Unassociated Document


    
      Exhibit
4.3

    

     

     

     

     

     

     

     

     

    QUARK
PHARMACEUTICALS, INC.

     

     

    Fourth
Amended and Restated Investor Rights Agreement

     

     

    March
19, 2008

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      
        Table
of Contents

         

        Page

      

       

      
        
          	
                  SECTION
      1

                	 	
                  CERTAIN
      DEFINITIONS

                	 	
                  2

                
	
                  1.1

                	 	
                  “Commission”

                	 	
                  2

                
	
                  1.2

                	 	
                  “Common
      Stock

                	 	
                  2

                
	
                  1.3

                	 	
                  “Conversion
      Stock

                	 	
                  2

                
	
                  1.4

                	 	
                  “Eligible
      Investors

                	 	
                  2

                
	
                  1.5

                	 	
                  “Holder”

                	 	
                  2

                
	
                  1.6

                	 	
                  “Initiating
      Holders”

                	 	
                  2

                
	
                  1.7

                	 	
                  “Investors”

                	 	
                  3

                
	
                  1.8

                	 	
                  “Preferred
      Stock”

                	 	
                  3

                
	
                  1.9

                	 	
                  “Qualified
      Common Stock”

                	 	
                  3

                
	
                  1.10

                	 	
                  “Qualified
      Conversion Shares”

                	 	
                  3

                
	
                  1.11

                	 	
                  “Registrable
      Securities

                	 	
                  3

                
	
                  1.12

                	 	
                  “Registration
      Expenses”

                	 	
                  3

                
	
                  1.13

                	 	
                  “Restricted
      Securities”

                	 	
                  4

                
	
                  1.14

                	 	
                  “Securities”

                	 	
                  4

                
	
                  1.15

                	 	
                  “Securities
      Act”

                	 	
                  4

                
	
                  1.16

                	 	
                  “Selling
      Expenses”

                	 	
                  4

                
	
                  1.17

                	 	
                  “Warrants”

                	 	
                  4

                
	 
      	 	 
      	 	
                   
      

                
	
                  SECTION
      2

                	 	
                  REGISTRATION
      RIGHTS

                	 	
                  4

                
	
                  2.1

                	 	
                  Restrictions
      on Transferability

                	 	
                  4

                
	
                  2.2

                	 	
                  Restrictive
      Legend

                	 	
                  4

                
	
                  2.3

                	 	
                  Notice
      of Proposed Transfers

                	 	
                  5

                
	
                  2.4

                	 	
                  Requested
      Registration

                	 	
                  6

                
	
                  2.5

                	 	
                  Company
      Registration

                	 	
                  8

                
	
                  2.6

                	 	
                  Registration
      on Form S-3

                	 	
                  9

                
	
                  2.7

                	 	
                  Limitations
      on Subsequent Registration Rights

                	 	
                  10

                
	
                  2.8

                	 	
                  Expenses
      of Registration

                	 	
                  10

                
	
                  2.9

                	 	
                  Registration
      Procedures

                	 	
                  10

                
	
                  2.10

                	 	
                  Indemnification

                	 	
                  11

                
	
                  2.11

                	 	
                  Information
      by Holder

                	 	
                  13

                
	
                  2.12

                	 	
                  Rule
      144 Reporting

                	 	
                  13

                
	
                  2.13

                	 	
                  Transfer
      of Registration Rights

                	 	
                  13

                
	
                  2.14

                	 	
                  Standoff
      Agreement

                	 	
                  13

                
	
                  2.15

                	 	
                  Termination
      of Registration Rights

                	 	
                        
                    14

                  

                


        

         

        
          
             

          

          
            -i-

            
              

            

          

          
             

          

        

        

          Table
of Contents

          (continued)

           

          Page

        

        
          	 	 	 	 	 
	
                  SECTION
      3

                	 	
                  NEW
      ISSUANCE RIGHT OF FIRST REFUSAL

                	 	
                  14

                
	
                  3.1

                	 	
                  Right
      of First Refusal

                	 	
                  14

                
	
                  3.2

                	 	
                  Termination
      of Obligations

                	 	
                  15

                
	 	 	 	 	 
	
                  SECTION
      4

                	 	
                  RIGHT
      OF FIRST REFUSAL ON FOUNDER QUALIFIED COMMON STOCK SALES

                	 	
                  15

                
	
                  4.1

                	 	
                  Company
      Right

                	 	
                  15

                
	
                  4.2

                	 	
                  Notice
      of Company Acceptance

                	 	
                  15

                
	
                  4.3

                	 	
                  Investor
      Right

                	 	
                  16

                
	
                  4.4

                	 	
                  Notice
      of Investor Acceptance

                	 	
                  16

                
	
                  4.5

                	 	
                  Permitted
      Sales of Refused Securities

                	 	
                  16

                
	
                  4.6

                	 	
                  Closing

                	 	
                  17

                
	
                  4.7

                	 	
                  Further
      Sale

                	 	
                  17

                
	 	 	 	 	 
	
                  SECTION
      5

                	 	
                  CO-SALE
      RIGHTS ON FOUNDER QUALIFIED COMMON STOCK SALES

                	 	
                  17

                
	
                  5.1

                	 	
                  Right
      to Participate

                	 	
                  17

                
	
                  5.2

                	 	
                  Qualified
      Participation

                	 	
                  17

                
	
                  5.3

                	 	
                  Continuing
      Rights

                	 	
                  18

                
	
                   

                	 	 	 	 
	
                  SECTION
      6

                	 	
                  ADDITIONAL
      PROVISIONS RELATING TO RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS ON
      CERTAIN FOUNDER SALES

                	 	
                  18

                
	
                  6.1

                	 	
                  Invalid
      Transfers

                	 	
                  18

                
	
                  6.2

                	 	
                  Permitted
      Transfers

                	 	
                  18

                
	
                  6.3

                	 	
                  Termination
      of Rights

                	 	
                  18

                
	
                  6.4

                	 	
                  Legends

                	 	
                  19

                
	
                   

                	 	 	 	 
	
                  SECTION
      7

                	 	
                  CERTAIN
      COVENANTS OF THE COMPANY AND THE INVESTORS

                	 	
                  19

                
	
                  7.1

                	 	
                  Certain
      Covenants Involving Investors Other Than the Series F
      Investors

                	 	
                  19

                
	
                  7.2

                	 	
                  Covenants
      Involving Only the Series B Investors, the Series C Investors, the Series
      D Investor, the Series E Investors, the Series G Investors and the Series
      H Investors

                	 	
                  21

                
	
                  7.3

                	 	
                  Termination
      of Covenants and Certain Rights of the Series A Investors, the Series B
      Investors, the Series C Investors, the Series D Investor, the Series E
      Investors, the Series G Investors and the Series H
    Investors

                	 	
                  23

                


        

         

        
          
             

          

          
            -ii-

            
              

            

          

          
             

          

        

         

        
          Table
of Contents

          (continued)

           

          Page

           

        

        
          	
                  SECTION
      8

                	 	
                  MISCELLANEOUS

                	 	
                  24

                
	
                  8.1

                	 	
                  Governing
      Law

                	 	
                  24

                
	
                  8.2

                	 	
                  Entire
      Agreement; Amendment

                	 	
                  24

                
	
                  8.3

                	 	
                  Notices

                	 	
                  25

                
	
                  8.4

                	 	
                  Successors
      and Assigns

                	 	
                  25

                
	
                  8.5

                	 	
                  Delays
      or Omissions

                	 	
                  25

                
	
                  8.6

                	 	
                  Expenses

                	 	
                  26

                
	
                  8.7

                	 	
                  Attorneys’
      Fees

                	 	
                  26

                
	
                  8.8

                	 	
                  Reverse
      Stock Split

                	 	
                  26

                
	
                  8.9

                	 	
                  Arbitration

                	 	
                  26

                
	
                  8.10

                	 	
                  Counterparts

                	 	
                  27

                
	
                  8.11

                	 	
                  Severability

                	 	
                  27

                
	
                  8.12

                	 	
                  Titles
      and Subtitles

                	 	
                  27

                


        

      

       

      
        
           

        

        
          -iii-

          
            

          

        

        
           

        

      

    

     

    QUARK
PHARMACEUTICALS,
INC.

     

    FOURTH
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

     

    THIS FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT (the “Agreement”) is made as of the
19th of March, 2008 by and among Quark Pharmaceuticals, Inc., a California
corporation (the “Company”), the purchasers of
shares of Series A Preferred Stock of the Company (the “Series A Investors”) pursuant
to the Series A Preferred Stock Purchase Agreement dated as of February 18, 1994
(the “Series A
Agreement”), the purchasers of Series B Preferred Stock of the Company
(the “Series B
Investors”) pursuant to the Series B Preferred Stock Purchase Agreement
dated as of June 1, 1995 (the “Series B Agreement”), the
purchasers of Series C Preferred Stock of the Company (the “Series C Investors”) pursuant
to the Series C Preferred Stock Purchase Agreement dated as of October 3, 1996,
as amended April 19, 1997 (the “Series C Agreement”), the
purchaser of Series D Preferred Stock of the Company (the “Series D Investor”) pursuant
to the Series D Preferred Stock Purchase Agreement dated as of August 28, 1997
(the “Series D
Agreement”), the purchasers of Series E Preferred Stock of the Company
(the “Series E
Investors”) pursuant to the Series E Preferred Stock Purchase Agreement
dated December 17, 1999 (the “Series E Agreement”), the
purchasers of Series F Preferred Stock of the Company (the “Series F Investors”) pursuant
to the Series F Preferred Stock Purchase Agreement dated March 26, 2001 (the
“Series F Agreement”),
the purchasers of Series G Preferred Stock of the Company (the “Series G Investors”) pursuant
to the Series G Preferred Stock and Warrant Purchase Agreement dated December
27, 2005 (the “Series G
Agreement”), the purchasers of Series H Preferred Stock of the Company
(the “Series H
Investors”) pursuant to the Series H Preferred Stock Purchase Agreement
dated as of even date herewith (the “Series H Agreement”), the
holders of Common Stock of the Company listed on Exhibit A (the “Common Holders”) and those
persons listed on Exhibit
B (collectively, the “Founders” and each
individually a “Founder”).

     

    RECITALS

     

    A.           The
Company, the Series A Investors, the Series B Investors, the Series C Investors,
the Series D Investor, the Series E Investors, the Series F Investors, the
Series G Investors, the Common Holders, and the Founders are parties to that
certain Third Amended and Restated Investor Rights Agreement dated as of
December 27, 2005, as amended by Amendment No. 1 effective February 12, 2007
(together, the “Prior Investor
Rights Agreement”).

     

    B.           The
Series H Investors, in connection with the proposed purchase of up to 5,400,000
shares of the Company’s Series H Preferred Stock pursuant to the Series H
Agreement (the “Shares”
or “Series H Preferred”)
desire to obtain certain rights pursuant to this Agreement.

     

    C.           In
order to induce the Series H Investors to purchase the Shares, the Prior
Investor Rights Agreement is hereby amended in its entirety and restated
herein.  Such amendment and restatement is effective upon the
execution of this Agreement by the Company, a Super Majority-in-Interest (as
defined in the Prior Investor Rights Agreement), holders of a majority of the
Qualified Conversion Shares (as defined in the Prior Investor Rights Agreement)
held by the Founders, and holders of a majority-in-interest of the Conversion
Stock issued or issuable to the Series G Investors, all as of the date of this
Agreement.  Upon such execution, all provisions of, rights granted and
covenants made in the Prior Investor Rights Agreement are hereby waived,
released and superseded in their entirety and shall have no further force or
effect, including, without limitation, all rights of first refusal and any
notice period associated therewith otherwise applicable to the transactions
contemplated by the Series H Agreement.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    NOW, THEREFORE, the parties
agree to amend and restate the Prior Investor Rights Agreement in its entirety
as follows:

     

    SECTION
1

     

    CERTAIN
DEFINITIONS

     

    As used
in this Agreement, the following terms shall have the following respective
meanings:

     

    1.1           “Commission” shall mean the
Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.

