Unassociated Document


     

    Exhibit
10.17


    Quark
Pharmaceuticals, Inc.

     

    2007
Equity Incentive Plan

     

    Approved
By Board on:  March 2, 2007 (“Effective Date”)

    Approved
By Shareholders: May 17, 2007

    Amended
by the Board on: May 24, 2007

    Amendment
Approved by Shareholders: June 1, 2007

    Termination
Date: March  1, 2017

     

    1.           General.

     

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

     

    (b)           Available
Awards.  The Plan provides for the grant of the following
Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii)
Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Stock
Appreciation Rights, (vi) Performance Stock Awards, (vii) Performance Cash
Awards, and (viii) Other Stock Awards. Israeli Optionees may be issued with
Awards in accordance with Exhibit B of the Plan.

     

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

     

    (d)           Compliance with Section 25102(o)
California Code of Corporations.  In the case of a Participant
who is a resident of the State of California, notwithstanding anything to the
contrary in the Plan or in such Participant’s Stock Award Agreement, the terms
and conditions set forth in Exhibit A hereto
shall apply to any Stock Award granted to such Participant in reliance on
Section 25102(o) of the California Corporate Securities Law of 1968, as amended
from time to time, (“Section
25102(o)”) and shall be deemed to be a part of the Plan, if and to the
extent compliance with the terms set forth on Exhibit A is required
under Section 25102(o).  In the event of any conflict or inconsistency
between the provisions of Exhibit A and any
provisions otherwise appearing in the Plan, the provisions of Exhibit A shall
control solely with respect to Stock Awards granted under the Plan to residents
of the State of California in reliance on Section 25102(o), if and to the extent
compliance with the terms set forth on Exhibit A required
under Section 25102(o), provided that, for the
avoidance of doubt, with respect to any requirement set forth on Exhibit A, the
corresponding provision set forth in the applicable Stock Award Agreement or the
Plan shall control in lieu of the minimum requirement set forth on Exhibit A as long as
such corresponding provision of the Stock Award Agreement or the Plan is no less
favorable to the Participant than the applicable minimum requirement set forth
on Exhibit
A.


    
      
         


      

      
        1.

        
          

        

      

      
         


      

    


    (e) Israeli Optionees In the
case of a Participant who is an Israeli Optionee (as defined in Exhibit B),
notwithstanding anything to the contrary in the Plan or in such Participant’s
Stock Award Agreement, the terms and conditions set forth in Exhibit B hereto
shall apply to any Stock Award granted to such Participant.

     

    2.           Administration.

     

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

     

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

     

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

     

    (ii)          To
construe and interpret the Plan and Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration (including rules
and regulations relating to sub-plans established for the purpose of qualifying
for preferred tax treatment under foreign tax laws).  The Board, in
the exercise of this power, may correct any defect, omission or inconsistency in
the Plan or in any Stock Award Agreement or in the written terms of a
Performance Cash Award, in a manner and to the extent it shall deem necessary or
expedient to make the Plan or Award fully effective.

     

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

     

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

     

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


    
      
         


      

      
        2.

        
          

        

      

      
         


      

    


    (vi)         To
amend the Plan in any respect the Board deems necessary or advisable, including,
without limitation, relating to Incentive Stock Options and certain nonqualified
deferred compensation under Section 409A of the Code and/or to bring the Plan or
Stock Awards granted under the Plan into compliance therewith, subject to the
limitations, if any, of applicable law. However, except as provided in Section
9(a) relating to Capitalization Adjustments, stockholder approval shall be
required for any amendment of the Plan that either (A) materially increases the
number of shares of Common Stock available for issuance under the Plan, (B)
materially expands the class of individuals eligible to receive Awards under the
Plan, (C) materially increases the benefits accruing to Participants under the
Plan or materially reduces the price at which shares of Common Stock may be
issued or purchased under the Plan, (D) materially extends the term of the Plan,
or (E) expands the types of Awards available for issuance under the Plan, but
only to the extent required by applicable law or listing requirements. Except as
provided above, rights under any Award granted before amendment of the Plan
shall not be impaired by any amendment of the Plan unless (1) the Company
requests the consent of the affected Participant, and (2) such Participant
consents in writing.

     

    (vii)        To
submit any amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of (A)
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to Covered Employees, (B) Section 422 of the
Code regarding Incentive Stock Options or (C) Rule 16b-3.

     

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

     

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

     

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

     

    (xi)         To
effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (1) the reduction of the exercise price of any
outstanding Option under the Plan, (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefore of (A) a new
Option under the Plan or another equity plan of the Company covering the same or
a different number of shares of Common Stock, (B) a Restricted Stock Award
(including a stock bonus), (C) a Stock Appreciation Right, (D) Restricted Stock
Unit, (E) an Other Stock Award, (F) cash and/or (G) other valuable consideration
(as determined by the Board, in its sole discretion), or (3) any other action
that is treated as a repricing under generally accepted accounting
principles.


    
      
         


      

      
        3.

        
          

        

      

      
         


      

    


    (c)         Delegation
to Committee.

     

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

     

    (ii)         Section 162(m) and Rule 16b-3
Compliance.  In the sole discretion of the Board, the Committee
may consist solely of two (2) or more Outside Directors, in accordance with
Section 162(m) of the Code, or solely of two (2) or more Non-Employee Directors,
in accordance with Rule 16b-3.  In addition, the Board or the
Committee, in its sole discretion, may (A) delegate to a Committee of Directors
who need not be Outside Directors the authority to grant Awards to eligible
persons who are either (I) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such Stock
Award, or (II) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code, or (B) delegate to a Committee of Directors who
need not be Non-Employee Directors the authority to grant Stock Awards to
eligible persons who are not then subject to Section 16 of the Exchange
Act.

     

    (d)          Delegation to an
Officer.  The Board may delegate to one (1) or more Officers
the authority to do one or both of the following (i) designate Employees who are
not Officers to be recipients of Options (and, to the extent permitted by
applicable law, other Stock Awards) and the terms thereof, and (ii) determine
the number of shares of Common Stock to be subject to such Stock Awards granted
to such Employees; provided,
however, that the Board resolutions regarding such delegation shall
specify the total number of shares of Common Stock that may be subject to the
Stock Awards granted by such Officer and that such Officer may not grant a Stock
Award to himself or herself.  Notwithstanding anything to the contrary
in this Section 2(d), the Board may not delegate to an Officer authority to
determine the Fair Market Value of the Common Stock pursuant to Section
13(w)(ii) below.

     

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


    
      
         


      

      
        4.

