaneously with the execution and delivery by the Parties and/or their Affiliates of the Investor Rights Agreement and the Services Agreement.  For purposes of clarity, nothing in this Agreement will be deemed to modify or amend any provision of any of the Formation Agreements.

 

Section 13.10                     Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth herein. No amendment, modification, release or discharge will be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

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Section 13.11                     INDEPENDENT CONTRACTORS. Nothing herein will be construed to create any relationship of employer and employee, agent and principal, partnership or joint venture between the Parties. Each Party is an independent contractor. Neither Party will assume, either directly or indirectly, any liability of or for the other Party. Neither Party will have the authority to bind or obligate the other Party, and neither Party will represent that it has such authority.

 

Section 13.12                     INTERPRETATION. Except as otherwise explicitly specified to the contrary, (a) references to a section, exhibit or schedule means a section of, or schedule or exhibit to this Agreement, unless another agreement is specified, (b) the word “including” (in its various forms) means “including without limitation,” (c) the words “shall” and “will” have the same meaning, (d) references to a particular statute or regulation include all rules and regulations thereunder and any predecessor or successor statute, rules or regulation, in each case as amended or otherwise modified from time to time, (e) words in the singular or plural form include the plural and singular form, respectively, (f) references to a particular Person include such Person’s successors and assigns to the extent not prohibited by this Agreement, (g) unless otherwise specified, “$” is in reference to United States dollars, and (h) the headings contained in this Agreement, in any exhibit or schedule to this Agreement are for convenience only and will not in any way affect the construction of or be taken into consideration in interpreting this Agreement.

 

Section 13.13                     BOOKS AND RECORDS. Any books and records to be maintained under this Agreement by a Party or its Affiliates or Sublicensees will be maintained in accordance with U.S. Generally Accepted Accounting Principles (or any successor standard), consistently applied.

 

Section 13.14                     FURTHER ACTIONS. Each Party will execute, acknowledge and deliver such further instruments, and do all such other acts, as may be necessary or appropriate in order to carry out the expressly stated purposes and the clear intent of this Agreement. If a Party requests any data and results generated by the other Party under this Agreement, such other Party will disclose to the requesting Party such data and results as promptly as possible.

 

Section 13.15                     CONSTRUCTION OF AGREEMENT. The terms and provisions of this Agreement represent the results of negotiations between the Parties and their representatives and neither of which has acted under duress or compulsion, whether legal, economic or otherwise. Accordingly, the terms and provisions of this Agreement will be interpreted and construed in accordance with their usual and customary meanings, and each of the Parties hereto hereby waives the application in connection with the interpretation and construction of this Agreement of any rule of law to the effect that ambiguous or conflicting terms or provisions contained in this Agreement will be interpreted or construed against the Party whose attorney prepared the executed draft or any earlier draft of this Agreement.

 

Section 13.16                     SUPREMACY. In the event of any express conflict or inconsistency between this Agreement and any Schedule or Appendix hereto, the terms of this Agreement will apply.  The Parties understand and agree that the Schedules identifying the Licensed Technology

 

37

 

are not intended to be the final and complete embodiment of any terms or provisions of this Agreement, and are to be updated from time to time during the Agreement Term, as appropriate and in accordance with the provisions of this Agreement.

 

Section 13.17                     COUNTERPARTS. This Agreement may be signed in counterparts, each of which will be deemed an original, notwithstanding variations in format or file designation which may result from the electronic transmission, storage and printing of copies of this Agreement from separate computers or printers. Facsimile signatures and signatures transmitted via electronic mail in PDF format will be treated as original signatures.

 

Section 13.18                     COMPLIANCE WITH LAWS. Each Party will, and will ensure that its Affiliates and Sublicensees will, comply with all relevant laws and regulations in exercising its rights and fulfilling its obligations under this Agreement.

 

Section 13.19                     DEBARMENT. Neither Party is debarred under the United States Federal Food, Drug and Cosmetic Act or comparable Applicable Laws and it does not, and will not during the Agreement Term, employ or use the services of any person or entity that is debarred, in connection with the Development, Manufacture or Commercialization of the Products. If either Party becomes aware of the debarment or threatened debarment of any person or entity providing services to such Party, including the Party itself and its Affiliates or Sublicensees, which directly or indirectly relate to activities under this Agreement, the other Party will be immediately notified in writing.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.

 

 

	
ISIS PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ B. Lynne Parshall
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
B.   Lynne Parshall
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
Chief   Operating Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
AKCEA THERAPEUTICS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Paula Soteropoulos
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Paula   Soteropoulos
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
Chief   Executive Officer
    	
 
    

 

39

 

List of Appendices and Schedules

 

	
APPENDIX 1
    	
 
    	
Definitions
    
	
 
    	
 
    	
 
    
	
APPENDIX 2
    	
 
    	
Isis Core Technology Patents
    
	
 
    	
 
    	
 
    
	
APPENDIX 3
    	
 
    	
Isis Product-Specific Patents
    
	
 
    	
 
    	
 
    
	
APPENDIX 4
    	
 
    	
Isis Manufacturing Patents
    
	
 
    	
 
    	
 
    
	
