Exhibit 4.3


 






 


 


QUARK BIOTECH, INC.


 


 


Third Amended and Restated Investor Rights
Agreement


 


First Closing


 


December 27, 2005


 


Second Closing


 


February 24, 2006


 


Third Closing


 


May 1, 2006


 


 






 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  SECTION 1

  	
  CERTAIN DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  “Commission”

  	
  2

  
	
  1.2

  	
  “Common
  Stock”

  	
  2

  
	
  1.3

  	
  “Conversion
  Stock”

  	
  2

  
	
  1.4

  	
  “Eligible
  Investors”

  	
  2

  
	
  1.5

  	
  “Holder”

  	
  2

  
	
  1.6

  	
  “Initiating
  Holders”

  	
  2

  
	
  1.7

  	
  “Investors”

  	
  2

  
	
  1.8

  	
  “Preferred
  Stock”

  	
  3

  
	
  1.9

  	
  “Qualified
  Common Stock”

  	
  3

  
	
  1.10

  	
  “Qualified
  Conversion Shares”

  	
  3

  
	
  1.11

  	
  “Registrable
  Securities”

  	
  3

  
	
  1.12

  	
  “Registration
  Expenses”

  	
  3

  
	
  1.13

  	
  “Restricted
  Securities”

  	
  3

  
	
  1.14

  	
  “Securities”

  	
  4

  
	
  1.15

  	
  “Securities
  Act”

  	
  4

  
	
  1.16

  	
  “Selling
  Expenses”

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 2

  	
  REGISTRATION RIGHTS

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Restrictions
  on Transferability

  	
  4

  
	
  2.2

  	
  Restrictive
  Legend

  	
  4

  
	
  2.3

  	
  Notice of
  Proposed Transfers

  	
  5

  
	
  2.4

  	
  Requested
  Registration

  	
  6

  
	
  2.5

  	
  Company
  Registration

  	
  8

  
	
  2.6

  	
  Registration
  on Form S-3

  	
  9

  
	
  2.7

  	
  Limitations
  on Subsequent Registration Rights

  	
  10

  
	
  2.8

  	
  Expenses of
  Registration

  	
  10

  
	
  2.9

  	
  Registration
  Procedures

  	
  10

  
	
  2.10

  	
  Indemnification

  	
  11

  
	
  2.11

  	
  Information
  by Holder

  	
  12

  
	
  2.12

  	
  Rule 144
  Reporting

  	
  12

  
	
  2.13

  	
  Transfer of
  Registration Rights

  	
  13

  
	
  2.14

  	
  Standoff
  Agreement

  	
  13

  
	
  2.15

  	
  Termination
  of Registration Rights

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  NEW ISSUANCE RIGHT OF FIRST REFUSAL

  	
  14

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Right of
  First Refusal

  	
  14

  
	
  3.2

  	
  Termination
  of Obligations

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  RIGHT OF FIRST REFUSAL ON FOUNDER QUALIFIED COMMON STOCK SALES

  	
  15

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Company
  Right

  	
  15

  
	
  4.2

  	
  Notice of
  Company Acceptance

  	
  15

  



 


i

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Investor
  Right

  	
  15

  
	
  4.4

  	
  Notice of
  Investor Acceptance

  	
  15

  
	
  4.5

  	
  Permitted
  Sales of Refused Securities

  	
  16

  
	
  4.6

  	
  Closing

  	
  16

  
	
  4.7

  	
  Further Sale

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  CO-SALE RIGHTS ON FOUNDER QUALIFIED COMMON STOCK SALES

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Right to
  Participate

  	
  17

  
	
  5.2

  	
  Qualified
  Participation

  	
  17

  
	
  5.3

  	
  Continuing
  Rights

  	
  17

  
	
  SECTION 6

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

  	
  17

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Invalid
  Transfers

  	
  17

  
	
  6.2

  	
  Permitted
  Transfers

  	
  18

  
	
  6.3

  	
  Termination
  of Rights

  	
  18

  
	
  6.4

  	
  Legends

  	
  18

  
	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  CERTAIN COVENANTS OF THE COMPANY AND THE INVESTORS

  	
  18

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Certain
  Covenants Involving Investors Other Than the Series F Investors

  	
  18

  
	
  7.2

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

  	
  20

  
	
  7.3

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

  	
  23

  
	
   

  	
   

  	
   

  
	
  SECTION 8

  	
  MISCELLANEOUS

  	
  23

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Governing
  Law

  	
  23

  
	
  8.2

  	
  Entire
  Agreement; Amendment

  	
  23

  
	
  8.3

  	
  Notices

  	
  24

  
	
  8.4

  	
  Successors
  and Assigns

  	
  25

  
	
  8.5

  	
  Delays or
  Omissions

  	
  25

  
	
  8.6

  	
  Expenses

  	
  25

  
	
  8.7

  	
  Attorneys’
  Fees

  	
  25

  
	
  8.8

  	
  Reverse
  Stock Split

  	
  26

  
	
  8.9

  	
  Arbitration

  	
  26

  
	
  8.10

  	
  Counterparts

  	
  26

  
	
  8.11

  	
  Severability

  	
  26

  
	
  8.12

  	
  Titles and
  Subtitles

  	
  27

  



 


ii

















 


QUARK BIOTECH, INC.


