GALENA BIOPHARMA, INC. (Form: 8-K, Received: 09/26/2011 07:05:29)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): September 24, 2011

GALENA BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)


Delaware	001-33958	20-8099512

(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

310 N. State Street, Suite 208
Lake Oswego, Oregon 97034

(Address of Principal
Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (855) 855-4253

RXi Pharmaceuticals Corporation
60 Prescott Street, Worcester, Massachusetts 01605

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS


Item 1.01 Entry into a Material Definitive Agreement
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
Item 8.01 Other Events
Item 9.01 Financial Statements and
Signature
Index to Exhibits
EX-3.1
EX-4.1
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-99.1

INTRODUCTION

As reported in Item 5.03, below, on September 26, 2011, we changed the name of our company from RXi Pharmaceuticals Corporation to Galena Biopharma, Inc. (“ Galena ”) in connection with our planned separation into two companies: (i) Galena, which will operate as a late-stage oncology drug development company; and (ii) RXi Pharmaceuticals Corporation (“ RXi ”), which is a newly formed subsidiary of Galena that will continue to develop novel RNAi-based therapies utilizing our historical RNAi assets described below under Item 1.01. RXi was initially incorporated as RNCS, Inc. and assumed the name RXi Pharmaceuticals Corporation in conjunction with the change in our name to Galena. Unless the context otherwise indicates, references in this report to the “company,” “we,” “us” or “our” prior to the proposed partial spin-off of RXi collectively refer to Galena, our wholly owned subsidiary, Apthera, Inc. (“ Apthera ”), and RXi; references to the “ company ,” “ we ,” “ us” or “ our ” after the partial spin-off of RXi refer only to Galena and Apthera.

Our new RXi subsidiary was formed by us in agreement with two institutional investors (the “investors” ). As described in more detail below under Item 1.01, on September 24, 2011, we contributed to RXi substantially all of our RNAi-related technologies and assets and entered into a number of agreements relating to RXi’s ongoing business and operations. RXi will focus on developing and commercializing therapeutic products based on RNAi technologies for the treatment of human diseases, including its lead anti-scarring and anti-fibrosis product candidate, RXI-109, with initial financing to be provided by the investors. In these agreements, we have committed, among other things, to undertake to distribute to our stockholders a portion of the RXi common stock held by Galena, which we refer to in this report as the “partial spin-off of RXi.” In this report, we sometimes refer to the shares of common stock of RXi to be distributed to our stockholders as the “spin-off shares.”

To date, RXi’s activities have consisted of completing its organizational activities, acquiring our RNAi-related assets and entering into the agreements described in Item 1.01, below:

Item 1.01 Entry into a Material Definitive Agreement.

Contribution Agreement

On September 24, 2011, we entered into a contribution agreement with RXi pursuant to which we assigned and contributed to RXi substantially all of our RNAi-related technologies and assets. The contributed assets consist primarily of our novel RNAi compounds and licenses relating to our RNAi technologies, as well as the lease of our Worcester, Massachusetts laboratory facility, fixed assets and other equipment located at the facility and our employment arrangements with certain scientific, corporate and administrative personnel who have become employees of RXi. In the contribution agreement, we have agreed to contribute $1.5 million of cash to the capital of RXi.

Pursuant to the contribution agreement, RXi has agreed to assume certain recent accrued expenses of our RXi-109 development program and all future obligations under the contributed licenses, employment arrangements and other agreements. RXi has also agreed to make future milestone payments to us of up to $45 million, consisting of two one-time payments of $15 million and $30 million, respectively, if RXi achieves annual net sales equal to or greater than $500 million and $1 billion, respectively, of any covered products that may be developed with the contributed RNAi technologies.

In the contribution agreement, we have made customary representations and warranties to RXi regarding the contributed assets and other matters, and the parties have agreed to customary covenants regarding the conduct of RXi’s business pending the partial spin-off of RXi. The parties also have agreed to indemnify each other against losses arising from a breach of their respective representations, warranties and covenants set forth in the contribution agreement.

A copy of the contribution agreement is filed herewith as Exhibit 10.1, and the foregoing description of the principal terms and conditions of the contribution agreement is qualified by reference to such exhibit, the terms of which are incorporated herein by reference.

Securities Purchase Agreement

On September 24, 2011, we entered into a securities purchase agreement with RXi and the investors, pursuant to which the investors agreed to purchase a total of $9,500,000 of Series A Preferred Stock (the “ Preferred Stock ”) at the closing of the partial spin-off of RXi, and to lend up to $1,500,000 to RXi to fund its operations between signing and closing (the “ Bridge Loan ”). The outstanding principal and accrued interest from the Bridge Loan will, except under certain circumstances described below, be converted into Preferred Stock at the closing and will represent a portion of the $9,500,000 total investment, which is referred to herein as the “RXi financing.” The RXi financing and the partial spin-off of RXi are subject to customary closing conditions, including the registration under the Securities Act of 1933, as amended (the “Securities Act" ), of the distribution by us of the spin-off shares. There is no assurance that the RXi financing and the partial spin-off of RXi will be completed.

The Preferred Stock will be convertible by a holder at any time into shares of RXi common stock, except to the extent that the holder would own more than 9.999% of the shares of RXi common stock outstanding immediately after giving effect to such conversion. Without regard to this conversion limitation, the shares of the Preferred Stock to be held by the investors upon completion of the RXi financing and the partial spin-off of RXi will be convertible into shares of RXi common stock representing approximately 83% of the shares of RXi common stock that would be outstanding, assuming the conversion in full of the Preferred Stock, which we refer to as the “as-converted common stock.” We will own approximately 12% of the as-converted common stock immediately prior to the partial spin-off of RXi, and Advirna, LLC, a key licensor of RXi, will be issued the remaining 5% of the as-converted common stock pursuant to the agreement with Advirna, as described below.

Spin-Off

We have also agreed in the securities purchase agreement to undertake to distribute to our stockholders on a share-for-share basis approximately 8% of the as-converted common stock, subject to the registration of the distribution of such shares under the Securities Act and other conditions. Assuming the partial spin-off of RXi is completed, we will initially retain 4% of the as-converted common stock, and have agreed, in the securities purchase agreement, not to sell or dispose of our shares of RXi common stock for a one-year period following completion of the partial spin-off of RXi. The securities purchase agreement provides that the spin-off will be on a share-for-share basis, so that one share of RXi will be distributed as a dividend on each share of Galena that is issued and outstanding as of a record date to be determined prior to the spin-off. Accordingly, the capitalization of RXi has not yet been established and the actual number of spin-off shares, as well as the actual shares of common stock of RXi to be outstanding upon completion of the partial spin-off of RXi, are not yet known and will be determined at a subsequent time closer to the completion of the spin-off.

Purchase Agreement Terms and Conditions

In the securities purchase agreement, the parties have made customary representations and warranties to the other parties and have agreed to customary covenants regarding the parties’ actions in connection with the partial spin-off of RXi and other matters, including the filing of a resale registration statement registering a portion of the common stock underlying the conversion of the Preferred Stock. The parties also have agreed to indemnify each other against losses arising from a breach of their respective representations, warranties and covenants set forth in the securities purchase agreement. RXi has agreed to reimburse Galena and the investors, upon completion of the partial spin-off of RXi, for up to a total of $350,000 of transaction costs relating to the contribution agreement, the securities purchase agreement and the transactions contemplated by the agreements.

The securities purchase agreement may be terminated in certain circumstances, including by the investors or us if the partial spin-off of RXi has not occurred by February 22, 2012. If the securities purchase agreement is terminated without cause due to the fact that the spin-off has not occurred by such date, then a portion of the Bridge Loan will be converted into common stock of RXi, as described below.

A copy of the securities purchase agreement is filed herewith as Exhibit 10.2, and the foregoing description of the principal terms and conditions of the securities purchase agreement is qualified by reference to such exhibit, the terms of which are incorporated herein by reference.

Bridge Loan

Pursuant to the securities purchase agreement, the investors have agreed to provide the Bridge Loan by purchasing at signing $500,000 of secured convertible promissory notes of RXi and agreeing to purchase up to an additional $1 million of such promissory notes prior to closing (the “RXi convertible notes” ). The RXi convertible notes will, except as described below, be convertible into shares of Preferred Stock at a conversion price of $1,000 per share. The proceeds from the Bridge Loan will be used by RXi in accordance with an operating budget approved by the investors to fund RXi’s business and operations pending completion of the partial spin-off of RXi.

The RXi convertible notes accrue interest at a rate of 7% per annum (or 18% per annum in the case of an event of default) and mature on February 22, 2012, or earlier in the case of an event of default. The obligations due under the RXi convertible notes are secured by a first-priority blanket lien on the assets of RXi and are guaranteed by Galena. Additionally, Galena has pledged all of the shares of RXi common stock that it holds to further guaranty the timely repayment of the amounts due under the RXi convertible notes, if not converted into Preferred Stock at closing.

The RXi convertible notes will be issued, and the Bridge Loan will be funded, in three tranches of $500,000 each, with the initial tranche issued on September 24, 2011 and the second and third tranches to be issued following the approval by the investors, in their discretion, of operating budgets for RXi during the period between September 24, 2011 and closing under the securities purchase agreement.

If the closing of the transactions under the securities purchase agreement has not occurred by the maturity date of the notes, then 50% of the outstanding Bridge Loan balance will be converted into a number of shares of RXi common stock equal to 51% of the post-conversion shares outstanding. RXi will remain obligated to repay the remaining balance of the principal and accrued interest under the Bridge Loan, and, as noted above, Galena has agreed to guarantee RXi’s repayment of the RXi convertible notes to the extent they are not converted. In this event, Galena and Advirna will beneficially own 44% and 5%, respectively, of the outstanding shares of RXi common stock, and RXi will carry on as a stand-alone private company. Neither the investors nor our company will be obliged to provide any funding to RXi upon this event.

The form of RXi convertible note is filed herewith as Exhibit 4.1, and the foregoing description of the principal terms of the RXi convertible notes is qualified by reference to such exhibit, the terms of which are incorporated herein by reference.

Preferred Stock Terms

The Preferred Stock has a face value of $1,000 per share and will accrue dividends at a rate of 7% per annum from the date of issuance through the date of conversion or redemption, payable quarterly in shares of Preferred Stock.

The holders of Preferred Stock do not have any right to elect directors and have only limited voting rights, which consist primarily of the right to vote under certain protective provisions set forth in the Certificate of Designations and the right to vote on any proposed Liquidation Event.

The Preferred Stock will be convertible by a holder at any time into shares of RXi common stock. The rate at which the Preferred Stock will convert into RXi common stock will be established prior to closing, as set forth in Annex II to the securities purchase agreement. The conversion rate will be adjusted for certain events, such as stock splits, stock dividends, reclassifications and recapitalizations, and is subject to full-ratchet anti-dilution protection such that any subsequent issuance of Common Stock below the effective conversion price of the Preferred Stock at the time of such issuance automatically adjusts the conversion price of the Preferred Stock to such lower price. Holders of Preferred Stock may not convert if such conversion would result in the holder beneficially owning more than 9.999% of the Company’s then issued and outstanding shares of Common Stock.

Upon a Liquidation Event (as defined in the Certificate of Designations), no other class or series of capital stock can receive any payment unless the Preferred Stock has first received a payment in an amount equal to $1,000 per share, plus all accrued and unpaid dividends, if applicable.

A copy of the form of Certificate of Designations is attached as Exhibit C to the securities purchase agreement filed herewith as Exhibit

10.2, and the foregoing description of the Preferred Stock is qualified in its entirety with reference to such document, the terms of which are incorporated herein by reference.

Advirna Agreement

As part of the transactions contemplated by the contribution and securities purchase agreements, RXi has entered into an agreement with Advirna, LLC, which we refer to as “Advirna,” a company affiliated with Anastasia Khvorova, Ph.D., RXi’s Senior Vice President and Chief Scientific Officer. In the agreement, Advirna has agreed to amend its existing patent and technology assignment agreement with RXi to eliminate all clinical milestone and royalty payments to Advirna under the amended agreement; obligations remain to make an annual $100,000 maintenance fee and a one-time milestone payment of $350,000 to Advirna upon the issuance of a patent with valid claims covering the assigned technology. Additionally, RXi will be required to pay a 1% royalty to Advirna for any licensing revenue received by RXi on the license of the assigned Advirna technology. In exchange, RXi has agreed to issue to Advirna upon the earlier of the closing under the securities purchase agreement or the partial conversion of the RXi convertible notes, a number of shares of RXi common stock equal to 5% of the “as-converted common stock.”

See Item 5.02 below for information regarding RXi’s new employment arrangement with Dr. Khvorova.

Investor Subscription Agreement

On September 24, 2011, we entered into an investor subscription agreement with the investors under which they have agreed to purchase from Galena a total of $2.5 million of Galena common stock at a purchase price per share equal to the daily volume-weighted closing price of our common stock as reported on The NASDAQ Capital Market over the three trading days following our announcement of the agreements described above in this Item 1.01.

The closing of the investors’ purchase of our common stock is expected to occur on September 30, 2011, subject to customary closing conditions. The shares of our common stock are being offered and sold to the investors pursuant to our shelf registration statement on Form S-3 (File No. 333-167025), which was declared effective by the Commission on May 28, 2010.

A copy of the investor subscription agreement is filed herewith as Exhibit 10.3, and the foregoing description of the principal terms and conditions of the securities purchase agreement is qualified by reference to such exhibit, the terms of which are incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information in Item 1.01, above, regarding Galena’s guarantee of RXi’s repayment of the RXi convertible notes is incorporated herein by reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Compensatory Arrangements of Certain Officers of RXi

Mark J. Ahn, Ph.D., our President and Chief Executive Officer, serves as the sole director and as the President and Chief Financial Officer of RXi. In connection with the contribution of our RNAi assets to RXi, on September 24, 2011, Anastasia Khvorova, Ph.D., our former Chief Scientific Officer, and Pamela Pavco, Ph.D., our former Vice

President of Pharmaceutical Development, entered into new employment agreements with RXi and their former employment agreements with us were terminated without any severance obligations on our part.

Under her new employment agreement, Dr. Khvorova will serve as the Senior Vice President and Chief Scientific Officer of RXi at an annual salary of $310,000. She also is entitled to a grant by RXi of stock options to purchase 2% of the as-converted common stock of RXi after the spin-off at an exercise price per share to be determined based on the fair value of RXi common stock at the date of grant. The options will be subject to vesting in equal monthly installments over the four-year period following the effective date of her employment, subject to accelerated vesting in some events.

Dr. Khvorova’s employment agreement provides that, upon termination of Dr. Khvorova’s employment without “cause” (as defined) by RXi or by Dr. Khvorova for “good reason,” (as defined) she will be entitled to payment of (a) any accrued but unpaid salary and unused vacation as of the date of her termination, (b) twelve months (in the event of such termination within twelve months of the effective date of her employment) or six months (in the event of such termination after twelve months from the effective date of her employment), as the case may be, of salary from the date of termination and (c) continued participation, at RXi’s expense, during the applicable severance period in RXi’s sponsored group medical and dental plans. In the event her employment is terminated within twelve months following a “change of control” of RXi, she will be entitled to (x) twelve months of salary from the date of termination, (y) accelerated vesting of any unvested RXi stock options held by her as to 50% of the unvested option shares or the portion of the unvested option shares that would have vested over the following twenty-four months, whichever is greater, and (z) continued participation, at RXi’s expense, during the severance period in RXi’s sponsored group medical and dental plans.

In connection with the transactions contemplated by the agreements described above, we paid Dr. Khvorova $50,000 in cash and issued to her, under our 2007 Incentive Plan, $50,000 of shares of our common stock valued for this purpose at the closing price of our common stock as reported on The NASDAQ Capital Market on September 26, 2011. We also have agreed in conjunction with completion of the partial spin-off of RXi to grant to Dr. Khvorova under our 2007 Incentive Plan an option to purchase up to 50,000 shares of our common stock at an exercise price equal to the closing price of our common stock as reported on The NASDAQ Capital Market on the date the partial spin-off of RXi is completed.

Under Dr. Pavco’s new employment agreement, she will serve as RXi’ s Senior Vice President of Pharmaceutical Development at an annual salary of $300,000. She also is entitled under her employment agreement to a grant by RXi of stock options to purchase 2% of the as-converted common stock of RXi at an exercise price per share to be determined based on the fair value of RXi common stock at the date of grant. The options will be subject to vesting in equal monthly installments over the four-year period following the effective date of her employment, subject to accelerated vesting in some events.

Dr. Pavco’s employment agreement provides that, upon termination of Dr. Pavco’s employment without “cause” (as defined) by RXi or by Dr. Pavco for “good reason,” (as defined) she will be entitled to payment of (a) any accrued but unpaid salary and unused vacation as of the date of her termination, (b) twelve months (in the event of such termination within twelve months of the effective date of her employment) or six months (in the event of such termination after twelve months from the effective date of her employment), as the case may be, of salary from the date of termination, and (c) continued participation, at RXi’s expense, during the applicable severance period in RXi’s sponsored group medical and dental plans. In the event her employment is terminated within twelve months following a “change of control” of RXi, she will be entitled to (x) twelve months of salary from the date of termination, (y) accelerated vesting of any unvested RXi stock options held by her as to 50% of the unvested option shares or the portion of the unvested option shares that would have vested over the following twenty-four months, whichever is greater, and (z) continued participation, at RXi’s expense, during the severance period in RXi’s sponsored group medical and dental plans.

In connection with the transactions contemplated by the definitive agreements described above, we granted Dr. Pavco, under our 2007 Incentive Plan, an option to purchase up to 150,000 of shares of our common stock at an exercise price equal to the closing price of our common stock as reported on The NASDAQ Capital Market on September 26 , 2011. We also have agreed to amend Dr. Pavco’s previously outstanding stock

options under our 2007 Incentive Plan to provide for the continued vesting and exercisability of the options in the usual way for so long as she remains in the employ of RXi.

Compensatory Arrangements of Chief Operating Officer

On September 23, 2011, we amended our existing employment agreement with Mark W. Schwartz, Ph.D., our Senior Vice President and Chief Operating Officer, to extend the term of the employment agreement to September 23, 2013 and to increase Dr. Schwartz’s base annual salary from $275,000 to $350,000.

Resignation of Chief Financial Officer

On September 23, 2011, Robert E. Kennedy resigned as our Vice President and Chief Financial Officer. He will remain as a consultant to our company through March 31, 2012 at his current base salary under his former employment agreement. Dr. Ahn has assumed the duties of Chief Financial Officer pending our search for a possible replacement for Mr. Kennedy.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

Amendment to Certificate of Incorporation

In order to effect the change in our company’s name contemplated by the securities purchase agreement as described in Item 1.01, above, on September 26, 2011, we amended our certificate of incorporation to change our name to Galena Biopharma, Inc.

In connection with the change of our company name, we obtained a new trading symbol for our common stock on The NASDAQ Capital Market. On or about the time of the spin-off, our common stock will commence trading under the symbol “GALE,” while the common stock of RXi is expected to trade under the symbol “RXII.”

Item 8.01 Other Events.

In connection with the contribution to RXi of the lease of our Worcester, Massachusetts, laboratory facility, we relocated our executive offices to 310 N. State Street, Suite 208, Lake Oswego, Oregon 97034. Our telephone number there is (855) 855-4253 and our website is www.galenabiopharma.com . The information available on our website is not part of this report.

A copy of our press release issued on September 26, 2011 with respect to the matters reported in this report is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and

Exhibits. (d) Exhibits

We are filing as part of this report the exhibits listed on the accompanying Index to Exhibits, which information is incorporated herein by reference.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: September 26, 2011	GALENA BIOPHARMA, INC.
	By:	/s/ Mark J. Ahn
		Mark J. Ahn
		President and Chief Executive Officer

Index to Exhibits


Exhibit No.		Description
3.1		Certificate of Ownership and Merger.

4.1		Form of Secured Convertible Promissory Notes, dated September 24, 2011 of RXi Pharmaceuticals Corporation (formerly, RNCS, Inc.).

10.1		Contribution Agreement, dated September 24, 2011, between Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation) and RXi Pharmaceuticals Corporation (formerly RNCS, Inc.).

10.2		Securities Purchase Agreement, dated September 24, 2011, among Galena Biopharma, Inc. (formerly, RXi Pharmaceuticals Corporation), RXi Pharmaceuticals Corporation (formerly, RNCS, Inc.), Tang Capital Partners, LP and RTW Investments, LLC.

10.3		Investor Subscription Agreement, dated September 24, 2011, among Galena Biopharma, Inc. (formerly, RXi Pharmaceuticals Corporation), Tang Capital Partners, LP. and RTW Investments, LLC.

10.4		Employment Agreement, dated September 24, 2011, between RXi Pharmaceuticals Corporation (formerly, RNCS, Inc.) and Anastasia Khvorova, Ph.D.

10.5		Employment Agreement, dated September 24, 2011, between RXi Pharmaceuticals Corporation (formerly, RNCS, Inc.) and Pamela Pavco, Ph.D.

10.6		Amendment No. 1 to Employment Agreement, dated September 23, 2011, between Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation) and Mark W. Schwartz, Ph.D.

99.1		Press release of Galena Biopharma, Inc., dated September 26, 2011.

Exhibit 3.1

CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
GALENA BIOPHARMA, INC.
(a Delaware corporation)

WITH AND INTO
RXI PHARMACEUTICALS CORPORATION
(a Delaware corporation)

(Pursuant to Section 253 of the Delaware General Corporation Law)

RXi Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), does hereby certify to the following facts relating to the merger (the “ Merger ”) of Galena Biopharma, Inc., a Delaware corporation (the “ Subsidiary ”), with and into the Company, with the Company remaining as the surviving corporation under the name of “Galena Biopharma, Inc.”

1. The Subsidiary is a corporation incorporated on September 8, 2011 under the Delaware General Corporation Law (the “ DGCL ”).

2. The Company is a corporation incorporated on April 3, 2006 under the DGCL.

3. The Company is the owner of all of the outstanding shares of the capital stock of the Subsidiary.

4. The Board of Directors of the Company, by resolutions duly adopted at a meeting of the Board of Directors of the Company held on August 23, 2011, determined to merge into itself the Subsidiary, and to effect a change of the Company’s name to “Galena Biopharma, Inc.” in connection with such merger, pursuant to Section 253 of the DGCL. Such resolutions are as follows:

WHEREAS, in view of the Company’s proposed transfer and contribution to a wholly-owed subsidiary of the Company of certain RNAi assets and related obligations of RXi Pharmaceuticals Corporation (the “ Company ”) (the “ Spin-Off ”), the Company has proposed to change its corporate name so as not to include the name “RXi” or “RNAi”; and

WHEREAS, after thorough consideration, the Board of Directors believes it is advisable and in the best interests of the Company and its stockholders to change the name of the Company to Galena Biopharma, Inc. from RXi Pharmaceuticals Corporation (the “ Name Change ”), and to effect such Name Change pursuant to the provisions of Section 253 of the Delaware General Corporation Law (the “ DGCL ”); and

WHEREAS, in order to effect the Name Change, the Company desires to form a new corporation named Galena Biopharma, Inc., a Delaware corporation (the “ Subsidiary ”), and to acquire shares of common stock, par value $0.0001 per share, of the Subsidiary (collectively, the “ Incorporation ”); and

WHEREAS, following the effectiveness of the Incorporation, the Company will own all of the outstanding shares of the capital stock of the Subsidiary; and

WHEREAS, in order to consummate the Name Change, the Board of Directors of the Company believes it is advisable and in the best interests of the Company and its stockholders that, following the effectiveness of the Incorporation, the Subsidiary be merged with and into the Company (the “ Merger ”) pursuant to Section 253 of the DGCL, so that the Company will be the surviving corporation following the Merger and that the Name Change be effected as part of the Merger as permitted under the DGCL;

NOW, THEREFORE, BE IT RESOLVED, that the Incorporation is hereby authorized and approved in all respects; and it is

RESOLVED FURTHER, that the officers of the Company be and each hereby is authorized, empowered and directed, by and on behalf of the Company and in its name, to prepare or cause to be prepared, and to execute and file with the Delaware Secretary of State a Certificate of Incorporation to form the Subsidiary, and to take all such other actions as they or any one of them shall deem necessary or appropriate to consummate the Incorporation; and it is

RESOLVED FURTHER, that the Merger and the Name Change are hereby authorized and approved; and it is

RESOLVED FURTHER, that following the Incorporation, the officers of the Company be and each hereby is authorized, empowered and directed, by and on behalf of the Company and in its name, to effect the Name Change by merging the Subsidiary with and into the Company pursuant to Section 253 of the DGCL, so that the Company will be the surviving corporation and possess all of the Subsidiary’s property, rights, privileges and powers, and assume all of the Subsidiary’s liabilities and obligations; and it is

RESOLVED FURTHER, that by virtue of the Merger and without any action on the part of the holder thereof, each then outstanding share of common stock, par value $0.0001 per share, of the Company (the “ Common Stock ”) shall remain unchanged and continue to remain outstanding as one share of Common Stock, held by the person who was the holder of such share of Common Stock immediately prior to the Merger; and it is

RESOLVED FURTHER, that the directors and officers of the Company immediately prior to the Merger shall continue to remain the directors and officers of the Company until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified, as the case may be; and it is

RESOLVED FURTHER, that, pursuant to Section 253(b) of the DGCL, upon the effective date of the Merger, the corporate name of the Company shall be changed to Galena Biopharma, Inc.; and it is

RESOLVED FURTHER, that the Certificate of Incorporation of the Company as in effect immediately prior to the effective time of the Merger shall be the certificate of

incorporation of the surviving corporation, except that Article I thereof shall be amended in its entirety to read as follows:

“ARTICLE I

The name of this corporation is Galena Biopharma, Inc.”

RESOLVED FURTHER, that the Bylaws of the Company as in effect immediately prior to the effective time of the Merger shall be amended and restated to reflect the Name Change; and it is

RESOLVED FURTHER, that the officers of the Company be and each hereby is authorized, empowered and directed, in the name and on behalf of the Company, to prepare or cause to be prepared, and to execute and file with the Delaware Secretary of State a Certificate of Ownership and Merger that sets forth therein a copy of these resolutions and the date that such resolutions were adopted by the Board of Directors; and it is

RESOLVED FURTHER, that the officers of the Company be, and each of them hereby is, authorized, empowered and directed, in the name and on behalf of the Company, to (i) notify the Company’s transfer agent and registrar for the Company’s common stock of the Name Change, (ii) obtain a new CUSIP number, (iii) prepare and file with the SEC a current report on Form 8-K to disclose the transactions contemplated by the foregoing resolutions, and (iv) execute such documents, disburse such funds, engage such persons, and take all such other actions that such officer may deem necessary or advisable in connection with the Name Change and the Merger and to carry out the intent and purpose of the foregoing resolutions.

5. The Company shall be the surviving corporation of the Merger.

6. The Certificate of Incorporation of the Company as in effect immediately prior to the effective time of the Merger shall be the certificate of incorporation of the surviving corporation, except that Article I thereof shall be amended in its entirety to read as follows:

“ARTICLE I

The name of this corporation is Galena Biopharma, Inc.”

7. The Merger shall be effective as of September ____, 2011.

IN WITNESS WHEREOF, RXi Pharmaceuticals Corporation has caused this Certificate of Ownership and Merger to be signed by its duly authorized officer, this ____ day of September 2011.


RXI PHARMACEUTICALS CORPORATION
By:	/s/ Mark J. Ahn
	Name:	Mark J. Ahn, Ph.D.
	Title:	President and Chief Executive Officer

Exhibit 4.1

THIS NOTE AND THE SECURITIES UNDERLYING THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

RNCS, INC.

FORM OF SECURED CONVERTIBLE PROMISSORY NOTE


Up to $[ l ] ¹		[City, State]
		September [ ], 2011

For Value Received , RNCS, Inc., a Delaware corporation (the “ Company ”), hereby unconditionally promises to pay to the order of [ l ] (together with its successors and assigns, “ Holder ”), in lawful money of the United States of America and in immediately available funds, the principal sum of up to [ l ] ($[ l ]), or such lesser amount as the Company may owe Holder hereunder, as determined in accordance with Section 1.2 (such amount, the “ Principal ”), together with accrued and unpaid interest thereon, each due and payable on the date and in the manner set forth below.

This Secured Convertible Promissory Note (this “ Note ”) is one of a series of Secured Convertible Notes (collectively, the “ Notes ”) executed and delivered in connection with that certain Securities Purchase Agreement by and among the Company and the purchasers listed on Annex I thereto (the “ Investors ”), dated as of September [ l ], 2011 (the “ Securities Purchase Agreement ”). Subject to the terms and conditions of the Notes, funds will be provided to the Company under the Notes in up to three funding tranches of Five Hundred Thousand Dollars ($500,000) each, with the first tranche to be funded concurrently with the execution and delivery of the Notes (the “ First Tranche ”). The purchasers of the Notes under the Securities Purchase Agreement other than the Holder are referred to below as the “ Other Holders ” and the Other Holders and the Holder are collectively referred to herein as the “ Holders .” All capitalized terms used herein and not otherwise defined herein will have the respective meanings given to them in the Securities Purchase Agreement.