     

    1.2           “Common Stock” shall mean the
Class A Common Stock Voting of the Company.

     

    1.3           “Conversion Stock” shall mean
the Common Stock issued or issuable upon conversion of the Series A Preferred
Stock issued pursuant to the Series A Agreement (the “Series A Preferred”), the
Series B Preferred Stock issued pursuant to the Series B Agreement (the “Series B Preferred”), the
Series C Preferred Stock issued pursuant to the Series C Agreement (the “Series C Preferred”), the
Series D Preferred Stock issued pursuant to the Series D Agreement (the “Series D Preferred”), the
Series E Preferred Stock issued pursuant to the Series E Agreement (the “Series E Preferred”), the
Series F Preferred Stock issued pursuant to the Series F Agreement (the “Series F Preferred”), the
Series G Preferred Stock issued pursuant to the Series G Agreement (the “Series G Preferred”), the
Series H Preferred issued pursuant to the Series H Agreement, and the Common
Stock issued or issuable upon exercise of the Warrants.

     

    1.4           “Eligible Investors” shall
mean for purposes of Section 4, Section 5 and Section 6, the Series B Investors,
the Series C Investors, the Series D Investor, the Series E Investors, the
Series F Investors, the Series G Investors and the Series H
Investors.

     

    1.5           “Holder” shall mean any
Founder or Investor holding Registrable Securities and any person holding
Registrable Securities to whom the rights under Section 2 hereof have been
transferred in accordance with Section 2.13 of this Agreement.

     

    1.6           “Initiating Holders” shall
mean any Investor or transferees of any Holder under Section 2.13 who in the
aggregate are holders of greater than thirty-three percent (33%) of the
Registrable Securities.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    1.7           “Investors” means, except as
otherwise defined in Section 7.1, the Series A Investors, the Series B
Investors, the Series C Investors, the Series D Investor, the Series E
Investors, the Series F Investors, the Series G Investors and the Series H
Investors, and “Investor” shall mean any one
of them.

     

    1.8           “Preferred Stock” means the
Series A Preferred, the Series B Preferred, the Series C Preferred, the Series D
Preferred, the Series E Preferred, the Series F Preferred, the Series G
Preferred and the Series H Preferred.

     

    1.9           “Qualified Common Stock” means
the Common Stock, excluding Conversion Stock.

     

    1.10         “Qualified Conversion Shares”
means the Common Stock issued or issuable upon conversion of the Series B
Preferred, the Series C Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, the Series G Preferred and the Series H
Preferred, and the Common Stock issued or issuable upon exercise of the
Warrants.

     

    1.11         “Registrable Securities” shall
mean (i) the Conversion Stock; (ii) Qualified Common Stock held by any Founder;
(iii) any Common Stock acquired (or issuable upon conversion of Preferred Stock
acquired) pursuant to the exercise of the right of first refusal in Section 3.1
of this Agreement or pursuant to the exercise of the right of first refusal in
Section 4.3 of this Agreement (including any shares issued by virtue of such
shares upon any stock split, stock dividend, recapitalization (that does not
change in any material respect the economic relationship of the then existing
shareholders) or similar event (a “Recapitalization”)); and (iv)
any Common Stock or other Securities issued or issuable in respect of the
Qualified Common Stock or Conversion Stock issued or issuable upon any
Recapitalization or any Common Stock otherwise issued or issuable with respect
to the Preferred Stock, provided, however, that shares of Common Stock or other
Securities shall no longer be treated as Registrable Securities after (A) they
have been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, whether in a registered
offering, pursuant to Rule 144 or otherwise, or (B) such Common Stock or other
Securities are available for sale, in the opinion of counsel to the Company, in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such
sale.

     

    The terms
“register,” “registered” and “registration” refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.

     

    1.12         “Registration Expenses” shall
mean all expenses, except as otherwise stated below, incurred by the Company in
complying with Sections 2.4, 2.5 and 2.6, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company) and the reasonable fees and
expenses of one counsel for all Holders in the event of the exercise of any
demand registration provided for in Section 2.4.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    1.13           “Restricted Securities” shall
mean Securities required to bear the legend set forth in Section
2.2.

     

    1.14           “Securities” shall mean (i)
the Company’s equity or debt securities, (ii) rights, options or warrants to
subscribe for, purchase or otherwise acquire any equity or debt security of the
Company and (iii) any agreement or commitment to issue any of the
foregoing.

     

    1.15           “Securities Act” shall mean
the Securities Act of 1933, as amended, or any similar federal statute and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.

     

    1.16           “Selling Expenses” shall mean
all underwriting discounts, selling commissions and stock transfer taxes
applicable to the Registrable Securities registered by the Holders and, except
as set forth above, all reasonable fees and disbursements of counsel for any
Holder

     

    1.17           “Warrants” shall mean those
warrants to purchase Common Stock of the Company issued to Series G Investors as
part of the Series G Agreement.

     

    SECTION
2

     

    REGISTRATION
RIGHTS

     

    2.1           Restrictions on
Transferability. The Preferred Stock and the Conversion Stock shall not
be sold, assigned, transferred or pledged except upon the conditions specified
in this Section 2, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Investor will cause any proposed
purchaser, assignee, transferee, or pledgee of the Preferred Stock and the
Conversion Stock held by an Investor to agree to take and hold such Securities
subject to the provisions and upon the conditions specified in this Section
2.

     

    2.2           Restrictive Legend. Each
certificate representing (i) the Series A Preferred, (ii) the Series B
Preferred, (iii) the Series C Preferred, (iv) the Series D Preferred, (v) the
Series E Preferred, (vi) the Series F Preferred, (vii) the Series G Preferred,
(viii) the Series H Preferred, (ix) the Conversion Stock and (x) any other
Securities issued in respect of the Preferred Stock or the Conversion Stock upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of Section
2.3 below) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under applicable state
securities laws):

     

    THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE COMPANY RECEIVES AT ITS REQUEST AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    Certificates
representing Securities issued by the Company under Regulation S of the
Securities Act shall be stamped or otherwise imprinted with a legend
substantially in the following form:

     

    THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE US.
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF, DIRECTLY OR INDIRECTLY,
IN THE UNITED STATES, ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS
JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A “U.S. PERSON” AS THAT
TERM IS DEFINED IN RULE 901 OF REGULATION S OF THE U.S. SECURITIES ACT OF 1933,
AS AMENDED, AT ANY TIME PRIOR TO ONE (1) YEAR AFTER [the date of issuance]
EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II)
IN COMPLIANCE WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED.

     

    Each
Investor and Holder consents to the Company making a notation on its records and
giving instructions to any transfer agent of the Preferred Stock or the
Conversion Stock in order to implement the restrictions on transfer established
in Section 2.1 and this Section 2.2.

     

    2.3           Notice of Proposed Transfers.
The holder of each certificate representing Restricted Securities by acceptance
thereof agrees to comply in all respects with the provisions of this Section
2.3. Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities (other than (i) a transfer not involving a change in
beneficial ownership or (ii) in transactions involving the distribution without
consideration of Restricted Securities by any of the Investors to any of its
partners or members, or retired partners or members, or to the estate of any of
its partners or retired partners), unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder’s intention to
effect such transfer, sale, assignment or pledge. Each such notice shall
describe the manner and circumstances of the proposed transfer, sale, assignment
or pledge in sufficient detail, including whether or not the proposed transferee
is an accredited investor as defined in Regulation D under the Securities Act,
and, if requested by the Company, shall be accompanied, at such holder’s
expense, by either (i) an unqualified written opinion of legal counsel who shall
be, and whose legal opinion shall be, reasonably satisfactory to the Company
addressed to the Company, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act, or (ii) a “no action” letter from the Commission to the effect that the
transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. It is agreed that the Company will not
request an opinion of counsel for the holder for transactions made in reliance
on Rule 144 under the Securities Act except in unusual circumstances, the
existence of which shall be determined in good faith by the Board of Directors
of the Company, and in any case the Company will not request an opinion of
counsel for the holder for transactions made in reliance on Rule 144(k) under
the Securities Act. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
2.2 above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for such holder and the Company such legend is not
required in order to establish compliance with any provision of the Securities
Act.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    2.4           Requested
Registration.

     

    (a)           Request for Registration. In
case the Company shall receive from Initiating Holders a written request (a
“Demand Request”) that
the Company effect any registration, qualification or compliance with respect to
Registrable Securities, the Company will:

     

    (i)           promptly
give written notice of the proposed registration, qualification or compliance to
all other Holders; and

     

    (ii)          as
soon as practicable, use its diligent efforts to effect such registration,
qualification or compliance (including, without limitation, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holders
joining in such request as are specified in a written request received by the
Company within twenty (20) days after receipt of such written notice from the
Company; provided,
however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 2.4:

     

    (A)           In
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities
Act;

     

    (B)           During
the period starting with the date sixty (60) days prior to the Company’s
estimated date of filing of any registration statement (provided that (i) the
Company actually files a registration statement within such time period, (ii)
the period of delay or deferral shall end upon the expiration of such sixty
(60)-day period if such registration statement is not filed by such time, and
(iii) the Company shall not exercise the right to defer registration granted
pursuant to this paragraph (B) more than one time in any twelve-month period),
and ending on the date six (6) months immediately following the effective date
of, any registration statement pertaining to securities of the Company (other
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to become
effective;

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (C)           Unless
the Registrable Securities sought to be registered by all Initiating Holders
pursuant to this Section 2.4 comprises at least fifteen percent (15%) of all
their outstanding Registrable Securities, except that such fifteen percent (15%)
requirement shall not apply if the anticipated aggregate offering price, net of
underwriting discounts and commissions, of all Registered Securities sought to
be registered by all Initiating Holders and other Holders pursuant to this
Section 2.4, would exceed $3,000,000;

     

    (D)           After
the Company has effected two such registrations pursuant to this Section 2.4(a),
and such registrations have been declared or ordered effective and the
Registrable Securities offered pursuant to such registrations have been sold;
or

     

    (E)           If
the Company shall furnish to such Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of Directors
it would be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, then the Company’s
obligation to use its best efforts to register, qualify or comply under this
Section 2.4 shall be deferred for a period not to exceed the earlier of (i) the
date ninety (90) days from the later of the end of the Lock-Up Period (as
defined in Section 2.14) and the date of receipt by the Company of the Demand
Request from the Initiating Holders, and (ii) the filing date of the Company’s
first periodic report filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act after the receipt by the Company of the Demand Request the from
Initiating Holders; provided,
however, that the Company shall not exercise the right to defer
registration granted pursuant to this paragraph (E) more than one time in any
twelve-month period.

     

    In no
event shall the Company be required to file a registration statement under this
Section 2.4 until after the expiration of the Lock-Up Period following the
initial public offering of the Company’s securities.  Subject to the
foregoing clauses (A) through (E), the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Initiating
Holders, but in any event within one hundred twenty (120) days of such request
or requests.

     

    (b)           Underwriting. In the event
that a registration pursuant to Section 2.4 is for a registered public offering
involving an underwriting, the Company shall so advise the Holders as part of
the notice given pursuant to Section 2.4(a)(i). In such event, the right of any
Holder to registration pursuant to Section 2.4 shall be conditioned upon such
Holder’s participation in the underwriting arrangements required by this Section
2.4, and the inclusion of such Holder’s Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.