 


THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT


 


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


 


RECITALS


 


A.                                   The
Company, the Series A Investors, the Series B Investors, the Series C
Investors, the Series D Investor, the Series E Investors, the Series F
Investors, the Common Holders, the Founders and Lawrence J. Ellison (“Ellison”) are parties to an Amended and
Restated Investor Rights Agreement dated as of March 26, 2001 (the “Prior Investor Rights Agreement”).


 


C.                                     The
Series G Investors, in connection with the proposed purchase of up to
10,489,511 shares of the Company’s Series G Preferred Stock pursuant to the
Series G Agreement (the “Shares”
or “Series G Preferred”) and
warrants to acquire up to 2,097,902 shares of Common Stock (the “Warrants”), desire to obtain certain rights
pursuant to this Agreement.


 


C.                                     In
order to induce the Series G Investors to purchase the Shares, the holders of a
majority of the Series A Preferred (including the Common Stock issued upon
conversion thereof), the holders of a majority of the Series B Preferred
(including the Common Stock issued upon conversion thereof), the holders of a
majority of the Series C Preferred (including the Common Stock issued upon
conversion thereof), the holders of a majority of the Series D Preferred
(including the Common Stock issued upon conversion thereof), the holders of a
majority of the Series E Preferred (including the Common Stock issued upon
conversion


 


1

















 


thereof), the holders of a majority of the
Series F Preferred (including the Common Stock issued upon conversion thereof),
and the holders of a majority of the shares of Common Stock held by the Common
Holders have agreed, pursuant to Section 10.2 of the Prior Investor Rights
Agreement, to amend and restate in its entirety the Prior Investor Rights
Agreement, and to incorporate the provisions constituting such agreement, as so
amended and restated, in this Agreement in the manner set forth herein.


 


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


 


SECTION 1

CERTAIN
DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


SECTION 2

REGISTRATION
RIGHTS


 


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


 


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


 


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


 


4

















 


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


 


THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE US.
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF, DIRECTLY OR INDIRECTLY,
IN THE UNITED STATES, ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS
JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A “U.S. PERSON” AS THAT
TERM IS DEFINED IN RULE 901 OF REGULATION S OF THE U.S. SECURITIES ACT OF 1933,
AS AMENDED, AT ANY TIME PRIOR TO ONE (1) YEAR AFTER [the date of issuance]
EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(II) IN COMPLIANCE WITH RULE 144 OR (110 PURSUANT TO AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED.


 


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


 


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


 


5

















 


for the holder for transactions made in
reliance on Rule 144(k) under the Securities Act. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 2.2 above, except that such certificate shall not bear
such restrictive legend if in the opinion of counsel for such holder and the
Company such legend is not required in order to establish compliance with any
provision of the Securities Act.


 


2.4                               Requested
Registration.


 


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


 


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


 


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


 


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


 


(B)                               Prior
to six months after the effective date of the Company’s first registered public
offering of its stock;


 


(C)                               During
the period starting with the date sixty (60) days prior to the Company’s
estimated date of filing of, and ending on the date six (6) months immediately
following the effective date of, any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule
145 transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective;


 


(D)                               Unless
the Registrable Securities sought to be registered by all Initiating Holders
pursuant to this Section 2.4 comprises at least fifteen percent (15%) of all
their outstanding Registrable Securities, except that such fifteen percent (1
5%) requirement shall not apply if the anticipated aggregate offering price,
net of underwriting discounts and


 


6

















 


commissions, of all Registered Securities
sought to be registered by all Initiating Holders and other Holders pursuant to
this Section 2.4, would exceed $3,000,000;


 


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


 


(F)                                 If
the Company shall furnish to such Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for a registration statement to be filed in the near future, then the Company’s
obligation to use its best efforts to register, qualify or comply under this
Section 2.4 shall be deferred for a period not to exceed 180 days from the date
of receipt of written request from the Initiating Holders, provided, however,
that the Company shall not exercise the right to defer registration granted
pursuant to this paragraph (F) more than one time in any twelve-month period.


 


Subject to the
foregoing clauses (A) through (F), the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Initiating
Holders, but in any event within one hundred twenty (1 20) days of such request
or requests.


 


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


 


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


 


If any Holder
of Registrable Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. Any Registrable Securities
excluded or withdrawn from


 


7

















 


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


 


2.5                               Company
Registration.


 


(a)                                  Notice
of Registration. If at any time or from time to time the Company shall
determine to register any of its Securities, either for its own account or the
account of a security holder or holders, other than (i)(a) a firm commitment
underwritten initial public offering pursuant to an effective registration
statement under the Securities Act, covering the offer and sale of Common Stock
for the account of the Company to the public if (x) the price per share
(determined without regard to underwriter commissions and expenses) is not less
than $1.43 (as adjusted for Recapitalizations), (y) the aggregate gross
proceeds to the Company are not less than $20,000,000 (or ¥2,000,000,000 if the
primary listing of shares is on a Japan exchange or over-the-counter market)
before deduction of underwriting discount and commissions, and (z) the
pre-offering market capitalization of the Company is at least $200,000,000 (or
¥20,000,000,000 if the primary listing of shares in on a Japan exchange or
over-the-counter market), calculated as the number of outstanding shares,
assuming the conversion of all convertible Securities and exercise of all
options and warrants, multiplied by the mid-point of the range of sales prices
published in the initial preliminary prospectus (a “Qualified IPO”), (ii) a registration relating solely to
employee benefit plans, or (iii) a registration relating solely to a Commission
Rule 145 transaction, the Company will:


