Exhibit 10.22


 










[ * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION

PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


COLLABORATION AGREEMENT


 


THIS AGREEMENT is made the sixth day of December, 2004


 


Between


 


atugen AG, a company
incorporated under the laws of Germany, whose registered office is at
Robert-Rössle-Str. 10, D13125 Berlin, Germany (hereinafter “Atugen”), of the first
Part; and


 


Quark Biotech, Inc.,
a private limited company incorporated under the laws of California whose
principal office is at 6540 Kaiser Drive, Fremont CA 94555, U.S.A. and QBI Enterprises Ltd., a private company
incorporated under the laws of the State of Israel whose principal office is at
Weizmann Science Park, P.O. box 4071, Nes Ziona 70400, ISRAEL, of the second
Part (together hereinafter, “QBI”)


 


WHEREAS


 


A.                         Atugen has established
proprietary technology and patent rights related to the development and
manufacture of siRNA molecules potentially silencing any target in any species
and has filed a patent application directed to biological aspects relating to
the 801 gene in the field of cancer


 


B.                           QBI owns patent rights and
know-how directed to the structure and function of the 801 gene and its role in
diseases;


 


C.                           Atugen and QBI wish to
engage in a collaborative research program with the aim of using Atugen’s
technology to develop products directed to the 801 gene, for the treatment of
cancer and other diseases in humans;


 


NOW, THEREFORE, it is agreed as follows:


 


1.             DEFINITIONS


 


“Affiliate” means
any enterprise which controls, is controlled by, or is under common control
with, such party as long as such control exists. For the purpose of the preceding
sentence, the word “control” means the ownership of at least 50% of the
outstanding voting stock of such enterprise or, a comparable equity interest in
any other type of entity


 


“Atugen Background Technology”
means any and all inventions, discoveries, methods and processes, improvements,
know-how, technical information, data or other technology that is heretofore or
hereafter discovered, conceived, made, developed


 

















 


and/or reduced to practice by Atugen or its Affiliates, or owned in
whole or in part by, or licensed (with a right to sublicense) to Atugen or its
Affiliates and relates to: (i) the development and manufacture of siRNA
molecules silencing gene targets in animals and humans, and (ii) the
preparation of (liposome-based) formulations for the delivery of siRNA
therapeutic products, as well as any and all intellectual property rights
therein, including without limitation Patent Rights, copyright, trademark or
trade secret rights. Atugen Background Technology related to patents and patent
applications as of the date of this Agreement is identified in Schedule A1. The term Atugen Background
Technology does not include the Atugen Program IP.


 


“Atugen Existing IP” means
the Atugen Background Technology, and the Atugen Program IP.


 


“Atugen Products” – shall
mean Products and Drug Products for the treatment of cancer in humans.


 


“Atugen Program IP” means
certain stabilized, chemically modified siRNA molecule(s) silencing the human
801 gene and the mouse 801 gene that have been developed by Atugen prior to the
date of this Agreement and certain lipids and liposome-based formulations, as
identified in Schedule A2
hereto, and any and all intellectual property rights therein, including without
limitation Patent Rights, copyright, trademark or trade secret rights.


 


“Clinical Development”
means the trials conducted in human subjects to determine the safety, efficacy
and pharmacokinetics of a compound as required by the US FDA. Clinical
Development includes Phase I, Phase II, Phase III (and IV if required), and the
New Drug Application (NDA) for Regulatory Approval by the FDA .


 


“First Commercial Sale”
means the first sale to a third party in an arm’s length transaction for use or
consumption in such country after required Regulatory Approval has been granted
by the relevant regulatory authority in such country, provided that in a Major
Market the First Commercial Sale shall not be deemed to have commenced until
the annual Net Sales in that market exceeds [ * ].


 


“Formal Preclinical Development”
means the aggregate of in vitro and in vivo studies required by the US FDA to
determine the potential risk a compound poses to man and the environment,
necessary and sufficient for an IND approval.


 


“Drug Product” means the
Product formulated (such as e.g. using liposome-based Atugen Background
Technology) for administration to man.


 


“IND” means an
Investigational New Drug application filed with the FDA for a Drug Product in
order to obtain approval for the commencement of clinical trials


 


“Know-How” means
unpatented technical and other information, including information comprising or
relating to concepts, discoveries, inventions, data, designs, formulae, ideas,
methods, models, assays, research plans, procedures, designs for experiments
and tests and results of experimentation and testing (including results of
research or development) processes (including manufacturing processes,
specifications and techniques), laboratory records, chemical, pharmacological,
toxicological, clinical,


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


2

















 


analytical and quality control data, trial data, case report forms,
data analyses, reports or summaries and information contained in submissions
to, and information from, ethical committees and regulatory authorities.


 


“Major Markets” shall mean
any of: [ * ].


 


“Net Sales” shall mean the aggregate gross sales of any Product
invoiced to third parties in an arm’s length transaction by QBI or Atugen or
their Affiliates, less the following deductions (to the extent that such
deductions are actually shown on the relevant invoices to third-party customers):


 


(a)          any tax, duty or other
governmental charge on the import or export, sale or use of any royalty-bearing
Product (not including franchise tax or income tax);;
and


 


(b)         actual costs of transportation
and insurance if invoiced to the customer; and


 


(c)          and
[ * ] deduction of [ * ]
of the price invoiced for Products to cover all the usual sales expenses such
as charges or allowances given or normal trade discounts allowed or commissions
paid in lieu of trade discounts as well as credits or allowances given or made
on account of return or rejection of any royalty-bearing Product;


 


“Patent Rights” shall mean
any and all (a) patents, (b) pending patent applications, including,
without limitation, all provisional applications, continuations, continuations-in-part,
divisions, reissues, renewals, and all patents granted thereon, and
(c) all patents-of-addition, reissue patents, reexaminations and
extensions or restorations by existing or future extension or restoration mechanisms,
including, without limitation, supplementary protection certificates or the
equivalent thereof.


 


“Products” means RNAi
products that are (i) based on the Existing Atugen IP or discovered, developed
or produced using the Existing Atugen IP, and (ii) are based on the QBI
Existing IP and directed to the 801 gene.


 


“Proof of Concept” means
those [ * ] that a Party deems [ * ].


 


“QBI Existing IP” means
the present and future Patent Rights and Know-How owned by QBI and directed to
the 801 polypeptide, to nucleic acid encoding the 801 polypeptide, antibody to
the 801 polypeptide, antisense and siRNA to 801 gene and methods of treatment
of diseases using these,including but not limited to rights to patents and
patent applications listed in Schedule B.


 


“QBI Products” means
Products and Drug Products for the treatment of human diseases other than
cancer.


 


“Regulatory Approval”
shall mean any and all MAA (Marketing Authorization Application) approvals or
post-MAA approvals (including any applicable governmental price and
reimbursement approvals), licenses, registrations, or authorizations of any
federal, national, multinational, state, provincial or local regulatory agency,
department,


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


3

















 


bureau or other governmental entity necessary for the development,
manufacture, use, storage, import, transport, promotion, marketing and sale of
a product in a country.


 


“Sublicense Royalties”
shall mean net revenues from any royalties or similar payments that a Party or
an Affiliate of a Party receives from a sublicensee on account of sales of
Products by such sublicensee or its sublicensee


 


“Valid Patent Claim” shall mean:
(i) a claim under an issued and unexpired patent which has not been
revoked, held unenforceable or invalidated by a decision of a court or other
governmental agency of competent jurisdiction, is unappealable or for which an
appeal has not been filed within the time allowed for appeal and which has not
been discharged, denied or admitted to be invalid or unenforceable through reissue
or disclaimer or otherwise; or (ii) a claim in a pending patent
application, which application: (a) is under active prosecution; or
(b) for which formal examination has been requested; or (c) is a
provisional application, the benefit of which can be claimed in a
non-provisional application.