1. Principal Repayment; Security .

1.1 Repayment of this Note will be made in lawful money of the United States of America to Holder at [address], or at such other place as Holder may designate in writing. Unless earlier converted pursuant to Section 4 hereof, the Principal and accrued and unpaid interest will be due and payable in cash on the earlier to occur of (the “ Maturity Date ”): (i) 150 days from the date set forth above, or (ii) an Event of Default (as defined below). This Note is secured by certain collateral of the Company and RXi (defined below) and subject to a guaranty, as described in that certain: (a) Security Agreement, dated September [ l ], 2011, by and between the Company and Tang Capital Partners, LP as agent (the “ Agent ”); (b) Pledge, Assignment and

¹ Maximum principal amount to equal $1.5 million, multiplied by the fraction of the total investment to be put in by each investor (e.g., if Tang represents 50% of the total investment, then $750,000).

Security Agreement, dated September [ l ], 2011, by and between RXi Pharmaceuticals Corporation, a Delaware corporation (“ RXi ”); and the Agent, and (c) General Continuing Guaranty, dated September [ l ], 2011, by and between RXi and the Agent.

1.2 The Principal due under Section 1.1 shall be equal to: (x) [ l ] ($[ l ]), which sum the Holder has lent to the Company concurrent with the execution of this Note (the “ First Tranche Loan Amount ”), plus (y) the Second Tranche Loan Amount and the Third Tranche Loan Amount (each defined below), to the extent such sums are lent to the Company in accordance with Section 1.3 of this Note.

1.3 Use of Proceeds; Additional Tranches .

1.3.1 The funds provided by the Holders in the First Tranche will be used to fund the Company’s operations pursuant to the budget attached hereto as Annex A (the “ Initial Budget ”). Subject to the approval of the Second Tranche Budget and the Third Tranche Budget (each defined below), the Holders will provide up to two additional funding tranches of Five Hundred Thousand Dollars ($500,000) each, as set forth below.

1.3.2 Within fifteen (15) days prior to the exhaustion of the funds underlying the First Tranche, the Company will present the Holders with an updated budget for their review and approval, in their sole discretion (the “ Second Tranche Budget ”), which budget will detail the planned use of proceeds for a second tranche of funding under the Notes in the aggregate sum of sum of Five Hundred Thousand Dollars ($500,000) (the “ Second Tranche ”). Upon the Company and the Requisite Holders (defined below) mutually agreeing upon the use of proceeds under the Second Tranche Budget, the Holders will fund the Second Tranche, with the Holder under this Note thereupon being required to lend the Company an additional [ l ] ($[ l ]) of Principal hereunder (the “ Second Tranche Loan Amount ”). Upon the funding of the Second Tranche Loan Amount, interest will thereafter accrue on such additional Principal balance, as set forth below in Section 2.

1.3.3 Within fifteen (15) days prior to the exhaustion of the funds underlying the Second Tranche, the Company will present the Investors with an updated budget for their review and approval, in their sole discretion (the “ Third Tranche Budget ”), which budget will detail the planned use of proceeds for a third tranche of funding under the Notes in an amount equal to in the aggregate sum of sum of Five Hundred Thousand Dollars ($500,000) (the “ Third Tranche ”). Upon the Company and the Requisite Holders (defined below) mutually agreeing on the use of proceeds under the Third Tranche Budget, the Holders will fund the Third Tranche, with the Holder under this Note thereupon being required to lend the Company an additional [ l ] ($[ l ]) of Principal hereunder (the “ Third Tranche Loan Amount ”). Upon the funding of the Third Tranche Loan Amount, interest will thereafter accrue on such additional Principal balance, as set forth below in Section 2 . For purposes of this Note, each of the Initial Budget, the Second Tranche Budget and the Third Tranche Budget are referred to below as a “ Budget .”

2. Interest Rate . The Company further promises to pay interest on the outstanding Principal from the date hereof until payment in full, with interest accruing from the Funding Date (defined below) with respect to each tranche at a rate of seven percent (7.0%) per annum or the

maximum rate permitted by law, whichever is less. Interest will be due and payable on the Maturity Date and will be calculated on the basis of a 360-day year for the actual number of days elapsed. Notwithstanding the foregoing, upon the occurrence of an Event of Default, interest shall thereafter accrue at a rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less. For purposes of this Section 2 , the “ Funding Date ” shall mean the respective dates on which the Company receives the First Tranche Loan Amount, the Second Tranche Loan Amount and the Third Tranche Loan Amount.

3. Prepayment . The Company may not in whole or in part prepay its obligations under this Note without the prior written consent of Holder.

4. Conversion

4.1 Series A Preferred Conversion . At the Closing, the Principal and accrued interest due under the Note will automatically convert into fully paid shares (the “ Conversion Shares ”) of Series A Preferred at rate of $1,000 per share. To the extent necessary, the Company may issue fractional shares of Series A Preferred in issuing the Conversion Shares pursuant to this Section 4.1.

4.2 Common Stock Conversion . If, as of the Maturity Date, (i) neither the Company nor the Investors have terminated the Securities Purchase Agreement pursuant to Sections 8.01(d) or 8.01(e), respectively, and (ii) the Closing has not occurred, then, in such case, this Note will be automatically cancelled as to 50% of the outstanding balance (i.e., Principal and accrued interest) thereof in exchange for the Company’s sale and issuance to the Investors at such time of a number of shares of Company common stock, par value $0.0001 per share, (the “ Common Stock ”) constituting 51% of the outstanding shares of Common Stock (measured on a Fully-Diluted Basis) immediately following such issuance, after giving effect to the issuance contemplated by the Advirna Amendment. The remaining balance due under this Note will be due and payable at the Maturity Date as set forth herein. For purposes of this Note, “ Fully-Diluted Basis ” includes the issued and outstanding capital stock of the Company, determined on an as-converted basis, as well as any securities underlying outstanding options, warrants, convertible securities or future stock issuance obligations, conditional, unconditional or otherwise. In the events described in clauses (i) and (ii), above, it is intended and agreed that the shares of Company common stock held by RXi shall constitute 44% of the outstanding shares of Common Stock (measured on a Fully-Diluted Basis) and that the Company, RXi and the holders shall enter into a customary form of stockholders agreement under which RXi shall be entitled to designate one or more members of the Board of Directors of the Company constituting a minority of the members of the Board of Directors, to receive periodic financial and other information from the Company, tag-along (and drag-along) rights in connection with proposed sales or other dispositions of capital stock of the Company, and other protective rights as a minority stockholder of the Company, all as shall be mutually agreed upon among the Company, RXi and the holders.

4.3 Delivery of Stock Certificates, Etc .

4.3.1 Conversion Pursuant to Section 4.1 . If this Note is converted pursuant to Section 4.1 , written notice will be delivered to Holder at the address last shown on

the records of the Company for Holder or given by Holder to the Company for the purpose of notice, notifying Holder of the conversion to be effected, the principal amount of this Note to be converted, together with all accrued and unpaid interest, the date on which such conversion is expected to occur and calling upon Holder to surrender to the Company, in the manner and at the place designated, this Note. Upon such conversion of this Note, Holder agrees to deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the Holder agrees to indemnify the Company from any loss incurred by it in connection with this Note) at the Closing for cancellation; provided , however , that at such time, this Note will be deemed converted and of no further force and effect, whether or not it is delivered for cancellation as set forth in this sentence. The Company will, as soon as practicable thereafter, issue and deliver to Holder a certificate or certificates for the number of shares to which Holder will be entitled upon such conversion.

4.3.2 Conversion Pursuant to Section 4.2 . If this Note is converted pursuant to Section 4.2 , written notice will be delivered to Holder at the address last shown on the records of the Company for Holder or given by Holder to the Company for the purpose of notice, notifying Holder of the conversion to be effected, the amount of this Note to be converted (taking into account all accrued and unpaid interest), the date on which such conversion is expected to occur and the remaining balance due under the Note. The written notice shall also call upon Holder to surrender to the Company, in the manner and at the place designated, this Note and the remaining balance due under this Note. Upon such conversion of this Note and payment of remaining balance due, Holder agrees to deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the Holder agrees to indemnify the Company from any loss incurred by it in connection with this Note) on the Maturity Date for cancellation; provided , however , that at such time, as long as the remaining balance due under this Note is paid in full, this Note will be deemed converted as set forth in Section 4.2 and paid in full and of no further force and effect, whether or not it is delivered for cancellation as set forth in this sentence. The Company will, as soon as practicable thereafter, issue and deliver to Holder a certificate or certificates for the number of shares to which Holder will be entitled upon such conversion.

4.3.3 Any conversion of this Note pursuant to Section 4 will be deemed to have been made immediately prior to the Closing or the Maturity Date, as applicable, and on and after such date the persons entitled to receive the shares issuable upon such conversion will be treated for all purposes as the record Holder of such shares.

5. Default . If any of the following events (hereafter called “ Events of Default ”) occur:

(a) The Company makes a general assignment for the benefit of creditors;

(b) The Company files a voluntary petition in bankruptcy, or becomes insolvent or adjudicated bankrupt, or files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or other applicable federal, state or other statute, law or regulation, or files any answer admitting the material allegation of a petition filed against the

Company in such proceeding, or seeks or consents to or acquiesce in the appointment of any trustee, receiver or liquidator of the Company of all or any substantial part of the properties of the Company, or the Company commences the winding up or the dissolution or liquidation of the Company;

(c) Within sixty (60) days after a court of competent jurisdiction has entered an order, judgment or decree approving any complaint or petition against the Company seeking reorganization, dissolution or similar relief under the present or any future federal bankruptcy act or other applicable federal, state or other statute, law or regulation, such order, judgment or decree has not been dismissed or stayed pending appeal, or, within sixty (60) days after the appointment, without the consent or acquiescence of the Company, of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment has not been vacated or stayed pending appeal, or if, within sixty (60) days after the expiration of any such stay, has not been vacated;

(d) The Company or RXi materially breach any representation, warranty or covenant contained in the Transaction Documents and such breach is not cured (if it can be cured) within five (5) Business Days after the Investors provide notice of such breach;

(e) The Company’s actual aggregate expenditures with respect to any Budget exceed 105% of the aggregate budgeted amount for that time period covered by such Budget, without the prior approval of the Investors;

(f) There is a Material Adverse Effect with respect to the Company, the Company or RXi provide written notice to the Investors that either of them will be unable to satisfy a condition to Closing set forth in Article V of the Securities Purchase Agreement, or the Securities Purchase Agreement is terminated by the Investors as permitted under Section 8.01(e) thereof;

(g) A final judgment or order for the payment of monetary damages or awarding injunctive relief in connection with the transactions contemplated by the Securities Purchase Agreement is rendered against the Company and the same remains undischarged for a period of thirty (30) days during which execution has not been effectively stayed, or any injunction, judgment, writ, assessment, warrant of attachment, or execution or similar process has been issued or levied against a substantial part of the property of the Company, if any and such injunction, judgment, writ, or similar process is not released, stayed, vacated or otherwise dismissed within thirty (30) days after issue or levy;

then, and in each and every such case, amounts under this Note will be forthwith due and payable, without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived. The Company will give prompt written notice to Holder of the occurrence of any and all of the foregoing events. In addition to the foregoing remedies, upon the occurrence and during the continuance of any Event of Default, Holder may exercise any other right power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

For the purposes of this Note, a “Business Day” means a day other than a Saturday or a Sunday on which banks are open for business in New York.

6. Payment . Unless converted into the Company’s equity securities pursuant to the terms hereof, payment will be made in lawful tender of the United States.

7. Waiver . The Company waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and will pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses. The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the fullest extent permitted by law.

8. Assignment . The rights, interests or obligations hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of Holder.

9. Registration, Transfer and Replacement of the Note . This Note will be a registered Note. The Company will keep, at its principal executive office, books for the registration and registration of transfer of this Note. Prior to presentation of any Note for registration of transfer, the Company will treat the person in whose name such Note is registered as the owner and Holder of such Note for all purposes whatsoever, whether or not such Note will be overdue, and the Company will not be affected by notice to the contrary. Subject to any restrictions on or conditions to transfer set forth herein, the Holder, at its option, may in person or by duly authorized attorney surrender the same for exchange at the Company’s chief executive office, and promptly thereafter and at the Company’s expense, except as provided below, receive in exchange therefor one new Note, in the principal requested by such holder, dated the date to which interest will have been paid on the Note so surrendered or, if no interest will have yet been so paid, dated the date of the Note so surrendered and registered in the name of such person or persons as will have been designated in writing by such Holder or its attorney for the same principal amount as then unpaid principal amount of the Note so surrendered. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b) in the case of mutilation, upon surrender thereof, the Company, at its expense, will execute and deliver in lieu thereof a new Note executed in the same manner as the Note being replaced, in the same principal amount as the unpaid principal amount of such Note and dated the date to which interest will have been paid on such Note or, if no interest will have yet been so paid, dated the date of such Note.

10. Governing Law; Consent to Jurisdiction . This Note and all actions arising out of or in connection with this Note will be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California or of any other state. Each of the Company and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in California and the courts of the State of California for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action

or proceeding is improper. Each of the Company and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 10 shall affect or limit any right to serve process in any other manner permitted by law. Each of the Company and the Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Note shall be entitled to reimbursement for fees and expenses, including reasonable legal fees, from the non-prevailing party.

11. Notices. All notices and other communications required or permitted hereunder will be in writing and will be transmitted by e-mail or facsimile, or, if sent within the United States, mailed by first-class mail, postage prepaid, to the address set forth below the recipient’s signature, or at such other address as the recipient will have furnished to the other party in writing. All notices will be deemed effectively delivered upon transmission or mailing.

12. Amendment . No provision of the Notes may be modified or amended on behalf of all of the Holders other than by a written instrument signed by the Company and the holders of at least a majority of the combined principal amount of the then outstanding Notes (the “ Requisite Holders ”); provided that if any of the rights of the Holder under this Note are materially diminished by such waiver or amendment in a manner that is not similar in all material respects to the effects on the Other Holders, then such waiver or amendment shall not be effective with respect to the Holder without the written consent of the Holder. The Holder acknowledges that any amendment or modification made in compliance with this Section 12 shall be binding on all Holders of the Notes, including, without limitation, an amendment or modification that has an adverse effect on any or all Holders. Notwithstanding the foregoing, nothing provided in this Section 12 shall limit the Holder’s right to waive or amend any provision of this Note on its own behalf. No consideration shall be offered or paid to any Holder of Notes to amend or waive or modify any provision of the Notes unless the same consideration is also offered to all of the Holders holding Notes on the date of such amendment, waiver or modification, on a pro rata basis based upon the outstanding Principal amount of the Notes. This provision constitutes a separate right granted to each Holder by the Company and shall not in any way be construed as the Holders acting in concert or as a group.

13. Ranking of Notes . The obligations of the Company under the Notes shall be senior in time and right of payment to all other Indebtedness (defined below) of the Company. Upon maturity or any Event of Default, the Holder will be entitled to receive, before any distribution or payment is made upon, or set apart with respect to, any Indebtedness of the Company other than Indebtedness represented by the Notes, or any class of capital stock of the Company, an amount equal to the Principal amount plus all accrued and unpaid interest thereon. For purposes of this Section 13 , “ Indebtedness ” means (a) all obligations for borrowed money; (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products; (c) all capital lease obligations; (d) all obligations or liabilities secured by a lien or encumbrance on any asset of the Company, irrespective of whether such obligation or liability is assumed; (e) all obligations for the deferred purchase price of assets, together with trade debt and

other accounts payable; (f) all synthetic leases; (g) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person; (h) trade debt; and (i) endorsements for collection or deposit.

14. Usury . In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate will be deemed a payment of principal and applied against the principal of this Note.

[Signature page follows]

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first set forth above.


	RNCS, Inc.
	By:
		Name:
		Title:


	Agreed and Accepted: [ l ]
	By:
		Name:
		Title:

[Signature page follows]

EXECUTION VERSION

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of September 23, 2011 (the “ Effective Date ”), by and between RXi Pharmaceuticals Corporation, a Delaware corporation (“ RXi ”) and RNCS, Inc., a Delaware corporation and wholly owned subsidiary of RXi (“ RNCS ”).

RECITALS

WHEREAS, RXi owns or has the right to use certain tangible and intangible assets and rights that collectively constitute the RNAi Platform;

WHEREAS, prior to the execution and delivery of this Agreement, RXi formed RNCS under the laws of Delaware for purposes of effectuating the transactions contemplated by this Agreement;

WHEREAS, the board of directors of RXi has determined it to be in the best interests of RXi and its stockholders to transfer and contribute to RNCS the rights and assets constituting the RNAi Platform, with the objective of distributing shares of RNCS Common Stock to the RXi stockholders, as contemplated in the Purchase Agreement (defined below); and

WHEREAS, it is contemplated that Tang Capital Partners, LP and RTW Investments, LLC (together, the “ Investors ”) will purchase bridge notes and preferred shares of RNCS pursuant to that certain Securities Purchase Agreement by and among the Investors, RXi and RNCS to be executed contemporaneously with the execution of this Agreement (the “ Purchase Agreement ”), with the capital to be invested by the Investors being used to fund the further development of the RNAi Platform.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties and agreements herein contained, the parties agree as follows:

SECTION 1. DEFINITIONS; CONSTRUCTION

1.1 Definitions . When used herein, the following capitalized terms shall have the meanings set forth below. Capitalized terms that are not otherwise defined herein shall have the meanings attributed to such terms in the Purchase Agreement.

(a) “ Ancillary Agreements ” means the Bill of Sale and the Assignment and Assumption Agreement.

(b) “ Annualized Net Sales ” means the cumulative Net Sales over any rolling period of four consecutive fiscal quarters (i.e., three-month periods ending on March 31, June 30, September 30 and December 31).

(c) “ Covered Products ” means any pharmaceutical product that has been approved for marketing by the FDA, EMA or other foreign equivalent agency, provided that the manufacture, sale, use, or importation of such product would be within the scope of one or more valid claims contained in issued patents that are included in the Transferred Technology.

(d) “ Damages ” means out-of-pocket losses, damages, assessments, fines, penalties, fees, expenses, costs (including reasonable attorney’s fees) or amounts paid in settlement, but shall not include punitive, consequential or special damages or lost profits. The calculation of any Damages of any party shall reflect offsets for the amount of any insurance proceeds received or receivable by the party in respect of such Damages.

(e) “ Indemnified Party ” means a party seeking indemnification under Section 5.1 or 5.2 hereof.

(f) “ Indemnifying Party ” means the party from which indemnification is sought under Section 5.1 or 5.2 hereof.

(g) “ Indemnity Claim ” means a claim for indemnity under Section 5.1or 5.2, as the case may be.

(h) “ Net Sales ” means any amount received by RNCS for the sale of any Covered Products, plus amounts received by any Third Parties who hold from RNCS rights under the Transferred Technology to make, have made, sell, offer or sale, use or import any Covered Products, less the following: (a) customary trade and quantity discounts actually allowed and taken; (b) allowances actually given for returned Covered Products; (c) freight and insurance, if separately identified on the invoice; and (d) value added tax, sales, use, or turnover taxes, excise taxes, and customs duties included in the invoiced price. In addition, Net Sales are subject to the following: (i) in the case of pharmacy incentive programs, hospital performance incentive program charge backs, disease management programs, co-pay rebate programs, and similar programs, or discounts, including on “bundles” of products, all discounts and the like shall be deducted from the gross amounts received in determining the Net Sales and, if such discounts relate to a bundle of products, then the discounts shall be allocated among the bundled products on the basis on which such discounts and the like were accrued, or if such basis cannot be determined, proportionately to the list prices of such products; (ii) in the case of any sale or other disposal of a Covered Product to an affiliated party for resale, the Net Sales shall be calculated as above on the value charged or invoiced on the first arm’s length sale to a third party; and (iii) if a Covered Product is sold to a customer in a particular country other than on normal commercial terms or as part of a package of products and services, the Net Sales of that Covered Product shall be deemed to be “the fair market value” of such Covered Product (i.e., the value that would have been derived had said Covered Product been sold as a separate product to a similar customer in the country concerned on normal commercial terms).

(i) “ Third Party ” means any person other than RXi or RNCS and their respective affiliates.

(j) “ Transferred Contracts ” means the Contractual Obligations listed on Schedule 1.1(j) hereto, as such schedule may be supplemented from time to time after the Closing by mutual agreement between RXi and RNCS (any such Contractual Obligations so added being referred to herein as “ Additional Transferred Contracts ”).

(k) “ Transferred Technology ” means the assets, equipment, rights and property (tangible and intangible) listed on Schedule 1.1(k) hereto and any remedies against any and all past, present and future infringements thereof and rights to protections of interest therein.

1.2 Construction .

(a) Gender . Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other genders as the context requires.

(b) Paragraph Headings . The paragraph and other headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.

SECTION 2. CONTRIBUTION OF TRANSFERRED ASSETS

2.1 Contribution Transaction . In consideration for the obligations to make the Milestone Payments, when and if the conditions to such payments are met, and in consideration for RNCS’s assumption of the Assumed Obligations, RXi hereby transfers, assigns, conveys and contributes to RNCS and its successors and assigns, for its and their own use and behalf, all of RXi’s right, title and interest in and to the following assets, other than any such assets as may be among the Excluded Assets (the “ Transferred Assets ”), and all goodwill associated therewith, and RNCS hereby accepts the transfer, assignment, conveyance and contribution of the Transferred Assets and agrees to fully and entirely stand in the place of RXi in all matters related thereto (collectively, the “ Contribution Transaction ”):

(a) the Transferred Contracts;

(b) the Transferred Technology;

(c) originals or, at RXi’s election, true and complete copies, of all (i) accounting and other books and records; (ii) correspondence; (iii) reports; (iv) studies; and (v) documents and other business records and files, in each case to the extent related to the Transferred Assets, the Assumed Obligations or the conduct of the Business after the date hereof (collectively, the “ Business Documents ”);

(d) the tangible personal property and equipment, if any, listed on Schedule 2.1(d) hereto; and

(e) the additional rights and property listed on Schedule 2.1(e) hereto.

2.2 Excluded Assets . Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this Agreement, the following assets and rights of RXi (the “ Excluded Assets ”) are excluded from the Transferred Assets:

(a) the rights and property, if any, listed in Schedule 2.2(a) hereto;

(b) all personnel and other records that RXi is required by law to retain in its possession, provided that RXi shall make these records reasonably available to RNCS after the date hereof to the extent related to RNCS’s conduct of the Business;

(d) all rights and obligations of RXi arising under or relating to any Contractual Obligations not included in the Transferred Contracts; and

(e) all rights in the nature of affirmative defenses, offsets or counterclaims under any of the Transferred Contracts with respect to any claims against RXi or its successors and assigns with respect to the Transferred Contracts.

2.3 Assumption of Obligations .

(a) RNCS hereby assumes from RXi, and agrees to fully and faithfully perform and discharge when due, and be solely responsible for, the following (the “ Assumed Obligations ”):

(i) the accounts payable and inter-company payable set forth on Schedule 2.3(a) hereto;

(ii) all of RXi’s payment, performance and other obligations arising on or after the Contribution Closing Date under the Transferred Contracts; and

(iii) all other liabilities incurred on or after the Contribution Closing Date relating to the Transferred Assets.

(b) Except as provided in Section 2.3(a), RNCS shall not assume or be responsible to perform, pay or discharge, and shall have no liability for, and RXi shall remain liable for any obligations, liabilities and commitments of RXi, of any kind or nature, known or unknown, fixed or contingent, including, without limitation (i) all liabilities arising under or relating to the Transferred Assets, to the extent that such liabilities arose or accrued prior to the Contribution Closing Date, and (ii) all liabilities arising under or relating to the Excluded Assets, whether arising before or after the Contribution Closing Date (the “ Excluded Liabilities ”).

(c) The assumption by RNCS of the Assumed Obligations under Section 2.3(a) shall not enlarge or otherwise affect any rights of third parties under any of the Transferred Contracts.

2.4 Inability to Transfer Assets .

(a) If and to the extent that the purported transfer to RNCS hereunder of any of the Transferred Assets would violate applicable laws or agreements or require any consent or governmental approval in connection with the transactions contemplated hereby that has not been obtained by the date hereof (a “ Transfer Impediment ”), then, unless the parties shall otherwise determine, the actual transfer to RNCS of such Transferred Asset shall be automatically deemed deferred, such purported transfer shall be null and void until such time as all relevant Transfer Impediments are removed or obtained, as applicable, and RXi shall not be obligated to transfer such asset except as provided in Section 2.4(b) below. Notwithstanding the foregoing, such asset shall be considered a Transferred Asset for purposes of determining the Assumed Obligations.

(b) If the transfer or assignment of any asset intended to be transferred hereunder is not consummated on the date hereof, whether as a result of the provisions of Section 2.1(a) or for any other reason, then RXi shall hold such asset for the use and benefit, insofar as reasonably possible and not in violation of a Transfer Impediment, of RNCS (at the expense of RNCS) and shall take such other actions as may be reasonably requested by RNCS in order to place RNCS, insofar as reasonably possible and not in violation of a Transfer Impediment, in the same position as if such asset had been transferred as contemplated hereby and so that all the benefits and burdens relating to such asset, including possession, use, risk of loss, potential for gain, and dominion, control and command over such asset, are to inure from and after the date hereof to RNCS. If and when a Transfer Impediment that caused the deferral of a transfer of any asset pursuant to Section 2.1(a) is removed or obtained, as applicable, the transfer of the applicable asset shall be effected in accordance with the terms of this Agreement. The parties shall cooperate and use reasonable efforts, without the requirement to make any payment or make a material concession, to remove or obtain, as applicable, any Transfer Impediment that prohibits the transfer of any of the Transferred Assets hereunder.

2.5 Inability to Assign Liabilities . If the assignment of an Assumed Obligation to RNCS hereunder is prohibited by a Transfer Impediment, RXi shall continue to be bound by the relevant obligations and, unless not permitted by law or the terms of the relevant obligation, RNCS shall, as agent or subcontractor for RXi, pay, perform and discharge fully, or cause to be paid, transferred or discharged all the obligations of RXi thereunder without recourse or obligation to RXi. RXi shall, without further consideration, pay and remit, or cause to be paid or remitted, to RNCS promptly all money, rights and other consideration received by it in respect of such performance (unless any such consideration is an Excluded Asset). If and when such Transfer Impediment is removed or obtained, as applicable, or such obligations shall otherwise become assignable, the transfer of the applicable obligation shall be effected in accordance with the terms of this Agreement. The parties shall cooperate and use reasonable efforts, without the requirement to make any payment or make a material concession, to remove or obtain, as applicable, any Transfer Impediment that prohibits the assignment of any of the Assumed Obligations hereunder.

2.6 Closing . The consummation of the Contribution Transaction (the “ Contribution Closing ”) shall take place concurrently with the execution of this Agreement. The date that the Contribution Closing actually occurs is referred to herein as the “ Contribution Closing Date .”

2.7 Closing Deliverables .

(a) At the Contribution Closing, RXi shall deliver or cause to be delivered to RNCS all of the Transferred Assets, and in furtherance thereof:

(i) concurrently with the execution of this Agreement, RXi shall deliver or cause to be delivered to RNCS all of the Transferred Contracts with such assignments thereof and consents to assignments as necessary to transfer to RNCS RXi’s full right, title and interest in the same;

(ii) concurrently with the execution of this Agreement, RXi shall execute and deliver to RNCS a bill of sale in substantially the form attached hereto as Exhibit A (the “ Bill of Sale ”) and an Assignment and Assumption Agreement in substantially the form attached hereto as Exhibit B (the “ Assignment and Assumption Agreement ”); and

(iii) as soon as is practicable, but in any within 30 days after the execution of this Agreement, RXi shall make available, transfer and deliver to RNCS any and all physical embodiments of the Transferred Technology.

(b) RNCS shall accept delivery of the Transferred Assets and execute and deliver to RXi the Assignment and Assumption Agreement.

2.8 Milestone Payments . As partial consideration for the Transferred Assets, RNCS shall be required to pay to RXi up to two milestone payments based on Annualized Net Sales of all Covered Products (the “ Milestone Payments ”). Each of the two Milestone Payments will be due when and if RNCS achieves Annualized Net Sales equal to or greater than the thresholds set forth below, at which time, RNCS shall, within 120 days from the quarter end in which the threshold was met, pay RXi the amounts set forth below by wire transfer.


