Document:

EXHIBIT 10.1

 

SRS LABS, INC.

 

 

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

(also functioning as a Summary Plan Description)

 

 

As Amended and Restated
on August 3, 2009

 

 

 

SRS LABS, INC.

 

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

(also functioning as a Summary Plan Description)

 

 

Table of Contents

 

 

	
   

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  BENEFITS PAYABLE UNDER
  THE PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)           Change in Control
  Severance Benefit

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)           Paid Leave in Lieu of
  Notice

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)           Definition of Change
  in Control

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  PLAN ELIGIBILITY

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  VESTING AND ELIGIBILITY
  RULES FOR BENEFITS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)           Covered Terminations

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)           Definitions

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)           Agreements Precedent
  to Collecting Benefits; Recapture of Benefits

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  ADDITIONAL BENEFITS

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  TAXES, AND
  AUTHORIZATIONS FOR TAX LAW COMPLIANCE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  RELATION TO OTHER PLANS
  AND AGREEMENTS

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CLAIMS PROCEDURES

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)           Claims Normally Not
  Required

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)           Disputes

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)           Time for Filing
  Claims

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)           Procedures

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  PLAN ADMINISTRATION

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)           Discretion

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)           Finality of
  Determinations

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)           Drafting Errors

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)           Scope

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  COSTS, INDEMNIFICATION,
  AND REIMBURSEMENT FOR LITIGATION EXPENSES

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  PLAN AMENDMENT
  AND TERMINATION; LIMITATION ON EMPLOYEE RIGHTS; CONDITIONS OF RECEIPT OF
  BENEFITS

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)           Sponsor
  May Amend or Terminate the Plan

  	
   

  	
  12

  

 

i

 

	
   

  	
  (b)           Application of
  Amendment or Termination of the Plan

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)           No Right to Continued
  Employment

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  PLAN FUNDING

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  GOVERNING LAW

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  MISCELLANEOUS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  OTHER INFORMATION

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)           Type of Plan

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)           Addresses, etc.

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)           Agent for Service of
  Legal Process

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)           Funding

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)           Plan Amendment or
  Termination

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)            Statement of ERISA
  Rights

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)           Whom to Call for
  Additional Information

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Participation Agreement – Version 1 (Persons with Employment/Severance
  Agreements) and Version 2 (Persons without Employment/Severance Agreements)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  Grantor Trust Agreement

  	
   

  	
   

  
					

 

ii

 

SRS LABS, INC.

 

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

 

 

Plan Document and Summary
Plan Description

 

 

SRS Labs, Inc. (the “Company”) recognizes that a corporate
change in control may adversely affect certain employees.  To treat these employees in a fair and
compassionate manner, the Company has adopted this Amended and Restated Change
in Control Protection Plan (the “Plan”).

 

This document is the Plan’s plan document, and also
functions as its summary plan description. 
This Plan will control in case of conflict with any other document.  Throughout this Plan, the term “Sponsor” is used when the Company
is acting in its non-fiduciary capacity as Plan sponsor and settlor.  The term “Plan
Administrator” is used when the Company is acting in the limited
capacity of interpreting the Plan and determining eligibility for benefits (see
Section 8 below for detailed information).

 

The Plan became effective on April 27, 2005 and
was amended and restated on August 3, 2009.   Even if the Plan expires or is terminated,
the Sponsor will thereafter honor any vested but unpaid benefits under the Plan
(subject to Section 10 below). 
References to Sponsor, the Company, and their affiliates also refer to
any successor to their interests.

 

1.             Benefits Payable Under the Plan

 

(a)           Change in Control Severance
Benefit

 

You will become entitled to severance
benefits pursuant to this Plan if, while this Plan is in effect and while you
are eligible under Section 2 for Plan participation, your employment
terminates under the circumstances described in Section 3(a).  The severance benefits (“Change in Control Benefits”) to be paid
to you after your termination date shall be determined pursuant to an
agreement, substantially in the form attached as Exhibit A (the “Participation Agreement”), that you
sign pursuant to Section 2 as a condition for becoming a Plan participant.
The Sponsor will make all decisions relating to who is offered a Participation
Agreement and the terms, conditions, and benefits promised under the
Participation Agreement.

 

(b)           Paid Leave in Lieu of Notice

 

To the extent that the Federal Worker
Adjustment and Retraining Notification Act applies to you, if you become
entitled to Change in Control Benefits under the Plan, to the extent you have
been given less than sixty (60) days’ advance written notice of the date
your active services actually terminate, you will be given a Paid Leave in Lieu
of Notice for the balance of that 60-day period, as follows:

 

 

(i)            During
your Paid Leave in Lieu of Notice, you will be an inactive employee but you
will be entitled to the same employee benefits and participation rights to
which you would have been entitled under our company-wide employee benefit
plans had your active employment continued.

 

(ii)           If you
resign or die during a paid leave, your paid leave will end and the Change in
Control Benefits that you would have received during the balance of the paid
leave will be paid to you (or, if you have died, to your estate) in a lump
sum.  All other paid leave benefits will
stop on the day you resigned or died, except for any group insurance
coverage that by its terms continues until the end of the calendar month in
which you terminate.

 

(iii)          This
Paid Leave in Lieu of Notice runs concurrently with the Change in Control
Benefits provided for in Section 1(a) hereof and is not in addition
to Change in Control Benefits provided for in this Plan.

 

(c)           Definition of Change in
Control

 

The term “Change in Control” shall mean the occurrence of any of the
following events, subject to the Plan Administrator’s absolute discretion to
interpret this definition in a manner that conforms with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”)
and associated regulations:

 

(i)            The
Company is merged, consolidated or reorganized into or with another corporation
or other legal person and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting power of the then
outstanding securities of such corporation or person immediately after such transaction
are held in the aggregate by the holders of Voting Stock (as that term is
defined in subsection (iii) hereof) of the Company immediately prior to
such transaction;

 

(ii)           The
Company sells all or substantially all of its assets to any other corporation
or other legal person, less than a majority of the combined voting power of the
then-outstanding voting securities of which are held directly or indirectly in
the aggregate by the holders of Voting Stock of the Company immediately prior
to such sale;

 

(iii)          Any
person (as the term “person” is
used in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of
securities representing more than 50%  of
the combined voting power of the then-outstanding securities of the Company
entitled to vote generally in the election of directors of the Company (“Voting Stock”); or

 

2

 

(iv)          The
Company files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in, or in response to, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein)
that a  Change in Control of the Company
has occurred.

 

Notwithstanding the foregoing provisions of (a) subsections (iii) or
(iv) hereof, a “Change in Control” shall not be deemed to have occurred
for purposes of this Agreement solely because the Company, an entity in which
the Company directly or indirectly beneficially owns 50% or more of the voting
securities of such entity (an “Affiliate”),
any Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company either files or becomes obligated to file a report
or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act, disclosing beneficial ownership by it of shares of
voting securities of the Company, whether in excess of 50% or otherwise, or
because the Company reports that a Change in Control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership; or (b) Subsection (iii) hereof, a “Change in Control”
shall not be deemed to have occurred for purposes of this Agreement solely
because a person who is a holder of five percent (5%) or more of the Voting
Stock and who also is an officer and director of the Company on the date of
this Agreement acquires more than 50% of the Voting Stock.

 

Notwithstanding the foregoing provisions of subsections (i) and (ii) hereof,
a “Change in Control” shall not be deemed to have occurred for purposes of this
Agreement solely because the Company engages in an internal reorganization,
which may include a transfer of assets to one or more Affiliates, provided
that such transaction has been approved by at least two-thirds of the
Directors of the Company and as a result of such transaction or transactions,
at least 80% of the combined voting power of the then-outstanding securities of
the Company or its successor are held in the aggregate by the holders of Voting
Stock immediately prior to such transactions.

 

2.             Plan
Eligibility

 

You are eligible for this Plan only if the Sponsor
has provided you with a Participation Agreement signed by a duly authorized
officer of the Company confirming your eligibility for the Plan.  If you execute the Participation Agreement
and return it to the Company within thirty (30) days after receiving it,
you will be a “Participant”.  If your Participation Agreement expires for
any reason before you become vested in the right to collect Change in Control
Benefits, you will immediately cease to be a Participant.

 

3.             Vesting
and Eligibility Rules for Benefits

 

(a)           Covered
Terminations

 

If you are a
Participant, incur a Covered Termination (as defined below), and satisfy the
conditions set forth in Section 3(c) below, you will become vested in
your right to receive the Change in Control Benefits set forth in your
Participation Agreement.  If you
terminate employment for any other reason, you will not be eligible for any benefits
under this Plan.  For example, you will
not be eligible for Change in Control Benefits under the

 

3

 

Plan
if the Plan Administrator determines, in its sole discretion, that your
Employment (as defined below) has either (i) terminated before a Change in
Control occurs, or (ii) terminated on or after a Change in Control by
reason of —

 

(i)            your
resignation without Good Reason (as defined below);

 

(ii)           your
death; or

 

(iii)          your
discharge for Cause (as defined below), as determined by the Sponsor in its
sole discretion.

 

(b)           Definitions

 

(i)            For
purposes of this Plan, a “Covered
Termination” shall mean that, at a time on or two (2) years
after a Change in Control either (I) you have resigned from
Employment for Good Reason (as defined below), or (II) your Employment is
involuntarily terminated by the Company without Cause (as defined below).  A Covered Termination shall not include a
transfer of your Employment to the parent of the Company, if any, or an
affiliate of the parent, or an affiliate of the Company, or any successor to
the Company’s obligations under this Plan, whether through a merger,
acquisition of the Company or any related entity or their assets, or a
contractual assumption of the Plan or its liabilities in anticipation of or
after a Change in Control, in which case you shall continue to be a Participant
under the Plan and any reference herein to “Company” shall refer to the entity
that is your employer.

 

(ii)           For  purposes of this Plan, “Employment”
shall mean your employment (I) with the Company, (II) the parent of
the Company, if any, or an affiliate of the parent, or an affiliate of the
Company, or (III) any successor to the Company’s obligations under this
Plan, whether through a merger, an acquisition of the Company or any related
entity, or a contractual assumption of the Plan or its liabilities.

 

(iii)          For
purposes of this Plan, “Cause”
shall mean (I) your engagement in fraud, misappropriation or a material
breach of the Company’s code of ethics; (II) your engagement in
intentional conduct which is materially injurious, monetarily or otherwise, to
the Company or its affiliates, (III) your commission of an act of
deliberate and material dishonesty; (IV) your failure to follow a lawful
and material directive related to your job responsibilities or otherwise
related to your position at the Company; (V) your commission of a crime or
causing the Company to commit a crime; or (VI) your conviction, guilty
plea or plea of nolo contendere either to any felony, or to any misdemeanor
involving dishonesty or moral turpitude, provided however, in case of (II) and
(IV), such events shall not constitute “Cause” until after you have been given
written notice of such and have failed to cure such within thirty (30)
days following such notice.

 

4

 

(iv)          For
purposes of this Plan, and unless otherwise stated in a Participant’s
Participation Agreement, “Good
Reason” shall mean (I) any material reduction by the
Company in your base salary below the amount in effect immediately prior to the
Change in Control; (II) the
requirement that you change your principal location of work to any location
that is in excess of forty (40) miles from your location of work as of the
effective time of the Change in Control; (III) the substantial curtailment
of your rights, duties and responsibilities as an Employee as compared to those
you were performing before the Change in Control.  In addition, Good Reason shall mean the
liquidation, dissolution, merger, consolidation or reorganization of the
Company, or the transfer of all or substantially all of the Company’s assets,
unless the successor (by liquidation, dissolution, merger, consolidation,
reorganization, transfer or otherwise) to which all or substantially all of its
assets have been transferred (directly or by operation of law) assumes the
duties and obligations of the Company under this Plan.  Notwithstanding the foregoing, “Good Reason”
shall only be found to exist if prior to your resignation for Good Reason, you
have provided written notice to the Company within ninety (90) days following
the existence of such Good Reason event indicating and describing the event
resulting in such Good Reason, and the Company does not cure such event within thirty
(30) days following the receipt of such notice. 
In the event the Company fails to timely cure, you must resign within
ninety (90) days following the expiration of the cure period in order for the
resignation to constitute Good Reason.

 

(c)           Conditions
Precedent to Collecting Benefits; Recapture of Benefits

 

As a condition precedent to your vesting
in the right to collect any benefits pursuant to this Plan, the Sponsor may in
its discretion require that you execute any one or more of the following agreements
in a form satisfactory to the Sponsor (provided such agreements if required
must be executed and delivered to the Company within 21 days following your
receipt of such agreements) and comply with the following obligations:

 

(i)            A
general release of any and all past, present, or future claims (whether or not
such claims relate to the Plan) that you may have against the Company, its
subsidiaries and affiliates, and their officers, directors, employees and
agents, and a covenant not to bring any action in respect of any claim so
released.

 

(ii)           An
agreement not to make disparaging comments (whether orally or in writing)
regarding the Company or its subsidiaries and affiliates, its officers and
employees, its products and services, or any other aspect of the Company’s
business either during or following termination of your employment with the
Company.

 

(iii)          An
agreement that you will not, without the prior written consent of the Company,
disclose to any entity or person any information which is treated as
confidential by the Company (“Confidential Information”),
and is not generally known or available to the public, provided, that you may
make disclosures of such Confidential Information to the extent required by law
or legal process.  The term “Confidential
Information” shall include:

 

5

 

(A)                              information regarding the business
methods, business policies, procedures, techniques, business or strategic
plans, trade secrets, pricing policies, or other processes of or developed by
the Company;

 

(B)                                any names and addresses of customers or
clients, and any data on or relating to past, present or prospective customers
or clients;

 

(C)                                formulae, inventions, research or
development projects or results, or other knowledge developed by the Company;
and

 

(D)                               any other confidential information
relating to or dealing with the business operations or activities of the
Company; made known to you or learned or acquired by you while in the employ of
the Company, which is not generally known to others outside the Company,
whether written or otherwise, regarding earnings, plans, strategies,
prospective and executed contracts and other business arrangements.

 

(iv)                              Upon termination of your employment, you
must return all property of the Company and reimburse the Company for any
personal telephone calls, credit card charges and other expenses, and pay all
amounts due to the Company.

 

Notwithstanding any other provision of the Plan, you
will not be treated as having satisfied the requirements of this Section 3(c) unless
(I) you execute any one or more of the above agreements that the Sponsor
may for any reason require, (II) you deliver such agreements to the
person, and within the time period above and prescribed in such agreement, and (III) you
do not make a legally valid revocation of such agreement.  In the event the Sponsor determines that you
have breached any of the conditions set forth in this Subsection 3(c) or
any agreement referenced hereunder, the Company shall (in addition to any other
remedies it may have) not be required to provide any of Change in Control Benefits
pursuant to the Plan, and you shall be obligated to return to the Company, upon
demand, an amount (plus simple interest) equal to all of the Change in Control
Benefits that you have received under this Plan.

 

4.                                      Additional
Benefits

 

(a)                                 If you become entitled to Change in
Control Benefits under this Plan, you will also be reimbursed for COBRA
continuation premiums you pay for yourself, your spouse, and your dependents
for the period, if any, set forth in your Participation Agreement.  For COBRA purposes, however, the date on
which you terminate employment will commence the period for which you are
entitled to continuation coverage under COBRA (meaning that the Company’s
payment of COBRA premiums may not extend the duration of your COBRA
eligibility).  The regular COBRA
procedures and rules will apply.

 

(b)                                 Upon the death
of a Participant receiving Change in Control Benefits, the beneficiary(ies) of
the Participant (whom he or she designated for purposes of group life insurance
benefits) shall be entitled to receive such Change in Control Benefits on
the same terms that would have applied if the Participant had survived to
collect all benefits.

 

6

 

5.                                      Taxes, and
Authorizations for Tax Law Compliance

 

Taxes will be withheld from your Change in Control
Benefits to the extent the Plan Administrator, it its sole discretion,
determines that this is appropriate or is required by law.  You are solely responsible and liable for the
satisfaction of all taxes and penalties, including any taxes arising under Section 409A
of the Code  that may arise in connection with your Plan
participation or your receipt of Change in Control Benefits.  Accordingly, neither the Sponsor, the Plan
Administrator, nor any person associated with them has any obligation or
authority to provide you with tax planning advice, or to take actions that
minimize or eliminate any or all of the taxes or penalties which you incur or
may incur pursuant to the Plan.  The Plan
Administrator shall nevertheless have the discretion to unilaterally modify
your rights under this Plan (including your rights under any Participation
Agreement) in a manner that —

 

(a) voids
or modifies any terms of the Plan or your Participation Agreement to the extent
it would violate Section 409A of the Code, and

 

(b) for
any payment that would otherwise violate Section 409A of the Code, to
provide Change in Control Benefits only in connection with a distribution event
that is allowable under Section 409A of the Code.  For example, the Plan Administrator may delay
paying your Change in Control Benefits for up to six months and one day if the
Plan Administrator reasonably determines that an earlier payment will violate Section 409A(a)(2)(B)(i) of
the Code.

 

The
Plan Administrator has the sole discretion to interpret the requirements of the
Code, including Section 409A, for purposes of determining your rights
under the Plan and your Participation Agreement.

 

6.                                      Relation to
Other Plans and Agreements; 280G Limitations

 

By signing your Participation Agreement, you
recognize and agree that any prior severance or similar plan of the Company
(including a prior version of this Plan or a related Participation Agreement)
that might apply to you is hereby revoked and ineffective as to you;
provided that, unless specifically provided in your Participation Agreement,
neither this Plan nor your Participation Agreement will affect any outstanding
employment, equity award,  or other
written agreement between you and the Company.  No Change in Control Benefits that you
receive will be taken into account for purposes of determining benefits under
other benefit plans, retirement or pension plans, 401(k) plans, or similar
retirement arrangements.  All such
retirement-related plans or similar arrangements, to the extent inconsistent
with this Plan, are hereby so amended.

 

The
amount of any cash payment to be received by Participant  pursuant to this Plan shall be reduced (but
not below zero) to the extent required so that no portion of any payment or benefit
in the nature of compensation received or to be received by Participant
(whether payable pursuant to the terms of this Plan or pursuant to any other
plan, contract, agreement or arrangement with the Employer or any other person)
(such payments or benefits are referred to collectively as the “Total Payments”) shall be treated
as an “excess parachute payment” within the meaning of section 280G(b)(1) of
the Code. Only amounts

 

7

 

payable under this Plan, and no other payments or
benefits included in the Total Payments, shall be reduced pursuant to this Section 6.  Notwithstanding the foregoing, Participant
may elect in writing to reduce other benefits payable by the Company to
Participant outside of the Plan (in lieu of reducing all or some of the
benefits payable hereunder) in order to avoid having any such “excess payments;”
provided that the written notice of such election must be received by the
Company’s Chief Executive Officer prior to the date on which any payments are
required to be made under the Plan.

 

The
determination of whether any reduction in payments is required pursuant to  Section 6 of this Plan shall be made in
writing by the Company’s independent public accountants, or such other
independent accounting firm or tax advisors selected by the Plan Administrator
in its sole discretion (the “Accountants”),
whose determination shall be conclusive and binding upon Participant and the
Company for all purposes under this Plan. 
For the purposes of making the calculations required by this Section 6,
the Accountants may make reasonable assumptions and approximations regarding
applicable taxes and applicable tax rates and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code, applicable regulations and other authority.  The Plan Administrator and the Participant
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section.  The Accountants shall provide
detailed supporting calculations, in writing, to both the Plan Administrator
and the Participant of determinations made pursuant to this Section 6.  The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.

 

In the
event of any uncertainty as to whether a reduction in payments to a Participant
is required pursuant to Section 6 of this Plan, the Company shall
initially make the payment to Participant, and Participant shall be required to
refund to the Company any amounts ultimately determined not to have been
payable under the terms of this Plan.

 

The
Company and the Participant shall promptly deliver to each other copies of any
written communications, and summaries of any verbal communications, with any
taxing authority regarding the applicability of Section 280G or 4999 of
the Code to any portion of the Total Payments. 
In the event of any controversy with the Internal Revenue Service or
other taxing authority with regard to the applicability of Section 280G or
4999 of the Code to any portion of the Total Payments, the Company shall have
the right, exercisable in its sole discretion, to control the resolution of
such controversy at its own expense. 
Participant and the Company shall in good faith cooperate in the
resolution of such controversy.

 

7.                                      Claims
Procedures

 

(a)                                 Claims
Normally Not Required

 

Normally, you
do not need to present a formal claim to receive the Change in Control Benefits
payable under this Plan.

 

8

 

(b)                                 Disputes

 

If any person
(claimant) believes that benefits are being denied improperly, that the Plan is
not being operated properly, that fiduciaries of the Plan have breached their
duties, or that the claimant’s legal rights are being violated with respect to
the Plan, the claimant must file a formal claim with the Plan Administrator within the time period set forth in Section 7(c).  The Plan Administrator will handle all such
claims in accordance with the procedures set forth in Section 7(d). 
This requirement applies to all claims that any claimant has with
respect to the Plan, including claims against fiduciaries and former
fiduciaries, except to the extent the Plan Administrator determines, in its
sole discretion, that it does not have the power to grant all relief reasonably
being sought by the claimant.  See
Section 14(f) for information about your rights in the event the
Administrator denies your claim.

 

(c)                                  Time
for Filing Claims

 

A formal claim
must be filed within ninety (90) days after the date the claimant first
knew or should have known of the facts on which the claim is based (or, if earlier, the date that is 120 days
after your employment terminates for any reason), unless the Sponsor in writing consents
otherwise.  The Plan Administrator will
provide a claimant, on request, with a copy of the claims procedures
established under subsection 7(d). If a claimant files an
untimely claim, no benefits of any kind shall be payable under the Plan.

 

(d)                                 Procedures

 

The Plan
Administrator will adopt procedures for considering claims, which it may amend
from time to time, as it sees fit.  If
the Plan Administrator does not offer a Participant the payment of Plan benefits
within 10 days after such benefits are due and payable, the Participant must file a claim for benefits on a form
prescribed by the Plan Administrator and within the time frame set forth in
subsection (c) above.  If the
claimant’s claim for a benefit is wholly or partially denied, the Plan
Administrator will furnish the claimant with a written notice of the
denial.  This written notice must be
provided to the claimant within a reasonable period of time (generally within
ninety (90) days, unless special circumstances require an extension of
time for processing the claim, in which case a period not to exceed one hundred
and eighty (180) days) after the receipt of the claimant’s claim by the Plan
Administrator.  (If such an extension of
time is required, written notice of the extension will be furnished to the
claimant prior to the termination of the initial 90-day period, and will
indicate the special circumstances requiring the extension.)  Written notice of denial of the claimant’s
claim must contain the following information:

 

(i)                                     the specific reason or
reasons for the denial;

 

(ii)                                  a specific reference to
those provisions of the Plan on which such denial is based;

 

9

 

(iii)                               a description of any
additional information or material necessary to perfect the claimant’s claim,
and an explanation of why such material or information is necessary; and

 

(iv)                              a copy of the appeals
procedures under the Plan and the time limits applicable to such procedures,
including a statement of the claimant’s right to bring a civil action under Section 502(a) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) following an adverse
determination of the claimant’s claim.

 

If the
claimant’s claim has been denied, and the claimant wishes to submit his or her
request for a review of his or her claim, the claimant must follow the
following Claims Review Procedure:

 

1.                                       Upon the denial of his or her claim for
benefits, the claimant may file his or her request for review of his or her
claim, in writing, with the Plan Administrator or claims processor;

 

2.                                       The claimant must file the claim for
review not later than sixty (60) days after he or she has received written
notification of the denial of his or her claim for benefits.

 

3.                                       The claimant has the right to review and
obtain copies of all relevant documents relating to the denial of his or her
claim and to submit any issues and comments, in writing, to the Plan
Administrator;

 

4.                                       If the claimant’s claim is denied, the
Plan Administrator must provide the claimant with written notice of this denial
within sixty (60) days after the Plan Administrator’s receipt of the
claimant’s written claim for review. 
There may be times when this 60-day period may be extended.  This extension may only be made, however,
where there are special circumstances which are communicated to the claimant in
writing within the 60-day period.  If
there is an extension, a decision will be made as soon as possible, but not
later than one hundred and twenty (120) days after receipt by the Plan
Administrator of the claimant’s claim for review; and

 

5.                                       The Plan Administrator’s decision
regarding the claimant’s claim for review will be communicated to the claimant
in writing, and if the claimant’s claim for review is denied in whole or part,
the decision will include:

 

(B)                                the specific reason or reasons for the
denial;

 

(C)                                specific
references to the pertinent provisions of the Plan on which the decision was
based;

 

(D)                               a statement
that the claimant may receive, upon request and free of charge, reasonable
access to and copies of, all documents, records and other information relevant
to the claimant’s claim for benefits; and

 

10

 

(E)                                 a statement of
the claimant’s right to bring a civil action under Section 502(a) of
ERISA.

 

8.                                      Plan
Administration

 

(a)                                 Discretion

 

The Plan
Administrator is responsible for the general administration and management of
the Plan and shall have all powers and duties that the Plan Administrator, in
its sole discretion, deems necessary to fulfill its responsibilities,
including, but not limited to, the discretion to interpret and apply the Plan
and to determine all questions relating to eligibility for benefits.  The Plan Administrator and all Plan
fiduciaries shall have the discretion to interpret or construe ambiguous,
unclear, or implied (but omitted) terms in any fashion they deem to be
appropriate in their sole and absolute discretion, and to make any findings of
fact needed in the administration of the Plan. 
The validity of any such interpretation, construction, decision, or
finding of fact shall not be given de novo review if challenged in court, by
arbitration, or in any other forum, and shall be upheld unless clearly
arbitrary or capricious.

 

(b)                                 Finality
of Determinations

 

Unless
arbitrary and capricious, all actions taken and all determinations by the Plan
Administrator or by Plan fiduciaries will be final and binding on all persons
claiming any interest in or under the Plan.  To the extent the Plan Administrator or any
Plan fiduciary has been granted discretionary authority under the Plan, the
Plan Administrator’s or Plan fiduciary’s prior exercise of such authority shall
not obligate it to exercise its authority in a like fashion thereafter.

 

(c)                                  Drafting
Errors

 

If,
due to errors in drafting, any provision of the Plan or any Participation
Agreement does not accurately reflect its intended meaning, as demonstrated by
consistent interpretations or other evidence of intent (by the Sponsor or the
Plan Administrator, as the case may be), or as determined by the Plan
Administrator in its sole and absolute discretion, the provision shall be
considered ambiguous and shall be interpreted by the Plan Administrator and all
Plan fiduciaries in a fashion consistent with its intent, as determined in the
sole and absolute discretion of the Plan Administrator (but with regard to the
intent of the Sponsor as settlor).

 

(d)                                 Scope

 

This Section may
not be invoked by any person to require the Plan to be interpreted in a manner
inconsistent with its interpretation by the Plan Administrator or other Plan
fiduciaries.

 

11

 

9.                                      Costs, Indemnification, and Reimbursement
for Litigation Expenses

 

(a)                                 All costs of
administering the Plan and providing Plan benefits will be paid by the Company.

 

(b)                                 To the extent
permitted by applicable law and in addition to any other indemnities or
insurance provided by the Company, the Company shall indemnify and hold
harmless its (and its affiliates’) current and former officers, directors,
employees, and agents against all expenses, liabilities, and claims (including
legal fees incurred to defend against such liabilities and claims) arising out
of their discharge in good faith of their administrative and fiduciary
responsibilities with respect to the Plan. 
Expenses and liabilities arising out of willful misconduct will not be
covered under this indemnity.

 

(c)                                  In the event
that, at any time on or after the date three (3) months before a
Change in Control, a Participant substantially prevails over the Company or any
successor to its interests in any dispute that arises between the Participant
and the Company with respect to the terms or interpretation of the Plan,
whether instituted by formal legal proceeding or otherwise (including any
action that the Participant takes to enforce the terms of his or her
Participation Agreement or to defend against any action taken by the Company),
the Company shall reimburse the Participant for all costs and expenses, include
reasonable attorney’s fees, arising from such dispute, proceedings, or
actions.  Such reimbursement will however
be subject to proof of such costs.

 

10.                               Plan Amendment
and Termination; Limitation on Employee Rights; Conditions of Receipt of
Benefits

 

(a)                                 Sponsor
May Amend or Terminate the Plan

 

The Sponsor, acting through its Board of
Directors or its delegate, has the right in its sole and absolute discretion to
amend the Plan, to extend its term, or to terminate the Plan, prospectively.

 

(b)                                 Application
of Amendment or Termination of the Plan

 

Notwithstanding
the foregoing, any amendment or termination of the Plan that occurs within the
three-month period before a Change in Control, in connection with a Change in
Control, or within two years after a Change in Control shall only apply to
those Participants:

 

(i)                                     who consent
individually and in writing to the amendment or termination; or

 

(ii)                                  whose vested
Change in Control Benefits, or rights under the Plan to become entitled to the
Change in Control Benefits set forth in his or her Participation Agreement are
not adversely affected by such amendment or termination.

 

12

 

Any decision or
interpretation that is made either after a Change in Control or pursuant to
this subparagraph (b) shall be subject to judicial review under a de novo
standard, and not under the arbitrary and capricious standard that is generally
intended to apply (and shall apply) to all other Plan determinations and
interpretations.

 

(c)                                  No
Right to Continued Employment

 

This Plan shall not give any employee the
right to be retained in the service of the Company, and shall not interfere
with or restrict the right of the Company to terminate or retire the employee for
any lawful reason.

 

11.                               Plan Funding

 

The Company shall pay any Change in Control Benefits
from its general assets.  Notwithstanding
the foregoing, in the event of a Change in Control, the Company shall establish
and fund an irrevocable grantor (a/k/a rabbi) trust from which all Change in
Control Benefits shall be paid.  The
agreement which shall be used to establish such trust is attached hereto as Exhibit B.

 

12.                               Governing Law

 

This Plan is a welfare plan subject to ERISA, and it
shall be interpreted, administered, and enforced in accordance with that
law.  To the extent that state law is
applicable, the statutes and common law of the State of Delaware (excluding its
choice of laws principles) shall apply.

 

13.                               Miscellaneous

 

Where the context so indicates, the singular will
include the plural and vice versa. 
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.  Unless the context clearly indicates to the
contrary, a reference to a statute or document shall be construed as referring
to any subsequently enacted, adopted, or executed counterpart.

 

14.                               Other
Information

 

(a)                                 Type of
Plan

 

This is a
welfare plan.

 

(b)                                 Addresses,
etc.

 

The Company’s
address, telephone number, and employer identification number are as follows:

 

SRS Labs, Inc.

2909 Daimler Street

Santa Ana, California  92705

Attention: Chair, Compensation Committee of the
Board of Directors

Telephone: 949.442.1070

EIN: 33-0714264

 

13

 

The Plan’s Plan Year is as follows:

 

Plan Year:                                           Calendar

 

The address for
the Plan Administrator shall be the address of the Company set forth above.

 

(c)                                  Agent
for Service of Legal Process

 

The Plan
Administrator is the Plan’s agent for service of legal process.

 

(d)                                 Funding

 

The Plan is
funded out of the Company’s general assets.

 

(e)                                  Plan
Amendment or Termination

 

The Sponsor has
reserved the right to amend and terminate the Plan as set forth in Section 10
herein.

 

(f)                                    Statement
of ERISA Rights

 

As a
participant in this Plan, you are entitled to certain rights and protections
under a federal law called the Employee Retirement Income Security Act of 1974
(as noted above, “ERISA”).  ERISA
provides that all plan participants shall be entitled to:

 

·                                          Examine, without charge, at the Plan
Administrator’s office and other specified locations, all documents governing
the Plan, including insurance contracts, and a copy of the latest annual report
(Form 5500 Series) filed by the Plan with the U.S. Department of Labor.