APPENDIX 5
    	
 
    	
Existing In-License Agreements
    
	
 
    	
 
    	
 
    
	
APPENDIX 6
    	
 
    	
Prior Agreements
    
	
 
    	
 
    	
 
    
	
SCHEDULE 3.4.3
    	
 
    	
Cardio-Metabolic Advisory Board
    
	
 
    	
 
    	
 
    
	
SCHEDULE 3.8.1
    	
 
    	
Commercial Manufacturing Organization Contracts
    
	
 
    	
 
    	
 
    
	
SCHEDULE 3.8.2
    	
 
    	
Cost of Goods Calculation
    
	
 
    	
 
    	
 
    
	
SCHEDULE 13.9
    	
 
    	
Formation Agreements
    

 

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APPENDIX 1

 

DEFINITIONS

 

“Additional Core Patent” means a Third Party Patent that is necessary to practice an Isis Core Technology Patent to Commercialize a Product. For clarity, Additional Core Patent does not include any Patents claiming (or intellectual property related to) specific drug compositions, sequences, therapeutic methods, formulation or delivery technology, manufacturing or analytical methods, or other active ingredients.

 

“Affiliate” of an entity means any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such first entity, but such an entity will be deemed to be an Affiliate only for the duration of such control. For purposes of this definition only, “control” (and, with correlative meanings, the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct the management or policies of an entity, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance.  During the time that Isis retains a majority ownership position of Akcea, Isis will not be considered an Affiliate of Akcea and Akcea will not be considered an Affiliate of Isis for the purposes of this Agreement only.

 

“Agreement” means this Agreement, together with all Schedules and Appendices attached hereto as the same may be amended or supplemented from time to time in accordance with the terms of this Agreement.

 

“Agreement Term” has the meaning set forth in Section 10.1.

 

“Akcea” means Akcea Therapeutics, Inc.

 

“Akcea Indemnitee” has the meaning set forth in Section 11.1.2.

 

“Akcea Product-Specific Know-How” means all Know-How Controlled by Akcea at any time during the Term necessary to Research, Develop or Commercialize a Product specifically relating to (i) the composition of matter of a Lipid Drug or Product or (ii) methods of using a Lipid Drug or Product as a prophylactic or therapeutic; provided however, Know-How Controlled by Akcea that (y) consists of subject matter applicable to oligonucleotide compounds or products in general or (z) relates to an oligonucleotide compound that does not specifically modulate expression of a Lipid Drug Target via the binding, partially or wholly, of such compound to RNA that encodes a Lipid Drug Target, will not be considered Akcea Product-Specific Know-How, and in the case of (y) and (z), such Know-How will be considered Akcea Core Technology Know-How.

 

“Akcea Product-Specific Patents” means all Patents Controlled by Akcea at any time during the Term Covering (i) the composition of matter of a Lipid Drug or Product, or (ii) methods of using a Lipid Drug or Product as a prophylactic or therapeutic; provided however, Patents Controlled by Akcea that include only claims that are directed to (y) subject matter applicable to oligonucleotide compounds or products in general, including Conjugate

 

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Technology, or (z) an oligonucleotide compound that does not specifically modulate expression of a Lipid Drug Target via the binding, partially or wholly, of such compound to RNA that encodes Lipid Drug Target, will not be considered Akcea Product-Specific Patents, and in the case of (y) and (z), such Patents will be considered Akcea Core Technology Patents.

 

“Akcea Profit-Share” means a portion of profits paid to Akcea by a Sublicensee, wherein Akcea receives as a result of sales of a Product by a Sublicensee.

 

“Annual” means the period covering a Calendar Year or occurring once per Calendar Year, as the context requires.

 

“API” means the bulk active pharmaceutical ingredient manufactured in accordance with cGMP for a Product.

 

“APOCIIIRx Initial Registration” means the initial indications in the Strategic Plan for which Akcea intends to file NDAs for ISIS-APOCIIIRx, e.g. familial chylomicronemea syndrome (FCS) and familial partial lipodystrophy (FPL).

 

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

 

“Approval” means, with respect to any Product in any regulatory jurisdiction, approval from the applicable Regulatory Authority sufficient for the manufacture, distribution, use, and sale of the Product in such jurisdiction in accordance with Applicable Laws.

 

“ASO” means a single-stranded or double-stranded oligonucleotide, or analog, mimic or mimetic thereof, having a sequence of at least six bases long designed to hybridize to the target nucleic acid transcript via binding, partially or wholly, of such compound to the nucleic acid transcript.

 

“Broad Patient Population Indication” means a disease indication with a patient population with more than 500,000 patients worldwide or a patient population for which the Regulatory Authorities require Phase 3 Clinical Studies exceeding 1,000 patients and 2 years of treatment.

 

“Business Day” means any day, other than Saturday, Sunday or any statutory holiday or bank holiday in the United States.

 

“Calendar Quarter” means the respective periods of three consecutive calendar months ending on March 31, June 30, September 30, and December 31.

 

“Calendar Year” means each successive period of 12 months commencing on January 1 and ending on December 31.

 

“Claims” has the meaning set forth in Section 11.1.1.