 


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


 


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


 


(b)                                  Underwriting.
If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to Section 2.5(a)(i). In
such event the right of any Holder to registration pursuant to Section 2.5
shall be conditioned upon such Holder’s participation in such underwriting and
the inclusion of Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their Securities through
such underwriting shall (together with the Company and the other holders
distributing their Securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 2.5, if the managing underwriter determines that marketing factors


 


8

















 


require a limitation of the number of shares
to be underwritten, the managing underwriter may limit (or exclude entirely)
the shares held by holders of registration rights (other than Holders) and
following exclusion of all such shares, Registrable Securities that may be
included in such registration. The Company shall advise all Holders and other
holders exercising their registration rights to distribute their Securities
through such underwriting of any such limitation, and shall first limit (or
exclude entirely) the shares held by holders of registration rights (other than
the Holders), and following exclusion of all such shares, the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders exercising their registration
rights in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders. If any Holder or holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
Securities excluded or withdrawn from such underwriting, in the event that such
underwriting represents the initial underwritten public offering of the Company’s
securities, shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto, or
such other shorter period of time as the underwriters may require.


 


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


 


2.6                               Registration
on Form S-3.


 


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


 


(b)                                  Notwithstanding
the foregoing, the Company shall not be obligated to take any action pursuant
to this Section 2.6:  (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such


 


9

















 


jurisdiction and except as may be required by
the Securities Act; or (ii) if the Company shall furnish to such Major Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for registration statements to be filed in the
near future, then the Company’s obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed one hundred
twenty (120) days from the receipt of the request to file such registration by
such Major Holder, provided, however, that the Company shall not exercise the
right to defer registration granted by this subparagraph (b)(ii) more than once
in any twelve month period.


 


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


 


2.8                               Expenses
of Registration.


 


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


 


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


 


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


 


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


 


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


 


(c)                                  Prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration


 


10

















 


statements as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
Securities covered by such registration statement;


 


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


 


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


 


2.10                        Indemnification.


 


(a)                                  The
Company will indemnify each Holder, each of its officers and directors and
partners, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to the Agreement, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
or liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for
any legal and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use
therein.


 


(b)                                  Each
Holder will, if Registrable Securities held by such Holder are included in the
Securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company’s Securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each
of its officers, directors and partners and each person controlling such


 


11

















 


Holder within the meaning of Section 15 of
the Securities Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, partners,
persons, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.


 


(c)                                  Each
party entitled to indemnification under this Section 2.10 (the “Indemnified Party”) shall give notice to
the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party’s expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 2.10 unless the failure to give such notice
is materially prejudicial to an Indemnifying Party’s ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be liable for indemnification hereunder
with respect to any settlement or consent to judgment, in connection with any
claim or litigation to which these indemnification provisions apply, that has
been entered into without the prior consent of the Indemnifying Party (which
consent will not be unreasonably withheld).


 


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


 


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


 


12

















 


(a)                                  Make
and keep public information available, as those terms are understood and
defined in Rule 144 under the Securities Act, at all times after the effective
date that the Company becomes subject to the reporting requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”);


 


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


 


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


 


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


 


2.14                        Standoff
Agreement. Each Holder agrees in connection with the Company’s initial
public offering of the Company’s Securities that, upon request of the Company
or the underwriters managing any underwritten offering of the Company’s
Securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the underwriters; provided, that the
officers and directors of the Company who own stock of the Company also agree
to such restrictions with respect to all of their shares.


 


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


 


13

















 


SECTION 3

NEW
ISSUANCE RIGHT OF FIRST REFUSAL


 


3.1                               Right
of First Refusal.


 


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


 


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


 


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


 


(iii)                            The
Company shall have one hundred eighty (180) days following the ten (1 0)
calendar day period specified above to sell, or enter into an agreement
pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within such one hundred eighty (180) day period, the New Securities
with respect to which the rights of the holders of Preferred Stock or Common
Holders (as the case may be) were not exercised at a price and upon terms no
more favorable to the purchasers thereof than specified in the Company’s Notice.
In the event the Company has not sold the New Securities within such one
hundred eighty (180) day period, the Company shall not thereafter issue or sell
any New Securities, without first offering such New Securities to the holders
of Preferred Stock and the Common Holders in the manner provided above.


 


3.2                               Termination
of Obligations. The obligations of the Company and the rights of the
Investors and Common Holders set forth in this Section 3 shall terminate and be
of no further force or effect immediately prior to the earliest of (i) as to an
Investor or Common Holder, such


 


14

















 


time as the Investor or Common Holder no
longer owns any Securities, (ii) the closing of a Qualified PO, (iii) such time
as the Company is subject to the reporting requirements of Sections 13 or 15(d)
under the Exchange Act, or (iv) the occurrence of the merger or consolidation
of the Company into, or the sale of all or substantially all of the Company’s
assets to another corporation, unless the shareholders of the Company
immediately prior to such merger, consolidation or sale shall own more than
fifty percent (50%) of the capital stock of such other corporation immediately
after such merger, consolidation or sale (“Change
of Control”).