     

    The
Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders, but subject to the Company’s
reasonable approval. Notwithstanding any other provision of this Section 2.4, if
the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter’s marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest one hundred (100) shares.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    If any
Holder of Registrable Securities disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the managing underwriter and the Initiating Holders. Any Registrable Securities
excluded or withdrawn from such underwriting, in the event that such
underwriting represents the initial underwritten public offering of the
Company’s Securities, shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto, or such
other shorter period of time as the underwriters may require. If by the
withdrawal of such Registrable Securities a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
maximum of any limitation imposed by the underwriters), then the Company shall
offer to all Holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities calculated
in the same manner used in this Section 2.4(b) in determining the allocation of
shares to be sold when subject to an underwriter limitation.

     

    2.5           Company
Registration.

     

    (a)           Notice of Registration. If at
any time or from time to time the Company shall determine to register any of its
Securities, either for its own account or the account of a security holder or
holders, other than (i) a firm commitment underwritten initial public offering
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of Common Stock for the account of the Company to
the public if (x) the price per share (determined without regard to underwriter
commissions and expenses) is not less than $7.50 (as adjusted for
Recapitalizations after the date hereof), and (y) the aggregate gross proceeds
to the Company are not less than $20,000,000 (or its equivalent if the primary
listing of shares is on a non-U.S. exchange or over-the-counter market) before
deduction of underwriting discount and commissions (a “Qualified IPO”), (ii) a
registration relating solely to employee benefit plans, or (iii) a registration
relating solely to a Commission Rule 145 transaction, the Company
will:

     

    (i)           promptly
give to each Holder written notice thereof; and

     

    (ii)          include
in such registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made within twenty (20)
days after receipt of such written notice from the Company, by any
Holder.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (b)           Underwriting. If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Holders as a
part of the written notice given pursuant to Section 2.5(a)(i). In such event
the right of any Holder to registration pursuant to Section 2.5 shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Securities through such
underwriting shall (together with the Company and the other holders distributing
their Securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 2.5, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit (or
exclude entirely) the shares held by holders of registration rights (other than
Holders) and following exclusion of all such shares, Registrable Securities that
may be included in such registration. The Company shall advise all Holders and
other holders exercising their registration rights to distribute their
Securities through such underwriting of any such limitation, and shall first
limit (or exclude entirely) the shares held by holders of registration rights
(other than the Holders), and following exclusion of all such shares, the number
of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders exercising their registration
rights in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders. If any Holder or holder disapproves
of the terms of any such underwriting, it may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. Any Securities
excluded or withdrawn from such underwriting, in the event that such
underwriting represents the initial underwritten public offering of the
Company’s securities, shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto, or such
other shorter period of time as the underwriters may require.

     

    (c)           Right to Terminate
Registration. If the Company reasonably determines that a registration
initiated by it under this Section 2.5 is not in the best interest of the
Company, the Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 2.5 prior to the effectiveness
of such registration whether or not any Holder has elected to include Securities
in such registration.

     

    2.6           Registration on Form
S-3.

     

    (a)           If
any Holder whose Registrable Securities sought to be registered pursuant to this
Section 2.6 comprises at least two percent (2%) of the Company’s outstanding
Common Stock (assuming conversion of all convertible Securities and the exercise
of all outstanding options and warrants) (a “Major Holder”), requests that
the Company file a registration statement on Form S-3 (or any successor form to
Form S-3) for a public offering of shares of the Registrable Securities the
reasonably anticipated aggregate price to the public of which would exceed
$1,000,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall: (i) promptly
give written notice of the proposed registration to all other Holders of
Registrable Securities and (ii) use its best efforts to cause, as soon as
practicable, all Registrable Securities to be registered as may be so requested
for the offering on such form and to cause such Registrable Securities to be
qualified in such jurisdictions as the Major Holder or other Holders may
reasonably request; provided,
however, that the Company shall not be required to effect more than two
(2) such registrations for each Major Holder pursuant to this Section 2.6 per
twelve month period. The substantive provisions of Section 2.4(b) shall be
applicable to each registration initiated under this Section 2.6.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (b)           Notwithstanding
the foregoing, the Company shall not be obligated to take any action pursuant to
this Section 2.6: (i) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act; or (ii) if the Company shall furnish to such Major Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future,
then the Company’s obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed the earlier of (i) the
date ninety (90) days from the receipt by the Company of the request to file
such registration by such Major Holder, or (ii) the filing date of the Company’s
first periodic report filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act after the receipt by the Company of the request to file such
registration by such Major Holder, provided, however, that the Company shall not
exercise the right to defer registration granted by this subparagraph (b)(ii)
more than once in any twelve month period.

     

    2.7           Limitations on Subsequent
Registration Rights. From and after the date of this Agreement, the
Company shall not enter into any agreement granting any holder or prospective
holder of any Securities of the Company registration rights with respect to such
Securities unless such new registration rights, including standoff obligations,
are subordinate to the registration rights granted Holders
hereunder.

     

    2.8           Expenses of
Registration.

     

    (a)           All
Registration Expenses incurred in connection with all registrations pursuant to
Sections 2.4 and 2.5, shall be borne by the Company. Unless otherwise stated,
all Selling Expenses relating to Registrable Securities registered on behalf of
the Holders and all other Registration Expenses shall be borne by the Holders of
such Registrable Securities pro rata on the basis of the number of Registrable
Securities so registered.

     

    (b)           All
Registration Expenses and Selling Expenses incurred in connection with a
registration pursuant to Section 2.6 shall be borne pro rata by the Holder whose
Registrable Securities are included in the registration on Form S-3 according to
the number of Registrable Securities included in such registration.

     

    2.9           Registration Procedures. In
the case of each registration, qualification or compliance effected by the
Company pursuant to the Agreement, the Company will keep each Holder advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense the Company will with all
deliberate speed:

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (a)           Prepare
and file with the Commission a registration statement with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for at least one hundred eighty (180) days or until
the distribution described in the registration statement has been
completed;

     

    (b)           Furnish
to the Holders participating in such registration and to the underwriters of the
Securities being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
such underwriters may reasonably request in order to facilitate the public
offering of such Securities;

     

    (c)           Prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statements as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Securities covered by such
registration statement;

     

    (d)           Use
its best efforts to register and qualify the Securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions; and

     

    (e)           In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.

     

    2.10        Indemnification.

     

    (a)           The
Company will indemnify each Holder, each of its officers and directors and
partners, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to the Agreement, and each underwriter, if
any, and each person who controls any underwriter 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 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, qualification or compliance, 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 any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably 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 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 Holder,
controlling person or underwriter and stated to be specifically for use
therein.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (b)           Each
Holder will, if Registrable Securities held by such Holder are included in the
Securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company’s Securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers, directors and partners 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 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, and will reimburse the Company, such Holders, such
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in 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 Holder and stated to be specifically for use
therein.

     

    (c)           Each
party entitled to indemnification under this Section 2.10 (the “Indemnified Party”) shall give
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 Section 2.10 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 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, 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. No Indemnifying Party shall be liable for
indemnification hereunder with respect to any settlement or consent to judgment,
in connection with any claim or litigation to which these indemnification
provisions apply, that has been entered into without the prior consent of the
Indemnifying Party (which consent will not be unreasonably
withheld).

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    2.11        Information by Holder. The
Holders of Registrable Securities included in any registration shall furnish to
the Company such information regarding such Holders, the Registrable Securities
held by them and the distribution proposed by such Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 2.11.

     

    2.12        Rule 144 Reporting. With a
view to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Restricted Securities to
the public without registration, after such time as a public market exists for
the Common Stock of the Company, the Company agrees to use its best efforts
to:

     

    (a)           Make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act, at all times after the effective date that
the Company becomes subject to the reporting requirements of the Securities Act
or the Exchange Act;

     

    (b)           File
with the Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements);

     

    (c)           So
long as an Investor owns any Restricted Securities, furnish to the Investor
forthwith upon request a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144 (at any time after ninety (90)
days after the effective date of the first registration statement filed by the
Company for an offering of its Securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company and
other information in the possession of or reasonably obtainable by the Company
as an Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing an Investor to sell any such Restricted
Securities without registration.

     

    2.13        Transfer of Registration
Rights. The rights to cause the Company to register Registrable
Securities granted the Investors under Sections 2.4, 2.5 and 2.6 may be assigned
(i) in connection with transactions involving the distribution without
consideration of Registrable Securities by any of the Investors, to any of its
partners or retired partners or the estate of any of its partners or members or
retired partners or members, or (ii) to a transferee or assignee reasonably
acceptable to the Company in connection with any transfer or assignment of
Registrable Securities by an Investor, provided that (a) such transfer may
otherwise be effected in accordance with applicable securities laws and Sections
2.2 and 2.3, and (b) such assignee or transferee acquires at least one hundred
thousand (100,000) shares of Conversion Stock (adjusted for Recapitalizations
after the date of this Agreement).

     

    2.14        Standoff Agreement. Each
Holder agrees in connection with the Company’s initial public offering of the
Company’s Securities that, upon request of the Company or the underwriters
managing any underwritten offering of the Company’s Securities, not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days or such longer period, not to exceed thirty-four (34)
days after the expiration of the one hundred eighty (180)-day period, as the
underwriters or the Company shall request in order to facilitate compliance with
NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or
regulation (the “Lock-Up
Period”)) from the effective date of such registration as may be
requested by the underwriters; provided, that the officers and directors of the
Company who own stock of the Company also agree to such restrictions with
respect to all of their shares.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    2.15        Termination of Registration
Rights. The registration rights granted pursuant to this Section 2 shall
terminate as to each Holder at such time as a public market for the Company’s
Common Stock exists and all Registrable Securities held by such Holder may, in
the opinion of counsel to the Company (which opinion shall be concurred in by
counsel for such Holder), be sold within a given three month period pursuant to
Rule 144 or any other applicable exemption that allows for resale free of
registration.

     

    SECTION
3

     

    NEW
ISSUANCE RIGHT OF FIRST REFUSAL

     

    3.1           Right of First
Refusal.

     

    (a)           The
Company hereby grants to each holder of Preferred Stock and each Common Holder a
right of first refusal (the “New Issuance Right of First
Refusal”) to purchase all (or any part) of such holder’s pro rata portion
of any New Securities (as defined in this Section 3.1) that the Company may,
from time to time, propose to sell and issue. Such pro rata portion, for
purposes of this New Issuance Right of First Refusal, shall be the ratio of (X)
such holder’s Common Stock, including Common Stock issued or issuable pursuant
to conversion of such holder’s Preferred Stock to (Y) the sum of the total
number of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock then outstanding and the Common Stock then held by the Common
Holders. This New Issuance Right of First Refusal shall be subject to the
following provisions:

     

    (i)           “New Securities” shall mean any
Common Stock and Preferred Stock of the Company whether or not authorized on the
date hereof, and rights, options, or warrants to purchase Common Stock or
Preferred Stock and Securities of any type whatsoever that are, or may become,
convertible into Common Stock or Preferred Stock; provided, however, that
“New Securities” does
not include (x) the shares of Common Stock that would not constitute Additional
Shares of Common Stock under the Company’s Articles of Incorporation, as amended
from time to time, and (y) shares of Series H Preferred issued pursuant to the
Series H Agreement.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (ii)           In
the event that the Company proposes to undertake an issuance of New Securities,
it shall give each holder of Preferred Stock and each Common Holder written
notice (the “Notice”) of
its intention, describing the type of New Securities, the price, the general
terms upon which the Company proposes to issue the same and the holder’s pro
rata share of the New Securities. Each such holder shall have ten (10) calendar
days after receipt of such Notice to agree to purchase up to its pro rata share
of such New Securities at the price and upon the terms specified in the Notice
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.