 


2.             SCOPE
OF THE COLLABORATION


 


The Parties shall undertake the following activities in accordance with
the terms of this Agreement, all of which shall together comprise the
“Collaboration” for the purposes of this Agreement:


 


2.1           In the first stage
of the Collaboration the Parties shall undertake a joint research program for
the purpose of developing a Product or Products, which shall potentially have
application in both Parties’ therapeutic area of interest. Such program shall
include all research required for the development of such Products towards submission
of an IND up to and including the Proof of Concept studies in animals, in accordance
with the provisions of Section 3 herein (the “Joint
Research Stage”);


 


2.2           In the second stage of the Collaboration, following the
Joint Research Stage, each Party or its sublicensee shall independently
undertake, at its own expense, such further pre-clinical and clinical drug
development activities as are necessary to obtain Regulatory Approvals for the
commercialization of Products in such Party’s therapeutic area of interest (the
“Development Stage”). During the
Development Stage of Collaboration the Parties shall determine which, if any,
Formal Preclinical Development or Clinical Development studies are suitable to
both Parties’ therapeutic category of interest and benefit both their Formal
Preclinical Development or Clinical Development and shall cooperate with each
other in the performance of such studies, in accordance with the provisions of
Section 4.3 herein (the “Joint Development
Program” ).


 


3.             THE
JOINT RESEARCH STAGE


 


3.1.          Objectives of the
Joint Research Stage The Parties shall undertake a joint research program
with the overall objective of identifying and developing Product candidates
related to 801 gene in each Party’s therapeutic area of interest up to and including
Proof of Concept in vitro cell culture studies , in accordance with a detailed
research plan which shall be agreed upon by the Parties as provided in Section
3.3.1


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


4

















 


(the “Joint Research Program”).
For the avoidance of doubt, it is agreed that any studies in animals shall be
made by either party on its own account unless the Parties otherwise agree
upon. Once agreed upon, the Joint Research Program shall be attached as Schedule C to this Agreement and shall form
an integral part thereof. The Joint Research Program may be up-dated and
amended with the written consent of both Parties or the unanimous approval of
the Steering Committee.


 


3.2.          Research Period. The
Joint Research Program shall commence on the date upon which the Joint Research
Plan is approved by the Parties in accordance with Section 3.3.1 below (the “Commencement Date”). The Joint Research
Program shall continue for a period of [ * ] from the
Commencement Date (the “Research Period”),
and may be extended by the decision of the Steering Committee (as defined
below) or by mutual written consent of the Parties.


 


3.3          Conduct
of the Joint Research Program


 


3.3.1           The
Joint Research Program. The Joint Research Program, comprising a detailed
research plan and time-frame, shall be prepared and approved by the Parties by
no later than [ * ] from the date first above
written (the “Effective Date”). The
Joint Research Program shall be divided into the tasks to be performed by each
Party (each, a “Research Task”),
and shall provide the following details with respect to each Research Task:


 


(a)                                            The
objectives of the Research Task


 


(b)                                           The Party
who shall be responsible for performing the Research Task (each, a “Performing Party”);


 


(c)                                            The
specific activities that must be performed to complete the Research Task and
the work product that must be produced and delivered by the Performing Party
(the “Research Task Deliverables”).


 


(d)                                           The Party or
Parties who will benefit from the results of the Research Task and bear the
costs thereof as provided in Section 3.6.


 


(e)                                            The
timeframe for performance of the Research Task (a “Research Task Timeframe”); and


 


(f)                                              The
anticipated cost of the Research Task (the “Cost
Estimate”).


 


3.3.2           Preparation
of Research Task Costs Estimates The Party or Parties responsible for each
Research Task shall be responsible for preparing the Cost Estimate, and shall
submit it to the other Party for its approval.


 


3.4          Steering Committee


 


3.4.1        Membership and Functions.  The parties hereto agree to establish a
Steering Committee (SC) which shall comprise four members, two representatives,
designed by either party. the chairperson of the SC shall be designated semi-annually
on an alternating basis between the parties. The initial


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


5

















 


chairperson shall be selected by
[ * ]. The party not designating the
chairperson shall designate one of its representative members as secretary to
the SC for such period. Each party shall be free to change its representative
members upon notice to the other party.


 


3.4.2 The Steering Committee
shall manage the specific objectives and activities of the Joint Research
Program and the Joint Development Program. Specifically, the Steering Committee
shall be responsible for the following functions:


 


(a)                                 Updating the Joint Research Program from time to time in
accordance with the recommendations of the Parties. Such updates, once
approved, shall be recorded and signed by both Parties and shall be
incorporated herein as amendments to Schedule D. Such updates may involve the
addition, alteration, or cancellation of entire Research Tasks or the
alteration of specific details within each Research Task, such as the Research
Task Deliverables, Research Task Timeframe, or Research Task Cost Estimate.


 


(b)                                Monitoring implementation of the Joint Research
Program and Joint Development Program by the Parties, including the
accomplishment of key objectives and the devotion of appropriate resources.


 


(c)                                 Determining whether the Research Task Deliverables have been
achieved at the end of each Research Task.


 


(d)                                Determining
patenting strategy with respect to the Joint Program IP, including the timing
of patent application filing and the choice of the prosecuting party for each
invention within the Joint Program IP.


 


(e)                                 Determining
the policy on the publication of the results of the Joint Research Program and
the Joint Development Program.


 


(f)                                   Acting as the first forum in the resolution of disputes.


 


3.4.2        Meetings of the Steering Committee. Meetings of the S
C shall be held at least once every [ * ] during
the Joint Research Program and the Joint Development Program, at times and
places as agreed upon at the prior meeting of the S C, and may be
conducted in person or by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Either Party may also convene a special meeting of
the S C at any time for the purpose of deciding any matter within the authority
of the Steering Committee, by providing [ * ] written
notice to the other Party. The chairperson shall be responsible for sending
notices of the meetings to all members.


 


Two weeks prior to each SC
meeting, a summary of progress of the development work of either party shall be
provided by either party to the members of the SC.


 


3.4.3                Decisions of the Steering Committee. The
Steering Committee shall make all decisions unanimously. Deadlock will be
resolved by submission of the issue


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


6

















 


jointly to the CEO’s of QBI
and Atugen, and if the parties are unable to reach a solution within [ * ] of such submission, the matter may be referred for resolution
by either Party under Section 12. The Steering Committee will keep full records
of all its decisions and minutes of its meetings will be circulated to each
party and available for inspection by the parties on request.


 


Within [ * ]
after each SC meeting, the secretary of the DMC shall prepare and distribute
minutes of the meetings, which shall provide a description in reasonable detail
of the discussions held at the meeting and list any actions, decisions or
determinations approved by the SC.


 


The secretary shall be responsible
for circulation of all draft and final minutes. The draft shall first be
circulated to the chairperson, edited by the chairperson and then circulated in
the final draft form to all members of the SC, sufficiently in advance of the
next meeting to allow adequate review and comment prior to the meeting.


 


The minutes shall be approved or
disapproved and revised as necessary, at the next meeting. Final minutes shall
be distributed to the members of the SC.


 


3.4.4                Expenses of Steering Committee Members. For the
avoidance of doubt, each party shall bear the travel accommodation and
subsistence expenses of its staff involved in Steering Committee meetings.