 

·                                          Obtain, upon written request to the Plan
Administrator, copies of documents governing the operation of the Plan,
including copies of the latest annual report (Form 5500 Series) and
updated summary plan description. The administrator may make a reasonable
charge for the copies.

 

·                                          Receive a summary of the Plan’s annual
financial report. The Plan Administrator is required by law to furnish each
participant with a copy of this summary annual report.

 

In addition to
creating rights for Plan participants ERISA imposes duties on the people who
are responsible for the operation of this Plan. The people who operate this
Plan are called “fiduciaries,” and have a duty to
operate this Plan prudently and in the interest of you and other Plan
participants and beneficiaries. No one, including your

 

14

 

employer
or any other person, may fire you or otherwise discriminate against you in any
way to prevent you from obtaining a benefit or exercising your rights under
ERISA. If your claim for a benefit is denied in whole or in part, you must
receive a written explanation of the reason for this denial. You have the right
to have the Plan Administrator review and reconsider your claim, as described
elsewhere in this Summary Plan Description. Under ERISA, there are steps you
can take to enforce the above rights. For instance, if you request certain
materials required to be furnished by the Plan and do not receive them within
30 days, or if you have any other claim with respect to the Plan, you may file
suit in a federal court. In such a case, the court may require the Plan
Administrator to provide the materials you have requested and that you be paid
up to $110 a day until you receive them, unless the materials were not sent
because of reasons beyond the Plan Administrator’s control.  If you have a claim for benefits which is
denied or ignored, in whole or in part, you should file a claim under the Plan’s
claims procedures or you may file suit in a state or federal court. In
addition, if you disagree with the Plan’s decision or lack thereof concerning
the qualified status of a domestic relations order or a medical child support
order, you may file suit in Federal court. If it should happen that Plan
fiduciaries misuse the Plan’s money, or if you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a federal court. The court will decide who
should pay the court costs and legal fees. If you are successful the court may
order the person you have sued to pay these costs and fees. If you lose, the
court may order you to pay these costs and fees, for example, if it finds that
you should have used the Plan’s claims procedures or that your claim is frivolous.   If you have any questions about your Plan,
you should contact the Plan Administrator. If you have any questions about this
statement or about your rights under ERISA, you should contact the nearest
office of the Pension and Welfare Benefits Administration, U.S. Department of
Labor, listed in your telephone directory or the Division of Technical
Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S.
Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.  You may also obtain certain publications
about your rights and responsibilities under ERISA by calling the publications
hotline of the Employee Benefits Security Administration or by visiting its
website (http://www.dol.gov/ebsa/).

 

(g)                                 Whom to
Call for Additional Information

 

If you have any questions, please contact
the Plan Administrator.

 

15

 

Exhibit A/Version
1

(Persons
with Employment/

Severance
Agreements)

 

SRS LABS, INC.

 

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

 

Participation Agreement

 

WHEREAS,
SRS Labs, Inc. (the “Company”)
sponsors and maintains the SRS Labs, Inc. Amended and Restated Change in
Control Protection Plan (the “Plan”),
and has executed this agreement (the “Participation Agreement”)
in order to offer
                              
(the “Officer”) the
opportunity to participate in the Plan;

 

WHEREAS,
the Officer has received a copy of the Plan (which also serves as its summary
plan description); and

 

WHEREAS,
the parties acknowledge that capitalized terms not defined in this
Participation Agreement shall have the meaning assigned to them in the Plan;
and

 

WHEREAS,
the Officer understands that participation in the Plan requires that the
Participant to agree irrevocably to the terms of the Plan and the terms set
forth below; and

 

WHEREAS,
the Employee has had the opportunity to carefully evaluate this opportunity, and
desires to become a “Participant” in the Plan under the conditions set forth
herein.

 

NOW,
THEREFORE, the parties hereby AGREE as follows:

 

1.                                       If the Officer incurs a Covered
Termination while the Plan is in effect and the Officer has satisfied all other
conditions precedent to collecting benefits under the Plan, the Officer shall within
sixty (60) days thereafter (subject to Section 5 of the Plan and to Section 2
of this Participation Agreement) receive the following benefits (the “Change in Control Benefits”):

 

(i)                                     A lump sum payment in cash equal to
         times the Officer’s “base
amount.”  The term “base
amount” refers to (A) the Officer’s base salary in effect
immediately preceding the Change in Control; plus (B) the Officer’s cash
bonus and cash commissions paid by the Company (before deductions for taxes and
other withholdings) during the last completed calendar year immediately
preceding the year in which a Change in Control occurred.  The base amount shall not include
perquisites, allowances, per diem payments, stock options or other equity
compensation or fringe benefits.

 

 

(ii)                                  In the event Officer elects COBRA
continuation coverage on a timely basis, and makes the premium payments
therefor, the Company’s shall promptly reimburse the Officer for such premiums
for the Officer’s COBRA coverage for a period of
            
(    ) months following the Officer’s Covered Termination.

 

Each of the Officer’s benefits provided under this Section shall
be subject to any reduction or withholding required or permitted under the
Plan.

 

2.                                       Notwithstanding Section 1 of this
Participation Agreement, the Officer shall not receive the Change in Control
Benefits set forth in Section 1 above if the Officer is entitled to
collect severance-related benefits (the “Contract Benefits”)
pursuant to a separate written employment agreement or severance agreement that
the Officer has entered into with the Company or any of its affiliates, unless
the Officer waives any and all Contract Benefits in writing within five business
days after the Covered Termination.  If
the Officer waives the Contract Benefits, the Officer shall become entitled to
receive the Change in Control Benefits in accordance with the terms and
conditions of the Plan and this Participation Agreement.

 

3.

 

(a)  In
consideration of becoming eligible to receive the benefits provided under the
terms and conditions of the Plan, the Officer hereby waives any and all rights,
benefits, and privileges (other than the Contract Benefits defined in Section 2
above) to which the Officer is or would otherwise be entitled to receive under
any plan, program, or arrangement under which the Company or any of its
affiliates provides severance benefits (excluding any retirement plan, stock
option or other equity-based plan or agreement, or other plan that is not a “welfare
plan” within the meaning of ERISA).

 

(b)  Subject to Section 2
of this Participation Agreement, the Officer’s collection of the Change in
Control Benefits pursuant to this Participation Agreement shall be absolutely
contingent on the Officer’s agreement in the Release (i) to waive any and
all rights (including, but not limited to, any Contract Benefits) under any
employment agreement or severance agreement that the Officer has entered into
with the Company or any of its affiliates, and (ii) that all such
agreements shall be terminated and become null and void upon the Officer’s
collection of any portion of the Change in Control Benefits.  The terms of the Release will be open for
acceptance for a period of 21 days, during which time you may consider whether
or not to accept the Release.

 

4.                                       The Officer understands that the waiver
set forth in Section 3(a) above is irrevocable for so long as this
Participation Agreement is in effect. 
The Officer further understands that this Participation Agreement and
the Plan set forth the entire agreement between the parties with respect to any
subject matter covered herein.

 

5.                                       This Participation Agreement shall
terminate, and the Officer’s status as a “Participant” in the Plan shall end,
on the first to occur of (i) if before a Change in Control occurs, the
Officer’s termination of employment with the Company and its affiliates, (ii) if

 

2

 

after a Change in Control occurs, the Officer’s
termination of employment for a reason other than a “Covered Termination” as
defined in Section 3(b)(i) of the Plan, (iii) the date two years
after a Change in Control, and (iv) if before a Change in Control occurs,
the date twelve (12) months after the Company provides the Officer with written
notice that this Participation Agreement is being terminated by the Company in
its discretion as employer and Sponsor.

 

6.                                       The Officer agrees that this
Participation Agreement shall supersede in its entirety any prior Participation
Agreement executed by the Officer under the Plan.  The Officer hereby consents to the amendment
and restatement of the Plan in August 2009, and agrees to be bound by all
of the terms and conditions of the Plan, as amended and restated.

 

7.                                       The Officer recognizes and agrees that
execution of this Participation Agreement results in enrollment and
participation in the Plan, agrees to be bound by the terms and conditions of
the Plan and this Participation Agreement, and understands that this
Participation Agreement may not be amended or modified except pursuant to Section 10
of the Plan.  The Officer further agrees
that to the extent there is any conflict or ambiguity between the Plan and the
Participation Agreement, the Plan prevails.

 

 

ACCEPTED
AND AGREED TO this
                
day of
                            ,
20      .

 

 

	
  The “Officer”:

  	
   

  	
  The “Company”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  A Duly Authorized
  Officer

  

 

3

 

Exhibit A/Version
2

(Persons
without severance 

Agreements)

 

SRS LABS, INC.

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

 

Participation Agreement

 

WHEREAS, SRS Labs, Inc. (the “Company”) sponsors and maintains the
SRS Labs, Inc. Amended and Restated Change in Control Protection Plan (the
“Plan”), and has executed
this agreement (the “Participation Agreement”)
in order to offer
                              
(the “Employee”) the
opportunity to participate in the Plan;

 

WHEREAS, the Employee has received a copy of the Plan
(which also serves as its summary plan description); and

 

WHEREAS, the parties acknowledge that capitalized
terms not defined in this Participation Agreement shall have the meaning
assigned to them in the Plan; and

 

WHEREAS, the Employee understands that participation
in the Plan requires that the Employee agree irrevocably to the terms of the
Plan and the terms set forth below; and

 

WHEREAS, the Employee has had the opportunity to
carefully evaluate this opportunity, and desires to become a “Participant” in
the Plan under the conditions set forth herein.

 

NOW, THEREFORE, the parties hereby AGREE as follows:

 

1.                                       If the Employee incurs a Covered
Termination while the Plan is in effect, the Employee shall within
sixty (60) days thereafter (but subject to Section 5 of the Plan) receive
a lump sum payment in cash (the “Change in Control Benefits”) equal to
         times the Employee’s “base
amount” as determined by the Administrator, subject to any reduction or
withholding required or permitted under the Plan.  The term “base
amount” refers to (A) the Employee’s base salary in effect
immediately preceding the Change in Control; plus (B) the Employee’s cash
bonus and cash commissions paid by the Company (before deductions for taxes and
other withholdings) during the last completed calendar year immediately
preceding the year in which a Change in Control occurred.  The base amount shall not include
perquisites, allowances, per diem payments, stock options or other equity
compensation or fringe benefits.  In
addition, in the event Employee elects COBRA continuation coverage on a timely
basis, and makes the premium payments therefor, the Company shall reimburse
Employee’s premiums payable for such COBRA coverage for a period of
              
(    ) months following the Employee’s Covered
Termination.  All of the Employee’s
benefits provided under this Section shall be subject to any reduction or
withholding that is required or permitted under the Plan.

 

 

2.                                       In consideration of becoming eligible to
receive the benefits provided under the terms and conditions of the Plan, the
Employee hereby waives any and all rights, benefits, and privileges to which
the Employee is or would otherwise be entitled to receive under —

 

(a)                                  any employment agreement or severance
agreement that the Employee has entered into with the Company or any of its
affiliates; and

 

(b)                                 any plan, program, or arrangement under
which the Company or any of its affiliates provides severance benefits
(excluding any retirement plan, stock option or other equity-based plan or
agreement, or other plan that is not a “welfare plan” within the meaning of
ERISA).

 

3.                                       The Employee understands that the waiver
set forth in Section 2 above is irrevocable for so long as this
Participation Agreement is in effect, and that this Participation Agreement and
the Plan set forth the entire agreement between the parties with respect to any
subject matter covered herein.

 

4.                                       This Participation Agreement shall
terminate, and the Employee’s status as a “Participant” in the Plan shall end,
on the first to occur of (i) if before a Change in Control occurs, the
Employee’s termination of employment with the Company and its affiliates, (ii) if
after a Change in Control occurs, the Employee’s termination of employment for
a reason other than a “Covered Termination” as defined in Section 3(b)(i) of
the Plan, (iii) the date two years after a Change in Control, and (iv) if
before a Change in Control occurs, the date twelve (12) months after the
Company provides the Employee with written notice that this Participation
Agreement is being terminated by the Company in its discretion as employer and
Sponsor.

 

5.                                       The Employee agrees that this
Participation Agreement shall supersede in its entirety any prior Participation
Agreement executed by Employee under the Plan. 
The Employee hereby consents to the amendment and restatement of the
Plan in August 2009, and agrees to be bound by all of the terms and
conditions of the Plan, as amended and restated.

 

6.                                       The Employee recognizes and agrees that
execution of this Participation Agreement results in enrollment and
participation in the Plan, agrees to be bound by the terms and conditions of
the Plan and this Participation Agreement, and understands that this
Participation Agreement may not be amended or modified except pursuant to Section 10
of the Plan.  The Employee
further agrees that to the extent there is any conflict or ambiguity between
the Plan and the Participation Agreement, the Plan prevails.

 

2

 

ACCEPTED AND AGREED TO
this
                
day of
                            ,
20      .

 

	
  The “Employee”:

  	
   

  	
  The “Company”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  A Duly Authorized
  Officer

  

 

3

 

Exhibit B

 

SRS LABS, INC.

GRANTOR TRUST AGREEMENT

 

PREAMBLE. 
This Grantor Trust Agreement (the “Trust Agreement”) made this
           day of
                      ,
20       
(the “Effective Date”), by and
between SRS Labs, Inc. and any successor to its interest (the “Company”) as
creator and grantor, and
                                    
as trust (the “Trustee”).

 

WHEREAS,
the Company has adopted the SRS Labs, Inc. Amended and Restated Change in
Control Protection Plan attached as Exhibit A  (the “Plan”) under
which the Company has current or potential liability to individuals (the “Beneficiaries”)
who are either Participants in the Plan or are the designated beneficiary for
any benefits payable under the Plan in the event of the death of an individual
who is a participant in the Plan;

 

WHEREAS,
it is the intention of the Company to establish, upon a Change in Control as
defined in Section 1(c) of the Plan (a “Change in
Control”), this trust (the “Trust”) and to contribute assets to
the Trust that shall be held therein, subject to the claims of the Company’s
general creditors in the event of the Company’s Insolvency, as defined in Section 3(a) hereof,
until paid to Beneficiaries of this Trust in such manner and at such times as
specified in the Plan;

 

WHEREAS,
it is the intention of the parties hereto that this Trust shall constitute an
unfunded arrangement and shall not affect the status of the Plan as being
unfunded for purposes of Title I of the Employee Retirement Income Security Act
of 1974; and

 

WHEREAS,
it is the intention of the Company to make contributions to the Trust following
a Change in Control to enable the Trust to fully fund its liabilities under the
Plan.

 

NOW,
THEREFORE, the parties do hereby establish this Trust and agree that the Trust
shall be established and administered as set forth herein:

 

15.                               Establishment of Trust

 

(a)                                 Upon a Change in Control, the Company
shall, as soon as possible but in no event later than ten business days after
the Change in Control, make an irrevocable contribution to this Trust in an
amount that is projected to provide the Trust with sufficient liquid
assets (meaning assets readily convertible into cash) to pay (i) each Beneficiary the
benefits to which he or she is entitled pursuant to the Plan as in effect on
the date of the Change in Control, and (ii) all fees associated with
maintaining the Trust for the maximum period over which Beneficiaries are
reasonably expected to be receiving payments from the Trust.  Any amendment to the Plan’s definition of
Change in Control shall be deemed to apply with equal force, effect, and timing
to the definition of Change in Control for purposes of this Trust, except that
a modification that does or may adversely affect a Beneficiary shall be
ineffectual as to the Beneficiary unless he or she consents in writing to be
bound by the modification.

 

 

(b)                                 Within 75 days following each December 31st
after a Change in Control occurs, the Company shall, if the Trustee deems
necessary, be required to irrevocably deposit additional cash or other liquid
assets to the Trust in an amount sufficient to pay each Beneficiary the
benefits to which he or she is entitled pursuant to the Plan.  The Trustee shall have the right to monitor,
enforce and/or collect any amounts due and owing from the Company or to give
notice of any default in the payment of benefits to Participants.

 

(c)                                  The Trust hereby established shall be
irrevocable.

 

(d)                                 The Trust is intended to be a grantor
trust, of which the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended (the “Code”), and shall be construed accordingly.

 

(e)                                  The principal of the Trust, and any
earnings thereon, shall be held separate and apart from other funds of the
Company, and shall be used exclusively for the uses and purposes of
Beneficiaries and general creditors as herein set forth.  Beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any Trust assets.  Any rights created under the Plan and this
Trust Agreement shall be unsecured contractual rights of the Beneficiaries, as
provided for in this Trust Agreement. 
Any assets held by the Trust will be subject to the claims of the
Company’s general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.

 

16.                               Payments to Beneficiaries

 

(a)                                 Upon a Change in Control, the Company
shall, as soon as possible but in no event later than ten business days after
the Change in Control, deliver to the Trustee a schedule (the “Payment Schedule”) which reflects
the benefits payable with respect to each Beneficiary on account of the Change
in Control.  Except as otherwise provided
herein, the Trustee shall make payments to Beneficiaries in accordance with
such Payment Schedule.  The Trustee shall
make provisions for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld, and paid by the Company.

 

(b)                                 The entitlement of a Beneficiary to
benefits under the Plan shall be determined by the Company or such party as may
be designated under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set forth in the Plan.

 

(c)                                  The Company may make payment of benefits
directly to Beneficiaries as such benefits become due under the terms of the
Plan.  The Company shall notify the
Trustee of its decision to make such payment of benefits prior to the time
benefits are payable to Beneficiaries. 
In addition, if the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in accordance with the terms of
the Plan, the Company shall make the balance of each such payment as due.  The Trustee shall notify the Company when
existing principal and earnings are insufficient under the Payment Schedule.

 

2

 

(d)                                 The Trustee shall make distributions from
the Trust in a manner reasonably intended to provide each Beneficiary with all
of his or her benefits payable under the Plan.

 

17.                               Trustee Responsibility Regarding Payments
to Trust Beneficiary When the Company Is Insolvent

 

(a)                                 The Trustee shall cease payment of
benefits to Beneficiaries if the Company is Insolvent.  The Company shall be considered “Insolvent” for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts when the
same become due, or (ii) the Company files a voluntary petition under
Chapter 11 of the Federal Bankruptcy Code, or (iii) an involuntary
petition under Chapter 11 of the Federal Bankruptcy Code is filed with respect
to the Company.

 

(b)                                 At all times during the existence of this
Trust, as provided in Section 1(d) hereof, the principal and income
of the Trust shall be subject to claims of general creditors of the Company
under federal and state law as set forth below.

 

(c)                                  The Board of Directors and the Chief
Executive Officer of the Company shall have the duty to inform the Trustee in
writing of the Company’s Insolvency.  If
a person claiming to be a creditor of the Company alleges in writing to the
Trustee that the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such determination, the Trustee
shall discontinue payment of benefits to Beneficiaries.

 

(i)                                     Unless the Trustee has actual knowledge
of the Company’s Insolvency, or has received notice from the Company or a
person claiming to be a creditor alleging that the Company is Insolvent, the
Trustee shall have no duty to inquire whether the Company is Insolvent.  The Trustee may in all events rely on such
evidence concerning the Company’s solvency as may be furnished to the Trustee
and that provides the Trustee with a reasonable basis for making a
determination concerning the Company’s solvency.

 

(ii)                                  If at any time the Trustee has determined
that the Company is Insolvent, the Trustee shall discontinue payments to
Beneficiaries, shall liquidate the Trust’s investment, if any, in common stock
(“Common Stock”) of the Company, and shall hold the assets of the Trust for the
benefit of the Company’s general creditors. 
Nothing in this Trust Agreement shall in any way diminish any rights of
Beneficiaries as general creditors of the Company with respect to benefits due
under the Plan or otherwise.

 

(iii)                               The Trustee shall resume the payment of
benefits to Beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the Company is not
Insolvent or is no longer Insolvent.

 

(d)                                 If the Trustee discontinues the payment
of benefits from the Trust pursuant to Section 3(a) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Beneficiaries under the terms of the Plan for the period of such
discontinuance, provided that there are sufficient assets to make such
payments.  The aggregate amount of any
payments to Beneficiaries by the Company, in lieu of the payments provided for
hereunder during any such period of discontinuance, shall be deducted from any
payments made by the Trustee hereunder.

 

3

 

18.                               Payments to the Company

 

After
the Trust has become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others any of the Trust
assets before all payment of benefits have been made to Beneficiaries pursuant
to the terms of the Plan, except as provided for in Section 3 hereof.

 

19.                               Investment Authority

 

(a)                                 The Trustee shall have the sole
discretion as to the investment of Trust assets, provided that the Trustee
shall invest Trust assets in a manner reasonably anticipated to provide the
Trust with assets sufficient to fund the Company’s obligations under the Plan.

 

(b)                                 All rights associated with assets of the
Trust shall be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or through Beneficiaries.  The Company shall have the continuing
obligation to substitute liquid assets of equal fair market value for any
illiquid assets held by the Trust, and the Trustee
shall have full authority to convert any illiquid assets into liquid assets.

 

20.                               Disposition of Income

 

During
the term of this Trust, all income received by the Trust, net of expenses and
taxes, shall be reinvested.

 

21.                               Accounting by Trustee

 

The
Trustee shall keep accurate and detailed records of all investments, receipts,
disbursements of all transactions, including such specific records as shall be
agreed upon in writing between the Company and the Trustee.  Within 75 days following each December 31
after the execution of this Agreement, and within 20 days after the removal or
resignation of the Trustee, the Trustee shall deliver to the Company a written
account of its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of such removal or
resignation, reflecting all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable recorded separately), and
reflecting all cash, securities and other property held in the Trust at the end
of such year or as of the date of such removal or resignation, as applicable.

 

22.                               Responsibility of Trustee

 

(a)                                 The Trustee shall act with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like objectives,

 

4

 

provided, however,
that the Trustee shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Company which is
contemplated by, and in conformity with, the terms of the Plan or this Trust
Agreement and is given in writing by the Company.  In the event of a dispute between the Company
and a party, the Trustee may apply to a court of competent jurisdiction to
resolve the dispute.

 

(b)                                 If the Trustee undertakes or defends any
litigation arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee’s costs, expense and liabilities
(including, without limitation, attorneys’ fees and expenses) relating thereto
and to be primarily liable for such payments, except in those cases where the
Trustee shall have been found by a court of competent jurisdiction to have
acted with negligence or willful misconduct. 
If the Company does not pay such costs, expenses and liabilities in a
reasonably timely manner, the Trustee may obtain payment from the Trust.

 

(c)                                  The Trustee may consult with legal
counsel with respect to any of its duties or obligations hereunder.

 

(d)                                 The Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants or other professionals to
assist it in performing any of its duties or obligations hereunder.

 

(e)                                  The Trustee shall have, without exclusion,
all powers conferred on trustees by applicable law, unless expressly provided
otherwise herein, provided, however, that if an insurance policy is held as an
asset of the Trust, the Trustee shall have no power to name a beneficiary of
the policy other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a successor
Trustee, or to loan to any person the proceeds of any borrowing against such
policy.

 

(f)                                    Notwithstanding any powers granted to the
Trustee pursuant to this Trust Agreement or to applicable law, the Trustee
shall not have any power that may accord the Trust the authority to engage in a
business and to receive the gains therefrom, within the meaning of section
301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant
to the Code.

 

23.                               Compensation and Expenses of Trustee

 

The
Company shall pay all administrative expenses and the Trustee’s fees and
expenses relating to the Plan and this Trust. 
If not so paid, the fees and expenses shall be paid from the Trust.

 

24.                               Resignation and Removal of Trustee

 

The
Trustee may resign at any time by written notice to the Company, which
resignation shall be effective 30 days after the Company receives such notice
(unless the Company and the Trustee agree otherwise).  The Trustee may be removed by the Company on
30 days notice, or upon shorter notice accepted by the Trustee; provided that
if such removal occurs on or after a Change in Control, or within 90 days
beforehand, the removal will be ineffective unless it is done with the written
consent of Beneficiaries who are entitled to at least 75% of the Trust’s
assets.

 

5

 

If the
Trustee resigns or is removed, a successor shall be appointed, in accordance
with Section 11 hereof, by the effective date or resignation or removal
under this section.  If no such
appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions.  All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses of the
Trust.  Upon resignation or removal of
the Trustee and appointment of a Successor Trustee, all assets shall
subsequently be transferred to the Successor Trustee.  The transfer shall be completed within 60
days after receipt of a notice of resignation, removal or transfer, unless the
Company extends the time for such transfer.

 

25.                               Appointment of Successor

 

If the
Trustee resigns or is removed in accordance with Section 10 hereof, the
Company may appoint any other party as a successor to replace the Trustee upon
such resignation or removal.  The
appointment shall be effective when accepted in writing by the new trustee, who
shall have all of the rights and powers of the former trustee, including
ownership rights in the Trust assets. 
The former trustee shall execute any instrument necessary or reasonably
requested by the Company or the Successor Trustee to evidence the
transfer.  Notwithstanding the foregoing,
if the Trustee resigns or is removed in connection with or following a Change
in Control, the Trustee that has resigned or is being removed shall appoint as
its successor a third party financial institution that has trust powers, is
independent of and unrelated to the Company, its affiliates, or their
successors, and is agreed to in writing by Beneficiaries who are entitled to at
least 75% of the Trust’s assets.

 

A
Successor Trustee need not examine the records and acts of any prior trustee
and may retain or dispose of existing Trust assets, subject to Sections 7 and 8
hereof.  The Successor Trustee shall not
be responsible for, and the Company shall indemnify and defend the Successor
Trustee from, any claim or liability resulting from any action or inaction of
any prior trustee or from any other past event, or any condition existing at
the time it becomes Successor Trustee.

 

26.                               Amendment or Termination

 

(a)                                 This Trust Agreement may be amended by a
written instrument executed by the Trustee and the Company, provided that no
such amendment shall either conflict with the terms of the Plan.

 

(b)                                 Notwithstanding subsection (a) hereof,
the provisions of this Trust Agreement and the Trust created thereby may not be
amended, within six months before or at any time on or after a Change in
Control occurs, without the written consent of Beneficiaries who are entitled
to at least 75% of the Trust’s assets.

 

(c)                                  The Trust shall not terminate until the
date on which no Beneficiary is entitled to benefits pursuant to the terms
hereof or of the Plan.  Upon termination
of the Trust, the Trustee shall return any assets remaining in the Trust to the
Company.

 

6

 

(d)                                 The Company may terminate this Trust prior
to the payment of all benefits under the Plan only upon written approval of all
Beneficiaries entitled to payment of such benefits.

 

27.                               Miscellaneous

 

(a)                                 Any provision of this Trust Agreement
prohibited by law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.

 

(b)                                 Benefits payable to Beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process, except
pursuant to the terms of the Plan and this Trust Agreement.

 

(c)                                  This Trust Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
reference to the principles of conflicts of laws.

 

(d)                                 The Trustee agrees to be bound by the
terms of the Plan, as in effect from time to time.

 

28.                               Effective Date

 

The
Effective Date of this Trust Agreement shall be the date referenced in the
Preamble.

 

IN WITNESS WHEREOF, the Company, by its duly
authorized officer, has caused this Trust Agreement to be executed, and its
corporate seal affixed, and the Trustee has executed this Trust Agreement, on
the date referenced in the Preamble.

 

 

	
  Witnessed by:

  	
   

  	
  SRS LABS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witnessed by:

  	
   

  	
  TRUSTEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

7Exhibit 10.1

 

Execution
Copy

 

CONFIDENTIAL
TREATMENT REQUESTED

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

 

AMENDED
AND RESTATED

STRATEGIC
COLLABORATION AND

LICENSE
AGREEMENT

 

This Amended and Restated
Strategic Collaboration and License Agreement (the “Agreement”) is executed
this April 28, 2009 (the “Restatement Date”), between ISIS
PHARMACEUTICALS, INC., a Delaware corporation having an address at 1896
Rutherford Road, Carlsbad, CA 92008 (“Isis”) and ALNYLAM PHARMACEUTICALS, INC.,
a Delaware corporation having an address at 300 Third Street, Cambridge,
Cambridge, MA 02142 (together with its wholly owned subsidiaries Alnylam U.S., Inc.,
a Delaware corporation, and Alnylam Europe AG, a company organized under the
laws of Germany, “Alnylam”).  Isis and
Alnylam may be referred to herein as the “Parties,” or each individually as a “Party.”

 

GUIDING
PRINCIPLES

 

Isis
is the leader in RNA-based drug discovery, has created technology, intellectual
property, expertise, facilities and resources to discover and develop
oligonucleotide drugs;

 

Alnylam
is the leader in RNAi therapeutics, has developed and acquired intellectual
property, expertise and technology in RNAi therapeutics, and is conducting
research, drug discovery and development focused on Double Stranded RNA drugs;

 

Isis
and Alnylam desire to create a long-term strategic relationship that will
enhance the positions of both companies in RNA-based drug discovery;

 

Isis
will continue to pursue RNA-based drug discovery technology very broadly
including all potential mechanisms of action. 
Isis will work with Alnylam as Isis’ primary means of participating in
the potential value of Double Stranded RNA Products, and will not enter into
any collaborations with Third Parties the primary purpose of which is to
discover Double Stranded RNA Products;

 

Alnylam
will focus on RNAi therapeutics and the use of Double Stranded RNA;

 

Isis
and Alnylam are parties to the Strategic Collaboration and License Agreement
dated March 11, 2004 (as amended to date, the “Original Agreement”); and

 

Isis
and Alnylam now wish to amend and restate the Original Agreement primarily to
expand the Original Agreement by providing each other exclusive licenses to
research, develop and commercialize Single Stranded RNAi Products for a limited
pool of gene targets, and co-exclusivity in the field of Single Stranded RNAi
Compounds.

 

The
objectives of the strategic relationship are to:

 

·                  Enhance the leadership of
Alnylam in RNAi therapeutics.

 

1

 

·                  Enhance the potential of Alnylam to develop
Double Stranded RNA drugs.

·                  Enhance the patent positions of each Party
with respect to Double Stranded RNA drugs and Single Stranded RNAi Products.

·                  Provide Isis with a means for participating
in the success of RNAi therapeutics.

·                  Provide each party with exclusive rights to
research, develop and commercialize Single Stranded RNAi Products for a limited
pool of gene targets, and provide each other co-exclusivity in the field of
Single Stranded RNAi Compounds.

 

2

 

ARTICLE 1

 

DEFINITIONS;
AMENDMENT AND RESTATEMENT

 

1.1                               Capitalized terms used herein and not
defined elsewhere herein have the meanings set forth in Exhibit 1.1.

 

1.2                               Effective as of the Restatement Date,
this Agreement restates and supersedes the Original Agreement as amended
through the Restatement Date.  The terms
and conditions of the Original Agreement shall apply for the period from the
Effective Date until the Restatement Date unless otherwise provided by this
Agreement.

 

ARTICLE 2

 

EQUITY INVESTMENT

 

2.1                               In connection with the Original
Agreement, Isis purchased from Alnylam 1,666,667 shares of Series D
Preferred Stock, at $6.00 per share (i.e., at an aggregate purchase price of
$10,000,002).

 

ARTICLE 3

 

MANUFACTURING SERVICES RELATIONSHIP

 

3.1                               [Intentionally Deleted]

 

ARTICLE 4

 

COLLABORATIVE RESEARCH EFFORTS; PROTECTED TARGETS

 

4.1                               Research Management Committee.

 

(a)          To promote the success of the collaboration objectives
and RNAi technology, the Parties will establish a Research Management Committee
(“RMC”), which will be comprised of equal numbers of representatives of each of
the Parties and will meet at least twice per calendar year, alternating venues
between the vicinities of Cambridge, Massachusetts and Carlsbad, California, to
share scientific direction and data, to coordinate basic research experiments,
and to facilitate the guiding principles of the collaboration.

 

(b)          Intellectual property representatives of each Party
will be invited to participate in RMC meetings and such meetings will provide a
forum to discuss patent prosecution and enforcement issues and to allocate
responsibility for the filing and prosecution of any Joint Patents.