 

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“Cardio-Metabolic Advisory Board” has the meaning set forth in Section 3.4.5(a).

 

“Clinical Hold” means a clinical hold issued by the FDA (or other Regulatory Authority) in accordance with 21 CFR 312.42 (or a similar foreign counterpart law or regulation) to delay a proposed clinical investigation of a Product or to suspend an ongoing clinical investigation of a Product.

 

“Clinical Trial” or “Clinical Trials” means a Phase 1 Clinical Trial, Phase 2 Clinical Trial, or Phase 3 Clinical Trial, or such other study in humans that is conducted in accordance with good clinical practices and is designed to generate data in support or maintenance of an NDA, MAA or other similar marketing application.

 

“Clinical Supply” or “Clinical Supplies” means finished Drug Product for use in Clinical Trials.

 

“CMO” means a contract manufacturing organization.

 

“CMC” means Chemistry, Manufacturing and Controls as set forth 21 C.F.R.

 

“Commercialize,” “Commercializing” and “Commercialization” means activities directed to manufacturing, obtaining pricing and reimbursement approvals, marketing, promoting, distributing, importing or selling a Product.

 

“Commercially Reasonable Efforts” means, with respect to a Product, the carrying out of Research, Development, or Commercialization activities using good faith commercially reasonable and diligent efforts, using the efforts that a similarly situated company would reasonably devote to a compound or product of similar market potential or profit potential at a similar stage in development or product life resulting from its own Research efforts, based on conditions then prevailing and taking into account, without limitation, issues of safety and efficacy, regulatory authority-approved labeling, product profile, the competitiveness of alternative products in the marketplace, the likely timing of the product’s entry into the market, the patent and other proprietary position, the likelihood of regulatory approval and other relevant scientific, technical and commercial factors.

 

“Commercial Supplies” has the meaning set forth in Section 3.8.2(b).

 

“Competitive Infringement” has the meaning set forth in Section 9.3.1.

 

“Confidential Information” means all information and know-how and any tangible embodiments thereof provided by or on behalf of the Disclosing Party to the Receiving Party either in connection with the discussions and negotiations pertaining to this Agreement or in the course of performing this Agreement, including data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, marketing and business plans; and financial and personnel matters relating to the Disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business; regardless of whether any of the foregoing are marked “confidential” or “proprietary” or communicated to the other by the Disclosing Party in oral, written, graphic or electronic form.

 

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Notwithstanding the foregoing, information or know-how of a Party will not be deemed Confidential Information for purposes of this Agreement to the extent that the Receiving Party can show by competent proof that such information or know-how:

 

(a)           was already known to the Receiving Party or any of its Affiliates, without any obligation to the Disclosing Party to keep it confidential or restricting its use, prior to the time of disclosure to such Receiving Party;

 

(b)           was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to the Receiving Party;

 

(c)           became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such Receiving Party through no fault of the Receiving Party;

 

(d)           was disclosed to such Receiving Party or any of its Affiliates by a Third Party lawfully in possession thereof, and was not obtained indirectly or directly from the Disclosing Party; or

 

(e)           was independently discovered or developed by employees or (sub)contractors of the Receiving Party or any of its Affiliates, without the aid, application or use of Confidential Information of the Disclosing Party.

 

“Conjugate Technology” means chemistry designed to enhance targeting and/or uptake of antisense drugs to specific tissues and cells. Conjugate Technology includes, but is not limited to, N-acetylgalactosamine (GalNAc) ligand conjugates capable of binding to the asialoglycoprotein receptor (ASGP-R) and enhancing the targeting and/or uptake of antisense drugs to the liver.

 

“Control” or “Controlled” means possession of the ability to grant a license or sublicense hereunder without violating the terms of any agreement with any Third Party and, in the case of sublicenses granted hereunder by Isis to Akcea, without any compensation to such Third Party (Notwithstanding anything to the contrary under this Agreement, with respect to any Third Party that later becomes an Affiliate of Isis after the Effective Date (including a Third Party acquirer), no intellectual property of such Third Party will be included in the licenses granted hereunder by virtue of such Third Party becoming an Affiliate of Isis.

 

“Cover” or “Covered” or “Covering” means, with respect to a Patent, that, but for rights granted to a Person under such Patent, the practice by such Person of an invention claimed in such Patent would infringe a Valid Claim included in such Patent, or in the case of a Patent that is a patent application, would infringe a Valid Claim in such patent application if it were to issue as a patent.

 

“CPR Rules” has the meaning set forth in Section 13.4.2.

 

44

 

“Development” or “Develop” or “Developing” means non-clinical and clinical development activities reasonably related to the development and submission of information to a Regulatory Authority, including chemical synthesis, toxicology, pharmacology, test method development and stability testing, manufacturing process development, formulation development, delivery system development, quality assurance and quality control development, manufacturing, statistical analysis, and Clinical Trials.

 

“Development Expenses” means costs directly associated with preclinical studies, clinical trials, Regulatory submissions, CMC and post-marketing trials for the Products, all in accordance with GAAP, consistently applied to all of Akcea’s products.

 

“Discontinued Patent” has the meaning set forth in Section 9.2.4.