Annualized Net Sales		Milestone Payment
$	500,000,000	$	15,000,000
$	1,000,000,000	$	30,000,000

SECTION 3. REPRESENTATIONS AND WARRANTIES .

Subject to such exceptions as are specifically disclosed in the schedules referenced in this Section 3, of even date herewith, delivered by RXi to RNCS and the Investors (the “ RXi Disclosure Schedules ”), RXi represents and warrants as follows:

3.1 Organization . RXi is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to

own, lease and operate its properties and assets and to conduct its business as it is now being conducted.

3.2 Authorization . RXi has the requisite corporate power and authority to enter into and perform this Agreement and the Ancillary Agreements (collectively, the “ Transaction Documents ”) and to perform its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and consummation of the Contribution Transaction by RXi have been duly and validly authorized by all necessary corporate action and no further consent or authorization of RXi or its board of directors or stockholders is required to consummate the Contemplated Transactions. When executed and delivered by RXi, each of the Transaction Documents shall constitute a valid and binding obligation of RXi, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

3.3 No Approvals or Conflicts . Neither the execution and delivery by RXi of this Agreement nor the consummation by RXi of the transactions contemplated hereby will (i) violate, conflict with or result in a breach of any provision of the Certificate of Incorporation or Bylaws of RXi, each as amended to date; (ii) except as set for in Schedule 3.3 hereto, violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the creation of any Encumbrance upon any of the Transferred Assets under any Contract, or other instrument to which RXi or any of its properties may be bound; (iii) violate any order, injunction, judgment, ruling, law or regulation of any court or governmental authority applicable to RXi or give rise to any Transfer Impediments; or (iv) except for applicable requirements of The NASDAQ Capital Market and except for applicable requirements of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder, require any consent, approval or authorization of, or notice to, or declaration, filing or registration with, any governmental or regulatory authority or other third party, which, in the case of clauses (ii), (iii) and (iv) above, would be reasonably likely to have a Material Adverse Effect or a material, adverse affect on RXi’s ability to consummate the transactions contemplated hereby and thereby.

3.4 Litigation . As of the date hereof, there are no claims, actions, proceedings or investigations pending or, to the knowledge of RXi, threatened against RXi or the transactions contemplated by this Agreement, before any court or governmental or regulatory authority or body which would be reasonably likely to have a Material Adverse Effect or a material, adverse effect on RXi’s ability to consummate the transactions contemplated hereby.

3.5 Patents, Trademarks, Trade Names, Etc . Schedule 3.5 hereto contains an accurate summary of all Intellectual Property Rights owned or used by RXi that are material to the Transferred Assets or the Business, all applications therefor and a list of all Contractual Obligations relating thereto (collectively, “ RXi Intellectual Property ”). The consummation of the transactions contemplated by this Agreement, including the transfer and assignment of the RXi Intellectual Property to RNCS, will not materially impair the right or ability of RNCS to use the RXi Intellectual Property; (ii) no claims have been asserted by any person to the use of any

such RXi Intellectual Property, or challenging or questioning the validity or effectiveness of any such license or agreement, which claims, if adversely decided, would be reasonably likely to have a Material Adverse Effect; and (iii) to the knowledge of RXi, the use of such RXi Intellectual Property by RXi does not, and its use by RNCS following the date hereof will not, infringe on the rights of any person. RXi’s rights in and to such RXi Intellectual Property are sufficient to permit RNCS to carry on the Business following the date hereof in all material respects as previously conducted by RXi.

3.6 Contracts . Each of the Transferred Contracts is in full force and effect, and there are no existing defaults by RXi or, to the knowledge of RXi, any other party thereunder that would be reasonably likely to result in a Material Adverse Effect. Except as set for in Schedule 2.3(a) hereto, there are no royalties, maintenance fees, milestone payments, license fees or other amounts or obligations that are accrued and unpaid as of the Contribution Closing with respect to any of the Transferred Contracts. No Transferred Contract relates to any of the Excluded Assets.

3.7 Entire Business . The Transferred Assets comprise all of the non-cash assets, properties and rights of every type and description, whether real or personal, tangible or intangible, used or necessary for the conduct of the Business, as it has historically been conducted by RXi and as it will be conducted by the Company as of the Closing Date.

3.8 No Brokers’ or Other Fees . No broker, finder or investment banker is entitled to any fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of RXi.

SECTION 4. CERTAIN TAX COVENANTS.

4.1 Tax Liability .

(a) RXi shall be liable for, and shall indemnify and hold RNCS harmless against, all Taxes of, or payable by RXi, for any taxable year or period ending on or before the Contribution Closing Date. RXi shall file or cause RNCS to file all Tax Returns relating to RNCS for any taxable year ending on or before the date hereof. RXi shall be liable for and shall hold RNCS harmless against any transfer, documentary, sales, use, value added, excise, stock transfer, stamp, recording, registration and any similar Taxes and fees, including any penalties and interest thereon, that become payable in connection with the transactions contemplated by this Agreement.

(b) Subject to 4.1(a), all Taxes levied with respect to the Transferred Assets for a taxable period that includes (but does not end on) the Contribution Closing Date (collectively, the “ Apportioned Obligations ”) shall be apportioned between RXi and RNCS as of the Contribution Closing Date based on the number of days of such taxable period ending on and including the Contribution Closing Date (“ Pre-Closing Apportioned Period ”) and the number of days of such taxable period beginning from the day after the Contribution Closing Date through the end of such taxable period (the “ Post-Closing Apportioned Period ”). RXi shall be liable for the proportionate amount of Apportioned Obligations that is attributable to the Pre-Closing Apportioned Period. RNCS shall be liable for the proportionate amount of the Apportioned

Obligations that is attributable to the Post-Closing Apportioned Period. RNCS shall notify RXi upon receipt of any bill for real property Taxes, personal property Taxes or similar ad valorem obligations relating to the Transferred Assets, part or all of which are attributable to the Pre-Closing Apportioned Period, and shall promptly deliver such bill to RXi, who shall pay the same to the appropriate Governmental Authority; provided that if such bill also relates to the Post-Closing Apportioned Period, RXi shall remit, prior to the due date of assessment, to RNCS payment only for the proportionate amount of such bill that is attributable to the Pre-Closing Apportioned Period.

4.2 Refunds or Credits . Any Tax refunds, credits or overpayments attributable to real property Taxes, personal property Taxes and similar ad valorem obligations levied with respect to the Transferred Assets shall be apportioned between RXi and RNCS in accordance with the apportionment provided in Section 4.1(b).

4.3 Mutual Cooperation . As soon as practicable, but in any event within 30 days after RXi’s or RNCS’s request, as the case may be, RNCS shall deliver to RXi or RXi shall deliver to RNCS, such information and other data in the possession of RXi or RNCS, as the case may be, relating to the tax returns and taxes of RXi, including such information and other data customarily required by RXi or RNCS, as the case may be, to cause the payment of all taxes or to permit the preparation of any tax Returns for which it has responsibility or liability or to respond to audits by any taxing authorities with respect to any tax returns or taxes for which it has any responsibility or liability under this Agreement, or otherwise, or to otherwise enable RXi or RNCS, as the case may be, to satisfy its accounting or tax requirements, and shall make available such knowledgeable employees of RXi or RNCS, as the case may be, as RXi or RNCS may reasonably request. For a period of seven years after the Contribution Closing Date, and, if at the expiration thereof any tax audit or judicial proceeding is in progress or the applicable statute of limitations has been extended, for such longer period as such audit or judicial proceeding is in progress or such statutory period is extended, RNCS shall maintain and make available to RXi, at RXi’s reasonable request, copies of any and all information, books and records referred to in this Section 4.3. After such period, RNCS may dispose of such information, books and records, provided that prior to such disposition RNCS shall give RXi a reasonable opportunity to take possession of such information, books and records.

4.4 Contests . Whenever any taxing authority asserts a claim, makes an assessment or otherwise disputes or affects the tax reporting position of RXi for periods ending on or prior to the Contribution Closing Date or the amount of Taxes for which RXi is or may be liable under this Agreement, RNCS shall, promptly upon receipt by RNCS of notice thereof, inform RXi, and RXi shall have the right to control any resulting proceedings and to determine whether and when to settle any such claim, assessment or dispute, to the extent such proceedings or determinations affect the tax reporting position of RXi for periods ending on or prior to the Contribution Closing Date or the amount of taxes for which RXi is liable under this Agreement. Whenever any taxing authority asserts a claim, makes an assessment or otherwise disputes the amount of taxes for which RNCS may be liable under this Agreement, RXi shall, promptly upon receiving notice thereof, inform RNCS. RXi shall have the right to control any resulting proceedings and to determine whether and when to settle any such claim, assessment or dispute, but only to the extent such proceedings affect the amount of Taxes for which RXi is liable under this

Agreement, and otherwise RNCS shall control such proceedings and settlements; provided, however, that RNCS shall not, unless otherwise required by law, take any position on any tax return or in any contest or proceeding that is inconsistent with this Agreement or a position taken by RXi and its affiliates with respect to taxes incurred on or prior to the Contribution Closing Date.

4.5 Resolution of Disagreements . If RXi and RNCS disagree as to the amount for which each is liable under this Section 4, RXi and RNCS shall promptly consult with each other in an effort to resolve such dispute. If any such point of disagreement cannot be resolved within 30 days of the date of consultation, RXi and RNCS shall jointly select an independent auditor to act as an arbitrator to resolve all points of disagreement concerning Tax accounting matters with respect to this Agreement. The prevailing party in any such dispute, as determined by the auditor hearing the dispute, shall be entitled to be awarded reasonable fees and expenses, including reasonable attorneys fees.

SECTION 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

5.1 Indemnification by RXi . Subject to Section 5.4, RXi shall indemnify RNCS from and against Damages incurred by RNCS, and each of its officers and directors and Affiliates, as a result of any breach of any of the following:

(a) any breach of a representation or warranty made by RXi in this Agreement;

(b) any material breach by RXi of any covenant made in this Agreement; and

5.2 Indemnification by RNCS . Subject to Section 5.4, RNCS shall indemnify RXi from and against Damages incurred by RXi, and each of its officers and directors and Affiliates, as a result of any of the following:

(a) any failure of RNCS to discharge or perform when due any of the Assumed Obligations; and

(b) RNCS’s ownership or operation of the Business after the Contribution Closing Date.

5.3 Third Party Claims . Except as otherwise provided herein, if any Third Party notifies an Indemnified Party with respect to any matter (a “ Third Party Claim ”) that may give rise to an Indemnity Claim against an Indemnifying Party under this Section 5, then the Indemnified Party will promptly give written notice to the Indemnifying Party; provided , however , that no delay on the part of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party from any obligation under this Section 5, except to the extent (and only to the extent) that such delay prejudices the Indemnifying Party. The Indemnifying Party will be entitled to control the defense of any Third Party Claim. In addition, the

Indemnifying Party will have the right to participate in the defense of any Third Party Claim for which it does not assume control. The Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim for which the Indemnifying Party has assumed control. If the Indemnifying Party does not elect to control the defense of a Third Party Claim within 20 days of providing notice of the Third Party Claim, the Indemnified Party will control the defense of the Third Party Claim at the expense of the Indemnifying Party. The Indemnified Party will not, however, without the prior written consent of the Indemnifying Party, consent to the entry of any judgment or enter into any compromise or settlement with respect to the Third Party Claim.

5.4 Limitations on Indemnification .

(a) No indemnification shall be payable to an Indemnified Party pursuant to Section 5 unless the amount of all claims for indemnification by such Indemnified Party exceeds $25,000 in the aggregate, and, after all claims for indemnification exceed such amount, the Indemnifying Party shall be required to indemnify such Indemnified Party with respect to all Damages claimed by such Indemnified Party.

(b) The representations and warranties contained in this Agreement shall survive the Contribution Closing, except that all such representations and warranties shall expire on the date twenty-four (24) months after the Contribution Closing Date, except with respect to and to the extent of any claims of which written notice specifying in reasonable detail, the nature and amount of the claims, has been given prior to such expiration.

5.5 Exclusive Remedy . The indemnification provisions of this Section 5 shall be the sole and exclusive remedy of the parties following the Contribution Closing Date with respect to any matter arising out of this Agreement.

SECTION 6. GENERAL

6.1 Amendment . This Agreement may not be amended prior to the Contribution Closing except with the written consent of RXi and RNCS; provided however, that any amendment to this Agreement between the Contribution Closing Date and the Closing Date shall also require the prior written consent of the Investors.

6.2 Further Assurances . Each of the parties agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including, without limitation, the execution of such additional assignments, agreements, documents and instruments, that may be necessary or as another party hereto may at any time and from time to time reasonably request in connection with this Agreement or to effect the transactions contemplated hereby, including, without limitation, the identification, review and assignment, as may be mutually agreed, of any Additional Transferred Contracts.

6.3 Fees and Expenses . Whether or not the transactions contemplated hereby are consummated, the parties each shall bear their own costs and expenses incurred in connection

with this Agreement and the transactions contemplated hereby, except as provided in Section 5 and in the Purchase Agreement. Except as provided in Section 5 and in the Purchase Agreement, no portion of the cost and expenses incurred in connection with this Agreement shall be borne by RNCS.

6.4 Controlling Law; Venue . This Agreement, the rights of the parties hereunder and all actions arising in whole or in part under or in connection herewith, will be governed by and construed and enforced in accordance with the domestic substantive laws of the State of California, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. Each of the parties to this Agreement, by its execution hereof, (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court located in California, or if such action may not be brought in federal court, the state courts of the State of California for the purpose of any action among any of the parties relating to or arising in whole or in part under or in connection with this Agreement; (ii) hereby waives to the extent not prohibited by applicable legal requirements, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens , should be transferred or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other action in any other court other than one of the above-named courts or that this Agreement or the subject matter hereof or thereof may not be enforced in or by such court; and (iii) hereby agrees not to commence any such action other than before one of the above-named courts. Notwithstanding the previous sentence a party may commence any action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts.

6.5 Venue . Each of the parties to this Agreement agrees that for any action among any of the parties relating to or arising in whole or in part under or in connection with this Agreement, such party shall bring such action only in California. Notwithstanding the previous sentence a party may commence any action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts. Each party hereto further waives any claim and will not assert that venue should properly lie in any other location within the selected jurisdiction.

6.6 Service of Process . Each of the parties to this Agreement hereby (i) consents to service of process in any action among any of the parties hereto relating to or arising in whole or in part under or in connection with this Agreement in any manner permitted by California law; (ii) agrees that service of process made in accordance with clause (i) or made by registered or certified mail, return receipt requested, at its address specified pursuant to Section 6.8, will constitute good and valid service of process in any such action; and (iii) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any such action any claim that service of process made in accordance with clause (i) or (ii) does not constitute good and valid service of process.

6.7 Remedies Cumulative; Specific Performance . The rights and remedies of the parties hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement for the benefit of any other party to this Agreement, such other party shall be entitled (in addition to any other remedy that may be available to it) to (a) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (b) an injunction restraining such breach or threatened breach. The parties hereto acknowledge and agree that the Investors are intended to be third party beneficiaries under this Agreement.

6.8 Notices . All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered against receipt, upon receipt of a facsimile transmission, pdf or other electronic transmission, or when deposited in United States mails, first class postage prepaid, addressed as set forth below:


		If to RXi :		Galena Biopharma, Inc.
				310 N. State Street, Suite 208
				Lake Oswego, Oregon 07034
				Facsimile number: (503) 400-6611
				Email: mahn@galenabiopharma.com
				Attention: President and Chief Executive Officer

		With a copy to :		TroyGould PC
				1801 Century Park East, 16 ^th Floor
				Los Angeles, California 90067
				Facsimile: (310)789-1459
				Email: dshort@troygould.com
				Attention: Dale E. Short

		If to RNCS :		c/o Galena Biopharma, Inc.
				310 N. State Street, Suite 208
				Lake Oswego, Oregon 07034
				Facsimile number: (503) 400-6611
				Email: mahn@galenabiopharma.com
				Attention: President and Chief Executive Officer

Any party may alter the address to which communications or copies are to be sent by giving notice to the other parties of such change of address in conformity with the provisions of this Section 6.8 for the giving of notice. A copy of all notices, requests, demands and other communications required or permitted under this Agreement shall also be contemporaneously sent to the Investors at the addresses set forth in the Purchase Agreement.

6.9 Binding Nature of Agreement; No Assignment . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns,

except that no party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other parties hereto and provided further that no rights or obligations may be assigned prior to the Closing Date without the prior written consent of the Investors.

6.10 Entire Agreement . Except as set forth in the Purchase Agreement (including the Ancillary Agreements as defined therein), this Agreement and the Ancillary Agreements contain the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.

6.11 Documents and Exhibits . All documents, schedules, writings and exhibits referred to herein or delivered pursuant hereto are hereby incorporated by reference into, and made a part of, this Agreement.

6.12 Indulgences, Not Waivers . Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver, and no waiver shall be granted hereunder prior to the Closing Date without the prior written consent of the Investors.

6.13 No Presumption . The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if draft jointly by all the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

6.14 Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. This Agreement may be executed as facsimile originals or by other electronic (including, without limitation, in pdf format) transmission and each copy of this Agreement bearing the facsimile or other electronically-transmitted signature of the authorized representatives of each of the parties shall be deemed to be an original.

6.15 Attorneys’ Fees . If any action at law or suit in equity to enforce or construe this Agreement or the rights of any of the parties is brought against any party hereto, the prevailing

party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements in addition to any other relief to which the prevailing party may be entitled.

6.16 Provisions Separable . The provisions of this Agreement are independent and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.


	RXi PHARMACEUTICALS CORPORATION
	By:	/s/ Mark J. Ahn
		Mark J. Ahn, Ph.D.
		President and Chief Executive Officer

	RNCS, Inc.
	By:	/s/ Mark J. Ahn
		Mark J. Ahn, Ph.D.
		President


	ATTEST:
	/s/ Caitlin Kontulis
	Caitlin Kontulis, Secretary

[Signature Page to Contribution Agreement]

Exhibit Index


Exhibit A		Bill of Sale

Exhibit B		Assignment and Assumption Agreement

EXHIBIT A

Form of Bill of Sale

A-1

EXHIBIT B

Form of Assignment and Assumption Agreement

B-1

Exhibit 10.2

EXECUTION VERSION

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (as amended, modified or supplemented from time to time, this “ Agreement ”) is made and entered into as of September 24, 2011 (the “ Effective Date ”) by and among Tang Capital Partners, LP, a Delaware limited partnership (“ Tang ”), RTW Investments, LLC, a Delaware limited liability company (“ RTW ” and, together with Tang, the “ Investors ”), RNCS, Inc., a Delaware corporation (the “ Company ”), and RXi Pharmaceuticals Corporation, a Delaware corporation (“ RXi ”).

RECITALS

WHEREAS, RXi has formed the Company to accomplish the spin-off of RXi’s RNAi technology platform and drug candidates, including all intellectual property and related assets and rights (the “ RNAi Platform ”), as set forth in the Contribution Agreement, and transferred to the Company all right, title and interest in and to the RNAi Platform pursuant to the Contribution Agreement;

WHEREAS, between the Effective Date and the Closing Date, the Investors have agreed to lend the Company up to $1,500,000 pursuant to the Bridge Notes for the purpose of funding the Company’s operations in accord with the Operating Budgets; and

WHEREAS, the Investors desire to purchase from the Company and the Company desires to sell to the Investors, at the Closing (as defined below), shares of Series A Convertible Preferred Stock of the Company (such preferred stock being referred to herein as the “ Preferred Stock ” and such outstanding preferred shares being referred to herein as the “ Preferred Shares ”) upon the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

NOW THEREFORE, in consideration of the premises and mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties to this Agreement hereby agree as follows:

ARTICLE I
DEFINITIONS; CERTAIN RULES OF CONSTRUCTION.

Section 1.01 Definitions . In addition to the other terms defined throughout this Agreement, the following terms shall have the following meanings when used in this Agreement:

“ Action ” means any claim, controversy, action, cause of action, suit, litigation, arbitration, investigation, opposition, interference, audit, assessment, hearing, complaint, demand or other legal proceeding (whether sounding in contract, tort or otherwise, whether civil or criminal and whether brought at law or in equity) that is commenced, brought, conducted, tried or heard by or before, or otherwise involving, any Governmental Authority.

“ Advirna Shares ” means the shares of Company Common Stock to be issued to Advirna pursuant to the Advirna Amendment, in an amount determined in accordance with Annex II attached hereto.

“ Affiliate ” means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person.

“ Ancillary Agreements ” means the Bridge Notes, the Guaranty, the Security Agreement, the Pledge Agreement, and the Subscription Agreement, as well as any other agreements, certificates or instruments to be entered into by the Parties pursuant to this Agreement or the Bridge Notes, the Guaranty, the Security Agreement, the Pledge Agreement or the Subscription Agreement.

“ Audited Financial Statements ” means the audited consolidated balance sheets of RXi as of December 31, 2010, December 31, 2009 and December 31, 2008, and the related audited consolidated statements of income, cash flow and changes in stockholders’ equity for the fiscal years then ended, accompanied by any notes thereto and the reports of RXi’s independent accountants with respect thereto.

“ Bridge Notes ” means those certain Secured Convertible Promissory Notes, in the form attached hereto as Exhibit B , to be issued by the Company and purchased by the Investors as provided in Section 4.06 to fund the Business between Effective Date and the Closing.

“ Business ” means research and development activities relating to the development of the RNAi Platform, as such activities are planned to be conducted by the Company commencing on the Effective Date, and as such activities have historically been conducted by RXi prior to the Effective Date.

“ Business Day ” means any day other than a Saturday or a Sunday or a weekday on which banks in New York City are authorized or required to be closed.

“ Certificate of Designations ” means the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company, substantially in the form attached hereto as Exhibit C .

“ Certificate of Incorporation ” means the Certificate of Incorporation of the Company, as in effect as of the Effective Date, and as it shall be amended and restated prior to Closing as contemplated in Section 4.13(d) in the form to be provided by the Investors.

“ Closing Date ” means the date on which the Closing actually occurs.

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.

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“ Company Intellectual Property Rights ” means all Intellectual Property Rights owned by the Company, used by the Company, or historically used by, owned by or licensed to RXi, to the extent reasonably necessary for the conduct of the Business, including all Intellectual Property Rights in and to Company Technology.

“ Company’s Knowledge ,” “ Knowledge of the Company ,” “ Knowledge ” and similar formulations mean that one or more of Mark J. Ahn, Robert E. Kennedy, Anastasia Khvorova, and Pamela Pavco (a) has actual knowledge of the fact or other matter at issue or (b) should have had actual knowledge of such fact or other matter assuming the diligent exercise of such individual’s duties as a director, officer or employee of the Company or RXi and after reasonable investigation of all employees of the Company or RXi reasonably expected to have actual knowledge of such fact or matter.

“ Company Technology ” means any and all Technology used or proposed to be used in connection with the Business.

“ Compensation ” means, with respect to any Person, all salaries, compensation, remuneration, bonuses or benefits of any kind or character whatsoever (including issuances or grants of Equity Interests), made directly or indirectly by the Company to or for the benefit of such Person or any Family Member of such Person.

“ Contemplated Transactions ” means the transactions contemplated by this Agreement, including: (a) the purchase and sale of the Preferred Shares; (b) effecting the transactions contemplated under the Subscription Agreement; (c) the execution, delivery and performance of the Ancillary Agreements; (d) the execution and filing by the Company of the Certificate of Designations; (e) effecting the transactions contemplated under the Contribution Agreement; and (f) the Spin-Off.

“ Contractual Obligation ” means, with respect to any Person, any contract, agreement, deed, mortgage, lease, sublease, license, sublicense or other legally enforceable commitment, promise, undertaking, obligation, arrangement, instrument or understanding, whether written or oral, to which or by which such Person is a party or otherwise subject or bound or to which or by which any property, business, operation or right of such Person is subject or bound.

“ Contribution Agreement ” means that certain Contribution Agreement by and between RXi and the Company, dated September 24, 2011, pursuant to which RXi has contributed and assigned the Assets to the Company.

“ Debt ” means, with respect to any Person, and without duplication, all Liabilities, including all obligations in respect of principal, accrued interest, penalties, fees and premiums, of such Person (a) for borrowed money (including amounts outstanding under overdraft facilities); (b) evidenced by notes, bonds, debentures or other similar Contractual Obligations; (c) in respect of “earn-out” obligations and other obligations for the deferred purchase price of property, goods or services (other than trade payables or

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accruals incurred in the Ordinary Course of Business); (d) for the capitalized liability under all capital leases of such Person (determined in accordance with GAAP); (e) in respect of letters of credit and bankers’ acceptances; (f) for Contractual Obligations relating to interest rate protection, swap agreements and collar agreements, in each case, to the extent payable if such Contractual Obligation is terminated at the Closing; and (g) in the nature of Guarantees of the obligations described in clauses (a) through (f) above of any other Person.

“ Employee Plan ” means any plan, program, policy, arrangement or Contractual Obligation, whether or not reduced to writing, and whether covering a single individual or a group of individuals, that is (a) a welfare plan within the meaning of Section 3(1) of ERISA; (b) a pension benefit plan within the meaning of Section 3(2) of ERISA; (c) a stock bonus, stock purchase, stock option, restricted stock, stock appreciation right or similar equity-based plan; or (d) any other deferred-compensation, retirement, severance, welfare-benefit, reimbursement, bonus, profit-sharing, incentive or fringe-benefit plan, program or arrangement.

“ Encumbrance ” means any charge, claim, community or other marital property interest, equitable or ownership interest, lien, license, option, pledge, security interest, mortgage, deed of trust, right of way, easement, encroachment, servitude, right of first offer or first refusal, buy/sell agreement and any other restriction or covenant with respect to, or condition governing the use, construction, voting (in the case of any security or Equity Interest), transfer, receipt of income or exercise of any other attribute of ownership (other than, in the case of a security, any restriction on the transfer of such security arising solely under federal and state securities laws). “ Encumber ” has the correlative meaning.

“ Enforceable ” means, with respect to any Contractual Obligation stated to be Enforceable by or against any Person, that such Contractual Obligation is a legal, valid and binding obligation of such Person enforceable by or against such Person in accordance with its terms, except to the extent that enforcement of the rights and remedies created thereby is subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

“ Environmental Laws ” means any Legal Requirement relating to (a) releases or threatened releases of Hazardous Substances; (b) pollution or protection of public health or the environment or worker safety or health; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.

“ Equity Interest ” means, with respect to any Person, (a) any capital stock, partnership or membership interest, unit of participation or other similar interest (however designated) in such Person and (b) any option, warrant, purchase right, conversion right, exchange right or other Contractual Obligation which would entitle any other Person to acquire any such interest in such Person or otherwise entitle any other

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Person to share in the equity, profits, earnings, losses or gains of such Person (including stock appreciation, phantom stock, profit participation or other similar rights).

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

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

“ Family Member ” means, with respect to any individual, (a) such Person’s spouse; (b) each parent, brother, sister or child of such Person or such Person’s spouse; (c) the spouse of any Person described in clause (b) above; (d) each child of any Person described in clauses (a), (b) or (c) above; (e) each trust created for the benefit of one or more of the Persons described in clauses (a) through (d) above; and (f) each custodian or guardian of any property of one or more of the Persons described in clauses (a) through (e) above in his or her capacity as such custodian or guardian.

“ FDCA ” means the Federal Food, Drug and Cosmetic Act, as amended, and the rules and regulations promulgated thereunder.

“ Financial Statements ” means Audited Financial Statements and the Interim Financial Statements.

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

“ Government Order ” means any order, writ, judgment, injunction, decree, stipulation, ruling, decision, verdict, determination or award made, issued or entered by or with any Governmental Authority.

“ Governmental Authority ” means any United States federal, state or local or any foreign government, or political subdivision thereof, or any multinational organization or authority, or any other authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any arbitrator or arbitral body.

“ Guarantee ” means, with respect to any Person, (a) any guarantee of the payment or performance of, or any contingent obligation in respect of, any Debt or other Liability of any other Person; (b) any other arrangement whereby credit is extended to any obligor (other than such Person) on the basis of any promise or undertaking of such Person (i) to pay the Debt or other Liability of such obligor; (ii) to purchase any obligation owed by such obligor; (iii) to purchase or lease assets under circumstances that are designed to enable such obligor to discharge one or more of its obligations; or (iv) to maintain the capital, working capital, solvency or general financial condition of such obligor; and (c) any liability as a general partner of a partnership or as a venturer in a joint venture in respect of Debt or other Liabilities of such partnership or venture.

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“ Guaranty ” means that certain General Continuing Guaranty, in the form attached hereto as Exhibit E .