 

(c)          Through the RMC, the Parties will update one another
regarding the progress of the Research Program (as defined below), including a
summary of the work 

 

3

 

each Party has performed
thereunder; and regarding their respective Future Chemistry and Motif and Mechanism
Patents.

 

(d)          The RMC will establish a written clearance policy that
will govern any publication or presentation by a Party in which such Party
proposes to include any previously undisclosed information or intellectual
property Controlled by the other Party.

 

(e)          The RMC and any subcommittees and working groups
established by the RMC will dissolve at the end of the Research Term.  Upon termination of the RMC, the Parties will
agree upon a strategy to make decisions about the items in Sections 4.1 (b),
(c), and (d).

 

4.2       Single Stranded RNAi Collaboration. 
Subject to Alnylam’s early termination right set forth in Section 14.4,
during the 3 year period following the Restatement Date (the “Research Term”),
the Parties will collaborate in carrying out a research program focused on
Single Stranded RNAi Compounds (the “Research Program”).  The Parties may extend the Research Term by
mutual written agreement.

 

(a)          Research Plan.  The Research
Program will be carried out in accordance with a written research plan,
including without limitation the Budget (as defined below), which research plan
shall be mutually agreed upon by the Parties (the “Research Plan”).  The initial outline of the Research Plan
agreed to by the Parties as of the Restatement Date is hereby incorporated into
this Agreement by reference and is made a part of this Agreement; provided,
within [***] days of the Restatement Date, the Parties will complete and agree
in writing on an initial Research Plan, including without limitation an initial
Budget, which is hereby incorporated into this Agreement by reference and is
made a part of this Agreement.  The
purpose of the Research Plan is to detail the responsibilities and activities
of Isis and Alnylam with respect to carrying out the Research Program.  The Research Plan will include a description
of the specific activities to be performed by the Parties in support of the
Research Program, the allocation of Isis FTEs and Alnylam FTEs to perform such
activities, projected timelines for completion of such activities, and an
applicable budget (the “Budget”).  The
Budget for the Research Program must be mutually agreed by the Parties and will
be at least $3,000,000 per year during the Research Term, including without
limitation budgeted costs of Isis FTEs and Alnylam FTEs, and external
costs.   Beginning in 2010, at least once
during September of each year of the Research Term, the RMC will review
the Research Plan and will amend the Research Plan, as may be necessary, from
time to time.  In addition, each Calendar
Quarter the RMC will review the progress of the work under the Research Plan,
including spending against the Budget, and recommend adjustments to the Budget
as necessary to support the Research Plan. 
The Research Plan, including without limitation any Budget, may only be
amended with the written approval of the RMC. 
If the activities contemplated by the Research Plan at any time do not
justify the number of Isis FTEs allocated to the Research Program, the Parties
will work in good faith to mutually agree to modify the scope of the Research
Plan or adjust the number of Alnylam funded FTEs and related Budget; provided
that the minimum Budget for the Research Plan shall be as set forth in this Section 4.2(a).  For clarity, Alnylam shall not be required to
agree to any Budget which exceeds $3,000,000 per year.

 

4

 

(b)          Research
Staffing.  Subject to
Alnylam’s obligations under Section 4.2(c), the Research Plan will provide
for (and Isis will supply) a minimum of [***] Isis FTEs per year during the
initial two-year period of the Research Term to perform activities in support
of the Research Program and a minimum of [***] Isis FTEs during the third year
of the Research Program.  Each Party will
supply the number of FTEs the Research Plan specifies that such Party will
supply, and will conduct the Research Program diligently and in good scientific
manner, and in compliance with all applicable good laboratory practices, and
applicable legal requirements, to attempt to achieve efficiently and
expeditiously the objectives of the Research Program.  Each Party will comply with all Applicable
Laws, in the performance of work under this Agreement.

 

(c)          Research Funding.  Alnylam will
fund 100% of the costs of conducting the Research Program in accordance with
the Research Plan (collectively, the “Research Costs”) to the extent that such
Research Costs are incurred under the Budget, including without limitation FTEs
(whether employed by Isis or Alnylam) plus any out-of-pocket expenses specified
in the Research Plan.  By [***], 2009
with respect to the second Calendar Quarter of 2009 and thereafter within [***]
Days following [***] each Calendar Quarter, Alnylam will pay Isis [***] for the
Alnylam-funded Isis FTEs assigned to the Research Program for such Calendar
Quarter (a prorated amount shall be payable for any portion of a Calendar
Quarter).  With respect to any work to be
performed in support of the Research Program during the [***] days following
the Restatement Date, if the Parties have not agreed on an initial Research
Plan, then Alnylam will make [***] payments for such work based on [***] Isis
FTEs. No later than [***] days following the end of each Calendar Quarter, Isis
will provide Alnylam with a report of the number of FTEs actually assigned to
the Research Program with a summary of the FTEs who performed under the
Research Program (“Actual FTE Costs”) and a reasonably detailed accounting of
all other Research Costs actually incurred by Isis during such Calendar Quarter
(“Actual External Costs”).  Alnylam shall
not be responsible for any Research Costs incurred by Isis that exceed the
[***] amount in the Budget for the work specified in the Research Plan to be
conducted by Isis (“Excess Amount”), unless the RMC approves an amendment to
the Budget to include such Excess Amount. 
Similarly, (i) Alnylam will promptly provide Isis a summary of the
Alnylam FTEs who performed under the Research Program for a given Calendar
Quarter and a reasonably detailed accounting of all other Research Costs
actually incurred by Alnylam during such Calendar Quarter, and (ii) Research
Costs incurred by Alnylam that exceed the total amount in the Budget for the
work specified in the Research Plan to be conducted by Alnylam will not reduce
the amounts committed in the Budget to fund Isis’ Research Costs.  In addition, upon reasonable request, each
Party shall provide the other Party with reasonable documentation of Research
Costs incurred by such Party during the Research Term and shall grant the other
Party reasonable audit rights consistent with the terms set forth in Section 9.3
in connection with such Research Costs.

 

(d)          Materials Transfer.  In order to
facilitate the Research Program, either Party may provide to the other Party certain
materials for use by the other Party in furtherance of the Research
Program.  All such materials shall be
used by the receiving Party in accordance with the terms and conditions of this
Agreement solely for purposes of performing its rights and obligations under
this Agreement and the Research Plan, and the receiving Party shall not
transfer such materials to any Third Party unless expressly 

 

5

 

contemplated by this
Agreement or the Research Plan, or upon the written consent of the supplying
Party.

 

4.3                               Enabled Targets for Single Stranded RNAi.

 

(a)          Enabled Targets.  Each Party
will have a pool (with respect to either Party, an “Enabled Target Pool”; with
respect to Isis, the “Isis Enabled Target Pool”; and, with respect to Alnylam,
the “Alnylam Enabled Target Pool”) each containing [***] [***] slots for which
such Party can designate certain Gene Targets against which such Party intends
to research, develop and commercialize a Single-Stranded RNAi Product (each
such slot, an “Enabled Target Slot” and any Gene Target occupying such a slot,
an “Enabled Target”); provided, however, that, each time a Party (the “Advancing
Party”) designates as a Development Candidate a Single Stranded RNAi Product
Designed for one of such Advancing Party’s Enabled Targets, then (i) such
Enabled Target will be considered to have graduated from the Advancing Party’s
Enabled Target Pool (a “Graduated Enabled Target”), (ii) the Advancing
Party will be permitted to designate a new Enabled Target to fill the open
Enabled Target Slot in the Advancing Party’s Enabled Target Pool, and (iii) so
long as the Advancing Party continues to maintain an Active Program for the
applicable Single Stranded RNAi Product Designed for the Graduated Enabled
Target, such Graduated Enabled Target will remain an Enabled Target of such
Advancing Party hereunder.  For purposes
of clarity, except as set forth in Sections 5.1(g)(i), 5.1(h)(i), 5.5, 6.6,
6.1(h)(i) and 6.1(i)(i), as applicable, neither Party may research,
develop or commercialize a Single Stranded RNAi Product other than a Single
Stranded RNAi Product Designed for one of such Party’s Enabled Targets.

 

(b)          Designating Enabled Targets. 
Within thirty (30) days following completion of [***],
the Parties will begin the process set forth below for selecting Enabled
Targets for inclusion in each Party’s Enabled Target Pool.  For clarity, at no time may either Party
designate a Gene Target which is in the other Party’s Enabled Target Pool.  Except as set forth in Section 4.3(e) below,
the Parties will designate Enabled Targets by taking alternating turns (each
Party’s designation of a new Gene Target (a “Pick”) or affirmative election not
to designate an Enabled Target (a “Pass”) shall be considered a “Turn”; and
each round in which Isis and Alnylam have each Picked or Passed once shall be
considered a “Round”) in one or more Rounds, as necessary.  For each Turn, a Party shall either Pick or
Pass within five (5) Business Days (it being understood that if a Party
does not provide affirmative notice of a Pick or Pass within such five (5) Business
Day-period, then such Party shall be deemed to have “Passed” in such
Turn).  The Parties will complete Rounds
until the Parties have either (i) both filled all of their respective
Enabled Target Slots, or (ii) both elected to Pass in the same Round,
thereby completing a Round (such point being the end of a “Selection Session”,
which Selection Session includes all of the Rounds completed since the end of
the last Selection Session (or, in the case of the first Selection Session, all
prior Rounds)).  For purposes of clarity,
either Party may, prior to Picking or Passing in such Party’s Turn in any
ongoing Round, remove any existing Gene Target(s) on its Enabled Target List
in accordance with Section 4.3(d) and use its Pick in such Turn to
Pick a different Gene Target as an Enabled Target on its Enabled Target List,
subject to the [***] Enabled Target Slot limitation.  Either Party may initiate a new Selection
Session at any time by providing written notice to the other Party (such new
Selection Session to begin on the 

 

6

 

first Business Day
following the 30th day following such notice).  For each new Selection Session, the Party who
gets to take the first Turn in the First Round will be determined in accordance
with Section 4.3(c) below.

 

(c)          Determining First Turn.  Alnylam will
take the first Turn in the first Round of the first Selection Session.
Thereafter:

 

(i)                                     If, immediately prior to the start of a
Selection Session, one Party (the “Lopsided Party”) has fewer Enabled Targets
in its Enabled Target Pool than the number of Enabled Targets the other Party
has in such other Party’s Enabled Target Pool, then the Lopsided Party will
take the first Turn in the First Round. 
In such event (1) in each Turn the Lopsided Party makes a [***]
that is not a [***] the other Party [***] until both Parties have an [***] in
their respective Enabled Target Pools (and then subsequent Rounds in the
Selection Session will continue in accordance with Section 4.3(c)(iii) below
with the other Party getting the first Pick in the first such subsequent
Round); and (2) if the Lopsided Party [***] or [***] in a Turn, the other
Party may Pick or Pass (and then any subsequent Rounds in the Selection Session
will continue in accordance with Section 4.3(c)(iii) below).

 

(ii)                                If there is no Lopsided Party immediately
prior to the start of a Selection Session, then the Party who was not the last Party to Pass in the prior Selection Session
shall be the first Party to take the first Turn in the first Round of such new
Selection Session (and then any subsequent Rounds in the Selection Session will
continue in accordance with Section 4.3(c)(iii) below).

 

(iii)                            For any subsequent Rounds in a Selection
Session, the Party who was not the first Party to take a Turn in the
most previous Round will have the first Turn in the next Round.

 

(iv)                               The Parties have attached as Exhibit 4.3(c)(iv) examples
of how the Parties intend this Section 4.3(c) to operate.

 

(d)          Removing Enabled Targets. 
From time to time after the Restatement Date (except during the 30-day
period immediately preceding a Selection Session or when a Lopsided Party is
taking Turns under Section 4.3(c)(i)), each Party may remove a Gene Target
from its Enabled Target Pool upon written notice to the other Party (which
removal will create an open Enabled Target Slot).  In addition, on an Enabled Target-by-Enabled
Target basis, if the applicable Party has not designated a Development
Candidate comprising a Single Stranded RNAi Product Designed for the applicable
Enabled Target before the [***]year anniversary of the date such Party added
the applicable Enabled Target to such Party’s Enabled Target Pool, then such
Gene Target will be automatically removed from such Party’s Enabled Target
Pool.  Once a Party removes a Gene Target
from its Enabled Target Pool (whether voluntarily or by operation of this Section 4.3(d)),
such Gene Target shall no longer be deemed an Enabled Target hereunder and the
removing Party will be prevented from later adding such Gene Target to its
Enabled Target Pool until [***] months have passed from the date such Gene
Target was removed.

 

7

 

(e)          Isis Protected Targets. 
Notwithstanding the foregoing, Alnylam may not designate as one of
Alnylam’s Enabled Targets any of the Gene Targets identified as an Isis
Protected Target in the letter Isis issued to Alnylam on the Restatement Date
(collectively, the “Isis Protected Targets”).

 

(i)                                    With respect to any Isis Protected Target
Isis identified as an Isis Protected Target on the Restatement Date due to a
contractual restriction that prevents or otherwise restricts Isis’ ability to
grant a license to Alnylam under Sections 5.1(g) and 5.1(h) (each an “Isis
Partnered Excluded Target”), (1) Isis shall list in the above-reference
letter such Isis Partnered Excluded Targets separately such that they are
clearly distinguished from other Isis Protected Targets, (2) Isis shall
diligently enforce the relevant terms governing Isis’ rights to clear any
contractual restrictions on such Isis Partnered Excluded Target, (3) once
a particular contractual restriction clears or expires on such Isis Partnered
Excluded Target, such Gene Target will no longer be considered an Isis
Protected Target, such that Alnylam may then designate such Gene Target as one
of its Enabled Targets in accordance with the terms of this Agreement, and (4) when
practical (but at least every [***] months), Isis shall update the list of Isis
Protected Targets to remove Gene Targets that are no longer Isis Partnered
Excluded Targets.

 

(ii)                                For purposes of clarity, except as
permitted under Sections 6.1(h)(i) and 6.1(i)(i), Isis may not research,
develop or commercialize a Single-Stranded RNAi Product Designed for any Isis
Protected Target unless such Isis Protected Target is designated as an Enabled
Target by Isis pursuant to Section 4.3(b) above or the remainder of
this Section 4.3(e)(ii).   Notwithstanding
anything in this Section 4.3 to the contrary, with respect to any Isis
Partnered Excluded Target for which the applicable contractual restriction has
cleared or expired (each, a “Cleared Target”) (A) Isis shall not have the
right to designate such a Cleared Target as one of its Enabled Targets until
Isis has provided written notice to Alnylam of such clearance (as part of the
regular updates contemplated in Section 4.3(e)(i) above or otherwise)
(such notice, a “Clearance Notice”), and (B) in the first Selection
Session following Alnylam’s Receipt of the applicable Clearance Notice with
respect to a particular Cleared Target, Isis may not Pick such Cleared Target
as one of its Enabled Targets until and unless Alnylam has had a full Turn  in such Selection Session in which it could
Pick such Cleared Target as one of its Enabled Targets and does not elect to
Pick such Cleared Target.  For example,
if two Gene Targets become Cleared Targets (and Alnylam receives a Clearance
Notice related thereto) immediately prior to the start of a Selection Session
and Isis has the first Turn, (1) Isis may not Pick either such Cleared
Target in its first Turn, (2) in Alnylam’s next Turn, Alnylam could Pick
either such Cleared Target, and (3) once Alnylam opts to Pick a Gene
Target (whether or not such Pick was for one of the two Cleared Targets) or
Pass, Isis may then pick either of the remaining two such Cleared Targets that
it was prohibited from Picking in its previous Turn.

 

(f)            Confidentiality.  The fact that
a Party has designated or removed a particular Gene Target within its Enabled
Target Pool is Confidential Information of such Party, subject to the
provisions of Article 12.  Neither
Party shall disclose such Confidential Information of the other Party to any Third
Party, including its Third Party collaborators, or use such Confidential
Information of the other Party to guide its own (or its Third Party
collaborators’) decisions to pursue particular Gene Targets, but either 

 

8

 

Party can use such
Confidential Information to decline a Third Party’s request for a license to
such Gene Target.  The Isis Protected
Targets are Isis’ Confidential Information.

 

(g)         Review Designating Process. 
The Parties agree that on or about the three year anniversary of the
Restatement Date, if either Party deems appropriate, the Parties will, in good
faith, review the process for designating Enabled Targets for the purposes of
improving the process for the mutual benefit of both Parties, and if necessary,
amend this Section 4.3, to effect such improvements; provided, however,
that either Party shall have the right to refuse any such changes in its sole
discretion.

 

ARTICLE 5

 

LICENSES
GRANTED BY ISIS TO ALNYLAM; AND

CO-EXCLUSIVITY COVENANT

 

5.1                               License Grants. 
Subject to the terms and conditions of this Agreement, including, but
not limited to, the restrictions set forth in Section 5.3, Isis grants
Alnylam the following licenses:

 

(a)          Under Isis Current Motif and Mechanism Patents and Isis
Current Chemistry Patents, a license to research, develop, make, have made,
use, import, offer to sell and sell Double Stranded RNA and Double Stranded RNA
Products.

 

(b)          Subject to the terms of Section 11.8, under Isis
Future Motif and Mechanism Patents, Isis Future Chemistry Patents and Isis’
rights in Joint Patents, a license to research, develop, make, have made, use,
import, offer to sell and sell Double Stranded RNA and Double Stranded RNA
Products.

 

(c)          Under the Isis Current Motif and Mechanism Patents and
Isis Current Chemistry Patents, a license to research, develop, make, have
made, use, import, offer to sell and sell MicroRNA Products.

 

(d)          Subject to the terms of Section 11.8, under the
Isis Future Motif and Mechanism Patents and Isis Future Chemistry Patents, a
license to research, develop, make, have made, use, import, offer to sell and
sell MicroRNA Products.

 

(e)          A royalty-free, fully paid, license to practice any
Know-How disclosed to Alnylam during the performance of this Agreement, subject
to the non-disclosure but not the non-use provisions contained in Article 12.

 

(f)            A fully paid, royalty-free license under Isis
Manufacturing Patents to research, develop, make, have made, use and import
Alnylam Products for Research Use.

 

(g)         Under the Isis Current Motif and Mechanism Patents and
Isis Current Chemistry Patents, a license to (i) research, develop, make,
have made, use and import Single Stranded RNAi Compounds and Single Stranded
RNAi Products for Research 

 

9

 

Use, and (ii) research,
develop, make, have made, use, import, offer to sell and sell Alnylam Single
Stranded RNAi Products.

 

(h)         Subject to the terms of Section 11.8, under Isis
Future Motif and Mechanism Patents, Isis Future Chemistry Patents and Isis’
rights in Joint Patents, a license to (i) research, develop, make, have
made, use and import Single Stranded RNAi Compounds and Single Stranded RNAi
Products for Research Use, and (ii) research, develop, make, have made,
use, import, offer to sell and sell Alnylam Single Stranded RNAi Products.

 

(i)            Under Isis’ rights in Research Program Patents, a
royalty-free license for any and all purposes, except to research,
develop, make, have made, use, import, offer to sell or sell any (1) oligonucleotides
(or chemically modified oligonucleotide analogs) designed to work via the RNase
H 1 or 2 mechanism (including any oligonucleotide which has [***]), (2) Double
Stranded RNA Products, (3) MicroRNA Products, (4) Single Stranded
RNAi Products, or (5) Isis Single Stranded Products.

 

5.2                               License Exclusivity, Territory and
Sublicenses.

 

(a)          Subject to the terms and conditions of this Agreement,
including the restrictions set forth in Section 5.3, the licenses from
Isis to Alnylam granted in Sections 5.1(a) and (b) are worldwide and
co-exclusive (with Isis), with the exclusive right to grant Naked Sublicenses;
the licenses from Isis to Alnylam granted in Sections 5.1 (c), (d), (e), (f),
(g)(i), (h)(i) and (i) are worldwide and nonexclusive; and the licenses
from Isis to Alnylam granted in Sections 5.1 (g)(ii) and (h)(ii) are
worldwide and exclusive.  Alnylam is not
permitted to grant sublicenses under the licenses granted in Sections 5.1(a) through
5.1(e), except that Alnylam is permitted to grant (i) sublicenses in
connection with a Bona Fide Drug Discovery Collaboration, (ii) sublicenses
in connection with a Development Collaboration, (iii) Naked Sublicenses
and (iv) sublicenses under the license granted in Section 5.1(e) in
connection with the discovery, development or commercialization of any
product.  Furthermore, Alnylam is not
permitted to grant sublicenses under the licenses granted in Section 5.1(f).  Alnylam may grant sublicenses under Section 5.1(i),
subject to Section 7.7.

 

(b)          Alnylam may grant sublicenses under the licenses
granted in Sections 5.1(g) and 5.1(h) only to further the research,
development or commercialization of an Alnylam Single Stranded RNAi Product
that Alnylam has performed on its own (or with Isis under the Research Plan) and
[***] at least [***]% of the work to discover and develop the Alnylam Single
Stranded RNAi Product through the [***] [***] (or a date that is earlier than
the [***] if requested by Alnylam and approved in writing by Isis, such
approval not to be unreasonably withheld).

 

(c)          Alnylam cannot sublicense its right to grant Naked
Sublicenses under this Agreement except that Alnylam may permit its
sublicensees to grant further sublicenses in connection with a sublicense to
further the research, development or commercialization of an Alnylam Product.

 

10

 

 

(d)          Notwithstanding the foregoing, (i) Alnylam
acknowledged and permits the license Isis granted [***], as amended through the
Restatement Date, that granted [***] a nonexclusive license under Isis Current
Motif and Mechanism Patents and Isis Current Chemistry Patents for the
manufacture and sale of chemically modified oligonucleotides for [***] only and
(ii) Isis may continue to grant licenses to Third Parties for the purpose
of manufacturing and selling oligonucleotides; provided  that, to
the extent such licenses cover Double Stranded RNA or Single Stranded RNAi
Compounds, Isis will restrict such licenses to [***].

 

5.3                               Limitations
on Licenses.

 

(a)          The licenses granted under Section 5.1 above are
not intended to grant any rights to Alnylam to practice the Isis Excluded
Technology.  If Alnylam wishes to license
any Isis Excluded Technology for which Isis has the right to grant a license or
sublicense, Isis will negotiate in good faith an appropriate license.

 

(b)          Notwithstanding the licenses granted to Alnylam under Section 5.1,
Isis retains its rights in the Isis Patent Rights and in the Joint Patents (i) exclusively
for the Isis Reserved DS-Targets, and (ii) exclusively for the Isis
Encumbered Targets.  Once a particular
contractual restriction expires on an Isis Encumbered Target, Alnylam’s
licenses under Section 5.1 will no longer be limited under this Section 5.3(b) for
such target and such target shall no longer be an Isis Encumbered Target.  Isis will update the [***] (as defined in the
letter agreement dated March 9, 2004 between Alnylam and Isis) provided to
Alnylam prior to the Effective Date and subsequent [***] provided to Alnylam
from time to time to remove targets that are no longer Isis Encumbered Targets
promptly upon receipt of a written request from Alnylam to update such [***],
but will not be required to update such [***] more frequently than [***] a
calendar quarter.  In addition, the
licenses granted by Isis to Alnylam under each of Sections 5.1(g)(i) and
5.1(h)(i) do not include the right to research, develop, make, have made,
use, or import Single Stranded Compounds or Single Stranded RNAi Products, in
each case that are Designed for Isis’ Enabled Targets or the Isis Protected
Targets.

 

(c)          Licenses to Isis Patent Rights that are joint patents
with Third Parties (i.e., invented by one or more Isis inventors and one or
more non-Isis inventors) are licensed subject to the retained rights of any
non-Isis inventors and their assignees and licensees.  Any such retained rights of non-Isis inventors
and their assignees and licensees existing as of the Restatement Date are set
forth in Exhibit 5.3(c) attached hereto.

 

(d)          Licenses to Isis Patent Rights that are subject to
contractual obligations between Isis and Third Parties in effect as of the Restatement
Date are licensed subject to the restrictions and other terms described in Exhibit 5.3(d) attached hereto. 
Alnylam hereby agrees to comply, and to cause its sublicensees to
comply, with such restrictions and other terms.

 

5.4                               Alnylam Covenant Regarding Sublicensing
of Isis Patent Rights.  Alnylam shall use good faith
efforts to include sublicenses under the licenses under the Isis Patent Rights
granted to Alnylam in Sections 5.1(a) and 5.1(b) in any Third Party
collaboration

 

11

 

or license agreement in
which Alnylam grants rights to develop and commercialize Double Stranded RNA
Products, unless the technology covered by such licensed Isis Patent Rights
would not reasonably be expected to advance the goals of such Third Party
collaboration or license relationship.

 

5.5                               Isis Covenant to Alnylam Regarding
Co-Exclusivity for Single Stranded RNAi Products.  Isis hereby
covenants to Alnylam, that, after the Restatement Date, Isis will not itself,
and will not grant to a Third Party a license under the Isis Current Motif and
Mechanism Patents, Isis Current Chemistry Patents, Isis Future Motif and
Mechanism Patents, Isis Future Chemistry Patents, the Co-Exclusive ssRNAi
Patents, and/or Isis’ rights in any Joint Patents or Research Program Patents
to, research, develop, make, have made, use, import, offer to sell and sell
Single Stranded RNAi Compounds or Single Stranded RNAi Products, except Isis
may (i) research, develop, make, have made, use and import Single Stranded
RNAi Compounds or Single Stranded RNAi Products for [***], (ii) grant a
license to Controlled Contractors to support work under the Research Plan, (iii) grant
a license to further the research, development or commercialization of an Isis
Single Stranded Product, (iv) grant a license to further the research,
development or commercialization of an Isis Single Stranded RNAi Product solely
in conjunction with a permitted sublicense by Isis under Section 6.3; and (v) continue
to grant licenses to Third Parties for the purpose of manufacturing and selling
oligonucleotides; provided that, to the extent such licenses cover
Single Stranded RNAi Compounds, Isis will restrict such licenses to [***].  For purposes of clarity, this Section 5.5
will not preclude Isis from (A) itself using the [***], or (B) granting
any Third Party a license under the [***].

 

ARTICLE 6

 

LICENSES
GRANTED BY ALNYLAM TO ISIS; AND

CO-EXCLUSIVITY COVENANT

 

6.1                               License Grants. 
Subject to the terms and conditions of this Agreement, including, but
not limited to, the restrictions set forth in Section 6.5, Alnylam grants
Isis the following licenses:

 

(a)          A fully-paid, royalty-free, nonexclusive license under
Alnylam Current Motif and Mechanism Patents and Alnylam Current Chemistry Patents
to research, develop, make, have made, use and import Isis Products other than
Isis Single Stranded RNAi Products for Research Use.

 

(b)          Subject to the terms of Section 11.8, a fully
paid, royalty-free nonexclusive license under Alnylam Future Motif and
Mechanism Patents and Alnylam Future Chemistry Patents to research, develop,
make, have made, use and import Isis Products other than Isis Single Stranded
RNAi Products for Research Use.

 

(c)          A nonexclusive license under Alnylam Current Motif and
Mechanism Patents and Alnylam Current Chemistry Patents to research, develop,
make, have made, use, import, offer to sell and sell Isis Single Stranded
Products.

 

12

 

(d)          Subject to the terms of Section 11.8, a nonexclusive
license under Alnylam Future Motif and Mechanism Patents and Alnylam Future
Chemistry Patents to research, develop, make, have made, use, import, offer to
sell and sell Isis Single Stranded Products.

 

(e)          Under the Alnylam Current Motif and Mechanism Patents
and Alnylam Current Chemistry Patents, a nonexclusive license to research,
develop, make, have made, use, import, offer to sell and sell MicroRNA
Products.

 

(f)            Subject to the terms of Section 11.8, under the
Alnylam Future Motif and Mechanism Patents and Alnylam Future Chemistry
Patents, a nonexclusive license to research, develop, make, have made, use,
import, offer to sell and sell MicroRNA Products.

 

(g)         A worldwide, royalty-free, fully paid, nonexclusive
license to practice any Know-How disclosed to Isis during the performance of
this Agreement, subject to the non-disclosure but not the non-use provisions
contained in Article 12.

 

(h)         A worldwide license under the Alnylam Current Motif
and Mechanism Patents and Alnylam Current Chemistry Patents to (i) research,
develop, make, have made, use and import Single Stranded RNAi Compounds and
Single Stranded RNAi Products for Research Use, and (ii) research,
develop, make, have made, use, import, offer to sell and sell Isis Single
Stranded RNAi Products.  The license
granted to Isis under the foregoing clause (i) shall be non-exclusive, and
the license granted to Isis under the foregoing clause (ii) shall be
exclusive.

 

(i)            Subject to the terms of Section 11.8, a worldwide
license under Alnylam Future Motif and Mechanism Patents and Alnylam Future
Chemistry Patents to (i) research, develop, make, have made, use and
import Single Stranded RNAi Compounds and Single Stranded RNAi Products for
Research Use, and (ii) research, develop, make, have made, use, import,
offer to sell and sell Isis Single Stranded RNAi Products.  The license granted to Isis under the
foregoing clause (i) shall be non-exclusive, and the license granted to
Isis under the foregoing clause (ii) shall be exclusive.

 

(j)            Under Alnylam’s rights in Research Program Patents, a
royalty-free license for any and all purposes, except to research,
develop, make, have made, use, import, offer to sell or sell any (1) oligonucleotides
(or chemically modified oligonucleotide analogs) designed to work via the RNase
H 1 or 2 mechanism (including any oligonucleotide which has [***]), (2) Double
Stranded RNA Products, (3) MicroRNA Products, (4) Single Stranded
RNAi Products, or (5) Isis Single Stranded Product.

 

6.2                               License Option. 
For each Gene Target in the Isis DS-Target Pool (as further described
below) Alnylam grants Isis an option to obtain (on a Reserved
DS-Target-by-Reserved DS-Target basis), subject to the terms and conditions of
this Agreement, including, but not limited to, the restrictions set forth in Section 6.5,
a non-exclusive license under (i) Alnylam Current Motif and Mechanism
Patents and Alnylam

 

13

 

Current Chemistry Patents
and (ii) subject to the terms of Section 11.8, Alnylam Future Motif
and Mechanism Patents, Alnylam Future Chemistry Patents and Alnylam’s rights in
Joint Patents, to research, develop, make, have made, use, import, offer for
sale and sell Double Stranded RNA Products that are Isis Products.

 

(a)          This option will expire  on
a Reserved DS-Target-by-Reserved DS-Target basis if Isis has not paid Alnylam
the option fee set forth in Section 8.1 below before the earlier of (i) the
[***] with respect to such Reserved DS-Target, (ii) the [***] anniversary
of the date such Reserved DS-Target [***] or the [***] anniversary of the date
such Reserved DS-Target [***] with a Third Party and Isis is contractually able
to revoke such Third Party’s rights or (iii) the date [***] with respect
to such Reserved DS-Target.

 

(b)          For any Reserved DS-Target for which Isis obtains a
license from Alnylam under this Section 6.2, Isis will use Commercially
Reasonable Efforts (either on its own or in an Antisense Drug Discovery Program
or Development Collaboration) to develop and commercialize Double Stranded RNA
Products that modulate such Reserved DS-Target.

 

6.3                               Sublicenses.

 

(a)          With respect to any license granted by Alnylam
pursuant to Section 6.1(a), 6.1(b), or 6.2, Isis may only grant a
sublicense to a Third Party solely for (i) the purpose of enabling such
Third Party to collaborate with Isis in an Antisense Drug Discovery Program, or
(ii) to develop and commercialize an Isis Product in a Development
Collaboration.  With respect to any license
granted by Alnylam pursuant to Section 6.1(c), 6.1(d), 6.1(e), 6.1(f),
6.1(g), Isis may grant a sublicense to a Third Party in connection with the
discovery, development or commercialization of any product.  Isis may grant sublicenses under Section 6.1(j),
subject to Section 8.5.  With
respect to the licenses granted by Alnylam pursuant to Section 6.1(h) and
6.1(i), Isis may only grant a sublicense to a Third Party to further the
research, development or commercialization of an Isis Single Stranded RNAi
Product that Isis has performed on its own (or with Alnylam under the Research
Plan) and [***] at least [***]% of the work to discover and develop the Isis
Single Stranded RNAi Product through the [***] (or a date that is earlier than
the [***] if requested by Isis and approved in writing by Alnylam, such approval
not to be unreasonably withheld).