        
          

        

      

      
         


      

    


    3.           Shares
Subject to the Plan.

     

    (a)           Share
Reserve.  Subject to the provisions of Section 9 relating to
adjustments upon changes in stock, the aggregate number of shares of Common
Stock of the Company that may be issued pursuant to Stock Awards after the
Effective Date shall not exceed 5,655,056 shares (such number consisting of (i)
the 1,186,149 shares of Common Stock that have been reserved but not made
subject to any awards under the Quark Biotech, Inc. 1997 Stock Plan (such plan,
including its subplan (the 2003 Israeli Stock Option Plan), is referred to
herein as the “1997
Plan”) as of the Effective Date, (ii) up to 1,662,175 shares of Common
Stock that are subject to awards outstanding under the 1997 Plan as of the
Effective Date that expire or otherwise terminate without having been exercised
in full, and (iii) an additional 2,806,732 shares to be approved by the
stockholders of the Company as part of the approval of this Plan.  In
addition, the number of shares of Common Stock available for issuance under the
Plan shall automatically increase on January 1st of each
year commencing in 2008 and ending (and including) January 1, 2017, in an amount
equal to four percent (4%) of the total number of shares of Common Stock
outstanding on December 31st of the preceding calendar
year.  Notwithstanding the foregoing, the Board may act prior to the
first day of any calendar year, to provide that there shall be no increase in
the share reserve for such calendar year or that the increase in the share
reserve for such calendar year shall be a lesser number of shares of Common
Stock than would otherwise occur pursuant to the preceding
sentence.  For clarity, the limitation in this subsection 3(a) is a
limitation in the number of shares of the Company’s common stock that may be
issued pursuant to the Plan.  Accordingly, this subsection 3(a) does
not limit the granting of Stock Awards except as provided in subsection
7(a).  Shares may be issued in connection with a merger or acquisition
as permitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed
Company Manual Section 303A.08, or AMEX Company Guide Section 711 and such
issuance shall not reduce the number of shares available for issuance under the
Plan.  Furthermore, if a Stock Award (i) expires or otherwise
terminates without having been exercised in full or (ii) is settled in cash
(i.e., the holder of
the Stock Award receives cash rather than stock), such expiration, termination
or settlement shall not reduce (or otherwise offset) the number of shares of the
Company’s Common Stock that may be issued pursuant to the Plan.

     

    (b)           In
addition, if any shares of Common Stock issued pursuant to a Stock Award are
forfeited back to the Company because of the failure to meet a contingency or
condition required to vest such shares in the Participant, then the shares which
are forfeited shall revert to and again become available for issuance under the
Plan.  Also, any shares reacquired by the Company pursuant to
subsection 8(g) or as consideration for the exercise of an Option shall again
become available for issuance under the Plan.  Notwithstanding the
provisions of this subsection 3(b), any such shares shall not be subsequently
issued pursuant to the exercise of Incentive Stock
Options.  

     

    (c)           Share Reserve
Limitation.  Notwithstanding the provisions of Section 3(a) and
(b), to the extent it is necessary to comply with Section 260.140.45 of Title 10
of the California Code of Regulations, the total number of shares of Common
Stock issuable upon exercise of all outstanding Stock Awards and the total
number of shares of Common Stock provided for under any Common Stock bonus or
similar plan of the Company shall not exceed the applicable percentage as
calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, based on shares of
the Common Stock of the Company that are outstanding at the time the calculation
is made.

     

    (d)           Incentive Stock Option
Limit.  Notwithstanding anything to the contrary in this
Section 3(d), subject to the provisions of Section 9(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
granted after the Effective Date shall be 1,950,019 shares of Common Stock. 


    
      
         


      

      
        5.

        
          

        

      

      
         


      

    


    (e)           Section 162(m) Limitation on Annual
Grants.  Subject to the provisions of Section 9(a) relating to
Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, no Employee shall be
eligible to be granted during any calendar year Stock Awards whose value is
determined by reference to an increase over an exercise or strike price of at
least one hundred percent (100%) of the Fair Market Value of the Common Stock on
the date the Stock Award is granted covering more than  689,655 shares of Common Stock.


     

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

     

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

     

    4.           Eligibility.

     

    (a)           Eligibility for Specific Stock
Awards.  Incentive Stock Options may be granted only to
employees of the Company or a parent corporation or subsidiary corporation (as
such terms are defined in Code Sections 424(e) and (f)).  Stock Awards
other than Incentive Stock Options may be granted to Employees, Directors and
Consultants.

     

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

     

    (c)           Consultants.   A
Consultant shall be eligible for the grant of a Stock Award only if, at the time
of grant, (i) a Form S-8 Registration Statement under the Securities Act (“Form
S-8”) is available to register either the offer or the sale of the
Company’s securities to such Consultant, (ii) such grant complies with the
requirements of Rule 701 of the Securities Act, or (iii) the Company determines
that such grant will otherwise comply with the securities laws of all relevant
jurisdictions.

     

    5.           Option
Provisions.

     

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


    
      
         


      

      
        6.

        
          

        

      

      
         


      

    


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

     

    (b)         Exercise
Price.  Subject to the provisions of Section 4(b) regarding Ten
Percent Stockholders and the requirements set forth on Exhibit A, the
exercise price of each Option shall be generally not less than one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted.  Notwithstanding the
foregoing, an Option may be granted with an exercise price lower than one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Option if such Option is granted pursuant to an assumption of or
substitution for another option in a manner consistent with the provisions of
Section 424(a) of the Code (whether or not such options are Incentive Stock
Options) or is otherwise granted in a manner designed to satisfy the
requirements of Section 409A of the Code and applicable securities
laws.

     

    (c)         Consideration.  The
exercise price of Common Stock acquired pursuant to the exercise of an Option
shall be paid, to the extent permitted by applicable law and as determined by
the Board in its sole discretion, by any combination of the methods of payment
set forth below.  The Board shall have the authority to grant Options
that do not permit all of the following methods of payment (or otherwise
restrict the ability to use certain methods) and to grant Options that require
the consent of the Company to utilize a particular method of
payment.  The methods of payment permitted by this Section 5(c)
are:

     

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

     

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

     

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

     

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


    
      
         


      

      
        7.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

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

     

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


    
      
         


      

      
        8.

        
          

        

      

      
         


      

    


    (g)         Extension of Termination
Date.  If the exercise of the Option following the termination
of the Optionholder’s Continuous Service (other than for Cause) would be
prohibited at any time during the post-termination exercise period solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of a period of three (3) months after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements, or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement.

     

    (h)         Disability of
Optionholder.  In the event that an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination of Continuous
Service), but only within such period of time ending on the earlier of (i) the
date twelve (12) months following such termination of Continuous Service (or
such longer or shorter period specified in the Option Agreement; provided,
however, that any shorter period shall comply with the provisions of Exhibit A, as
applicable), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement.  If, after termination of Continuous Service,
the Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall
terminate.