“ Hazardous Substance ” means any pollutant, petroleum, or any fraction thereof, contaminant or toxic or hazardous material (including toxic mold), substance or waste.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“ Intellectual Property Rights ” means all rights, title, and interests in and to all proprietary rights of every kind and nature however denominated, throughout the world, including:

(a) patents, patent applications, copyrights, confidential information, trade secrets, database rights, and all other proprietary rights in Technology;

(b) trademarks, trade names, service marks, service names, brands, trade dress and logos, and the goodwill and activities associated therewith;

(d) any and all registrations, applications, recordings, licenses, common-law rights, statutory rights, and contractual rights relating to any of the foregoing; and

(e) all Actions and rights to sue at law or in equity for any past or future infringement or other impairment of any of the foregoing, including the right to receive all proceeds and damages therefrom, and all rights to obtain renewals, continuations, divisions, or other extensions of legal protections pertaining thereto.

“ Interim Financial Statements ” means the unaudited consolidated balance sheet of RXi as of June 30, 2011, and the related unaudited consolidated statement of income and cash flow of RXi for the six months then ended, accompanied by any notes thereto.

“ Legal Requirement ” means any United States federal, state or local or any foreign law, statute, standard, ordinance, code, rule, regulation, resolution or promulgation, or any Governmental Order, or any Permit granted under any of the foregoing, or any similar provision having the force or effect of law.

“ Liability ” means, with respect to any Person, any liability or obligation of such Person whether known or unknown, whether asserted or unasserted, whether determined, determinable or otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether directly incurred or consequential, whether due or to become due and whether or not required under GAAP to be accrued on the financial statements of such Person.

“ Material Adverse Effect ” means any event, change, fact, condition, circumstance or occurrence that, when considered either individually or in the aggregate together with all other adverse events, changes, facts, conditions, circumstances or

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occurrences with respect to which such phrase is used in this Agreement, has had or would reasonably be expected to have a material adverse effect on: (A) the business, operations, results of operations, properties, assets, value, prospects or condition (financial or otherwise) of the Company, taken as a whole; (B) the Company’s ability to conduct the Business, in substantial accord with the manner in which RXi has historically conducted the Business; (C) the projected timing, costs or likelihood of success for developing or commercializing the Company’s lead product candidate for an anti-scarring indication, to the extent that such event, change, fact, condition, circumstance or occurrence is caused by or relates to: (i) the results reported to or observed by the Company with regard to the Company’s ongoing studies of the lead candidate designated as “RXI-109”; or (ii) any adverse development pertaining to any product candidate targeting connective tissue growth factor; or (iii) any development regarding Intellectual Property Rights that would reasonably be expected to have a material adverse impact on the development or commercialization of RXI-109; (D) the making of a public market for the Company Common Stock concurrent with the Spin-Off, including the ability of the RXi stockholders to publicly trade that portion of the Outstanding Common Stock that is distributed as part of the Spin-Off; or (E) the ability of the Company or RXi to consummate the Contemplated Transactions.

“ Operating Budgets ” means the budget attached as Annex A to the Bridge Notes, the Second Tranche Budget (as defined in the Bridge Notes) and the Third Tranche Budget (as defined in the Bridge Notes).

“ Ordinary Course of Business ” means an action taken by any Person in the ordinary course of such Person’s business that is consistent with the past customs and practices of such Person (including past practice with respect to quantity, amount, magnitude and frequency, standard employment and payroll policies and past practice with respect to management of working capital and the making of capital expenditures) and that is taken in the ordinary course of the normal day-to-day operations of such Person.

“ Organizational Documents ” means, with respect to any Person (other than an individual), (a) the certificate or articles of incorporation or organization and any joint venture, limited liability company, operating or partnership agreement and other similar documents adopted or filed in connection with the creation, formation or organization of such Person and (b) all by-laws, voting agreements and similar documents, instruments or agreements relating to the organization or governance of such Person, in each case, as amended or supplemented.

“ Permits ” means, with respect to any Person, any license, franchise, permit, consent, approval, right, privilege, certificate or other similar authorization issued by, or otherwise granted by, any Governmental Authority to which or by which such Person is subject or bound or to which or by which any property, business, operation or right of such Person is subject or bound.

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“ Permitted Encumbrance ” means (a) statutory liens for current Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with GAAP, (b) liens in favor of lessors of Assets subject to leases included in the “Transferred Contracts” (as defined in the Contribution Agreement) and (c) mechanics’, materialmen’s, carriers’, workers’, repairers’ and similar statutory liens arising or incurred in the Ordinary Course of Business the existence of which would not constitute an event of default under, or breach of, a Real Property Lease and the Liabilities of the Company in respect of which are not overdue or otherwise in default.

“ Person ” means any individual or any corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, Governmental Authority or other entity of any kind.

“ Pledge Agreement ” means that certain Pledge, Assignment and Security Agreement in the form attached hereto as Exhibit A .

“ Registration Statement ” means a registration statement or registration statements of the Company filed under the Securities Act pursuant to ARTICLE VII hereof.

“ Required Approvals ” means the consents and approvals described on Schedule 1.01—Required Approvals .

“ Representative ” means, with respect to any Person, any director, officer, employee, agent, manager, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“ Retained Shares ” means the shares of Company Common Stock to be retained by RXi after the Spin-Off and not distributed to the holders of RXi Common Stock on the Record Date. The number of Retained Shares shall be determined in accordance with Annex II attached hereto.

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

“ Security Agreement ” means that certain Security Agreement in the form attached hereto as Exhibit D .

“ Spin-Off ” means the distribution by RXi to its stockholders, on a share-for-share (i.e., 1:1) basis as a dividend, of a number of shares of Company Common Stock equal to the Target Float, as determined in accordance with Annex II attached hereto.

“ Tax ” or “ Taxes ” means (a) any and all federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added,

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alternative or add-on minimum, estimated, or other tax of any kind or any charge of any kind in the nature of (or similar to) taxes whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and (b) any liability for the payment of any amounts of the type described in clause (a) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, as a result of any tax sharing or tax allocation agreement, arrangement or understanding, or as a result of being liable for another Person’s taxes as a transferee or successor, by Contractual Obligation or otherwise.

“ Technology ” means all inventions, works, discoveries, innovations, know-how, information (including ideas, research and development, formulas, algorithms, compositions, processes and techniques, data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, business and marketing plans and proposals, graphics, illustrations, artwork, documentation, and manuals), gene sequences, assays, databases, computer software, and all other forms of technology, including improvements, modifications, works in process, derivatives, or changes, whether tangible or intangible, embodied in any form, whether or not protectable or protected by patent, copyright, trade secret law, or otherwise, and all documents and other materials recording any of the foregoing.

Section 1.02 Certain Matters of Construction .

(a) The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

(b) Section and subsection headings are not to be considered part of this Agreement, are included solely for convenience, are not intended to be full or accurate descriptions of the content of the Sections or subsections of this Agreement and shall not affect the construction hereof.

(c) Except as otherwise explicitly specified to the contrary herein, (i) the words “hereof,” “herein,” “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular Section or subsection of this Agreement and reference to a particular Section of this Agreement shall include all subsections thereof; (ii) references to an Article, Section, Exhibit, Annex or Schedule means an Article or Section of, or Exhibit, Annex or Schedule to, this Agreement, unless another agreement is specified; (iii) definitions shall be equally applicable to both the singular and plural forms of the terms defined, and references to the masculine, feminine or neuter gender shall include each other gender; (iv) the word “including” means including without limitation; (v) any reference to “$” or “dollars” means United States dollars; and (vi) references to a particular statute or regulation include all rules and regulations thereunder and any successor statute, rule or regulation, in each case as amended or otherwise modified from time to time.

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(d) Neither the listing nor description of any item, matter or document in any Schedule hereto nor the furnishing or availability for review of any document will be construed to modify, qualify or disclose an exception to any representation or warranty of any party made herein or in connection herewith, except to the extent that such representation or warranty specifically refers to such Schedule and such modification, qualification or exception is clearly described in such Schedule.

(e) The parties intend that each representation, warranty and covenant contained herein will have independent significance. If any party has breached or violated, or if there is an inaccuracy in, any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached or violated, or in respect of which there is not an inaccuracy, will not detract from or mitigate the fact that the party has breached or violated, or there is an inaccuracy in, the first representation, warranty or covenant.

(f) Unless the context clearly requires otherwise, when used herein “or” shall not be exclusive ( i.e. , “or” shall mean “and/or”).

(g) Time is of the essence with regard to all dates and time periods set forth or referred to in this Agreement.

ARTICLE II
PURCHASE AND SALE OF PREFERRED SHARES; CLOSING.

Section 2.01 Purchase and Sale of Preferred Shares . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Company shall issue and sell to the Investors, and the Investors shall purchase from the Company, Preferred Shares in the respective amounts set forth opposite such Investor’s name on Annex I hereto.

Section 2.02 Purchase Price . The aggregate purchase price (the “ Purchase Price ”) of the Preferred Shares will be $9,500,000, payable as provided in Section 2.04 .

Section 2.03 The Closing . The purchase and sale of the Preferred Shares (the “ Closing ”) shall take place at 10:00 a.m. (Pacific Time) at the offices of Ropes & Gray LLP, 3 Embarcadero Center, San Francisco, California, two Business Days after the satisfaction or waiver of the closing conditions set forth in ARTICLES V and VI , or at such other time and place as may be agreed to by the parties hereto.

Section 2.04 Closing Deliverables and Payments .

(a) Pre-Closing Deliverables and Payments . Subject to the receipt by the Investors of certificates signed by the Secretaries of the Company and RXi certifying as to the satisfaction of the closing conditions set forth in ARTICLES V and VI , the Investors shall, one Business Day prior to Closing, deliver or cause to be delivered to the Company an aggregate amount in cash equal to the Purchase Price, less the sum of the principal amount of and the accrued

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interest under the Bridge Notes as of the Closing Date (the “ Cash Portion of the Purchase Price ”), which shall be paid by the Investors as set forth opposite each such Investor’s name on Annex I hereto by wire transfer of immediately available funds.

(b) Investors’ Closing Deliverables and Payments . Upon the terms and subject to the conditions set forth in this Agreement, in addition to the Cash Portion of the Purchase Price, at the Closing, the Investors shall also tender to the Company for cancellation the Bridge Notes, which, upon cancellation, shall constitute the payment of a portion of the Purchase Price.

(c) Company’s Closing Deliverables . Upon the terms and subject to the conditions set forth in this Agreement, the Company shall issue and deliver or cause to be delivered to the Investors at the Closing certificates representing the Preferred Shares, in the respective amounts set forth opposite the Investors’ names on Annex I hereto.

ARTICLE III
REPRESENTATIONS AND WARRANTIES.

Section 3.01 Representations and Warranties of the Company and RXi . In order to induce the Investors to enter into and perform this Agreement and to consummate the Contemplated Transactions, the Company and RXi hereby represent and warrant (for RXi, as it pertains to both RXi and the Company, and for the Company, as it pertains to the Company alone) to the Investors as follows:

(a) Organization, Good Standing and Power . Each of the Company and RXi is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and each of the Company and RXi has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted (and, in the case of RXi, had the requisite corporate power to own, lease and operate the RNAi Platform). The Company does not have any direct or indirect subsidiaries or own securities of any kind in any other entity. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to do so would not have a Material Adverse Effect.

(b) Authorization; Enforcement . The Company and RXi have the requisite corporate power and authority to enter into and perform this Agreement and the Ancillary Agreements (collectively, the “ Transaction Documents ”) and to perform their respective obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and the performance of the Contemplated Transactions by the Company and RXi have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or RXi or their respective boards of directors or stockholders is required to consummate the Contemplated Transactions. When executed and delivered by the Company and RXi, each of the Transaction Documents shall constitute a valid and binding obligation of the Company, Enforceable against the Company and RXi, as applicable.

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(c) Capitalization . As of the Effective Date, the Company has authorized (i) 1,000 shares of common stock, par value $0.0001 per share (the “ Company Common Stock ”), of which 100 shares are issued and outstanding (such number of shares being referred to herein as the “ Outstanding Common Stock ”), and (ii) no shares of Preferred Stock. The Outstanding Common Stock is held solely of record and beneficially by RXi. The Outstanding Common Stock has been duly and validly authorized and, except as set forth in this Agreement or as set forth on Schedule 3.01(c) hereto, no shares of Company Common Stock or any other security of the Company are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. Furthermore, except as set forth in this Agreement or the other Transaction Documents or on Schedule 3.01(c) hereto, there are no equity plans, contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except as set forth herein, the Company is not a party to or bound by any agreement or understanding granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities. Except as set forth in this Agreement or the other Transaction Documents or on Schedule 3.01(c) , the Company is not a party to, and it has no Knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of the Company.

(d) Issuance of Shares . The Preferred Shares to be issued at the Closing have been duly authorized by all necessary corporate action and, when paid for and issued in accordance with the terms hereof, such Preferred Shares shall be validly issued and outstanding, fully paid and non-assessable, free and clear of all liens, encumbrances and rights of refusal of any kind. The Conversion Shares (as defined below) have been duly authorized by all necessary corporate action and, when issued upon conversion of the Preferred Shares, such Conversion Shares shall be validly issued and outstanding, fully paid and non-assessable, free and clear of all Encumbrances. Each share of Preferred Stock shall have the rights, preferences, privileges and restrictions set forth in the Certificate of Designations. The certificates to be used to evidence the Preferred Stock will comply in all material respects with all applicable legal requirements, the requirements of the Certificate of Incorporation and the Certificate of Designations (collectively, the “ Certificate ”) and the bylaws of the Company (the “ Bylaws ”).

(e) No Conflicts . The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents and the consummation by the Company of the Contemplated Transactions, and the issuance of the Securities (as defined below) as contemplated hereby and thereby, do not and will not (i) violate or conflict with any provision of the Certificate or the Bylaws, each as amended to date; (ii) subject to obtaining the Required Approvals, conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any Contract; (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected; or (iv) create or impose any Encumbrance of any nature

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on any property or asset of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its properties or assets are bound. The Company is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents.

(f) Authorization of Certificate of Designations . The Certificate of Designations has been duly and validly authorized by the Company and, when filed by the Company with the Secretary of State of the State of Delaware, will be legally valid and effective and Enforceable against the Company.

(g) No Material Adverse Changes . Since January 1, 2010, RXi has not experienced or suffered any Material Adverse Effect with respect to the RNAi Platform. Since formation, the Company has not experienced or suffered any Material Adverse Effect. Except for the execution and delivery of this Agreement and the other Transaction Documents, no event or circumstance has occurred or exists with respect to the RNAi Platform, which, under applicable law, rule or regulation, requires public disclosure or announcement by RXi but which has not been so publicly announced or disclosed.

(h) Actions Pending . There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the Knowledge of the Company, threatened against the Company or RXi that questions the validity of this Agreement or any of the other Contemplated Transactions or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth on Schedule 3.01(h) hereto, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the Knowledge of the Company, threatened against or involving RXi, the Company or any of its properties or assets, which individually or in the aggregate, would reasonably be expected, if adversely determined, to have a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against RXi or the Company or any officers or directors of RXi or the Company in their capacities as such, which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(i) Compliance with Law . The Company has been and is presently conducting the Business and, RXi has at all times conducted the Business, in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, including, without limitation, the FDCA and Environmental Laws, except such that, individually or in the aggregate, the noncompliance therewith could not reasonably be expected to have a Material Adverse Effect. The Company has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of the Business, as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

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(j) Taxes . As of the Effective Date, the Company has no obligations, whether accrued, contingent or otherwise, for unpaid Taxes, other than corporate franchise taxes arising since the Company’s date of incorporation.

(k) Certain Fees . Except as set forth on Schedule 3.01(k ), neither the Company nor RXi has employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Contemplated Transactions.

(l) Contracts . Set forth on Schedule 3.01(l) is a complete and accurate list of all Contractual Obligations to which the Company is a party, or by which the Company is bound, whether written or oral (the “ Contracts ”). The Company has delivered to the Investors accurate and complete copies of all written Contacts, in each case, as amended or otherwise modified and in effect. The Company has delivered to the Investors a written summary setting forth all of the material terms and conditions of all oral Contracts. Each Contract is Enforceable against the Company and, to the Knowledge of the Company, each other party to such Contract, is in full force and effect, and subject to obtaining the Required Approvals, will continue to be so Enforceable and in full force and effect on substantially identical terms following the consummation of the Contemplated Transactions. Neither the Company nor, to the Company’s Knowledge, any other party to any Contract is in material breach or violation of, or default under, or has repudiated any material provision of, any Contract.

(m) Employees . Set forth on Schedule 3.01(m) is a complete and accurate list of all Persons employed by the Company as of the Effective Date (each, a “ Company Employee ”), as well as the job title and current and historical compensation for each Company Employee over the past twelve (12) months, which includes, but is not limited to, salary, bonus, vacation, incentive compensation, equity compensation, severance compensation and any other material term to such Company Employee’s employment. No Company Employee has notified the Company or RXi of his or her intention to resign or retire and the Company knows of no such intention to resign or retire. Except as set forth on Schedule 3.01(m) , the Company will not be obligated to maintain or contribute to any Employee Plan after the consummation of the Contemplated Transactions.

(n) Absence of Certain Developments . Except as contemplated by this Agreement and the Advirna Amendment or as set forth on Schedule 3.01(n) , since its formation, the Company has not:

(i) issued any stock, bonds or other corporate securities or any right, options or warrants with respect thereto;

(ii) incurred any Liability, other than future Liabilities arising under the Contracts after the Effective Date;

(iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

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(iv) sold, assigned or transferred any other tangible assets, or canceled any debts or claims;

(v) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights;

(vi) suffered any material losses or waived any rights of material value, or suffered the loss of any material amount of prospective business;

(vii) made any changes in employee compensation;

(viii) made capital expenditures or commitments therefor;

(ix) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(x) experienced any material problems with labor or management in connection with the terms and conditions of their employment; or

(xi) entered into an agreement, written or otherwise, to take any of the foregoing actions.

(o) Governmental Approvals . Except as contemplated by this Agreement or the other Transaction Documents or as set forth on Schedule 3.01(o) hereto, no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the performance by the Company or RXi of their respective obligations under the Transaction Documents.

(p) Insurance . The Company is, and will be through the Closing Date, covered by the insurance policies of RXi, which policies are in such amounts as management of the Company and RXi believe to be prudent and customary in the businesses in which the Company is engaged. The Company has not been refused any insurance coverage sought or applied for and the Company does not have any reason to believe that it will not be able to obtain insurance coverage from similar insurers as may be necessary to conduct the Business at a cost that would not have a Material Adverse Effect.

(q) Related Party Transactions . Except for the matters disclosed on Schedule 3.01(q) , neither the Company or RXi, nor any officer or director of the Company or RXi (or, to the Company’s or RXi’s Knowledge, any Family Member of any such Person) has any material interest in any material Asset owned by the Company or used in connection with the Business.

(r) Financial Matters . The Financial Statements (including any notes thereto) (i) were prepared in accordance with the books and records of RXi; (ii) have been prepared in accordance with GAAP, consistently applied (subject, in the case of the Interim Financial Statements, to normal year-end audit adjustments, the effect of which will not, individually or in the aggregate, be materially adverse, and the absence of footnote disclosure that if presented,

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would not differ materially from those included in the Audited Financial Statements); and (iii) fairly present the consolidated financial position of RXi as of the respective dates thereof and the consolidated results of the operations of RXi and changes in financial position for the respective periods covered thereby.

(s) Assets . The Company owns, or, in the case of property held under a lease, license or other Contractual Obligation, has an Enforceable interest in, or adequate rights to use, the RNAi Platform and all of its other properties, rights and assets, whether real or personal and whether tangible or intangible (collectively, the “ Assets ”). The schedules of the Contribution Agreement set forth a complete and accurate list of all assets, properties and rights of every type and description, whether real or personal, tangible or intangible, included in the Assets. None of the Assets is subject to any Encumbrance, other than a Permitted Encumbrance. The Assets comprise all of the non-cash assets, properties and rights of every type and description, whether real or personal, tangible or intangible, used or necessary for the conduct of the Business, as it has historically been conducted by RXi and as it will be conducted by the Company as of the Closing. All material tangible personal property included in the Assets (A) is, in all material respects, adequate and suitable for its present use(s); (B) is in satisfactory working order, operating condition and state of repair (ordinary wear and tear excepted); and (C) has been maintained in all material respects in accordance with normal industry practice. The unaudited opening balance sheet for the Company, as of the Effective Date, is attached hereto as Exhibit I , and sets forth the assets and liabilities of the Company as of such date, after giving effect to the transactions contemplated under the Contribution Agreement.

(t) Intellectual Property .

(i) Company IP . The Company owns or has adequate rights to use all Company Technology and all Company Intellectual Property Rights, to the Company’s Knowledge, without any conflict with, or infringement of, the Intellectual Property Rights of others. Except, with respect to the Technology and Intellectual Property Rights licensed to the Company under the Inbound IP Contracts (as defined below), to the extent provided in such Inbound IP Contracts, none of the Company Technology or Company Intellectual Property Rights is in the possession, custody, or control of any Person other than the Company. To the Company’s and RXi’s Knowledge, and except as set forth on Schedule 3.01(t), the Company Technology and Company Intellectual Property Rights included in the Assets comprise all of the material Intellectual Property Rights necessary to conduct the Business.

(ii) Infringement . To the Knowledge of the Company and RXi, neither the Company nor RXi, through the operation of the Business or otherwise, (A) has interfered with, infringed upon, diluted, misappropriated, or violated any Intellectual Property Rights of any Person; (B) has received any charge, complaint, claim, demand, or notice alleging interference, infringement, dilution, misappropriation, or violation of the Intellectual Property Rights of any Person (including any invitation to license or request or demand to refrain from using any Intellectual Property Rights of any Person in connection with the conduct of the Business or the use of the Company Technology); or (C) has agreed to or has a Contractual Obligation to indemnify any Person for or against any interference, infringement, dilution, misappropriation, or violation with respect to any Intellectual Property Rights. To the Company’s Knowledge, no Person has interfered

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with, infringed upon, diluted, misappropriated, or violated any Company Intellectual Property Rights.

(iii) Scheduled Intellectual Property Rights . Schedule 3.01(t)(iii) identifies all patents, patent applications, registered trademarks and copyrights, applications for trademark and copyright registrations, domain names, registered design rights, and other forms of registered Intellectual Property Rights and applications therefor, owned by or exclusively licensed to the Company (collectively, the “ Company Registrations ”). Schedule 3.01(t)(iii) also identifies each trade name, each unregistered trademark, service mark, or trade dress, and each unregistered copyright owned or exclusively licensed by the Company that, in each case, is material to the Business. For purposes of this Agreement, all items listed on Schedule 3.01(t)(iii) shall be called “ Scheduled Intellectual Property Rights ”. Schedule 3.01(t)(iii) specifically identifies those items of Scheduled Intellectual Property Rights that are exclusively or co-exclusively licensed to the Company, including the identification of the Contractual Obligation pursuant to which each such Intellectual Property Right is licensed. For each of the Company Registrations, Schedule 3.01(t)(iii) includes the following information: (A) for each patent and patent application, the title, patent number or application serial number, jurisdiction, filing date, date issued (if applicable), inventors, owner of record, and present status thereof; (B) for each registered trademark and trademark application, the mark, application serial number or registration number, jurisdiction, filing date, registration date (if applicable), class of goods or services covered, description of goods or services, owner of record, and present status thereof; (C) for each domain name, the registration date, any renewal date, owner of record, and name of the registrar; (D) for each copyright registration and copyright application, the title of the work, number and date of such registration or application, owner of record, and jurisdiction; and (E) any actions that must be taken within ninety (90) days after the Closing Date for the purposes of obtaining, maintaining, perfecting, preserving, or renewing any Company Registrations, including the payment of any registration, maintenance, or renewal fees or the filing of any responses to office actions, documents, applications, or certificates. Each of the Company Registrations is valid, subsisting, and Enforceable.

(iv) IP Contracts . Schedule 3.01(t)(iv) identifies under separate headings each Contractual Obligation, whether written or oral, (A) under which the Company uses or licenses a material item of Company Technology or any material Company Intellectual Property Rights that any Person besides the Company owns, in each case, other than off-the-shelf software with a cost of $1,000 or less (the “ Inbound IP Contracts ”); (B) under which the Company has granted any Person any right or interest in any material Company Intellectual Property Rights including any right to use any material item of Company Technology (the “ Outbound IP Contracts ”); and (C) that otherwise affects the Company’s use of or rights in the material Company Technology or any material Company Intellectual Property Rights (including settlement agreements and covenants not to sue) (such Contractual Obligations, together with the Inbound IP Contracts and Outbound IP Contracts, the “ IP Contracts ”). Except as provided in the Inbound IP Contracts, or as otherwise disclosed on Schedule 3.01(t)(iv) , the Company does not owe

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any royalties or other payments to any Person for the use of any Intellectual Property Rights or Technology. The Company has delivered to the Investors accurate and complete copies of each of the IP Contracts (or, where an IP Contract is an oral agreement, an accurate and complete written description of such IP Contract), in each case, as amended or otherwise modified and in effect.

(v) Title to Company Technology and Company Intellectual Property Rights.

(A) The Company owns or has adequate rights to use each material item of Company Technology and Company Intellectual Property Rights that is not licensed to the Company pursuant to an Inbound IP Contract identified on Schedule 3.01(t)(iv) , free and clear of any Encumbrance other than a Permitted Encumbrance, and licenses granted in the Outbound IP Contracts identified on Schedule 3.01(t)(iv) .

(B) With respect to (i) each material item of Company Technology and Company Intellectual Property Rights that is not licensed to the Company pursuant to an Inbound IP Contract identified on Schedule 3.01(t)(v)(B) and (ii) to the Company’s Knowledge, all material Company Technology and Company Intellectual Property Rights licensed to the Company on an exclusive or co-exclusive basis, such item or right is not subject to any outstanding Government Order, and no Action (including any opposition, interference, or re-examination) is pending or, to the Company’s Knowledge, threatened, which challenges the legality, validity, enforceability, use, or ownership of such right or item.

(vi) Confidentiality and Invention Assignments . The Company and RXi have maintained commercially reasonable practices to protect the confidentiality of the Company’s confidential information and trade secrets and have required all employees and other Persons with access to the Company’s confidential information to execute Enforceable Contractual Obligations requiring them to maintain the confidentiality of such information and use such information only for the benefit of the Company or RXi, as applicable. All current and former employees and contractors of the Company and RXi who contributed to the Company Technology have executed Enforceable Contractual Obligations that assign to the Company or RXi, as applicable, all of such Person’s respective rights, including Intellectual Property Rights, relating to such product or service. RXi has assigned all such rights to the Company pursuant to the Contribution Agreement.

(u) Suppliers . None of the Company’s suppliers has cancelled, terminated or otherwise materially altered (including any material increase in the prices charged or paid, as the case may be) or notified the Company of any intention to do any of the foregoing or otherwise threatened in writing to cancel, terminate or materially alter (including any material increase in the prices charged or paid as the case may be) its relationship with the Company. As of the date hereof, to the Company’s Knowledge, there is no reason to believe that there will be any material change in the relationships of the Company with such suppliers as a result of the Contemplated Transactions.

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(v) Debt; Guarantees . As of the Effective Date, the Company has no Liabilities in respect of Debt and the Company does not have any Liability in respect of a Guarantee of any Debt or other Liability of any other Person.

(w) Disclosure .

(i) Neither this Agreement, the Transaction Documents or the Schedules hereto or thereto, nor any other documents, certificates or instruments or portions thereof furnished to the Investors by or on behalf of the Company or RXi in connection with the Contemplated Transactions (but only to the extent that such documents, certificates or instruments were prepared by or on behalf of the Company or RXi and excluding any third-party information), contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

(ii) To the Knowledge of RXi and the Company, no documents, certificates or instruments or portions thereof that were: (A) furnished to the Investors by or on behalf of the Company or RXi in connection with the Contemplated Transactions, and (B) prepared by any third party (other than on behalf of the Company or RXi, which materials are referenced above in Section 3.01(w)(i)), contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

Section 3.02 Representations and Warranties of the Investors . Each of the Investors hereby represents and warrants to the Company and RXi, severally but not jointly, and with respect solely to itself and not with respect to any other Investor, as follows as of the Effective Date and as of the Closing Date:

(a) Organization and Standing of the Investors . Such Investor is duly organized, validly existing and in good standing under the laws of the State of Delaware.

(b) Authorization and Power . Each Investor has the requisite power and authority to enter into and perform the Transaction Documents and to purchase the Preferred Shares being sold to it hereunder. The execution and delivery of the Transaction Documents and the performance of the Contemplated Transactions by each Investor has been duly authorized. When executed and delivered by the Investors, the Transaction Documents shall constitute valid and binding obligations of each Investor Enforceable against such Investor.