 

“Discontinued Product” means a Product for which Akcea was granted a license under Section 4.1, and which Product is the subject of a termination under this Agreement.

 

“Disclosing Party” has the meaning set forth in Section 8.1.

 

“Dollars” or “$” means the lawful currency of the United States.

 

“Drug Product” means any drug product containing API as an active ingredient in finished bulk form for the Development or Commercialization by a Party under this Agreement.

 

“eCTD” has the meaning set forth in Section 3.5.2.

 

“Effective Date” has the meaning set forth in the opening paragraph of this Agreement.

 

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

 

“Existing In-License Agreement” is an agreement provided in APPENDIX 5.

 

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

 

“First Commercial Sale” means the first sale of a Product by Akcea, its Affiliate or its Sublicensee to a Third Party in a particular country after Approval of such Product has been obtained in such country.

 

“FTE” means a total of 47 weeks or 1880 hours per year of work on the Development, Manufacturing or Commercialization of a Product carried out by employees of a Party having the appropriate relevant expertise to conduct such activities.

 

“FTE Rate” means for a given Calendar Year the rate that Isis charges for a FTE with the appropriate technical skill which includes salary and benefits for Isis’ R&D employees, direct R&D expenses, R&D specific overhead, and support costs, all at Isis’ cost without mark-up and is calculated consistent with the rate Isis charges its other partners in such Calendar Year.

 

45

 

“FTE Costs” means the cost of an FTE allocated to perform a given activity at the FTE Rate.

 

“Fully Absorbed Cost of Goods” means the reasonable and necessary internal and third party costs with no mark-up incurred by Isis in making or acquiring of product as determined using the methodology set forth in SCHEDULE 3.8.2(B) fairly applied and as employed on a consistent basis throughout Isis’ operations and shall not include inter-company profits among Isis and its Affiliates.

 

“GAAP” means generally accepted accounting principles of the United States consistently applied, or for any non-US entity (i) international financial reporting standards (IFRS) consistently applied, or (ii) for such non-US entity that does not use IFRS, the generally accepted accounting rules in its home jurisdiction for entities of a similar size in the same industry, consistently applied throughout its organization.

 

“Incremental Tax Cost” has the meaning set forth in Section 13.1.

 

“IND” means an Investigational New Drug Application (as defined in the Food, Drug and Cosmetic Act, as amended) filed with the FDA or any equivalent application for authorization to commence human clinical trials in other countries or regulatory jurisdictions.

 

“Isis” means Isis Pharmaceuticals, Inc.

 

“Isis Core Technology Know-How” means all Know-How Controlled by Isis or its Affiliates on the Effective Date or at any time during the Term necessary to Research, Develop or Commercialize a Product that relates generally to oligonucleotides including Conjugate Technology, other than Product-Specific Know-How or Know-How specifically relating to methods and materials used in the synthesis or analysis of a Lipid Drug or Product regardless of sequence or chemical modification.

 

“Isis Core Technology Patents” means all Patents Controlled by Isis or its Affiliates on the Effective Date or at any time during the Term, necessary to Research, Develop or Commercialize a Product claiming subject matter generally applicable to oligonucleotides including Conjugate Technology, other than Isis Product-Specific Patents or Patents that claim methods and materials used in the synthesis or analysis of a Lipid Drug or Product regardless of sequence or chemical modification. A representative list of Isis Core Technology Patents as of the Effective Date is set forth on APPENDIX 2.

 

“Isis-Incurred Development Costs” has the meaning set forth in Section 3.6.3.

 

“Isis Indemnitee” has the meaning set forth in Section 11.1.1.

 

“Isis Internal Oligonucleotide Safety Database” has the meaning set forth in Section 3.9.

 

“Isis Know-How” means the Isis Core Technology Know-How and the Product-Specific Know-How.

 

“Isis Manufacturing and Analytical Know-How” means Know-How that relates to the synthesis or analysis of a Product regardless of sequence or chemical modification, owned, used,

 

46

 

developed by, or licensed to Isis or its Affiliates, in each case to the extent Controlled by Isis or its Affiliates on the Effective Date or at any time during the Agreement Term. Isis Manufacturing and Analytical Know-How does not include the Isis Know-How.

 

“Isis Manufacturing Patents” means Patent Rights that claim Isis Manufacturing and Analytical Know-How. A list of Isis Manufacturing Patents as of the Effective Date is set forth on APPENDIX 4 attached hereto. Isis Manufacturing Patents do not include the Isis Product-Specific Patents or the Isis Core Technology Patents.

 

“Isis Patent Rights” means the Isis Core Technology Patents and the Isis Product-Specific Patents.

 

“Isis Post-FTE Cutoff Date Development Activities” has the meaning set forth in Section 3.6.4.

 

“Isis Product-Specific Know-How” means all Know-How Controlled by Isis or its Affiliates on the Effective Date or at any time during the Term necessary to Research, Develop or Commercialize a Product or disclosed by Isis to Akcea and specifically relating to (i) the composition of matter of a Lipid Drug or Product or (ii) methods of using a Lipid Drug or Product as a prophylactic or therapeutic; provided however, Know-How Controlled by Isis or any of its Affiliates that (y) consists of subject matter applicable to oligonucleotide compounds or products in general or (z) relates to an oligonucleotide compound that does not specifically modulate expression of a Lipid Drug Target via the binding, partially or wholly, of such compound to RNA that encodes a Lipid Drug Target, will not be considered Isis Product-Specific Know-How, and in the case of (y) and (z), such Know-How will be considered Isis Core Technology Know-How.