 


SECTION 4

RIGHT
OF FIRST REFUSAL ON FOUNDER QUALIFIED COMMON STOCK SALES


 


4.1                               Company
Right. At any time a Founder (a “Seller”)
proposes to sell or otherwise dispose of for value to a third party (the “Proposed Transferee”) any Qualified Common
Stock of the Company held by such Founder (the “Offered Securities”), the Seller shall first offer, in a
writing delivered to the Company (the “Company
Offer”), to sell the Offered Securities to the Company at the same
price and on the same terms as proposed to be sold to the Proposed Transferee,
which Company Offer shall remain open for a period of ten (1 0) calendar days
after delivery thereof (unless terminated earlier by written notice from the
Company declining to accept) (the “Company
Offer Period”).


 


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


 


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


 


4.4                               Notice
of Investor Acceptance. Notice of an Eligible Investor’s election to accept
the Investor Offer (the “Acceptance Notice”),
in whole or in part, shall be evidenced by a writing signed by such Eligible
Investor, setting forth the amount that the Eligible Investor elects to
purchase (and, if such Eligible Investor elects to purchase more than its Basic
Amount, the Undersubscription Amount that such Eligible Investor elects to
purchase), and delivered to the Seller prior to the end of the Investor Offer
Period. If the Basic Amounts subscribed for by the Eligible Investors are less
than the total amount of Offered Securities the Eligible Investors are


 


15

















 


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


 


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


 


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


 


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


 


16

















 


SECTION 5

CO-SALE
RIGHTS ON FOUNDER QUALIFIED COMMON STOCK SALES


 


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


 


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


 


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


 


SECTION 6

ADDITIONAL
PROVISIONS RELATING TO RIGHT OF FIRST REFUSAL AND

CO-SALE RIGHTS ON CERTAIN FOUNDER SALES


 


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


 


17

















 


6.2                               Permitted
Transfers.


 


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


 


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


 


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


 


6.4                               Legends.


 


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


 


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


 


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


 


SECTION 7

CERTAIN
COVENANTS OF THE COMPANY AND THE INVESTORS


 


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


 


18

















 


the Series B Investors, the Series C
Investors, the Series D Investor, Series E Investors and the Series G
Investors.


 


(a)                                  Financial
Information.


 


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


 


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


 


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


 


(b)                                  Confidentiality.
Each Investor agrees that any information obtained by the Investor pursuant to
this Section 7 that may be proprietary to the Company or otherwise confidential
will not be disclosed without the prior written consent of the Company. If the
Investor requests in writing, the Company will identify in writing all
information obtained by the Investor under this Section 7 that the Company
considers confidential and that the Investor may not disclose without the
Company’s prior written consent. Each Investor further acknowledges and
understands that any information so obtained that may be considered “inside”
non-public information will not be utilized by the Investor in connection with
purchases or sales of the Company’s Securities except in compliance with applicable
state and federal anti-fraud statutes. The provisions of this Section 7 shall
not be in limitation of any rights that the Investor may have with respect to
the books and records of the Company, or to inspect its properties or discuss
its


 


19

















 


affairs, finances and accounts, under the
laws of the jurisdictions in which it is incorporated. The term “Investor” as used in this Section 7.2(b)
includes all officers, directors, affiliates, agents and other representatives
of the Investor. Notwithstanding the above, “confidential information” shall
not include (i) information known to the public generally, (ii) information
known to the Investor from an independent source prior to the receipt of such
information from the Company and (iii) information required to be disclosed by
the Investor by court order or otherwise required by law, provided, however,
that in the event of a required disclosure pursuant to this clause (iii), the
Investor shall give the Company prompt written notice of any such requirement
so that the Company may seek a protective order or other appropriate remedy.


 


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


 


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


 


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


 


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


 


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


 


20

















 


(c)                                  Indemnification.


 


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


 


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


 


(iii)                            An
Investor Indemnitee seeking indemnification hereunder shall give written notice
to the Company of any claim with respect to which it seeks indemnification
promptly after the discovery by such party of any matters giving rise to a
claim for indemnification; provided that the failure of any Investor
Indemnitee to give notice as provided herein shall not relieve the Company of
its obligations under this Section 7.2(c) except to the extent the Company
shall have been materially prejudiced by the failure of the Investor Indemnitee
to make such notification. In case any such action, suit, claim or proceeding
is brought against an Investor Indemnitee, the Company shall be entitled to
participate in the defense thereof and, to the extent that it may wish, to
assume the defense thereof, with counsel reasonably satisfactory to the
Investor Indemnitee, and after notice from the Company to the Investor
Indemnitee of its election so to assume the defense thereof, the Company shall
not be liable to such Investor Indemnitee under this Section 7.2(c) for any
legal or other expense subsequently incurred by such Investor Indemnitee in
connection with the defense thereof; provided that (i) if the Company
shall elect not to assume the defense of such claim or action or (ii) if the
Investor Indemnitee reasonably determines that there may be a conflict between
the