     

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

     

    (j)          Termination for
Cause.  Except as explicitly provided otherwise in an
Optionholder’s Option Agreement, in the event that an Optionholder’s Continuous
Service is terminated for Cause, the Option shall terminate upon the termination
date of such Optionholder’s Continuous Service, and the Optionholder shall be
prohibited from exercising his or her Option from and after the time of such
termination of Continuous Service.

     

    (k)         Non-Exempt
Employees.  No Option granted to an Employee that is a
non-exempt employee for purposes of the Fair Labor Standards Act shall be first
exercisable for any shares of Common Stock until at least six (6) months
following the date of grant of the Option.  The foregoing provision is
intended to operate so that any income derived by a non-exempt employee in
connection with the exercise or vesting of an Option will be exempt from his or
her regular rate of pay.


    
      
         


      

      
        9.

        
          

        

      

      
         


      

    


    (l)          Early Exercise.  The
Option may, but need not, include a provision whereby the Optionholder may elect
at any time before the Optionholder’s Continuous Service terminates to exercise
the Option as to any part or all of the shares of Common Stock subject to the
Option prior to the full vesting of the Option.  Any unvested shares
of Common Stock so purchased may be subject to a repurchase option in favor of
the Company or to any other restriction the Board determines to be appropriate,
including but not limited to those set forth on Exhibit A
hereto.  The Company will not exercise its repurchase option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in the
Option.

     

    6.           Provisions
of Stock Awards other than Options.

     

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

     

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

     

    (ii)         Vesting.  Shares of
Common Stock awarded under the Restricted Stock Award Agreement may be subject
to forfeiture to the Company in accordance with a vesting schedule to be
determined by the Board.

     

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

     

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


    
      
         


      

      
        10.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

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

     

    (vi)         Termination of Participant’s
Continuous Service.  Except as otherwise provided in the
applicable Restricted Stock Unit Award Agreement, such portion of the Restricted
Stock Unit Award that has not vested will be forfeited upon the Participant’s
termination of Continuous Service.


    
      
         


      

      
        11.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

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

     

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


    
      
         


      

      
        12.

        
          

        

      

      
         


      

    


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

     

    (vii)        Termination of Continuous
Service.  In the event that a Participant’s Continuous Service
terminates (other than for Cause), the Participant may exercise his or her Stock
Appreciation Right (to the extent that the Participant was entitled to exercise
such Stock Appreciation Right as of the date of termination) but only within
such period of time ending on the earlier of (A) the date three (3) months
following the termination of the Participant’s Continuous Service (or such
longer or shorter period specified in the Stock Appreciation Right Agreement),
or (B) the expiration of the term of the Stock Appreciation Right as set forth
in the Stock Appreciation Right Agreement.  If, after termination, the
Participant does not exercise his or her Stock Appreciation Right within the
time specified herein or in the Stock Appreciation Right Agreement (as
applicable), the Stock Appreciation Right shall terminate.

     

    (viii)       Termination for
Cause.  Except as explicitly provided otherwise in an
Participant’s Stock Appreciation Right Agreement, in the event that a
Participant’s Continuous Service is terminated for Cause, the Stock Appreciation
Right shall terminate upon the termination date of such Participant’s Continuous
Service, and the Participant shall be prohibited from exercising his or her
Stock Appreciation Right from and after the time of such termination of
Continuous Service.

     

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

     

    (d)         Performance
Awards.

     

    (i)           Performance Stock
Awards.  A Performance Stock Award is a Stock Award that may be
granted, may vest, or may be exercised based upon the attainment during a
Performance Period of certain Performance Goals.  A Performance Stock
Award may, but need not, require the completion of a specified period of
Continuous Service.  Notwithstanding the foregoing, to the extent
required by applicable law, any Performance Stock Award will be subject to the
provisions of Exhibit
A, including provisions regarding minimum vesting
requirements  The length of any Performance Period, the Performance
Goals to be achieved during the Performance Period, and the measure of whether
and to what degree such Performance Goals have been attained shall be
conclusively determined by the Committee in its sole discretion.  The
maximum number of shares that may be granted to any Participant in a calendar
year attributable to Stock Awards described in this Section 6(d)(i) shall not
exceed 25,862 shares of Common Stock.  In addition, to the extent
permitted by applicable law and the applicable Award Agreement, the Board may
determine that cash may be used in payment of Performance Stock
Awards.


    
      
         


      

      
        13.

        
          

        

      

      
         


      

    


    (ii)         Performance Cash
Awards.  A Performance Cash Award is a cash award that may be
granted upon the attainment during a Performance Period of certain Performance
Goals.  A Performance Cash Award may also require the completion of a
specified period of Continuous Service.  The length of any Performance
Period, the Performance Goals to be achieved during the Performance Period, and
the measure of whether and to what degree such Performance Goals have been
attained shall be conclusively determined by the Committee in its sole
discretion.  The maximum value that may be granted to any Participant
in a calendar year attributable to cash awards described in this Section 6(d)(i)
shall not exceed one million dollars ($1,000,000).The Board may provide for or,
subject to such terms and conditions as the Board may specify, may permit a
Participant to elect for, the payment of any Performance Cash Award to be
deferred to a specified date or event.  The Committee may specify the
form of payment of Performance Cash Awards, which may be cash or other property,
or may provide for a Participant to have the option for his or her Performance
Cash Award, or such portion thereof as the Board may specify, to be paid in
whole or in part in cash or other property. In addition, to the extent
permitted by applicable law and the applicable Award Agreement, the Board may
determine that Common Stock authorized under this Plan may be used in payment of
Performance Cash Awards, including additional shares in excess of the
Performance Cash Award as an inducement to hold shares of Common
Stock.

     

    (e)         Other Stock
Awards.  Other forms of Stock Awards valued in whole or in part
by reference to, or otherwise based on, Common Stock may be granted either alone
or in addition to Stock Awards provided for under Section 5 and the preceding
provisions of this Section 6.  Subject to the provisions of the Plan
(including Exhibit
A, as applicable), the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Other Stock Awards and all
other terms and conditions of such Other Stock Awards.

     

    7.           Covenants
of the Company.

     

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

     

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


    
      
         


      

      
        14.

        
          

        

      

      
         


      

    


    (c)           No Obligation to
Notify.  The Company shall have no duty or obligation to any
holder of a Stock Award to advise such holder as to the time or manner of
exercising such Stock Award.  Furthermore, the Company shall have no
duty or obligation to warn or otherwise advise such holder of a pending
termination or expiration of a Stock Award or a possible period in which the
Stock Award may not be exercised.  The Company has no duty or
obligation to minimize the tax consequences of a Stock Award to the holder of
such Stock Award.

