SETTLEMENT, RELEASE, AND LICENSE GRANT AGREEMENT

        This SETTLEMENT, RELEASE, AND LICENSE GRANT AGREEMENT (hereinafter the "Agreement") is made and entered into effective on September 6, 2002, by and between Isis Pharmaceuticals, Inc. on the one hand and Sequitur, Inc. on the other hand.

        Whereas, Isis Pharmaceuticals, Inc. is the owner of all rights, title and interest to United States Patent Number 6,001,653, 6,326,199, 5,959,097, 5,958,773, 6,043,090 and 6,096,543;

        Whereas, on July 9, 2001, Isis Pharmaceuticals, Inc. instituted suit against Sequitur, Inc. in the United States District Court for the Southern District of California, Case No. 01 CV 1223 B JFS (hereinafter the "First Action"), seeking injunctive relief and damages against Sequitur, Inc. based on the allegation that Sequitur, Inc. was infringing U.S. Patent No. 6,001,653;

        Whereas, Sequitur, Inc. denied all allegations of infringement in the First Action and Sequitur, Inc. further filed a counterclaim alleging that it was entitled to declaratory judgment of non-infringement, invalidity and/or unenforceability, and alleging claims of breach of contract, unfair competition under the Lanham Act, Antitrust Violations and unfair competition under California Law (the "Counterclaim");

        Whereas, Isis Pharmaceuticals, Inc. denied all allegations of breach of contract, unfair competition and antitrust violations in the Counterclaim;

        Whereas, on December 12, 2001, Isis Pharmaceuticals, Inc. instituted suit against Sequitur, Inc. in the United States District Court for the Southern District of California, Case No. 01 CV 2286 B JFS (hereinafter the "Second Action"), seeking injunctive relief and damages against Sequitur, Inc. based on the allegation that Sequitur, Inc. was infringing U.S. Patent No. 6,326,199;

        Whereas, Sequitur, Inc. denied all allegations of infringement in the Second Action;

        Whereas, on May 2, 2001, Isis Pharmaceuticals, Inc. instituted suit against Sequitur, Inc. in the United States District Court for the Southern District of California, Case No. 02 CV 0842 B JFS (hereinafter the "Third Action"), seeking injunctive relief and damages against Sequitur, Inc. based on the allegation that Sequitur, Inc. was infringing U.S. Patent Nos. 5,959,097, 5,958,773, 6,043,090 and 6,096,543;

        Whereas, Sequitur, Inc. denied all allegations of infringement in the Third Action; and

        Whereas, the parties to this Agreement deny any and all liability to one another, but desire to fully compromise and resolve all of the claims between them arising from or in any way related to the First Action, Second Action, Third Action and the Counterclaim ("the Lawsuit");

        Now, Therefore, to reconcile their differences and in consideration of the promises and covenants and agreements contained herein, the parties agree as follows:

1.    Definitions.

        1.1  Antisense Oligonucleotides. As used herein, the term "Antisense Oligonucleotides" means a sequence of nucleotides which is designed to be complementary to and bind to a specific sequence of nucleotides in an mRNA target to inhibit production of the protein encoded by the target mRNA.

1

        1.2  Change of Control. As used herein, the term "Change in Control" shall be deemed to occur upon (i) the acquisition of all or substantially all of the assets of Sequitur, Inc. or (ii) an acquisition of Sequitur, Inc. by another corporation or entity by consolidation, merger or other reorganization in a transaction (or series of transactions) in which the holders of Sequitur, Inc.'s outstanding voting stock immediately prior to such transaction (or series of transactions) own, immediately after such transaction (or series of transactions), securities representing less than fifty percent (50%) of the voting power of the corporation or other entity surviving such transaction (or series of transactions).

        1.3  Existing Customer. As used herein, the term "Existing Customer" means a customer of Sequitur's Target Validation Program, whether inside or outside the U.S., to whom Sequitur has supplied or used on their behalf Antisense Oligonucleotides prior to June 30, 2002, as set forth in Exhibit A attached hereto.

        1.4  First Generation Oligonucleotides. As used herein, the term "First Generation Oligonucleotides" means Antisense Oligonucleotides having: phosphorothioate, phosphodiester, or mixed phosphorothiote/phosphodiester backbones; unmodified Adenine, Cytosine, Thymine, Guanine, bases; and, unmodified deoxy sugars. First Generation Oligos may contain fluorescent dyes or other non-nucleotide end-blocks incorporated at either or both the 3' and 5' ends.

        1.5  Isis. As used herein, the term "Isis" shall mean Isis Pharmaceuticals, Inc., and its successors in interest.

        1.6  Isis First Generation Oligonucleotide Patents. As used herein, the term "Isis First Generation Oligonucleotide Patents" means Patents owned by Isis on the Effective Date, including U.S. Patent No. 6,001,653, which have claims which read on First Generation Oligonucleotides. Isis First Generation Oligonucleotide Patents does not include Isis Patents that claim specific nucleotide sequences, or Patents claiming oligonucleotides designed to inhibit specific genes identified in the patent, or methods of using such oligonucleotides.

        1.7  Next Generation Oligonucleotides. As used herein, the term "Next Generation Oligonucleotides" means Antisense Oligonucleotides with a combination of 2' hydrogen and 2' modified sugars that elicit RNase H cleavage as a mechanism of action.


 

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