 


21

















 


positions of the Company and of the Investor
Indemnitee in defending such claim or action, then the Investor Indemnitee’s
separate counsel shall be entitled to participate in and conduct the defense,
and the Company shall be liable to any legal or other expenses incurred by the
Investor Indemnitee in connection with the defense; provided that in no
event shall the Company be required to pay the fees or expenses of more than
one counsel other than its own. The Company shall not be liable for any
settlement of any action, suit, claim or proceeding effected without its
written consent; provided, however, that the Company shall not
unreasonably withhold, delay or condition its consent. The Company further
agrees that it shall not, without the Investor Indemnitee’s prior written
consent, settle or compromise any claim or consent to entry of any judgment in
respect thereof in any pending or threatened action, suit, claim or proceeding
in respect of which indemnification may be sought hereunder (whether or not any
Investor Indemnitee is an actual or potential party to such action, suit, claim
or proceeding) unless such settlement or compromise includes an unconditional
release of the Series D Investor or Series E Investors and each other Investor
Indemnitee from all liability arising out of such action, suit, claim or
proceeding.


 


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


 


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


 


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


 


22

















 


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


 


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


 


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


 


SECTION 8

MISCELLANEOUS


 


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


 


8.2                               Entire
Agreement; Amendment.


 


(a)                                  This
Agreement constitutes the full and entire understanding and agreement and
supersedes any existing agreement between the parties with regard to the
subject matter hereof, including without limitation the Prior Investor Rights
Agreement. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument referencing this Agreement and signed by the Company and
Holders holding not less than sixty percent (60%) of the issued or issuable
Conversion Stock (excluding any of such shares that have been sold to the
public or pursuant to Rule 144) (a “Super
Majority-in-Interest”); provided, however, that
Holders purchasing Shares under the Series G Agreement after the Initial
Closing (each as defined in the Series G Agreement) may become parties to this
Agreement without any amendment to this Agreement pursuant to this section or
any consent or approval of any party hereto; and provided, further,
that if any amendment, waiver, discharge or termination operates in a manner
that treats


 


23

















 


any Holder different from other Holders, the
consent of such Holder shall also be required for such amendment, waiver,
discharge or termination. Any such amendment, waiver, discharge or termination
effected in accordance with this paragraph shall be binding upon each Holder
and each future holder of all such securities of such Holder. Each Holder
acknowledges that by the operation of this paragraph, and except as expressly
provided herein, a Super Majority-in-Interest will have the right and power to
diminish or eliminate all rights of such Holder under this Agreement.


 


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


 


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


 


(d)                                  Section
7.1(d) may only be amended with the consent of all of (x) the Company and (y)
the holders of a majority-in-interest of the Conversion Stock issued or
issuable to the Series G Investors.


 


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


 


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


 


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


 


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


 


24

















 


for the deposit of registered or certified
mail or express courier, addressed and mailed as aforesaid.


 


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


 


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


 


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


 


8.7                               Attorneys’
Fees. In the event of any litigation in a court of competent jurisdiction
or arbitration in accordance with Section 8.9 arising in connection with this


 


25

















 


Agreement and the transactions contemplated
hereby, the prevailing party in judgment shall be entitled to recover
reasonable legal fees and costs in connection with such action.


 


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


 


8.9                               Arbitration.


 


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


 


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


 


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


 


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


 


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


 


8.11                        Severability.
In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement


 


26

















 


shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.


 


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


 


27

















 


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


 


	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  QUARK BIOTECH, INC.

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Zurr

  
	
   

  	
   

  	
  Daniel Zurr,
  Ph.D.

  
	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  6536 Kaiser
  Drive

  
	
   

  	
   

  	
  Fremont, CA
  94555

  
	
   

  	
  Fax:

  	
  (510)
  402-4021

  
				



 


 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 

















 


	
   

  	
  “COMMON HOLDERS” AND

  “FOUNDERS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  David M. Fineman
  and Ellen Gunn Fineman,

  Trustees of the Fineman Revocable Trust dated

  2/12/97

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Claire F. Gunn,
  as Custodian for Chloe Rose

  Fineman Under the California Uniform

  Transfers to Minors Act

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Claire F. Gunn,
  as Custodian for Emma Hart

  Fineman Under the California Uniform

  Transfers to Minors Act

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  John V. Roos

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bonnee
  Rubinfeld

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bonnee
  Rubinfeld and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Loretta
  Rubinfeld, JTWROS

  



 


 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 

















 


	
   

  	
  [Common Holders and Founders cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ J. Gregory Swendsen

  
	
   

  	
  J. Gregory
  Swendsen,

  
	
   

  	
  The J.
  Gregory Swendsen Revocable Living

  Trust Dated February 1, 2001

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Susan H. Bell

  
	
   

  	
  Susan H.
  Bell,

  
	
   

  	
  The Susan H.
  Bell Revocable Trust U/A Dated

  January 31, 2001

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Daniel Zurr

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Daniel Zurr,

  
	
   

  	
  Goddard and
  Ephrat Trust Company

  
	
   

  	
  fbo Mr.
  Daniel Zurr

  



 


 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 














 


	
   

  	
  “SERIES A INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donald T. Campbell, IRA
  FBO Donald T.