 


3.5           Obligations of the Parties Pursuant to the Joint
Research Program


 


3.5.1        Diligence Obligations of the Parties.  Each of the Parties agrees to diligently and
timely perform its obligations pursuant to the Joint Research Program. Without
limiting the generality of the foregoing, each Party undertakes to commit its
resources and to exert the efforts necessary and reasonable and consistent with
its normal business practices to execute and perform the Research Tasks
assigned to such Party in the Joint Research Program, to maintain and utilize
the scientific staff, laboratories, offices and other facilities consistent
with such undertaking, and to reasonably cooperate with the other Party in the
conduct of the Joint Research Program.


 


3.5.2        Supply of Products and Product Candidates by Atugen during
the Joint Research Program.  During
the Joint Research Program, Atugen shall be responsible for developing and
manufacturing (or having manufactured) the siRNA molecules in quantities of up
to [ * ] that are identified as potential
Product candidates by the Parties (“Product
Candidates”), and shall manufacture (or have manufactured) and
supply quantities of up to [ * ] of such
Product Candidates to the Parties, as needed by the Parties to perform their
obligations pursuant to the Joint Research Program. The supply of Product
Candidates by Atugen during the Research Stage shall be detailed as Research
Tasks within the Joint Research Program, and the timing, quality and quantity
of Product Candidates supplied by Atugen shall be defined as Research
Deliverables for the purposes of this Agreement.


 


3.5.3        Transparency of
Research. The Parties shall communicate frequently by way of written
communication such as reports, letters, e-mails, by phone conversations,
meetings and visits to each other’s site in order to keep each other informed
at all times of the work performed by each Party under the Joint Research
Program. Each Party shall provide the other party and the Steering Committee
with quarterly


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


7

















 


written summary reports at the end of each three-month period
specifying the activities undertaken by that party pursuant to the Joint
Research Program and the results in such details to allow a qualified
judgement. Specifically the Parties undertake to inform the Steering Committee
of any and all results of all Research Tasks performed under this Agreement,
including studies (if any) performed for them by third parties, including the
Proof of Concept in vivo studies. Further, each Party shall provide all
necessary data, results, documentation and information in its possession that
was generated in the course of the Joint Research Program and in the event that
the parties jointly participated in a Joint Development Program pursuant to
Section 4, the Joint Development Program, to support regulatory applications
such as for example IND or NDA/BLA. Each Party shall have the right to send
members of its staff to visit the sites at which work on the Joint Research
Program is being conducted by the other Party, or its Affiliates, in order to
review and discuss the progress and results of the Joint Research Program
and/or Joint Development Program, provided such visits are at reasonable times
and are for a period to be agreed between the parties, and provided reasonable
prior notice is given. The Party sending such visitors shall be responsible for
meeting the travel, subsistence and accommodation expenses of its staff.


 


3.6          Funding
of the Joint Research Program.


 


3.6.1        Funding of
Research Tasks for the Benefit of Both Parties.  Where a Research Task has been identified in
the Joint Research Program as being for the joint benefit of the Parties, each
Party shall [ * ] such Research Task, up to
the amount set forth in the applicable Cost Estimate according to the then
current Joint Research Program (Schedule C).


 


3.6.2        Funding of
Research Tasks for the Benefit of One Party.  Where a Research Task has been identified in
the Joint Research Program as being for the sole benefit of one Party, such
Party shall [ * ] such Research Task, up to
the amount set forth in the applicable Cost Estimate according to the then
current Joint Research Program (Schedule C).


 


3.6.3        Payments. Upon
Successful Completion of each Research Task, the Performing Party shall issue
an invoice to the other Party for its share (if any, in accordance with
Sections 3.6.1 and 3.6.2 above) of the actual costs incurred by the Performing
Party, up to the amount set forth in the relevant Cost Estimate, and the other
Party shall pay the amount invoiced within thirty days of receipt thereof. A
Party performing several Research Tasks may issue a consolidated invoice for
all such Research Tasks upon Successful Completion of the last thereof. For the
purposes of this Section the term “Successful Completion” shall mean
achievement of the relevant Research Task Deliverables as determined by the
Steering Committee.


 


3.6.4        Failure to Perform
Notwithstanding anything to the contrary in this Section 3.6, a Party shall not
be required to pay its share of the costs for a Research Task if the Performing
Party failed to deliver the Research Task Deliverables as set forth in the then
current Joint Research Program within the Research Timeframe, provided that (i)
such failure is not due to a good scientific reason or other reasons beyond the
control of the Party, and (ii) such failure or delay has not been cured and
continued for a period in excess of [ * ] (a “Failure to Perform”). In the event of a
Failure to Perform, the non-Performing Party shall have the right, at its sole
discretion,


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


8

















 


to (i) assume performance of the Research Task from the Performing
Party, and the Performing Party shall be required to transfer to the other
Party, at its request, any and all Know How and Material in the possession of
the Performing Party that is useful or necessary for the performance of the
Research Task, and shall grant the other Party a license to use the same to the
extent necessary to perform the Research Task, or (ii) to terminate this
Agreement in accordance with Section 11.3.


 


4.             DEVELOPMENT
STAGE


 


4.1          Preparation
of Third Party Manufacturer for the Joint Development Stage


 


3.7.1        The Parties agree
that [ * ] shall be approached first as the
potential major third party manufacturer for the purpose of manufacturing
Products and Drug Products meeting the cGMP standards required by the U.S FDA
and supplying Products in suitable quantities for use in each Party’s
individual development program and (if applicable) in the Joint Development
Program. As QBI will be the first Party requiring such cGMP quality of
Products, QBI will negotiate and enter into a Manufacturing and Supply Agreements
securing, however, that Atugen is fully embedded into the flow of information
by receiving copies of reports, changes of the program and project, quantities
produced and delivered and that Atugen shall have the right and option to be
supplied byQBI’s selected manufacturers. on Atugen’s expense  Atugen shall prepare and provide to such
common third-party manufacturers and to QBI an up-to-date dossier, which atugen has developed with its partner and
which has proven to be suitable for a production of specific 801-siRNA
molecules at such partners’ manufacturing facilities. It is understood and
agreed that the manufacturers will have to adapt such Manufacturing Process
File (the “Manufacturing Process File
“) to its own conditions. The Manufacturing
Process File intends to describe the Product manufacturing process in sufficient
detail (and in any event, at least that level of detail indicated in Schedule D) to (i) enable the preparation
of a Drug Master File (DMF) for submission in the IND application and (ii) to
enable the selected third party manufacturer (or manufacturers) to practice the
Product manufacturing process. For the removal of doubt it is clarified that
Atugen’s obligations to prepare, deliver, and update the Manufacturing Process
File pursuant to this Section 4.1 shall remain in effect even if Atugen does
not participate in the Joint Development Program or its participation in the
Collaboration is terminated pursuant to Section 11; however, if Atugen terminates this Agreement in its entirety
pursuant to Section 11.2 (ii), Atugen has no longer such obligation pursuant to
this Section 4.1. For the removal of doubt Atugen has no further obligation to
prepare and provide additional information other than given in the Manufacturing Process File, even if this
information may not be sufficient for the preparation of a DMF.