     

    8.           Miscellaneous.

     

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

     

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

     

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

     

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

     

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


    
      
         


      

      
        15.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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


    
      
         


      

      
        16.

        
          

        

      

      
         


      

    


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

     

    9.           Adjustments
upon Changes in Common Stock; Other Corporate Events.

     

    (a)           Capitalization
Adjustments.  In the event of a Capitalization Adjustment, the
Board shall appropriately adjust: (i) the class(es) and maximum number of
securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and
maximum number of securities that may be issued pursuant to the exercise of
Incentive Stock Options pursuant to Section 3(d), (iii) the class(es) and
maximum number of securities that may be awarded to any person pursuant to
Section 3(d) and 6(d)(i), and (iv) the class(es) and number of securities and
price per share of stock subject to outstanding Stock Awards.  The
Board shall make such adjustments, and its determination shall be final, binding
and conclusive.

     

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

     

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


    
      
         


      

      
        17.

        
          

        

      

      
         


      

    


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

     

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

     

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


    
      
         


      

      
        18.

        
          

        

      

      
         


      

    


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

     

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

     

    10.         Termination
or Suspension of the Plan.

     

    (a)         Plan Term.  Unless
sooner terminated by the Board pursuant to Section 2, the Plan shall
automatically terminate on the day before the tenth (10th) anniversary of the
date the Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier.  No Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.

     

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

     

    11.         Effective
Date of Plan.

     

    This Plan
shall become effective on the Effective Date (as set forth on the first page of
this Plan); provided, however, that no Award shall be exercised unless and until
the Plan has been approved by the shareholders of the Company, which approval
shall be within twelve (12) months before or after the date the Plan is adopted
by the Board.

     

    12.         Choice
of Law.

     

    Except as
(and solely to the extent) expressly provided in Exhibit B hereto, the
law of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.

     

    13.         Definitions.   As
used in the Plan, the definitions contained in this Section 13 shall apply to
the capitalized terms indicated below:

     

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

     

    (b)           “Applicable
Laws” means the requirements relating to the administration of
compensatory cash and equity-based award plans under United States federal,
state and local laws, the rules and regulations of any stock exchange or
quotation system on which the Common Stock is listed or quoted and/or the
applicable laws of any other country or jurisdiction where Awards are granted
under the Plan.


    
      
         


      

      
        19.

        
          

        

      

      
         


      

    


    (c)           “Award”
means a Stock Award or a Performance Cash Award.

     

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

     

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

     

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

     

    Notwithstanding
the foregoing or any other provision of this Plan, the definition of Cause (or
any analogous term) in an individual written agreement between the Company or
any Affiliate and the Participant shall supersede the foregoing definition with
respect to Awards subject to such agreement; provided, however, that if no
definition of Cause or any analogous term is set forth in such an individual
written agreement, the foregoing definition shall apply.


    
      
         


      

      
        20.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

    (iv)         individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
members of the Board; (provided, however, that if
the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be
considered as a member of the Incumbent Board).

     

    For the
avoidance of doubt, the term Change in Control shall not include a sale of
assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company.

     

    Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Awards subject to such agreement; provided, however, that if no
definition of Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall
apply.


    
      
         


      

      
        21.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

    (k)         “Company”
means Quark Pharmaceuticals, Inc., a California corporation.

     

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

     

    (m)        “Continuous
Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or
terminated.  A change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee, Consultant or Director or
a change in the entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s service with
the Company or an Affiliate, shall not terminate a Participant’s Continuous
Service.  For example, a change in status from an employee of the
Company to a consultant to an Affiliate or to a Director shall not constitute an
interruption of Continuous Service.  To the extent permitted by law,
the Board or the chief executive officer of the Company, in that party’s sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal
leave.  Notwithstanding the foregoing, a leave of absence shall be
treated as Continuous Service for purposes of vesting in a Stock Award only to
such extent as may be provided in the Company’s leave of absence policy, in the
written terms of any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.

     

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

     

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

     

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

     

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

     

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


    
      
         


      

      
        22.

        
          

        

      

      
         


      

    


    (o)         “Covered
Employee” shall have the meaning provided in Section 162(m)(3) of the
Code and the regulations promulgated thereunder.

     

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

     

    (q)         “Disability”
means, with respect to a Participant,  the inability of such
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of
the Code.

     

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

     

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

     

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

     

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

     

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

     

    (w)         “Fair Market
Value” means, as of any date, the value of the Common Stock determined as
follows:

     

    (i)           If
the Common Stock is listed on any established stock exchange or traded on any
established market, unless otherwise determined by the Board, the Fair Market
Value of a share of Common Stock shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
market (or the exchange or market with the greatest volume of trading in the
Common Stock) on the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable.  Unless otherwise
provided by the Board, if there is no closing sales price (or closing bid if no
sales were reported) for the Common Stock on the date of determination, then the
Fair Market Value shall be the closing selling price (or closing bid if no sales
were reported) on the last preceding date for which such quotation
exists.


    
      
         


      

      
        23.

        
          

        

      

      
         


      

    


    (ii)         In
the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith.

     

    (x)         “Incentive Stock
Option” means an option granted pursuant to Section 5 of the Plan that is
intended to be, and qualifies as, an “incentive stock option” within the meaning
of Section 422 of the Code and the regulations promulgated
thereunder.

     

    (y)         “Non-Employee
Director” means a Director who
either (i) is not a current employee or officer of the Company or an Affiliate,
does not receive compensation, either directly or indirectly, from the Company
or an Affiliate for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction for which
disclosure would be required under Item 404(a) of Regulation S-K, and is not
engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered
a “non-employee director” for purposes of Rule 16b-3.

     

    (z)         “Nonstatutory
Stock Option” means any option granted pursuant to Section 5 of the Plan
that does not qualify as an Incentive Stock Option.

     

    (aa)       “Officer”
means any person designated by the Company as an officer; provided, however,
that at any time that any class of the equity securities of the Company is
registered pursuant to Section 12 of the Exchange Act, “Officer” shall mean a
person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.

     

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

     

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

     

    (dd)       “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
permitted under the terms of this Plan, such other person who holds an
outstanding Option.

     

    (ee)       “Other Stock
Award” means an award based in whole or in part by reference to the
Common Stock which is granted pursuant to the terms and conditions of Section
6(e).

     

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


    
      
         


      

      
        24.

        
          

        

      

      
         


      

    


    (gg)       “Outside
Director” means a Director who either (i) is not a current employee of
the Company or an “affiliated corporation” (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year, has not been an officer of the Company or an
“affiliated corporation,” and does not receive remuneration from the Company or
an “affiliated corporation,” either directly or indirectly, in any capacity
other than as a Director, or (ii) is otherwise considered an “outside director”
for purposes of Section 162(m) of the Code.