 

(b)          Notwithstanding anything in this Agreement to the
contrary, Isis may not enter into any drug discovery collaboration the primary
purpose of which is to discover Double Stranded RNA Products and/or to develop
Double Stranded RNA Products to any point up to the [***].

 

6.4                               DS-Target Pool.

 

(a)          Reserved DS-Target Slots. 
On the Effective Date, Isis will have a pool (the “Isis DS-Target Pool”)
containing up to [***] slots for which Isis can designate certain Gene Targets
solely for Antisense Drug Discovery Programs (each such slot, a “DS-Target
Slot” and any Gene Target occupying such a slot, a “Reserved DS-Target”);

 

14

 

provided, however, that on January 1 of each year
starting with January 1, 2007, Isis will gain the right to purchase one
additional DS-Target Slot by paying Alnylam $[***] per each additional
DS-Target Slot.  These rights are
cumulative and, subject to Section 17.2(c) do not expire during the
License Term.  Furthermore, in the event
that Isis pays the $[***] license option fee for a Reserved DS-Target pursuant
to Section 8.1, such Reserved DS-Target will be considered to have
graduated from the Isis DS-Target Pool, and, subject to Section 6.4(e),
Isis will be permitted to designate a new Reserved DS-Target to fill the open
DS-Target Slot in the Isis DS-Target Pool. 
For purposes of clarity, except as permitted under Sections 6.1(h)(i) and
6.1(i)(i), Isis may not research, develop or commercialize Single Stranded RNAi
Products for a Reserved DS-Target unless such Reserved DS-Target is designated
as an Enabled Target by Isis pursuant to Section 4.3(a) above.

 

(b)          Initial Designations.  The letter
delivered by Isis to Alnylam on the Restatement Date sets forth the Reserved
DS-Targets as of the Restatement Date.

 

(c)          Removing/Adding DS-Targets. 
After the Restatement Date and no more than once in any [***] period (a
“Target Reallocation Period”), Isis may do any of the following:

 

(i)                                     Remove a Gene Target from the Isis
DS-Target Pool (which, following such removal will create an open DS-Target
Slot); or

 

(ii)                                  Add a new Gene Target to any open
DS-Target Slot (subject to the procedures and provisions of Section 6.4(e).

 

Notwithstanding the
foregoing provisions of this Section 6.4(c), in any Target Reallocation
Period, Isis cannot remove a number of Reserved DS-Targets that exceeds the
number calculated by dividing the then current number of DS-Target Slots by
[***] and rounding down to the nearest whole number.  For the purpose of the limitation described
in the immediately preceding sentence, removing a Gene Target from the Isis
DS-Target Pool and then filling the open DS-Target Slot created by such removal
shall count as a single removal.  Once
Isis removes a Gene Target from the Isis DS-Target Pool, Isis will be prevented
from later adding such Gene Target to the Isis DS-Target Pool until [***] have
passed from the date Isis removed such Gene Target.

 

(d)          New Target Request.  When Isis
wishes to add a new Gene Target to occupy a vacant DS-Target Slot, it will
provide Alnylam with written notice (the “Request Notice”) of the Gene Target
it wishes to add (the “Proposed Reserved DS-Target”).  The Request Notice will include the gene
name, and the NCBI accession number or nucleic acid sequence for the Proposed
Reserved DS-Target.

 

(e)          New Target Rejection/Approval. 
Within [***] of receipt of the Request Notice, Alnylam will give Isis
written notice if any of the criteria set forth below applied to such Proposed
Reserved DS-Target at the time of Alnylam’s receipt of the Request Notice.  If, at such time, the Proposed Reserved
DS-Target is (i) subject to Alnylam’s own Active Program [***], (ii) encumbered
by a contractual obligation

 

15

 

between Alnylam and a
Third Party that would preclude Alnylam from granting a license under Section 6.2
with respect to the Proposed Reserved DS-Target or (iii) the subject of
Alnylam’s good faith negotiations to enter into a contractual obligation within
the [***] following receipt of the Request Notice with a Third Party (as
supported by a written request from such Third Party) that would preclude
Alnylam from granting a license under Section 6.2 with respect to the
Proposed Reserved DS-Target, then the Proposed Reserved DS-Target will be
rejected and will not become a Reserved DS-Target.  If the Proposed Reserved DS-Target is not
rejected under this subsection (e), the Proposed Reserved DS-Target will become
an Isis Reserved DS-Target.  Alnylam will
promptly notify Isis in writing if a rejected Proposed Reserved DS-Target later
becomes available to be designated as a Reserved DS-Target.

 

(f)            [Intentionally Deleted].

 

(g)         Diligence on Rejected Targets. 
If (i) Alnylam rejects a Proposed Reserved DS-Target under Section 6.4(e) above
and (ii) Alnylam has [***] with respect to such rejected Proposed Reserved
DS-Target by the [***] anniversary of the date Alnylam rejected such Proposed
Reserved DS-Target if Alnylam is working on such target alone, or the [***]
anniversary of the date Alnylam rejected such Proposed Reserved DS-Target if
such rejected Proposed Reserved DS-Target is subject to a contractual
obligation between Alnylam and a Third Party that would preclude Alnylam from
granting a license under Section 6.2 with respect to the rejected Proposed
Reserved DS-Target but Alnylam [***], then [***] such rejected Proposed
Reserved DS-Target [***].

 

(h)         Diligence Obligations in Third Party Contractual
Obligations.  With the goal of minimizing contractual
encumbrances on Alnylam Patent Rights with respect to Gene Targets in the
absence of a reasonable intent to discover and develop products that modulate
such Gene Targets by Third Parties with which Alnylam enters into such
contractual obligations, Alnylam intends to seek reasonable diligence
obligations from Third Parties in negotiating contracts between Alnylam and
such Third Parties that would constitute contractual obligations of Alnylam
that would preclude Alnylam from granting licenses to Isis under Section 6.2
with respect to Proposed Reserved DS-Targets; or that would prevent Alnylam
from granting Isis licenses with respect to Proposed Reserved DS-Targets; provided
that Isis hereby acknowledges that such diligence obligations are often
heavily negotiated in biotechnology license and collaboration agreements and
that this Section 6.4(h) shall not prevent Alnylam from entering into
contracts between Alnylam and Third Parties in accordance with Alnylam’s
reasonable business judgment.

 

(i)            Confidentiality.  The fact that
Isis has designated or removed a particular Gene Target within the Isis
DS-Target Pool is Confidential Information of Isis, or that Alnylam has
rejected a particular Gene Target proposed for a DS-Target Slot or disallowed
the redesignation of a particular Gene Target is Confidential Information of
Alnylam, subject to the provisions of Article 12.  Neither Party shall disclose such
Confidential Information of the other Party to any Third Party, including its
Third Party collaborators, or use such Confidential Information of the other
Party to guide its own (or its Third Party collaborators’) decisions to pursue
particular Gene Targets, but Alnylam

 

16

 

can use such Confidential
Information of Isis to decline a Third Party’s request for a license to such
Gene Target.

 

6.5                               Limitations
on Licenses.

 

(a)          The licenses granted under Sections 6.1 and 6.2 above
are not intended to grant any rights to Isis to practice the Alnylam Excluded
Technology.  If Isis wishes to license
any Alnylam Excluded Technology for which Alnylam has the right to grant a
sublicense, Alnylam will negotiate in good faith an appropriate license.

 

(b)          Licenses to Alnylam Patent Rights that are joint
patents with Third Parties (i.e., invented by one or more Alnylam inventors and
one or more non-Alnylam inventors) are licensed subject to the retained rights
of any non-Alnylam inventors and their assignees and licensees.  There are no Alnylam Current Chemistry
Patents or Alnylam Current Motif and Mechanism Patents subject to such retained
rights.

 

(c)          Licenses to Alnylam Patent Rights that are subject to
contractual obligations between Alnylam and Third Parties in effect as of the
Effective Date are licensed subject to the restrictions and other terms
described in Exhibit 6.5(c) attached hereto. 
Isis hereby agrees to comply, and to cause its sublicensees to comply,
with such restrictions and other terms.

 

(d)          Notwithstanding anything to the contrary herein, the
licenses to Alnylam Patent Rights hereunder initially shall not include
licenses to Patents licensed by Alnylam from Stanford University under any
agreement between Alnylam and Stanford University in effect as of the
Restatement Date; provided  that if any such licensed Patents
become issued Patents, Isis shall have the option of expanding its licenses to
Alnylam Patent Rights hereunder to include such issued Patents by notifying
Alnylam of such election and agreeing to pay to Alnylam, in addition to all
amounts otherwise payable to Alnylam hereunder (and without any right under Section 8.2
to reduce such otherwise payable amounts as a consequence of such additional
payment amounts), all amounts that (i) become payable by Alnylam to
Stanford University as a result of such expansion of Isis’ licenses and Isis’
(and its Affiliates’ and sublicensees’) exercise of its rights thereunder and (ii) are
described on Exhibit 6.5(d) attached hereto.

 

(e)          In addition, the licenses granted by Alnylam to Isis
under each of Sections 6.1(h)(i), 6.1(i)(i) and 6.1(j) do not include
the right to research, develop, make, have made, use, or import Single Stranded
RNAi Compounds or Single Stranded RNAi Products, in each case that are Designed
for Alnylam’s Enabled Targets.

 

6.6                               Alnylam Covenant to Isis Regarding
Co-Exclusivity for Single Stranded RNAi Products.  Alnylam
hereby covenants to Isis, that, after the Restatement Date, Alnylam will not
itself, and will not grant to a Third Party a license under the Alnylam Current
Motif and Mechanism Patents, Alnylam Current Chemistry Patents, Alnylam Future
Motif and Mechanism Patents, Alnylam Future Chemistry Patents, the Co-Exclusive
ssRNAi Patents, and/or Alnylam’s rights in any Joint Patents or Research
Program Patents to, research, develop, make, have made, use, import, offer to
sell and sell Single Stranded RNAi Compounds or Single Stranded RNAi Products,
except

 

17

 

Alnylam may (i) research,
develop, make, have made, use or import Single Stranded RNAi Compounds or
Single Stranded RNAi Products for [***], (ii) grant a license to
Controlled Contractors to support work under the Research Plan, (iii) grant
a license to further the research, development or commercialization of an
Alnylam Single Stranded RNAi Product solely in conjunction with a permitted
sublicense by Alnylam under Section 5.2; and (iv) continue to grant
licenses to Third Parties for the purpose of manufacturing and selling
oligonucleotides; provided that, to the extent such licenses cover Single
Stranded RNAi Compounds, Alnylam will restrict such licenses to [***].  For purposes of clarity, this Section 6.6
will not preclude Alnylam from (A) itself using the [***], or (B) granting
any Third Party a license under the [***].

 

ARTICLE 7

 

LICENSE FEES
AND ROYALTIES PAYABLE TO ISIS

 

7.1                               License Fees.

 

(a)          In connection with the Original Agreement, Alnylam
paid Isis an initial, irrevocable, noncreditable and non-refundable license fee
of $5,000,000.

 

(b)          Alnylam will pay Isis an additional, irrevocable,
noncreditable and non-refundable license fee of $11,000,000 within 5 Business
Days following the Restatement Date.

 

7.2                               Royalties.

 

(a)          Subject to the terms and conditions of, and during the
term of, this Agreement, Alnylam will pay to Isis royalties on sales of Alnylam
Double Stranded RNA Products by Alnylam, its Affiliates or sublicensees (except
Naked Sublicensees) equal to [***]% of Net Sales.  Alnylam may reduce the royalty due under this
section by [***]% of any additional royalties that Alnylam owes to Third
Parties on such Alnylam Double Stranded RNA Product that arise from Alnylam
acquiring access to new technologies after the Effective Date; provided,
however  that (a) the royalty due under
this section can never be less than a floor of [***]% and (b) additional
royalties arising as the result of the addition, pursuant to Section 11.8,
of Isis Future Chemistry Patents or Isis Future Motif and Mechanism Patents to
the Isis Patent Rights licensed to Alnylam cannot be used to reduce the
royalty.

 

(b)          Subject to the terms and conditions of, and during the
term of, this Agreement, Alnylam will pay to Isis royalties on sales of Alnylam
Single Stranded RNAi Products by Alnylam, its Affiliates or sublicensees equal
to [***]% of Net Sales; provided, however, that if Alnylam is the
subject of an Acquisition, the royalty payable under this Section 7.2(b) on
the Net Sales of Alnylam Single Stranded RNAi Products after the date of such
Acquisition will be [***]%.

 

18

 

7.3                               Research and Development Milestones.

 

(a)          Single Stranded Research Milestones.  Alnylam, its
Affiliates or sublicensees will pay to Isis the following milestone payments
within [***] after the first achievement of each of the following events:

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  
	
  The earlier of
  (i) first In Vivo Efficacy in Rodents and
  (ii) the 18-month anniversary of the Restatement Date

  	
   

  	
  US$10,000,000

  
	
  First In Vivo Efficacy in NHP

  	
   

  	
  US$5,000,000

  
	
  First Initiation of
  Phase I Trial

  	
   

  	
  US$5,000,000

  

 

Alnylam
shall have the right to prepay Isis any or all of the milestone payments set
forth in this Section 7.3(a) prior to achievement of the
corresponding milestone event(s), in which event such milestone event(s) shall
be deemed to have been achieved as of the date of such early payment(s) by
Alnylam, and such early payments will be irrevocable, noncreditable and
non-refundable.  If Alnylam decides to
terminate this Agreement pursuant to Section 14.4, the terms of Section 14.4(d) shall
apply.  For purposes of clarity, Alnylam
does not have the right to prepay any of the milestones set forth in Section 7.3(b) through
7.3(d) below.

 

(b)          Single Stranded Development Milestones.  Alnylam, its
Affiliates or sublicensees will pay to Isis the following milestone payments
for each Alnylam Single Stranded RNAi Product within [***] after the first
achievement of each of the following events:

 

	
  Milestone Event

  	
   

  	
  Milestone Payment*

  
	
  Initiation of Phase I
  Trial

  	
   

  	
  US$[***]

  
	
  Initiation of Phase III
  Trial

  	
   

  	
  US$[***]

  
	
  Filing NDA in U.S., EU
  or Japan

  	
   

  	
  US$[***]

  
	
  Marketing Approval in
  U.S., EU or Japan

  	
   

  	
  US$[***]

  

 

*If Alnylam is the subject of an Acquisition, any
milestone payments under this Section 7.3(b) that were not due before
the date of such Acquisition will [***] in amount.

 

Each
milestone payment under this Section 7.3(b) will only be due on the
[***] Alnylam Single Stranded RNAi Product that modulates a particular Gene
Target to trigger such milestone payment, whether such milestone is achieved by
Alnylam or an Affiliate or sublicensee of Alnylam.

 

(c)          Double Stranded Development Milestones.  Alnylam, its
Affiliates or sublicensees (except Naked Sublicensees) will pay to Isis the
following milestone payments for each Alnylam Double Stranded RNA Product
within [***] [***] after the first achievement of each of the following events:

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  
	
  Initiation of Phase I
  Trial

  	
   

  	
  US$[***]

  
	
  Initiation of Phase III
  Trial

  	
   

  	
  US$[***]

  
	
  Filing NDA

  	
   

  	
  US$[***]

  
	
  Marketing Approval

  	
   

  	
  US$[***]

  

 

19

 

Each
milestone payment under this Section 7.3(c) will only be due on the
[***] Alnylam Double Stranded RNA Product that modulates a particular Gene
Target to trigger such milestone payment, whether such milestone is achieved by
Alnylam or an Affiliate or sublicensee of Alnylam.

 

(d)          MicroRNA Milestone.  Alnylam, its
Affiliates or sublicensees will pay to Isis a milestone payment of US$[***] for
the [***] MicroRNA Product that is an Alnylam Product that modulates a
particular Gene Target within [***] after such MicroRNA Product reaches the
initiation of [***], and not for any other MicroRNA Product that is an Alnylam
Product that modulates the particular Gene Target.

 

7.4                               Sublicensing Revenue on Naked Sublicenses
and Single Stranded Sublicenses.

 

(a)          With respect to Sublicense Revenue from each Naked
Sublicense granted by Alnylam and its Affiliates under this Agreement, Alnylam
will pay Isis within [***] following receipt by Alnylam of such Sublicense
Revenue (i) fifty percent (50%) of all such Sublicense Revenue that does
not constitute royalty payments, and (ii) [***] percent ([***]%) of the
amount that remains of the total royalties received under such Naked Sublicense
after Alnylam has paid the royalties that are due from Alnylam to any Third
Parties in connection with such Naked Sublicense.

 

(b)          Alnylam will pay Isis a percentage of Sublicense
Revenue received by Alnylam and its Affiliates pursuant to sublicenses (or
right to obtain a sublicense) granted by Alnylam to a Third Party as permitted
by Section 5.2(b).  Alnylam shall
make such payment within [***] [***] following receipt by Alnylam of such
Sublicense Revenue.  Such percentage will
be calculated based on the year in which Alnylam executes such sublicense
agreement, and whether or not Alnylam executes such sublicense before or after
the Product(s) that are the subject of such sublicense have met the [***]
under Section 7.3(b), using the following table:

 

For Single Stranded RNAi Products
Alnylam Sublicenses Before [***]

 

	
  Year

  	
   

  	
  2009-

  2011

  	
   

  	
  2012-

  2013

  	
   

  	
  2014-

  2015

  	
   

  	
  2016-

  2017

  	
   

  	
  2017+

  	
   

  
	
  Applicable Percentage

  	
   

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  

 

For Single Stranded RNAi Products
Alnylam Sublicenses [***] Such Products

 

	
  Year

  	
   

  	
  2009-

  2012

  	
   

  	
  2013

  	
   

  	
  2014

  	
   

  	
  2015+

  	
   

  
	
  Applicable Percentage

  	
   

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  

 

20

 

 

(c)          If Alnylam grants a sublicense (or right to obtain a
sublicense) pursuant to which Alnylam will be required to pay Isis Sublicense
Revenue under  Section 7.4(b), then,
so long as Alnylam pays Isis the applicable Sublicense Revenue when due,
Alnylam [***] have to pay Isis [***] of the milestones that become due under Section 7.3(b) after
the execution of such sublicense solely with respect to the Alnylam Single
Stranded RNAi Product(s) that are being developed and commercialized under
each such sublicense.

 

(d)          Notwithstanding any of the foregoing, each of the
applicable percentages set forth in the tables above in Section 7.3(b) for
any and all periods following the [***] anniversary of the Restatement Date
shall be recalculated by multiplying each such percentage by the fraction of
X/Y, where X is [***] and Y is the total number of Isis Partnered Excluded
Targets for which contractual restrictions have not expired or been cleared as
of the [***] anniversary of the Restatement Date.  Such recalculation shall be made on the
thirtieth (30th) day following the [***] anniversary of
the Restatement Date, provided, however, that (i) no recalculation
shall be made if the total number of Isis Partnered Excluded Targets for which
contractual restrictions have not expired or been cleared as of the [***]
anniversary of the Restatement Date is less than or equal to [***]; (ii) the
applicable percentages, as so recalculated, shall apply only to all sublicenses
entered into between Alnylam and a Third Party following the [***] anniversary
of the Restatement Date; and (iii) this Section 7.4(d) shall not
adjust the applicable percentages set forth in the tables above in Section 7.3(b) as
they apply to any sublicenses entered into between Alnylam and a Third Party on
or before the [***] anniversary of the Restatement Date.

 

7.5                               Technology Access Fees from Bona Fide
Collaborations.

 

(a)          Alnylam will pay Isis a percentage of Technology
Access Fees received by Alnylam and its Affiliates pursuant to Bona Fide Drug
Discovery Collaborations and Development Collaborations entered into between
Alnylam and a Third Party.  Alnylam shall
make such payment to Isis within [***][***] following receipt by Alnylam of
such Technology Access Fees.  Such
percentage will be calculated based on the year in which Alnylam executes such
Bona Fide Drug Discovery Collaboration or Development Collaboration agreement
using the following table:

 

	
  Year

  	
   

  	
  2004/2005

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008+

  	
   

  
	
  Applicable Percentage

  	
   

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  	
  [***]

  	
  %

  

 

However, Alnylam may credit any milestone payments made by
Alnylam under Section 7.3(c) above with respect to an Alnylam Double
Stranded RNA Product against any Technology Access Fees that are later due
under a Bona Fide Drug Discovery Collaboration or Development Collaboration
that involves the same Alnylam Double Stranded RNA Product that triggered such
milestone payment.

 

(b)          Notwithstanding the foregoing, for any Bona Fide Drug
Discovery Collaboration or Development Collaboration agreement, Alnylam will
pay Isis a minimum fee, payable upon the first Alnylam Product other than a
Single Stranded RNAi

 

21

 

Product developed
pursuant to such Bona Fide Drug Discovery Collaboration agreement reaching
[***] (in which event Alnylam shall pay Isis such minimum fee within [***]
following such initiation of [***]) or within [***] after the execution of such
Development Collaboration agreement, equal to the lesser of (i) $[***] or (ii) [***]%
of the Technology Access Fees from such collaboration; provided, however
that Alnylam may credit any amounts paid Isis pursuant to Section 7.5(a) above
as the result of the same Bona Fide Drug Discovery Collaboration or Development
Collaboration agreement against this minimum fee with such amounts credited
only once, and provided further that if following such payment, additional
Technology Access Fees are owed to Isis for such Bona Fide Drug Discovery
Collaboration or Development Collaboration, the amounts paid under this Section 7.5(b) (after
crediting of any previous Technology Access Fees paid under Section 7.5(a) in
accordance with the immediately preceding proviso) will be creditable against
such future Technology Access Fees.

 

7.6         Allocation of Sublicense Income and Technology
Access Fees.  Each time Alnylam
enters a collaboration or license agreement (an “Isis IP Sublicense”) pursuant
to which Alnylam grants a sublicense under the Isis Patent Rights to a Third
Party, the CEO of Isis and the CEO of Alnylam will in mutually discuss and
agree in writing upon: (a) if the Isis IP Sublicense only relates Double
Stranded RNA, a good faith determination as to whether such Isis IP Sublicense
is a Naked Sublicense or a Bona Fide Drug Discovery Collaboration or
Development Collaboration; and (b) if the Isis IP Sublicense relates to
Double Stranded RNA and Alnylam Single Stranded RNAi Product(s), a good faith
allocation of the consideration received by Alnylam under such Isis IP
Sublicense between the consideration attributable to the components of such
Isis IP Sublicense that relate to (i) Double Stranded RNA and (ii) Alnylam
Single Stranded RNAi Product(s). Within [***] days following the execution of
each Isis IP Sublicense, Alnylam, through its CEO, will provide Isis’ CEO a
reasonably detailed and accurate description of such Isis IP Sublicense for the
purpose of enabling the CEOs to perform the determination and allocation
described in this Section 7.6.

 

7.7         Revenue
Sharing for Research Program Patents. 
Alnylam will pay Isis 50% of any payments received by Alnylam and its
Affiliates pursuant to licenses granted by Alnylam to a Third Party under the
Research Program Patents for any and all purposes, except to research,
develop, make, have made, use, import, offer to sell or sell any (1) oligonucleotides
(or chemically modified oligonucleotide analogs) designed to work via the RNase
H 1 or 2 mechanism (including any oligonucleotide which has [***]), (2) Double
Stranded RNA Products, (3) MicroRNA Products, (4) Single Stranded
RNAi Products, or (5) Isis Single Stranded Product.  Alnylam shall make such payment to Isis
within [***] following receipt by Alnylam of such payments.

 

ARTICLE 8

 

LICENSE
FEES, SUBLICENSE REVENUE AND

ROYALTIES
PAYABLE TO ALNYLAM

 

8.1                               Option Fee.  For each Isis
Reserved DS-Target for which Isis exercises its option granted pursuant to Section 6.2,
Isis will pay Alnylam an irrevocable,

 

22

 

noncreditable and
non-refundable option fee of $[***] due upon the date of exercise.  Isis may credit any $[***] payment made under
Section 6.4(a) for the DS-Target Slot occupied by such Reserved
DS-Target against this option fee.  The
option fee is only payable once per Gene Target.

 

8.2                               Royalties.

 

(a)          Subject to the terms and conditions of, and during the
term of, this Agreement, Isis will pay to Alnylam royalties on sales of Double
Stranded RNA Products that are Isis Products by Isis, its Affiliates or
sublicensees equal to [***]% of Net Sales. 
Isis may reduce the royalty due under this section by [***]% of any
additional royalties that Isis owes to Third Parties on such Double Stranded
RNA Products that are Isis Products that arise from Isis acquiring access to
new technologies after the Restatement Date; provided, however  that (i) the royalty due under this section can never
be less than a floor of [***]%, (ii) additional royalties arising as the
result of the addition, pursuant Section 11.8, of Alnylam Future Chemistry
Patents or Alnylam Future Motif and Mechanism Patents to the Alnylam Patent Rights
licensed to Isis, or as the result of an expansion of Isis’ licenses pursuant
to Section 6.5(d), cannot be used to reduce the royalty and (iii) Isis
shall not be entitled to reduce, pursuant to this sentence, its royalty
obligation to Alnylam below a royalty obligation equal to the lesser of (y) Alnylam’s
aggregate royalty obligations [***] existing as of the Effective Date [***]
[***] and (z) Alnylam’s aggregate royalty obligations [***] [***] as such
obligations may be reduced from time to time after the Effective Date.

 

(b)          Subject to the terms and conditions of, and during the
term of, this Agreement, Isis will pay to Alnylam royalties on Net Sales of
Isis Single Stranded RNAi Products by Isis, its Affiliates or sublicensees
equal to [***]% of Net Sales; provided, however, that if
Isis is the subject of an Acquisition, the royalty payable under this Section 8.2(b) on
the Net Sales of Isis Single Stranded RNAi Products following such Acquisition
will be [***]%.

 

8.3                               Development Milestones.

 

(a) Subject to Section 8.4, Isis, its
Affiliates or sublicensees will pay to Alnylam the following milestone payments
for each Double Stranded RNA Product that is an Isis Product within [***] after
the first achievement of each of the following events:

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  
	
  Initiation
  of Phase I Trial

  	
   

  	
  US$[***]

  
	
  Initiation
  of Phase III Trial

  	
   

  	
  US$[***]

  
	
  Filing
  NDA

  	
   

  	
  US$[***]

  
	
  Marketing
  Approval

  	
   

  	
  US$[***]

  

 

Each
milestone payment under this Section 8.3(a) will only be due on [***]
Double Stranded RNA
Product that is an Isis Product that modulates a particular Gene Target to
trigger such milestone payment, whether such milestone is achieved by Isis or
an Affiliate or sublicensee of Isis.

 

23

 

(b)  Isis, its Affiliates
or sublicensees will pay to Alnylam a milestone payment of US$[***] for the
[***] Isis Single Stranded Product that is an Isis Product that modulates a
particular Gene Target within [***] after such Isis Single Stranded Product
reaches the initiation of IND-Enabling Studies, and not for any other Isis
Single Stranded Product that modulates that particular Gene Target.

 

(c) Isis, its Affiliates or
sublicensees will pay to Alnylam a milestone payment of US$[***] for the [***]
MicroRNA Product that is an Isis Product that modulates a particular Gene
Target within [***] after such MicroRNA Product reaches the initiation of
[***], and not for any other MicroRNA Product that is an Isis Product that
modulates the particular Gene Target.

 

8.4                               Sublicense Income on Single Stranded RNAi
Sublicenses.

 

(a)          With respect to Sublicense Revenue from each
sublicense (or right to obtain a sublicense) related to an Isis Single Stranded
RNAi Product granted by Isis and its Affiliates under this Agreement after the
Restatement Date, Isis will pay Alnylam, within [***] following receipt by Isis
of such Sublicense Revenue, a percentage of all such Sublicense Revenue that
does not constitute royalty payments. Such percentage will be calculated based
on the year in which Isis executes such sublicense agreement, and whether or
not Alnylam has paid Isis the research funding and applicable milestones under Section 4.2(c) and
7.3(a), using the following table:

 

	
  Milestone Event

  	
   

  	
  Applicable

  Percentage

  	
   

  
	
  1

  	
  Sublicense executed
  after the Restatement Date but before Alnylam pays Isis the $[***]
  milestone under Section 7.3(a)

  	
   

  	
  [***]

  	
  %

  
	
  2

  	
  Sublicense executed
  after Alnylam pays Isis the $[***] milestone under Section 7.3(a) but
  before the 3rd milestone event described below

  	
   

  	
  [***]

  	
  %

  
	
  3

  	
  Sublicense executed
  after Alnylam pays the first 3 years of research funding under
  Section 4.2(c) and the $[***] milestone for First In Vivo Efficacy in NHP under Section 7.3(a)

  	
   

  	
  [***]

  	
  %

  

 

(b)          In the event that Isis enters an Antisense Drug
Discovery Program pursuant to which Isis (i) grants a sublicense under the
Alnylam Patent Rights to further develop and/or commercialize an Isis Single
Stranded RNAi Product, (ii) commits to discover and/or develop Double
Stranded RNA Products or single stranded oligonucleotides that are not Single
Stranded RNAi Compounds, or (iii) grants a license or sublicense to
intellectual property which would not otherwise result in any amounts becoming
payable to Alnylam hereunder (an “Other Isis Sublicense”), then in determining
the applicable payment due from Isis to Alnylam in connection with such
Antisense Drug Discovery Program, the CEO of Isis and the CEO of Alnylam will
mutually agree in writing upon a good faith allocation of the consideration
received by Isis under such Antisense Drug Discovery Program between and among
the consideration attributable to the components of such Antisense Drug
Discovery Program that qualify as

 

24

 

(x) a sublicense to
further develop and/or commercialize an Isis Single Stranded Product, (y) a
collaboration to discover and/or develop Double Stranded RNA Products or single
stranded oligonucleotides that are not Single Stranded RNAi Compounds, and (z) an
Other Isis Sublicense; and Isis will pay Alnylam Sublicense Income Fees under Section 8.4(a) in
accordance with such allocation.  Within
30 days following the execution of each such transaction, Isis, through its
CEO, will provide Alnylam’s CEO a reasonably detailed and accurate description
of such transaction for the purpose of enabling Alnylam’s CEO to perform the
allocation described in this Section 8.4(b).

 

8.5       Revenue Sharing for Research Program Patents. 
Isis will pay Alnylam 50% of any payments received by Isis and its
Affiliates pursuant to licenses granted by Isis to a Third Party under the
Research Program Patents for any and all purposes, except to research,
develop, make, have made, use, import, offer to sell or sell any (1) oligonucleotides
(or chemically modified oligonucleotide analogs) designed to work via the RNase
H 1 or 2 mechanism (including any oligonucleotide which has [***]), (2) Double
Stranded RNA Products, (3) MicroRNA Products, (4) Single Stranded
RNAi Products, or (5) Isis Single Stranded Product.  Isis shall make such payment to Alnylam
within [***] following receipt by Isis of such payments.

 

ARTICLE 9

 

OTHER
PAYMENT TERMS

 

9.1                               Payments.  All payments
by a Party under this Agreement will be made in United States dollars by bank
wire transfer in next day available funds to such bank account in the United
States designated in writing by Alnylam or Isis, from time to time.  Royalties payable under Sections 7.2 and 8.2
shall be payable on a quarterly basis within 45 days after the end of each calendar
quarter.  The Party with such royalty
obligation (the “Royalty-Paying Party”) shall provide the other Party with a
report setting forth (i) gross sales of Alnylam Products or Isis Products,
as applicable, by the Royalty-Paying Party, its Affiliates and sublicensees, (ii) all
deductions from such gross sales taken in calculating Net Sales, (iii) Net
Sales of Alnylam Products or Isis Products, as applicable, by the
Royalty-Paying Party, its Affiliates and sublicensees, (iv) royalties
payable based on such Net Sales and (v) all other information relevant to
the calculation of such royalties, on a product-by-product and
country-by-country basis, for each calendar quarter within [***] after the end
of such calendar quarter.