 


4.2.          Completion of
Joint Research Program. The Joint Research Program shall be deemed
completed upon decision of the Parties to proceed to Development Stage and
perform the Joint Development Program. In the event that the Parties do not
make such decision at the same time, the Development Stage shall commence when
one Party notifies the other in writing that it has commenced Formal
Preclinical Development of a Product following completion of Proof of Concept
studies (i.e. in vitro cell


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


9

















 


culture studies) in such Party’s therapeutic area of interest (the “Development Commencement Date”). The first
Party to commence Formal Preclinical Studies shall promptly notify the other
Party thereof and shall be referred to hereinafter as the “Initiating Party”, and the other Party
shall be referred to hereinafter as the “Non-Initiating
Party”. For the removal of doubt, it is clarified that a Party has
the right to initiate Formal Preclinical Development of the Product even if the
other Party has not yet completed the Proof of Concept studies for the Product
in his therapeutic category of interest. It is agreed, however, that the
Initiating Party shall keep the other party informed of the progress of its
Formal Preclinical Development by sending [ * ] summary
reports with the essential data and results to enable the other party to a
qualified decision.


 


4.3           Initiation of the
Joint Development Program. For a period of [ * ]
after the Development Commencement Date, the Non-Initiating Party shall have
the right, but not the obligation, to join with the Initiating Party in the
performance of a Joint Development Program, by providing the Initiating Party
with a notice of participation (a “Participation Notice”). The Non-Initiating
Party may participate in the Joint Development Program even if it has not yet
completed its Proof of Concept studies in its therapeutic area of interest.
Upon delivery of a Notice of Participation by the Non-Initiating Party, the
Parties shall prepare and implement the Joint Development Program in accordance
with the provisions of Section 4.5 below.


 


(a)                      In the event that the
Non-Initiating Party joins the Development Program during the period of [ * ] after the Development Commencement Date, the
Non-Initiating Party shall reimburse to the Initiating party [ * ] of all costs incurred by the Initiating Party during
the period between the Development Commencement Date and the Participation Notice.


 


(b)                     In the event that the
Non-Initiating Party joins the Development Program during the period between [ * ] after the Development Commencement Date, the
Non-Initiating Party shall reimburse to the Initiating party [ * ] of all costs incurred by the Initiating Party during
the period between the Development Commencement Date and the Participation
Notice.


 


It is clarified that the Non-Initiating Party shall not be obliged to
join the Initiating Party in performing a Joint Development Program even if it
has completed its Proof of Concept studies in its therapeutic area of interest
or at any time. In the event that the Non-Initiating Party does not notify the
Initiating Party of its decision to join in for the performance of the Joint Development
Program within [ * ] from the Development
Commencement Date, no Joint Development Program shall be performed. For the
removal of doubt, the non-performance of the Joint Development Program shall
not, except in the circumstances set forth in Section 4.4 below, affect any of
the other rights and obligations of the Parties pursuant to this Agreement


 


Notwithstanding anything to the contrary in this Section 4.3, in the
event that a Party has sublicensed the development of Products in its
therapeutic area of interest to a sublicensee in accordance with Section 6.3,
such sublicensee shall not be obliged to enter into a Joint Development Program
with the other Party in accordance with this Section 4.3.


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


10

















 


4.4. Preparation of the Joint Development Program. Upon receipt
of a Participation Notice from the Non-Initiating Party in accordance with
Section 4.3, the Parties shall prepare and the Steering Committee shall meet to
determine the Joint Development Program. The Joint Development Program shall
include specifically those studies of the Formal Preclinical Development or
Clinical Development studies required by each Party for their specific
independent development program, and that are suitable to both Parties’
therapeutic category of interest and benefit both their Formal Preclinical
Development and Clinical Development. The Joint Development Program shall
detail the studies, timetable, Cost Estimates and payment terms and schedules
and shall be incorporated into this agreement as a new Schedule F. Other than as provided in the
Joint Development Program each Party shall be responsible for [ * ].


 


4.5.          Implementation of
the Joint Development Program. Unless otherwise agreed, the Initiating
Party shall be responsible for implementing the Joint Development Program and
shall report to the Steering Committee and to the Non-Initiating Party. It is
clarified that the Steering Committee shall be operative during the Joint
Development stage in accordance with Section 3.4 above and the Parties shall
cooperate with each other as provided in Section 3.5.3.


 


4.6           Funding of the
Joint Development Program. Each Party shall each bear [ * ]
by QBI or Atugen in the performance of the Joint Development Program. The payment
schedule shall be agreed upon by the Parties and detailed in Schedule F to this
Agreement. In the event that either Party withdraws from the Joint Development
Program in accordance with Section 4.7 below, such Party shall [ * ].


 


4.7.          Termination of
Participation in the Joint Development Program. Either Party may terminate
its participation in the Joint Development Program by providing the other Party
with [ * ] written notice. In such case the
followings shall apply:


 


(a)          The rights and licenses granted by one Party
to the Other Party pursuant to this Agreement shall remain in full force and effect,
subject to the obligations of the Parties pursuant to this Agreement.


 


(b)         Each Party shall transfer to the other Party,
and shall cause all of its sublicenses or Affiliates to transfer to the other
Party, by no later than [ * ] from the
date of termination of participation under this Section 4.7 all Know-How and
Materials relating to (a) the Joint Program IP, and (b), the information, data,
Know How developed under this Agreement, to the extent necessary or useful for
the development, manufacture, marketing and sale of Products and Drug Products
in the other Party’s therapeutic area of interest.


 


(c)          Atugen shall update the Product Manufacturing
Process file and shall forward it to QBI in sufficient detail to enable preparation
of a DMF or the IND and further to enable QBI to manufacture or have
manufactured the Product and the Drug Product during the Development Stage and
for commercial purposes. Atugen’s obligations under 3.7.1 shall survive such
termination of participation in the Joint Development Program.


 


4.8   Diligent Performance of the Development
and Commercialization Obligations of the Parties. 


 


4.8.1. Diligent Performance of Development. Each Party, by
itself or through


 










[
* ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.


 


11

















 


its
Affiliates or sub licensees, undertakes to employ commercially reasonable
efforts, including funding consistent with such efforts, to develop Products in
accordance with such Party’s own individual development plan and (if applicable)
the Joint Development Program and to achieve the Development Milestones set
forth in Section 11.4. Specifically, each Party, by itself or through
Affiliates or sublicensees, undertakes to employ its best efforts, including
funding consistent with such efforts, to carry out all efficacy, pharmaceutical,
safety, toxicological and clinical tests, trials and studies and all other
activities necessary in order to obtain Regulatory Approval for the production,
use and sale of Products in such Party’s therapeutic area of interest. In the
event that a Party (or its Affiliates of sublicensees) does not achieve the
Development Milestones set, the other Party may terminate the licenses granted
to the Non-Achieving Party as set forth in Section 11.4.


 


4.8.2. Progress Reports. During the period commencing on the
Development Commencement Date and ending upon the receipt of the Regulatory
Approval for a Product each Party (or Affiliate or sublicensee) shall make
periodic progress reports to the other Party with a frequency of not less than
each [ * ] (the “Progress Reports”) whether
or not the Joint Development Program has been initiated.


 


4.8.3. Commercial Manufacture of Product.
Following completion of the Development Stage, each Party shall be entitled, at
such Party’s sole discretion, to (i) continue obtaining supplies of the
Products and Drug Products for all of such Party’s commercial needs from the
third party-manufacturer appointed by the Parties in accordance with Section
3.7.1 or (ii) to appoint and qualify a different or additional manufacturer to
supply such Party with commercial quantities of Products and Drug Products, and
the provisions of Section 3.7.1 shall apply, mutatis mutandis, to such
additional or different manufacturer.


 


4.8.4        Diligence in Commercialization.
During
the period commencing with the receipt of Regulatory Approval by a Party or sub
licensee for Products in a given country, such Party shall, and shall ensure
that its Affiliates and sub licensees shall, use its or their best efforts, including
funding consistent with such efforts, to promote, market and sell such
Products in such country.