     

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

     

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

     

    (jj)         “Performance Cash
Award” means an award of cash granted pursuant to the terms and
conditions of Section 6(d)(ii).

     

    (kk)       “Performance
Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance
Period.  The Performance Criteria that shall be used to establish such
Performance Goals may be based on any one of, or combination of, the following:
(i) earnings per share; (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization; (iv) total
stockholder return; (v) return on equity; (vi) return on assets, investment, or
capital employed; (vii) operating margin; (viii) gross margin; (ix) operating
income; (x) net income (before or after taxes); (xi) net operating income; (xii)
net operating income after tax; (xiii) pre-tax profit; (xiv) operating cash
flow; (xv) sales or revenue targets; (xvi) increases in revenue or product
revenue; (xvii) expenses and cost reduction goals; (xviii) improvement in or
attainment of working capital levels; (xix) economic value added (or an
equivalent metric); (xx) market share; (xxi) cash flow; (xxii) cash flow per
share; (xxiii) share price performance; (xxiv) debt reduction; (xxv)
implementation or completion of projects or processes; (xxvi) customer
satisfaction; (xxvii) stockholders’ equity; and (xxviii) to the extent that an
Award is not intended to comply with Section 162(m) of the Code, other measures
of performance selected by the Board.  Partial achievement of the
specified criteria may result in the payment or vesting corresponding to the
degree of achievement as specified in the Stock Award Agreement or the written
terms of a Performance Cash Award.  The Board shall, in its sole
discretion, define the manner of calculating the Performance Criteria it selects
to use for such Performance Period.


    
      
         


      

      
        25.

        
          

        

      

      
         


      

    


    (ll)         “Performance
Goals” means, for a Performance Period, the one or more goals established
by the Board for the Performance Period based upon the Performance
Criteria.  Performance Goals may be based on a Company-wide basis,
with respect to one or more business units, divisions, Affiliates, or business
segments, and in either absolute terms or relative to the performance of one or
more comparable companies or the performance of one or more relevant
indices.  At the time of the grant of any Award, the Board is
authorized to determine whether, when calculating the attainment of Performance
Goals for a Performance Period: (i) to exclude restructuring and/or other
nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for
non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude
the effects of changes to generally accepted accounting standards required by
the Financial Accounting Standards Board; (iv) to exclude the effects of any
statutory adjustments to corporate tax rates; and (v) to exclude the effects of
any “extraordinary items” as determined under generally accepted accounting
principles.  In addition, the Board retains the discretion to reduce
or eliminate the compensation or economic benefit due upon attainment of
Performance Goals.

     

    (mm)     “Performance
Period” means the period of time selected by the Board over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to and the payment of a Stock Award or a
Performance Cash Award.  Performance Periods may be of varying and
overlapping duration, at the sole discretion of the Board.

     

    (nn)       “Performance
Stock Award” means a Stock Award granted under the terms and conditions
of Section 6(d)(i).

     

    (oo)        “Plan”
means this Quark Pharmaceuticals, Inc. 2007 Equity Incentive Plan.

     

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

     

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

     

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

     

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

     

    (tt)         “Rule
16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

     

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

     

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


    
      
         


      

      
        26.

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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


    
      
         


      

      
        27.

        
          

        

      

      
         


      

    


    Exhibit
A

    Provisions
Applicable For Awards Made Pursuant to

    Section
25102(o) of the California Corporate Securities Law of 1968

    


    As
provided in Section 1(d) of the Plan, in the case of a Participant who is a
resident of the State of California, notwithstanding anything to the contrary in
the Plan or in such Participant’s Stock Award Agreement, the following terms
shall apply to any Stock Award granted to such Participant in reliance on
Section 25102(o) and shall be deemed to be a part of the Plan, if and to the
extent compliance with the terms set forth below is required under Section
25102(o).  In the event of any conflict or inconsistency between the
following provisions and any provisions otherwise appearing in the Plan, the
following provisions shall control solely with respect to Stock Awards granted
under the Plan to residents of the State of California in reliance on Section
25102(o) , if and to the extent compliance with the terms set forth below is
required under Section 25102(o), provided that, for the
avoidance of doubt, with respect to any requirement set forth herein, the
corresponding provision set forth in the applicable Stock Award Agreement or the
Plan shall control in lieu of the minimum requirement set forth herein as long
as such corresponding provision of the Stock Award Agreement or the Plan is no
less favorable to the Participant than the applicable minimum requirement set
forth herein:

    


    1.           Exercise Price.  The
Exercise Price shall not be less than 100% of the Fair Market Value of the
Common Stock subject to the Stock Award at the time the Stock Award is granted,
except that the Exercise Price shall not be less than (i) one hundred ten
percent (110%) of the Fair Market Value of the Common Stock in the case of any
Participant who owns securities possessing more than 10% of the total combined
voting power (as defined in Section 194.5 of the California Corporations Code in
the case of a corporate issuer) of all classes of securities of the Company or
its Affiliates possessing voting power, or (ii) such lower percentage of the
Fair Market Value of the Common Stock on the date of grant as is permitted by
Section 260.140.41 of Title 10 of the California Code of Regulations at the time
of the grant of the Stock Award. The Fair Market Value of
the Common Stock shall be determined by the Board in a manner consistent with
Section 260.140.50 of Title 10 of the California Code of
Regulations.

    


    2.           Term.  No Stock
Award shall have an exercise period of more than 120 months from the date such
Stock Award is granted.

    


    3.           Minimum Vesting.  To
the extent that the following restrictions on vesting are required by Section
260.140.41(f) of Title 10 of the California Code of Regulations at the time of
the grant of the Stock Award, then:

    


    (a)           Stock
Awards granted to a Participant who is not an officer, director, manager or
consultant of the Company or its Affiliates shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Stock Award was granted,
subject to reasonable conditions such as continued employment;
and


    
      
         


      

      
        28.

        
          

        

      

      
         


      

    


    (b)           Stock
Awards granted to officers, directors, managers or consultants of the Company or
its Affiliates may be made fully exercisable, subject to reasonable conditions
such as continued employment, at any time or during any period established by
the Company.

    


    4.           Extended
Exercise.  A Participant who ceases to be an employee or
service provider to the Company or of an Affiliate for any reason other than for
Cause may exercise any Stock Award, to the extent that the Stock Award is
exercisable on the date of such termination:

    


    (a)           at
least 6 months from the date of termination if termination was caused by death
or disability;

    


    (b)           at
least 30 days from the date of termination if termination was caused by other
than death or disability.