 

“Isis Product-Specific Patents” means all Patents Controlled by Isis or its Affiliates on the Effective Date or at any time during the Term Covering (i) the composition of matter of a Lipid Drug or Product, or (ii) methods of using a Lipid Drug or Product as a prophylactic or therapeutic; provided however, Patents Controlled by Isis or any of its Affiliates that include only claims that are directed to (y) subject matter applicable to oligonucleotide compounds or products in general or (z) an oligonucleotide compound that does not specifically modulate expression of a Lipid Drug Target via the binding, partially or wholly, of such compound to RNA that encodes Lipid Drug Target, will not be considered Isis Product-Specific Patents, and in the case of (y) and (z), such Patents will be considered Isis Core Technology Patents. A representative list of Isis Product-Specific Patents as of the Effective Date is set forth on APPENDIX 3.

 

“Joint Core Patents” means all Patents jointly invented by Isis and Akcea at any time during the Term, necessary to Research, Develop or Commercialize a Product claiming subject matter generally applicable to oligonucleotides in a target-independent manner including Conjugate Technology, other than Akcea Product-Specific Patents, Isis Product-Specific Patents or Patents that claim methods and materials used in the synthesis or analysis of a Lipid Drug or Product regardless of sequence or chemical modification.

 

“Joint Patent Committee” or “JPC” has the meaning set forth in Section 9.1.

 

47

 

“Joint Steering Committee” or “JSC” has the meaning set forth in Section 3.4.1.

 

“Joint Patent Rights” means, collectively, all Joint Product-Specific Patents and Joint Core Patents.

 

“Joint Product-Specific Patents” means all Patents invented jointly by Isis and Akcea at any time during the Term Covering (i) the composition of matter of a Lipid Drug or Product, or (ii) methods of using a Lipid Drug or Product as a prophylactic or therapeutic; provided however, Patents jointly invented by Isis and Akcea that include only claims that are directed to (y) subject matter applicable to oligonucleotide compounds or products in general in a target independent manner including Conjugate Technology or (z) an oligonucleotide compound that does not specifically modulate expression of a Lipid Target via the binding, partially or wholly, of such compound to RNA that encodes Lipid Target, will not be considered Joint Product-Specific Patents, and in the case of (y) and (z), such Patents will be considered Joint Core Technology Patents.

 

“Know-How” means any unpatented information or material, whether proprietary or not and whether patentable or not, including ideas, concepts, formulas, methods, procedures, designs, compositions, plans, documents, data, trade secrets, inventions, discoveries, compounds and biological materials.

 

“Lipid Drug” is one of the following drug candidates: ISIS-APOCIIIRx (ISIS304801),  ISIS-APOCIII-LRx (ISIS678354),  ISIS-APO(a)Rx (ISIS494372),  ISIS-APO(a)-LRx (ISIS681257),  ISIS-ANGPTL3Rx (ISIS563580), or  ISIS-ANGPTL3-LRx (ISIS703802).

 

“Lipid Drugs” are the following drug candidates:  ISIS-APOCIIIRx (ISIS304801),  ISIS-APOCIII-LRx (ISIS678354),  ISIS-APO(a)Rx (ISIS494372),  ISIS-APO(a)-LRx (ISIS681257),  ISIS-ANGPTL3Rx (ISIS563580), or  ISIS-ANGPTL3-LRx (ISIS703802).

 

“Lipid Target” is an RNA to which a Lipid Drug is designed to hybridize and to modulate such RNA, such RNAs are apolipoprotein C-III, apolipoprotein (a) and angiopoietin-like 3.

 

“Losses” has the meaning set forth in Section 11.1.1.

 

“Major Market” means the United States of America, Germany, United Kingdom, France, Spain, Italy, Brazil, Canada, or Japan .

 

“Manufacture” or “Manufactured” or “Manufacturing” means any activity involved in or relating to the manufacturing, quality control testing (including in-process, release and stability testing), releasing or packaging, for pre-clinical, clinical or commercial purposes, of API or the bulk active pharmaceutical ingredient for a Product in finished form.

 

“Manufacturing Agreement” has the meaning set forth in SCHEDULE 3.8.1.

 

“Material Change” has the meaning set forth in Section 3.1.2.

 

“Milestone Event” has the meaning set forth in Section 6.1.