(c) Acquisition for Investment . Each Investor is purchasing the Preferred Shares solely for its own account and not with a view to or for sale in connection with distribution. Each Investor does not have a present intention to sell any of the Preferred Shares or the underlying Company Common Stock (the “ Conversion Shares ” and, with the Preferred Shares, the “ Securities ”), nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Securities to or through any person or entity; provided , however , that by making the representations herein, such Investor does not agree to hold the

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Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition. Each Investor acknowledges that it (i) has such Knowledge and experience in financial and business matters such that Investor is capable of evaluating the merits and risks of Investor’s investment in the Company; (ii) is able to bear the financial risks associated with an investment in the Securities; and (iii) has been given full access to such records of the Company and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation.

(d) General . Each Investor understands that the Securities are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the applicability of such exemptions and the suitability of such Investor to acquire the Securities. Each Investor understands that no United States federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Preferred Shares.

(e) No General Solicitation . Each Investor acknowledges that the Securities were not offered to such Investor by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Investor was invited by any of the foregoing means of communications. Each Investor, in making the decision to purchase the Preferred Shares, has relied upon independent investigation made by it and has not relied on any information or representations made by third parties.

(f) Accredited Investor . Each Investor is an “accredited investor” (as defined in Rule 501 of Regulation D), and such Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities. Such Investor is not required to be registered as a broker-dealer under Section 15 of the Exchange Act or other Legal Requirement and such Investor is not a broker-dealer. Each Investor acknowledges that an investment in the Securities is speculative and involves a high degree of risk.

(g) Certain Fees . The Investors have not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Contemplated Transactions.

(h) Independent Investment . No Investor has agreed to act with any other Investor for the purpose of acquiring, holding, voting or disposing of the Preferred Shares purchased hereunder for purposes of Section 13(d) under the Exchange Act, and each Investor is acting independently with respect to its investment in the Preferred Shares.

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ARTICLE IV
COVENANTS OF THE PARTIES

Section 4.01 Commercially Reasonable Efforts; Notices and Consents . Subject to the terms and conditions of this Agreement, from the Effective Date to the Closing, or the earlier termination of this Agreement pursuant to Article VIII , each of the parties hereto shall use its commercially reasonable efforts to take or cause to be taken all actions, to file or cause to be filed all documents, to give or cause to be given all notices to Governmental Authorities or other Persons, to obtain or cause to be obtained all authorizations, consents, waivers, approvals, permits or orders from Governmental Authorities or other Persons, and to do or cause to be done all other things necessary, proper or advisable, in order to consummate and make effective the Contemplated Transactions as soon as practicable following the Effective Date (including satisfaction, but not waiver, of the closing conditions set forth in Articles V and VI ) and to allow the Business to be operated following the Closing in the same manner as it is operated prior to the Closing and in substantially the same manner as it has been operated prior to the Effective Date.

Section 4.02 Operation of the Business .

(a) Conduct of the Business Generally . From the Effective Date until the Closing, or the earlier termination of this Agreement in accordance with Article VIII , without the prior written consent of the Investors, the Company shall, and RXi shall cause the Company to:

(i) conduct the Business only in the Ordinary Course of Business and in all material respects in accordance with all applicable Legal Requirements;

(ii) use commercially reasonable efforts to maintain the value of the Business as a going concern;

(iii) use commercially reasonable efforts to preserve intact its business organization and relationships with third parties (including licensors, suppliers, and employees); and

(iv) consult with the Investors prior to taking any action material to the Business or entering into any transaction that may be of strategic importance or material to the Company.

(b) Specific Prohibitions . Without limiting the generality or effect of Section 4.02(a) , from the Effective Date until the Closing, or the earlier termination of this Agreement in accordance with Article VIII , without the prior written consent of the Investors, and except as specifically contemplated herein or in the other Transaction Documents or as set forth in Schedule 4.02(b) , the Company shall not take any of the following actions:

(i) amend its Organizational Documents, effect any split, combination, reclassification or similar action with respect to its capital stock or other Equity Interests or adopt or carry out any plan of complete or partial liquidation or dissolution;

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(ii) issue, sell, grant or otherwise dispose of any of its Equity Interests or other securities, or amend any term of any of its outstanding Equity Interests or other securities;

(iii) (A) make any declaration or payment of, or set aside funds for, any dividend or other distribution with respect to any of its capital stock or other Equity Interests (other than to effect the Spin-Off) or (B) repurchase, redeem, or otherwise acquire or cancel any of its capital stock or other Equity Interests;

(iv) become liable in respect of any Guarantee or incur, assume or otherwise become liable in respect of any Debt;

(v) (A) merge or consolidate with any Person; (B) acquire any material assets, except for acquisitions of assets, equipment and raw materials in the Ordinary Course of Business; or (C) make any loan, advance or capital contribution to, acquire any Equity Interests in, or otherwise make any investment in, any Person;

(vi) permit any of its material Assets to become subject to an Encumbrance (other than a Permitted Encumbrance) or sell, lease, license or otherwise dispose of any of its material Assets;

(vii) increase any benefits under any Employee Plan or increase the Compensation payable or paid, whether conditionally or otherwise, to any employee, officer, director or consultant of the Company;

(viii) make any material change in its methods of accounting or accounting practices (including with respect to reserves), payment or credit practices, fail to pay any creditor any material amount owed to such creditor when due or grant any extensions of credit other than in the Ordinary Course of Business;

(ix) make, change or revoke any material Tax election; elect or change any method of accounting for Tax purposes; or enter into any Contractual Obligation in respect of Taxes with any Governmental Authority;

(x) enter into or adopt any material Contractual Obligation or terminate, modify, renew or amend in any material respect (including by accelerating material rights or benefits under) any Contracts;

(xi) license or otherwise dispose of the rights to use any material patent, trademark or other Intellectual Property Rights or disclose material trade secrets to a third party;

(xii) use the proceeds under the Bridge Notes in a manner not in accordance with the Operating Budgets, or exceed any line-item expense under any Operating Budget by more than five percent (5%);

(xiii) appoint or elect any officer or director of the Company;

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(xiv) enter into any Contractual Obligation to do any of the things referred to elsewhere in this Section 4.02(b) ; or

(xv) take or omit to take any other action that would cause any of the representations and warranties in Article III to be untrue at, or as of any time prior to, the Closing Date.

Section 4.03 Access to Premises and Information . From the Effective Date until the Closing, or the earlier termination of this Agreement in accordance with ARTICLE VIII , the Company shall permit the Investors and their Representatives to have full access (at reasonable times and upon reasonable notice) to all Representatives of the Company and to all premises, properties (including for the purposes of environmental inspection), books, records (including Tax records), contracts, financial and operating data and other information and documents of, or pertaining to, the Company, the Assets or the Business, and to make copies of such books, records, contracts, data, information and documents as the Investors or their Representatives may reasonably request.

Section 4.04 Notice of Developments . From the Effective Date until the Closing, or the earlier termination of this Agreement in accordance with ARTICLE VIII , the Company and RXi shall promptly (and in any event prior to the Closing) notify the Investors in writing (with any such writing to include a written update to the Schedules, to the extent applicable) upon the Company or RXi becoming aware: (i) that any representation or warranty made by the Company or RXi in this Agreement was when made, or has subsequently become, untrue or inaccurate in any material respect; (ii) of the occurrence or non-occurrence of any event the occurrence or non-occurrence of which has caused or may reasonably be expected to cause any condition to the obligations of any party hereto to effect the Contemplated Transactions not to be satisfied; (iii) of the failure of the Company or RXi to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by the Company or RXi pursuant to this Agreement or any Ancillary Agreement; (iv) of any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Contemplated Transactions; (v) of any notice or other communication from any Governmental Authority in connection with the Contemplated Transactions; (vi) of the commencement or initiation or threat of commencement or initiation of any Action regarding the Contemplated Transactions or otherwise involving the Company, the Assets or the Business; (vii) of any material development in any pending Action regarding the Contemplated Transactions or otherwise involving the Company or the Business; or (viii) of any other material development affecting the Assets, Liabilities, Business, financial condition, operations or prospects of the Company. The delivery of any notice pursuant to this Section 4.04 shall not cure any breach of any representation or warranty requiring disclosure of such matter or any breach of any covenant, condition or agreement contained in this Agreement or any Ancillary Agreement or otherwise limit or affect the rights of, or the remedies available to, the Investors. For the avoidance of doubt, the closing conditions set forth in Sections 5.01 and 5.02 and the indemnification provisions of ARTICLE IX shall be read without giving effect to any update to the Schedules or other written notices delivered pursuant to this Section 4.04 .

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Section 4.05 Exclusivity . From the Effective Date until the Closing, or the earlier termination of this Agreement in accordance with ARTICLE VIII , the Company and RXi shall not directly or indirectly: (a) solicit, initiate or encourage the submission of any proposal or offer from any Person relating to, or enter into or consummate any transaction relating to, the acquisition of any Equity Interests in the Company or any merger, recapitalization, share exchange, sale of Assets (other than sales of inventory in the Ordinary Course of Business) or any similar transaction or any other alternative to the Contemplated Transactions (whether such alternative would be accomplished directly with the Company or indirectly through a transaction with RXi), or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner, any effort or attempt by any Person to do or seek any of the foregoing. The Company and RXi shall notify the Investors immediately if any Person makes any proposal, offer, inquiry or contact with respect to any of the foregoing (whether solicited or unsolicited).

Section 4.06 Bridge Notes . Concurrent with the execution and delivery of this Agreement: (i) the Investors will purchase from the Company the Bridge Notes, with an aggregate principal balance of up to $1,500,000, in the respective amounts set forth on Annex I ; (ii) the Company shall execute and deliver to the Investors the Security Agreement, in the form attached hereto as Exhibit D , and (iii) RXi shall execute and deliver the Guaranty and the Pledge Agreement, in the forms attached hereto as Exhibits E and I , respectively. On or before the Closing (as defined in the Subscription Agreement), RXi shall deliver to the Investors an opinion from TroyGould PC, counsel to the Company and RXi (or other counsel reasonably acceptable to the Investors), its opinion with respect to the Bridge Note and the Subscription Agreement to the effect set forth in Exhibit H-1 attached hereto.

Section 4.07 Expenses .

(a) Except as set forth herein, RXi shall bear all out-of-pocket fees and expenses incurred by RXi or the Company in connection with the negotiation and execution of the Transaction Documents and the consummation of the Contemplated Transactions, including, without limitation, all fees and expenses relating to the Exchange Act Registration and the Securities Act Registration; provided , however , that the Company, alone, will bear all stock exchange listing and quotation fees arising under the Spin-Off (if any).

(b) Except as set forth herein, the Investors shall bear all out-of-pocket fees and expenses incurred by the Investors in connection with the negotiation and execution of the Transaction Documents and the consummation of the Contemplated Transactions.

(c) Notwithstanding the foregoing, the Company will, within 30 days after the Closing, reimburse: (i) RXi for up to $250,000 of its out-of-pocket expenses incurred through the Closing, plus up to $50,000 of fees and expenses incurred by RXi in obtaining valuation or fairness opinions or other investment banking advice, if any, in connection with the negotiation, preparation or implementation of this Agreement and the other Transaction Documents and the consummation of the Contemplated Transactions; and (ii) the Investors in the aggregate for up to $100,000 of their out-of-pocket expenses incurred through the Closing (collectively, the “ Transaction Costs ”); provided , further , that in the event that this Agreement

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is terminated pursuant to either Section 8.01(d) or 8.01(e) , then, in addition to other rights and remedies of the terminating party(ies), the non-terminating party(ies) (i.e., the non-breaching party(ies)) shall pay or reimburse the terminating party(ies) for their respective Transaction Costs.

Section 4.08 Confidentiality .

(a) RXi acknowledges that the success of the Company after the Closing depends upon the continued preservation of the confidentiality of certain information possessed by RXi, that the preservation of the confidentiality of such information by RXi is an essential premise of the bargain between RXi and the Investors, and that the Investors would be unwilling to enter into this Agreement in the absence of this Section 4.08(a) . Accordingly, RXi hereby agrees with the Investors that RXi, its Affiliates and its and its Affiliate’s Representatives shall not, and that RXi shall cause its Affiliates and such Representatives not to, at any time on or after the Closing Date, directly or indirectly, without the prior written consent of the Investors, disclose or use, any information involving or relating to the Business or the Company, except as required by applicable Legal Requirements; provided , that the information subject to this Section 4.08(a) will not include any information generally available to, or known by, the public (other than as a result of disclosure in violation hereof); provided , further , that the provisions of this Section 4.08(a) will not prohibit any retention of copies of records or disclosure (A) required by any applicable Legal Requirement so long as reasonable prior notice is given to the Investors and the Company of such disclosure and a reasonable opportunity is afforded the Investors and the Company to contest the same or (B) made in connection with the enforcement of any right or remedy relating to the Transaction Documents. RXi agrees that it shall be responsible for any breach or violation of the provisions of this Section 4.08(a) by any of its Affiliates or its or its Affiliates’ Representatives. Notwithstanding the foregoing, each of the parties hereto and their respective Representatives may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Contemplated Transactions and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, all as contemplated by Treasury Regulation Section 1.6011-4(b)(3)(iii).

(b) Certain Confidentiality Agreements . At or prior to the Closing, RXi shall assign to the Company any and all rights that RXi or any Affiliate thereof may have under any confidentiality agreement (or similar Contractual Obligation) relating to the Assets or the Business.

Section 4.09 Publicity .

(a) No public announcement or disclosure (including any general announcement to employees, customers or suppliers) will be made by any party with respect to the subject matter of this Agreement or the Contemplated Transactions without the prior written consent of the Company and the Investors; provided , that the provisions of this Section 4.09 shall not prohibit (a) any disclosure required by any applicable Legal Requirements or (b) any disclosure made in connection with the enforcement of any right or remedy relating to this Agreement or any Ancillary Agreement or the Contemplated Transactions, provided , further , that in the event

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of any disclosure pursuant to the foregoing clause (a), the disclosing party shall provide the other parties with at least forty-eight (48) hours prior written notice of the proposed disclosure and provide the other parties with the opportunity to make changes to such disclosure, with the acceptance of such changes not to be unreasonably withheld.

(b) Notwithstanding the foregoing, RXi shall, no later than 8:30 a.m. (Eastern Time) on the first Business Day following the Effective Date, issue a press release describing the material terms of the Contemplated Transactions (the “ Press Release ”) and file with the U.S. Securities and Exchange Commission a Current Report on Form 8-K describing the material terms of this Agreement, the Ancillary Agreements and the Contemplated Transactions, which Press Release and Form 8-K (collectively, the “ Required Disclosure ”) shall be subject to the Investors’ prior review and approval, which will not be unreasonably withheld.

Section 4.10 Further Assurances .

(a) From and after the Closing Date, upon the request of the Investors, RXi or the Company, each of the parties hereto shall do, execute, acknowledge and deliver all such further acts, assurances, deeds, assignments, transfers, conveyances and other instruments and papers as may be reasonably required or appropriate to carry out the Contemplated Transactions.

(b) Neither the Company nor RXi shall take any action that is designed or intended to have the effect of discouraging any licensor, supplier, or employee of the Company or other Person with whom the Company has a relationship from maintaining the same relationship with the Company after the Effective Date as it maintained prior to the Effective Date. RXi shall refer all customer inquiries relating to the Business to the Company.

Section 4.11 Noncompetition and Non-solicitation . For a period of five (5) years from and after the Closing Date, RXi shall not, and shall not permit, cause or encourage any of their Affiliates to, engage directly or indirectly, as an owner, employee, consultant or otherwise, in all or any portion of the Business (or any business that is competitive with the Business) as it is conducted on the Effective Date or the Closing Date; provided , that no owner of less than two percent (2%) of the outstanding stock of any publicly-traded corporation will be deemed to be so engaged solely by reason thereof in the Business. For a period of five (5) years from and after the Closing Date, RXi shall not, and shall not permit, cause or encourage any of their Affiliates to, recruit, offer employment, employ, engage as a consultant, lure or entice away, or in any other manner persuade or attempt to persuade, any Person who is an employee of any of the Company to leave the employ of the Company. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 4.11 is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability will have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement will be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

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Section 4.12 Filing of Registration Statement; Trading Market . As promptly as practicable after the Effective Date, the Company shall take such actions as may be necessary to: (a) cause the Company Common Stock to be registered as a class of securities under Section 12 of the Exchange Act, which actions shall include the filing of a registration statement on Form 10 or, if permitted, on Form 8-A (the “ Exchange Act Registration ”), and (b) list the Company Common Stock for trading or quotation, as the case may be, on any Trading Market (as defined in the Certificate of Designations).

Section 4.13 Spin-Off; Target Float .

(a) The Company and RXi shall take such actions as may be necessary or advisable to effect the Spin-Off immediately prior to the Closing, subject to the completion of the Exchange Act Registration and, if applicable, the Securities Act Registration (as defined below). The Spin-Off shall be effected in such a way so as to ensure that the Company Common Stock that is distributed to the RXi stockholders is not deemed “restricted stock” under the Securities Act. To the extent necessary to comply with the foregoing requirement, the Company shall, and RXi shall cause the Company to, file a Registration Statement on Form S-1 (or other form as applicable) to register the Spin-Off under the Securities Act (the “ Securities Act Registration ”).

(b) Not later than thirty (30) days prior to the anticipated effective date of the Spin-Off, RXi shall fix a record date for the distribution of the Company Common Stock in the Spin-Off (the “ Record Date ”). Within two Business Days after the Record Date, RXi shall notify the Investors of the total number of shares of RXi’s common stock, $0.0001 par value per share (“ RXi Common Stock ”), issued and outstanding as of the Record Date (“ Recorded Shares ”), as well as the number of outstanding shares of preferred stock and shares issuable underlying outstanding options, warrants and other purchase rights where the holders thereof would be entitled to participate in the Spin-Off (the Recorded Shares, plus the total number of such shares potentially issuable being the “ RXi Outstanding Shares ”). Following the timely receipt of a report of the total RXi Outstanding Shares, the Investors shall, within five Business Days after the Record Date: (i) confirm with the Company the number of shares of Company Common Stock to be distributed to the RXi stockholders in the Spin-Off (the “ Target Float ”), calculated in accordance with Annex II, and (ii) notify the Company of the total number of shares of Company Common Stock to be authorized for issuance under the Certificate of Incorporation (the “ Authorized Capital ”). Following the Company’s receipt of such notice from the Investors, the Company and RXi shall take such actions as may be necessary to adjust the number of shares of Outstanding Common Stock, whether through a stock split, reverse stock split or otherwise, to achieve the Target Float, and shall implement such changes to the Certificate of Incorporation as may be directed by the Investors to the extent that such changes relate to stock splits and/or changes in the authorized number of shares of Company Common Stock.

(c) For the avoidance of doubt, any adjustments made to the Outstanding Common Stock under Section 4.13(b), whether by stock split, reverse stock split or otherwise (the “ Target Float Adjustments ”), shall be similarly applied to the Retained Shares and the Advirna Shares, as well as the conversion price for the Preferred Stock so that appropriate adjustments

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are made in each case to provide that the Outstanding Common Stock will be held in the relative amounts set forth on Annex II (determined on an as-converted basis) immediately after the Closing.

(d) The Company shall, prior to effectiveness of the Exchange Act Registration and, if applicable, the Securities Act Registration, implement the Target Float Adjustments and designate the Authorized Capital by filing the Certificate of Incorporation with the Delaware Secretary of State.

Section 4.14 Board of Directors . Upon the earlier of the Closing or the Maturity Date (as defined in the Bridge Notes), the Company and RXi shall take such actions as are necessary to provide that the Board of Directors of the Company will consist of three members, who shall be Mark Ahn, Kevin Tang and Roderick Wong. Each of these directors shall also have tendered their conditional resignations, which will become effective with respect to all three initial directors upon the affirmative vote of two-thirds of the directors, upon the appointment of a new Board of Directors of the Company consisting solely of independent directors, as determined in accordance with NASDAQ Marketplace Rule 5605(a)(2); provided, however, that the Chief Executive Officer or other senior officer of the Company may serve as one of the members of the Board of Directors of the Company.

Section 4.15 Corporate Name of the Company . Following the Effective Date, the Company and RXi shall take such actions as may be necessary to allow the Company to change its name on or before the Closing to “RXi Pharmaceuticals Corporation” and to thereafter use the stock trading symbol RXII, or any derivative thereof ( e.g ., RXII.OB or RXII.PK).

Section 4.16 Corporate Name of RXi . Following the Effective Date, the Company and RXi shall take such actions as may be necessary to allow the Company to change its name on or before the Closing to “RXi Pharmaceuticals Corporation” and, as nearly concurrent to Closing as practicable, to cause RXi to cease using the stock trading symbol RXII, or any derivative thereof (e.g., RXII.OB or RXII.PK) and to allow the Company to thereafter commence the use of that stock trading symbol.

Section 4.17 RXi Lock-Up . RXi agrees that, without the prior approval of the Board of Directors of the Company, it will not, during the period commencing on the Closing Date and ending on the first anniversary of the Closing Date: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any of the Retained Shares or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Retained Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Company Common Stock or such other securities, in cash or otherwise.

Section 4.18 Advirna Amendment . Concurrent with the execution of this Agreement, the Company shall enter into an amendment to that certain patent and technology assignment agreement by and between Advirna, LLC, a Colorado limited liability company (“ Advirna ”), and RXi, dated September 21, 2009 (“ Advirna Agreement ”), to be executed by Advirna and the Company, which amendment shall be substantially in the form attached hereto as Exhibit F (such fully executed amendment, “ Advirna Amendment ”).

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Section 4.19 RXi Contribution to the Company . Within five (5) Business Days following the issuance of the Required Disclosure, RXi will contribute $1,500,000 to the Company, which shall be recorded as additional paid in capital (the “ RXi Contribution ”).

Section 4.20 Subscription Agreement . Concurrently with the execution of this Agreement on the Effective Date, RXi and the Investors shall enter into a subscription agreement providing for the issuance and sale of $2,500,000 of common stock of RXi to the Investors, which agreement shall be in the form attached hereto as Exhibit G (the “ Subscription Agreement ”), and which offering and sale shall close on the fourth Business Day after the date on which the Required Disclosure is made.

ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS AT THE CLOSING.

The obligations of the Investors to consummate the Spin-Off and the other Contemplated Transactions to be consummated at the Closing are subject to the fulfillment, or, to the extent permitted by law, waiver by the Investors, of each of the following conditions:

Section 5.01 Representations and Warranties . The representations and warranties of the Company and RXi contained in (a) this Agreement (i) that are not qualified by materiality, Material Adverse Effect, substantial compliance or a similar materiality qualifier will be true and correct in all material respects both when made and at the Closing with the same force and effect as if made as of the Closing Date, other than such representations and warranties that expressly speak only as of a specific date or time, which will be true and correct in all material respects as of such specified date or time and (ii) that are qualified by materiality, Material Adverse Effect, substantial compliance or a similar materiality qualifier will be true and correct in all respects both when made and at the Closing with the same force and effect as if made as of the Closing Date, other than such representations and warranties that expressly speak only as of a specific date or time, which will be true and correct as of such specified date or time.

Section 5.02 Performance; Default .

(a) The Company and RXi will have performed and complied with in all material respects, with all agreements, obligations and covenants contained in the Transaction Documents, including those that are required to be performed or complied with by them at or prior to the Closing (which shall include, but not be limited to, the completion of the Spin-Off and the effectiveness of the Exchange Act Registration).

(b) There shall not have been any Event of Default under the Bridge Notes, as such term is defined thereto.

Section 5.03 Delivery of Shares . The Company will have delivered to each of the Investors a duly executed stock certificate or certificates evidencing all of the Preferred Shares to be issued to such Investor hereunder.

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Section 5.04 Filing of Certificate of Designation. The Certificate of Designations shall have been adopted and approved by the Company’s Board of Directors as required by applicable law (including without limitation the Delaware General Corporation Law), the Certificate and Bylaws and any agreements to which the Company is a party or is bound, and the Company shall have filed the Certificate of Designations with the Secretary of State of the State of Delaware who shall have accepted the Certificate of Designations for filing, and the Certificate of Designations shall be in full force and effect as of the Closing.

Section 5.05 Qualification Under Blue Sky Laws . The Company will have obtained qualification of the Securities, including those required pursuant to the Spin-Off, under applicable Blue Sky laws.

Section 5.06 Delivery of Closing Certificates . The Company and RXi shall have delivered to the Investors the following:

(a) Secretary Certificate : Certificates, dated as of the Closing Date, signed by the Secretaries of the Company and RXi certifying as to (i) the resolutions adopted by the Boards of Directors of the Company and RXi in connection with the Transaction Documents and the Contemplated Transactions, and (ii) the satisfaction of the conditions set forth in Sections 5.01 and 5.02 .

(b) Good Standing Certificate . A certificate of good standing with respect to the Company issued by the State of Delaware, as of a recent date.

Section 5.07 Absence of Litigation . No Action will be pending or threatened which seeks a Governmental Order, nor will there be any Governmental Order in effect, that would prevent consummation of any of the Contemplated Transactions, or that would result in any of the Contemplated Transactions being rescinded following consummation.

Section 5.08 Legal Opinion . The Investors shall have received from TroyGould PC, counsel to the Company and RXi (or other counsel reasonably acceptable to the Investors), its opinion with respect to the Contemplated Transactions to the effect set forth in Exhibit H-2 attached hereto.

Section 5.09 Consents . All actions by (including any authorization, consent or approval) or in respect of (including notice to), or filings with, any Governmental Authority or other Person that are required to consummate the Contemplated Transactions, including the effectiveness of the Exchange Act Registration and, if applicable, the Securities Act Registration, will have been obtained or made, in a manner reasonably satisfactory in form and substance to the Investors, and no such authorization, consent or approval will have been revoked.

Section 5.10 Proceedings and Documents . All corporate and other proceedings of RXi and the Company in connection with the Contemplated Transactions and all documents incident thereto will be reasonably satisfactory in form and substance to the Investors and their counsel, and they will have received all such counterpart original and other copies of such documents as they may reasonably request.

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Section 5.11 No Material Adverse Change . Since the Effective Date, there will not have occurred or arisen any events, changes, facts, conditions or circumstances, nor will there exist any events, changes, facts, conditions or circumstances, which individually or in the aggregate have resulted in or would reasonably be expected to result in a Material Adverse Effect.

Section 5.12 Completion of Contemplated Transactions . The following actions shall have been taken: (i) the Advirna Amendment shall have been fully executed and delivered by the parties thereto; (ii) the Spin-Off shall have been completed and conditions set forth in Section 4.13 shall have been satisfied; (iii) the RXi Contribution shall have been completed; and (iv) the transactions contemplated under the Subscription Agreement shall have been consummated.

Section 5.13 Required Approvals . The Company shall have obtained all Required Approvals set forth on Schedule 1.01—Required Approvals .

ARTICLE VI
CONDITIONS TO THE COMPANY’S OBLIGATIONS AT THE CLOSING.

The obligations of the Company to consummate the Spin-Off and the other Contemplated Transactions to be consummated at the Closing are subject to the fulfillment, or, to the extent permitted by law, waiver by the Company of each of the following conditions:

Section 6.01 Representations and Warranties . The representations and warranties of the Investors contained in this Agreement (a) that are not qualified by materiality will be true and correct in all material respects both when made and at the Closing with the same force and effect as if made as of the Closing Date and (b) that are qualified by materiality will be true and correct in all respects both when made and as at the Closing with the same force and effect as if made as of the Closing Date, in each case, other than representations and warranties that expressly speak only as of a specific date or time, which will be true and correct (or true and correct in all material respects, as applicable) as of such specified date or time.

Section 6.02 Performance . The Investors will have performed and complied with, in all material respects, all agreements, obligations and covenants contained in the Transaction Documents, including those that are required to be performed or complied with by the Investors at or prior to the Closing.

Section 6.03 Payment of Purchase Price . Prior to Closing, the Investors will have paid the Cash Portion of the Purchase Price of the Preferred Shares.

Section 6.04 Compliance Certificate . The Investors will have delivered to the Company a certificate dated as of the Closing Date and signed by duly authorized representatives of the Investors certifying as to the conditions set forth in Sections 6.01 and 6.02 .

Section 6.05 Qualifications . Any applicable waiting periods (and any extensions thereof) under the HSR Act will have expired or otherwise been terminated. No provision of any applicable Legal Requirement and no Government Order will prohibit the consummation of any of the Contemplated Transactions.

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Section 6.06 Absence of Litigation . No Action will be pending or threatened which seeks a Governmental Order, nor will there be any Governmental Order in effect, that would prevent consummation of any of the Contemplated Transactions, or that would result in any of the Contemplated Transactions being rescinded following consummation.