 

9.2                               Late Payments; Collections. 
In the event that any payment, including royalty, milestone, Sublicense
Revenue or Technology Access Fee payments, due hereunder is not made when due,
the payment will bear interest from the date due at the lesser of (i) 1.5%
per month, compounded monthly, or (ii) the highest rate permitted by law; provided,
however, that in no event will such rate exceed the maximum legal annual
interest rate.  If a Party disputes in
writing the amount of an invoice presented by the other Party within [***] of
receipt of such invoice, interest will only be due on the correct amount as
later determined or agreed. The payment of such interest will not limit a Party
from exercising any other rights it may have as a consequence of the lateness
of any payment.  In addition, each Party
agrees to pay all external costs of collection, including

 

25

 

reasonable attorneys’
fees, incurred by the other Party in enforcing the payment obligations after a
due date has passed under this Agreement.

 

9.3                               Audit Rights.

 

(a)          Upon the written request of Isis or Alnylam, as the
case may be, and not more than once in each calendar year, Isis or Alnylam will
permit the other Party’s independent certified public accountant to have access
upon reasonable advance notice and during normal business hours to its records
as may be reasonably necessary to verify the accuracy of the royalty reports
hereunder for the current year and the preceding 2 years prior to the date of
such request.  The accounting firm will
disclose to the auditing Party only whether the royalty reports are correct or
incorrect, the specific details concerning any discrepancies, and the corrected
amount of Net Sales and royalty payments. 
No other information will be provided to the auditing Party.  Once a Party has audited a particular
calendar year under this section, the Party will be precluded from subsequently
auditing such calendar year.  In any
sublicense granted by a Party under this Agreement, such Party will endeavor to
secure a similar audit right and if reasonably requested by the other Party
will enforce such audit right.

 

(b)          If such accounting firm concludes that additional
royalties were owed during such period, the delinquent Party will pay the
additional royalties within 90 days of the date such Party receives the
accounting firm’s written report.  The
fees charged by such accounting firm will be paid by the auditing Party unless
the additional royalties, milestones or other payments owed by the audited
Party exceed 5% of the royalties, milestones or other payments paid for the
time period subject to the audit, in which case the audited Party will pay the
reasonable fees and expenses charged by the accounting firm.

 

(c)          Each Party will treat all financial information
subject to review under this Section 9.3 or under any sublicense agreement
in accordance with the confidentiality provisions of Article 12, and will
cause its accounting firm to enter into an acceptable confidentiality agreement
obligating such firm to retain all such financial information in confidence
pursuant to such confidentiality agreement.

 

9.4                               Taxes.  If laws, rules or regulations require
withholding of income taxes or other taxes imposed upon payments set forth in Section 4.2(c) or
Article 7 or 8, each Party will make such withholding payments as required
and subtract such withholding payments from the payments set forth in Section 4.2(c) or
Article 7 or 8.  Each Party will
submit appropriate proof of payment of the withholding taxes to the other Party
within a reasonable period of time.  The Parties
will cooperate to obtain the appropriate tax clearance and/or recover any such
withholdings if possible.

 

ARTICLE
10

 

ALNYLAM RIGHTS OF FIRST NEGOTIATION; PREFERRED LICENSEE

 

10.1                        Right of First Negotiation. 
Isis will notify Alnylam in writing once (i) Isis, on its own with
no subsequent rights to Third Parties, intends to initiate [***] for an

 

26

 

Isis Product that is a
Double Stranded RNA Product or (ii) if a Third Party with which Isis has a
Development Collaboration or a collaboration on an [***] an Isis Double
Stranded RNA Product before or during clinical development or commercialization
with no subsequent rights to Third Parties. 
Alnylam will have [***] from the receipt of such notice to notify Isis
in writing whether or not Alnylam wishes to negotiate with Isis regarding the
development and/or commercialization of such Isis Product.  If Alnylam fails to respond to Isis’ notice
within the [***] or if Alnylam declines in writing to exercise its right of
first negotiation, then Isis will be free to develop and commercialize (either
on its own or with a Third Party) the Isis Product.  If Alnylam wishes to negotiate a license or
development or commercialization rights in such Isis Product, the Parties will
negotiate in good faith the terms of the license or collaboration
agreement.  If, despite good faith
negotiations, Alnylam and Isis do not reach agreement within [***] from
Alnylam’s exercise of its right of first negotiation, then Isis will be free to
develop and commercialize (either on its own or with a Third Party) the Isis
Product; provided  that during the period prior to the latest of (x) the
initiation of [***] the Isis Product, (y) the [***] anniversary of the
commencement of [***] for the Isis Product or (z) in the case of an Isis
Product [***] after the commencement of [***], the [***] anniversary of Isis’
notice to Alnylam [***], Isis shall not enter into a license or collaboration
agreement with a Third Party for such Isis Product on terms (the “More
Favorable Terms”) that are in the aggregate materially more favorable to the
Third Party than the terms on which Isis most recently offered in writing to
grant such rights to Alnylam without first offering the More Favorable Terms to
Alnylam.

 

10.2                        Preferred Licensee. 
If, after the Effective Date, Alnylam grants to any Third Party that is
not a Major Pharmaceutical Company a license under the Alnylam Patent Rights to
develop and commercialize Double Stranded RNA Products, then if (a) either
(i) the [***] terms of such license are more favorable to the Third Party
than the [***] terms hereunder with respect to Isis Products are to Isis or (ii) the
[***] covered by such license exceeds the [***] potentially licensed to Isis
hereunder for development and commercialization of Double Stranded RNA
Products, and (b) the roles to be played by Alnylam and such Third Party
in the development and commercialization of Double-Stranded RNA Products under
such Third Party license, the nature of the Gene Targets covered by such Third
Party license and any other relevant terms of such Third Party license do not
collectively justify the conditions described in the preceding clauses (a)(i) and/or
(a)(ii), then Alnylam shall modify the terms of its licenses to Isis hereunder
with respect to such conditions so that they are reasonably equivalent to those
granted to the Third Party.

 

ARTICLE
11

 

INTELLECTUAL
PROPERTY

 

11.1                        Ownership of Inventions.

 

(a)          Each Party will solely own all inventions, technology,
discoveries, or other proprietary property (collectively, “Inventions”) that
are made (as determined by U.S. rules of inventorship) solely by employees
of or consultants to that Party under this Agreement.

 

27

 

(b)          Isis and Alnylam will jointly hold title to all
Inventions, whether or not patentable, that are made (as determined by the U.S.
rules of inventorship) jointly by employees of or consultants to Isis and
Alnylam, as well as to Patents filed thereon. 
Such Inventions will be “Joint Inventions,” and Patents claiming such
Joint Inventions will be “Joint Patents.” 
Isis and Alnylam will promptly provide each other with notice whenever a
Joint Invention is made.  The Parties
agree and acknowledge that, except insofar as this Agreement provides
otherwise, the default rights conferred on joint owners under US patent law,
including the right of each Party to independently practice, license and use a
Joint Patent, will apply in relation to the Joint Patents throughout the world
as though US patent law applied worldwide.

 

(c)          The Parties agree, upon reasonable request, to execute
any documents reasonably necessary to effect and perfect each other’s ownership
of any Invention.

 

11.2                        Filing and Prosecution of Isis and
Alnylam Patent Rights.

 

(a)          Isis and Alnylam will work closely, through their
interactions on the RMC to ensure that, to the greatest degree permitted by
United States and foreign patent laws, Patents for Inventions relating to all
aspects of Double Stranded RNA and/or Single Stranded RNAi Compounds or Single
Stranded RNAi Products are obtained and shared.

 

(b)          Except as set forth in Sections 11.2(f) and 11.2(g) below,
Isis will be responsible for preparing, filing, prosecuting, maintaining and
taking such other actions as are reasonably necessary or appropriate with
respect to the Isis Patent Rights.

 

(c)          Except as set forth in Section 11.2(f) and
11.2(g) below, Alnylam will be responsible for preparing, filing,
prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to the Alnylam Patent Rights.

 

(d)           Each Party will endeavor in good faith to coordinate
its efforts with those of the other Party to minimize or avoid interference
with the prosecution of the other Party’s Patents.  Neither Party will initiate or participate in
any opposition, reexamination, interference, litigation or other proceeding for
the purpose of narrowing or invalidating any claim in a Patent of the other
Party.

 

(e)          At either Party’s request, the other Party will keep
the requesting Party continuously informed of and provide documentation of all
significant matters relating to the preparation, filing, prosecution and
maintenance of any designated Patent.

 

(f)            Alnylam will be responsible for preparing, filing,
prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to the Isis Special Patents.  If Alnylam elects not to file for or continue
the prosecution (including any interferences, oppositions, reissue proceedings
and re-examinations) or maintenance of an Isis Special Patent in any country,
then, Alnylam will notify Isis promptly in writing of its intention in
sufficient time to enable Isis to meet any deadlines by which an action must be
taken to establish or preserve any such rights in such Patent in such country
and Isis will have the right, but not the obligation, to file for

 

28

 

or continue the
prosecution or maintenance of such Patent in such country, and Alnylam will
cooperate with Isis in regard thereto.

 

(g)         Solely with respect to (i) Research Program
Patents, or (ii) Patents licensed under this Agreement that claim
Inventions that primarily relate to Single Stranded RNAi Compounds, but, in
each case, excluding Joint Patents, the Party who Controls such Patent (the
“Responsible Party”) will be responsible for preparing, filing, prosecuting,
maintaining and taking such other actions as are reasonably necessary or appropriate
with respect to such Patent.  If the
Responsible Party decides to discontinue the preparation, filing, prosecution
or maintenance of such a Patent, the Responsible Party will notify the other
Party at least [***] prior to any deadline that, if missed, would materially
prejudice the Patent, and the other Party will have the right, at such Party’s
own expense, to prepare, file, prosecute and maintain such Patent.

 

11.3                        Filing
and Prosecution of Jointly Owned Patents.

 

(a)          The Research Management Committee will designate one
of the Parties as being the responsible Party for preparing, filing,
prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to any Joint Patent.

 

(b)          Each Party will keep the other Party continuously
informed of all significant matters relating to the preparation, filing,
prosecution and maintenance of Joint Patents, and shall provide the other Party
with copies of any substantial prosecution papers within thirty days of
receipt.

 

11.4                        Costs and Expenses.

 

(a)          Except as set forth in Section 11.4(c) below,
each Party will bear its own costs and expenses in filing, prosecuting,
maintaining and extending the Alnylam Patent Rights and Isis Patent Rights,
respectively.

 

(b)          Except as set forth in Section 11.4(c) below,
the Parties will pay equal shares of all costs and expenses in filing,
prosecuting, maintaining and extending the Joint Patents.

 

(c)          Alnylam will bear [***]% of its own costs and expenses
in filing, prosecuting, maintaining and extending the Isis Special
Patents.  If Alnylam elects not to file for or continue the
prosecution (including any interferences, oppositions, reissue proceedings and
re-examinations) or maintenance of an Isis Special Patent in any country, and
Isis assumes the continued prosecution of such Isis Special Patent (as
permitted by Section 11.2(f)) in such country, then the Parties will [***] all of Isis’ costs and
expenses in filing, prosecuting, maintaining and extending the Isis Special
Patent for which Isis assumed prosecution.

 

11.5                        Enforcement.

 

(a)          Each Party will promptly advise the other of any
suspected or actual infringement of the Isis Patent Rights, Alnylam Patent
Rights, or Joint Patents by any

 

29

 

person
that reasonably affects the other Party’s business.  The notice shall set forth the facts of such
infringement or misappropriation in reasonable detail.

 

(b)          Subject to subsections (c) and (h) below,
Alnylam will have the sole and exclusive right, in its sole discretion and at
its expense, to assert and enforce any Isis Patent Rights, Alnylam Patent
Rights or Joint Patents against any party engaging in an unlicensed or
unauthorized making, having made, using, selling, offering for sale or importing
of any allegedly infringing Double Stranded RNA.

 

(c)          For any enforcement by Alnylam under subsection (b) above
that includes Isis Patent Rights covering a [***] chemical modification, Isis
will actively participate in the planning and conduct of such enforcement and
will take the lead of such enforcement to the extent that the scope or validity
of any such Isis Patent Rights covering a [***] chemical modification is at
risk.

 

(d)          Except as set forth in Sections 11.5(b) and (h),

 

(i)                                    Isis will have the sole and
exclusive right, in its sole discretion and at its expense, to assert and
enforce any Isis Patent Rights;

 

(ii)                                Alnylam will have the sole and
exclusive right, in its sole discretion and at its expense, to assert and
enforce any Alnylam Patent Rights and the Isis Special Patent Rights; and

 

(iii)                            The RMC will agree in advance on
the enforcement of any Joint Patent and will apportion enforcement
responsibilities and recoveries amongst the parties.

 

(e)          The rights granted hereunder to Alnylam to enforce
certain licensed in or jointly owned Isis Patent Rights are further limited as
described in Exhibit 5.3(d) attached hereto.  The rights granted hereunder to Isis to
enforce certain licensed in or jointly owned Alnylam Patent Rights are further
limited as described in Exhibit 6.5(c) attached hereto.

 

(f)            The nonenforcing Party will have the right, at its own expense, to
participate in the conduct of the enforcement action and to be represented in
such action by its own counsel.

 

(g)         The enforcing Party will not enter into any settlement
that impacts the validity, scope or interpretation of any claim of any Joint
Patent or of any Patent of the nonenforcing Party without prior written
authorization of the nonenforcing Party.

 

(h)         If the Party with enforcement rights under section (b) or
(d) above (the “Primary Party”) fails to initiate proceedings against any
actual or suspected infringement within [***] of receipt of written request for
enforcement from the other Party (the “Step-in Party”) and if the infringer is
directly competing with a Product (the “Affected Product”) of such Step-in
Party, then (i) if the license granted in this Agreement under which the
Step-in Party is selling the Affected Product is exclusive or co-exclusive,
the  Step-in Party will have the right to
assert and enforce the patents that are allegedly being

 

30

 

infringed,
or (ii)  if the license granted in this Agreement under which the Step-in
Party is selling the Affected Product is non-exclusive, the Step-in Party will
have no obligation to pay royalties during the period for which the Primary
Party fails to initiate proceedings or take other action (including without
limitation entering into a licensing arrangement) to eliminate such infringement;
provided that the provisions of the immediately preceding clause (ii) shall
not apply if the Primary Party elects to grant the Step-in Party enforcement
rights with respect to such infringement. The Primary Party will not grant a
license to any such infringing Third Party with respect to any directly
competitive infringing product on terms materially more favorable (milestones
and royalties) than the terms of the license granted hereunder to the Step-in
Party or, solely with respect to the Affected Product, will adjust the terms of
such license so that they are not materially less favorable than the terms of
the license granted to the infringing Third Party.  In addition, as a condition to the Step-in
Party’s right (under clause (i) of this Section 11.5(h)) to assert
and enforce a Patent Controlled by the Primary Party that is allegedly being
infringed, the Step-in Party must also assert and enforce any relevant Patents
Controlled by such Step-in Party against the alleged infringer who is competing
with the Affected Product.

 

(i)             Except as otherwise agreed to by the Parties as part of
a cost-sharing arrangement, any recovery realized as a result of such
litigation, after reimbursement of any reasonable litigation expenses of Isis
and Alnylam, shall be retained by the Party or Parties that brought and
controlled such litigation for purposes of this Agreement, except that any
recovery realized as a result of such litigation shall be treated as Net Sales
of Isis Products or Net Sales of Alnylam Products and distributed as such Net
Sales would have been distributed.

 

11.6                        [Intentionally Deleted]

 

11.7                        Third Party Patents.  The Parties will consult about the need to
license any patents Controlled by Third Parties that would be useful or
necessary for either Party to research, develop, make, have made, use, sell,
offer for sale or import Double Stranded RNA Products or Single Stranded RNAi
Products.  If it is agreed that there is
a desire to obtain a license or to acquire any such patent, the Parties will negotiate
in good faith regarding (i) the share of the financial obligations
relating to the license or acquisition that each Party will bear; (ii) the
compensation of any acquisition costs incurred in connection with obtaining the
Patent rights; and (iii) an agreement by the Parties to abide by all terms
of the agreement under which the patent rights are granted.

 

11.8                        Future
Licenses.  If after the
Effective Date, a Party (the “Controlling Party”) later invents or acquires
rights or title to an invention claimed by a Patent that (i) would be
included in the Isis Future Chemistry Patents or Isis Future Motif and
Mechanism Patents if such Party is Isis or in the Alnylam Future Chemistry
Patents or Alnylam Future Motif and Mechanism Patents if such Party is Alnylam
(the “Additional Rights”) and (ii) carry financial or other obligations,
then the Controlling Party must promptly notify the non-Controlling Party of
such acquisition or invention.  If the
non-Controlling Party wishes to include such Additional Rights under the
licenses granted pursuant to Article 5 or 6, as applicable, the
non-Controlling Party will notify the Controlling Party of its desire to do so
and will assume all financial and other obligations

 

31

 

to
the Controlling Party’s licensors or collaborators, if any, arising from the
grant to the non-Controlling Party of such license. Any Additional Rights that
do not carry financial or other obligations shall be automatically included
under the licenses granted pursuant to Article 5 or 6, as applicable.  If a Party pays any upfront payments or
similar acquisition costs to access Additional Rights, the Parties will
negotiate in good faith regarding sharing such acquisition costs and payments.  When acquiring or creating such Additional
Rights, each Party will endeavor in good faith to secure the right to
sublicense such Additional Rights to the other Party.

 

ARTICLE
12

 

CONFIDENTIALITY

 

12.1                        Nondisclosure Obligation.  All Confidential Information disclosed by one
Party to the other Party hereunder will be maintained in confidence by the
receiving Party and will not be disclosed to a Third Party or Affiliate or used
for any purpose except as set forth below.

 

12.2                        Permitted Disclosures.  Except as otherwise provided herein, a Party
may disclose Confidential Information received from the other Party:

 

(a)                                  to governmental or other regulatory
agencies in order to obtain Patents or approval to conduct clinical trials, or
to gain Marketing Approval; provided that such disclosure may be made
only to the extent reasonably necessary to obtain such Patents or approvals;

 

(b)                                  to any adjudicative body as required by
law, provided that prior to such disclosure, the Party subject to such
disclosure obligation (the “Notifying Party”) promptly notifies the other Party
of such requirement so that such other Party can seek a protective order,
confidential treatment or other appropriate remedy; and provided, further, that
in the event that no such protective order, confidential treatment or other
remedy is obtained, or that such other Party waives compliance with this
section, the Notifying Party will furnish only that portion of the other
Party’s Confidential Information that it is advised by counsel it is legally
required to furnish;

 

(c)                                  to Affiliates, sublicensees, agents,
consultants, and/or other Third Parties for the development, manufacturing
and/or marketing of Isis Products or Alnylam Products (or for such parties to
determine their interest in performing such activities) in accordance with this
Agreement on the condition that such Affiliates, sublicensees and Third Parties
agree to be bound by the confidentiality obligations contained in this
Agreement;

 

(d)                                  if such disclosure is required by law or
regulation (including without limitation by rules or regulations of any
securities exchange or NASDAQ), provided that prior to such disclosure,
the Notifying Party promptly notifies the other Party of such requirement so
that such other Party can seek a protective order, confidential treatment or
other appropriate remedy; and provided, further, that in the event that
no such protective order, confidential treatment or other remedy is obtained,
or

 

32

 

that such other Party
waives compliance with this section, the Notifying Party will furnish only that
portion of the other Party’s Confidential Information that it is advised by
counsel it is legally required to furnish; or

 

(e)                                  as necessary if embodied in products to
develop and commercialize such products.

 

Either Party may disclose
(i) a copy of this Agreement on a confidential basis to prospective
lenders and investors, (ii) a mutually agreed upon redacted copy of this
Agreement on a confidential basis to prospective collaborators and (iii) the
terms of this Agreement as required under applicable securities laws or
regulations (including without limitation under rules or regulations of
any securities exchange or NASDAQ); provided, however, that, subject to Section 6.4(i),
Alnylam shall not disclose Isis’ past or current Reserved DS-Targets or past or
current Isis Protected Targets without the express prior written consent of
Isis, and, subject to Section 4.3(f), neither Party shall disclose the
other Party’s past or current Enabled Targets without the express prior written
consent of the other Party.

 

12.3                        Announcements; Publicity.

 

(a)                                  Each Party understands that this
Agreement is likely to be of significant interest to investors, analysts and
others, and that either Party therefore may make public announcements with
respect to this Agreement.  The Parties
agree that any such announcement will not contain confidential business or
technical information unless disclosure of confidential business or technical
information is required by law or regulation, in which case they will make
reasonable efforts to minimize such disclosure of confidential business or
technical information to that required by law or regulation.  Each Party agrees to provide to the other
Party a copy of any such public announcement as soon as reasonably practicable
under the circumstances prior to its scheduled release.  Except under extraordinary circumstances,
each Party shall provide the other with an advance copy of any press release at
least two (2) business days prior to the scheduled disclosure.  The other Party shall have the right to
expeditiously review and recommend changes to any announcement regarding this
Agreement or the subject matter of this Agreement, provided that such
right of review and recommendation shall only apply for the first time that
specific information is to be disclosed, and shall not apply to the subsequent
disclosure of information that (i) is substantially similar to a
previously reviewed disclosure and (ii) in the context of the subsequent
disclosure, does not carry a substantially different qualitative message than
that carried by the previously reviewed disclosure.  The Party whose press release has been
reviewed shall in good faith consider any changes that are timely recommended
by the reviewing Party.

 

(b)                                  Each Party will (i) use reasonable,
good faith efforts to provide the other Party with at least 5 business days’
prior notice (which notice may be given orally to a senior executive officer of
the other Party) before such Party publicly announces the execution of a Naked
Sublicense, Bona Fide Drug Discovery Collaboration agreement or Development
Collaboration agreement (or any material amendments thereto) that could
reasonably be expected to be of strategic or financial importance to the other
Party’s

 

33

 

business and (ii) cooperate
with the other Party to enable the other Party to develop appropriate mutually
beneficial public announcements regarding such transactions.

 

ARTICLE
13

 

INDEMNIFICATION

 

13.1                        Indemnification by Alnylam. 
Alnylam will indemnify, defend and hold Isis and its agents, employees,
officers and directors (the “Isis Indemnitees”) harmless from and against any
and all liability, damage, loss, cost or expense (including reasonable
attorneys’ fees) arising out of Third Party claims or suits related to (a) Alnylam’s
performance of its obligations under this Agreement; (b) breach by Alnylam
of its representations and warranties set forth in Article 15; or (c) the
discovery, development, manufacture, use, importation or commercialization
(including marketing and sale) of Alnylam Products.

 

13.2                        Indemnification by Isis. 
Isis will indemnify, defend and hold Alnylam and its Affiliates and each
of their respective agents, employees, officers and directors (the “Alnylam
Indemnitees”) harmless from and against any and all liability, damage, loss,
cost or expense (including reasonable attorneys’ fees) arising out of Third
Party claims or suits related to (a) Isis’ performance of its obligations
under this Agreement; (b) breach by Isis of its representations and
warranties set forth in Article 15; or (c) the discovery,
development, manufacture, use, importation or commercialization (including
marketing and sale) of Isis Products.

 

13.3                        Notification of Claims; Conditions to
Indemnification Obligations.  A Party
entitled to indemnification under this Article 13 shall (a) promptly
notify the other Party as soon as it becomes aware of a claim or action for
which indemnification may be sought pursuant hereto, (b) cooperate with
the indemnifying Party in the defense of such claim or suit, and (c) permit
the indemnifying Party to control the defense of such claim or suit, including
without limitation the right to select defense counsel; provided  that
if the Party entitled to indemnification fails to promptly notify the
indemnifying Party pursuant to the foregoing clause (a), the indemnifying Party
shall only be relieved of its indemnification obligation to the extent
prejudiced by such failure. In no event, however, may the indemnifying Party
compromise or settle any claim or suit in a manner which admits fault or
negligence on the part of the indemnified Party, or which imposes obligations
on the indemnified Party other than financial obligations that are covered by
the indemnifying Party’s indemnification obligation, without the prior written
consent of the indemnified Party. The indemnifying Party will have no liability
under this Article 13 with respect to claims or suits settled or compromised
without its prior written consent.

 

ARTICLE
14

 

TERM AND
TERMINATION OF AGREEMENT

 

14.1                        Term and Termination of Agreement.  This Agreement will be effective as of the
Restatement Date (unless otherwise expressly stated) and unless terminated
earlier

 

34

 

pursuant
to Sections 14.2 or 14.3 below, the term of this Agreement will continue in
effect until expiration of the License Term.

 

14.2                        Termination upon Material Breach.  This Agreement may be terminated upon written notice by
either Party to the other at any time during the term of this Agreement if the
other Party is in material breach of its obligations hereunder and has not
cured such breach within 90 days after written notice requesting cure of the breach;
provided, however, that (a) in the event of a good faith dispute
with respect to the existence of such a material breach, the 90-day cure period
will be stayed until such time as the dispute is resolved pursuant to Section 17.6
hereof, (b) so long as the breaching Party takes substantial steps to cure
the breach promptly after receiving notice of the breach from the non-breaching
Party and thereafter diligently prosecutes the cure to completion as soon as is
practicable, the non-breaching Party may not terminate this Agreement, and (c) any
license granted under this Agreement with respect to an Isis or Alnylam Product
that has at least reached IND-Enabling Studies may not be terminated for a
material breach under this Section 14.2 (except
for an uncured failure to make any undisputed portion of any payment obligation
under Article 7 or 8 with respect to such Isis or Alnylam Product) to the
extent such license is necessary to develop, make and have made, sell and
import such Isis or Alnylam Product.

 

14.3                        Termination upon Bankruptcy; Rights in
Bankruptcy.

 

(a)          This Agreement may be terminated with written notice
by either Party at any time during the term of this Agreement upon the filing
or institution of bankruptcy, reorganization, liquidation or receivership
proceedings by or against the other Party or upon an assignment of a
substantial portion of its assets for the benefit of creditors by the other
Party; provided, however, in the case of any involuntary bankruptcy
proceeding such right to terminate will only become effective if the Party
consents to the involuntary bankruptcy or such proceeding is not dismissed
within 90 days of the filing thereof.

 

(b)           All rights and licenses granted under or pursuant to  this Agreement by Isis or Alnylam are, and will otherwise
be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101
of the U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees
of such rights under this Agreement, will retain and may fully exercise all of
their rights and elections under the U.S. Bankruptcy Code. The Parties further
agree that, in the event of the commencement of a bankruptcy proceeding-by or
against either Party under the U.S. Bankruptcy Code, the Party hereto which is
not a Party to such proceeding will be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in their
possession, will be promptly delivered to them (i) upon any such
commencement of a bankruptcy proceeding upon their written request therefore,
unless the Party subject to such proceeding elects to continue to perform all
of its obligations under this Agreement, or (ii) if not delivered under (i) above,
following the rejection of this Agreement by or on behalf of the Party subject
to such proceeding upon written request therefore by the non-subject Party.

 

35

 

 

14.4        Alnylam’s Limited Right to Terminate the Research
Program.  Notwithstanding Section 4.2, Alnylam may
unilaterally elect to terminate the Research Program, by providing Isis a
written notice of such election (an “Early Termination Notice”) on or before
5:00 PM Pacific Time on September 30, 2010.  If Alnylam unilaterally terminates the
Research Program (the “Early Collaboration Termination”) in accordance with
this Section 14.4, then, as of the date of the Early Termination Notice
(the “Collaboration Termination Date”):

 

(a)   each Party’s obligation to perform under the Research
Program, and Alnylam’s obligation to provide funding under the Research Program
that was not payable on or before the Collaboration Termination Date will
automatically terminate;

 

(b)   Alnylam’s rights and Isis’ obligations under the
licenses granted by Isis to Alnylam under Section 5.1(g), 5.1(h) and
5.1(i), including any sublicenses granted by Alnylam thereunder, will
automatically terminate;

 

(c)   Solely with respect to the license granted to Isis
under Section 6.1(i), the definition of Alnylam Future Motif and Mechanism
Patents, and Alnylam Future Chemistry Patents, will be fixed as of the
Collaboration Termination Date in accordance with Sections 12 and 13,
respectively, of Exhibit 1.1;

 

(d)   Alnylam will be relieved of its obligations to pay
Isis any milestones, royalties and sublicense income relating to Alnylam Single
Stranded RNAi Products under Sections 7.2(b), 7.3(a), 7.3(b), and 7.4(b) that
had not accrued by the Collaboration Termination Date, except
that if the Collaboration Termination Date is before the [***]-month
anniversary of the Restatement Date and before the [***] following the date
Alnylam obtains the data that demonstrates the first In Vivo
Efficacy in Rodents, then Alnylam will not be obligated to pay the $[***]
research milestone for the first In Vivo
Efficacy in Rodents set forth in Section 7.3(a); and

 

(e)   Isis will be relieved of its obligations under
Sections 5.5 and 8.5, and its obligations as a Responsible Party under Section 11.2(g).

 

14.5        Accrued Rights and Surviving Obligations.

 

(a)   Expiration or termination of the
Agreement will not relieve the Parties of any obligation accruing prior to such
expiration or termination, including, but not limited to, financial obligations
under Section 4.2(c) or Article 7 or 8.  Sections 4.3(f), 6.4(i), 9.2, 9.3 and 11.1,
and Articles 1, 12, 13, 14 and 17 will survive expiration or termination of the
Agreement.  Provisions concerning
reporting requirements will continue in effect in accordance with any
applicable timetables set forth herein. Any expiration or early termination of
this Agreement will be without prejudice to the rights of either Party against
the other accrued or accruing under this Agreement prior to termination.  No expiration of this Agreement will relieve
a Party of its obligation to pay milestones, royalties, or a percentage of
Technology Access Fees or Sublicense Revenue to the extent accrued prior to
such expiration.

 

36

 

(b)   Except
as set forth in Section 14.4.(b), the rights of any sublicensee under any
permitted sublicense granted in accordance with Section 5.2 or 6.3 will
survive the termination of this Agreement.

 

ARTICLE
15

 

REPRESENTATIONS AND WARRANTIES; DISCLAIMER

 

15.1        Representations and Warranties of the Parties. 
Each Party represents and warrants to the other Party that, as of the
Effective Date and the Restatement Date:

 

(a)   Such Party is duly organized and validly existing
under the laws of the state of its incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof;

 

(b)   Such Party has taken all corporate action necessary to
authorize the execution and delivery of this Agreement and the performance of its obligations under this
Agreement;

 

(c)   This Agreement is a legal and valid obligation of such
Party, binding upon such Party and enforceable against such Party in accordance
with the terms of this Agreement.  The
execution, delivery and performance of this Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which such Party is a Party or by which such Party may be bound, and does not
violate any law or regulation of any court, governmental body or administrative
or other agency having authority over such Party. All consents, approvals and
authorizations from all governmental authorities or other Third Parties
required to be obtained by such Party in connection with this Agreement have
been obtained;

 

(d)   Such Party has sufficient right, power and authority
to enter into this Agreement, to perform its obligations under this Agreement and to grant the licenses granted
hereunder.

 

15.2        Disclaimers.  THE PARTIES
EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT OF THIRD PARTY RIGHTS, UNLESS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT.