 

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

 

“Net Sales” means, with respect to any Product, the gross amount billed or invoiced by Akcea or its Affiliates for sales of such Product in arm’s length transactions to Third Parties, after deduction (if not already deducted in the amount invoiced) of the following items with respect to sales of such Product:

 

(a)           trade, cash, and/or quantity discounts, retroactive price reductions, charge back payments and rebates actually taken and allowed, including discounts or rebates to governmental or managed care organizations, their agencies, purchasers and reimbursers;

 

(b)           credits or allowances given or recorded for rejection or return of previously sold Product (including returns of Product in connection with recalls or withdrawals);

 

(c)           freight out, postage, shipping and insurance charges actually incurred for delivery of such Product;

 

(d)           any tax, tariff, duty or government charge (including any tax such as a value added or similar tax or government charge other than an income tax) levied on the sale, transportation or delivery of a Product and borne by the seller thereof without reimbursement from any Third Party; and

 

(e)           amounts written off by reason of uncollectible debt.

 

Net Sales and all of the foregoing deductions from the gross invoiced sales prices of Product will be determined in accordance with, as applicable, Akcea’s or its Affiliates’ standard accounting procedures and GAAP. In the event that Akcea or its Affiliates make any adjustments to such deductions after the associated Net Sales have been reported pursuant to this Agreement, the adjustments will be reported and reconciled with the next report and payment of any royalties due.

 

Transfers of a Product between Akcea and its Affiliates and Sublicensees shall not be included in Net Sales, it being understood that the royalties set forth in Section 6.2 shall be determined based on sales to independent, non-Sublicensee Third Parties.  If Akcea or its Affiliate receives non-monetary consideration for a Product (excluding in-kind consideration such as development obligations and cross-licensing that may occur in the context of a license or collaboration), Net Sales are calculated based on the fair market value of that consideration. If Akcea or its Affiliates use or disposes of a Product in the provision of a commercial service, the Product is sold and the Net Sales are calculated based on the sales price of the Product to an independent Third Party or, in the absence of sales, on the fair market value of the Product as determined by the Parties in good faith.  Net Sales will not include any transfers of supplies of the applicable Product for (i) use in clinical trials, pre-clinical studies or other research or development activities, or (ii) a

 

49

 

bona fide charitable purpose; or (iii) a commercially reasonable sampling program.

 

Isis and Akcea agree that any reasonable definition of “net sales” customarily used in drug discovery, development or commercialization licensing or collaboration contracts that is agreed to by a Party (or a Third Party acquirer or assignee) and a sublicensee with respect to royalties payable to such Party from such sublicensee in an arms-length transaction under a particular sublicense will replace the definition of Net Sales in this Agreement and will be used in calculating the royalty payment to the other Party on sales of Products  sold pursuant to such sublicense and due under this Agreement, for so long as the same definition of net sales is used to calculate the royalty payable from the applicable sublicensee to such Party.

 

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

 

“Permitted Licenses” means licenses granted by Isis before or after the Effective Date to any Third Party under the Isis Core Technology Patents to (a) conduct pre-clinical research, or (b) enable such Third Party to manufacture or formulate oligonucleotides, where such Third Party is primarily engaged in providing contract manufacturing or services and is not primarily engaged in drug discovery, development or commercialization of therapeutics.

 

“Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture company, governmental authority, association or other entity.

 

“Phase 1 Clinical Trial” means the initial clinical testing of a Product in humans (first-in-humans study) with the intention of gaining a preliminary assessment of the safety of such Product.

 

“Phase 2 Clinical Trial” means a human clinical trial of a Product, conducted in any country that is intended to explore a variety of doses, dose response and duration of effect to generate initial evidence of clinical safety and activity in a target patient population, that would satisfy the requirements of 21 CFR 312.21(b) (but does not provide data sufficient to file an NDA), or equivalent clinical trials required by a Regulatory Authority in a jurisdiction outside of the United States.  A “Phase 2 Clinical Trial” includes any human clinical trial that has an efficacy endpoint.

 

“Phase 3 Clinical Trial” or “Pivotal Study” means a human clinical trial of a Product on a sufficient number of subjects that is designed to establish that the Product is safe and efficacious for its intended use, and to determine warnings, precautions and adverse reactions that are associated with such Product in the dosage range to be prescribed, which trial is intended to support Approval of the Product, as described in 21 C.F.R. 312.21(c) for the United States, or a similar Clinical Trial prescribed by the Regulatory Authorities in a foreign country.

 

50

 

“PMDA” means the Pharmaceutical and Medical Device Agency of Japan.

 

“Prior Agreements” means the agreements listed on APPENDIX 6.

 

“Product” means any pharmaceutical preparation that contains a Lipid Drug.

 

“Product-Specific Patents” mean collectively, the Isis Product-Specific Patents and Joint Product-Specific Patents.

 

“Prosecuting Party” has the meaning set forth in Section 9.2.4.

 

“Rare Disease Indication” means a disease indication with a patient population with less than or equal to 500,000 patients worldwide or a patient population for which the Regulatory Authorities require Phase 3 Clinical Studies less than 1,000 patients and less than 2 years of treatment.

 

“Receiving Party” has the meaning set forth in Section 8.1.

 

“Regulatory Authority” means any governmental authority, including FDA, EMA, or PMDA, that has responsibility for granting any licenses or approvals or granting pricing and/or reimbursement approvals necessary for the marketing and sale of a Product in any country.

 

“Regulatory Documentation” means all applications, registrations, licenses, authorizations and approvals (including all Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), all supporting documents and all Clinical Trials and tests, including the manufacturing batch records, relating to a Product, and all data contained in any of the foregoing, including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.