     

    (iii)           The
Company shall have one hundred eighty (180) days following the ten (10) calendar
day period specified above to sell, or enter into an agreement pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
such one hundred eighty (180) day period, the New Securities with respect to
which the rights of the holders of Preferred Stock or Common Holders (as the
case may be) were not exercised at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company’s Notice. In the event the
Company has not sold the New Securities within such one hundred eighty (180) day
period, the Company shall not thereafter issue or sell any New Securities,
without first offering such New Securities to the holders of Preferred Stock and
the Common Holders in the manner provided above.

     

    3.2           Termination of Obligations.
The obligations of the Company and the rights of the Investors and Common
Holders set forth in this Section 3 shall terminate and be of no further force
or effect immediately prior to the earliest of (i) as to an Investor or Common
Holder, such time as the Investor or Common Holder no longer owns any
Securities, (ii) the closing of a Qualified IPO, (iii) such time as the Company
is subject to the reporting requirements of Sections 13 or 15(d) under the
Exchange Act, or (iv) the occurrence of the merger or consolidation of the
Company into, or the sale of all or substantially all of the Company’s assets to
another corporation, unless the shareholders of the Company immediately prior to
such merger, consolidation or sale shall own more than fifty percent (50%) of
the capital stock of such other corporation immediately after such merger,
consolidation or sale (a “ Change of
Control”).

     

    SECTION
4

     

    RIGHT
OF FIRST REFUSAL ON FOUNDER QUALIFIED COMMON STOCK SALES

     

    4.1           Company Right. At any time a
Founder (a “Seller”)
proposes to sell or otherwise dispose of for value to a third party (the “Proposed Transferee”) any
Qualified Common Stock of the Company held by such Founder (the “Offered Securities”), the
Seller shall first offer, in a writing delivered to the Company (the “Company Offer”), to sell the
Offered Securities to the Company at the same price and on the same terms as
proposed to be sold to the Proposed Transferee, which Company Offer shall remain
open for a period of ten (10) calendar days after delivery thereof (unless
terminated earlier by written notice from the Company declining to accept) (the
“Company Offer
Period”).

     

    4.2           Notice of Company Acceptance.
Notice of the Company’s election to accept, in whole or in part, a Company Offer
shall be made by a writing signed by an officer of the Company specifying the
portion of the Offered Securities that the Company elects to purchase, delivered
to the Seller prior to the expiration of the Company Offer Period (the “Company Acceptance
Notice”).

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    4.3           Investor Right. If the Company
does not elect to purchase all of the Offered Securities, the Company shall give
written notice to the Eligible Investors, and the Seller shall offer to sell to
each Eligible Investor (i) that amount of the remaining Offered Securities
multiplied by a fraction, the numerator of which is the aggregate number of
shares of Qualified Common Stock and Qualified Conversion Shares held by or
issuable to such Eligible Investor and the denominator of which is the total
number of shares of Qualified Common Stock and Qualified Conversion Shares held
by or issuable to all the Eligible Investors (the “Basic Amount”) and (ii) such
additional portion of the remaining Offered Securities as any Eligible Investor
indicates it will purchase should any of the Eligible Investors subscribe for
less than their Basic Amounts (the “Undersubscription Amount”) and
to which such Eligible Investor is entitled under Section 4.4 below, at the same
price and on the same terms as those set forth in the Company Offer (the “Investor Offer”), which
Investor Offer shall remain open for a period of fifteen (1 5) calendar days
after delivery thereof (the “Investor Offer
Period”).

     

    4.4           Notice of Investor Acceptance.
Notice of an Eligible Investor’s election to accept the Investor Offer (the
“Acceptance Notice”), in
whole or in part, shall be evidenced by a writing signed by such Eligible
Investor, setting forth the amount that the Eligible Investor elects to purchase
(and, if such Eligible Investor elects to purchase more than its Basic Amount,
the Undersubscription Amount that such Eligible Investor elects to purchase),
and delivered to the Seller prior to the end of the Investor Offer Period. If
the Basic Amounts subscribed for by the Eligible Investors are less than the
total amount of Offered Securities the Eligible Investors are entitled to
purchase pursuant to Section 4.3, then each Eligible Investor specifying an
Undersubscription Amount in its Acceptance Notice shall be entitled to purchase
the Undersubscription Amount specified; provided, however, that
should the Undersubscription Amounts subscribed for exceed the difference
between the total amount of Offered Securities the Eligible Investors are
entitled to purchase and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Eligible Investor who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as is determined by multiplying such
Available Undersubscription Amount by a fraction, the numerator of which is the
aggregate number of shares of Qualified Common Stock and Qualified Conversion
Shares held by or issuable to such Eligible Investor and the denominator of
which is the aggregate number of shares of Qualified Common Stock and Qualified
Conversion Shares held by or issuable to the Eligible Investors who have
subscribed for an Undersubscription Amount; provided further, however,
that if, as a result of the allocation of the Available Undersubscription Amount
described above, any Eligible Investor shall be allocated a number of Offered
Securities greater than the number of Offered Securities it has indicated it is
willing to purchase, it shall not be required to purchase such Offered
Securities; rather such additional Offered Securities shall be reallocated in
accordance with the above formula among the other Eligible Investors who have
subscribed for an Undersubscription Amount. All amounts determined by the
formula set forth in this Section 4.4 shall be subject to rounding by the Board
of Directors of the Company to the extent it reasonably deems
necessary.

     

    4.5           Permitted Sales of Refused
Securities. In the event that the amount of the Offered Securities the
Company and the Eligible Investors elect to purchase does not equal the total
amount of the Offered Securities, Seller shall have one hundred twenty (120)
days from the expiration of the Investor Offer Period to sell, subject to
Section 5 below, all or any part of the Offered Securities for which a Company
Acceptance Notice or an Investor Acceptance Notice has not been given (the
“Refused Securities”) to
the Proposed Transferee at the same price and on the same terms as those set
forth in the Company Offer.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    4.6           Closing. The Company and the
Eligible Investors shall purchase the amount of Offered Securities specified in
each Company Acceptance Notice or Acceptance Notice, as the case may be, upon
the terms and conditions specified in the Company Offer, promptly following
delivery of such Company Acceptance Notice or Acceptance Notice; provided, however, that the
consummation of such purchase shall be subject to the preparation, execution and
delivery of a purchase agreement reasonably satisfactory to the Company and the
Eligible Investors, as the case may be, and their respective counsel. In
addition, Seller shall promptly remit to each Eligible Investor that portion of
the sale proceeds to which each Eligible Investor is entitled by reason of its
participation in the sale to the Proposed Transferee pursuant to Section 5
below.

     

    4.7           Further Sale. Any Offered
Securities not purchased by the Company, Eligible Investors or the Proposed
Transferee in accordance with this Section 4 may not be sold or otherwise
disposed of until they are again offered to the Company and the Eligible
Investors in accordance with this Section 4.

     

    SECTION
5

     

    CO-SALE
RIGHTS ON FOUNDER QUALIFIED COMMON STOCK SALES

     

    5.1           Right to Participate. Each
Eligible Investor shall have the right to participate in the sale to the
Proposed Transferee upon the same terms and conditions as set forth in the
Company Offer, subject to the terms and conditions set forth in this Section 5.
An Eligible Investor shall exercise its right by delivering to the Seller, prior
to the expiration of the Investor Offer Period, (i) written notice of its
intention to participate, specifying the amount of shares such Eligible Investor
desires to sell to the Proposed Transferee, and (ii) one or more certificates
representing the number of shares which such Eligible Investor elects to sell
hereunder, duly endorsed for transfer to the Proposed Transferee.

     

    5.2           Qualified Participation. Each
Eligible Investor shall have the right to sell up to that number of shares equal
to the product of (i) the amount of Offered Securities multiplied by (ii) a
fraction, the numerator of which is the number of shares of Qualified Common
Stock and Qualified Conversion Shares owned by such Eligible Investor, and the
denominator of which is the total number of shares of Qualified Common Stock and
Qualified Conversion Shares owned by the Seller and the Eligible Investors as a
group. In the event that the Proposed Transferee together with the accepting
Eligible Investors (if any) desire to purchase a number of shares of Common
Stock different from the amount of the Offered Securities (the “New Amount”), the New Amount
shall be substituted for the Offered Securities in the above equation for the
purpose of determining each Eligible Investor’s participation rights. In the
event of Eligible Investor participation, the amount of Offered Securities which
Seller is entitled to sell on Seller’s own behalf pursuant to Section 4 hereof
shall be reduced accordingly, and Seller shall include such Eligible Investor
shares in the sale of the Offered Securities.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    5.3           Continuing Rights. The
exercise or non-exercise of the right to participate hereunder with respect to a
particular sale by a Seller shall not adversely affect an Eligible Investor’s
right to participate in subsequent sales by the same or other Sellers pursuant
to this Section 5.

     

    SECTION
6

     

    ADDITIONAL
PROVISIONS RELATING TO RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS ON CERTAIN
FOUNDER SALES

     

    6.1           Invalid Transfers. Any sale,
assignment or other transfer of Securities by a Seller contrary to the
provisions of Section 4 and Section 5 hereof shall be null and void, and the
transferee shall not be recognized by the Company as the holder or owner of the
Securities sold, assigned, or transferred for any purpose (including, without
limitation, voting or dividend rights), unless and until the Seller has
satisfied the requirements of Section 4 and Section 5 with respect to such sale.
The Seller shall provide the Company and the Eligible Investors with written
evidence that such requirements have been met or waived prior to consummating
any sale, assignment or other transfer of Securities, and no Securities shall be
transferred on the books of the Company until such written evidence has been
received by the Company and the Eligible Investors.

     

    6.2           Permitted
Transfers.

     

    (a)           Intra-Family and Other
Transfers. Any Seller may transfer any Securities to the following
(“Permitted Transferee”)
without complying with Section 4 or Section 5 hereof: (i) to a member of such
Seller’s immediate family, (ii) to a trust established by such Seller for the
benefit of such Seller or such Seller’s immediate family by gift or inheritance
or (iii) to any person or entity as a bona fide gift, provided, however, that no
such transfer of Securities shall be effective unless and until the Permitted
Transferee shall have executed such documentation, in form and substance
satisfactory to the Company, evidencing the agreement by the Permitted
Transferee to be bound by the provisions of this Agreement.

     

    (b)           Exempt Transactions. The
participation rights set forth in Section 5 above shall not apply to any pledge
of the Company’s Common Stock made by a Seller which creates a mere security
interest, provided,
however, that the pledgee shall execute such documentation, in form and
substance satisfactory to the Company evidencing the agreement by the pledgee to
be bound by the provisions of this Agreement.

     

    6.3           Termination of Rights. The
obligations of the Founders and the rights of the Investors set forth in Section
4 and Section 5 shall terminate and be of no further force or effect immediately
prior to the earliest of (i) as to an Eligible Investor, such time as the
Eligible Investor no longer owns any Securities, (ii) the closing of a Qualified
PO, (iii) such time as the Company becomes subject to the reporting obligations
of Section 13 or 15(d) of the Exchange Act, or (iv) the occurrence of a Change
of Control.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    6.4           Legends.

     

    (a)           Legend. Each certificate
representing shares of the Common Stock of the Company now or hereafter owned by
a Founder or sold or otherwise transferred to any Permitted Transferee shall be
endorsed with the following legend:

     

    “THE SALE
OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF AN AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT BY AND
BETWEEN THE SHAREHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF PREFERRED STOCK.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE CORPORATION.”

     

    (b)           Legend Removal. The legend
referred to in Section 6.4(a) shall be removed upon termination, in accordance
with the provisions of Section 6.3 above, of the rights set forth in Section 4
and Section 5.