  Campbell/DLJSC as Custodian/Rollover

  
	
   

  	
  Account

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ David L.
  Austin

  
	
   

  	
  David L. Austin,

  
	
   

  	
  MLPF&S Cust. FPO
  David L. Austin

  
	
   

  	
  Account 813-81529

  
	
   

  	
   

  
	
   

  	
   /s/ Frances M.
  Austin

  
	
   

  	
   

  
	
   

  	
  Frances M. Austin,

  
	
   

  	
  MLPF&S Cust. FPO
  Frances M. Austin RRA

  Account 813-81530

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Deborah R. Bernstein
  and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Harvey S. Hecht, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Harvey S. Hecht

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mari Bruckman, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman,

  
	
   

  	
  Robert Bruckman, M.D.,
  Inc. Money Purchase

  Pension Plan

  
	
   

  	
   

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 

















 


	
   

  	
  “SERIES A INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donald T. Campbell, IRA
  FBO Donald T.

  Campbell/DLJSC as Custodian/Rollover

  
	
   

  	
  Account

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  David L. Austin,

  
	
   

  	
  Morgan Stanley Trust
  Company as Custodian 

  for David L. Austin IRA Acct. # IS-80329

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Frances M. Austin,

  
	
   

  	
  Morgan Stanley Trust
  Company as Custodian 

  for Frances M. Austin IRA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Joanne Radmore Ratkai, VP & GC

  
	
   

  	
  First Trust Corporation
  TTEE FBO

  
	
   

  	
  Harvey Hecht IRA
  M619043-0001

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Deborah R. Bernstein     /s/
  Harvey S. Hecht

  
	
   

  	
  Deborah R. Bernstein
  and Harvey S. Hecht,

  TTEE Deborah R. Bernstein and Harvey S.

  Hecht Living Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mari Bruckman, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman,

  
	
   

  	
  Robert Bruckman, M.D.,
  Inc. Money Purchase

  Pension Plan

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 

















 


	
   

  	
  “SERIES A INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donald T. Campbell, IRA
  FBO Donald T.

  Campbell/DLJSC as Custodian/Rollover

  
	
   

  	
  Account

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  David L. Austin,

  
	
   

  	
  Morgan Stanley Trust
  Company as Custodian 

  for David L. Austin IRA Acct. # IS-80329

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Frances M. Austin,

  
	
   

  	
  Morgan Stanley Trust
  Company as Custodian 

  for Frances M. Austin IRA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  First Trust Corporation
  TTEE FBO

  
	
   

  	
  Harvey Hecht IRA
  M619043-0001

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Patricia Berns

  
	
   

  	
  Patricia Berns

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Deborah R. Bernstein
  and Harvey S. Hecht,

  TTEE Deborah R. Bernstein and Harvey S.

  Hecht Living Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mari Bruckman, as
  Community Property

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 

















 


	
   

  	
  [Series A Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman,

  
	
   

  	
  Robert Bruckman, M.D.,
  Inc. Profit Sharing 

  Plan

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert Bruckman, TTEE

  
	
   

  	
  Murray A. Bruckman
  Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jerome C. Dougherty

  
	
   

  	
  Jerome C. Dougherty,

  
	
   

  	
  Trustee for Jerome
  Dougherty

  
	
   

  	
  Attorney at Law Money
  Purchase Pension and

  Profit Sharing Plan Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Christian Pardee Erdman

  
	
   

  	
  Christian Pardee Erdman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Lois Pat Lee Gintjee,

  
	
   

  	
  Trustee of the Lois Pat
  Lee Gintjee

  
	
   

  	
  Living Trust, dated
  November 19, 1996

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ David Fineman, TTEE

  
	
   

  	
  David Fineman, TTEE,

  
	
   

  	
  The Gunn-Fineman Inc.
  Profit Sharing and

  Money Purchase Pension Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Joyce Hawkins, TTEE

  
	
   

  	
  Hawkins Family Trust
  dated March 18, 1991

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  [Series A Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Jeffrey A. Hawkins

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Jonathan D. Hawkins

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Roger W. Hedin, MD. and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mary A. Hedin, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bonnie J. Lawless

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Kathleen Lewis, M.D.
  and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Julien Homan, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  San Francisco
  Neonatology Medical Group 

  Profit Sharing Plan fbo Kathleen Lewis, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Jack N. Rudel

  
	
   

  	
  W. Scott Newhall

  
	
   

  	
  Jack N. Rudel for W.
  Scott Newhall under 

  POA dated 8-3-00

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors Rights
Agreement]


 


 

















 


	
   

  	
  [Series A Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mark J. Peterson, TTEE,

  
	
   

  	
  Mark J. Peterson, Inc.
  Money Purchase 

  Pension Plan

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Polly Sue Ogden

  
	
   

  	
  Polly Sue Ogden, TTEE,

  
	
   

  	
  Polly Ogden Associates
  Keogh Profit Sharing 

  and Money Purchase Pension Plans

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donald H. Oppenheim

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Peter Oppenheim, TTEE,

  
	
   

  	
  Oppenheim Family Trust
  u/t/a dated June 1974

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Sylvia Oppenheim, TTEE,

  
	
   