 

“Research” means pre-clinical research, including gene function, gene expression and target validation research, lead optimization, and which may include small pilot toxicology studies but excludes Development, and Commercialization.  When used as a verb, “Researching” means to engage in Research.

 

“Royalty Period” has the meaning set forth in Section 6.2.2.

 

“Sales & Marketing Expenses” means all costs and expenses incurred directly related to marketing, sales force and sales force management by Akcea, medical affairs, patient support programs, and reimbursement support , all in accordance with GAAP, consistently applied to all of Akcea’s products.

 

“Senior Representatives” has the meaning set forth in Section 13.4.1.

 

“Significant Event” has the meaning set forth in Section 7.1.1.

 

“Strategic Plan” has the meaning set forth in Section 3.1.1.

 

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“Sublicense” means an agreement pursuant to which Akcea or an Akcea Affiliate grants a Third Party the right to practice an Isis Patent Right (whether by license or covenant not to sue) or an option to obtain such a right, to Develop or Commercialize a Product.

 

“Sublicensee” means any Third Party that enters into a Sublicense with Akcea or its Affiliate to Develop and/or Commercialize a Product.

 

“Sublicense Revenue” means any fees, payments or other consideration Akcea or its Affiliate receives from a Sublicensee under a Sublicense, including license fees, up-front payments, milestone payments (including development, regulatory, and sales-based milestones), royalty pre-payments, cancellation or forgiveness of debt, or license maintenance fees, and payments made by a Sublicensee in consideration of equity or debt securities of Akcea or an Akcea Affiliate above the then fair market value but excluding: (a) payments made in consideration of equity or convertible debt securities of Akcea or its Affiliates at fair market value (provided that any premium over fair market value that is paid for such equity or debt securities will be Sublicense Revenue), and (b) payments made to Akcea or its Affiliates explicitly designated in the applicable Sublicense to fund  future Development Expenses or Sales & Marketing Expenses of Products by Akcea or its Affiliates after the effective date of such Sublicense and Akcea or its Affiliates are contractually obligated to spend such payments.  If Akcea or its Affiliate receives any non-cash Sublicense Revenue (excluding in-kind commitments by the applicable Sublicensee to Develop and Commercialize a Product), Akcea will pay Isis, at Akcea’s election, either (i) a cash payment equal to the fair market value of Isis’ portion of the Sublicense Revenue, or (ii) the in-kind portion, if practicable, of the Sublicense Revenue, provided that if such in-kind Sublicense Revenue is in the form of equity securities of a Third Party and does not exceed the Sublicensing Equity Threshold.  If the in-kind portion of the Sublicensing Revenue in the form of Third Party equity securities exceeds the Sublicensing Equity Threshold, then Akcea will pay Isis the remainder of such payment in cash. Consideration paid under a series of agreements related to a Product will be aggregated and treated as one Sublicense.

 

“Sublicensing Equity Threshold” means the threshold amount of equity securities in a Third Party equal to 18.5% of such Third Party’s issued and outstanding shares (i) transferred to Isis by Akcea or (ii) Isis’ and Akcea’s combined ownership interest, so long as Isis and Akcea are consolidating for financial reporting purposes.

 

“Third Party” means any Person other than Isis or Akcea or their respective Affiliates.

 

“Third Party Obligations” means any financial and non-financial encumbrances, obligations, restrictions, or limitations imposed by an agreement between Isis or Akcea and a Third Party (including Existing In-License Agreements and Additional Third Party Agreements) that relate to a Product, including field or territory restrictions, covenants, milestone payments, diligence obligations, sublicense revenue, royalties, or other payments.

 

“Transition Plan” has the meaning set forth in Section 3.2.1.

 

“Valid Claim” means a claim of a Patent which (i) in the case of any granted, unexpired United States Patent or foreign Patent, will not have been donated to the public, disclaimed or held invalid or unenforceable by a court of competent jurisdiction in an unappealed or

 

52

 

unappealable decision, or (ii) in the case of any United States or foreign patent application, is being prosecuted in good faith and will not have been permanently cancelled, withdrawn, or abandoned, provided that (x) no more than five years have passed since the earliest date of filing for such application in the United States (unless and until such claim is granted), and (y) no more than eight years have passed since the earliest date of filing for such application outside of the United States (unless and until such claim is granted).

 

53

 

APPENDIX 2

 

ISIS CORE TECHNOLOGY PATENTS

 

[***]

 

***Confidential Treatment Requested

 

54

 

APPENDIX 3

 

ISIS PRODUCT-SPECIFIC PATENTS

 

[***]

 

***Confidential Treatment Requested

 

 

APPENDIX 4

 

ISIS MANUFACTURING PATENTS

 

[***]

 

***Confidential Treatment Requested

 

 

APPENDIX 5

 

IN-LICENSE AGREEMENTS

 

1.                                      [***]

 

2.                                      [***]

 

3.                                      [***]

 

4.                                      [***]

 

5.                                      [***]

 

6.                                      [***]

 

7.                                      [***]

 

[***]

 

***Confidential Treatment Requested

 

 