     

    SECTION
7

     

    CERTAIN
COVENANTS OF THE COMPANY AND THE INVESTORS

     

    7.1           Certain Covenants Involving Investors
Other Than the Series F Investors. The following are covenants by and
among the Company and the Investors. Solely for purposes of this Section 7.1,
the term “Investor” or “Investors” shall refer only to the Series A Investors,
the Series B Investors, the Series C Investors, the Series D Investor, Series E
Investors, the Series G Investors and the Series H Investors.

     

    (a)           Financial
Information.

     

    (i)           As
soon as practicable after the end of each fiscal year, and in any event within
one hundred and twenty (120) days thereafter, the Company will mail to each
Investor a consolidated statement of financial position of the Company, as of
the end of such fiscal year, and a consolidated statement of operations and a
consolidated statement of cash flows, for the year then ended, prepared in
accordance with generally accepted accounting principles, all in reasonable
detail and audited by independent public accountants of national standing
selected by the Company.

     

    (ii)           As
long as an Investor holds not less than (A) 100,000 shares of Series A Preferred
(including shares of Common Stock issued upon conversion of the Series A
Preferred), (B) 250,000 shares of Series B Preferred (including shares of Common
Stock issued upon conversion of the Series B Preferred), (C) 80,000 shares of
Series C Preferred (including shares of Common Stock issued upon conversion of
the Series C Preferred), (D) 80,000 shares of Series D Preferred (including
shares of Common Stock issued upon conversion of the Series D Preferred), (E)
100,000 shares of Series E Preferred (including shares of Common Stock based
upon conversion of the Series E Preferred) (F) 1,000,000 shares of Series G
Preferred (including shares of Common Stock based upon conversion of the Series
G Preferred), or (G) 200,000 shares of Series H Preferred (including shares of
Common Stock issued upon conversion of the Series H Preferred), as adjusted for
Recapitalizations (collectively, the “Major Investors”), the Company
will deliver or provide to each such Major Investor (A) within sixty (60) days
after the end of the first, second and third quarterly accounting periods in
each fiscal year an unaudited consolidated statement of financial position,
consolidated statement of operations and consolidated statement of cash flows of
the Company, certified by the Company’s Chief Financial Officer, (B) an annual
operating plan approved by the Board of Directors, within the earlier of (i)
thirty (30) days prior to the beginning of the fiscal year, and (ii) ten (10)
days following its adoption by the Board of Directors, and (C) upon written
request by a Major Investor, within thirty (30) days after the end of each
month, unaudited monthly financial statements.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (iii)           The
rights granted pursuant to Section 7.1 (a) may not be assigned or otherwise
conveyed by an Investor except as provided in Section 7.2(a).

     

    (b)           Confidentiality. Each Investor
agrees that any information obtained by the Investor pursuant to this Section 7
that may be proprietary to the Company or otherwise confidential will not be
disclosed without the prior written consent of the Company. If the Investor
requests in writing, the Company will identify in writing all information
obtained by the Investor under this Section 7 that the Company considers
confidential and that the Investor may not disclose without the Company’s prior
written consent. Each Investor further acknowledges and understands that any
information so obtained that may be considered “inside” non-public information
will not be utilized by the Investor in connection with purchases or sales of
the Company’s Securities except in compliance with applicable state and federal
anti-fraud statutes. The provisions of this Section 7 shall not be in limitation
of any rights that the Investor may have with respect to the books and records
of the Company, or to inspect its properties or discuss its affairs, finances
and accounts, under the laws of the jurisdictions in which it is incorporated.
The term “Investor” as
used in this Section 7.2(b) includes all officers, directors, affiliates, agents
and other representatives of the Investor. Notwithstanding the above,
“confidential information” shall not include (i) information known to the public
generally, (ii) information known to the Investor from an independent source
prior to the receipt of such information from the Company and (iii) information
required to be disclosed by the Investor by court order or otherwise required by
law, provided, however,
that in the event of a required disclosure pursuant to this clause (iii), the
Investor shall give the Company prompt written notice of any such requirement so
that the Company may seek a protective order or other appropriate
remedy.

     

    (c)           Inspection. The Company shall
permit each Major Investor, at such Major Investor’s expense, to visit and
inspect the Company’s properties, to examine its books of account and records
and to discuss the Company’s affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by the Major
Investor.

     

    (d)           Clinical Trial Reports. The
Company will deliver or provide to each Series G Investor and Series H Investor,
upon the written request of any such Series G Investor or Series H Investor,
management reports regarding clinical trials, which shall include management’s
review and analysis of data collected from such trials, as well as input from
the Company’s medical and regulatory advisors, within thirty (30) days after
completion of such trials. Such reports shall also include a certification from
the Chief Executive Officer and Chief Technology Officer of the Company that the
content of such reports is materially accurate and materially
complete.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    7.2          Covenants Involving Only the Series B
Investors, the Series C Investors, the Series D Investor, the Series E
Investors, the Series G Investors and the Series H Investors. The
following are covenants by and among only the Company and the Series B
Investors, the Series C Investors, the Series D Investor, the Series E
Investors, the Series G Investors and the Series H Investors. Solely for
purposes of this Section 7.2, unless otherwise expressly indicated, the term
“Investor” or “Investors” shall refer only to the Series B Investors, the Series
C Investors, the Series D Investor, the Series E Investors, the Series G
Investors and the Series H Investors.

     

    (a)           Assignment of Rights to Financial
Information. The rights to Company financial information granted pursuant
to Section 7.1(a) may not be assigned or otherwise conveyed by an Investor or by
any subsequent transferee of any such rights without the prior written consent
of the Company (which consent shall not be unreasonably withheld); provided, however, that,
subject to Section 7.2(a), an Investor, after giving notice to the Company, may
assign the rights granted pursuant to Section 7.1(a), to any transferee, other
than a competitor of the Company, who acquires not less than (A) 250,000 shares
of Series B Preferred, (B) 80,000 shares of Series C Preferred, (C) 80,000
shares of Series D Preferred, (D) 100,000 shares of Series E Preferred (E)
1,000,000 shares of Series G Preferred or (F) 200,000 shares of Series H
Preferred (all as adjusted for Recapitalizations).

     

    (b)           Proprietary Information
Agreement. The Company shall ensure that future employees of the Company
execute the Company’s standard proprietary information agreement and that future
consultants of the Company execute similar proprietary information agreements
with substantially the same effect.

     

    (c)           Indemnification of the Series D
Investor and the Series E Investors.

     

    (i)           To
the extent permitted by law, the Company shall indemnify and hold harmless the
Series D Investor and each Series E Investor, each person who controls Series D
Investor and each Series E Investor within the meaning of the Exchange Act
(including, without limitation, Lawrence J. Ellison), and each of the respective
members, managers, partners, officers, directors, employees, agents and
affiliates of the foregoing (the “Investor Indemnitees”) from
and against all actions, suits, claims, proceedings, costs, damages, judgments,
amounts paid in settlement and expenses (including, without limitations,
attorneys’ fees and disbursements) relating to or arising out of any claim,
demand or cause of action asserted by any third party as a result of (i) the
Series D Investor’s or any Series E Investor’s position as a shareholder of the
Company, or (ii) any of the transactions contemplated by the Series D Agreement
or the Series E Agreement, as the case may be; provided, however, that the
indemnification provided hereby shall not extend to costs, damages, judgment,
amounts paid in settlement and expenses to the extent directly and primary
attributable to activities of an Investor Indemnitee which involve a wrongful
act or omission (including a breach) of the Series D Investor or any Series E
Investor, an Investor Indemnitee or any agent thereof whether in violation of
the Series D Agreement or the Series E Agreement or otherwise (an “Indemnifiable
Claim”).

     

    (ii)           The
Company shall reimburse any Investor Indemnitees for all reasonable
out-of-pocket expenses (including attorneys’ fees and disbursements) as they are
incurred in connection with investigating, preparing to defend or defending any
such Indemnifiable Claim (including any inquiry or investigation) whether or not
an Investor Indemnitee is a party thereto. If an Investor Indemnitee makes a
claim hereunder for payment or reimbursement of reasonable expenses, such
expenses shall be paid or reimbursed promptly upon receipt of appropriate
documentation relating thereto, subject to an undertaking by each Investor
Indemnitee to repay to the Company all reimbursed amounts as to which such
Investor Indemnitee is subsequently determined by a court of competent
jurisdiction not to be entitled to indemnification hereunder, even if the
Company reserves the right to dispute whether the Series D Agreement or the
Series E Agreement, as the case may be, requires the payment or reimbursement of
such expenses.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    (iii)           An
Investor Indemnitee seeking indemnification hereunder shall give written notice
to the Company of any claim with respect to which it seeks indemnification
promptly after the discovery by such party of any matters giving rise to a claim
for indemnification; provided that the failure of
any Investor Indemnitee to give notice as provided herein shall not relieve the
Company of its obligations under this Section 7.2(c) except to the extent the
Company shall have been materially prejudiced by the failure of the Investor
Indemnitee to make such notification. In case any such action, suit, claim or
proceeding is brought against an Investor Indemnitee, the Company shall be
entitled to participate in the defense thereof and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satisfactory to the
Investor Indemnitee, and after notice from the Company to the Investor
Indemnitee of its election so to assume the defense thereof, the Company shall
not be liable to such Investor Indemnitee under this Section 7.2(c) for any
legal or other expense subsequently incurred by such Investor Indemnitee in
connection with the defense thereof; provided that (i) if the
Company shall elect not to assume the defense of such claim or action or (ii) if
the Investor Indemnitee reasonably determines that there may be a conflict
between the positions of the Company and of the Investor Indemnitee in defending
such claim or action, then the Investor Indemnitee’s separate counsel shall be
entitled to participate in and conduct the defense, and the Company shall be
liable to any legal or other expenses incurred by the Investor Indemnitee in
connection with the defense; provided that in no event
shall the Company be required to pay the fees or expenses of more than one
counsel other than its own. The Company shall not be liable for any settlement
of any action, suit, claim or proceeding effected without its written consent;
provided, however, that
the Company shall not unreasonably withhold, delay or condition its consent. The
Company further agrees that it shall not, without the Investor Indemnitee’s
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof in any pending or threatened action, suit, claim or
proceeding in respect of which indemnification may be sought hereunder (whether
or not any Investor Indemnitee is an actual or potential party to such action,
suit, claim or proceeding) unless such settlement or compromise includes an
unconditional release of the Series D Investor or Series E Investors and each
other Investor Indemnitee from all liability arising out of such action, suit,
claim or proceeding.

     

    (iv)           If
the indemnification provided for in this Section 7.2(c) is held by a court of
competent jurisdiction to be unavailable to an Investor Indemnitee with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Company, in lieu of indemnifying such Investor Indemnitee hereunder, shall
contribute to the amount paid or payable by such Investor Indemnitee as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
the Investor Indemnitee on the other in connection with the actions or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the Company and
of the Investor Indemnitee shall be determined by reference to, among other
things, whether the action, suit, claim proceeding, cost, damage, judgment,
amount paid in settlement or expense at issue arose in part due to wrongful
conduct of the Investor Indemnitee.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    (v)           The
Company and each Series D/E Representative shall enter into the Company’s
standard director indemnification agreement, pursuant to which the Company shall
indemnify each Series DE Representative to the furthest extent permitted by law.
The indemnification provided by such agreement shall supersede and replace the
indemnification provided by Section 7.2(c)(i) with respect to claims relating to
or arising out of Series D/E Representative’s position on the Board of Directors
of the Company which claims are covered under such agreement and in respect of
which claims indemnification is actually being provided under such
agreement.

     

    (vi)           Prior
to a Qualified PO, the Company shall maintain directors’ and officers’ insurance
covering the Series D/E Representatives in an amount and on terms not less
favorable than the most favorable terms of such insurance (if any) maintained by
the Company for its other directors and officers. Following a Qualified PO, the
Company shall use reasonable commercial efforts to maintain such directors’ and
officers’ insurance covering the Series D/E Representatives, provided that such
insurance is available for the Company’s Board of Directors at commercially
reasonable rates.