 


5.             INTELLECTUAL
PROPERTY


 


5.1           Ownership
 
5.1.1        Existing IP. Each Party shall remain the sole owner of its Existing IP, and shall have no right in or to the Existing IP of the other Party, except in accordance with the licenses set forth herein.
 
5.1.2        Improvements to Atugen Background Tech
nology  Atugen shall own any improvements that relate directly to the Atugen Background Technology and are of a general technology nature, rather than directed to specific target genes or products, which are made, invented, discovered, or reduced to practice by either Party in the course of the Collaboration.
 
5.1.3        Joint Program IP  The Parties shall jointly own all inventions, discoveries, know-how, trade secrets, methods, information, data, or Materials that are first


 






[ * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION

PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 
12















 
made, invented, discovered or reduced to practice by either Party in the conduct of the Joint Research Program, or the Joint Development Program (hereinafter, “Joint Program IP”). The Joint Program IP shall include patent applications directed to specific anti-801 siRNAs.
 
5.2           Assignment and Perfection of Interest. Each Party agrees to cooperate with the other Party and to take all reasonable action and to execute, or have its employees, agents or consulta
nts execute, all documents necessary to effectuate any assignment necessary to achieve joint ownership of the Joint Program IP. All patent applications and issued patents covering Joint Program IP shall be jointly owned and shall be prosecuted in accordance with Section 7.
 
6.             LICENSES
 
6.1.          Grant By QBI
 
6.1.1. Research License. Subject to the terms of this Agreement, QBI hereby grants to Atugen a non-exclusive, world-wide, royalty free license, without the right to sublicense, under the QBI Existing IP and the Joint Program IP, to perform the Joint Research Program and the Joint Development Program.
 
6.1.2        Development and Commercialization License Subject to the terms of this Agreement, QBI hereby grants to Atugen an exclusive, royalty bearing, world-wide license with the right to sublicense as set forth in Section 6.3, under the QBI Existing IP and the Joint Program IP, to develop, manuf
acture and/or have manufactured and commercialize import, market, sell and otherwise commercialize Atugen Products.
 
6.2           Grant By Atugen
 
6.2.1        Research License. Subject to the terms of this Agreement, Atugen hereby grants to QBI a non-exclusive, world-wide, royalty free license, without the right to sublicense, under the Atugen Existing IP and the Joint Program IP, to perform the Joint Research Program and the Joint Deve
lopment Program.
 
6.2.2.       Development and Commercialization License Subject to the terms of this Agreement, Atugen hereby grants to QBI an exclusive, royalty bearing, world-wide license, with the right to sublicense as set forth in Section 6.3 under the Atugen Existing IP and the Joint Program IP, to develop, use, manufacture and/or have manufactured, import, market, sell and otherwise commercialize QBI Products.
 
6.3          
Sublicenses
 
6.3.1. Sublicense Grant. Each Party shall be entitled to grant sublicenses to third parties under the development and commercialization license granted to such Party pursuant to Section 6.2.1.6 or 6.2.2.6 above, on terms and conditions in compliance with and not inconsistent with the terms of this Agreement (a “Sublicense”). Such Sublicenses shall be made for consideration and in arm’s length transactions.


 






[ * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION

PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 
13















 
6.3.2. Sublicense Agreements. Sublicenses shall only be granted pursuant to written agreements, which shall be in compliance and not inconsistent with and shall be subject and subordinate to the terms and conditions of this Agreement. Any act or omission by a sub licensee, which would have constituted a breach of this Agreement had it been an act or omission by the Party granting such Sublicense, shall constitute a breach of this Agreement
 


7.             PATENT
PROSECUTION AND MAINTENANCE


 


7.1           Upon decision of the
Steering Committee to file a Patent Application for the Joint Program IP (such Patent
Applications, and all Patent Rights issued with respect thereto, the “Joint Patents”), such Patent Application
shall be filed, prosecuted and maintained by the Party nominated by the
Steering Committee for the specific Patent Application (the “Filing Party”) in the joint names of Atugen
and QBI. The Filing Party shall consult with the other Party about the contents
of each Joint Patent Application prior to its filing, and shall obtain the
other Party’s approval thereto, such approval not to be unreasonably withheld. Unless
otherwise determined by the Steering Committee each Joint Patent shall be filed
in [ * ] and in such additional countries,
as the parties will agree. The costs of filing and maintaining the Joint
Patents shall be borne equally by the Parties. Each Party shall promptly
provide to the Filing Party all information, data or other assistance
including, without limitation, the execution of any documents or instruments,
necessary to enable such party to file, prosecute and defend the Patents and
Patent Applications.


 


7.2           If either Party gives written notice to the other Party
that it does not wish to fund a Joint Patent (i) for a specific claim relating
to the Joint Program IP, or (ii) in a particular country, or fails to respond
within [ * ] to a written request by the other
party that it state its intention with respect to such Joint Program IP, or if
a Party fails to reimburse the Filing Party for its half of the patent prosecution
and/or maintenance expenses relating to such Joint Patent within thirty days of
Filing Party’s invoice for the same, the other Party shall have the right to
file, in its own name and at its own expense, such Patent Application, or
application for such specific claim or in such country. In such event, the
Filing Party shall have the exclusive right to develop Products derived from or
covered by the claims in such patent application.


 


7.3           Infringement of IP by
Third Parties


 


7.3.1        If
either Party by itself or through an Affiliate or sublicensee becomes aware
that a third party is infringing any rights in the Joint Program IP, or if
either Party becomes aware of any allegation by a third party that the activity
of either of the Parties hereunder infringes or may infringe a patent of such
third party, that party will promptly provide the other with written notice
thereof. The Filing Party (or its sublicensee) shall have the initial right to
bring a claim for infringement or to defend such claim at the parties’ joint
expense, except that it shall keep the other Party reasonably informed of its
progress on the claim.


 


7.3.2   In the event that the Filing Party or its
sublicensee fails to institute a suit for infringement or fails to defend such
claim (as the case may be) or take other reasonable action in response to such
action pursuant to subsection 7.3.1 within [ * ] after
notice of such infringement, the other Party or its sublicensee will have the
right,


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


14

















 


but not the obligation, to
institute such suit or defend the claim as the case may be or take other
appropriate action in its own name to enforce the applicable patent or infringed
right or defend the claim. Regardless of which party brings the action, the
non-enforcing party agrees to provide the enforcing party with all assistance
reasonably requested by the enforcing party, and at the expense of the
enforcing party, including without limitation, joining as a party to such
action where legally required for the conduct or prosecution of such action. Any
damages or other monetary recovery, whether by settlement or otherwise, shall [ * ], and if done jointly, shall [ * ].
Neither party shall have the right to settle any patent infringement litigation
under this Section in a manner that diminishes the rights or interests of the
other party without the consent of such other party, which consent shall not be
unreasonably withheld.


 


7.3.3. Cooperation. Each
party agrees to cooperate fully with the other party in the preparation,
filing, prosecution, maintenance, enforcement and defense of the Joint Patents.
Such cooperation shall include, without limitation: (i) executing all papers
and instruments, or requiring its employees or agents to execute such papers
and instruments, so as to vest the ownership of the Joint Patents jointly in
the Parties, and to enable the party having the right hereunder to do so to
apply for, prosecute, maintain, enforce and defend its rights to the Joint
Patents; (ii) providing the other party with notice of any matters coming to
such party’s attention that may affect the preparation, filing, prosecution,
maintenance, enforcement or defense of such rights in the Joint Patents; and
(iii) undertaking no actions that are potentially deleterious to the preparation,
filing, prosecution, maintenance, enforcement or defense of such rights on the
Joint Patents.