 

ARTICLE
16

 

NOTICE

 

16.1        Notice.  All notices which are required or permitted
hereunder will be in writing and sufficient if delivered personally, sent by
facsimile (and confirmed by telephone), sent by nationally-recognized overnight
courier or sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

 

37

 

	
  if to Isis, to:

  	
   

  	
  Isis Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
  Attention: Chief Operating Officer

  
	
   

  	
   

  	
  Fax No.: +1 (760) 603-4652

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Fax No.: +1 (760) 268-4922

  
	
   

  	
   

  	
   

  
	
  if to Alnylam, to:

  	
   

  	
  Alnylam Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  300 Third Street

  
	
   

  	
   

  	
  Cambridge, MA 02142

  
	
   

  	
   

  	
  Attention: VP Legal

  
	
   

  	
   

  	
  Fax No.: +1 (617) 575-7315

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  WilmerHale

  
	
   

  	
   

  	
  60
  State Street

  
	
   

  	
   

  	
  Boston,
  Massachusetts 02109

  
	
   

  	
   

  	
  Attention:
  Steven D. Singer, Esq.

  
	
   

  	
   

  	
  Fax
  No.: +1 (617) 526-5000

  

 

or
to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. Any such notice
will be deemed to have been given when delivered if personally delivered or
sent by facsimile on a business day, on the business day after dispatch if sent
by nationally-recognized overnight courier and on the third business day
following the date of mailing if sent by mail.

 

ARTICLE
17

 

MISCELLANEOUS PROVISIONS

 

17.1        Relationship of the Parties.  It is expressly agreed that Isis and Alnylam will
be independent contractors and that the relationship between the two Parties
will not constitute a partnership, joint venture or agency. Neither Isis nor
Alnylam will have the authority to make any statements, representations or
commitments of any kind, or to take any action, which will be binding on the other,
without the prior consent of the other Party.

 

17.2        Successors and Assigns.  Neither this
Agreement nor any interest hereunder may be
assigned or otherwise transferred (whether by sale of stock, sale of assets or
merger), nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred by either Party without the
prior written consent of the other Party; provided, however, that a
Party may, without such consent, assign this Agreement and its rights and
obligations hereunder to an Affiliate or in connection with an
Acquisition.  Notwithstanding the
provisions of this Section 17.2:

 

38

 

(a)   If Alnylam is the subject of an
Acquisition and the
entity surviving such Acquisition does not maintain [***] that is substantially
similar or greater [***] after the time of the Acquisition, then (i) the
limit on the [***] that Isis can [***] pursuant to Section 6.4(a) will
[***], and (ii) the exclusive right to grant Naked Sublicenses under Section 5.2
will [***].

 

(b)   Additionally, if Alnylam is the
subject of an Acquisition, (i) the royalties payable by Alnylam with respect to Alnylam
Single Stranded RNAi Products will be adjusted in accordance with Section 7.2(b),
(ii) the definition of Alnylam Future Motif and Mechanism Patents, and
Alnylam Future Chemistry Patents, will be fixed as of the date of such
Acquisition in accordance with Sections 13 and 12, respectively, of Exhibit 1.1,
and (iii) [***].

 

(c)   If Isis is the subject of an Acquisition, (i) the
entity surviving such Acquisition will no longer [***] under Section 6.4(a),
(ii) the number of [***] such Acquisition will be permitted to [***]
pursuant to Section 6.4(a) shall be limited to [***] per calendar
year, (iii) the royalties payable by Isis with respect to Isis Single
Stranded RNAi Products will be adjusted in accordance with Section 8.2(b),
and (iv) the definition of Isis Future Motif and Mechanism Patents, and
Isis Future Chemistry Patents, will be fixed as of the date of such Acquisition
in accordance with Sections 57 and 58, respectively, of Exhibit 1.1.

 

(d)   Any permitted assignee will
assume all obligations of its assignor under this Agreement. Any
attempted assignment not in accordance with this Section 17.2 will be
void.

 

17.3        Entire Agreement; Amendments.  This Agreement contains the entire understanding
of the Parties with respect to the license, development and commercialization
of Products hereunder. All express or implied agreements and understandings,
either oral or written, heretofore made by the Parties on the same subject
matter are expressly superseded by this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly
executed by both Parties hereto.

 

17.4        Force Majeure.  Neither Party will be held liable or responsible to the
other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement
when such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party including, without limitation,
embargoes, acts of war (whether war be declared or not), insurrections, riots,
civil commotions, acts of terrorism, strikes, lockouts or other labor
disturbances, or acts of God. The affected Party will notify the other Party of
such force majeure circumstances as soon as reasonably practical and will make
every reasonable effort to mitigate the effects of such force majeure
circumstances.

 

17.5        Applicable Law.  The Agreement will be governed by and construed
in accordance with the laws of the State of Delaware without reference to any rules of
conflict of laws.

 

39

 

17.6        Dispute Resolution.

 

(a)       The Parties recognize that disputes may from time to time arise between
the Parties during the term of this Agreement. 
In the event of such a dispute, either Party, by written notice to the
other Party, may have such dispute referred to the Parties’ respective
executive officers designated below or their successors, for attempted
resolution by good faith negotiations within 30 days after such notice is
received.  Said designated officers are
as follows:

 

	
  For Isis:

  	
   

  	
  Chief Operating Officer

  
	
  For Alnylam:

  	
   

  	
  President and Chief
  Operating Officer

  

 

If
the dispute is not resolved as provided above, the CEO of Isis and the CEO of
Alnylam will meet for attempted resolution by good faith negotiations within 15
days after the expiration of the preceding 30 day period.

 

(b)       In the event the designated executive officers are not
able to resolve such dispute during such 15-day period, then any
such dispute shall be resolved through binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association by a panel of
three arbitrators appointed in accordance with such rules.  The Parties shall be entitled to the same
discovery as permitted under the U.S. Federal Rules of Civil Procedure; provided
that the panel shall be entitled in its discretion to grant a request
from a Party for expanded or more limited discovery.  The award of the arbitrators shall be the
sole and exclusive remedy between the Parties regarding any such dispute.  An award rendered in connection with an
arbitration pursuant to this Section 17.6 shall be final and binding upon
the Parties and any judgment upon such award may be entered and enforced in any
court of competent jurisdiction.  Any
arbitration pursuant to this Section 17.6 shall be conducted in San Diego,
California if Alnylam initiates the arbitration or in Boston, Massachusetts if
Isis initiates the arbitration.  Nothing
in this Section 17.6 shall be construed as limiting in any way the right
of a Party to seek an injunction or other equitable relief with respect to any actual
or threatened breach of this Agreement or to bring an action in aid of
arbitration.  Should any Party seek an
injunction or other equitable relief, or bring an action in aid of arbitration,
then for purposes of determining whether to grant such injunction or other
equitable relief, or whether to issue any order in aid of arbitration, the
dispute underlying the request for such injunction or other equitable relief,
or action in aid of arbitration, may be heard by the court in which such action
or proceeding is brought.

 

17.7        No Consequential Damages. 
IN NO EVENT WILL EITHER PARTY OR ANY OF ITS RESPECTIVE AFFILIATES BE
LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT,
NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS
OF PROFITS OR REVENUE, OR CLAIMS OF CUSTOMERS OF ANY OF THEM OR OTHER THIRD
PARTIES FOR SUCH OR OTHER DAMAGES.

 

40

 

17.8        Captions.  The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely a convenience to assist
in locating and reading the several Articles and Sections hereof.

 

17.9        Waiver.  The waiver by either Party hereto of any
right hereunder, or the failure to perform, or a breach by the other Party will
not be deemed a waiver of any other right hereunder or of any other breach or
failure by said other Party whether of a similar nature or otherwise.

 

17.10      Compliance with Law.  Nothing in
this Agreement will be deemed to permit a Party to export, re-export or
otherwise transfer any Product sold under this Agreement without compliance
with applicable laws.

 

17.11      Severability.  In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired
thereby, unless the absence of the invalidated provision(s) adversely
affect the substantive rights of the Parties. The Parties will in such an
instance use their best efforts to replace the invalid, illegal or
unenforceable provision(s) with valid, legal and enforceable provision(s) which,
insofar as practical, maintains the balance of the rights and obligations of
the Parties under this Agreement.

 

17.12      Waiver of Rule of Construction.  Each Party has had the opportunity to consult
with counsel in connection with the review, drafting and negotiation of this
Agreement. Accordingly, the rule of construction that any ambiguity in
this Agreement will be construed against the drafting Party will not apply.

 

17.13      Counterparts.  This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

 

17.14      Performance
by Affiliates.  To the extent that this Agreement imposes
obligations on Affiliates of a Party, such Party agrees to cause its Affiliates
to perform such obligations.

 

17.15      No Implied License. 
Except as expressly provided in Sections 5.1, 6.1 and 6.2 of 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 of such Party.

 

41

 

IN WITNESS WHEREOF, the Parties have executed this
Agreement as of the Restatement Date.

 

 

	
  ISIS
  PHARMACEUTICALS, INC.

  	
   

  	
  ALNYLAM
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ B. Lynne Parshall

  	
   

  	
  By:

  	
  /s/ Barry Greene

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  B. Lynne Parshall

  	
   

  	
  Name:

  	
  Barry Greene

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief Operating Officer

  	
   

  	
  Title:

  	
  President &
  COO

  

 

42

 

EXHIBIT
1.1

 

DEFINITIONS

 

1.                                       “Acquisition” means any of the following
events:  (a) the acquisition by any
Person or group, other than a Person or group controlling such Party as of the
Restatement Date, of “beneficial ownership” (as defined in Rule 13d-3 under
the United States Securities Exchange Act of 1934, as amended), directly or
indirectly, of fifty percent (50%) or more of the shares of such Party’s voting
stock; (b) the approval by the shareholders of such Party of a merger,
share exchange, reorganization, consolidation or similar transaction of such
Party (a “Transaction”), other than a Transaction which would result in the
voting stock of such Party outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the voting
stock of such Party or such surviving entity immediately after such
Transaction; or (c) approval by the shareholders of such Party of a
complete liquidation of such Party or a sale or disposition of all or
substantially all of the assets of such Party.

 

2.                                       “Active Program” means with respect to a
Gene Target and a Party, any ongoing drug discovery, development, or
commercialization of a compound directed to such Gene Target being conducted by
such Party (whether on its own or through a sublicensee).

 

3.                                       “Actual FTE Costs” has the meaning set
forth in Section 4.2(c).

 

4.                                       “Actual External Costs” has the meaning
set forth in Section 4.2(c).

 

5.                                       “Advancing Party” has the meaning set
forth in Section 4.3(a).

 

6.                                       “Affiliate” with respect to either Party
means Person controlling, controlled by, or under common control with such
Party.  For purposes of this definition, “control”
refers to the possession, directly or indirectly, of the power to direct the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, of a Person.  Notwithstanding the foregoing, Regulus Therapeutics
Inc. will not be considered an Affiliate of either Party.

 

7.                                       “Alnylam Current Chemistry Patents” means
all Chemistry Patents Controlled by Alnylam as of the Restatement Date,
including without limitation the Patents listed on Schedule 1-7 attached
hereto, except Patents that constitute Alnylam
Excluded Technology, or Co-Exclusive ssRNAi Patents.

 

8.                                       “Alnylam Current Motif and Mechanism
Patents” means all Motif and Mechanism Patents Controlled by Alnylam as of the
Restatement Date, including without limitation the Patents listed on Schedule
1-8 attached hereto,
except Patents that constitute
Alnylam Excluded Technology, or Co-Exclusive ssRNAi Patents.

 

43

 

9.                                       “Alnylam Double Stranded RNA Product”
means a Double Stranded RNA Product discovered or developed by Alnylam, its
Affiliates or sublicensees, the manufacture, sale or use of which is covered by
a Valid Claim within the Isis Patent Rights.

 

10.                                 “Alnylam Enabled Target Pool” has the
meaning set forth in Section 4.3(a).

 

11.                                 “Alnylam Excluded Technology” means
inhibitors to specific genes or gene families, manufacturing and analytical
technologies, formulation and delivery technologies and the specific technology
listed on Schedule 1-10 attached hereto.

 

12.                                 “Alnylam Future Chemistry Patents” means
all Chemistry Patents Controlled by Alnylam after the Restatement Date and
having an earliest priority date of no later than [***] or that is necessary to
practice a Patent licensed hereunder; provided, however that (a) for
any such Chemistry Patents that are acquired, licensed or invented that include
financial or other obligations to a Third Party, the provisions of Section 11.8
will govern whether such Patent will be included as an Alnylam Future Chemistry
Patent and (b) Alnylam Future Chemistry Patents do not include Patents
that constitute Alnylam Excluded Technology, or Co-Exclusive ssRNAi
Patents.  Notwithstanding the foregoing, (i) in
the event an Acquisition involving Isis occurs before [***], the date “[***]”
used in this definition will be automatically changed to the date of such
Acquisition; and (ii) in the event of an Early Collaboration Termination
under Section 14.4, solely with
respect to the licenses granted to Isis under Section 6.1(i), the date “[***]”
used in this definition will be automatically changed to the Collaboration
Termination Date.

 

13.                                 “Alnylam Future Motif and Mechanism
Patents” means all Motif and Mechanism Patents Controlled by Alnylam after the
Restatement Date and having an earliest priority date of no later than [***] or
that is necessary to practice a Patent licensed hereunder; provided, however
that (a) for any such Motif and Mechanism Patents that are acquired,
licensed or invented that include financial or other obligations to a Third
Party, the provisions of Section 11.8 will govern whether such Patent will
be included as an Alnylam Future Motif and Mechanism Patent and (b) Alnylam
Future Motif and Mechanism Patents do not include Patents that constitute
Alnylam Excluded Technology, or Co-Exclusive ssRNAi Patents.  Notwithstanding the foregoing, (i) in
the event an Acquisition involving Isis occurs before [***], the date “[***]”
used in this definition will be automatically changed to the date of such
Acquisition, and (ii) in the event of an Early Collaboration Termination
under Section 14.4, solely with
respect to the licenses granted to Isis under Section 6.1(i), the date “[***]”
used in this definition will be automatically changed to the Collaboration
Termination Date.

 

14.                                 “Alnylam Patent Rights” means Alnylam
Current Motif and Mechanism Patents, Alnylam Future Motif and Mechanism
Patents, Alnylam Current Chemistry Patents and Alnylam Future Chemistry
Patents.  For purposes of determining
whether a royalty is payable by Isis under Section 8.2 in connection with
the sale of an Isis Single Stranded RNAi Product, any Joint Patent, a Valid
Claim of 

 

44

 

which covers the
manufacture, use or sale of such Isis Single Stranded RNAi Product, will be
considered an Alnylam Patent Right.

 

15.                                 “Alnylam Product” means an Alnylam Double
Stranded RNA Product MicroRNA Product, or Alnylam Single Stranded RNAi Product,
discovered or developed by Alnylam, its Affiliates or sublicensees, the
manufacture, sale or use of which is covered by a Valid Claim within the Isis
Patent Rights.

 

16.                                 “Alnylam Single Stranded RNAi Product”
means any Single Stranded RNAi Product Designed for an Alnylam Enabled Target,
the manufacture, sale or use of which is covered by a Valid Claim within the
Isis Patent Rights.

 

17.                                 “Antisense Drug Discovery Program” means
an antisense drug discovery program that investigates multiple different
mechanisms of modulating a Gene Target to identify a drug candidate, with a
predominant emphasis on potential drug candidates that are single-stranded.

 

18.                                 “Applicable Laws” means all laws,
statutes, rules, regulations, orders, judgments, or ordinances having the
effect of law of any federal, national, multinational, state, provincial,
county, city or other political subdivision.

 

19.                                 “Bona Fide Drug Discovery Collaboration”
means a collaboration involving the discovery and development of Double
Stranded RNA Products, in which a Party plays an integral role in the
experimentation and an important, though not necessarily dominant or co-equal,
role in the decision-making, relating to the discovery and development of
Double Stranded RNA Products from the point in time at which the relevant Gene
Target has been designated through the initiation of [***].  A Bona Fide Drug Discovery Collaboration may
continue beyond the initiation of such [***]. For Isis Products that are Double
Stranded RNA Products, a Bona Fide Drug Discovery Collaboration must be an
Antisense Drug Discovery Program.  For
each Party, collaborations that do not include or involve Patents licensed from
the other Party hereunder shall not constitute Bona Fide Drug Discovery
Collaborations.  A Party’s
experimentation relating to the discovery and development of Double Stranded
RNA Products that modulate a relevant Gene Target prior to the commencement of
a collaboration shall be deemed to have been conducted in the course of the
collaboration for purposes of determining whether the collaboration is a Bona
Fide Drug Discovery Collaboration.  A
series of related collaborations and/or license agreements involving the
discovery and development of Double Stranded RNA Products with the same
sublicensee or related sublicensees that includes a Bona Fide Drug Discovery
Collaboration agreement will be aggregated to constitute a single Bona Fide
Drug Discovery Collaboration.

 

20.                                 “Budget” has the meaning set forth in Section 4.2(a).

 

21.                                 “Business Day” means a weekday on which
banking institutions in Boston, Massachusetts are open for business.  For purposes of clarity, a Business Day 

 

45

 

shall not include
any Saturday or Sunday or federal or Commonwealth of Massachusetts holiday.

 

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

 

23.                                 “Chemistry Patent” means any Patent that
covers (a) an oligomeric compound having a chemical composition
that differs from a native oligonucleotide composition or (b) any
modification to the base, sugar or internucleoside linkage of the oligomeric
compound, and specifically, but without limitation, includes covalently linked
conjugates and other such moieties

 

24.                                 “Co-Exclusive ssRNAi Patents” means third
party Patents in-licensed by both Alnylam and Isis prior to [***] to the extent
that such Patents Cover Single Stranded RNAi Compounds or Single Stranded RNAi
Products.

 

25.                                 “Collaboration Termination Date” has the
meaning set forth in Section 14.4.

 

26.                                 “Commercially Reasonable Efforts” means
the diligent efforts, expertise and resources normally used by a Party to
develop, manufacture and commercialize a product or compound owned by it or to
which it has rights, which is of similar market potential at a similar stage in
its development or product life, taking into account issues of safety, and
efficacy, product profile, difficulty in developing the product or compound,
competitiveness of the marketplace for the product, the proprietary position of
the compound or product, the regulatory structure involved, the potential total
profitability of the applicable product(s) marketed or to be marketed and
other relevant factors affecting the cost, risk and timing of development and
the total potential reward to be obtained if a product is commercialized, but
not less than reasonably diligent efforts. 
In determining whether Commercially Reasonable Efforts have been
satisfied, the fact that a Party is required to pay the other Party a royalty
or milestones shall not be a factor weighed (i.e., a Party may not apply lesser
resources or effort to a Product because it must pay a royalty or milestones to
the other Party).

 

27.                                 “Control” or “Controlled” means, with
respect to any Patent or other intellectual property right, possession of the
right (whether by ownership, license or otherwise), to assign, or grant a
license, sublicense or other right to or under, such Patent or right as
provided for herein without violating the terms of any agreement or other
arrangement with any Third Party.

 

28.                                 “Confidential Information” means
information which is (a) of a confidential and proprietary nature; and (b) not
readily available to that Party’s competitors and which, if known by a
competitor of that Party, might lessen any competitive advantage of that Party
or give such competitor a competitive advantage.

 

Confidential
Information includes, without limitation, (x) information that is
proprietary or confidential or which is treated by that Party as confidential
and which relates either directly or indirectly to the business of that Party
regardless 

 

46

 

of the form in
which that information is constituted, and which is not lawfully in the public
domain; and (y) any confidential information in relation to Patents,
technology, know-how, or any improvements owned or Controlled by a Party
hereto.

 

Confidential
Information will not include any information that the receiving Party can
establish by written records:

 

(i)            was known by it prior to the receipt of
Confidential Information from the disclosing Party;

 

(ii)           was disclosed to the receiving Party by a
Third Party having the right to do so;

 

(iii)          was, or subsequently became, in the
public domain through no fault of the receiving Party, its officers, directors,
employees or agents; or

 

(iv)          was concurrently or subsequently
developed by personnel of the receiving Party without having had access to the
disclosing Party’s Confidential Information.

 

29.           “Controlled Contractor” means a Third
Party contractor, such as a contract research organization, contract employee,
contract manufacturer, consultant and the like, who merely conducts activities
on behalf of a Party, is subject to such Party’s supervision and control, and
will not have any rights (other than non-exclusive rights) in any intellectual
property created in connection with such activities.

 

30.           “Designed for” means, when used in
relation to a specified Gene Target, a Single Stranded RNAi Compound that is
[***] to [***] of the specified [***] via [***].

 

31.           “Development Candidate” means a Single
Stranded RNAi Product for which [***] have commenced.

 

32.           “Development Collaboration” means a
collaboration by either Party with a Third Party whose purpose is the further
development and/or commercialization of a Double Stranded RNA Product or Single
Stranded RNAi Product, as applicable, and that begins at or after the
initiation of IND-Enabling Studies for such Product.  For each Party, collaborations that do not
include or involve Patents licensed from the other Party hereunder shall not
constitute Development Collaborations.

 

33.           “Double Stranded RNA” means a composition
designed to act primarily through an RNAi mechanism that is not a MicroRNA
Construct and which consists of either (a) two separate oligomers of
native or chemically modified RNA that are hybridized to one another along a
substantial portion (greater than or equal to [***]%) of their lengths, or (b) a
single oligomer of native or chemically modified RNA that is hybridized to
itself by self-complementary base-pairing along a 

 

47

 

substantial
portion (greater than or equal to [***]%) of its length to form a hairpin.

 

34.           “Double Stranded RNA Product” means a
pharmaceutical composition that contains a Double Stranded RNA.

 

35.           “Early Collaboration Termination” has the
meaning set forth in Section 14.4.

 

36.           “Early Termination Notice” has the
meaning set forth in Section 14.4.

 

37.           “Effective Date” means March 11,
2004.

 

38.           “Enabled Target” has the meaning set
forth in Section 4.3(a).

 

39.           “Enabled Target Pool” has the meaning set
forth in Section 4.3(a).

 

40.           “Enabled Target Slot” has the meaning set
forth in Section 4.3(a).

 

41.           “FTE” means the equivalent of the work of
one (1) employee working on a dedicated full time basis for one (1) year
(consisting of at least a total of [***] hours per year of dedicated effort,
excluding vacations and holidays) of work on or directly related to the
Research Plan, carried out by an Isis employee or an Alnylam employee, as the
case may be.  No one person will be
permitted to account for more than [***]hours of FTE contribution per
year.  Any person who devotes less than
[***]hours per year shall be treated as an FTE on a pro-rata basis, based upon
the actual number of hours worked divided by [***].  Scientific work performed in the performance
of the Research Program by an Isis FTE or Alnylam FTE may include, but is not
limited to, experimental laboratory work, recording and writing up results,
reviewing literature and references, and holding scientific discussions.

 

42.           “FTE Rate” means $[***] per FTE per year
for the initial calendar year of the Research Term, such FTE rate to be
increased by the percentage increase in the Consumer Price Index — Urban Wage
Earners and Clerical Workers, US City Average, All Items, 1982-84 = 100,
published by the United States Department of Labor, Bureau of Labor Statistics
(or its successor equivalent index, the “CPI”) over the CPI as of June 30,
2009, starting as of the beginning of the 2nd calendar year of the Research
Term (i.e., beginning in 2010) and each calendar year thereafter during the
Research Term, provided that any such increase shall not exceed [***]%
per annum.

 

43.           “Gene Target” means a transcriptional
unit of a gene, including any protein product of such transcriptional unit, and
including all splice variants.

 

44.           “Graduated Enabled Target” has the
meaning set forth in Section 4.3(a).

 

45.           “In Vivo
Efficacy in Rodents” means the first achievement by Alnylam or its sublicensees
of at least a [***]% nadir reduction of the mRNA of the intended 

 

48

 

Gene Target in an
internal organ(s), demonstrated in an independent rodent experiment and
confirmed by [***], with an unformulated, unconjugated Single Stranded RNAi
Compound administered subcutaneously as a [***] not to exceed [***] mg/kg.  If not achieved earlier, this milestone will
be deemed to have occurred upon In Vivo
Efficacy in NHP.

 

46.           “In Vivo
Efficacy in NHP” means the first achievement by Alnylam or its sublicensees of
at least a [***]% nadir reduction of the mRNA of the intended Gene Target in an
internal organ(s), demonstrated in an independent NHP experiment and confirmed
by [***], with an unformulated, unconjugated Single Stranded RNAi Compound
administered subcutaneously at a [***] not to exceed [***] mg/kg per week, with
the nadir reduction seen and confirmed in [***] consecutive administration
cycles.

 

47.           “IND” means an Investigational New Drug
Application or similar foreign application or submission for approval to
conduct human clinical investigations.

 

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

 

49.           “Initiation of Phase I Trial” means the
dosing of at least ten human subjects in the first human clinical trial
conducted and designed to evaluate safety of a product.

 

50.           “Initiation of Phase III Trial” means the
dosing of the first patient in the first pivotal human clinical trial the
results of which could be used to establish safety and efficacy of a Product as
a basis for an application for marketing approval or that would otherwise
satisfy the requirements of 21 CFR 3 12.21I or its foreign equivalent.

 

51.           “Isis Current Chemistry Patents” means
all Chemistry Patents Controlled by Isis as of the Restatement Date, including
without limitation the Patents listed on Schedule 1-51 attached hereto, except Patents that constitute Isis Excluded Technology, or
Co-Exclusive ssRNAi Patents.

 

52.           “Isis Current Motif and Mechanism Patents”
means all Motif and Mechanism Patents Controlled by Isis as of the Restatement
Date, including without limitation the Patents listed on Schedule 1-52 attached
hereto, except Patents that constitute Isis
Excluded Technology, or Co-Exclusive ssRNAi Patents.

 

53.           “Isis DS-Target Pool” has the meaning set
forth in Section 6.4(a).

 

54.           “Isis Enabled Target Pool” has the
meaning set forth in Section 4.3(a).

 

55.           “Isis Encumbered Target” means a Gene
Target (a) to which Isis has a contractual obligation to a Third Party
existing as of the Restatement Date that precludes Isis from granting a license
under Section 5 with respect to such Gene Target and (b) that is
identified and described on a [***] (as defined in the letter agreement dated March 9,
2004 between Alnylam and Isis).  When and
if such restrictions lapse a Gene Target will cease to be an Isis Encumbered
Target.

 

49

 

56.           “Isis Excluded Technology” means (a) RNase
H mechanisms, RNase H motifs and RNase H oligonucleotides when utilized in an
RNase H mechanism, assays and methods thereof; (b) modulators of specific
genes, gene families or proteins; (c) manufacturing technologies; (d) analytical
technologies, kits and assays, including without limitation methods, systems
and compositions of matter for amplifying, quantifying, detecting,
characterizing or identifying nucleic acids or nonoligomeric ligands thereto; (e) formulation
and delivery technologies; and (f) the specific technology listed on
Schedule 1-56 attached hereto.

 

57.           “Isis Future Motif and Mechanism Patents”
means all Motif and Mechanism Patents Controlled by Isis after the Restatement
Date and having an earliest priority date of no later than [***] or that is
necessary to practice a Patent licensed hereunder; provided, however
that (a) for any such Motif and Mechanism Patents that are acquired,
licensed or invented that include financial or other obligations to a Third
Party, the provisions of Section 11.8 will govern whether such Patent will
be included as an Isis Future Motif Mechanism Patent, and (b) Isis Future
Motif and Mechanism Patents do not include Patents that constitute Isis
Excluded Technology, or Co-Exclusive ssRNAi Patents.  Notwithstanding the foregoing, in the event
of an Acquisition involving Alnylam, the date “[***]” used in this definition
will be automatically changed to the date of such Acquisition.

 

58.           “Isis Future Chemistry Patents” means the
Chemistry Patents Controlled by Isis after the Restatement Date and having an
earliest priority date of no later than [***] or that is necessary to practice
a Patent licensed hereunder; provided, however that (a) for any
such Chemistry Patents that are acquired, licensed or invented that include
financial or other obligations to a Third Party, the provisions of Section 11.8
will govern whether such Chemistry Patents will be included as an Isis Future
Chemistry Patent, except Patents that constitute
Isis Excluded Technology and (b) Isis Future Chemistry Patents do not
include Patents that constitute Isis Excluded Technology, or Co-Exclusive
ssRNAi Patents.  Notwithstanding the
foregoing, in the event of an Acquisition involving Alnylam, the date “[***]”
used in this definition will be automatically changed to the date of such
Acquisition.

 

59.           “Isis Manufacturing Patents” means the
Patents specifically listed on Schedule 1-59 attached hereto.  The Parties may agree in writing from time to
time to add additional Patents to Schedule 1-59 attached hereto.

 

60.           “Isis Partnered Excluded Targets” has the
meaning set forth in Section 4.3(e)(i).

 

61.           “Isis Patent Rights” means Isis Current
Motif and Mechanism Patents, Isis Future Motif and Mechanism Patents, Isis
Current Chemistry Patents and Isis Future Chemistry Patents.  For purposes of determining whether a royalty
is payable by Alnylam under Section 7.2 in connection with the sale of an
Alnylam Single Stranded RNAi Product, any Joint Patent, a Valid Claim of which
covers the manufacture, use or sale of such Alnylam Single Stranded RNAi
Product, will be considered an Isis Patent Right.

 

50

 

62.           “Isis Product” means any Isis Single Stranded Product,
MicroRNA Product, Double Stranded RNA Product or Isis Single Stranded RNAi
Product, discovered or developed by Isis, its Affiliates or sublicensees, the
manufacture, sale or use of which is covered by a Valid Claim within the
Alnylam Patent Rights.

 

63.           “Isis Protected Targets” has the meaning set forth in Section 4.3(e).

 

64.           “Isis Single Stranded Product” means any single
stranded oligomeric compound (a) that hybridizes in whole or in part with
a target RNA and modulates the Gene Target, (b) is not a Double Stranded
RNA or Double Stranded RNA Product and (c) the manufacture, sale or use of
which is covered by a Valid Claim within the Alnylam Patent Rights.  For purposes of clarity, an Isis Single Stranded
Product shall not include Single Stranded RNAi Compounds, Single Stranded RNAi
Products and Isis Single Stranded RNAi Products.

 

65.           “Isis Single Stranded RNAi Product” means any Single
Stranded RNAi Product Designed for an Isis Enabled Target, the manufacture,
sale or use of which is covered by a Valid Claim within the Alnylam Patent
Rights.

 

66.           “Isis Special Patents” means the Patents specifically
listed on Schedule 1-66 attached hereto. 
The Parties may mutually agree in writing from time to time to add
additional Patents to Schedule 1-66 attached hereto

 

67.           “Joint Invention” has the meaning set forth in Section 11.1(b).

 

68.           “Joint Patent” has the meaning set forth in Section 11.1(b).

 

69.           “Know-How” means all tangible or intangible know-how, discoveries,
processes, formulas, data, clinical and preclinical results, non-Patented
Inventions, Inventions for which Patents are in preparation, trade secrets, and
any physical, chemical, or biological material or any replication of any such
material in whole or in part that are not otherwise covered by the Isis Patent
Rights or the Alnylam Patent Rights

 

70.           “License Term” means the period from the Restatement
Date until the date of expiry of the last to expire of the Patents licensed
hereunder.

 

71.           “Major Pharmaceutical Company” means a Person that,
together with all of its affiliated Persons, had annual pharmaceutical product
sales during the most recently completed calendar year in excess of $[***].

 

72.           “Marketing Approval” means the act of a Regulatory
Authority necessary for the marketing and sale of the Product in a country or
regulatory jurisdiction, including, without limitation, the approval of the NDA
by the FDA, EC Approval, and Japanese Approval.

 

73.           “MicroRNA Construct” is a construct having the
chemical and physical description of a Double Stranded RNA that is either (a) designed
to target a precursor microRNA or a microRNA, thereby to inhibit the production
or 

 

51

 

function of the
microRNA, or (b) designed to function by mimicking the translational
repressor function of a naturally occurring microRNA, and which, in relation to
its target RNA, has been demonstrated in vitro and, to the extent reasonably
feasible, in vivo, to function solely as a translational repressor and not via
cleavage of such target RNA.