Section 6.07 Consents . All actions by (including any authorization, consent or approval) or in respect of (including notice to), or filings with, any Governmental Authority or other Person that are required to consummate the Contemplated Transactions, including the effectiveness of the Exchange Act Registration and, if applicable, the Securities Act Registration, will have been obtained or made, in a manner reasonably satisfactory in form and substance to the Investors, and no such authorization, consent or approval will have been revoked.

Section 6.08 Proceedings and Documents . All necessary company, partnership and other proceedings of the Investors in connection with the Contemplated Transactions shall have been completed.

Section 6.09 Ancillary Agreements . Each of the Ancillary Agreements to which the Investors are party will have been executed and delivered to the Company by each of the other parties thereto and the transactions contemplated by the Subscription Agreement shall have been consummated.

ARTICLE VII
REGISTRATION RIGHTS OF THE INVESTORS.

Section 7.01 Mandatory Registration . The Company shall prepare and file as soon as practicable, but in no event later than thirty (30) days after the Closing Date (the “ Filing Deadline ”), a Registration Statement covering the resale of twenty percent (20%) of the Conversion Shares underlying the Preferred Shares outstanding immediately following the Closing (collectively, the “ Registrable Securities ”). The Company shall use its commercially reasonable efforts to have the Registration Statement declared effective by the Commission as soon as practicable, but in no event later than either (i) ninety (90) days after the Closing Date, or (ii) in the event that the Commission reviews the Registration Statement, one hundred twenty (120) days after the Closing Date (but in any event, no later than four Business Days from the Commission indicating that it has no further comments on the Registration Statement) (the “ Effectiveness Deadline ”). By 9:30 am (Eastern Time) on the second Business Day following the Effectiveness Deadline, the Company shall file with the Commission in accordance with Rule 424 under the Securities Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

Section 7.02 Legal Counsel . The Investors shall have the right to select one legal counsel to review and oversee any registration pursuant to this Section VII , which shall be Ropes & Gray LLP, or such other counsel (“ Legal Counsel ”) as thereafter designated by the Investors. The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company’s obligations under this Section VII .

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Section 7.03 Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement . If (a) a Registration Statement covering all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is (i) not filed with the Commission on or before the Filing Deadline (a “ Filing Failure ”) or (ii) not declared effective by the Commission on or before the Effectiveness Deadline (an “ Effectiveness Failure ”) or (b) on any day after the Effectiveness Deadline, sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register a sufficient number of shares of common stock) or Rule 144 under the Act (a “ Maintenance Failure ”) then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying shares of common stock (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to two percent (2.0%) of such holder’s pro rata interest in the Purchase Price, as reflected on Annex I , attributable to the portion of the Registrable Securities so affected by the Filing Failure or Maintenance Failure, as applicable, on each of the following dates: (i) the day of a Filing Failure and monthly thereafter (pro rated for partial months) until such Filing Failure is cured, with a maximum penalty of twelve months applied to such holder’s pro rata interest in the Purchase Price; (ii) the day of an Effectiveness Failure and monthly thereafter (pro rated for partial months) until such Effectiveness Failure is cured, with a maximum penalty of twelve months applied to such holder’s pro rata interest in the Purchase Price; and (iii) the initial day of a Maintenance Failure and monthly thereafter (pro rated for partial months) until such Maintenance Failure is cured, with a maximum penalty of twelve months applied to such holder’s pro rata interest in the Purchase Price. The payments to which a holder shall be entitled pursuant to this Section 7.03 are referred to herein as “ Registration Delay Payments .” The first such Registration Delay Payment shall be paid within three (3) Business Days after the event or failure giving rise to such Registration Delay Payment occurred and all other Registration Delay Payments shall be paid on the earlier of (I) the last day of the calendar month during which such Registration Delay Payments are incurred and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of two percent (2.0%) per month (prorated for partial months) until paid in full. In addition, the Investors shall, among seeking other remedies, be entitled to seek injunctive relief compelling the Company to address the Filing Failure, Effectiveness Failure or the Maintenance Failure. Notwithstanding the foregoing, no Registration Delay Payments shall accrue with regard to any portion of a Filing Failure or Maintenance Failure that occurs or continues after the first anniversary of Closing, provided that the Investors are then eligible to sell the Registrable Securities without limitation under Rule 144 under the Securities Act.

Section 7.04 Related Obligations . At such time as the Company is obligated to file a Registration Statement with the Commission pursuant to ARTICLE VII , the Company will use its best efforts to effect the registration of the Registrable Securities in accordance with the

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intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

(a) The Company shall submit to the Commission, within two (2) Business Days after the Company learns that no review of a particular Registration Statement will be made by the staff of the Commission or that the staff has no further comments on a particular Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than two (2) Business Days after the submission of such request. The Company shall keep each Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without restriction pursuant to Rule 144 (or any successor thereto) promulgated under the Securities Act or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “ Registration Period ”). The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading.

(b) The Company shall prepare and file with the Commission such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 7.04(b) ) by reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

(c) The Company shall (i) permit Legal Counsel to review and comment upon (A) a Registration Statement at least five (5) Business Days prior to its filing with the Commission and (B) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q and any similar or successor reports) within a reasonable number of days prior to their filing with the Commission and (ii) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld. The

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Company shall furnish to Legal Counsel, without charge, (i) copies of any correspondence from the Commission or the staff of the Commission to the Company or its representatives relating to any Registration Statement; (ii) promptly after the same is prepared and filed with the Commission, one copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by the Investors, and all exhibits; and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this ARTICLE VII .

(d) The Company shall furnish to the Investors without charge, (i) promptly after the Registration Statement including such Investor’s Registrable Securities is prepared and filed with the Commission, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by the Investor, all exhibits and each preliminary prospectus; (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request); and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities.

(e) The Company shall use its best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by the Investor of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States; (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period; (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided , however , that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 7.06(e) ; (y) subject itself to general taxation in any such jurisdiction; or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and the Investors of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of notice of the initiation or threatening of any proceeding for such purpose.

(f) The Company shall notify Legal Counsel and the Investors in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any

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material, nonpublic information), and, promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and the Investors (or such other number of copies as Legal Counsel or the Investors may reasonably request). The Company shall also promptly notify Legal Counsel and the Investors in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and the Investors by facsimile on the same day of such effectiveness and by overnight mail); (ii) of any request by the Commission for amendments or supplements to a Registration Statement or related prospectus or related information; and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

(g) The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and the Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of notice of the initiation or threat of any proceeding for such purpose.

(h) If a Investor is required under applicable securities law to be described in the Registration Statement as an underwriter, at the reasonable request of the Investor, the Company shall furnish to the Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as the Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investor and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investor.

(i) If an Investor is required under applicable securities law to be described in the Registration Statement as an underwriter, upon the written request of the Investor in connection with the Investor’s due diligence requirements, if any, the Company shall make available for inspection by (i) the Investor; (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investor (collectively, the “ Inspectors ”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “ Records ”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided , however , that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to the Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act; (b) the release of such Records is

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ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction; or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other Transaction Document. The Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and the Investor) shall be deemed to limit the Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(j) The Company shall hold in confidence and not make any disclosure of information concerning the Investors provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws; (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement; (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction; or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investors is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investors and allow the Investors, at each Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(k) The Company shall use its best efforts to cause all of the Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 7.06(k) .

(l) The Company shall cooperate with the Investors and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

(m) If requested by an Investor, the Company shall (i) as soon as practicable incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) as soon as practicable make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus

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supplement or post-effective amendment; and (iii) as soon as practicable, supplement or make amendments to any Registration Statement if reasonably requested by the Investor.

(n) The Company shall use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(o) The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the Commission in connection with any registration hereunder.

(p) Within two (2) Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors) confirmation that such Registration Statement has been declared effective by the Commission.

Section 7.05 Obligations of the Investors .

(a) At least five (5) Business Days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from such Investor in order to have that Investor’s Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that the Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

(b) Each Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless the Investor has notified the Company in writing of the Investor’s election to exclude all of the Investor’s Registrable Securities from such Registration Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 7.04(g) or the first sentence of Section 7.04(f) , the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 7.04(g) or the first sentence of Section 7.04(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of common stock to a transferee of the Investor in accordance with the terms of this Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the

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Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 7.04(g) or the first sentence of Section 7.04(f) and for which the Investor has not yet settled.

(d) Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

Section 7.06 Expenses of Registration . All expenses incurred in connection with registrations, filings or qualifications pursuant to this Article VII will be borne by the respective parties.

Section 7.07 Reports under the Exchange Act . With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the Commission that may at any time permit the Investors to sell securities of the Company to the public without registration (“ Rule 144 ”), the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

(c) furnish to the Investors so long as any Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act; (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

Section 7.08 Piggyback Rights . Whenever the Company proposes to register any of its common stock or securities convertible into common stock, whether or not for its own account, provided such offering shall be underwritten or placed by a placement agent, the Company will give prompt written notice to the Investors of its intention to effect such a registration (but in no event less than fifteen (15) Business Days prior to the anticipated filing date) and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) Business Days after the date of the Company’s notice (a “ Piggyback Registration” ). Any Investor may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth Business Day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 7.08 prior to the effectiveness of such registration, whether or not the Investor has elected to include Registrable Securities in such registration. If a Piggyback Registration

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relates to an underwritten primary offering on behalf of the Company, and the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such registration or prospectus only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), provided , without the consent of the Investor, such number so included shall equal at least thirty percent (30%) of such Investor’s Registrable Securities.

Section 7.09 Assignment of Registration Rights . The rights under this Article VII shall be automatically assignable by an Investor to any transferee of all or any portion of the Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the Securities Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of this Agreement.

Section 7.10 Preemptive Rights of RXi . For any offering and sale of Company securities that are sold in a capital raising transaction within one year following the Closing (each, a “ Subsequent Offering ”), RXi will be entitled to preemptive rights to participate (to the extent permitted under the Securities Act) in each Subsequent Offering (“ Preemptive Right ”). Pursuant to this Preemptive Right, RXi shall be entitled to purchase a portion of the securities offered in each Subsequent Offering equal to RXi’s percentage ownership of the Common Stock of the Company, determined on an as-converted, fully diluted basis, immediately prior to the consummation of such Subsequent Offering. Prior to execution of definitive offering documents for any such Subsequent Offering, RXi shall be provided with the details of such Subsequent Offering, including the security being offered, the offering price and material terms and conditions of the offering. RXi shall then have ten (10) days following receipt of such notice to elect to participate in such Subsequent Offering. For the avoidance of doubt, the offering and sale of Company securities in a transaction, the principal purpose of which is not to raise capital (e.g., exercise of employee stock options, issuance of shares in a merger or acquisition or issuance of shares to a strategic partner) shall not be deemed a “Subsequent Offering” for purposes of this Section 7.10 .

Section 7.11 Indemnification .

(a) Company Indemnification . The Company will indemnify each Investor who holds Registrable Securities (if Registrable Securities held by such Investor are included in the securities as to which such registration is being effected), each of its officers and directors,

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partners, members and each person controlling such Investor within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any Registration Statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such Registration Statement, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading or (ii) any violation by the Company of the Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under such laws applicable to the Company in connection with any such registration, and in each case, the Company will reimburse each such Investor, each of its officers and directors, partners, members and each person controlling such Investor, for any legal and any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on (X) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Investor or controlling person, and stated to be specifically for use therein, (Y) the use by an Investor of an outdated or defective prospectus after the Company has notified such Investor in writing that the prospectus is outdated or defective or (Z) an Investor’s (or any other indemnified person’s) failure to send or give a copy of the prospectus or supplement (as then amended or supplemented), if required, pursuant to Rule 172 under the Securities Act (or any successor rule) to the Persons asserting an untrue statement or alleged untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such prospectus or supplement; provided , further , that the indemnity agreement contained in this Section 7.11(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

(b) Investor Indemnification . Each Investor holding Registrable Securities will, if Registrable Securities held by such Investor are included in the securities as to which such registration is being effected, severally and not jointly, indemnify the Company, each of its directors and officers, other holders of the Company’s securities covered by such Registration Statement, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each such holder, each of its officers and directors and each person controlling such holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained in any such Registration Statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, and only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in

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such Registration Statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Investor and stated to be specifically for use therein or (ii) any violation by such Investor of the Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under such laws applicable to such Investor, and in each case, such Investor will reimburse the Company, each other holder, and directors, officers, persons, underwriters or control persons of the Company and the other holders for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage, liability or action; provided , that the indemnity agreement contained in this Section 7.11(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such indemnifying Investor (which consent shall not be unreasonably withheld or delayed). The liability of any Investor for indemnification under this Section 7.11(b) in its capacity as a seller of Registrable Securities shall not exceed the amount of net proceeds to such Investor of the securities sold in any such registration.

(c) Notice and Procedure . Each party entitled to indemnification under this Section 7.11 (the “ Indemnified Party ”) shall give written notice to the party required to provide indemnification (the “ Indemnifying Party ”) promptly after such Indemnified Party has actual Knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action and provided further , that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or there are separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party (whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

(d) Contribution . If the indemnification provided for in this Section 7.11 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any losses, claims, damages or liabilities referred to herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the untrue statement or omission that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by a court of law by reference to, among

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other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, Knowledge, access to information and opportunity to correct or prevent such statement or omission; provided , that in no event shall any contribution by an Investor hereunder exceed the proceeds from the offering received by such Investor. The amount paid or payable by a party as a result of any loss, claim, damage or liability shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 7.11 was available to such party in accordance with its terms.

(e) Survival . The obligations of the Company and the Investors under this Section 7.11 shall survive completion of any offering of Registrable Securities in a Registration Statement and the termination of this Agreement. The indemnity and contribution agreements contained in this Section 7.11 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of other remedies or causes of action that the parties may have under the Transaction Documents.

ARTICLE VIII
TERMINATION

Section 8.01 Termination of Agreement . This Agreement may be terminated and the Contemplated Transactions may be abandoned at any time prior to the Closing:

(a) by mutual written consent of the Company and the Investors;

(b) by either the Company or the Investors if a final non-appealable Governmental Order permanently enjoining or otherwise prohibiting the Contemplated Transactions has been issued by a Governmental Authority of competent jurisdiction;

(c) by either the Company or the Investors if the Closing has not occurred on or before 5:00 p.m., Eastern Standard Time, on February 20, 2012, which date may be extended from time to time by mutual written consent of the Company and the Investors (such date, as so extended from time to time, the “ Termination Date ”); provided , that the right to terminate this Agreement under this Section 8.01(c) shall not be available to the Investors if the failure of the Investors to fulfill or breach by the Investors of any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date and shall not be available to the Company if the failure of the Company to fulfill or breach by the Company of any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date and time; provided , further , that if the Closing fails to occur by reason of a breach by one party, the non-breaching party shall be entitled to recover its Transaction Costs, as well as recover any damages available under this Agreement, and the parties acknowledge and agree that the damages that may be eligible for recovery by the Company and RXi in the event of a termination for breach by the Investors shall include

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amounts incurred or expended by RXi and the Company on the development and maintenance of the RNAi Platform after August 15, 2011 and through the Termination Date;

(d) by the Company if the Investors are in breach of this Agreement and such breach cannot be cured or, if curable, shall continue unremedied for a period of ten (10) days after the Investors have received written notice from the Company of the occurrence of such failure ( provided that in no event shall such ten (10) day period extend beyond the Termination Date); or

(e) by the Investors if the Company is in breach of this Agreement and such breach cannot be cured or, if curable, shall continue unremedied for a period of ten (10) days after the Company has received written notice from the Investors of the occurrence of such failure ( provided that in no event shall such ten (10) day period extend beyond the Termination Date).

Any party desiring to terminate this Agreement shall give written notice of such termination to the other parties.

Section 8.02 Effect of Termination . In the event of a termination of this Agreement pursuant to Section 8.01 , this Agreement (other than the provisions of this Article VIII and Section 4.07 (Expenses), Section 4.08 (Confidentiality), Section 4.09 (Publicity), Section 10.07 (Governing Law), Section 10.08 (Jurisdiction; Venue; Service of Process) and Section 10.11 (Waiver of Jury Trial), which shall survive such termination) shall then be null and void and have no further force and effect and all other rights and liabilities of the parties hereunder will terminate without any liability of any party to any other party, except for liabilities arising in respect of material breaches under this Agreement by any party prior to such termination.

ARTICLE IX
INDEMNIFICATION.

Section 9.01 General Indemnity . Subject to Section 9.03 , each of the Company and RXi agrees to indemnify and hold harmless the Investors (and their respective directors, officers, affiliates, members, managers, employees, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Investors as a result of claims brought by third parties arising out of or relating to any breach of the representations, warranties or covenants made in the Transaction Documents by the Company or RXi, respectively.

Section 9.02 Indemnification Procedure . Any party entitled to indemnification under Section 9.01 (an “ SPA Indemnified Party ”) will give written notice to the indemnifying party of any matter giving rise to a claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 9.01 except to the extent, and then only to the extent, that the indemnifying party is actually prejudiced by such failure to give notice. In case

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any such action, proceeding or claim is brought against an SPA Indemnified Party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnifying party a conflict of interest between it and the SPA Indemnified Party exists with respect to such action, proceeding or claim (in which case the indemnifying party shall be responsible for the reasonable fees and expenses of one separate counsel for the indemnified parties), to assume the defense thereof with counsel reasonably satisfactory to the SPA Indemnified Party. In the event that the indemnifying party advises an SPA Indemnified Party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice (the “ Defense Period ”) to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the SPA Indemnified Party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the SPA Indemnified Party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding, only to the extent incurred after the expiration of the Defense Period, shall be losses subject to indemnification hereunder. The SPA Indemnified Party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the SPA Indemnified Party which relates to such action or claim. The SPA Indemnifying Party shall keep the SPA Indemnified Party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the SPA Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent. Notwithstanding anything in this ARTICLE IX to the contrary, the indemnifying party shall not, without the SPA Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the SPA Indemnified Party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the SPA Indemnified Party of a release from all liability in respect of such claim. The indemnification obligations to defend the SPA Indemnified Party required by this ARTICLE IX shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the SPA Indemnified Party shall refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar rights of the SPA Indemnified Party against the indemnifying party or others, including for breach of contract, fraud or otherwise and (ii) any liabilities that the indemnifying party may be subject to pursuant to the law.

Section 9.03 Survival . The representations and warranties contained in this Agreement shall survive the Closing, except that all such representations and warranties shall expire on the date twenty-four (24) months after the Closing Date, except with respect to and to the extent of

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any claims of which written notice specifying in reasonable detail, the nature and amount of the claims, has been given prior to such expiration.

ARTICLE X
MISCELLANEOUS

Section 10.01 Notices . Any notice, request, demand, claim or other communication required or permitted to be delivered, given or otherwise provided under this Agreement must be in writing and must be delivered personally, delivered by nationally recognized overnight courier service, sent by certified or registered mail, postage prepaid, or (if a facsimile number is provided below) sent by facsimile (subject to electronic confirmation of good facsimile transmission). Any such notice, request, demand, claim or other communication shall be deemed to have been delivered and given (a) when delivered, if delivered personally; (b) the Business Day after it is deposited with such nationally recognized overnight courier service, if sent for overnight delivery by a nationally recognized overnight courier service; (c) the day of sending, if sent by facsimile prior to 5:00 p.m. (Eastern time) on any Business Day or the next succeeding Business Day if sent by facsimile after 5:00 p.m. (Eastern time) on any Business Day or on any day other than a Business Day; or (d) five Business Days after the date of mailing, if mailed by certified or registered mail, postage prepaid, in each case, to the following address or, if applicable, facsimile number, or to such other address or addresses or facsimile number or numbers as such party may subsequently designate to the other parties by notice given hereunder:

If to RXi or the Company (prior to the Closing), to:

Galena Biopharma, Inc.
310 N. State Street, Suite 708
Lake Oswego, Oregon 07034
Facsimile number: (503) 400-6611
Attention: Mark J. Ahn

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

TroyGould PC
1801 Century Park East, 16 ^th Floor
Los Angeles, California 90067
Facsimile number: 310-201-4746
Attention: Attention: Dale E. Short, Esq.

If to the Investors, to:

Tang Capital Partners, LP
4401 Eastgate Mall
San Diego, CA 92121
Facsimile number: (858) 200-3837
Attention: Kevin Tang
and

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RTW Investments, LLC
1350 Avenue of the Americas, Suite 2801
New York, NY 10019
Facsimile number: (646) 597-6998
Attention: Roderick Wong

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

Ropes & Gray LLP
3 Embarcadero Center
San Francisco, CA 94111
Facsimile number: (415) 315-6026
Attention: Ryan A. Murr, Esq.

Each of the parties to this Agreement may specify a different address or addresses or facsimile number or facsimile numbers by giving notice in accordance with this Section 10.01 to each of the other parties hereto.

Section 10.02 Succession and Assignment; No Third-Party Beneficiaries . Subject to the immediately following sentence, this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, each of which such successors and permitted assigns will be deemed to be a party hereto for all purposes hereof. No party may assign, delegate or otherwise transfer either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other parties, and any attempt to do so will be null and void ab initio ; provided , that (a) either of the Investors may assign this Agreement and any or all of its rights and interests hereunder to one or more of its Affiliates or designate one or more of its Affiliates to perform its obligations hereunder, in each case, so long as such Investor is not relieved of any liability or obligations hereunder, and (b) either of the Investors may assign this Agreement and any or all of its rights and interest hereunder to any purchaser of all or substantially all its assets or designate such purchaser to perform its obligations hereunder; and provided further , that RXi may assign this Agreement and any or all of its rights and interest hereunder to any purchaser of all or substantially all its assets, provided that the assignee delivers to the Investors an undertaking agreeing in writing to assume RXi’s obligations under this Agreement and the Ancillary Agreements. Except as expressly provided herein, this Agreement is for the sole benefit of the parties hereto and their successors and permitted assignees and nothing herein expressed or implied will give or be construed to give any Person, other than the parties hereto and such successors and permitted assignees, any other right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. For the avoidance of doubt, it is hereby acknowledged and agreed by the parties hereto that an SPA Indemnified Party that is not party hereto is intended to be an express third party beneficiary of this Agreement.

Section 10.03 Amendments and Waivers . No amendment or waiver of any provision of this Agreement will be valid and binding unless it is in writing and signed, in the case of an

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amendment, the Company and the Investors, or in the case of a waiver, by the party against whom the waiver is to be effective. No waiver by any party of any breach or violation of, default under or inaccuracy in any representation, warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent breach or violation of, default under, or inaccuracy in, any such representation, warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. No delay or omission on the part of any party in exercising any right, power or remedy under this Agreement will operate as a waiver thereof.

Section 10.04 Entire Agreement . This Agreement, together with the other Ancillary Agreements and any documents, instruments and certificates explicitly referred to herein, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, proposals, undertakings, understandings and agreements, whether written or oral, with respect thereto. There are no restrictions, promises, warranties, covenants, or undertakings, other than those expressly provided for herein and therein.

Section 10.05 Counterparts; Facsimile Signature . This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute but one and the same instrument. This Agreement will become effective when duly executed and delivered by each party hereto. Counterpart signature pages to this Agreement may be delivered by facsimile or electronic delivery ( e.g ., by email of a PDF signature page) and each such counterpart signature page will constitute an original for all purposes.

Section 10.06 Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. In the event that any provision hereof would, under applicable Legal Requirements, be invalid or unenforceable in any respect, each party hereto intends that such provision will be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable Legal Requirements.

Section 10.07 Governing Law . This Agreement, the rights of the parties hereunder and all Actions arising in whole or in part under or in connection herewith, will be governed by and construed and enforced in accordance with the domestic substantive laws of the State of California, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

Section 10.08 Jurisdiction; Venue; Service of Process .

(a) Jurisdiction . Each of the parties to this Agreement, by its execution hereof, (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the Northern District of California, or if such Action may not be brought in federal court, then the Superior Court of the State of California for the purpose of any Action among any of the

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parties relating to or arising in whole or in part under or in connection with this Agreement, any Ancillary Agreement or the Contemplated Transactions; (ii) hereby waives to the extent not prohibited by applicable Legal Requirements, and agrees not to assert, by way of motion, as a defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such Action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens , should be transferred or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other Action in any other court other than one of the above-named courts or that this Agreement, any Ancillary Agreement or the subject matter hereof or thereof may not be enforced in or by such court; and (iii) hereby agrees not to commence any such Action other than before one of the above-named courts. Notwithstanding the previous sentence a party may commence any Action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts.

(b) Venue . Each of the parties to this Agreement agrees that for any Action among any of the parties relating to or arising in whole or in part under or in connection with this Agreement, any Ancillary Agreement or the Contemplated Transactions, such party shall bring such Action only in a court of competent jurisdiction located in the City and County of San Francisco, California. Notwithstanding the previous sentence a party may commence any Action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts. Each party hereto further waives any claim and will not assert that venue should properly lie in any other location within the selected jurisdiction.

(c) Service of Process . Each of the parties to this Agreement hereby (i) consents to service of process in any Action among any of the parties hereto relating to or arising in whole or in part under or in connection with this Agreement, any Ancillary Agreement or the Contemplated Transactions in any manner permitted by California law; (ii) agrees that service of process made in accordance with clause (i) or made by registered or certified mail, return receipt requested, at its address specified pursuant to Section 10.01 , will constitute good and valid service of process in any such Action; and (iii) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any such Action any claim that service of process made in accordance with clause (i) or (ii) does not constitute good and valid service of process.

Section 10.09 Specific Performance . Each of the parties acknowledges and agrees that the other parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached or violated. Accordingly, each of the parties agrees that, without posting a bond or other undertaking, the other parties will be entitled to an injunction or injunctions to prevent breaches or violations of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any Action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity. Each party further agrees that, in the event of any action for specific performance in respect of such breach or violation, it will not assert that the defense that a remedy at law would be adequate.

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Section 10.10 Independent Nature of Investors . The Company and RXi acknowledge that the obligations of each Investor under the Transaction Documents are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under the Transaction Documents. The Company acknowledges that the decision of each Investor to purchase Preferred Shares pursuant to this Agreement has been made by such Investor independently of any other purchase and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have made or given by any other Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any Investor (or any other person) relating to or arising from any such information, materials, statements or opinions. The Company and RXi acknowledge that nothing contained herein, or in any of the Contemplated Transactions, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Contemplated Transactions. The Company acknowledges that it has elected to provide all Investors with the same terms and conditions for the convenience of the Company and not because it was required or requested to do so by the Investors. The Company acknowledges that such procedure with respect to any of the Contemplated Transactions in no way creates a presumption that the Investors are in any way acting in concert or as a group with respect to any of the Contemplated Transactions. The Company acknowledges that each Investor shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Contemplated Transactions, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

Section 10.11 Waiver of Jury Trial . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION WHATSOEVER BETWEEN OR AMONG THEM RELATING TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS AND THAT SUCH ACTIONS WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

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IN WITNESS WHEREOF, each of the undersigned has executed this Securities Purchase Agreement as of the date first above written.


THE COMPANY:	RNCS, INC.

	By:	/s/ Mark J. Ahn Name: Mark J. Ahn, Ph.D.
		Title: President and CFO

RXI:	RXI PHARMACEUTICALS CORPORATION

	By:	/s/ Mark J. Ahn Name: Mark J. Ahn, Ph.D.
		Title: President and CEO

TANG:	TANG CAPITAL PARTNERS, LP

	By:	/s/ Kevin Tang Name: Kevin Tang
		Title: Managing Director

RTW:	RTW INVESTMENTS, LLC

	By:	/s/ Roderick Wong Name: Roderick Wong
		Title: Managing Member

[Signature page to the Series A Securities Purchase Agreement]

Exhibit Index


Exhibit A		Pledge, Assignment and Security Agreement
Exhibit B		Bridge Notes
Exhibit C		Certificate of Designations
Exhibit D		Security Agreement
Exhibit E		General Continuing Guaranty
Exhibit F		Advirna Amendment
Exhibit G		Subscription Agreement
Exhibit H-1		Legal Opinion
Exhibit H-2		Legal Opinion
Exhibit I		Opening Balance Sheet

Annex I


	Preferred Stock Purchased		Bridge Loan Amounts
Investor Name	Dollars	No. of Shares	Tranche 1	Tranche 2	Tranche 3
Tang	$9,000,000		$473,684.21	$473,684.21	$473,684.21

RTW	$500,000		$26,315.79	$26,315.79	$26,315.79

Annex II
Distribution of Shares as of Closing*

The following calculations set forth, among other things, the number of shares of common stock of the Company that will be distributed to the holders of RXi Common Stock on the Record Date, based (1) on a one-for-one distribution with respect to each share RXi Common Stock and (2) the distribution by RXi of two-thirds of the total shares of common stock of the Company held by RXi immediately prior to the Spin-Off.