 


8.             ROYALTIES


 


8.1  Royalties on Sales of
Products by the Parties  Each Party
(the “Royalty Paying Party” shall pay to the other Party (the “Royalty Receiving
Party”) royalties on world-wide Net Sales of Products by the Royalty Paying
Party, its Affiliates, or its sub-licensees, as follows:


 


8.1.1        For Products that are
developed and/or marketed directly by the Royalty Paying Party or its
Affiliates, the Royalty Receiving Party shall be entitled to receive a royalty
equal to [ * ] of the annual Net Sales of such
Products.


 


8.1.2        For Products that are
developed and/or sold by sub licensees of the Royalty Paying Party, the Royalty
Receiving Party shall be entitled to receive a royalty equal to [ * ] of the Sublicense Royalties.


 


8.2           Royalty Reductions


 


8.2.1  Notwithstanding the
foregoing, in the event that (i) a Product of either Royalty Paying Party [ * ], and (ii) [ * ], the royalties
payable pursuant to Section 8.1.1 and Section 8.1.2 above shall be [ * ] as of the beginning of [ * ],
provided, however that such reduction shall only affect the royalty payable for
sales effected [ * ].


 


8.2.2        Offset of Third
Party License Fees.  The
Royalty Paying Party may offset [ * ] of any
royalties or license fees it must pay to third parties pursuant to any licenses


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


15

















 


necessary to commercialize such Party’s Products (the “Royalty Offset”)
against the royalties payable by the commercializing Party to the other Party;
provided, however, that the necessity of obtaining such licenses arose or
became known following the date of this Agreement.


 


8.2.3        No royalty reduction
as set forth in Sections 8.2.1 and 8.2.2 or resulting from combination of Sections
8.2.1 and 8.2.2 shall have the effect to reduce the royalties payable by the
commercializing Party to the other Party to less than [ * ]
of the amounts that would have otherwise been due under the percentages set
forth in Section 8.1, if the Product is covered by a Valid Patent Claim in the
Joint Patents


 


8.3           Sublicensing
Receipts. Where a Party receives payments, other than sublicensee Royalties
from a sub licensee, in consideration for the grant of the sublicense, or the
grant of an option to obtain a Sublicense, including without limitation license
fees, down-payments, milestone payments, and license maintenance fees, but
excluding payments specifically committed to cover costs actually incurred by
such Party or their Affiliates in the development of the Products (herein,
“Sublicense Fees”) such Party shall pay to the other Party an amount equal to [ * ] of such Sublicense Fees, within [ * ]
of the date on which such Sublicense Fees are paid by the sub licensee.


 


8.4           Royalty Term The royalties specified in Sections 8.1 1 and
8.1.2 shall be payable on a country-by-country basis commencing with the First
Commercial Sale of each Product and shall continue until the later of: (i) the
expiration of ten (10) years from the first commercial sale of each such
Product in that country (provided that in the case of a country within the
European Union such ten (10) year period shall run from the date of First
Commercial Sale of such Product anywhere in the European Union), and (ii) until
the last to expire of any Valid Patent Claims claiming such Product which are
included in the Joint Patents.


 


8.5           Royalty Calculation 
Royalties shall be
computed at the end of each calendar quarter, which, for the purpose of this
Agreement, shall end on the last day of the month of March, June, September and
December. If this Agreement is terminated for any reason during a quarter then,
for the purpose of this clause only, the date of termination shall be the end
of that current quarter. Royalties shall be paid for each quarter within [ * ] of the end of the quarter. All sums due under this
Agreement are exclusive of any value added tax, which shall be payable in
addition, against the rendering by the other party of any appropriate value
added tax invoice.


 


8.6           Records  Each Party will maintain, and will cause its
sublicensees to maintain, complete and accurate books and records which enable
the royalties and other amounts payable hereunder to be verified. Upon
reasonable prior notice to the commercializing Party, an auditor paid for and
selected by the other Party shall have access, during normal business hours, to
the books and records of the commercializing Party and its sublicensees to
conduct a review or audit thereof. The auditor shall agree not to use or
disclose any information contained in the commercializing Party’s or its
sublicensees’ books or records, except for the purpose of fulfilling its duties
as set forth in this provision. If the auditor determines that the
commercializing Party or any sublicensee has underpaid royalties and other
amounts payable by [ * ] or more,
the Commercializing Party shall pay promptly, in addition to any such
underpayment, the costs and expenses of such auditor in connection with its
review or audit, provided


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


16

















 


that no Party shall be liable to reimburse the other Party for any
underpayment that occurred more than [ * ] prior to
such audit.


 


8.7           Currency
Conversion Royalties shall be calculated and paid in Euro. For the purpose
of computing the Net Sales revenue made in a currency other than Euro, the
royalty-paying Party shall convert such currency from local currency to Euro in
accordance with [ * ].


 


8.8           Taxes In the
event that either Party (the “Paying Party”) is required to withhold any tax to
the tax or revenue authorities in any country regarding any payment to the
other Party (the “Recipient Party”) due to the laws of such country, such
amount shall be deducted from the payment to be made to the Recipient Party,
and the Paying Party shall promptly notify the Recipient Party of such
withholding and, within a reasonable time after making such deduction, furnish
the Recipient Party with copies of any tax certificate or other documentation
evidencing such withholding. Each Party agrees to cooperate with the other
Party in claiming exemptions from such deductions or withholdings under any
agreement or treaty from time to time in effect.


 


9.             WARRANTIES
AND LIMITATION OF LIABILITY


 


9.1           Organization and
Consents. Each of the Party’s hereby represents and warrants to the other
Party that as of the Effective Date it has full right, power and authority to
enter into this Agreement, this Agreement has been duly executed by such Party
and constitutes a legal, valid and binding obligation of such Party,
enforceable in accordance with its terms, and all necessary consents, approvals
and authorizations of all government authorities and other persons required to
be obtained by such Party in connection with the execution, delivery and
performance of this Agreement have been and shall be obtained.


 


9.2           No Conflict.
Each Party represents to the other Party that notwithstanding anything to the
contrary in this Agreement, the execution and delivery of this Agreement and
the performance of such Party’s obligations hereunder (a) do not conflict with
or violate such Party’s corporate charter and bylaws or any requirement of
applicable laws of regulations and (b) do not and shall not conflict with,
violate or breach or constitute a default or require any consent under, any
contractual obligation of such Party.


 


9.3           Intellectual
Property. Each Party warrants that it independently developed, and is the
owner or licensee (with the right to sublicense) or otherwise has rightful
possession of, such Party’s Existing IP, including patents and patent
applications. Each Party further warrants that as of the Effective Date such
Party is not aware of any actual or threatened proceedings in which it is
claimed or is implied that the use of such Party’s Existing IP infringes the
rights of a third party, [ * ] and to
the best of each Party’s knowledge, use of such Party’s Existing IP as set
forth in this Agreement will not infringe the rights of any third party.


 


9.4           Disclaimer.


 


EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH PARTY EXPRESSLY
DISCLAIMS, WAIVES, RELEASES, AND RENOUNCES ANY


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


17

















 


WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE PARTIES EXPRESSLY DO NOT WARRANT
(I) THE SUCCESS OF ANY STUDY OR TEST COMMENCED PURSUANT TO THE JOINT RESEARCH
PROGRAM OR THE DEVELOPMENT PROGRAM (II) THE SAFETY OR USEFULNESS FOR ANY PURPOSE
OF THE EXISTING IP PROVIDED BY EACH PARTY.