     

    (vii)           The
rights of Series D Investor and Series E Investors under this Section 7.2(c)
shall be in addition to any liability that the Company might otherwise have to
the Series D Investor, Series E Investors and the Series D/E Representatives
under the Series D Agreement, Series E Agreement, the Restated Articles, at
common law or otherwise.

     

    (d)           Legal
Requirements. Each of the Company, the Series D Investor and the Series E
Investors shall take all reasonable actions necessary or desirable to comply
promptly with all legal requirements which may be imposed on them with respect
to the consummation of the transactions contemplated by the Series D Agreement
or Series E Agreement (including finishing all information required in
connection with approvals of or filings with any governmental entity relating to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976) and shall promptly
cooperate with and furnish information to any party hereto necessary in
connection with any such requirements imposed upon any of them or their
respective subsidiaries in connection with the consummation of the transactions
contemplated by the Series D Agreement and Series E Agreement.

     

    7.3           Termination of Covenants and Certain
Rights of the Series A Investors, the Series B Investors, the Series C
Investors, the Series D Investor, the Series E Investors, the Series G Investors
and the Series H Investors. All covenants of the Company set forth in
Sections 7.1 and 7.2 shall terminate in all respects and be of no further force
or effect immediately prior to the earliest of (i) the closing of a Qualified
IPO (it being understood that solely for the purposes of this Section 7.3 with
respect to termination of a covenant to which a Series A Investor is a party,
any firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act shall constitute a “Qualified
IPO”), (ii) such time as the Company becomes subject to the reporting
obligations of Section 13 or 15(d) of the Exchange Act, or (iii) the occurrence
of a Change of Control.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    SECTION
8

     

    MISCELLANEOUS

     

    8.1           Governing Law. This Agreement
shall be governed in all respects by the internal laws of the State of
California.

     

    8.2           Entire Agreement;
Amendment.

     

    (a)           This
Agreement constitutes the full and entire understanding and agreement and
supersedes any existing agreement between the parties with regard to the subject
matter hereof, including without limitation the Prior Investor Rights Agreement.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument referencing this Agreement and signed by the Company and Holders
holding not less than a majority-in-interest of the issued or issuable
Conversion Stock (excluding any of such shares that have been sold to the public
or pursuant to Rule 144) (a “Majority-in-Interest”); provided, however, that
Holders purchasing Shares under the Series H Agreement after the Initial Closing
(each as defined in the Series H Agreement) may become parties to this Agreement
without any amendment to this Agreement pursuant to this section or any consent
or approval of any party hereto; and provided, further, that if any amendment,
waiver, discharge or termination operates in a manner that treats the shares of
any series or class of capital stock of the Company held by any Holder
differently from the shares of the same series or class of capital stock of the
Company held by other Holders, the consent of such Holder shall also be required
for such amendment, waiver, discharge or termination. Any such amendment,
waiver, discharge or termination effected in accordance with this paragraph
shall be binding upon each Holder and each future holder of all such securities
of such Holder. Each Holder acknowledges that by the operation of this
paragraph, and except as expressly provided herein, a Majority-in-Interest will
have the right and power to diminish or eliminate all rights of such Holder
under this Agreement.

     

    (b)           Sections
4, 5 and 6 may only be amended with the consent of all of (x) the Company and
(z) a Majority-in-Interest; provided, however, if any
such amendment would have an adverse effect on any or all Founders, the consent
of holders of a majority of the Qualified Conversion Shares held by the Founders
shall also be required.

     

    (c)           Section
7.1(a) through 7.1(c) may only be amended with the consent of all of (x) the
Company and (y) a Majority-in-Interest, but excluding any Conversion Stock
issued or issuable to the Series F Investors.

     

    (d)           Section
7.1(d) may only be amended with the consent of all of (x) the Company and (y)
the holders of a majority-in-interest of the Conversion Stock issued or issuable
to the Series G Investors and the Series H Investors, voting together on an
as-converted to Common Stock basis.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    (e)           Section
7.2(a) and (b) may only be amended with the consent of all of (x) the Company
and (y) a Majority-in-Interest, but excluding any Conversion Stock issued or
issuable to the Series A Investors and the Series F Investors.

     

    (f)           Section
7.2(c) may only be amended with the consent of all of (x) the Company and (y)
the holders of a majority-in-interest of the Conversion Stock issued or issuable
to the Series D Investor and the Series E Investors.

     

    (g)           Sections
7.3 and 8.2 may be amended by the consent of the Company and those Investors
whose approval would be required to amend any section of the Agreement to which
such sections relate.

     

    8.3           Notices. All notices and other
communications required or permitted hereunder shall be in writing and shall be
mailed by registered or certified mail, postage prepaid, express courier or
electronic mail, or otherwise delivered by hand, messenger or facsimile,
addressed (a) if to an Investor, at the Investor’s address (including electronic
mail address) or facsimile number set forth on the Schedule of Investors, or at
such other address (including electronic mail address) or facsimile number as
the Investor shall have furnished to the Company in writing, (b)if to the
Company, the Founders or the Common Holders, at the address or facsimile number
set forth on the signature page of this Agreement and addressed to the attention
of the Chief Executive Officer, or at such other address or facsimile number as
the Company shall have furnished to the Investors. Each such notice or other
communication shall for all purposes of this Agreement be treated as effective
or having been given (i) when delivered if delivered personally, by messenger,
by facsimile with receipt confirmed or by electronic mail with receipt confirmed
or, if sent by registered or certified mail or express courier, at the earlier
of its receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of registered or certified mail
or express courier, addressed and mailed as aforesaid.

     

    8.4           Successors and Assigns. Except
as otherwise set forth in Section 2.13 and Section 7, this Agreement and the
rights and obligations of the parties hereunder shall inure to the benefit of,
and be binding upon, their respective successors, assigns and legal
representatives; provided,
however, that, in addition to the requirements of Section 2.13, the right
of first refusal and co-sale rights set forth in Section 4 and Section 5 hereof
shall not be assignable by an Eligible Investor except to a transferee who
acquires at least ten thousand (10,000) shares of Series B Preferred, Series C
Preferred, Series D Preferred, Series E Preferred, Series F Preferred Series G
Preferred or Series H Preferred, as the case may be (or Qualified Conversion
Shares issued upon conversion of the Series B Preferred, Series C Preferred,
Series D Preferred, Series E Preferred, Series F Preferred, Series G Preferred
or Series H Preferred, as the case may be) (as adjusted for Recapitalizations
after the date hereof) and who agrees in writing to be bound by the applicable
terms of this Agreement.

     

    8.5           Delays or Omissions. Except as
expressly provided herein, no delay or omission to exercise any right, power or
remedy accruing to any Holder, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such Holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Holder of any breach or default under this Agreement, or any waiver on the part
of any Holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing and as set forth in Section 8.2 above. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative. Except as expressly provided herein, no delay or omission to
exercise any right, power, or remedy occurring to the Company, upon any breach
or default of the holder under this Agreement, shall impair any such right,
power, or remedy of the Company, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company of any breach of default under this
Agreement, or any waiver on the part of the Company of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to the Company, shall be
cumulative and not alternative.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    8.6           Expenses. The Company and each
Investor shall bear its own expenses incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby (except as otherwise provided
herein or in the Series H Agreement or in the Exhibits to the Series H Agreement
executed contemporaneously herewith) and any amendments or waivers
hereto.

     

    8.7           Attorneys’ Fees. In the event
of any litigation in a court of competent jurisdiction or arbitration in
accordance with Section 8.9 arising in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in judgment shall be
entitled to recover reasonable legal fees and costs in connection with such
action.

     

    8.8           Reverse Stock Split. In the
event the Company does a reverse stock split or share combination, such reverse
stock split or share combination shall affect the share holding of all
shareholders of the Company proportionately.

     

    8.9           Arbitration.

     

    (a)           At
the option of (i) the Company or (ii) a Majority-in-Interest, any and all
disputes or controversies whether of law or fact and of any nature whatsoever
arising from or respecting this Agreement, shall be decided by arbitration by
the American Arbitration Association (the “Association”) in accordance
with the rules and regulations of the Association.

     

    (b)           The
arbitrators shall be selected as follows: In the event the Company and a
Majority-in-Interest agree on one arbitrator, the arbitration shall be conducted
by such arbitrator. In the event the Company and a Majority-in-Interest do not
so agree, the Company and a Majority-in-Interest shall each select one
independent, qualified arbitrator and the two arbitrators so selected shall
select the third arbitrator. The Company reserves the right to object to any
individual arbitrator who shall be employed by or affiliated with a competing
organization.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    (c)           Arbitration
shall take place at San Francisco, California, or any other location mutually
agreeable to the parties. At the request of either party, arbitration
proceedings will be conducted in the utmost secrecy; in such case all documents,
testimony and records shall be received, heard and maintained by the arbitrators
in secrecy under seal, available for the inspection only of the Company or the
Investors and their respective attorneys and their respective experts who shall
agree in advance and in writing to receive all such information confidentially
and to maintain such information in secrecy until such information shall become
generally known. The provisions of California Code of Civil Procedure Section
1283.05 (permitting depositions to be taken and discovery to be obtained) are
incorporated into and made applicable to any arbitration hereunder. The
arbitrators, who shall act by majority vote, shall be able to decree any and all
relief of an equitable nature, including but not limited to such relief as a
temporary restraining order, a temporary and/or permanent injunction, and shall
also be able to award damages, with or without an accounting and costs. The
decree or judgment of an award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.

     

    (d)           Reasonable
notice of the time and place of arbitration shall be given to all persons, other
than the parties, as shall be required by law, in which case such persons or
those authorized representatives shall have the right to attend and/or
participate in all the arbitration hearings in such manner as the law shall
require.

     

    8.10           Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts, and all of
which together shall constitute one instrument.

     

    8.11           Severability. In the event
that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that no
such severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.

     

    8.12           Titles and Subtitles. The
titles and subtitles used in this Agreement are used for convenience only and
are not considered in construing or interpreting this Agreement. The foregoing
Agreement is executed as of the date first above written.

     

    8.13           Amendment of Prior Investor Rights
Agreement. The Prior Investor Rights Agreement is hereby amended and
superseded in its entirety and restated herein. Such amendment and restatement
is effective upon the execution of this Agreement by the Company and the parties
required for an amendment pursuant to Section 8.2 of the Prior Investor
Rights Agreement. Upon such execution, all provisions of, rights granted and
covenants made in the Prior Investor Rights Agreement are hereby waived,
released and superseded in their entirety by the provisions hereof and shall
have no further force or effect.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    [Remainder
of Page Intentionally Left Blank]

     

     

     

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    The
foregoing Agreement is executed as of the date first above written.

     

    
      
        	 	“COMPANY”
	 	 
	 	      
                QUARK
      PHARMACEUTICALS, INC.

                a
      California corporation

              
	 	 	 
	
                 

              	
                By:
      

              	/s/
      D. Zurr	 
	 	 	      
                Daniel
      Zurr, Ph.D.