 

74.           “MicroRNA Product” means a pharmaceutical product that
contains a MicroRNA Construct.

 

75.           “Motif and Mechanism Patents” means any Patent that
covers an oligomeric structure or composition of matter, or any method of using
or incorporating such oligomeric structure or composition of matter in vitro or in vivo,
including without limitation for therapeutic use, in which target RNA levels
are modulated by any mechanism other than RNase H.

 

76.           “Naked Sublicense” means a
license for Double Stranded RNA that includes rights to the Isis Patent Rights
that is not a license in connection with (a) a Development Collaboration
or (b) a Bona Fide Drug Discovery Collaboration.  A series of Naked Sublicenses to the same
sublicensee or related sublicensees will be aggregated to constitute a single
Naked Sublicense.  For the avoidance of
doubt, where this Agreement grants Alnylam exclusive rights to grant Naked
Sublicenses, such exclusive rights preclude Isis from granting licenses to the
Isis Patent Rights to Third Parties for Double Stranded RNA even though such
license grants by Isis would technically be license grants and not sublicense
grants.  Licenses that do not include or involve rights
to Isis Patents shall not constitute Naked Sublicenses.

 

77.           “Naked Sublicensee” means a
Third Party that obtains a Naked Sublicense from Alnylam in accordance with the
terms of this Agreement.

 

78.           “NDA” means New Drug Application or similar
application or submission for approval to market and sell a new pharmaceutical product filed with or
submitted to a Regulatory Authority.

 

79.           “Net Sales” will mean the gross invoice price of Products sold by
Alnylam or Isis (as applicable), their respective Affiliates and sublicensees
(but with respect to Alnylam does not include Naked Sublicensees) to a Third
Party less the following items:  (i) trade
discounts, credits or allowances, (ii) credits or allowances additionally
granted upon returns, rejections or recalls, (iii) freight, shipping and
insurance charges, (iv) taxes, duties or other governmental tariffs (other
than income taxes) and (v) government-mandated rebates and (vi) a
reasonable reserve for bad debts.  Except
in the cases of Products used to conduct clinical trials, reasonable amounts of
Products used as marketing samples and Product provided without charge for
compassionate or similar uses, a Party, its Affiliates or sublicensees will be
treated as having sold Products for an amount equal to the fair market value of
Products if: (a) Products are used by such Party, its Affiliates or
sublicensees without charge or provision of invoice, or (b) Products are
provided to a Third Party by such Party, its Affiliates or sublicensees without

 

52

 

charge or
provision of invoice and used by such third party.

 

Such amounts shall
be determined from the books and records of Alnylam or Isis (as applicable) and
their respective Affiliates and sublicensees, maintained in accordance with
GAAP, consistently applied.

 

In the event the Product is sold as part of a
Combination Product (as defined below), the Net Sales from the Combination
Product, for the purposes of determining royalty payments, shall be determined
by multiplying the Net Sales (as determined without reference to this
paragraph) of the Combination Product, during the applicable royalty reporting
period, by the fraction, A/A+B, where A is the average sale price of the
Product when sold separately in finished form and B is the average sale price
of the other product(s) included in the Combination Product when sold
separately in finished form, in each case during the applicable royalty
reporting period or, if sales of both the Product and the other product(s) did
not occur in such period, then in the most recent royalty reporting period in
which sales of both occurred.  In the
event that such average sale price cannot be determined for both the Product
and all other products(s) included in the Combination Product, Net Sales
for the purposes of determining royalty payments shall be calculated by
multiplying the Net Sales of the Combination Product by the fraction of C/C+D
where C is the fair market value of the Product and D is the fair market value
of all other product(s) included in the Combination Product.  As used above, the term “Combination Product”
means any pharmaceutical product which consists of a Product and other
therapeutically active pharmaceutical compound or any delivery technology that
embodies substantial intellectual property rights Controlled by the selling
Party (e.g., a common syringe would not constitute a delivery technology that
embodies substantial intellectual property rights Controlled by the selling
Party, but an implantable delivery device such as a stent would constitute such
a delivery technology).

 

80.           “Other Alnylam Sublicense”
has the meaning set forth in Section 7.6(a).

 

81.           “Other Isis Sublicense” has
the meaning set forth in Section 8.4(b).

 

82.           “Patent” or “Patents” means (a) patent applications
(including provisional applications and applications for certificates of
invention); (b) any patents issuing from such patent applications
(including certificates of invention); (c) all patents and patent
applications based on, corresponding to, or claiming the priority date(s) of
any of the foregoing; (d) any substitutions, extensions (including
supplemental protection certificates), registrations, confirmations, reissues,
divisionals, continuations, continuations-in-part, re-examinations, renewals
and foreign counterparts thereof; and (e) all patents claiming overlapping priority therefrom.

 

83.           “Person” means any person, organization, corporation
or other business entity.

 

84.           “Product” means either an Alnylam Product or an Isis
Product as the case may be.

 

53

 

85.           “Regulatory Authority” means any
applicable government regulatory authority involved in granting approvals for
the marketing and/or pricing of a Product worldwide including, without limitation,
the United States Food and Drug Administration (“FDA”) and any successor
government authority having substantially the same function, and foreign
equivalents thereof.

 

86.           “Research Costs” has the meaning set
forth in Section 4.2(c).

 

87.           “Research Plan” has the meaning set forth
in Section 4.2(a).

 

88.           “Research Program” has the meaning set
forth in Section 4.2.

 

89.           “Research Program Patent” means any
Patents that claim Inventions that were discovered by the employees of either
Party in the performance of the Research Program.  For purposes of clarity, Research Program
Patents may also be Isis Future Motif and Mechanism Patents, Isis Future
Chemistry Patents, Alnylam Future Motif and Mechanism Patents, or Alnylam
Future Chemistry Patents.

 

90.           “Research Term” has the meaning set forth
in Section 4.2.

 

91.           “Research Use” means discovering,
developing and optimizing an Alnylam Product or an Isis Product, as applicable,
up to, but not including, [***], and/or
conducting pilot manufacturing studies of an Alnylam Product or an Isis
Product, as applicable.  Research Use may include small pilot
toxicology studies.  With respect to
Isis, Research Use does not include studies [***] for potential drug targets,
but does include studies [***] for development of Double Stranded RNA Products
or Single Stranded RNAi Products, as applicable, from among potential targets
for which a reasonable scientific basis exists for believing that such
potential targets are associated with a particular disease or condition.

 

92.           “Reserved DS-Target” has the meaning set
forth in Section 6.4(a).

 

93.           “RMC” has the meaning set forth in Section 4.1(a).

 

94.           “Single Stranded RNAi Compound” means a
single stranded chemically modified oligonucleotide and/or analog designed to
cause target mRNA cleavage via the RISC or RNAi mechanism.  For purposes of clarity, an ssRNAi compound
does not include oligonucleotides (or chemically modified oligonucleotide
analogs) designed to work via other mechanisms such as (i) RNase H 1 or 2
(including any oligonucleotide which has [***]); (ii) alteration of
splicing; (iii) translation arrest (excluding RNAi-mediated repression of
translation); (iv) alteration of processing; (v) polyadenylation; (vi) capping;
(vii) modulation of pre-mRNA processing of the target mRNA; or (viii) oligonucleotides
(or chemically modified oligonucleotide analogs) designed to mimic a known
naturally occurring microRNA.

 

Working via the RISC or RNAi mechanism means that the
compound is capable 

 

54

 

of, in an in vitro
cell culture assay, causing cleavage of the target mRNA at the [***], as
evidenced for example by a [***] assay.

 

95.           “Single Stranded RNAi Product” means a
pharmaceutical composition that contains a Single Stranded RNAi Compound.

 

96.           “Sublicense Revenue” means any payments
that (1) with respect to Alnylam, Alnylam receives from a sublicensee in
consideration of a Naked Sublicense or a sublicense granted by Alnylam as
permitted by Section 5.2(b), or (2) with respect to Isis, Isis
receives from a sublicensee in consideration of a sublicense to further the
research, development or commercialization of an Isis Single Stranded RNAi
Product, in each case including, but not limited to, license fees, royalties,
milestone payments, and license maintenance fees, but excluding: (i) payments
made in consideration of equity or debt securities of the applicable Party at
fair market value and (ii) payments specifically committed to reimburse
the applicable Party for the fully-burdened cost of research and
development.  If a Party receives any
non-cash Sublicense Revenue, such Party will pay the other Party, at the
election of the Party who is entitled to receive Sublicense Revenue payment,
either (x) a cash payment equal to the fair market value of the
appropriate percentage of the Sublicense Revenue or (y) the in-kind
portion, if practicable, of the Sublicense Revenue.

 

97.           “Technology Access Fee” means any
payments that Alnylam receives from granting a Third Party access (through
sublicense or otherwise) to the Isis Patent Rights as part of a Bona Fide
Collaboration or Development Collaboration agreement, including, but not
limited to, (1) license fees, (2) collaboration fees, (3) option
fees, (4)  payments made in consideration for the issuance of equity or
debt securities above fair market value, (5) payments made for research
and development support above Alnylam’s fully-burdened cost, but excluding the following payments: (i) payments made
in consideration for equity or debt securities of Alnylam at fair market value,
(ii) payments made in consideration for thirty-five percent (35%) or more
of Alnylam’s equity securities at fair market value plus a reasonable control
premium, (iii) payments specifically committed to reimburse Alnylam for the
fully-burdened cost of research and development, including without limitation
the fully-burdened cost of products transferred by Alnylam in connection with
such research and development, (iv) [***] (v) payments that are not
milestones and that are associated with the sale of commercial products, and (vi) payments
that count as Sublicense Revenue under a Naked Sublicense subject to Alnylam’s
payment obligations to Isis under Section 7.4.  If Alnylam receives any non-cash Technology
Access Fees, Alnylam will pay Isis, at Isis’ election, either (x) a cash
payment equal to the fair market value of Isis’ appropriate portion of the
Technology Access Fee or (y) the in-kind portion, if practicable, of the
Technology Access Fee.

 

98.           “Third Party” means any party other than
Isis or Alnylam and their respective Affiliates.

 

55

 

99.           “Valid Claim” means (i) an issued
claim of an unexpired Patent that has not been withdrawn, canceled or
disclaimed, or held invalid or unenforceable by a court of competent
jurisdiction in an unappealed or unappealable decision, or (ii) a claim of
a patent application which has been pending for less than [***] years from the
earliest priority date for such application.

 

56

 

EXHIBIT 4.3(c)(iv)

 

Picking Mechanism Examples

 

Example A

 

In
the initial round of Picking, the following will be the order (with total
number of Enabled Targets after Pick in parentheses):

 

Alnylam(1) —
Isis(1) — Isis(2) — Alnylam(2) — Alnylam(3) —Isis(3) —
Isis(4) — Alnylam(4) . . .

 

Example B

 

If
both Parties have an equal number of Enabled Targets (10, for this example) and
the previous round ended with an Alnylam Pass followed by an Isis Pass, the
following will be the order (with total number of Enabled Targets after Pick in
parentheses):

 

Alnylam(11)
— Isis(11) — Isis(12) — Alnylam(12) — Alnylam(13) —Isis(13) — Isis(14) —
Alnylam(14) . . .

 

Example C

 

If
Alnylam has 10 Enabled Targets and Isis has 5 Enable Targets and there have
been no Cleared Targets since the previous Selection Section, the following
will be the order (with total number of Enabled Targets after Pick in
parentheses) regardless of how the previous Round ended:

 

[***]  . . .

 

Example D

 

If
Alnylam has 10 Enabled Targets and Isis has 5 Enable Targets and there have
been one or more Cleared Targets since the previous Selection Section, the
following will be the order (with total number of Enabled Targets after Pick in
parentheses) but Isis will not be entitled to Pick a Cleared Target until it
Picks its [***] Enabled Target (in italics below) regardless of how the
previous Round ended:

 

[***]

 

Example E1

 

If
Isis has 10 Enabled Targets and Alnylam has 5 Enable Targets and there have
been one or more Cleared Targets since the previous Selection Section, the
following will be the order (with total number of Enabled Targets after Pick in
parentheses) regardless of how the previous Round ended and assuming that
Alnylam does not Pick a Cleared Target until it Picks its [***] Enabled Target
(in italics below):

 

[***]  . . .

 

57

 

Example E2

 

If
Isis has 10 Enabled Targets and Alnylam has 5 Enable Targets and there have
been one or more Cleared Targets since the previous Selection Section, the
following will be the order (with total number of Enabled Targets after Pick in
parentheses) regardless of how the previous Round ended and assuming that
Alnylam Picks a Cleared Target with its [***] Enabled Target (in italics below),
and for clarity, Isis may pick a Cleared Target for its [***] Enabled Target
(underlined below):

 

[***]Isis(11)[***]

 

58

 

EXHIBIT 5.3(C) PART I

 

ISIS THIRD-PARTY JOINT PATENTS RIGHTS

 

The following schedule is
provided by Isis Pharmaceuticals, Inc. to Alnylam Pharmaceuticals, Inc.,
in connection with the Strategic Collaboration and License Agreement between
Alnylam and Isis (the “Agreement”).  Capitalized terms used but not otherwise
defined herein have the meanings given to such terms in the Agreement.

 

This schedule and the
information and disclosures contained in this schedule are intended only to
qualify and limit the licenses granted by Isis to Alnylam in the Agreement and
do not expand in any way the scope or effect of any such licenses.

 

Isis
has cases with joint inventorship with the [***] following entities:

 

[***]

 

[***]

 

59

 

Exhibit 5.3(c) Part II, Joint Patent
Rights

 

	
  Isis

  Docket

  Number

  	
   

  	
  Country

  Name

  	
   

  	
  Status

  	
   

  	
  Patent

  Number

  	
   

  	
  Grant

  Date

  	
   

  	
  Title

  	
   

  	
  3rd Party

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

60

 

	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

61

 

EXHIBIT 5.3(D)

 

ISIS ENCUMBERED PATENT RIGHTS

 

The following schedule of encumbered Patents
is provided by Isis Pharmaceuticals, Inc. to Alnylam Pharmaceuticals, Inc.,
in connection with the Strategic Collaboration and License Agreement between
Alnylam and Isis (the “Agreement”).  Capitalized terms used but not otherwise
defined herein have the meanings given to such terms in the Agreement.

 

This schedule and the information and
disclosures contained in this schedule are intended only to qualify and limit
the licenses granted by Isis to Alnylam in the Agreement and do not expand in
any way the scope or effect of any such licenses.

 

1.             Merck

 

The
Patents identified by Isis docket numbers [***] cover the incorporation of
certain Merck-proprietary [***].

 

The
licenses from Isis to Alnylam with respect to these Patents are limited to the
Isis Field.  In addition, Merck has a
research license to practice these Patents in the Isis Field.

 

“Isis
Field” means the use of [the Merck [***]] solely for the purposes of developing
[***].

 

Reference
is made to the discussion regarding Merck nucleosides on the Excluded
Technology schedule.

 

2.             Gilead
Sciences, Inc.

 

Gilead
has retained exclusive rights in the Patents identified by a “Gilead” in the
Third Party column to make, have made, use, import, export or sell compounds
and other subject matter claimed within the scope of the patents which are
[***].

 

In
addition, Gilead has a non-exclusive, non-sublicensable, non-assignable license
under such Patents to make and use CodeBlocker Compounds and Oligonucleotide
Delivery Systems for internal research purposes, but not for any commercial
purpose.

 

“Codeblocker Compound” means
an oligonucleotide that binds directly to DNA or RNA within a cell on a
selective basis determined by the nucleotide sequence of the target DNA or RNA
and exerts its biological activity predominantly through binding to DNA or RNA
to inhibit the transcription or replication of the target DNA or RNA or binding
to RNA to inhibit the translation, processing, packaging or regulatory activity
of the target RNA.  A Codeblocker
Compound may also have a mechanism of action or biological activity other than
one conferred through direct binding to RNA or DNA provided that (i) 

 

62

 

the compound originally was
designed to bind a target DNA or RNA and (ii) the final compound or any
compounds used to derive the final compound were not identified using selective
purification and polymerase amplification in any fashion.  An oligonucleotide, is [***].  An oligonucleotide includes RNA or DNA
fragments, and may be composed of naturally occurring or non-naturally
occurring bases, sugars or intersugar linkages. 
An oligonucleotide may have [***]. 
Oligonucleotides may be made such that adjacent nucleoside or nucleoside
fragments are linked together by [***] linkages to form the [***] in the
linkage.

 

“Oligonucleotide
Delivery System” means any [***] which was developed by Gilead on or prior to
[***], and which (i) enhances the [***] of a Codeblocker Compound, (ii) selectively
delivers a Codeblocker compound to the intended [***], (iii) provides
[***], or (iv) otherwise favorably alters the [***] so as to enhance its
pharmacological activity of clinical value. 
“Oligonucleotide Delivery System” includes [***].

 

Glaxo
Smith Kline has retained rights (originally granted from Gilead to GSK) in the
Patents identified by a “Gilead” in the Third Party column to (i) conduct
research and development within the GSK Field and (ii) make, have made,
use, offer for sale, sell, supply and import within the GSK Field any form or
dosage of a GSK Codeblocker Compound and any GSK Codeblocker Delivery System
used in connection therewith.

 

GSK
may grant sublicenses only (a) to affiliates, for any use within the GSK
Field, and (b) to non-affiliates only to the extent necessary to enable
such sublicensee to make, have made, use, offer for sale, sell, supply and
import a GSK Codeblocker Compound developed by GSK or a research or development
collaborator of GSK during the term of such collaboration and for which GSK
(alone or in conjunction with a commercialization partner for such compound)
has commenced or is prepared to commence human clinical trials.

 

“GSK
Field” means research with respect to, and the development and use of, GSK
Codeblocker Compounds for the diagnosis, prevention or treatment of conditions
or diseases in humans.

 

“GSK
Codeblocker Compound” means any material which (i) binds directly to DNA or
RNA within a cell on a selective basis determined by the nucleotide sequence of
the target DNA or RNA and exerts its biological activity predominantly through
binding to DNA or RNA to inhibit the transcription or replication of the target
DNA or RNA or binding to RNA to inhibit the translation, processing, packaging
or regulatory activity of the target RNA, and (ii) is a molecule [***],
and (iii) is not a naturally occurring protein that binds to DNA to
regulate transcription, or a peptide derived from such a naturally occurring
protein, and (iv) is [***], and (v) was not known by GSK prior to
[***].

 

“GSK
Codeblocker Delivery System” means any [***] which is developed by GSK or
Gilead pursuant to their Collaborative Research Agreement dated March 25,
1996, and which (i) [***] a GSK Codeblocker Compound, (ii) [***] to
the intended target [***], 

 

63

 

(iii) provides
[***] a GSK Codeblocker Compound from [***], or (iv) otherwise [***] a GSK
Codeblocker Compound so as to [***].

 

3.             [***], Inc.

 

Alnylam
cannot grant Naked Sublicenses with respect to the Patents identified by a “[***]”
in the Third Party column or the Patents listed on Annex 3.  In addition, [***] has the first right to
defend and enforce such Patents if it is facing the greatest competitive threat
from infringement.

 

Alnylam
must notify Isis if it grants a sublicense of any kind to a Third Party with
respect to such Patents.

 

The
[***] has the first right to defend and maintain the Patents with a docket
number containing “[***].”

 

Isis
also has access to certain other [***] technology to the extent it is useful
for Antisense Products and Antisense Technology (both as defined in Annex
3).  However, in addition to the
restrictions described above, this technology carries certain other use
restrictions depending on how the technology is characterized under the
in-license agreement.  We do not believe
that such technology will be useful to Alnylam, but have provided a description
of the technology and its related encumbrances on Annex 3 attached hereto.

 

4.             Tullis Patents.

 

The Patents identified by a “Tullis”
in the Third Party column can only be sublicensed in combination with a product
that (i) uses such Patents and (ii) employs as a material element other
Isis Patent Rights.

 

5.             Amgen, GSK, Chiron
and Pfizer.

 

Amgen, Inc.,
Glaxo Smith Kline, Chiron Corporation and Pfizer, Inc. each have a license
to use some or all of the Patents identified by a “TV” in the Third Party
column for their own internal target validation research.

 

6.             Integrated DNA
Technologies, Inc.

 

With
respect to the Patents identified by an “IDT” in the Third Party column,
Integrated DNA Technologies, Inc. has a nonexclusive license to make, have
made, use, import, offer to sell, sell and have sold oligonucleotides and other
related research products to the Academic Market.

 

“Academic
Market” means end-users employed by and located at or in academic, university,
government, and other 501(c)(3) registered not-for-profit organizations;
provided however that specifically excluded from this definition shall be those
end-users 

 

64

 

at
such institutions whose research is directly funded by a for-profit corporation
for the purpose of drug discovery, drug development, or target validation/gene
functionalization wherein the funding corporation has a specific legal interest
or right to the data and information of the funded research

 

7.             TriLink
Biotechnologies, Inc.

 

TriLink Biotechnologies, Inc.
has a non-exclusive license to the Patents identified by a “TriLink” in the
Third Party column to (i) make, use, distribute and sell Licensed Products
to purchasers who have signed a form license agreement and (ii) have [***]
in the manufacture of Licensed Products.

 

“Licensed
Product” means [***]

 

·                  “Propyne” means any of the following [***]

 

[***]

 

8.             Government
Rights

 

Inventions
claimed in US Patent Applications: [***] were funded in part by a Small
Business Innovation Research grant administered by the National Institutes of
Health.  Accordingly, the U.S. Federal
Government retains certain rights to those inventions.

 

65

 

ANNEX 3

 

If
the Patents marked with either a B1 or B2 restriction are [***] prevails in the
[***] and [***] for such Patents broadly cover [***], the licenses under such
Patents are limited to discover, develop, make, have made, use, sell, have
sold, offer to sell, import and have imported Antisense Products and to
practice Antisense Technology; provided that the license will only extend to
the issued claims corresponding to the [***] and shall not extend to any other
claim of such Patents.

 

The
licenses under the Patents marked with an F restriction are limited (i) to
discover, develop, make, have made, use, sell, have sold, offer to sell, import
and have imported Antisense Products which contain modifications which have
[***], (ii) to practice Antisense Technology using oligonucleotides [***]
in such oligonucleotides, and (iii) to discover, develop, make, have made,
use, sell, have sold, offer to sell, import and have imported Antisense
Products which target genes involved in [***].

 

The
licenses under the Patents marked with a C or D restriction are limited to
discover, develop, make, have made, use, sell, have sold, offer to sell, import
and have imported Antisense Products and practice Antisense Technology,
provided that neither such Antisense Products nor such Antisense Technology
use, or are used with, [***].

 

The
licenses under the Patents marked with an A restriction are limited to
discover, develop, make, have made, use, sell, have sold, offer to sell, import
and have imported Antisense Products and practice Antisense Technology,
provided that such Antisense Products and Antisense Technology use, or are used
with, the technology covered by the claims of such Patents solely for the [***]
purposes only.

 

The
licenses under the Patents marked with an M restriction are limited to
discover, develop, make, have made, use, sell, have sold, offer to sell, import
and have imported Antisense Products and practice Antisense Technology, which
Antisense Products and Antisense Technology primarily act [***].

 

The
licenses under the Patents marked with a K restriction are limited to discover,
develop, make, have made, use, sell, have sold, offer to sell, import and have
imported Antisense Products and practice Antisense Technology; provided,
however, that such licenses will not extend to [***].

 

For
purposes of this description:

 

·                  Antisense Products means
oligonucleotides or oligonucleotide analogs or mimics thereof targeted to a
specific sequence of RNA that hybridize to such sequence 

 

66

 

and through such hybridization modulate the production of the targeted
gene product.  The term Antisense
Products shall not include Ribozymes.”

 

·                  Antisense Technology means
the use of any oligonucleotide or oligonucleotide analog or mimic thereof
targeted to a specific sequence of RNA that hybridizes to such sequence and
through such hybridization modulates the production of the targeted gene
product.  The term Antisense Technology
shall not include Ribozyme technology.

 

·                  Ribozymes means
oligonucleotides or oligonucleotide analogs or mimics containing a catalytic
core having a bulge or stem loop and regions flanking the catalytic core that
hybridize to a targeted RNA and modulate the targeted RNA by cleavage at a site
next to a specific ribonucleotide triplet by an oligonucleotide catalyzed
transesterification reaction.

 

·                  Ribozyme Technology means
the use of any oligonucleotides or oligonucleotide analogs or mimics thereof
containing a catalytic core having a bulge or stem loop and regions flanking
the catalytic core that hybridize to a targeted RNA and modulate the targeted
RNA by cleavage at a site next to a specific ribonucleotide triplet by an
oligonucleotide catalyzed transesterification reaction.

 

	
  Patent #

  	
   

  	
  HYBN #

  	
   

  	
  Title

  	
   

  	
  Patent Group

  	
   

  	
  Inventors

  	
   

  	
  Restriction

  
	
  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
   

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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67

 

	
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68

 

	
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  [***]

  

 

69

 

Exhibit 6.5(c)

 

RESTRICTIONS
IMPOSED BY AGREEMENTS BETWEEN ALNYLAM AND THIRD PARTIES

EXECUTED PRIOR TO THE EFFECTIVE DATE

 

Because of agreements in effect with Third
Parties as of the Effective Date, the following restrictions and other terms
apply to Alnylam Patent Rights with respect to which Isis is granted a license,
or option to obtain a license, under this Agreement.

 

RIGHTS LICENSED FROM [***]

 

The rights licensed from [***] (“[***]”)
relate to the “[***]” and “[***]” patents.

 

“[***] patent” means the pending patent
applications listed in Schedule 1-5 with the following case numbers: [***].

 

“[***] patent” means the pending patent
applications listed in Schedule 1-5 with the following case numbers, excluding
claims [***] (case number [***]) and the equivalent claims in any patent
applications and patents resulting from this PCT application:  [***].

 

The restrictions on, and other terms relating
to, the rights available to Isis under the Agreement are described in the
following clauses excerpted from the Co-Exclusive License executed between
Alnylam and [***] on December 20, 2002.

 

“ARTICLE
2 - GRANT OF RIGHTS

 

2.4  Sublicenses

 

.... Immediately after the
signature of each sublicense granted under this Agreement, COMPANY shall
provide [***] with a copy of the signed sublicense agreement, and COMPANY shall
confirm in writing to [***] that COMPANY shall be liable for payment of
royalties on NET SALES of the SUBLICENSEE in accordance with Sections 5.2 and
5.3.

 

ARTICLE
4 - COMPANY DILIGENCE OBLIGATIONS AND REPORTS

 

4.1  Activity Requirements

 

COMPANY shall use
commercially reasonable efforts, and shall oblige its SUBLICENSEES to use
commercially reasonable efforts, to develop and to introduce into the
commercial market LICENSED PRODUCTS at the earliest practical date.

 

4.2  Development Reports

 

Commencing with the
beginning of 2003, COMPANY shall furnish, and shall oblige its SUBLICENSEES to
furnish to COMPANY for inclusion in its reports to [***], to [***] in writing,
within 30 (thirty) days after the end of each calendar 

 

70

 

quarter with COMPANY’s
standard R&D report, as provided to the investors pursuant to the Amended
and Restated Investor’s Rights Agreement Series B, on the progress of its
efforts during the immediately preceding calendar quarter to develop and
commercialize LICENSED PRODUCTS for each indication and sub-indication within
the FIELD.  The report shall also contain
a discussion of intended R&D efforts for the calendar quarter in which the
report is submitted.

 

4.4  Liability for SUBLICENSEES

 

If SUBLICENSEES of COMPANY
develop, manufacture, use and/or sell LICENSED PRODUCTS under the PATENT
RIGHTS, COMPANY warrants and is liable towards [***] that the SUBLICENSEES
perform their sublicense agreement in accordance with this Agreement, and
COMPANY shall be responsible and liable for royalty payments and reports of the
SUBLICENSEES.

 

4.5  Effect of Failure

 

In the event that [***]
determines that COMPANY or any of its SUBLICENSEES has failed to fulfill any of
its obligations under this Section 4, then [***] may treat such failure as
a material breach in accordance with Section 11.7.

 

ARTICLE 5 - SHARES, Royalties and
Payment Terms

 

5.2  Running Royalties

 

COMPANY shall pay to [***]
the following running royalties on NET SALES of therapeutic and prophylactic
LICENSED PRODUCTS by COMPANY and its SUBLICENSEES:

 

[[***]%
([***] percent) to [***]% ([***]%) of NET SALES depending on level of NET
SALES].

 

In the event that COMPANY or
a SUBLICENSEE develops [***] LICENSED PRODUCTS, COMPANY shall initiate
negotiations with [***] at least 3 (three) months prior to the intended first
commercial sale of each [***] LICENSED PRODUCT. COMPANY and [***] shall
negotiate in good faith royalties on reasonable market terms for such [***]
LICENSED PRODUCT.

 

.... Non-cash consideration
shall not be accepted by COMPANY or any SUBLICENSEE for LICENSED PRODUCTS
without the prior written consent of [***].

 

5.3  Royalty Stacking

 

(a) Third Party
Licenses

 

In the event COMPANY or a
SUBLICENSEE takes, for objective commercial and/or legal reasons, a license
from any third party under any patent applications or patents that dominate the
PATENT RIGHTS or is dominated by the PATENT RIGHTS in order to develop, make,
use, sell or import any LICENSED 

 

71

 

PRODUCT [***],  then COMPANY is allowed to deduct [***]%
([***] percent) of any additional running royalties to be paid to such third
party up to [***]% ([***] percent) of the running royalties stated in Section 5.2,
from the date COMPANY has to pay running royalties to such third party.
However, the running royalties stated in Section 5.2 shall not be reduced
to less than a minimum of [***]% ([***] percent) of NET SALES in any case.

For avoidance of doubt, if
COMPANY or a SUBLICENSEE takes a license [***], COMPANY is in no event allowed
to deduct any license fees [***] from running royalties due to [***] under this
Agreement.

 

(b) PATENT RIGHTS
Coverage

 

In the event that (i) COMPANY
or its SUBLICENSEES sell a LICENSED PRODUCT in a country where no PATENT RIGHTS
are issued and no patent applications that are part of the PATENT RIGHTS are
pending that have not been pending for less than [***] years after filing
national patent applications in the country in question, and (ii) such
LICENSED PRODUCT is manufactured in a country where PATENT RIGHTS are issued or
patent applications that are part of the PATENT RIGHTS are pending that have
not been pending for more than [***] years after filing national patent
applications in the country in question, the royalties stated in Section 5.2
will be reduced by [***]% ([***] percent) for such LICENSED PRODUCT, until the
expiration or abandonment of all issued patents and filed patent applications
within the PATENT RIGHTS in the country in which the LICENSED PRODUCT is
manufactured.

 

5.4  Reports

 

Within 30 (thirty) days of
the end of each calendar half year, COMPANY shall deliver a detailed report to
[***] for the immediately preceding calendar half year showing at least (i) the
number of LICENSED PRODUCTS sold by COMPANY and its SUBLICENSEES in each
country, (ii) the gross price charged by COMPANY and its SUBLICENSEES for
each LICENSED PRODUCTS in each country, (iii) the calculation of NET
SALES, and (iv) the resulting running royalties due to [***] according to
those figures. If no running royalties are due to [***], the report shall so
state.

 

5.6  Bookkeeping and Auditing

 

COMPANY is obliged to keep,
and shall oblige its SUBLICENSEES to keep, complete and accurate books on any
reports and payments due to [***] under this Agreement, which books shall
contain sufficient information to permit [***] to confirm the accuracy of any
reports and payments made to [***]. 
[***], or [***] appointed agents, is authorized to check the books of
COMPANY, and, upon [***] request, COMPANY, or agents appointed by [***] for
COMPANY, shall check the books of its SUBLICENSEES for [***].  The charges for such a check shall be borne
by [***].  In the event that such check
reveals an underpayment in excess of 5% (five percent), COMPANY shall bear the
full cost of such check and shall remit any amounts due to [***] within thirty
days of receiving notice thereof from [***].