  	
  Oppenheim Family Trust
  u/t/a dated June 1974

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Joseph D. Sabella

  
	
   

  	
  Joseph D. Sabella, TTEE,

  
	
   

  	
  Restated Sabella Family
  Trust dated April 24,

  1995

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Iris Sabella

  
	
   

  	
  Iris Sabella, TTEE,

  
	
   

  	
  Restated Sabella Family
  Trust dated April 24, 

  1995

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Jack Sender and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Merideth Sender, as
  Community Property

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  [Series A Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Alfred D. Oppenheim

  
	
   

  	
  Alfred D. Oppenheim,
  TTEE,

  
	
   

  	
  Oppenheim/Slagle Family
  Trust u/t/a dated 

  August 12, 1991

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Terri A. Slagle

  
	
   

  	
  Terri A. Slagle, TTEE,

  
	
   

  	
  Oppenheim/Slagle Family
  Trust u/t/a dated 

  August 12, 1991

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Terri A. Slagle

  
	
   

  	
  Terri A. Slagle,

  
	
   

  	
  San Francisco
  Neonatology Medical Group 

  Profit Sharing Plan fbo Terri A. Slagle

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Steven Goldman,

  
	
   

  	
  San Francisco Neonatology
  Medical Group 

  Profit Sharing Plan fbo Steven Goldman, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Gerald L. Vercesi,
  TTEE,

  
	
   

  	
  Vercesi Family Trust
  dated December 15, 1994

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donna E. Vercesi, TTEE,

  
	
   

  	
  Vercesi Family Trust
  dated December 15, 1994

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James L, Warren and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Cassandra H. Warren, as
  Community Property

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  [Series A Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Mark Wexman

  
	
   

  	
  Mark Wexman,

  
	
   

  	
  California Central
  Trust Bank, TTEE, fbo 

  Mark Wexman, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Mark Wexman

  
	
   

  	
  Mark Wexman, M.D. and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Karen Wexman

  
	
   

  	
  Karen Wexman, M.D., as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WS Investment Company
  94A

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Illegible

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Howard B. Zack and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Diane C. Zack, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  John Ziegler

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES B PURCHASERS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TAKO VENTURES, LLC

  
	
   

  	
  a California limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By 

  	
  CEPHALOPOD CORPORATION,
  

  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Philip B. Simon

  
	
   

  	
  Philip B. Simon

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ David L. Austin

  
	
   

  	
  David L. Austin,

  
	
   

  	
  MLPF&S Cust. FPO
  David L. Austin

  
	
   

  	
  Acct. 813-80329

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donald T. Campbell, IRA
  FBO Donald T.

  Campbell/DLJSC as Custodian/Rollover 

  Account

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Christian Pardee Erdman

  
	
   

  	
  Christian Pardee Erdman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Steven Goldman, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Peter and Sylvia
  Oppenheim, Trustees 

  Oppenheim Family Trust u/t/a dated June 1974

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Peter and Sylvia
  Oppenheim, Trustees 

  Oppenheim Family Trust u/t/a dated June 1974

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 








 


	
   

  	
  “SERIES C INVESTORS”

  
	
   

  	
   

  
	
   

  	
  TAKO VENTURES, LLC

  
	
   

  	
  a California limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By 

  	
  CEPHALOPOD CORPORATION,
  

  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Philip B. Simon

  
	
   

  	
  Philip B. Simon

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Steven Goldman and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Diane Goldman, JTWROS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Jeffrey A. Hawkins

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Peter Oppenheim and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Sylvia Oppenheim, TTEES
  of the Oppenheim

  Family Trust dated June 12, 1994

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Diane C. Zack and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Howard B. Zack, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Joseph Rubinfeld

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  [Series C Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  John V. Roos

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WS Investment Company
  96B

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Illegible

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUPERGEN, INC.,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Joseph Rubinfeld,
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “SERIES D INVESTOR”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TAKO VENTURES, LLC

  
	
   

  	
  a California limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By 

  	
  CEPHALOPOD CORPORATION,
  

  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Philip B. Simon

  
	
   

  	
   

  	
  Philip B. Simon

  
	
   

  	
   

  	
  President

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 

















 


	
   

  	
  “SERIES E INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TAKO VENTURES, LLC

  
	
   

  	
  a California limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By 

  	
  CEPHALOPOD CORPORATION,
  

  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Philip B. Simon

  
	
   

  	
   

  	
  Philip B. Simon

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Christian Pardee Erdman

  
	
   

  	
  Christian Pardee Erdman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert M. Lawless,
  TTEE,

  
	
   

  	
  The Trust of Robert M.
  and Bernadine T. 

  Lawless

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Gerald L. Vercesi,
  TTEE,

  
	
   

  	
  Vercesi Family Trust
  dated December 15, 1994

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Donna E. Vercesi, TTEE,

  
	
   

  	
  Vercesi Family Trust
  dated December 15, 1994

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James L. Warren and

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Cassandra H. Warren, as
  Community Property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Delaware Charter
  Guarantee & Trust Co.,

  
	
   

  	
  fbo James L. Warren IRA

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  [Series E Investors cont’d.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Mark Wexman, MD

  
	
   

  	
  CNA TRUST, TTEE FBO
  Mark Wexman, 

  M.D.