                Chief
      Executive Officer

              	 
	 	 	 	 	 
	 	Address: 	6501
      Dumbarton Circle	 
	 	 	 	Fremont,
      CA 94555	 
	 	 	 	 	 
	 	Fax:	(510)
      402-4021	 


      

    

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    “COMMON
HOLDERS” AND “FOUNDERS”

     

     

    
      David
M. Fineman and Ellen Gunn 

      Fineman,
Trustees of the Fineman 

      Revocable
Trust dated 2/12/97

       

      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

       

    

     

    
      Claire
F. Gunn, as Custodian for Chloe 

      Rose
Fineman Under the California 

      Uniform
Transfers to Minors Act

       

       

      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

    

     

     

    
      Claire
F. Gunn, as Custodian for Emma 

      Hart
Fineman Under the California 

      Uniform
Transfers to Minors Act

       

      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

    

     

     

     

    
      ___________________________________

      Bonnee
Rubinfeld

       

       

       

       

       

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

       

      Bonnee and Loretta Rubinfeld JTWROS

       

      
        By:_________________________________

         

        Print:_______________________________

         

         

         

        The J. Gregory Swendsen Revocable 

        Living Trust Dated February 1, 2001

         

        
          By:_________________________________

           

          Print:_______________________________

           

          Title:_______________________________

        

         

         

         

        The Susan H. Bell Revocable Trust U/A 

        Dated January 31, 2001

         

      

    

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

    

     

    
       

      /s/ D.
Zurr                                                                


      Daniel
Zurr

       

       

       

       

       

    

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    Goddard
and Ephrat Trust Company

    
      fbo
Mr. Daniel Zurr

    

     

    
      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

         

         

        ____________________________________

        John V.
Roos

      

    

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

    “SERIES
A INVESTORS”

     

     

    ________________________________________

    Patricia
L. Berns

     

     

    


    Deborah
R. Bernstein and Harvey S. Hecht

     

    By:______________________________________

    


    Print:_____________________________________

     

     

     

    ________________________________________

    Gayle
Brooks

     

     

    ________________________________________

    Robert
Bruckman

     

    
 

    Robert
and Mari Bruckman

     

    
      By:______________________________________

      


      Print:_____________________________________

    

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

    Robert
Bruckman, M.D. Money Purchase Pension Plan

     

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________                                                          

    

     

     

     

    Robert
Bruckman, M.D. Profit Sharing Plan

     

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

    

                                                 

     

     

    Joel
Sklar, Mark Wexman & Jarold Young 

    as
TTEES for Cardiology Assoc. of Marin 

    and
San Francisco 401(k) FBO: Mark Wexman

     

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

       

       

       

       

       

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

         

      

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

       

      Jerome
C. Dougherty, TTEE for Jerome 

      Dougherty
Attorney at Law Money 

      Purchase
Pension & Profit Sharing Plan Trust

       

    

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

       

       

       

      Fineman,
TTEE for the Gunn-Fineman 

      Inc.
Profit Sharing & Money Purchase 

      Pension
Trust

    

     

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

       

       

       

      First
Trust Corporation, TTEE fbo Harvey 

      S.
Hecht IRA M619043-0001

       

    

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

       

       

       

       

       

    

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

     

    Lois
Pat Lee Gintjee, TTEE of the Lois Pat 

    Lee
Gintjee Living Trust Dated November 19, 1996

                         

    
      By:_________________________________

       

      Print:_______________________________

       

      Title:_______________________________

       

       

      ___________________________________

      Jeffrey
A. Hawkins

       

       

      ___________________________________

      Jonathan
D. Hawkins

       

       

       

      Joyce
Hawkins, Trustee of the Hawkins 

      Family
Trust dated March 18, 1991

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      Roger
W. Hedin, M.D. and Mary A. Hedin

       

      
        By:_________________________________

         

        Print:_______________________________

         

         

         

         

         

      

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

       

      IRA
FBO Donald T. Campbell/DLJSC as 

      Custodian/Rollover
Account

       

      By:_________________________________

      
        
           

          Print:_______________________________

           

          Title:_______________________________

        

      

       

       

       

      Lois
Pat Lee Gintjee, TTEE of the Lois Pat 

      Lee
Gintjee Living Trust Dated November 19, 1996

       

      By:_________________________________

      
        
           

          Print:_______________________________

           

          Title:_______________________________

        

      

       

       

      ___________________________________

      Bonnie J.
Lawless

       

       

       

      The
Trust of Robert M. and Bernadine T. Lawless

       

      
        
          By:_________________________________

           

          Print:_______________________________

           

          Title:_______________________________

           

           

           

           

           

        

      

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          37

          
            

          

        

        
           

        

      

       

      Kathleen
Lewis, M.D. and Julien Hoffman

       

      
        By:_________________________________

         

        Print:_______________________________

         

         

         

      

      MLPF
& S, Custodian FPO David L. Austin RRA

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

      

      MLPF
& S, Custodian FPO Frances M. Austin RRA

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

      ___________________________________

      W. Scott
Newhall

       

       

       

       

      Polly
Sue Ogden, Trustee, Polly Ogden 

      Associates
KEOGH Profit Sharing & 

      Money
Purchase Pension Plans

       

      
        
          
            By:_________________________________

             

            Print:_______________________________

             

            Title:_______________________________

          

        

         

         

         

         

         

      

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          38

          
            

          

        

        
           

        

      

       

      ___________________________________

      Donald
Oppenheim

       

       

       

      Alfred
D. Oppenheim and Terri A. Slagle, 

      Trustees
of the Oppenheim/Slagle Family 

      Trust
U/T/A Dated 8/12/1991

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      Peter
F. and Sylvia Oppenheim, Trustees of 

      the
Oppenheim Family Trust U/T/A Dated 

      June
12, 1974

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

      ___________________________________

      Christian
Pardee Erdman

       

       

       

       

       

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

       

      Mark
J. Peterson, Trustee, The Mark J. 

      Peterson
Money Purchase Pension Plan

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      Joseph
D. Sabella, M.D. and Iris Sabella, 

      TTEE,
Sabella Family Trust Dated May 18, 1987

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      San
Francisco Neonatology Medical Group 

      Profit
Sharing FBO Terri A. Slagle

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      San
Francisco Neonatology Medical Group 

      Profit
Sharing FBO Kathleen Lewis, M.D.

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

       

       

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

       

      San
Francisco Neonatology Medical Group 

      Profit
Sharing FBO Steven Goldman, M.D.

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      Jack
and Meredith Sender

       

      
        By:_________________________________

         

        Print:_______________________________

         

         

         

      

      Gerald
L. and Donna E. Vercesi, Trustees 

      of
the Vercesi Family Trust Dated 

      December
15, 1994

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      James
L. and Cassandra H. Warren

       

      
        By:_________________________________

         

        Print:_______________________________

         

         

         

         

         

        
          [Signature
Page to Quark Pharmaceuticals, Inc.

          Fourth
Amended and Restated Investors Rights Agreement]

        

      

       

      
        
           

        

        
          41

          
            

          

        

        
           

        

      

       

      Mark
Wexman, M.D. and Karen Wexman

       

      
        By:_________________________________

         

        Print:_______________________________

      

       

       

       

      WS
INVESTMENT COMPANY 94A

       

      
        By:_________________________________

         

        Title:_______________________________

      

       

       

       

      Diane
C. and Howard B. Zack

       

      
        By:_________________________________

         

        Print:_______________________________

      

       

       

      ___________________________________

      John
Ziegler

       

       

       

       

       

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          42

          
            

          

        

        
           

        

      

       

      “SERIES
B PURCHASERS”

       

      Delaware
Charter Guarantee & Trust Co. 

      fbo
James L. Warren IRA H10-6180292

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

      ___________________________________

      Steven
Goldman

       

       

       

      IRA
FBO Donald T. Campbell/DLJSC as 

      Custodian/Rollover
Account

       

      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

      

       

       

       

      MLPF
& S, Custodian FPO David L. Austin RRA

       

      
        By:_________________________________

         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

         

         

      

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          43

          
            

          

        

        
           

        

      

       

      Peter
and Sylvia Oppenheim, Trustees, 

      Oppenheim
Family Trust dtd June 1974

       

      
        By:_________________________________

        
           

          Print:_______________________________

           

          Title:_______________________________

        

      

       

       

      ___________________________________

      Christian
Pardee Erdman

       

       

       

      TAKO
VENTURES, LLC

      a
California limited liability company

       

      By:  Cephalopod
Corporation, Member

       

      By:  Philip
B. Simon, President

       

      /s/ Philip B.
Simon                                              

       

       

      ___________________________________

      Steven J.
Wexman

       

       

       

      Diane
C. and Howard B. Zack

       

      
        By:_________________________________

         

        Print:_______________________________

      

                 

       

       

       

       

      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

       

      
        
           

        

        
          44

          
            

          

        

        
           

        

         

      

    

    “SERIES
C INVESTORS”

     

    TAKO
VENTURES, LLC

    a
California limited liability company

     

    By:  Cephalopod
Corporation, Member

     

    By:  Philip
B. Simon, President

     

    /s/ Philip B.
Simon                                                

     

     

     

    WS
INVESTMENT COMPANY 96B

     

    
      
        By:_________________________________

        
           

          Title:_______________________________

           

           

           

          SUPERGEN,
INC.,

          a
California corporation

           

           

          ___________________________________

          Joseph
Rubinfeld, President

           

           

           

          Steven
and Diane Goldman, JTWROS

           

        

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

         

        ___________________________________

        Jeffrey
A. Hawkins

         

         

         

         

         

      

    

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        45

        
          

        

      

      
         

      

    

     

    Peter
and Sylvia Oppenheim, Trustees, 

    Oppenheim
Family Trust dtd June 1974

     

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

        ___________________________________

        John V.
Roos

         

         

        ___________________________________

        Joseph
Rubinfeld

         

         

         

        Diane
C. and Howard B. Zack

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

         

         

         

         

      

    

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        46

        
          

        

      

      
         

      

    

     

    “SERIES D
INVESTOR”

     

    TAKO
VENTURES, LLC

    a
California limited liability company

     

    By:  Cephalopod
Corporation, Member

     

    By:  Philip
B. Simon, President

     

    /s/ Philip B.
Simon                                              


     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

    
       

      
        
           

        

        
          47

          
            

          

        

        
           

        

      

       

      “SERIES
E INVESTORS”

       

      TAKO
VENTURES, LLC

      a
California limited liability company

       

      By:  Cephalopod
Corporation, Member

       

      By:  Philip
B. Simon, President

       

      /s/ Philip B.
Simon                                             

       

       

       

      Delaware
Charter Guarantee & Trust Co. 

      fbo
James L. Warren IRA H10-6180292

       

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

        Gerald
L. Vercesi and Donna E. Vercesi, 

        Trustees
of the Vercesi Family Trust dated 

        December
15, 1994

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

        ___________________________________

        Christian
Pardee Erdman

         

         

         

         

         

        
          [Signature
Page to Quark Pharmaceuticals, Inc.

          Fourth
Amended and Restated Investors Rights Agreement]

        

         

        
          
             

          

          
            48

            
              

            

          

          
             

          

        

         

         

        Robert
M. Lawless, TTEE, The Trust of 

        Robert
M. & Bernadine T. Lawless

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

        James
L. and Cassandra H. Warren

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

        Joel
Sklar, Mark Wexman & Jerold Young 

        as
TTEES for Cardiology Assoc. of Marin 

        and
San Francisco 401(k) FBO: Mark Wexman

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

         

         

        
          [Signature
Page to Quark Pharmaceuticals, Inc.

          Fourth
Amended and Restated Investors Rights Agreement]

        

         

        
          
             

          

          
            49

            
              

            

          

          
             

          

        

         

        “SERIES
F INVESTORS”

         

        TAISHO
PHARMACEUTICAL CO., LTD.

         

         

        /s/ Akira
Uehara                                                   

        Akira
Uehara

        President

         

         

         

        ASTELLAS
PHARMA INC.

         

         

        /s/ Hirofaini
Onosaka                                          


        Hirofaini
Onosaka

        Senior
Corporate Officer

        Senior
Vice President, Corporate Strategy

         

         

         

        DAIICHI
SANKYO CO., LTD.