 


9.5           Limitation of Liability.


 


NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OF THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.
 


10.          INDEMNITY


 


10.1         Indemnification by
QBI. QBI agrees to indemnify, defend, and hold harmless Atugen, its
Affiliates and its sublicensees and their respective directors, officers,
employees and agents (the “Atugen Indemnified Parties”) from and against any
losses, costs, damages, fees or expenses arising out of any third party claim
relating to (i) any breach by QBI of any of its representations, warranties or
obligations pursuant to this Agreement, (ii) the gross negligence or willful
misconduct of QBI, or (iii) injuries resulting from the development,
manufacture, use, sale or other disposition of any QBI Product in any country.
In the event of any such claim against the Atugen Indemnified Parties by any
third party, Atugen shall promptly notify QBI in writing of the claim and QBI
shall manage and control, at its sole expense, the defense of the claim and its
settlement. The Atugen Indemnified Parties shall cooperate with QBI and may, at
their option and expense, be represented in any such action or proceeding. QBI
shall not be liable for any litigation costs or expenses incurred by the Atugen
Indemnified Parties without QBI’s prior written authorization. In addition, QBI
shall not be responsible for the indemnification or defense of any Atugen
Indemnified Party arising from any negligent or intentional acts by any Atugen
Indemnified Party or the breach by Atugen of any obligation or warranty under
this Agreement, or any claims compromised or settled without Atugen’s prior
written consent.


 


10.2         Indemnification by
Atugen. Atugen agrees to indemnify, defend, and hold harmless QBI, its
Affiliates and its sublicensees, and their respective directors, officers,
employees and agents (the “QBI Indemnified Parties”) from and against any
losses, costs, damages, fees or expenses arising out of any third party claim
relating to (i) any breach by Atugen of any of its representations, warranties
or obligations pursuant to this Agreement, (ii) the gross negligence or willful
misconduct of Atugen, or (iii) injuries resulting from the development,
manufacture, use, sale or other disposition of any Atugen Product in any
country. In the event of any such claim against the


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


18

















 


QBI Indemnified Parties by any third party, QBI shall promptly notify
Atugen in writing of the claim and Atugen shall manage and control, at its sole
expense, the defense of the claim and its settlement. The QBI Indemnified
Parties shall cooperate with Atugen and may, at their option and expense, be
represented in any such action or proceeding. Atugen shall not be liable for
any litigation costs or expenses incurred by the QBI Indemnified Parties
without QBI’s prior written authorization. In addition, Atugen shall not be
responsible for the indemnification or defense of any QBI Indemnified Party
arising from any negligent or intentional acts by any QBI Indemnified Party or
the breach by QBI of any obligation or warranty under this Agreement, or any
claims compromised or settled without QBI’s prior written consent.


 


11.          TERM AND TERMINATION


 


11.1         Term  This Agreement shall be effective as of the
date first above written and shall continue in full force and effect until the
expiration of the Royalty term as set forth in Section 8.3, unless sooner
terminated under this Section 11 (“Term” of the Agreement).


 


11.2.1      Termination
for Breach. Either Party (the “Terminating Party”) shall be entitled, at
such Party’s sole and absolute discretion to (i) terminate the licenses granted
to the other Party (the “Non-Terminating Party”) pursuant to this Agreement, or
(ii) terminate this Agreement in its entirety, in the event that the
other Party commits a material breach of any of the terms of the Agreement and
fails to remedy such breach within [ * ] of
written notice given by the non-breaching party.


 


11.2.2      Effect
of Termination for Breach: In the event that the Terminating Party elects
to terminate only the licenses granted to the other Party pursuant to Subsection
11.2(i) above, the licenses granted to the Terminating Party hereunder shall
remain in full force and effect, subject to payment of the royalty obligations
set forth herein. In the event of termination for breach as set
forth in this Article 11.2, the Non-Terminating Party shall transfer to the
Terminating Party, and shall cause all of its sub licensees or Affiliates to
transfer to the Terminating Party, by no later than [ * ]
from the date of termination of participation under this Section 4.7. all
Know-How and Materials relating to (a) the Joint Program IP, and (b) the
information, data, Know How developed under this Agreement, to the extent
necessary or useful for the development, manufacture, marketing and sale of
Products and Drug Products in the other Party’s therapeutic area of interest.


 


11.3         Termination
due to Failure to Perform in the Joint Research Stage 


 


Without derogating from the generality of
Section 11.2, either Party shall be entitled to terminate the Joint Research
Program and to (i) terminate the licenses granted to the other Party or (ii)
terminate the Agreement in the event of Failure to Perform of the other Party
as provided in Section 3.6.4.


 


11.4.        Termination
due to non-achievement of Development Milestones. Either Party (or its
Affiliate or sub licensee) may (but is not obliged to) terminate the licenses
granted to the other Party (the “Terminating Party”) in the event that the
other party (the “Non-Achieving Party”) does not achieve its Development
Milestones set forth [ * ], i.e.
cancer indications for Atugen and a non-cancer indications for QBI, as set


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


19

















 


forth in the following table (the
“Development Milestones”) within the timeframe set therefore:


 


	
  Development Milestone

  	
   

  	
  Atugen or sublicensee

  	
   

  	
  Quark or sublicensee

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  



 


In the event of any termination
according to this Section 11.4 the licenses granted by the Non-Achieving Party to the
Terminating Party shall remain in full force and effect, subject to payment of
royalties as provided in this Agreement.


 


Notwithstanding the foregoing, if the
Non-Achieving Party is QBI and the reason for QBI’s failure to achieve the
Development Milestones is due only to a failure of the siRNA molecules
generated under this Agreement including Products or Drug Products to inhibit
the 801 gene in a manner that is suitable for drug development, then the
licenses granted to Atugen shall become non-exclusive.


 


11.5         Termination
by Either Party  Either Party shall be entitled to terminate
this Agreement should the other Party hereto become insolvent, or if
proceedings in voluntary or involuntary bankruptcy or pursuant to any other
insolvency law shall be instituted by, on behalf of or against the other party,
or if a trustee or receiver of the party’s property shall be appointed.


 


12.          DISPUTE
RESOLUTION


 


Any disputes between the Parties which relates to an alleged breach of
this Agreement, or is otherwise connected with this Agreement or any term or
condition hereof, and cannot be resolved amicably by the Parties, shall be
finally resolved by binding arbitration, except disputes regarding the
validity, scope or enforceability of patents or trademarks, which shall be
submitted to a court of competent jurisdiction. The arbitration shall be held
in The Hague, Netherlands according to the rules of the International Chamber of
Commerce (“ICC”) and the laws of the Netherlands. The arbitration will be
conducted by a panel of three (3) arbitrators with significant experience in
the pharmaceutical industry appointed in accordance with applicable ICC rules.
Any arbitration herewith shall be conducted in the English language to the
maximum extent possible. Judgment on the award so rendered shall be final and
may be entered in any court having jurisdiction thereof.


 


13.          PUBLIC
ANNOUNCEMENTS; PUBLICATIONS


 


Promptly following execution of this Agreement by the Parties, either
Party may issue an initial press release in such form as the Party may
hereafter agree upon. Neither Party shall issue any further news release or
other public announcement relating to this Agreement, including any of its
terms, or to the performance of either party hereunder, without the prior
written approval of the other Party, such approval not to be


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


20

















 


unreasonably withheld. Once the text or substance of any announcement
has been so approved, it may be repeated without further approval.