Determination of Target Float		A = B

Determination of Retained Shares		C = (B ÷ 0.08) * 0.04

Determination of Advirna Shares		D = (B ÷ 0.08) * 0.05

Determination of Conversion Shares		E = (B ÷ 0.08) * 0.83

Series A Preferred Conversion Rate		F = E ÷ G


*		All figures calculated and reflected on an as-converted basis


Definitions:		A = Target Float
		B = Recorded Shares
		C = Retained Shares
		D = Advirna Shares
		E = Conversion Shares
		F = Series A Preferred Conversion Rate
		G = Total Shares Series A Preferred Issued and Outstanding at Closing

Exhibit 10.3

INVESTOR SUBSCRIPTION AGREEMENT

This Investor Subscription Agreement (this “ Agreement ”) is entered into as of September 24, 2011 by and between RXi Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), and the purchasers identified on the signature page hereto (each a “ Purchaser ” and together, the “ Purchasers ”).

WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, Company Common Stock as more fully described in this Agreement.

NOW, THEREFORE, the Company and the Purchasers herbey agree as follows:

ARTICLE I
DEFINITIONS

1.1 Definitions . When used in this Agreement, the following capitalized terms have the meanings indicated:

“ Closing ” means the consummation of the purchase and sale of the Shares pursuant to Section 2.1.

“ Closing Date ” means the fourth Trading Day after the date on which the Required Disclosure is made.

“ Closing Price ” shall mean, on any particular date (i) the last trading price per share of the Common Stock on such date during regular trading hours on the principal Trading Market on which the Common Stock is then listed, or if there is no such price on such date, then the last trading price during regular trading hours on such Trading Market on the date nearest preceding such date, or (ii) if the Common Stock is not listed then on a Trading Market, the last trading price for a share of Common Stock in the over-the-counter market during regular trading hours, as reported in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices at the close of business on such date, or (iii) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes on such date, as determined in good faith by the Holder, or (iv) if the Common Stock is not then publicly traded, the fair market value of a share of Common Stock as determined by the Holder and reasonably acceptable to the Maker.

“ Commission ” means the U.S. Securities and Exchange Commission.

“ Common Stock ” means the common stock of the Company, par value $0.0001 per share.

“ Material Adverse Effect ” has the meaning set forth in Section 3.1(a).

“ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“ Purchase Price Per Share ” means the VWCP of the Common Stock, as reported on the Trading Market, for the three consecutive Trading Days immediately following the day on which the Required Disclosure is made.

“ Shares ” means a number of shares of Common Stock equal to the quotient determined by dividing the Subscription Amount by the Purchase Price Per Share.

“ Subscription Amount ” means Two Million Five Hundred Thousand Dollars ($2,500,000) in United States Dollars and in immediately available funds.

“ Trading Day ” means a day on which the Common Stock is traded on the Trading Market.

“ Trading Market ” means the OTC Bulletin Board, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange (“NYSE”) or the NYSE Amex, or any successor markets thereto.

“ VWCP ” means, for any specified period of consecutive Trading Days, the quotient of: (a) the sum of the individual products, calculated for each Trading Day within such period, of (i) the Closing Price for such Trading Day in such specified period, multiplied by (ii) the trading volume for the Common Stock for such Trading Day in such specified period as reported by the Trading Market, divided by (b) the total aggregate trading volume for the Common Stock for all Trading Days in such specified period, as reported by the Trading Market.

ARTICLE II
PURCHASE AND SALE

2.1 Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company shall sell, and each Purchaser shall purchase, the Shares for the Subscription Amount, which shall be paid by the Purchasers in the respective amounts set forth on Annex A attached hereto. At the Closing, each Purchaser shall deliver the Subscription Amount to the Company via wire transfer, against the Company’s delivery to each Purchaser of a number of Shares corresponding to the amount to be invested by the Purchasers. The Shares shall be delivered to each Purchaser’s prime brokerage account via DWAC pursuant to instructions to be provided by the Purchasers on the Closing Date.

2.2 Closing Conditions .

(a) The obligations of the Company hereunder at the Closing with respect to each Purchaser are subject to the satisfaction of the following conditions:

(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchaser contained herein; and

(ii) the delivery by the Purchaser to the Company of the Subscription Amount as set forth in Section 2.1.

(b) The obligations of each Purchaser hereunder at the Closing are subject to the satisfaction of the following conditions:

(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

(ii) the delivery by the Company to the Purchaser of the Shares as set forth in Section 2.1;

(iii) the Common Stock shall be listed for trading on the NASDAQ Capital Market; and

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company . As an inducement to the Purchaser to enter into this Agreement and to purchase the Shares, the Company hereby represents and warrants to the Purchaser as follows:

(a) Organization and Qualification . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement; (ii) a material adverse effect on the results of operations, assets, business, prospects or consolidated financial condition of the Company and its subsidiary, taken as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a “ Material Adverse Effect ”).

(b) Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of

creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies

(c) No Conflicts . The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the Company’s certificate of incorporation or bylaws; or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default), give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument to which the Company is a party or by which any property or asset of the Company is bound or affected; or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; or (iv) conflict with or violate the terms of any agreement by which the Company is bound or to which any property or asset of the Company is bound or affected, except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.

(d) Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than the filing of the Prospectus Supplement.

(e) Issuance of the Shares . The Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, claims or encumbrances imposed by the Company other than restrictions on transfer referred to in this Agreement.

(f) Capitalization . The capitalization of the Company is as described in the Company’s most recent periodic report filed with the Commission. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement. The issuance and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities.

(g) Material Changes . Since the date of the Company’s most recent periodic report filed with the Commission, there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect.

(h) Certain Fees . No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement.

(i) Registration of Offering . The Company’s Registration Statement on Form S-3 (File No. 333-167025) (the “ Registration Statement ”) has been declared effective by the Commission and no stop orders have been issued or, to the knowledge of the Company, are threatened. The Shares are to be offered and sold pursuant to the Registration Statement and the prospectus contained therein dated May 21, 2010, which shall be supplemented by a prospectus supplement to be filed pursuant to Rule 424(b) under the Securities Act of 1933 (the “ Prospectus Supplement ”). The Prospectus Supplement will be filed with the Commission in the manner and within the time period required under Rule 424(b).

3.2 Representations and Warranties of the Purchaser . In order to induce the Company to enter into this Agreement and to sell and issue the Shares, each Purchaser (severally but not jointly) hereby represents and warrants to the Company as follows:

(a) Organization; Authority . Such Purchaser is duly formed, validly existing and in good standing under the laws of Delaware with the requisite power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement by the Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes a valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) Short Sales . From July 21, 2011 through the date herof, neither the Purchaser nor any of its affiliates has made any short sales of, or granted any option for the purchase of or entered into any hedging or similar transaction with the same economic effect as a short sale.

ARTICLE IV
MISCELLANEOUS

4.1 Entire Agreement . This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.

4.2 Amendments; Waivers . No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchasers or, in the case of a waiver, by the party against whom a waiver of any such provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

4.3 Successors and Assigns . No party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party; provided , that this provision shall not limit Purchasers’ rights to transfer the Shares in accordance with all of the terms of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.

4.4 Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof.

4.5 Attorneys’ Fees . If any action at law or equity, including an action for declaratory relief, is brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and expenses from the other party, which fees and expenses shall be in addition to any other relief, which may be awarded.

4.6 Counterparts; Facsimile Signatures . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.

4.7 Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other parties may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

4.8 Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

* * *

IN WITNESS WHEREOF, the parties hereto have caused this Investor Subscription Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.


COMPANY:	RXi PHARMACEUTICALS CORPORATION
	By:	/s/ Mark J. Ahn
		Mark J. Ahn, Ph.D.
		President and Chief Executive Officer

PURCHASERS:	TANG CAPITAL PARTNERS, LP
	By:	TANG CAPITAL MANAGEMENT, LLC


	By:	/s/ Kevin Tang
		Kevin Tang, Managing Director


RTW INVESTMENTS, LLC
By:	/s/ Roderick Wong
	Name:	Roderick Wong
	Title:	Managing Member

Annex A


Purchaser Name	Subscription Amount
Tang Capital Partners, LP	$	2,368,421.05
RTW Investments, LLC	$	131,578.95
Total	$	2,500,000.00

Exhibit 10.4

EMPLOYMENT AGREEMENT

This Employment Agreement is made and entered into by and between RNCS, Inc. (the “ Company ”), a Delaware corporation with its principal place of business at Worcester, Massachusetts, and Anastasia Khvorova, of Worcester, Massachusetts (the “ Executive ”), signed on September 24, 2011 and effective as of the Effective Date, as defined in that certain Securities Purchase Agreement, by and among Tang Capital Partners, LP, RTW Investments, LLC, the Company, and RXi Pharmaceuticals Corporation (the “ Securities Purchase Agreement ”), and entered into as of September 24, 2011 (the “ Effective Date ”).

WHEREAS, the operations of the Company and its Affiliates are a complex matter requiring direction and leadership in a variety of arenas, including scientific operations and others;

WHEREAS, the Executive is possessed of certain experience and expertise that qualify her to provide the direction and leadership required by the Company and its Affiliates; and

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company therefore wishes to employ the Executive as its Senior Vice President and Chief Scientific Officer and the Executive wishes to accept such employment;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree:

1. Employment . Subject to the terms and conditions set forth in this Agreement, the Company hereby offers, and the Executive hereby accepts, employment.

2. Term . Subject to earlier termination as hereinafter provided, the Executive’s employment shall commence on the Effective Date, and shall continue until terminated pursuant to Section 5 hereof (the “ Term ”).

3. Capacity and Performance .

(a) During the Term, the Executive shall be employed by the Company on a full-time basis and shall direct the Company’s research and development programs and perform such other duties and responsibilities on behalf of the Company and its Affiliates related to her position as reasonably may be designated from time to time by the Board of Directors of the Company (the “ Board” ) or by its Chair or other designee.

(b) During the Term, the Executive shall devote her full business time and her best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of her duties and responsibilities hereunder. The Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the term of this Agreement, except as may be expressly approved in advance by the Board in writing, and except as noted on Schedule “A”, a copy of which is annexed hereto.

4. Compensation and Benefits . As compensation for all services performed by the Executive during the Term and subject to the Executive’s performance of her duties and obligations to the Company and its Affiliates, pursuant to this Agreement or otherwise, the Company shall provide the Executive with the following compensation and benefits:

(a) Base Salary and Bonus . During the Term, the Company shall pay the Executive a base salary at the rate of $310,000 per annum, payable in accordance with the payroll practices of the Company for its executives and subject to increase adjustment from time to time by the Board, in its sole discretion but not below $310,000 per annum (such base salary, as from time to time adjusted, the “ Base Salary ”). The Executive shall be eligible to receive an annual performance bonus, to be awarded at the discretion of the Compensation Committee of the Board of Directors (the “ Compensation Committee ”), for the achievement of certain Company and Executive performance goals, which goals will be established annually by the Compensation Committee. The target bonus for achieving these goals shall be equal to thirty (30%) percent of the Base Salary.

(b) Stock Options . On the day that is seven (7) days following the Closing (as defined in the Securities Purchase Agreement), the Company shall grant to the Executive an option to purchase shares of the common stock of the Company in an amount which shall equal 2% of the outstanding common stock as of such grant date (calculated on a fully-diluted basis), which option shall be exercisable at the fair market value of the common stock on the grant date (the “ Option ”). The shares that are subject to the Option shall vest and become exercisable in monthly installments over four (4) years beginning on the first month after the Effective Date of the Agreement, provided, in each case, that the Executive remains in the employ of the Company through each such monthly vesting date. Each vested Option shall have a term of ten (10) years and be exercisable by the Executive at any time during such ten (10) year period. The Option shall be subject to the Company 2011 Equity Incentive Plan, other equity incentive plan, award certificate and shareholder and/or option holder agreements and other restrictions and limitations generally applicable to equity held by Company executives or otherwise required by law. The Executive shall not be eligible to receive any stock options, restricted stock or other equity of the Company, however, whether under an equity incentive plan or otherwise, except as expressly provided in this Agreement or as otherwise expressly authorized for her individually by the Board.

(c) Paid Time Off . During the Term, the Executive shall be entitled to earn paid time off at the rate of 25 days per year. Paid time off, which may be taken for any reason including vacation, sick leave and personal leave, may be taken at such times and intervals as shall be determined by the Executive, subject to the reasonable business needs of the Company. Paid time off shall otherwise be governed by the policies of the Company, as in effect from time to time. The number of paid “time off” days will accrue per pay period and will stop accruing once twenty (20) days have been reached.

(d) Other Benefits . During the term hereof, the Executive shall be entitled to participate in any and all employee benefit plans from time to time in effect for employees of the Company generally, except to the extent any such employee benefit plan is in a category of benefit otherwise provided to the Executive (e.g., a severance pay plan). Such participation shall be subject to the terms of the applicable plan documents and generally applicable Company

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policies. The Company may alter, modify, add to or delete its employee benefit plans at any time as it, in its sole judgment, determines to be appropriate, without recourse by the Executive.

5. Termination of Employment and Severance Benefits . The Executive’s employment hereunder shall terminate under the following circumstances:

(a) Death . In the event of the Executive’s death during the Term, the Executive’s employment shall immediately and automatically terminate. In such event, the Company shall pay any Final Compensation (as defined below) to the Executive’s designated beneficiary or, if no beneficiary has been designated by the Executive in writing, to her estate.

(b) Disability .

(i) The Company may terminate the Executive’s employment hereunder, upon notice to the Executive, in the event that the Executive becomes disabled through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of her duties and responsibilities hereunder, notwithstanding the provision of any reasonable accommodation, for a total of ninety (90) days, whether or not consecutive, during any period of three hundred and sixty-five (365) consecutive calendar days. In the event of such termination, the Company shall have no further obligation to the Executive, other than for payment of Final Compensation.

(ii) The Board may designate another employee to act in the Executive’s place during any period of the Executive’s disability. Notwithstanding any such designation, the Executive shall continue to receive the Base Salary in accordance with Section 4(a) and benefits in accordance with Section 4(d), to the extent permitted by the then-current terms of the applicable benefit plans, until the Executive becomes eligible for disability income benefits under the Company’s disability income plan or until the termination of her employment, whichever shall first occur.

(iii) While receiving disability income payments under the Company’s disability income plan, the Executive shall not be entitled to receive any Base Salary under Section 4(a) hereof, but shall continue to participate in Company benefit plans in accordance with Section 4(d) and the terms of such plans, until the termination of her employment.

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submit to a medical examination by a physician selected by the Company to whom the Executive or her duly appointed guardian, if any, has no reasonable objection to determine whether the Executive is so disabled and such determination shall for the purposes of this Agreement be conclusive of the issue. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company’s determination of the issue shall be binding on the Executive.

(c) By the Company for Cause . The Company may terminate the Executive’s employment hereunder for Cause at any time upon written notice to the Executive setting forth in reasonable detail the nature of such Cause. The following, as determined by the Board in its reasonable judgment, shall constitute Cause for termination:

(i) The Executive’s repeated failure or repeated refusal to perform (other than by reason of disability), or gross negligence in the performance of, her material duties and responsibilities to the Company or any of its Affiliates;

(ii) Material breach by the Executive of any provision of this Agreement or any other agreement with the Company or any of its Affiliates; provided that the first occurrence of any particular breach shall not constitute Cause unless the Employee has failed to cure such breach within ten (10) days after receiving written notice from the Employer stating the nature of such breach;

(iii) The Executive’s conviction of, or plea of guilty or nolo contendere to, any felony;

(iv) The Executive’s act of fraud;

(v) The Executive’s act or omission that, in the reasonable determination of the Company indicates alcohol or drug abuse by the Executive; or

(vi) The Executive’s act or personal conduct that, in the judgment of the Company’s Board of Directors (or a Committee of the Board), gives rise to a material risk of liability of the Executive or the Company under federal or applicable state law for discrimination, or sexual or other forms of harassment, or other similar liabilities to subordinate employees.

Upon the giving of notice of termination of the Executive’s employment hereunder for Cause, the Company shall have no further obligation to the Executive, other than for Final Compensation.

(d) By the Company Other than for Cause . The Company may terminate the Executive’s employment hereunder other than for Cause at any time upon written notice to the Executive.

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termination, then monthly during the period of twelve (12) months following the date of termination, the Company shall continue to pay the Executive the Base Salary at the rate in effect on the date of termination and, subject to any employee contribution applicable to the Executive on the date of termination, shall continue to contribute to the premium cost of the Executive’s participation in the Company’s group medical and dental plans (unless prohibited by law), provided that the Executive is entitled to continue such participation under applicable law and plan terms.

(ii) More Than Twelve Months after the Effective Date . In the event of such termination after the first twelve (12) months following the Effective Date, in addition to Final Compensation, subject to Section 5(d)(iv) and provided that no benefits are payable to the Executive under a separate severance agreement as a result of such termination, then monthly during the period of six (6) months following the date of termination, the Company shall continue to pay the Executive the Base Salary at the rate in effect on the date of termination and, subject to any employee contribution applicable to the Executive on the date of termination, shall continue to contribute to the premium cost of the Executive’s participation in the Company’s group medical and dental plans (unless prohibited by law), provided that the Executive is entitled to continue such participation under applicable law and plan terms.

(iii) Following a Change of Control . In the event of such termination within twelve (12) months following a Change of Control, in addition to Final Compensation, subject to Section 5(d)(iv) and provided that no benefits are payable to the Executive under a separate severance agreement as a result of such termination, then: (A) monthly during the period of twelve (12) months following the date of termination, the Company shall continue to pay the Executive the Base Salary at the rate in effect on the date of termination, (B) the vesting of a portion of the Executive’s outstanding equity awards granted by the Company shall accelerate, with such acceleration to be equal to the greater of 50% of the unvested portion of all such outstanding awards or the portion that would have vested over the twenty four (24) months from the termination date and, (C) subject to any employee contribution applicable to the Executive on the date of termination, shall continue to contribute to the premium cost of the Executive’s participation in the Company’s group medical and dental plans (unless prohibited by law), provided that the Executive is entitled to continue such participation under applicable law and plan terms. For purposes of this Agreement, “ Change in Control ” shall mean: (x) an acquisition of any voting securities of the Company (the “Voting Securities”) by any “person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), immediately after which such person has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) (“Beneficial Ownership”) of 50% or more of the combined voting power of the Company’s then outstanding Voting Securities without the approval of the Board; (y) a merger or consolidation in which the Company’s stockholders immediately prior to such transaction hold, immediately after the consummation of the merger or consolidation, less than 50% of the combined voting power of the Company’s or its successor; or (z) the sale of all or substantially all of the Company’s assets.

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(iv) Release of Claims . Any obligation of the Company to the Executive hereunder, other than for Final Compensation, is conditioned on the Executive signing a timely and effective release of claims in the form provided by the Company (the “ Employee Release ”) and delivering it to the Company by the deadline specified therein, and the Employee Release taking effect by its terms, within sixty (60) calendar days following the date her employment terminates. Any severance payments to which the Executive is entitled hereunder shall be payable in accordance with the normal payroll practices of the Company, with the first payment, which shall be retroactive to the day immediately following the date the Executive’s employment terminated, being due and payable on the Company’s next regular payday for executives that follows the expiration of thirty (30) calendar days from the date the Executive’s employment terminates. The Release of Claims required for separation benefits in accordance with this Section 5(d)(iii) creates legally binding obligations on the part of the Executive and the Company and its Affiliates therefore advise the Executive to seek the advice of an attorney before signing it.

(e) By the Executive for Good Reason . The Executive may terminate her employment hereunder for Good Reason (A) by providing notice to the Company specifying in reasonable detail the condition giving rise to the Good Reason no later than thirty (30) days following the occurrence of that condition; (B) by providing the Company a period of thirty (30) days to remedy the condition and so specifying in the notice and (C) by terminating her employment for Good Reason within thirty (30) days following the expiration of the period to remedy if the Company fails to remedy the condition. The following, occurring without the Executive’s consent, shall constitute “ Good Reason ” for termination by the Executive:

(i) a material reduction of the Executive’s duties and responsibilities assigned to her as the Senior Vice President and Chief Scientific Officer.

(ii) the Company’s breach of any material term of the Agreement; provided that the first occasion of any particular breach shall not constitute such Good Reason unless the Company has failed to cure such breach within sixty (60) days after receiving written notice from the Executive stating the nature of such breach.

(iii) Relocation of the Company’s principal executive offices of a distance in excess of fifty (50) miles from its location at the Effective Date.

In the event of a termination of employment in accordance with this Section 5(e), the Executive will be entitled to receive the same pay and benefits she would have been entitled to receive had she been terminated by the Company other than for Cause in accordance with Section 5(d) above; provided that the Executive satisfies all conditions to such entitlement, including without limitation the signing of an effective Release of Claims as set forth in Section 5(d).

(f) Timing of Payments and Section 409A .

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separation from service that would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Executive’s death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code (“ Section 409A ”).

(ii) For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A-1(i).

(iii) Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.

(iv) The Executive’s right to reimbursement for business expenses hereunder shall be subject to the following additional rules: (i) the amount of expenses eligible for reimbursement during any calendar year shall not affect the expenses eligible for reimbursement in any other taxable year, (ii) reimbursement shall be made not later than December 31 of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement is not subject to liquidation or exchange for any other benefit.

(v) In no event shall the Company have any liability relating to any payment or benefit under this Agreement failing to comply with, or be exempt from, the requirements of Section 409A.

(g) Post-Agreement Employment . In the event the Executive remains in the employ of the Company or any of its Affiliates following termination of this Agreement, by the expiration of the term or otherwise, then such employment shall be at will.

6. Effect of Termination . The provisions of this Section 6 shall apply to any termination of the Executive’s employment hereunder:

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substantiation and documentation are submitted within sixty (60) days of termination and that such expenses are reimbursable under Company policy (all of the foregoing, “ Final Compensation ”). Subject to the terms of this Agreement, the Company shall have no further obligation to the Executive hereunder. Any Base Salary or pay for earned but unused paid time off shall be payable at the time provided by applicable law. Any bonus due for the preceding year shall be payable at the time provided for at the time such bonus is awarded. Any business expenses shall be payable not later than ninety (90) days following the date of termination.

(b) Payment by the Company of Final Compensation and any Base Salary and contributions to the cost of the Executive’s continued participation in the Company’s group health and dental plans that may be due the Executive in each case under the applicable termination provision of Section 5 shall constitute the entire obligation of the Company to the Executive hereunder. The Executive shall promptly give the Company notice of all facts necessary for the Company to determine the amount and duration of its obligations in connection with any termination pursuant to Section 5(d) hereof.

(c) Except for any right of the Executive to continue medical and dental plan participation in accordance with applicable law, benefits shall terminate pursuant to the terms of the applicable benefit plans based on the date of termination of the Executive’s employment without regard to any continuation of Base Salary or other payment to the Executive following such date of termination.

(d) Provisions of this Agreement shall survive any termination if so provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions, including without limitation the obligations of the Executive under Sections 7, 8 and 9 hereof. The obligation of the Company to make payments to or on behalf of the Executive under Section 5(d) hereof is expressly conditioned upon the Executive’s continued full performance of obligations under Sections 7, 8 and 9 hereof. The Executive recognizes that, except as expressly provided in Section 5(d), no compensation is earned after termination of employment.

7. Confidential Information .

(a) The Executive acknowledges that the Company and its Affiliates continually develop Confidential Information, that the Executive may develop Confidential Information for the Company or its Affiliates and that the Executive may learn of Confidential Information during the course of employment. The Executive will comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any Person or use, other than as required by applicable law or for the proper performance of her duties and responsibilities to the Company and its Affiliates, any Confidential Information obtained by the Executive incident to her employment or other association with the Company or any of its Affiliates. The Executive understands that this restriction shall continue to apply after her employment terminates, regardless of the reason for such termination. The confidentiality obligation under this Section 7 shall not apply to information which is generally known or readily available to the public at the time of disclosure or becomes generally known through no wrongful act on the part of the Executive or any other Person having an obligation of confidentiality to the Company or any of its Affiliates.

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(b) All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company or its Affiliates and any copies, in whole or in part, thereof (the “ Documents ”), whether or not prepared by the Executive, shall be the sole and exclusive property of the Company and its Affiliates. The Executive shall safeguard all Documents and shall surrender to the Company at the time her employment terminates, or at such earlier time or times as the Board or its designee may specify, all Documents then in the Executive’s possession or control.

8. Assignment of Rights to Intellectual Property . The Executive shall promptly and fully disclose all Intellectual Property to the Company. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the Executive’s full right, title and interest in and to all Intellectual Property. The Executive agrees to execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company and to permit the Company to enforce any patents, copyrights or other proprietary rights to the Intellectual Property. The Executive will not charge the Company for time spent in complying with these obligations. All copyrightable works that the Executive creates shall be considered “work made for hire” and shall, upon creation, be owned exclusively by the Company. The Executive’s obligation to assist the Company in obtaining and enforcing patents for Intellectual Property in any and all countries shall continue beyond the termination of the Executive’s employment with the Company, but the Company shall compensate the Executive at a reasonable, standard hourly rate following such termination for time directly spent by Employee at the Company’s request for such assistance.

9. Restricted Activities . The Executive agrees that the following restrictions on her activities during and after her employment are necessary to protect the good will, Confidential Information, trade secrets and other legitimate interests of the Company and its Affiliates:

(a) During the Term, the Executive will not undertake any outside activity, whether or not Competitive with the business of the Company or its Affiliates that could reasonably give rise to a conflict of interest or otherwise interfere with her duties and obligations to the Company or any of its Affiliates.

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biological target or for the treatment of the same diseases, disorders or conditions targeted by any Product. The foregoing, however, shall not prevent the Executive’s passive ownership of one percent (1%) or less of the equity securities of any publicly traded company. For purposes of this Agreement: (A) the “ Restricted Period ” shall be twelve (12) months if Executive’s employment terminates on or prior to the first anniversary of the Effective Date, and six (6) months if Executive’s employment terminates after the first anniversary of the Effective Date; and (B) the term “ Competitive ” shall mean either the discovery, development or commercialization of any human therapeutics or human diagnostics utilizing RNA interference, or the discovery, development or commercialization of any Products.

(c) During the Restricted Period, the Executive will not directly or indirectly (a) solicit or encourage any customer of the Company or any of its Affiliates to terminate or diminish its relationship with them; or (b) seek to persuade any such customer or prospective customer of the Company or any of its Affiliates to conduct with anyone else any business or activity which such customer or prospective customer conducts or could conduct with the Company or any of its Affiliates; provided that these restrictions shall apply (y) only with respect to those Persons who are or have been a customer of the Company or any of its Affiliates at any time within the immediately preceding two year period or whose business has been solicited on behalf of the Company or any of the Affiliates by any of their officers, employees or agents within said two year period, other than by form letter, blanket mailing or published advertisement, and (z) only if the Executive has performed work for such Person during her employment with the Company or one of its Affiliates or been introduced to, or otherwise had contact with, such Person as a result of her employment or other associations with the Company or one of its Affiliates or has had access to Confidential Information which would assist in the Executive’s solicitation of such Person

(d) During the Restricted Period, the Executive will not, and will not assist any other Person to, (a) hire or solicit for hiring any employee of the Company or any of its Affiliates or seek to persuade any employee of the Company or any of its Affiliates to discontinue employment or (b) solicit or encourage any independent contractor providing services to the Company or any of its Affiliates to terminate or diminish its relationship with them. For the purposes of this Agreement, an “employee” of the Company or any of its Affiliates is any person who was such at any time within the preceding two years.

10. Notification Requirement . Until forty-five (45) days after the conclusion of the Restricted Period, the Executive shall give notice to the Company of each new business activity she undertakes, at least ten (10) days prior to beginning any such activity. Such notice shall state the name and address of the Person for whom such activity is undertaken and the nature of the Executive’s business relationship(s) and position(s) with such Person. The Executive shall provide the Company with such other pertinent information concerning such business activity as the Company may reasonably request in order to determine the Executive’s continued compliance with her obligations under Sections 7, 8 and 9 hereof.

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protection of the good will, Confidential Information, trade secrets and other legitimate interests of the Company and its Affiliates; that each and every one of those restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent her from obtaining other suitable employment during the period in which the Executive is bound by these restraints. The Executive further agrees that she will never assert, or permit to be asserted on her behalf, in any forum, any position contrary to the foregoing. The Executive further acknowledges that, were she to breach any of the covenants contained in Sections 7, 8 or 9 hereof, the damage to the Company would be irreparable. The Executive therefore agrees that the Company, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by the Executive of any of said covenants, without having to post bond and to recover its reasonable attorneys’ fees and costs incurred in securing such relief. The Executive agrees that the Restricted Period shall be tolled, and shall not run, during any period of time in which she is in violation of the terms thereof, in order that the Company and its Affiliates shall have all of the agreed-upon temporal protection recited herein. The parties further agree that, in the event that any provision of Section 7, 8 or 9 hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.