         

        
          Name:_______________________________

          Title:________________________________

           

           

           

          MITSUBISHI
TANABE PHARMA Corporation

           

          
            Name:_______________________________

            Title:________________________________

          

        

      

    

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

    
 

    
      
         

      

      
        50

        
          

        

      

      
         

      

    

     

    
      ____________________________________

      Douglas
H. Harlan

       

       

      ____________________________________

      Hal P.
Harlan

       

       

      ____________________________________

      Hugh P.
Harlan

       

       

       

      Harlan
BioProducts for Science, Inc.

       

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

        Harlan
Biotech Israel Ltd.

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

         

         

        
          [Signature
Page to Quark Pharmaceuticals, Inc.

          Fourth
Amended and Restated Investors Rights Agreement]

        

         

        
          
             

          

          
            51

            
              

            

          

          
             

          

        

         

        Harlan
Development Company, LLC

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

         

        Harlan
Laboratories Ltd.

         

      

    

    
      By:_________________________________

      
         

        Print:_______________________________

         

        Title:_______________________________

         

         

        ___________________________________

        Christian
Pardee Erdman

         

         

         

         

         

      

    

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        52

        
          

        

      

      
         

      

    

     

    “SERIES
G INVESTORS”

     

     

    TRANS-SCIENCE
GLOBAL BIO-TECHNOLOGY FUND

     

    By: SBI
Asset Management Co., Ltd.

    Its
Truster

     

     

    /s/ Kazuyuki
Matsui                                           

    Name:  Kazuyuki
Matsui

    Title:  
 CEO & President

     

     

     

    TS-US
NO.1 INVESTMENT PARTNERSHIP

     

    By: Trans-Science,
Inc.

    Its
General Partner

     

     

    /s/ Seiji
Nakano                                                    

    Name:  Seiji
Nakano

    Title:   
President & CEO

     

     

     

    ASUKA
DBJ INVESTMENT LPS

     

    By:
Asuka DBJ Partners Co., Ltd.

    Its
General Partner

     

     

    /s/ Toru
Mio                                                         

    Name:  Toru
Mio

    Title:   
Representative Director

     

     

     

     

     

    
      
        [Signature
Page to Quark Pharmaceuticals, Inc.

        Fourth
Amended and Restated Investors Rights Agreement]

      

    

     

    
      
         

      

      
        53

        
          

        

      

      
         

      

    

     

    MUFG
VENTURE CAPITAL I, LIMITED PARTNERSHIP

     

    By:
The Mitsubishi UFJ Capital Company 

    Limited,
its General Partner

     

     

    /s/ Kazuhiko
Tokita                                                

    Name:  Kazuhiko
Tokita

    Title:   
President

     

     

     

    ORIX
FUND NO. 9

     

    By:
Orix Capital Corporation

     

     

    /s/ Kazutaka
Shimoura                                           


    Name:  Kazutaka
Shimoura

    Title:   
President

     

     

     

    CONCORDIA
INVESTMENT, L.P.

     

     

    ______________________________________

    Name:  Hirotoshi
Komoda

    Title:   
CEO & President, Birdhill,

     Its
General Partner

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        54

        
          

        

      

      
         

      

    

     

    
      TRANS-SCIENCE
NO.3 INVESTMENT LIMITED PARTNERSHIP

       

      By: 
Trans-Science, Inc.

      Its
General Partner

       

       

      /s/ Seiji
Nakano                                             


      Name:  Seiji
Nakano

      Title:  President
& CEO

       

       

       

      TOKIO
MARINE & NICHIDO FIRE INSURANCE CO., LTD.

       

      New
Financial Markets Dep

       

       

      _________________________________

      Name:  Takashi
Yoshikawa

      Title:   
General Manager

       

       

       

      ZENSHIN
CAPITAL FUND 1F PARTNERSHIP

       

      By: 
Zenshin Capital Partners, LLC

      Its
General Partner

       

       

      /s/ Takeshi
Mori                                           

      Name:  Takeshi
Mori

      Title:  Managing
Member

       

       

       

       

       

    

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]


    

     

    
      
         

      

      
        55

        
          

        

      

      
         

      

    

     

    “SERIES
H INVESTORS”

     

     

     

    TS-US
No. 3 INVESTMENT LIMITED PARTNERSHIP

     

    By:  Trans-Science,
Inc.

    Its:  General
Partner

     

     

    /s/ Seiji
Nakano                                               


    Name:  Seiji
Nakano

    Title:   
President & CEO

     

     

     

    SBI
Bond & Private Equity Fund III

     

    By:  SBI
Asset Management

    Its:
General Partner

     

     

    /s/ Kazuyuki
Matsui                                       


    Name:  Kazuyuki
Matsui

    Title:   
CEO & President

     

     

     

    TSI
No. 1 INVESTMENT LIMITED PARTNERSHIP 

    (“Tokumei-Kumiai”)

     

    By:  Trans-Science
Investment, Inc

    Its:  General
Partner (“Eigyo-sha”)

     

     

    /s/ Seiji
Nakano                                               

    Name:  Seiji
Nakano

    Title:    President
& CEO

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        56

        
          

        

      

      
         

      

    

     

    SBI
Investment Co., Ltd.

     

    Its:
Representative Director

     

     

    /s/ Takashi
Nakagawa                                    

    Name:  Takashi
Nakagawa

    Title:  
 Representative Director & COO

     

     

     

    SBI
BROADBAND FUND No. 1 LIMITED PARTNERSHIP

     

    By:
SBI Investment Co., Ltd.

    Its:
General Partner

     

     

    /s/ Takashi
Nakagawa                                    

    Name:  Takashi
Nakagawa

    Title:   
Representative Director & COO

     

     

     

    SBI
BROADBAND CAPITAL Co., Ltd.

     

    By:  SBI
Investment Co., Ltd.

    Its:  Representative
Director

     

     

    /s/ Takashi
Nakagawa                                    

    Name:  Takashi
Nakagawa

    Title:  
 Representative Director & COO

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

    


    
      
         

      

      
        57

        
          

        

      

      
         

      

    

     

    SBI
BB Media Investment Limited Partnership

     

    By:  SBI
Investment Co., Ltd.

    Its:
General Partner

     

     

    /s/ Takashi
Nakagawa                                     
 

    Name:  Takashi
Nakagawa

    Title:   
Representative Director & COO

     

     

     

    SBI
BB Mobile Investment LPS

     

    By:  SBI
Investment Co., Ltd.

    Its:
General Partner

     

     

    /s/ Takashi
Nakagawa                                       


    Name:  Takashi
Nakagawa

    Title: 
  Representative Director & COO

     

     

     

    SBI
Bio Life Science Investment LPS

     

    By:  SBI
Investment Co., Ltd.

    Its:
General Partner

     

     

    /s/ Takashi
Nakagawa                                       


    Name:  Takashi
Nakagawa

    Title:   
Representative Director & COO

     

     

     

     

    


    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

    


    
      
         

      

      
        58

        
          

        

      

      
         

      

    

     

    SBI
LIFE SCIENCE TECHNOLOGY INVESTMENT LPS

     

    By:
SBI Investment Co., Ltd.

    Its:
General Partner

     

     

    /s/ Takashi
Nakagawa                                         


    Name:  Takashi
Nakagawa

    Title:   
Representative Director & COO

     

     

     

    SBI
LIFE SCIENCE TECHNOLOGY II INVESTMENT LPS

     

    By:  SBI
Investment Co., Ltd.

    Its:
General Partner

     

     

    /s/ Takashi
Nakagawa                                         


    Name:  Takashi
Nakagawa

    Title:  Representative
Director & COO

     

     

     

    MUFG
VENTURE CAPITAL I, LIMITED PARTNERSHIP

     

    By:  The
Mitsubishi UFJ Capital Company Limited, 

    its
General Partner

     

    __________________________________

    Name:  Kazuhiko
Tokita

    Title:  
 President

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]

    

     

    
      
         

      

      
        59

        
          

        

      

      
         

      

    

     

    DAFNA
LifeScience Ltd.

     

    /s/ Nathan
Fischel                                                     


    Name:  Nathan
Fischel, M.D., CFA

    Title:   
Chief Executive Officer of Investment

    Manager,
DAFNA Capital Management, LLC

    on behalf
of DAFNA LifeScience Ltd.

     

     

     

    DAFNA
LifeScience Select Ltd.

     

    /s/ Nathan
Fischel                                                     


    Name:  Nathan
Fischel, M.D., CFA

    Title:  Chief
Executive Officer of Investment

    Manager,
DAFNA Capital Management, LLC

    on behalf
of DAFNA LifeScience Select Ltd.

     

     

     

     

     

    
      [Signature
Page to Quark Pharmaceuticals, Inc.

      Fourth
Amended and Restated Investors Rights Agreement]


    

     

    
      
         

      

      
        60

        
          

        

      

      
         

      

    

     

    EXHIBIT
A

     

    LIST
OF COMMON HOLDERS

     

    David M.
Fineman and Ellen Gunn Fineman,

     

    Claire F.
Gunn, Custodian for Chloe Rose Fineman Under the California Uniform Transfers to
Minors Act

     

    Claire F.
Gunn, Custodian for Emma Hart Fineman Under the California Uniform Transfers to
Minors Act

     

    John V.
Roos

     

    Bonnee
Rubinfeld

    Bonnee
Rubinfeld and Loretta Rubinfeld, JTWROS

     

    J.
Gregory Swendsen

    The J.
Gregory Swendsen Revocable Living Trust Dated February 1, 2001

     

    Susan
Bell

    The Susan
H. Bell Revocable Trust U/A Dated January 31, 2001

     

    Daniel
Zurr

    Goddard
and Ephrat Trust Company

    fbo Mr.
Daniel Zurr

     

    
      
         

      

      
        61

        
          

        

      

      
         

      

    

     

    EXHIBIT
B

     

    LIST
OF FOUNDERS

     

    
      	
              
                Founder’s
      Name

              

            	 	
              
                Address

              

            
	
              Daniel
      Zurr

              Goddard
      and Ephrat Trust Company Ltd.

              f/b/o
      Mr. Daniel Zurr

            	 	
              QBI
      Enterprises Ltd.

              P.O.
      Box 895

              Omer,
      84965

              Israel

            
	 	 	 
	
              Daniel
      Zurr

            	 	
              QBI
      Enterprises Ltd.

              P.O.
      Box 895

              Omer,
      84965

              Israel

            
	 	 	 
	
              David
      M. and Ellen Gunn Fineman, Trustees of the Fineman Revocable Trust dated
      2/12/97

            	 	
              Quark
      Pharmaceuticals, Inc.

              6501
      Dumbarton Circle

              Fremont,
      CA 94555

            
	 	 	 
	
              The
      J. Gregory Swendsen Revocable Living Trust Dated February 1,
      2001

            	 	
              Swendsen
      & Company

              703
      Market Street, Suite 906

              San
      Francisco, CA 94103

            
	 	 	 
	
              The
      Susan H. Bell Revocable Trust U/A Dated January 31, 2001

            	 	
              POB
      31295

              Santa
      Fe, NM 87594

            
	 	 	 
	
              Bonnee
      Rubinfeld

              Bonnee
      Rubinfeld and Loretta Rubinfeld, JTWROS

            	 	
              5304
      Blackhawk Drive

              Danville,
      CA 94506

            
	 	 	 
	
              Claire
      F. Gunn, Custodian for Chloe Rose Fineman under the California Uniform
      Transfers to Minors Act

            	 	
              Quark
      Pharmaceuticals, Inc.

              6501
      Dumbarton Circle

              Fremont,
      CA 94555

            
	 	 	 
	
              Claire
      F. Gunn, Custodian for Emma Hart Fineman under the California Uniform
      Transfers to Minor Act

            	 	
              Quark
      Pharmaceuticals, Inc.

              6501
      Dumbarton Circle

              Fremont,
      CA 94555

            


    

     

    
      
         

      

      
        62