    


    5.           Repurchase
Limitation.  The repurchase price for any shares subject to a
Stock Award to be repurchased pursuant to Section 5(l) or Section 6 of the Plan
may be either the Fair Market Value of such Common Stock on the date of the
Participant’s termination of Continuous Service or the lower of (i) the Fair
Market Value of the Common Stock on the date of repurchase, or (ii) the original
purchase price of the Common Stock.  Notwithstanding anything in the
Plan or herein to the contrary, to the extent required by Section 260.140.41 and
Section 260.140.42 of Title 10 of the California Code of Regulations at the time
a Stock Award is granted, any repurchase right contained in a Stock Award
Agreement granted to a person who is not an officer, director, manager or
consultant of the Company or its Affiliates shall be upon the terms described
below:

    


    (a)           Fair Market
Value.  If the repurchase right gives the Company the right to
repurchase the Common Stock upon termination of service at not less than the
Fair Market Value of the Common Stock to be purchased on the date of termination
of service, then (i) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the Common Stock within ninety
(90) days of termination of service (or in the case of Common Stock issued upon
exercise of Stock Awards after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant, and (ii) the right terminates when the Company’s
securities become publicly traded.

    


    (b)           Original Purchase
Price.  If the repurchase right gives the Company the right to
repurchase the Common Stock upon termination of service at the lower of (i) the
Fair Market Value of the Common Stock on the date of repurchase or (ii) their
original purchase price, then (x) the right to repurchase at the original
purchase price shall lapse at the rate of at least twenty percent (20%) of the
Common Stock per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (y) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the Common Stock within ninety
(90) days of termination of service (or in the case of Common Stock issued upon
exercise of Stock Awards after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant.


    
      
         


      

      
        29.

        
          

        

      

      
         


      

    


    6.           Information
Obligation.  To the extent required by Section 260.140.46 of
Title 10 of the California Code of Regulations, the Company shall deliver
financial statements to Participants covered by this Exhibit A at least
annually.  This Section shall not apply to key employees whose duties
in connection with the Company assure them access to equivalent
information.

    


    7.           Restriction on Transfer.  A Stock
Award granted to a California resident shall not be transferable, other than by
will or the laws of descent and distribution, or as permitted by rule 701 of the
Securities Act of 1933, as amended.

    


    8.           Voting Rights.  The
Common Stock subject to Stock Awards under the Plan will carry equal voting
rights on all matters where such vote is permitted by applicable
law.


    
      
         


      

      
        30.

        
          

        

      

      
         


      

    


    Exhibit
B

    Israeli
Sub-Plan

    


    1.           General Terms.

    


    (a)           This
Exhibit B to
the Quark Pharmaceuticals, Inc. 2007 Equity Incentive Plan (the “Plan”)
shall apply only to Participants who are residents of the state of Israel upon
the date of grant of the Stock Award by the Employing Corporation, or those who
are deemed to be residents of the state of Israel for tax purposes upon the date
of grant of the Stock Award by the Employing Corporation (collectively, “Israeli
Participants”). The provisions specified hereunder shall form an integral
part of the Plan.

    


    (b)           This
Exhibit B is
effective with respect to Stock Awards to be granted to Israeli Participants
according to the resolutions of the Board.

    


    (c)           This
Exhibit B is to
be read as a continuation of the Plan and modifies Stock Awards granted to
Israeli Participants to the extent necessary to comply with the requirements set
by the Israeli law in general, and in particular with the provisions of the
Ordinance and Section 102 thereof and any regulations, rules, orders or
procedures promulgated thereunder, as may be amended or replaced from time to
time. For the avoidance of doubt, this Exhibit B does not
add to or modify the Plan in respect of any other category of
Participants.

    


    (d)           The
Plan and this Exhibit
B are complementary to each other and shall be deemed as
one.  In any case of contradiction, whether express or implied,
between the provisions of this Exhibit B and the
Plan, the provisions set out in this Exhibit B shall
prevail.

    


    (e) Any
capitalized term used herein but not specifically defined in this Exhibit B shall be
construed according to the interpretation given to it in the Plan and any
capitalized term defined in the Ordinance and used herein but not specifically
defined in the Plan or in this Exhibit B shall be
construed according to the interpretation given to it in the
Ordinance.

    


    2.           Definitions.

    


    (a)           "Approved
102 Stock Award" means a Stock Award
granted pursuant to Section 102(b) of the Ordinance and held in trust by a
Trustee for the benefit of the Participant. Approved 102 Stock Awards may either
be classified as Capital Gain Stock Awards (“CGA”) or
Ordinary Income Stock Award (“OIA”).

    


    (b)           "Capital
Gain Stock Award" or
"CGA"
means an Approved 102 Stock Award elected and designated by the Company to
qualify under the capital gain tax treatment in accordance with the provisions
of Section 102(b)(2) of the Ordinance.

    


    (c)           “Approved
102 Option” means an Option granted pursuant to Section 102(b) of the
Ordinance and held in trust by a Trustee for the benefit of the
Participant.


    
      
         


      

      
        31.

        
          

        

      

      
         


      

    


    (d)           “Controlling
Shareholder” shall have the meaning ascribed to it in Section 32(9) of
the Ordinance.

    


    (e)           "Employee",
as defined in the Plan, but shall also include an individual who is serving as
an Officer Holder, and shall exclude a Controlling Shareholder.

    


    (f)           "Employing
Corporation" means Q.B.I. Enterprises Ltd., the Company and any Affiliate
all within the meaning of Section 102(a) of the Ordinance.

    


    (g)           
“ITA”
means the Israeli Tax Authorities.

    


    (h)           "Non-Employee"
means an Israeli Participant that is not an Employee (as defined herein) and
includes a Controlling Shareholder, or Consultant.

    


    (i)           "Ordinary
Income Stock Award" or "OIA",
which means an Approved 102 Stock Award elected and designated by the Company to
qualify under the ordinary income tax treatment in accordance with the
provisions of Section 102(b)(1) of the Ordinance.

    


    (j)           "102
Stock Award" means a Stock Award that the Board intends to be a “102
Stock Award” and which shall only be granted to Employees of the Company or any
Affiliate who are not Controlling Shareholders, and shall be subject to and
construed consistently with the requirements of Section 102.

    


    (k)           "3(i)
Stock Award" means Stock Awards issued to Israeli Participants that do
not contain such terms as will qualify under Section 102.

    


    (l)           "Office
Holders" ("Nose Misra") - as such term is defined in the Companies Law,
5759-1999, including, inter alia, any person who is part of the upper management
of the Company or an Affiliate and who grants managerial services to the
Company, or to an Affiliate.

    


    (m)          "Ordinance"
means the 1961 Israeli Income Tax Ordinance (New Version), as now in effect or
as hereafter amended.