 


14.          SCIENTIFIC
PUBLICATIONS


 


Each Party will submit to the other for review and approval, such
approval not to be unreasonably withheld, all proposed academic, scientific and
medical publications and public presentations relating to research and
development of Products or otherwise involving the Joint Program IP or their
share therein, for review in connection with protection of such Intellectual
Property rights, including without limitation, the preservation of exclusive
Patent rights and/or to determine whether any confidential information set out
therein should be modified or deleted. Written copies of such proposed
publications and presentations shall be submitted to a party no later than [ * ] before submission for publication or presentation and
the other party shall provide its comments with respect to such publications
and presentations with [ * ] of its
receipt of such written copy. Notwithstanding the foregoing, no such
publication or presentation shall be made until such publication or
presentation has been approved by each party’s patent counsel. Each party will
comply with standard academic practice regarding authorship or scientific
publication and recognition of contribution of other parties in any such
publication.


 


15.          CONFIDENTIALITY


 


15.1         Each Party undertakes
to keep and treat as confidential and not disclose to any third party, any
information relating to the business or trade secrets of the other, nor make
use of such information for any purpose whatsoever, except to those employees
of the party who need to know for the purposes of this Agreement, provided that
the foregoing obligation shall not extend to information which:


 


(a)           is or will have been
known to the receiving party prior to the disclosure by the other party as
evidenced by written record or other proof; or


 


(b)           is or will have been
public knowledge through no fault of the receiving party; or


 


(c)           has been received
from a third party who did not acquire it directly or indirectly from the
disclosing party.


 


16.          NOTICES


 


All notices required to be given hereunder shall be given in writing to
the recipient at the address stated below, or to such other address as the
recipient may from time to time specify in writing by sending the same by
pre-paid registered postage or facsimile and shall if sent by registered post
be deemed to be five days after posting, and if sent by facsimile, shall be
deemed to have been received at the time of delivery as indicated on the
facsimile activity report.


 


If to Atugen,
addressed to:


 


Thomas
Christély, COO and CFO


Telephone: +49 30 9489 2800, Facsimile: +49 30 9489 2801


email: christely@atugen.com


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


21

















 


With a copy to:


Dr. Klaus
Giese, CSO and VP Research


Telephone: +49 30 9489 2800, Facsimile: +49 30 9489 2801


email: giese@atugen.com


 


If to QBI, addressed
to:


 


Dr. Daniel
Zurr, President and CEO


Telephone: +972 8 9305111, Facsimile: +972-8-9406476


email: zurr@qbi.co.il


 


With a copy to:


Dr. Rami
Skaliter, EVP Research and Development


Telephone: +972 8 9305111, Facsimile: +972-8-9406476


email: skaliter@qbi.co.il


 


17.          MISCELLANEOUS


 


17.1         Amendment of
Agreement


 


Neither any alteration, modification or addition to this Agreement, nor
any waiver of any of the terms hereof shall be valid unless made in writing and
signed by the duly authorized representatives from both parties.


 


17.2         Force Majeure


 


Neither Party shall be deemed to be in breach of this Agreement or
otherwise liable to the other Party for any delay in performance or any
non-performance of any obligations under this Agreement (and the time for
performance shall be extended accordingly) if and to the extent that the delay
or non-performance is due to circumstances beyond its reasonable control
including without limitation flood, fire, earthquake, riots or industrial
disputes not involving employees of such party (“Force Majeure”).


 


A party suffering an event of Force Majeure
shall promptly notify the other of the nature and extent of the circumstances
giving rise to Force Majeure. If the relevant Force Majeure prevails for a
continuous or aggregate period in excess of two months after the date on which
the Force Majeure begins, the Party not suffering the event of Force Majeure is
entitled to give notice to the other party terminating the Agreement forthwith.
Neither party shall have any liability to the other in respect of termination
of this Agreement due to Force Majeure, but rights and liabilities which have
accrued prior to termination shall subsist and the parties shall meet to agree
on the process for their continuing use.


 


17.3         Severability.
If any part of this Agreement is declared invalid by any legal authority having
jurisdiction over either Party, then such declaration shall not affect the
remainder of the Agreement, which shall continue in full force and effect. The
Parties shall revise the invalidated part in a manner that will render such
provision valid and closely approximate the Parties’ original intent.


 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


22

















 


17.4         Waiver. Except
as specifically provided for herein, the waiver from time to time by either of
the Parties of any of their rights or their failure to exercise any remedy
shall not operate or be construed as a continuing waiver of same or of any
other of such Party’s rights or remedies provided in this Agreement.


 


17.5         Independent
Contractors.  It is understood and
agreed that the relationship between the Parties is that of independent contractors
and that nothing in this Agreement shall be construed as authorization for
either Atugen or QBI to act as agent for the other. Members of the Steering
Committee shall remain, employees of Atugen or QBI, as the case may be.


 


17.6         Consents Not
Unreasonably Withheld. Whenever provision is made in this Agreement for
either Party to secure the consent or approval of the other, that consent or
approval shall not unreasonably be withheld, and whenever in this Agreement
provision is made for one Party to object to or disapprove a matter, such
objection or disapproval shall not unreasonably be exercised.


 


17.7         Further Action.
Each Party agrees to execute, acknowledge and deliver such further instruments,
and to do all such other acts, as may be necessary or appropriate in order to
carry out the purposes and intent of this Agreement.


 


17.8         Assignment.
This Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their permitted successors and assigns; provided, however, that
neither Party shall assign any of its rights and obligations hereunder except
(i) as incident to the merger, consolidation, reorganization or acquisition of
stock or assets affecting substantially all of the assets or actual voting control
of the assigning Party or (ii) to an Affiliate; provided, however, that in no
event shall either Party’s obligations under the Joint Research Program be
assigned to an Affiliate without the prior written consent of the other Party.
Atugen acknowledges and agrees that the Research Program may be performed in
whole or in party on behalf of QBI by QBI Enterprises Ltd...


 


17.9         Headings. The
section and paragraph headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
sections or paragraphs.


 


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


 


In witness whereof, the Parties have signed this Agreement effective as of the date first above written,
 


	QBI
	 
	Atugen

	Quark Biotech Inc./QBI Enterprises Ltd.
	 
	 

	 
	 
	 

	
  By

  	
   

  	
  /s/ Daniel Zurr

  	
   

  	
   

  	
  By

  	
  /s/ P. Buckel, /s/ T. Christely

  	
   

  
	
  Name

  	
  Daniel Zurr

  	
   

  	
   

  	
  Name

  	
  P. Buckel, T. Christely

  	
   

  
	
  Title

  	
  CEO

  	
   

  	
   

  	
  Title

  	
  CEO, COO/CFO

  	
   

  
	
  Date

  	
  December 6, 2004

  	
   

  	
   

  	
  Date

  	
  November 30, 2004

  	
   

  
												



 






[ * ]  = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


23

















 


Schedule A1


 


•                  [ * ]


 


Schedule A2


 


•                  [ * ]


 


Schedule B


 


•                  [ * ]


 


Schedule C


General description of the Joint
Research and the specific Research Tasks. For each Research Task specify:


 


1.               Objectives of the Research Task


 


2.               Performing Party, responsible for
performing the Research Task


 


3.               The specific activities that must be
performed to complete the Research Task and the Research Task Deliverables


 


4.               The Party or Parties who will benefit
from the results of the Research Task and bear the costs thereof as provided in
Section 3.6.


 


5.               The Research Task Timeframe


 


6.               The Cost
Estimate of the Research Task.


 


Schedule D


In relation to the Manufacturing
Process File – specify the level of detail required (that enables the
preparation of a Drug Master File (DMF) for submission in the IND application)


 






[ * ] = CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


24