APPENDIX 6

 

PRIOR AGREEMENTS

 

1.              [***]

 

2.              [***]

 

3.              [***]

 

4.              [***]

 

5.              [***]

 

6.              [***]

 

7.              [***]

 

8.              [***]

 

9.              [***]

 

10.       [***]

 

11.       [***]

 

***Confidential Treatment Requested

 

 

12.       [***]

 

13.       [***]

 

14.       [***]

 

15.       [***]

 

16.       [***]

 

17.       [***]

 

18.       [***]

 

19.       [***]

 

20.       [***]

 

21.       [***]

 

22.       [***]

 

***Confidential Treatment Requested

 

 

SCHEDULE 3.4.3

 

CARDIO METABOLIC ADVISORY BOARD

 

1.                                      John Kastelein, M.D., Ph.D.

 

2.                                      Sam Tsimikas. M.D.

 

3.                                      Rosanne Crooke, Ph.D.

 

4.                                      Joe Witztum, M.D.

 

 

SCHEDULE 3.8.1

 

MANUFACTURING CMO AGREEMENTS

 

Executing CMO Agreements. In connection with Akcea’s selecting and engaging one or more CMOs under Section 3.8.2(a) above, the Parties will cooperate in good faith to negotiate and execute any agreements with CMOs for the Manufacture of Clinical Supplies as well as for the Manufacture of Commercial Supplies (each such agreement, a “Manufacturing Agreement”). As between Akcea and Isis, Akcea will enter into such Manufacturing Agreements with CMOs. The Manufacturing Agreements will include (1) a license from Isis to the CMO under the Isis Manufacturing Patents and Isis Manufacturing and Analytical Know-How to the extent necessary for such CMO to Manufacture Products in such Third Party’s own manufacturing facility (a “Manufacturing License”), which Isis agrees it shall grant to any such licensed CMO, or, at Akcea’s election, a sublicense from Akcea to the CMO and (2) provisions permitting Isis to elect to have such agreements assigned to Isis in the event of a termination of this Agreement. Absent any such assignment election, except as set forth in Section 3.8.2, Isis will have no obligations under such Manufacturing Agreements. Akcea will have the final decision-making authority regarding the terms of any such Manufacturing Agreement with a CMO. Prior to execution of any such Manufacturing Agreement, Akcea will provide a copy of any proposed Manufacturing Agreement to Isis for Isis’ review and will consider in good faith all comments and recommendations provided by Isis with respect to such Manufacturing Agreement. Akcea will provide Isis with a true and complete copy of any Manufacturing Agreement with a CMO within 30 days after the execution thereof.  Akcea will be responsible for paying the amount charged by a CMO for the Manufacture of Clinical Supplies and Commercial Supplies.

 

2

 

SCHEDULE 3.8.2

 

Isis’ FULLY ABSORBED COST OF GOODS METHODOLOGY

 

Cost Estimate of API Cost per Kilogram

 

(in OOO’s)

 

Direct Material:

 

Based on actual costs for raw materials.

 

Direct Labor:

 

Identify the number of dedicated FTEs required to support the manufacture of budgeted production volume.  Divide fully burdened salaries for these FTEs by the budgeted production volume.

 

Manufacturing Equipment Support:

 

These are the costs associated with supporting our manufacturing equipment such as calibration, service contracts, environmental monitoring, water testing, and cleaning.  Divide the total costs in this category by the budgeted production volume.

 

Depreciation:

 

This category includes the depreciation expense for the facilities and equipment in both manufacturing suites. The total costs in this category are divided by the total budgeted production volume. Because these costs are fixed in nature, the per unit cost will decline as our production volume increases.

 

Building Lease:

 

Costs in this category include rent expense and landlord pass through costs for our manufacturing facility. The total costs in this category are divided by the total production volume.

 

Occupancy Costs:

 

Costs in this category include utilities, repairs, maintenance, security, property taxes and insurance. The total costs in this category are divided by the total production volume.

 

Infrastructure Support:

 

The costs in this category are primarily costs of personnel needed to support manufacturing. The departments included in this category are information technology, purchasing, receiving, facilities, patents, health and safety (including hazardous waste

 

3

 

costs), finance, HR, QA, ADQC, document control.  We ask each department manager for an estimate of the percentage his/her department spends supporting manufacturing and we apply that percentage to the department’s budget on a department by department basis.

 

Estimated Total API Cost per Kilogram

 

*Isis’ Fully Absorbed Cost of Goods does not include import duties, VAT or other taxes, which Akcea will be responsible for paying in addition to Isis’ Fully Absorbed Cost of Goods.

 

CMO:  If Isis uses a Third Party CMO, as permitted by this Agreement, Fully Absorbed Cost of Goods will mean the amounts paid to the CMO plus costs associated with acquisition from such manufacturer.

 

4

 

SCHEDULE 13.9

 

FORMATION AGREEMENTS

 

1.                                      Services Agreement by and between Isis Pharmaceuticals, Inc. and Akcea Therapeutics, Inc., dated December 18, 2015.

 

2.                                      Akcea Therapeutics, Inc. Investor Rights Agreement, dated December 18, 2015.

 

5

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