    


    (n)           "Section
102" means Section 102 of the Ordinance, as now in effect or as hereafter
amended.

    


    (o)           "Trustee"
means a trustee to be approved by the ITA pursuant to Section 102.

    


    (p)           "Unapproved
102 Stock Award" means a Stock Award granted pursuant to Section 102(c)
of the Ordinance and not held in trust by a Trustee.

    


    3.           Eligibility;
Issuance of Stock Awards.

    


    (a)           The
persons eligible for participation in the Plan as Israeli Participants shall
include any Employees, Office Holders and/or Non-Employees of the Company and
its Affiliates (as such term is defined in the Plan); provided, however,
that (i) Employees may only be granted 102 Stock Awards and Office Holders may
be granted 102 Stock Awards; and (ii) Non-Employees and/or Controlling
Shareholders may only be granted 3(i) Stock Awards.


    
      
         


      

      
        32.

        
          

        

      

      
         


      

    


    (b)           The
Company may designate Stock Awards granted to Israeli Employees pursuant to
Section 102 as Unapproved 102 Stock Awards or Approved 102 Stock
Awards.

    


    (c)           The
grant of Approved 102 Stock Awards shall be made under this Exhibit B adopted by
the Board, and shall be conditioned upon the approval of this Exhibit B by the
ITA.

    


    (d)           Approved
102 Stock Awards may either be classified as Capital Gain Stock Awards or
Ordinary Income Awards.

    


    (e)           The
Company’s election of the type of Approved 102 Stock Awards as CGAs or OIAs
granted to Israeli Employees (the "Election"), shall be
appropriately filed with the ITA before the date of grant of an Approved 102
Option under such Election. Such Election shall become effective beginning the
first date of grant of an Approved 102 Stock Award under such Election and shall
remain in effect until the end of the year following the year during which the
Company first granted Approved 102 Stock Awards under such Election. For the
avoidance of doubt, such Election shall not prevent the Company from granting
Unapproved 102 Stock Awards simultaneously.

    


    (f)           The
Company shall have no liability to an Israeli Participant or to any other party,
if a Stock Award (or any part thereof), which is intended to be a 102 Stock
Award, is not a 102 Stock Award.

    


    (g)           All
Approved 102 Stock Awards, must be held in trust by a Trustee as described in
Section 4 below.

    


    (h)           For
the avoidance of any doubt, the designation of Unapproved 102 Stock Awards and
Approved 102 Stock Awards shall be subject to the terms and conditions set forth
in Section 102 of the Ordinance and the regulations promulgated
thereunder.

    


    (i)           Anything
in the Plan to the contrary notwithstanding, all grants of Stock Awards to
directors and Office Holders shall be authorized and implemented in accordance
with the provisions of the Companies Law, 5759-1999, or any successor act or
regulation, as in effect from time to time, to the extent that these provisions
are applicable.

    


    (j)           Shares
issued upon exercise of a Stock Award shall be issued in the name of the Trustee
(if issued on exercise of Stock Awards held by the Trustee at the time of
exercise) or in the name of the Israeli Participant or; if requested by the
Israeli Participant, in the name of the Israeli Participant and his or her
spouse.

    


    (k)           Subject
to the provision of Section 102, the Board may at any time offer to buy out for
a payment in cash or shares of Common Stock, a  Stock Award previously
granted, based on such terms and conditions as the Board shall establish and
communicate to the Israeli Participant at the time that such offer is
made.


    
      
         


      

      
        33.

        
          

        

      

      
         


      

    


    (l)           The
grant of a Stock Award hereunder shall neither entitle an Israeli Participant to
participate, nor disqualify an Israeli Participant from participating in any
other grant of Stock Awards pursuant to the Plan, or any other option or share
plan of the Company or any Affiliate.

    


    
      	
               
      

            	
              4.

            	
              Trustee

            


    

    


    (a)           Approved
102 Stock Awards which shall be granted under the Plan and/or any shares
allocated or issued upon exercise of such Approved 102 Stock Awards and/or other
shares received subsequently following any realization of rights including,
without limitation, bonus shares, shall be allocated or issued to the Trustee
(and registered in the Trustee's name in the register of members of the Company)
and held for the benefit of the Israeli Participants for such period of time as
required by Section 102 (the "Restricted Period
Per Section 102"). All certificates representing shares issued to the
Trustee under the Plan shall be deposited with the Trustee, and shall be held by
the Trustee until such time that such shares are released from the aforesaid
trust as herein provided. In the event that the requirements for Approved 102
Stock Awards are not met, then the Approved 102 Stock Awards may be treated as
Unapproved 102 Stock Awards, all in accordance with the provisions of Section
102.

    


    (b)           Notwithstanding
anything to the contrary, the Trustee shall not release any shares allocated or
issued upon exercise of Approved 102 Stock Awards prior to the full payment of
the Israeli Participant's tax liabilities arising from the Approved 102 Stock
Awards that were granted to such Israeli Participant, and/or any shares
allocated or issued upon exercise of such Stock Awards.

    


    (c)           With
respect to any Approved 102 Stock Award, subject to the provisions of Section
102, a Participant shall not be entitled to sell or release from trust any Share
received upon the exercise of an Approved 102 Stock Award and/or any share
received subsequently following any realization of rights, including without
limitation, bonus shares, until the lapse of the Restricted Period Per Section
102. Notwithstanding the foregoing, in the event that any such sale or release
from trust occurs during the Restricted Period Per Section 102, then the
sanctions under Section 102 shall apply and shall be borne by the Israeli
Participant.

    


    (d)           Upon
receipt of Approved 102 Stock Award, the Participant will sign an undertaking to
release the Trustee from any liability in respect of any action or decision duly
taken and bona fide executed in relation with the Plan and this Exhibit B, or any
Approved 102 Stock Award or share granted, or issued, to him
thereunder.

    


    5.           Fair Market Value for Tax
Purposes.  Without derogating from the above, solely for the
purpose of determining the tax liability pursuant to Section 102(b)(3) of the
Ordinance, if at the date of grant the Company’s shares are listed on any
established stock exchange or a national market system or if the Company’s
shares will be registered for trading within ninety (90) days following the date
of grant, the Fair Market Value of a Share at the date of grant shall be
determined in accordance with the average value of the Company’s shares in the
thirty (30) trading days preceding the date of grant or in the thirty (30)
trading days following the date of registration for trading, as the case may
be.


    
      
         


      

      
        34.

        
          

        

      

      
         


      

    


    6.           Integration
of Section 102 and Tax Commissioner’s Permit

    


    (a)           With
regards to Approved 102 Stock Awards, the provisions of the Plan and/or any
Stock Award Agreement shall be subject to the provisions of Section 102 and the
Income Tax Commissioner's permit, and the said provisions and permit shall be
deemed an integral part of the Plan and of the Stock Award
Agreement.