 

72

 

The right of auditing by
[***] under this Section shall expire five years after each report or
payment has been made. Sublicenses granted by COMPANY shall provide that
COMPANY shall have the right to check the books of its SUBLICENSEES according
to this Section 5.6.

 

5.7  No Refund

 

All payments made by COMPANY
or its SUBLICENSEES under this Agreement are nonrefundable and noncreditable
against each other.

 

ARTICLE 6 - Patent Prosecution
AND Infringement

 

6.3 
Infringement

 

COMPANY shall inform [***] promptly in writing of
any alleged infringement of the PATENT RIGHTS by a third party and of any
available evidence thereof.

 

Subject to COMPANY’s right to join in the
prosecution of infringements set forth below, the OWNERS shall have the right,
but not the obligation, to prosecute in their own discretion and at their own
expense, all infringements of the PATENT RIGHTS. The total cost of any such
sole infringement action shall be borne by the OWNERS, and the OWNERS shall
keep any recovery or damages derived therefrom. In any such infringement suits,
COMPANY shall, at the OWNERS’ expense, cooperate in all respects.

 

COMPANY shall have the right to join the OWNERS’
prosecution of any infringements of the PATENT RIGHTS: In any such joint
infringement suits, the OWNERS and COMPANY will cooperate in all respects. The
OWNERS and COMPANY will agree in good faith on the sharing of the total cost of
any such joint infringement action and the sharing of any recovery or damages
derived therefrom.

 

In the event that the OWNERS decide not to prosecute
infringements of the PATENT RIGHTS, neither solely nor jointly with COMPANY,
[***] shall offer to COMPANY to prosecute any such infringement in its own
discretion and at its own expense. .... The OWNERS shall, at COMPANY’S expense,
cooperate. The total cost of any such sole infringement action shall be borne
by COMPANY, and COMPANY shall keep any recovery or damages derived therefrom.

 

In the event that COMPANY intends to make any
arrangements with the infringer  to
settle the infringement (such as sublicenses), and solely the OWNERS or the
OWNERS jointly with COMPANY have prosecuted the infringement, any such
settlement needs  the prior written
approval of [***], which shall not unreasonably be withheld; reasons to
withheld include, without limitation, that the settlement is financially
disadvantageous for the OWNERS or [***]. Any infringer to which COMPANY grants
such sublicenses shall be a SUBLICENSEE under this Agreement.

 

73

 

ARTICLE
8 - CONFIDENTIALITY

 

8.2  Obligation for [***]

 

The content of this
Agreement and any information marked confidential which is disclosed to [***]
under this Agreement by COMPANY or its SUBLICENSEES shall be treated
confidential by [***] during the TERM and for [***] years thereafter. [***]
shall not use such information for any purposes other than those necessary to
directly further the purpose of this Agreement. [***] may disclose such
information to the OWNERS, provided however, that the OWNERS are obliged to confidentiality
to the same extent as [***].

The confidentiality
obligation shall not apply to information which is (i) publicly available
or becomes publicly available through no fault of [***], or (ii) obtained
by [***] from another source without a duty of confidentiality, or (iii) demonstrably
independently developed or possessed by [***], or (iv) is required by law,
regulation, accounting principles or an order of a court or government agency
to be disclosed.

 

ARTICLE 10 - General Compliance
with Laws

 

10.2  Non-Use of OWNERS Names

 

Neither COMPANY nor its
SUBLICENSEES shall use the name of [***] or any variation, adaptation, or
abbreviation thereof, or of any of its trustees, officers, faculty, students,
employees, or agents, or any trademark owned by any of the OWNERS, in any
promotional material or other public announcement or disclosure without the
prior written consent of the OWNERS or in the case of an individual, the
consent of that individual.  The
foregoing notwithstanding, without the consent of the OWNERS, COMPANY may state
generally that it is co-exclusively licensed by the OWNERS under the PATENT
RIGHTS.

 

ARTICLE
11 - EFFECTIVENESS AND TERMINATION

 

11.5  Attack on PATENT RIGHTS

 

[***] shall have the right
to terminate this Agreement immediately upon written notice to COMPANY, if
COMPANY attacks, or has  attacked or
supports an attack through a third party, the validity of any of the PATENT
RIGHTS. To the extent legally enforcable, sublicenses granted by COMPANY shall
provide that in the event the SUBLICENSEE attacks, or has attacked or supports
an attack through a third party, the validity of any of the PATENT RIGHTS,
COMPANY shall have the right to terminate the sublicense agreement immediately;
upon request of [***], COMPANY shall have the obligation to terminate such
sublicense agreement.

 

11.8  Effect of Termination

 

.... In no event shall
termination of this Agreement release COMPANY or its SUBLICENSEES from the
obligation to pay any amounts that became due on or before the effective date
of termination.

 

74

 

In the event that any
license granted to COMPANY under this Agreement is terminated, any sublicense
under such license granted prior to termination of said license shall remain in
full fore and effect, provided that:

(a) the SUBLICENSEE is
not then in breach of its sublicense agreement, and

(b) the SUBLICENSEE
agrees to be bound to [***] as licensor under the terms and conditions of the
sublicense agreement, provided that [***] shall have no other obligation than
to leave the sublicense granted by COMPANY in place.”

 

RIGHTS LICENSED FROM [***]

 

The rights licensed from [***] relate to the
pending patent applications listed in Schedule 1-5 with the following case
numbers: [***].

 

The restrictions on, and other terms relating
to, the rights available to Isis under the Agreement are described in the
following clauses excerpted from the agreement executed between Alnylam and
[***] on [***]. Articles 7, 8 and 9 of such agreement are included in these excerpts
because clause 13.4 of such agreement states that “Any sublicense will
expressly include the provisions of Articles 7, 8, and 9 for the benefit of
[***].”

 

“7                                  ROYALTY
REPORTS, PAYMENTS, AND ACCOUNTING

 

7.1                               Quarterly
Earned Royalty Payment and Report.  Beginning with
the first sale of a Licensed Product, Alnylam will make written reports (even
if there are no sales) and earned royalty payments to [***] within thirty days
after the end of each calendar quarter. 
This report will be in the form of the report of Appendix B and will
state the number, description, and aggregate Net Sales of Licensed Product
during the completed calendar quarter, and resulting calculation pursuant to Section 6.3
of earned royalty payment due [***] for the completed calendar quarter.  With each report, Alnylam will include
payment due [***] of royalties for the completed calendar quarter.”

 

7.2                               Termination
Report.  Alnylam will make a written
report to [***] within ninety days after the license expires under Section 3.2.  Alnylam will continue to make reports after
the license has expired, until all Licensed Product produced under the license
have been sold or destroyed.  Concurrent
with the submittal of each post-termination report, Alnylam will pay [***] all
applicable royalties.

 

7.3                               Accounting.  Alnylam will keep and
maintain records for a period of three years showing the manufacture, sale,
use, and other disposition of products sold or otherwise disposed of under the
license.  Records will include general-ledger
records showing cash receipts and expenses, and records that include production
records, customers, serial numbers, and related information in sufficient
detail to enable Alnylam to determine the royalties payable under this
Agreement.

 

7.4                               Audit
by [***]. Alnylam will 
permit an independent certified public accountant selected by [***] and
acceptable to Alnylam to examine Alnylam’s 

 

75

 

books and records from time
to time (but no more than one time a year) to the extent necessary to verify
reports provided for in Sections 7.1 and 7.2. 
[***] will pay for the cost of such audit, unless the results of the
audit reveal an underreporting of royalties due [***] of five percent or more,
in which case, Alnylam will pay the audit costs.

 

8                                         NEGATION
OF WARRANTIES

 

8.1                               To the best of
[***] OTL knowledge, [***] is the sole owner of Licensed Patent and has the
right to enter into this Agreement and to grant the rights and licenses set
forth herein.

 

8.2                               Negation
of Warranties.  Nothing in this
Agreement is construed as:

 

(A)                            [***] warranty or
representation as to the validity or scope of any Licensed Patent;

 

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

 

(C)                              An obligation to bring suit
against third parties for infringement, except as described in Article 12;

 

(D)                             Granting by implication,
estoppel, or otherwise any licenses or rights under patents or other rights of
[***] or other persons other than Licensed Patent, regardless of whether the
patents or other rights are dominant or subordinate to any Licensed Patent; or

 

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

 

8.3                               No
warranties.  Except as
expressly set forth in this Agreement, [***] makes no representations and
extends no warranties of any kind, either express or implied.  There are no express or implied warranties of
merchantability or fitness for a particular purpose, or that Licensed Product
will not infringe any patent, copyright, trademark, or other rights, or any
other express or implied warranties.

 

8.4                               Specific
Exclusion. Nothing in this Agreement grants Alnylam any express
or implied license or right under or to [***] entitled [***] or any patent
application corresponding thereto.

 

76

 

9                                         INDEMNITY

 

9.1                               Indemnification.  Alnylam will indemnify, hold
harmless, and defend [***] and [***] Hospitals and Clinics, and their
respective trustees, officers, employees, students, and agents against all
claims for death, illness, personal injury, property damage, and improper
business practices arising out of the manufacture, use, sale, or other
disposition of Invention, Licensed Patent, Licensed Product, by Alnylam or any
sublicensee, or their customers except to the extent such claims are due to the
gross negligence or willful misconduct of [***].  [***] agreed to promptly notify Alnylam in
writing of any such claim and Alnylam shall manage and control, at its own
expense, the defense of such claim and its settlement.  Alnylam agrees not to settle any such claim
against [***] without [***] written consent where such settlement would include
any admission of liability on the part of [***], where the settlement would
impose any restriction on the conduct by [***] of any of its activities, or
where the settlement would not include an unconditional release of [***] from
all liability for claims that are the subject matter of such claim.

 

9.2                               No
Liability. Subject to Section 9.1, neither party will be
liable to each other for any loss profit, expectation, punitive or other
indirect, special, consequential, or other damages whatsoever, in connection
with any claim arising out of or related to this Agreement whether grounded in
tort (including negligence), strict liability, contract, or otherwise.

 

9.3                               Workers’
Compensation. Alnylam will at all times comply, through insurance
or self-insurance, with all statutory workers’ compensation and employers’
liability requirements covering all employees with respect to activities
performed under this Agreement.

 

9.4                               Insurance.  Alnylam will maintain,
during the term of this Agreement, Comprehensive General Liability Insurance,
including Product Liability Insurance prior to commercialization, with a
reputable and financially secure insurance carrier to cover the activities of
Alnylam and its sublicensees.  Upon
initiation of human clinical trials of Licensed Product, such insurance will
provide minimum limits of liability of Five Million Dollars and will include
[***] and [***] Hospitals and Clinics, and their respective trustees,
directors, officers, employees, students, and agents as additional
insureds.  Insurance will be written to
cover claims incurred, discovered, manifested, or made during or after the
expiration of this Agreement and must be placed with carriers with ratings of
at least A- as rated by A.M. Best. 
Alnylam will furnish a Certificate of Insurance evidencing primary
coverage and additional insured requirements and requiring thirty (30) days
prior written notice of cancellation or material change to [***].  Alnylam will advise [***], in writing, that
it maintains excess liability coverage (following form) over primary insurance
for at least the minimum limits set forth above.  All insurance of Alnylam will be primary
coverage; insurance of [***] and [***] Hospitals and Clinics will be excess and
noncontributory.

 

77

 

12                                  INFRINGEMENT
BY OTHERS:  PROTECTION OF PATENTS

 

12.1                        Infringement
Action.

 

(A)                             The parties
will promptly inform each other of any suspected infringement of any Licensed
Patent by a third party.

 

(B)                              [***], Licensee
and the other Co-Exclusive licensee will meet to discuss the matter during the
Co-Exclusive period of this Agreement.

 

(C)                              If the
Field-of-Use becomes Exclusive for Licensee, [***] and Licensee will meet to
discuss the matter during the Exclusive period of this Agreement.

 

(D)                             If [***] does
not choose to institute suit against said third party within sixty days of
notification, then the suit may be brought in both Licensee’s and the other
Co-Exclusive licensee’s names, and [***] name if necessary and the
out-of-pocket costs thereof shall be borne equally by Licensee and the other
Co-Exclusive licensee and any recovery or settlement shall be shared equally
between Licensee and the other Co-Exclusive licensee.  In such situation, Licensee and the other
Co-Exclusive licensee shall agree to the manner in which they exercise control
over such action and if either party desires to also be represented by separate
counsel of its own selection, the fees for such counsel shall be paid by such
party.

 

(E)                               If both [***]
and the other Co-Exclusive licensee, or [***] if there is no other Co-Exclusive
Licensee, choose not to institute suit against said third party within sixty
days of notification, then Licensee shall have the right to institute suit in
its own name or if necessary, in [***] name, to enjoin such infringement.  Licensee shall bear the entire cost of such
litigation and shall be entitled to retain the entire amount of any recovery or
settlement.  However, any recovery in
excess of litigation/settlement costs will be considered Net Sales and Licensee
will pay [***] royalties as indicated in Article 6 hereof.  [***] shall provide reasonable assistance to
Licensee in the prosecution of any such suit brought by Licensee, at Licensee’s
expense.

 

13                                    SUBLICENSING

 

13.1                          Permitted
Sublicensing for Licensed Co-Exclusive Field of Use.  Alnylam may grant sublicenses in the
Co-exclusive Licensed Field of Use during the Co-Exclusive period:

 

78

 

(A)                          only in
conjunction with intellectual property under Alnylam’s control; and

 

(B)                            only if Alnylam
is developing or selling Licensed Products in the Co-Exclusive Licensed Field
of Use.

 

13.2                        Required
Sublicensing for Licensed Co-Exclusive Field of  Use.

 

(A)                          If Alnylam or
its sublicensee(s) is unable or unwilling to serve or develop a potential
market or market territory for which there is a willing sublicensee, Alnylam
will, at [***] request, negotiate in good faith a sublicense under the Licensed
Patents, provided that the same request has been made of the other Co-Exclusive
licensee.

 

(B)                            Bona fide
business concerns of Alnylam will be considered in any good faith negotiations
for a sublicense under this Agreement and Alnylam shall not be required to
license/sublicense any other intellectual property to such sublicensee.

 

(C)                            If the other
Co-Exclusive licensee itself or through its sublicensees is already developing
a product in the market or market territory for which there is a willing
sublicensee, Alnylam will not be required to sublicense to such party.

 

(D)                           In case that
any other issue arises in the context of Required Sublicensing, [***] will
discuss and try to resolve such issue with Alnylam in good faith.

 

13.3                        Sublicense
Requirements. Any sublicense granted by Alnylam under this
Agreement will be subject and subordinate to terms and conditions of this
Agreement, except:

 

(A)                          Sublicense
terms and conditions will reflect that any sublicensee will not further
sublicense, with the exception that sublicensee may further sublicense rights
under Licensed Patents only as needed or implied in the course of distribution
or performance of service as required for the sale to an end user of Licensed
Products; and

 

(B)                            The earned
royalty rate specified in the sublicense [***] in this Agreement.

 

13.4                        Sublicenses
Revert to [***]. Any sublicense will expressly include the
provisions of Articles 7, 8, and 9 for the benefit of [***]. If a sublicensee
desires that its sublicense survive the termination of this agreement, [***]
agrees that the sublicense will revert to [***] subject to the transfer of all 

 

79

 

obligations,
including the payment of royalties specified in the sublicense, to [***] or its
designee, if this Agreement is terminated.

 

13.5                        Copy of
Sublicenses. Alnylam will provide [***] in confidence a copy of
all relevant portions of any sublicenses granted pursuant to this Article 13.

 

13.6                        Sharing
of Sublicensing Income.  In
addition to the earned royalties defined in Article 6, Alnylam will pay
[***] percent ([***]%) of the amount received by Alnylam, that is specifically
attributable to the Licensed Patents, from a sublicensee in

 

(A)                            [***], and

 

(B)                              [***] as defined in [***].

 

13.7                        Royalty-free
Sublicenses. Alnylam may grant royalty-free or noncash
sublicenses or cross-licenses if Alnylam pays all royalties due [***] from
sublicensee’s Net Sales.”

 

80

 

EXHIBIT 6.5(d)

 

DESCRIPTION OF POTENTIAL PASS-THROUGH
AMOUNTS PAYABLE TO

STANFORD UNIVERSITY

 

The passages shown below
are excerpted from the License Agreement between THE BOARD OF TRUSTEES OF THE
LELAND Stanford JUNIOR UNIVERSITY (“Stanford”) and Alnylam Pharmaceuticals, Inc.
dated September 17, 2003. These passages were selected to provide Isis
with sufficient information to understand its potential obligation to Stanford
pursuant to Section 6.5(d) of the Agreement.

 

DEFINITIONS

 

2.5                                       “Licensed Field of Use” means delivery of
ex-vivo synthesized siRNA Molecules for research, development and therapeutic
uses (including a diagnostic necessary for development, sale or reimbursement
of a therapeutic Licensed Product).  The
Licensed Field of Use specifically excludes delivery of any system producing in
vivo expressed siRNAs for therapeutic use, including but not limited to
episomal and integrated vectors, and recombinant viruses.

 

2.7                                       “Co-Exclusive” means that, subject to Article 4,
Stanford will only grant one further license in the Licensed Territory in the
Licensed Field of Use.

 

GRANT

 

3.2                                       Co-Exclusivity. The license is Co-Exclusive, including
the right to sublicense pursuant to Article 13, in the Licensed Field of
Use for a term beginning on the Effective Date, and ending, on a
country-by-country basis, on the expiration of the last to expire of Licensed
Patents.

 

3.4                                       Exclusivity.

 

(A)                      If the other Co-Licensee discontinues
licensing this Field of Use, then the Field of Use will become exclusive for
Alnylam.

 

(B)                        If the other Co-Licensee discontinues any
other therapeutic license under the Licensed Patents, Stanford shall so inform
Alnylam and Alnylam shall have the option to obtain an exclusive, worldwide
sublicensable license to such therapeutic field.  The terms of any such license shall be
negotiated in good faith by Stanford and Alnylam.  This option may be exercised by Alnylam by
written notice to Stanford at any time during a period of ninety (90) days
after notification by Stanford.

 

ROYALTIES

 

6.3                                 Earned Royalty. In addition, Alnylam will pay Stanford
earned royalties on Net Sales as follows:

 

81

 

(A)                      [***]% of Net Sales for a Licensed
Product subject to the following;

 

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

 

(C)                        Such royalty payments shall be reduced as
follows:

 

(1)                              [***]% if Additional Earned Royalties are
[***]% or less.

(2)                              [***]% if Additional Earned Royalties are
greater than [***]% but less than [***]%.

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

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

(5)                              [***]% if Additional Earned Royalties are
equal to or higher than [***]%.

 

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

 

6.4                                       Creditable Payments. Creditable payments under this Agreement
will be an offset to Alnylam against each earned royalty payment which Alnylam
would be required to pay under Section 0 until the entire credit is
exhausted.

 

6.5                                       Milestone Payments.

 

(A)                        For the first Licensed Product, Alnylam
will make the following payments for the filing of an IND, intitiation of Phase
II trial, initiation of Phase III trial, and approval of New Drug Application
or equivalent in the U.S.  (“Milestone
Payments”):

 

(1)                              $[***] for filing of the first IND.

 

(2)                              $[***] for initiation of the first Phase
II trial.

 

(3)                              $[***] for initiation of the first Phase
III trial.

 

(4)                              $[***] for approval of the first New Drug
Application or equivalent regulatory approval in the U.S..

 

(B)                        For the second Licensed Product, Alnylam
will make the following Milestone Payments:

 

82

 

(1)                              $[***] for filing of the first IND.

 

(2)                              $[***] for initiation of the first Phase
II trial.

 

(3)                              $[***] for initiation of the first Phase
III trial.

 

(4)                              $[***] for approval of the first New Drug
Application or equivalent regulatory approval in the U.S..

 

(C)                        For the third and every subsequent
Licensed Product, Alnylam will make the following Milestone Payments:

 

(1)                              $[***] for filing of the first IND.

 

(2)                              $[***] for initiation of the first Phase
II trial.

 

(3)                              $[***] for initiation of the first Phase
III trial.

 

(4)                              $[***] for approval of the first New Drug
Application or equivalent regulatory approval in the U.S..

 

(D)                       Notwithstanding the above, at the time
that Stanford receives a Milestone Payment from Alnylam on behalf of a
sublicensee under 13.6, the corresponding Milestone Payment under this Section 6.5
will not be due.

 

6.6                                       Obligation to Pay
Royalties.  If this Agreement is not terminated in
accordance with other provisions, Alnylam will be obligated to pay royalties on
all Licensed Product that is either sold or produced under the license granted
in Article 3, whether or not the Licensed Product is produced before the
Effective Date of this Agreement or sold after the Licensed Patent has expired.

 

13                                          SUBLICENSING

 

13.1                                 Permitted Sublicensing
for Licensed Co-Exclusive Field of Use.  Alnylam may
grant sublicenses in the Co-exclusive Licensed Field of Use during the
Co-Exclusive period:

 

(A)                        only in conjunction with intellectual
property under Alnylam’s control; and

 

(B)                        only if Alnylam is developing or selling
Licensed Products in the Co-Exclusive Licensed Field of Use.

 

13.3                                 Sublicense Requirements. Any sublicense granted by Alnylam under
this Agreement will be subject and subordinate to terms and conditions of this
Agreement, except:

 

83

 

(A)                  Sublicense terms and conditions will
reflect that any sublicensee will not further sublicense, with the exception
that sublicensee may further sublicense rights under Licensed Patents only as
needed or implied in the course of distribution or performance of service as
required for the sale to an end user of Licensed Products; and

 

(B)                    The earned royalty rate specified in the
sublicense may be at different rates than the rates in this Agreement.

 

13.4                                 Sublicenses Revert to
Stanford. Any
sublicense will expressly include the provisions of Articles 7, 8, and 9 for
the benefit of Stanford [Note: these provisions are detailed in Exhibit 6.5(c)].
If a sublicensee desires that its sublicense survive the termination of this
agreement, Stanford agrees that the sublicense will revert to Stanford subject
to the transfer of all obligations, including the payment of royalties
specified in the sublicense, to Stanford or its designee, if this Agreement is
terminated.

 

13.5                                 Copy of Sublicenses. Alnylam will provide Stanford in
confidence a copy of all relevant portions of any sublicenses granted pursuant
to this Article 13.

 

13.6                                 Sharing of Sublicensing
Income.  In addition to the earned royalties defined
in Article 6, Alnylam will pay Stanford [***] percent ([***]%) of the
amount received by Alnylam, that is specifically attributable to the Licensed
Patents, from a sublicensee in

(A)                  up-front license fees, and

(B)                    clinical Milestone Payments as defined in
Article 6.5.

 

13.7                                 Royalty-free
Sublicenses.
Alnylam may grant royalty-free or noncash sublicenses or cross-licenses if
Alnylam pays all royalties due Stanford from sublicensee’s Net Sales.

 

84

 

EXHIBIT 8.2(c)

 

DESCRIPTION OF ALNYLAM ROYALTY
OBLIGATIONS TO [***] EXISTING

AS OF THE EFFECTIVE DATE

 

As of the Effective Date,
Alnylam has the following royalty obligations to [***] (“[***]”):

 

Alnylam is obligated to
pay [***] running royalties on NET SALES (as defined in Alnylam’s agreements
with [***]) of therapeutic and prophylactic LICENSED PRODUCTS (as defined in
Alnylam’s agreements with [***]) by Alnylam and its SUBLICENSEES (as defined in
Alnylam’s agreements with [***]) that range from [***]% ([***] percent) to
[***]% ([***] percent) of NET SALES, depending on the level of NET SALES.  Royalties payable by Alnylam to [***] are
subject to the following Royalty Stacking provision:

 

“5.3  Royalty Stacking

 

(a) Third Party
Licenses

 

In the event COMPANY or a
SUBLICENSEE takes, for objective commercial and/or legal reasons, a license
from any third party under any patent applications or patents that dominate the
PATENT RIGHTS or is dominated by the PATENT RIGHTS in order to develop, make,
use, sell or import any LICENSED PRODUCT (explicitly excluding, without
limitation, any third party patents and patent applications for formulation,
stabilization and delivery), then COMPANY is allowed to deduct [***]% ([***]
percent) of any additional running royalties to be paid to such third party up
to [***]% ([***] percent) of the running royalties stated in Section 5.2,
from the date COMPANY has to pay running royalties to such third party.
However, the running royalties stated in Section 5.2 shall not be reduced to
less than a minimum of [***]% ([***] percent) of NET SALES in any case.

 

For avoidance of doubt,
if COMPANY or a SUBLICENSEE takes a license to a third party target, COMPANY is
in no event allowed to deduct any license fees for such target from running royalties
due to [***] under this Agreement.”

 

Because Alnylam’s right
to reduce its royalty obligations to [***] pursuant to the foregoing royalty
stacking provision is not co-extensive with Isis’ right to reduce its royalty
obligations to Alnylam pursuant to Section 8.2 of this Agreement, Isis’
right to reduce its royalty obligations to Alnylam pursuant to Section 8.2
of this Agreement is limited, pursuant to Section 8.2(c) of this
Agreement, to the extent necessary to ensure that Isis’ royalty obligations to
Alnylam are never less than Alnylam’s royalty obligations to [***] with respect
to sales by Isis, its Affiliates and its sublicensees of any Isis Product.

 

85

 

SCHEDULE 1-7

ALNYLAM CURRENT CHEMISTRY PATENTS

 

Alnylam
Current Chemistry Patents include all claims of the patents and patent
applications listed below that do not claim inhibitors to specific genes or
gene families.

 

	
  Case No.

  	
   

  	
  Filing

  Date

  	
   

  	
  Country

  	
   

  	
  Serial
  No.

  	
   

  	
  Status

  	
   

  	
  Title

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
  [***]

  

 

86

 

 

SCHEDULE 1-8

ALNYLAM CURRENT MOTIF AND MECHANISM PATENTS

 

Alnylam
Current Motif and Mechanism Patents include all claims of the patents and
patent applications listed below that do not claim inhibitors to specific genes
or gene families.

 

	
  Case
  No.

  	
   

  	
  Filing

  Date

  	
   

  	
  Country

  	
   

  	
  Serial No.

  	
   

  	
  Status

  	
   

  	
  Title

  
	
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87

 

	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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88

 

	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
   

  	
   

  	
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  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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[***]†             Note that
Alnylam’s license to this series of patent applications specifically excludes
claims [***] and the equivalent claims in any patent applications and patents
resulting from this PCT application. The application contains claims relating
to [***]. The claims excluded from Alnylam’s license are those that [***].

 

*                Subject to the
provisions of section 6.5(d).

 

89

 

Schedule 1-10

ALNYLAM EXCLUDED TECHNOLOGY

 

1.             All Patent rights licensed
to Alnylam under the license agreements between [***] dated [***], and between
[***]and Alnylam dated [***].

 

2.             All Patent rights licensed
to Alnylam under the license agreement between [***] and Alnylam dated [***].

 

3.             All Patent rights licensed
to Alnylam under the license agreement between [***] and Alnylam dated [***].

 

90

 

Schedule 1-51 (Updated April 28, 2009)

Isis Current Chemistry Patents

 

[***]

 

91

 

Schedule 1-52 (Updated April 28, 2009)

Isis Current Motif and Mechanism Patents

 

[***]

 

92

 

Schedule
1-56

EXCLUDED
TECHNOLOGY

 

The following schedule of Excluded Technology is provided by Isis
Pharmaceuticals, Inc. to Alnylam Pharmaceuticals, Inc., in connection
with the Strategic Collaboration and License Agreement between Alnylam and Isis
(the “Agreement”).  Capitalized terms used but not otherwise
defined herein have the meanings given to such terms in the Agreement.

 

This schedule and the information and disclosures contained in this
schedule are intended only to qualify and limit the licenses granted by Isis to
Alnylam in the Agreement and do not expand in any way the scope or effect of
any such licenses.

 

In the event of a conflict between this schedule of Excluded Technology
and any other schedule or terms of the Agreement, this schedule will govern.

 

1.              INTELLECTUAL
PROPERTY COVERING:

 

·                  RNA processing, including modulation of [***]

 

·                  PNA chemistry licensed or acquired from (i) [***];

 

·                  [***] chemistry licensed or acquired from [***];

 

·                  [***] a Gene Target.

 

2.              [***]/4’-THIO
CHEMISTRY.

 

4’-thio chemistries
including patents licensed in from [***]

 

93

 

In
addition, the following Patents in-licensed from the [***] are excluded:

 

	
  Isis Docket Number

  	
   

  	
  Country

  	
   

  	
  Status

  	
   

  	
  Patent

  Number

  	
   

  	
  Granted

  Date

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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94

 

	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

95

 

	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  

 

3.              GEN-PROBE
AND NIH. (A)

 

The
following Patents in-licensed from Gen-Probe Inc. and the National Institute of
Health are excluded:

 

96

 

U.S.
Patent No. [***] entitled: [***];

U.S.
Patent No. [***] entitled: [***]; and

U.S.
Patent No. [***] entitled: [***]

 

4.              MCGILL
UNIVERSITY (B)

 

In
addition to certain manufacturing technology excluded by definition, the
following Patents in-licensed from McGill University are excluded:

 

	
  Isis Docket

  Number

  	
   

  	
  Country

  	
   

  	
  Status

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

5.              [***]
(B)

 

The
following Patents in-licensed from the [***] are excluded:

 

[***]
Patent No. [***] entitled [***];

[***]
Patent Application [***] entitled “[***];

[***]
Patent Application [***] entitled [***]; and

[***]
Patent No. [***] entitled [***].

 

6.              WALDER
PATENTS (B)

 

The Walder Patents are
excluded.  “Walder Patents” means and
includes [***]. Patent Nos. [***]; [***] Patent No. [***], and [***]
Patent Application No. [***] (allowed).

 

7.              MERCK
NUCLEOSIDE

 

Single nucleosides,
nucleotides or monomers claimed in Patents filed as of the Effective Date which
are prosecuted by Merck and Co. are excluded. 
However if such Patents are necessary for Alnylam to practice the
licenses granted under Section 5.1 with respect to a specific Alnylam
Product, then Isis will include such necessary Patents in the licenses granted
under Section 5.1.

 

97

 

[***]

Isis believes the
agreement under which Isis received a license to the [***] Patents listed below
[***].

 

	
  Isis

  Docket

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98

 

	
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  [***]

  

 

8.              CARNEGIE
INSTITUTION OF WASHINGTON.

 

Isis is not granting
Alnylam any sublicense under the License Agreement dated January 28, 2005
between Isis and Carnegie Institution of Washington.

 

9.              GARCHING
INNOVATION GMBH.

 

Isis is not granting
Alnylam any sublicense under the Co-Exclusive License Agreement dated October 18,
2004 among Isis, Alnylam and Garching Innovation GmbH.

 

(A)          Isis cannot sublicense the technologies marked with
this footnote.

(B)            Although, Isis can sublicense the technologies marked
with this footnote, such a sublicense carries additional financial and other
obligations.  Isis is willing to
negotiate a separate sublicense agreement for these technologies.

 

99

 

Schedule 1-59

ISIS MANUFACTURING PATENTS

 

The
Parties have not yet agreed to a specific list of Manufacturing Patents as of
the date of the Addendum Transmittal.  However, the Parties agree to work
together to develop a list of Manufacturing Patents by [***].

 

100

 

Schedule 1-66

ISIS SPECIAL PATENTS

 

	
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101

 

	
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102

 

	
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  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
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103

 

	
  Docket
  Number

  	
   

  	
  Country

  	
   

  	
  Status

  	
   

  	
  Serial

  Number

  	
   

  	
  Filing

  Date

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
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  [***]

  

 

104

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}]]