12. Conflicting Agreements . The Executive hereby represents and warrants that the execution of this Agreement and the performance of her obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any court order or other legal obligation that would affect the performance of her obligations hereunder. The Executive will not disclose to or use on behalf of the Company any proprietary information of a third party without such party’s consent.

13. Definitions . Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section and as provided elsewhere herein. For purposes of this Agreement, the following definitions apply:

(a) “ Affiliates ” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by management authority, contract or equity interest.

(b) “ Confidential Information ” means any and all information of the Company and its Affiliates that is not generally known by those with whom the Company or any of its Affiliates competes or does business, or with whom the Company or any of its Affiliates plans to compete or do business and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its Affiliates would assist in competition against them. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Affiliates, (ii) the Products, (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates, (iv) the identity and special needs of the customers of the Company and its Affiliates and (v) the people and organizations

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with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes any information that the Company or any of its Affiliates has received, or may receive hereafter, belonging to customers or others with any understanding, express or implied, that the information would not be disclosed.

(c) “ Intellectual Property ” means inventions, discoveries, developments, methods, processes, compositions, works, concepts and ideas (whether or not patentable or copyrightable or constituting trade secrets) conceived, made, created, developed or reduced to practice by the Executive (whether alone or with others, whether or not during normal business hours or on or off Company premises) during the Executive’s employment and during the period of six (6) months immediately following termination of her employment that relate to either the Products or any prospective activity of the Company or any of its Affiliates or that make use of Confidential Information or any of the equipment or facilities of the Company or any of its Affiliates.

(d) “ Person ” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates.

(e) “ Products ” mean all products and product candidates planned, researched, developed, tested, manufactured, sold, licensed, leased or otherwise distributed or put into use by the Company or any of its Affiliates, together with all related services provided or planned by the Company or any of its Affiliates, during the Executive’s employment with the Company or any of its Affiliates.

14. Withholding . All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

15. Assignment . Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without the consent of the Executive in the event that the Executive is transferred to a position with any of the Affiliates or in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into, any Person or transfer all or substantially all of its properties or assets to any Person. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, their respective successors, executors, administrators, heirs and permitted assigns.

16. Severability . If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

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17. Waiver . No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

18. Notices . Any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person, consigned to a reputable national courier service or deposited in the United States mail, postage prepaid, registered or certified, and addressed to the Executive at her last known address on the books of the Company or, in the case of the Company, at its principal place of business, attention of the Chief Executive Officer, or to such other address as either party may specify by notice to the other actually received.

19. Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment with the Company, other than any obligations owed to the Company or its predecessor with respect to confidentiality, non-competition, intellectual property, and proprietary information, all of which shall continue in force.

20. Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by an expressly authorized representative of the Company.

21. Headings . The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

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

23. Governing Law . This is a Massachusetts contract and shall be construed and enforced under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without regard to the conflict of laws principles thereof.

[Signature page follows immediately.]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.


THE EXECUTIVE:		THE COMPANY

/s/ Anastasia Khvorova Anastasia Khvorova, Ph.D.	By:	/s/ Mark J. Ahn Mark J. Ahn, Ph.D, President and Chief Financial Officer

[Signature Page to Anastasia Khvorova Employment Agreement]

Schedule A

I.		Potential consulting activities . As of the Effective Date, the Employee has a material interest (50% ownership) and is providing professional services to Advirna, LLC and the Employee desires expects to continue this relationship on a part-time basis. The Employer acknowledges this pre-existing relationship and agrees that the Employee may continue to provide professional services to Advirna, LLC, on a part-time basis so long as this activity does not materially interfere with the performance of the Employee’s duties hereunder.

II.		As of Effective Date, the Employee is participating in several professional organizations and activities, and as follows:

	a.		Board Member and Treasure of Oligonucleotide Therapeutic Society.

	b.		Editorial board member of several professional journals including Nucleic Acid Research, Silence, Nature Publishing Group Journal Molecular Therapy, Nucleic Acids, RNA, Oligonucleotides, Silence.

	c.		Review and adviser to NIH SBIR Funding Committee.

	d.		Keystone symposium 2012 and OTS 2012 meeting organizer.

III.		Potential participation on the Boards of other companies . The Employee may desire to seek appointment to an outside Board(s) for a non-competing company in the future. If so, the Employee will inform the Employer that she is contemplating an outside Board(s) position and request approval to pursue such an opportunity and the Employer agrees to give consider this request(s) in good faith and to unreasonably withhold its consent to such request(s).

IV.		Total time expended on outside companies shall not exceed 10 hours per month .

Exhibit 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement is made and entered into by and between RNCS, Inc. (the “ Company ”), a Delaware corporation with its principal place of business at Worcester, Massachusetts, and Pamela Pavco, of Longmont, Colorado (the “ Executive ”), signed on September 24, 2011 and effective as of the Effective Date, as defined in that certain Securities Purchase Agreement, by and among Tang Capital Partners, LP, RTW Investments, LLC, the Company, and RXi Pharmaceuticals Corporation (the “ Securities Purchase Agreement ”), and entered into as of September 24, 2011 (the “ Effective Date ”).

WHEREAS, the operations of the Company and its Affiliates are a complex matter requiring direction and leadership in a variety of arenas, including research and development and others;

WHEREAS, the Executive is possessed of certain experience and expertise that qualify her to provide the direction and leadership required by the Company and its Affiliates; and

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company therefore wishes to employ the Executive as its Senior Vice President of Pharmaceutical Development and the Executive wishes to accept such employment;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree:

1. Employment . Subject to the terms and conditions set forth in this Agreement, the Company hereby offers, and the Executive hereby accepts, employment.

3. Capacity and Performance .

(a) During the Term, the Executive shall be employed by the Company on a full-time basis and shall perform the duties and responsibilities of her position and such other duties and responsibilities on behalf of the Company and its Affiliates as reasonably may be designated from time to time by the Board of Directors of the Company (the “ Board” ) or by its Chair or other designee.

(b) During the Term, the Executive shall devote her full business time and her best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of her duties and responsibilities hereunder. The Executive’s services hereunder shall be rendered at the geographic location of the Executive’s choosing (and the Executive shall not be required to relocate), except for travel when and as required in the performance of the Executive’s duties hereunder. The Executive shall not engage in any other business activity or serve in any

industry, trade, professional, governmental or academic position during the term of this Agreement, except as may be expressly approved in advance by the Board in writing.

(a) Base Salary and Bonus . During the Term, the Company shall pay the Executive a base salary at the rate of $300,000 per annum, payable in accordance with the payroll practices of the Company for its executives and subject to adjustment from time to time by the Board, in its sole discretion (such base salary, as from time to time adjusted, the “ Base Salary ”). The Executive shall be eligible to receive an annual performance bonus, to be awarded at the discretion of the Compensation Committee of the Board of Directors (the “Compensation Committee”), for the achievement of certain Company and Executive performance goals, which goals will be established annually by the Compensation Committee. The target bonus for achieving these goals shall be equal to thirty (30%) percent of the Base Salary.

(b) Stock Options . On the day that is seven (7) days following the Closing (as defined in the Securities Purchase Agreement), the Company shall grant to the Executive an option to purchase shares of the common stock of the Company in an amount which shall equal 2% of the outstanding common stock as of such grant date (calculated on a fully-diluted basis), which option shall be exercisable at the fair market value of the common stock on the grant date (the “ Option ”). The shares that are subject to the Option shall vest and become exercisable in monthly installments over four (4) years beginning on the first month after the Effective Date of the Agreement, provided, in each case, that the Executive remains in the employ of the Company through each such monthly vesting date. Each vested Option shall have a term of ten years and be exercisable by the Executive at any time during such ten-year period. The Option shall be subject to the Company 2011 Equity Incentive Plan, other equity incentive plan, award certificate and shareholder and/or option holder agreements and other restrictions and limitations generally applicable to equity held by Company executives or otherwise required by law. The Executive shall not be eligible to receive any stock options, restricted stock or other equity of the Company, however, whether under an equity incentive plan or otherwise, except as expressly provided in this Agreement or as otherwise expressly authorized for her individually by the Board.

(c) Paid Time Off . During the Term, the Executive shall be entitled to earn paid time off at the rate of twenty-five (25) days per year. Paid time off, which may be taken for any reason including vacation, sick leave and personal leave, may be taken at such times and intervals as shall be determined by the Executive, subject to the reasonable business needs of the Company. Paid time off shall otherwise be governed by the policies of the Company, as in effect from time to time. The number of paid “time off” days will accrue per pay period and will stop accruing once twenty (20) days have been reached.

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(e) Business Expenses . The Company shall pay or reimburse the Executive for all reasonable and necessary business expenses incurred or paid by the Executive in the performance of her duties and responsibilities hereunder, subject to any maximum annual limit and other restrictions on such expenses set by the Board and to such reasonable substantiation and documentation as may be specified by the Company from time to time. In addition, the Company agrees to reimburse the Executive for expenses directly related to the Executive’s performance of duties at the Executive’s Colorado office including (but not limited to) such reasonable and necessary expenses directly related to fax, phone, internet, copying and similar items.

5. Termination of Employment and Severance Benefits . The Executive’s employment hereunder shall terminate under the following circumstances:

(b) Disability .

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(iv) If any question shall arise as to whether during any period the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of her duties and responsibilities hereunder, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to whom the Executive or her duly appointed guardian, if any, has no reasonable objection to determine whether the Executive is so disabled and such determination shall for the purposes of this Agreement be conclusive of the issue. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company’s determination of the issue shall be binding on the Executive.

(iii) The Executive’s conviction of, or plea of guilty or nolo contendere to, any felony;

(iv) The Executive’s act of fraud;

(v) The Executive’s act or omission that, in the reasonable determination of the Company indicates alcohol or drug abuse by the Executive; or

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Upon the giving of notice of termination of the Executive’s employment hereunder for Cause, the Company shall have no further obligation to the Executive, other than for Final Compensation.

(d) By the Company Other than for Cause . The Company may terminate the Executive’s employment hereunder other than for Cause at any time upon written notice to the Executive.

(i) Within Twelve Months of the Effective Date . In the event of such termination within the first twelve (12) months following the Effective Date, in addition to Final Compensation, subject to Section 5(d)(iv) and provided that no benefits are payable to the Executive under a separate severance agreement as a result of such termination, then monthly during the period of twelve (12) months following the date of termination, the Company shall continue to pay the Executive the Base Salary at the rate in effect on the date of termination and, subject to any employee contribution applicable to the Executive on the date of termination, shall continue to contribute to the premium cost of the Executive’s participation in the Company’s group medical and dental plans (unless prohibited by law), provided that the Executive is entitled to continue such participation under applicable law and plan terms.

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any voting securities of the Company (the “Voting Securities”) by any “person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), immediately after which such person has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) (“Beneficial Ownership”) of 50% or more of the combined voting power of the Company’s then outstanding Voting Securities without the approval of the Board; (y) a merger or consolidation in which the Company’s stockholders immediately prior to such transaction hold, immediately after the consummation of the merger or consolidation, less than 50% of the combined voting power of the Company’s or its successor; or (z) the sale of all or substantially all of the Company’s assets.

(iv) Release of Claims . Any obligation of the Company to the Executive hereunder, other than for Final Compensation, is conditioned on the Executive signing a timely and effective release of claims in the form provided by the Company (the “ Employee Release ”) and delivering it to the Company by the deadline specified therein, and the Employee Release taking effect by its terms, within sixty (60) calendar days following the date her employment terminates. Any severance payments to which the Executive is entitled hereunder shall be payable in accordance with the normal payroll practices of the Company, with the first payment, which shall be retroactive to the day immediately following the date the Executive’s employment terminated, being due and payable on the Company’s next regular payday for executives that follows the expiration of thirty (30) calendar days from the date the Executive’s employment terminates. The Release of Claims required for separation benefits in accordance with this Section 5(d) (iii) creates legally binding obligations on the part of the Executive and the Company and its Affiliates therefore advise the Executive to seek the advice of an attorney before signing it.

(i) a material reduction of the Executive’s regular responsibilities from those typically assigned to a Senior Vice President of a similarly situated biotechnology company.

(ii) a reduction in Base Salary set forth in Section 4 hereof by more than 10% in any calendar year, unless such reduction is in proportion with any Company-wide reductions in base salary for all executive officers of the Company.

(iii) the Company’s breach of any material term of the Agreement; provided that the first occasion of any particular breach shall not constitute such Good Reason

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unless the Company has failed to cure such breach within sixty (60) days after receiving written notice from the Executive stating the nature of such breach.

(iv) requiring the Executive to relocate her Colorado office a distance in excess of fifty (50) miles from its location at the time of such requirement.

(f) Timing of Payments and Section 409A .

(i) Notwithstanding anything to the contrary in this Agreement, if at the time of the Executive’s termination of employment, the Executive is a “specified employee,” as defined below, any and all amounts payable under this Section 5 on account of such separation from service that would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Executive’s death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code (“ Section 409A ”).

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(v) In no event shall the Company have any liability relating to any payment or benefit under this Agreement failing to comply with, or be exempt from, the requirements of Section 409A.

6. Effect of Termination . The provisions of this Section 6 shall apply to any termination of the Executive’s employment hereunder:

(a) The Company shall pay to the Executive: (i) any Base Salary earned but not paid during the final payroll period of the Executive’s employment through the date of termination, (ii) pay for any paid time off earned but not used through the date of termination, (iii) any bonus compensation awarded for the year preceding that in which termination occurs, but unpaid on the date of termination and (iv) any business expenses incurred by the Executive but un-reimbursed on the date of termination, provided that such expenses and required substantiation and documentation are submitted within sixty (60) days of termination and that such expenses are reimbursable under Company policy (all of the foregoing, “ Final Compensation ”). The Company shall have no further obligation to the Executive hereunder. Any Base Salary or pay for earned but unused paid time off shall be payable at the time provided by applicable law. Any bonus due for the preceding year shall be payable at the time provided for at the time such bonus is awarded. Any business expenses shall be payable not later than ninety (90) days following the date of termination.

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7. Confidential Information .

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(b) During the Term and for the Restricted Period (defined below), the Executive shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise: (i) engage in any Competitive activity within the United States or any other country in which the Company has conducted discovery, development or commercialization activities for any Product or has sought patent protection for any Product, in either case as of the date of such termination; or (ii) undertake any planning for any Competitive business. Specifically, but without limiting the foregoing, the Executive agrees not to engage in any manner in any activity that is directly or indirectly Competitive or potentially Competitive and further agrees not to work or provide services, in any capacity, whether as an employee, independent contractor or otherwise, whether with or without compensation, to any Person who is engaged in any business that is Competitive. For the purposes of this Section 9, the Executive’s foregoing obligations to not engage in any Competitive activity shall encompass all drugs and drug candidates being discovered, developed or commercialized for the same biological target or for the treatment of the same diseases, disorders or conditions targeted by any Product. The foregoing, however, shall not prevent the Executive’s passive ownership of one percent (1%) or less of the equity securities of any publicly traded company. For purposes of this Agreement: (A) the “ Restricted Period ” shall be twelve (12) months if Executive’s employment terminates on or prior to the first anniversary of the Effective Date, and six (6) months if Executive’s employment terminates after the first anniversary of the Effective Date; and (B) the term “ Competitive ” shall mean either the discovery, development or commercialization of any human therapeutics or human diagnostics utilizing RNA interference, or the discovery, development or commercialization of any Products.

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discontinue employment or (b) solicit or encourage any independent contractor providing services to the Company or any of its Affiliates to terminate or diminish its relationship with them. For the purposes of this Agreement, an “employee” of the Company or any of its Affiliates is any person who was such at any time within the preceding two years.

11. Enforcement of Covenants . The Executive acknowledges that she has carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed upon her pursuant to Sections 7, 8 and 9 hereof. The Executive agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the good will, Confidential Information, trade secrets and other legitimate interests of the Company and its Affiliates; that each and every one of those restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent her from obtaining other suitable employment during the period in which the Executive is bound by these restraints. The Executive further agrees that she will never assert, or permit to be asserted on her behalf, in any forum, any position contrary to the foregoing. The Executive further acknowledges that, were she to breach any of the covenants contained in Sections 7, 8 or 9 hereof, the damage to the Company would be irreparable. The Executive therefore agrees that the Company, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by the Executive of any of said covenants, without having to post bond and to recover its reasonable attorneys’ fees and costs incurred in securing such relief. The Executive agrees that the Restricted Period shall be tolled, and shall not run, during any period of time in which she is in violation of the terms thereof, in order that the Company and its Affiliates shall have all of the agreed-upon temporal protection recited herein. The parties further agree that, in the event that any provision of Section 7, 8 or 9 hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.

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14. Withholding . All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

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20. Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by an expressly authorized representative of the Company.

21. Headings . The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

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

[Signature page follows immediately.]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.

[Signature Page to Pamela Pavco Employment Agreement]

Exhibit 10.6

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This Amendment No. 1 to Employment Agreement (this “ Amendment ”) is made as of September 23, 2011, by and between RXi Pharmaceuticals Corporation, a Delaware corporation (“ Employer ”), and Mark W. Schwartz, Ph.D., an individual and resident of the State of California (“ Employee ”), with reference to the following facts:

WHEREAS, Employer and Employee previously entered into an Employment Agreement, dated as of April 13, 2011 (the “ Employment Agreement ”), in connection with Employee’s appointment as Employer’s Executive Vice President and Chief Operating Officer; and

WHEREAS, Employer and Employee wish to amend the Employment Agreement in certain respects as provided in this Amendment.

NOW, THEREFORE, in consideration of the foregoing and other consideration, the receipt and sufficiency of which hereby are acknowledged, Employer and Employee hereby agree as follows:

1. Definitions . Terms not defined in this Amendment shall have the meanings attributed to such terms in the Employment Agreement.

2. Amendments .

(a) Section 4 of the Employment Agreement is hereby amended by removing therefrom the first sentence and substituting the following:

“Employee’s employment shall commence on the Effective Date and shall terminate on September 23, 2013 (the “ Term ”), unless sooner terminated in accordance with Section 6.”

(b) Section 5.1 of the Employment Agreement is hereby amended and restated in its entirety to read as follows:

“5.1 Salary . Effective retroactive to September 7, 2011, Employee shall be entitled to receive an annual base salary during the Term of Three Hundred Fifty Thousand Dollars ($350,000) (hereinafter, the “ Base Salary ”), payable in accordance with the usual payroll period of Employer, as established from time to time.”

3. Stock Options . In conjunction with and consideration of Employee’s entering into this Amendment, the Administrator (as defined therein) under Employer’s Amended and Restated 2007 Incentive Plan, as amended (as so amended, the “ 2007 Plan ”), has granted Employee as of September 7, 2011 (the “ Grant Date ”) an incentive stock option under the Plan to purchase up to 250,000 shares of Employer’s common stock. Such option vested and became exercisable, in full, as of the Grant Date, and is on such other terms set forth in the Incentive Stock Option Agreement, a copy of which is attached as Exhibit A hereto.

4. No Other Changes to the Employment Agreement . Except as expressly amended by this Amendment, all of the terms of the Employment Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.

EXHIBIT A

Form of Incentive Stock Option Agreement

Exhibit 99.1

RXi Pharmaceuticals to Strengthen Strategic Focus by
Separating into Two Publicly Traded Companies

Galena Biopharma to Focus on Targeted Cancer Therapies
RXi Pharmaceuticals to Focus on RNAi-Based Therapeutics

	•		Separation of oncology and RNAi programs expected to enhance shareholder value through stronger development and strategic focus

	•		Institutional investors to invest $9.5 million in RXi Pharmaceuticals and $2.5 million in Galena Biopharma

	•		Galena to retain minority equity interest in RXi with potential to receive up to $45 million in milestones

WORCESTER, Mass., September 26, 2011— RXi Pharmaceuticals Corporation (NASDAQ: RXII), a biotechnology company focused on discovering, developing and commercializing innovative therapies addressing major unmet medical needs using targeted biotherapeutics, today reported that it will separate its programs into two publicly traded companies: Galena Biopharma will focus on the development of targeted cancer therapies; and RXi Pharmaceuticals will focus on the development of RNAi-based therapeutics. The RNAi programs have been contributed to the new RXi, which is expected to be spun off later this year. In connection with these transactions, the Company has changed its name to Galena Biopharma, but will continue to trade under the ticker symbol “RXII” until the completion of the spin-off.

As part of these transactions, institutional investors have agreed to invest $9.5 million in RXi preferred stock and $2.5 million in Galena common stock, for a total of $12 million. The RXi preferred stock will be convertible into 83% of the equity of RXi as of the completion of the spin-off. The investment in Galena common stock will be priced “at market” based on a volume-weighted average trading price. No warrants will be issued in the transaction.

It is expected that approximately 8% of the equity in RXi will be distributed on a share-for-share basis so that a holder of one share of Galena common stock prior to the distribution will hold one share of RXi and one share of Galena after the spin-off. Galena will retain a 4% equity position in RXi, and Advirna, LLC, a private company and key licensor of RXi, will acquire5% of the equity. The completion of the spin-off and the related transactions, including the financing of RXi, are subject to certain conditions, including registration of the spin-off distribution with the Securities and Exchange Commission.

Mark Ahn, Ph.D., the President and Chief Executive Officer of Galena Biopharma, will serve on the board of RXi. Anastasia Khvorova, Ph.D., will serve as RXi’s Senior Vice President and Chief

Scientific Officer, and Pamela Pavco, Ph.D., will serve as RXi’s Senior Vice President of Pharmaceutical Development. A search for RXi’s Chief Executive Officer is underway.

“We believe that the spin-off transaction will enhance shareholder value by providing a sharper strategic focus for both of the Company’s key programs,” commented Dr. Ahn. “Galena will focus its resources on its lead product, NeuVax™, a cancer immunotherapy that is expected to initiate its Phase 3 PRESENT (Prevention of Recurrence in Early-Stage, Node-Positive Breast Cancer with Low to Intermediate HER2 Expression with NeuVax™ Treatment) study in the first half of 2012. Galena also recently acquired Folate Binding Protein-E39 (FBP), a targeted vaccine scheduled to commence Phase 1/2 trials by year-end 2011.”

Dr. Ahn also stated, “RXi will focus on advancing its lead anti-scarring and anti-fibrosis product, RXI-109, into the clinic in 2012, as well as unlocking the therapeutic potential of gene silencing more broadly through its proprietary, next generation RNAi platform with several ongoing and future partners.”

Dr. Ahn concluded, “We are delighted to be strengthening our balance sheet at this uncertain time in the financial markets. We view this pair of financings from a strong group of investors as an endorsement of both of our platforms and our planned path forward.”

About Galena Biopharma

Galena Biopharma, Inc. (Nasdaq: RXII) is a Portland, Oregon-based biopharmaceutical company that develops innovative, targeted oncology treatments that address major unmet medical needs to advance cancer care. For more information please visit us at www.galenabiopharma.com .

About NeuVax™ (E75)

NeuVax consists of the E75 peptide derived from human epidermal growth factor receptor 2 (HER2) combined with the immune adjuvant granulocyte macrophage colony-stimulating factor (GM-CSF). Treatment with NeuVax stimulates cytotoxic (CD8+) T cells in a highly specific manner to target cells expressing any level of HER2. NeuVax is given as an intradermal injection once a month for six months, followed by a booster injection once every six months. Based on a successful Phase 2 trial, which achieved its primary endpoint of disease free survival (DFS), the Food and Drug Administration (FDA) granted NeuVax a Special Protocol Assessment (SPA) for its Phase 3 PRESENT ( P revention of R ecurrence in E arly- S tage, Node-Positive Breast Cancer with Low to Intermediate HER2 E xpression with N euVax™ T reatment) study. The Phase 3 trial is expected to commence in the first half of 2012.

According to the National Cancer Institute, over 200,000 women in the U.S. are diagnosed with breast cancer annually. Of these women, about 75% test positive for HER2 (IHC 1+, 2+ or 3+). Only 25% of all breast cancer patients, those with HER2 3+ disease, are eligible for Herceptin ^®

(trastuzumab; Roche-Genentech), which had revenues of over $5 billion in 2010. NeuVax targets the remaining 50% of HER2-positive patients (HER2 1+ and 2+) who achieve remission with current standard of care, but have no available HER2-targeted adjuvant treatment options to maintain their disease-free status.

Folate Binding Protein (FBP)-E39

Folate Binding Protein-E39 (FBP) is a targeted vaccine aimed at preventing the recurrence of ovarian, endometrial, and breast cancers. The FBP vaccine consists of the E39 peptide derived from the folate binding protein combined with the immune adjuvant granulocyte macrophage colony stimulating factor (GM-CSF). FBP is over-expressed (20-80 fold) in more than 90% of ovarian and endometrial cancers, as well as 20—50% of breast, lung, colorectal, and renal cell carcinomas. FBP has very limited tissue distribution and expression in non-malignant tissue, making it an ideal immunotherapy target. A Phase 1/2 trial is expected to commence by year end 2011.

Ovarian cancer occurs in over 22,000 patients per year in the U.S. and is the most lethal gynecologic cancer. Although the incidence of ovarian cancer is only approximately 20% of that of breast cancer, the number of patients that die from ovarian cancer is nearly 50% greater than the percentage of breast cancer patients who die from this disease. Endometrial cancer is the most common gynecologic cancer and occurs in over 46,000 women, with over 8,000 deaths, in the U.S. annually. While many patients respond to initial treatment and become clinically free of disease, the majority of these patients will relapse, and, once the disease recurs, the treatment options and successes drop dramatically.

About RXi Pharmaceuticals

RXi Pharmaceuticals is a wholly-owned biotechnology subsidiary of Galena focused on discovering, developing and commercializing innovative therapies based on its proprietary, next-generation RNAi platform. Therapeutics that use RNA interference, or “RNAi,” have great promise because of their ability to “silence,” or down-regulate, the expression of a specific gene that may be overexpressed in a disease condition. Building on the pioneering work of scientific founder and Nobel Laureate Dr. Craig Mello, RXi’s first RNAi product candidate, RXI-109, which targets CTGF (connective tissue growth factor), is scheduled to commence human clinical trials in anti-scarring in 2012. RXi is expected to be spun-out as an independent, publicly traded company in late 2011, after which RXi’s common stock is expected to commence trading under the symbol “RXII.”

About RXI-109

RXi Pharmaceuticals has initiated development of clinical candidate RXI-109, a self-delivering RNAi compound (sd-rxRNA) for the reduction of dermal scarring in planned surgeries. RXI-109 is designed to reduce the expression of CTGF, a critical regulator of several biological pathways

involved in fibrosis, including scar formation in the skin. RXI-109 is expected to enter clinical trials in 2012.

About Self-delivering rxRNA™ (or sd-rxRNA)

RXi’s sd-rxRNA compounds are designed for therapeutic use and have drug-like properties, such as high potency, target specificity, serum stability, reduced immune response activation, and efficient cellular uptake. They are hybrid oligonucleotide molecules that RXi believes combine the beneficial properties of both conventional RNAi and antisense technologies. sd-rxRNAs have a single-stranded phosphorothioate region, a short duplex region, and contain a variety of nuclease-stabilizing and lipophilic chemical modifications. The combination of these features has the potential to allow sd-rxRNAs to achieve efficient spontaneous cellular uptake and potent, long-lasting intracellular activity.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the possible benefits of the announced transactions and the timing of the proposed spin-off, as well as statements about expectations, plans and prospects of the development of Galena’s and RXi’s respective new product candidates. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including the risks that the anticipated benefits of the announced transactions are not achieved and that the proposed spin-off is delayed or is never completed, as well as the risks, uncertainties and assumptions relating to the development of Galena’s and RXi’s new product candidates, including those identified under “Risk Factors” in Galena’s most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q and in other filings Galena periodically makes with the SEC. Actual results may differ materially from those contemplated by these forward-looking statements. Galena does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this presentation.

Galena is offering the shares of its common stock described above pursuant to a shelf registration statement on Form S-3, including a base prospectus, previously filed and declared effective by the SEC. The securities may be offered only by means of a prospectus. A preliminary prospectus supplement related to the offering will be filed with the SEC. Electronic copies of the preliminary prospectus supplement, when available, may be obtained by accessing the SEC’s website, www.sec.gov.

Contacts:

Contacts: Madeline Hatton
Toll free: +1 (855) 855-GALE (4253), ext. 101
info@galenabiopharma.com

Remy Bernarda
IR Sense, LLC
+1 (415) 203-6386
remy@irsense.com

THE EXECUTIVE:

THE COMPANY

/s/ Pamela Pavco

/s/ Mark J. Ahn

Mark J. Ahn

President and Chief Financial Officer