    


    (b)           Any
provision of Section 102 and/or the said permit which is necessary in order to
receive and/or to maintain any tax benefit pursuant to Section 102, which is not
expressly specified in the Plan or the Stock Award Agreement, shall be
considered binding upon the Company and the Israeli Participants.

    


    7.           Tax
Consequences

    


    (a)           To
the extent permitted by Applicable Laws, any tax consequences arising from the
grant or exercise of any Stock Award, from the payment for shares covered
thereby or from any other event or act (of the Company, and/or its Affiliates,
and/or the Trustee or the Participant), hereunder, shall be borne solely by the
Israeli Participant. The Company and/or its Affiliates and/or the Trustee shall
withhold taxes according to the requirements under the applicable laws, rules,
and regulations, including withholding taxes at source. Furthermore, the Israeli
Participants agrees to indemnify the Company and/or its Affiliates and/or the
Trustee and hold them harmless against and from any and all liability for any
such tax or interest or penalty thereon, including without limitation,
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from any payment made to the Israeli Participant.

    


    (b)           The
Company and/or the Trustee shall not be required to release any Share
certificate to an Israeli Participant until all required payments have been
fully made by the Israeli Participant.

    


    8.           Restricted Period Per Section
102.  The following provisions shall apply for the purpose of
the tax benefits under Section 102 of the ordinance:

    


    (a)           In
accordance with the requirements of Section 102 as now in place and as may
be amended in the future, the Stock Awards to be issued shall be issued to the
Israeli Participant and held in trust by the Trustee for the benefit of Israeli
Participant for a period of no less than twenty four (24) months for CGAs and no
less than twelve (12) months for OIAs, from the date of which the Stock Awards
were granted and placed with the Trustee (during the Restricted Period Per
Section 102 the Participant will not be allowed to order the Trustee to sell the
Stock Awards held by him/her on behalf of the Participant or to transfer the
Stock Awards from Trustee’s trust).


    
      
         


      

      
        35.

        
          

        

      

      
         


      

    


    (b)           As
long as the Stock Awards are held by the Trustee on behalf of an Israeli
Participant, all rights of the Israeli Participant over the Stock Awards and the
shares that may derive on the exercise of the Stock Awards are personal and can
not be transferred, assigned, pledged, or mortgaged other than by testament or
pursuant to the laws of descent and distribution.

    


    (c)           In
order to receive the tax benefits of Section 102, the Stock Awards may not
be sold or transferred (other than through a transfer by testament or by
operation of law), and no power of attorney or transfer deed shall be given in
respect thereof (other than a power of attorney for the purpose of participation
in general meetings of shareholders).

    


    (c)           End of Restricted Period Per Section
102. Upon the termination of the Restricted Period Per Section 102, as
now in place and as may be amended in the future, an Israeli Participant shall
be entitled to receive from the Trustee the Stock Awards, or the shares acquired
in the exercise thereof, which have vested, subject to the provisions of the
Plan concerning the continued employment of the Israeli Participant by the
Company or any Affiliate, and subject to any other provisions set forth herein
or in the Plan, and the Israeli Participant shall be entitled to exercise the
Stock Awards and/or to sell the Stock Awards or shares thereby obtained subject
to the other terms and conditions of the Stock Award Agreement and the Plan,
including the provisions relating to the payment of taxes as set forth
below.

    


    9.           Israeli Participant's
Representations.  The following representations will be
included in the Stock Award Agreement with Israeli Participants who are
Employees, or if not included, shall be deemed to have been given by any Israeli
Participant Employees to the extent that any such Israeli Participant Employee
accepts any Stock Award issued under the Plan:

    


    (a)           The
Israeli Participant hereby agrees that the terms of Section 102 shall apply
regarding the Stock Awards granted.

    


    (b)           The
Israeli Participant is obliged not to sell or remove from the Trustee the Stock
Awards granted to the Israeli Participant prior to the end of Restricted Period
Per Section 102.

    


    (c)           The
Israeli Participant is aware of the directives set forth in Section 102, and of
the tax track that was chosen by the Company pursuant to Section 102 and its
implications.

    


    (d)           The
Israeli Participant hereby accepts the terms of the Trust Agreement signed
between the Company and the Trustee.

    


    (e)           The
Israeli Participant acknowledges that during the period in which Stock Awards
are held by the Trustee (including any shares issued to the Trustee on behalf of
the Israeli Participant upon exercise of an Approved 102 Stock Award), in the
event that dividends payable in securities are declared on Approved 102 Stock
Awards held by the Trustee, such securities shall also be subject to the
provisions of Section 102 and the provision of the Stock Award Agreement and
shall be held in trust by the Trustee. Notwithstanding anything to the contrary,
in the event that an Israeli Participant that holds Approved 102 Stock Awards is
entitled to receive a dividend in cash, the proceeds of such dividend may be
wired to the Israeli Participant, after deduction of all applicable
taxes.


    
      
         


      

      
        36.

        
          

        

      

      
         


      

    


    10.         Governing
Law & Jurisdiction

    


    (a)           The
Plan, and the granting and exercise of Stock Awards hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock under such
Stock Awards, shall be subject to all Applicable Laws, whether of the State of
Israel or of the United States or any other State having jurisdiction over the
Company and the Israeli Participant, including the registration of the shares of
Common Stock under the Securities Act and the Ordinance and to such approvals by
any governmental agencies or national securities exchanges as may be required.
Nothing herein shall be deemed to require the Company to register the shares of
Common Stock under the securities laws of any jurisdiction.

    


    (b)           This
Exhibit B shall
be governed by and construed and enforced in accordance with the laws of the
State of Israel applicable to contracts made and to be performed therein,
without giving effect to the principles of conflict of laws. The competent
courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters
pertaining to this Exhibit
B.

    


    (c)           The
adoption of the Plan (including this Exhibit B) by the
Board shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangements or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of options otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases. For the avoidance of doubt, prior grant of Stock Awards to
Israeli Participants of the Company under their employment agreements, and not
in the framework of any previous option plan, shall not be deemed an approved
incentive arrangement for the purpose of this Exhibit
B.

    


    (d)           Exhibit B may be
amended from time to time by the Company and the Trustee provided however that
any amendment that adversely effects the rights of the holders of Stock Awards,
shall not be made without the approval of the holders of a majority in interest
of the then issued and outstanding Stock Awards.

    


    
      
        	
                      

              
	
                Q.B.I. Enterprises ,
      Ltd.

              


      

    


    
      
         


      

      
        37.