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES F INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/

  	
  Akira Uehara

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Akira Uehara

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
  Taisho Pharmaceutical Co., Ltd.

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES F INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Astellas Pharma Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Hirofumi Onosaka

  
	
   

  	
   

  
	
   

  	
  Hirofumi Onosaka

  
	
   

  	
   

  
	
   

  	
  Senior Corporate
  Officer

  
	
   

  	
   

  
	
   

  	
  Senior Vice President,
  Corporate Strategy

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES F INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SANKYO CO., LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Hitoshi Suzuki

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Hitoshi Suzuki

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
  Director, Finance &
  Accounting Dept.

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TRANS-SCIENCE GLOBAL 

  BIO-TECHNOLOGY FUND

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  SBI Asset Management Co., Ltd.

  
	
   

  	
   

  	
  Its Truster

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kazuyuki Matsui

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Kazuyuki Matsui

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TS-US NO.1 INVESTMENT
  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Trans-Science, Inc.

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kiyoshi Inoue

  
	
   

  	
  Name:

  	
  Kiyoshi Inoue

  
	
   

  	
  Title:

  	
  CEO & President

  
	
   

  	
   

  
	
   

  	
   

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


“SERIES G INVESTORS”


 


	
  By:

  	
  Asuka DBJ Investment LPS

  	
   

  
	
   

  	
  General Partner Asuka DBJ Partners Co., Ltd

  	
   

  
	
   

  	
   

  
	
  Name: 

  	
  /s/ Toru Mio

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Representative Director

  	
   

  	
   

  
							



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MUFG Venture Capital I,
  Limited Partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  The Mitsubishi UFJ
  Capital Company

  Limited, its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kazuhiko Tokita

  
	
   

  	
   

  
	
   

  	
  Name: Kazuhiko Tokita

  
	
   

  	
   

  
	
   

  	
  Title: President

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ORIX FUND NO. 9

  
	
   

  	
  By: Orix Capital Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Akira Hirose

  
	
   

  	
  By: 

  	
  Akira Hirose, President

  
	
   

  	
  Its: 

  	
  ORIX Capital
  Corporation,

  
	
   

  	
   

  	
  Executive Partner of
  ORIX Fund No. 9

  
	
   

  	
   

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Concordia Investment, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hirotoshi Komoda

  
	
   

  	
  Name: 

  	
  Hirotoshi Komoda

  
	
   

  	
  Title: 

  	
  CEO& President,
  Birdhill,

  
	
   

  	
   

  	
  Its General Partner

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TRANS-SCIENCE NO.3 INVESTMENT

  LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Trans-Science, Inc.

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kiyoshi Inoue

  
	
   

  	
  Name: Kiyoshi Inoue

  
	
   

  	
  Title: CEO &
  President

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tokio Marine & Nichido Fire
  Insurance 

  Co., Ltd

  
	
   

  	
   

  
	
   

  	
  New Financial Markets Dept.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Takashi Yoshikawa

  
	
   

  	
  Name: Takashi Yoshikawa

  
	
   

  	
  Title: General Manager

  



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


	
   

  	
  “SERIES G INVESTORS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Zenshin Capital Fund 1F
  Partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Takeshi Mori

  
	
   

  	
  Name: 

  	
  Its General Partner

  
	
   

  	
   

  	
  Zenshin Capital
  Partners, LLC

  
	
   

  	
   

  	
  Takeshi Mori

  
	
   

  	
  Title:

  	
  Managing Member

  
				



 


[QBI – Signature Page to Series G Third Amended and Restated Investors
Rights Agreement]


 


 

















 


EXHIBIT A


 


LIST OF COMMON HOLDERS


 


David M. Fineman and Ellen Gunn Fineman,


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


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


 


John V. Roos


 


Bonnee Rubinfeld


Bonnee Rubinfeld and Loretta Rubinfeld, JTWROS


 


J. Gregory Swendsen


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


 


Susan Bell


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


 


Daniel Zurr


Goddard and Ephrat Trust Company


fbo Mr. Daniel Zurr


 


 

















 


EXHIBIT B


 


LIST OF FOUNDERS


 


	
  Founder’s
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
  Daniel Zurr

  Goddard and Ephrat Trust Company Ltd.

  f/b/o Mr. Daniel Zurr

  	
   

  	
  QBI Enterprises Ltd.

  P.O. Box 895

  Omer, 84965

  Israel

  
	
   

  	
   

  	
   

  
	
  Daniel Zurr

  	
   

  	
  QBI Enterprises Ltd.

  P.O. Box 895

  Omer, 84965

  Israel

  
	
   

  	
   

  	
   

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

  	
   

  	
  Quark Biotech, Inc.

  6536 Kaiser Dr.

  Fremont, CA 94555

  
	
   

  	
   

  	
   

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

  	
   

  	
  Swendsen & Company

  703 Market Street, Suite 906

  San Francisco, CA 94103

  
	
   

  	
   

  	
   

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

  	
   

  	
  POB 31295

  Santa Fe, NM 87594

  
	
   

  	
   

  	
   

  
	
  Bonnee Rubinfeld

  Bonnee Rubinfeld and Loretta Rubinfeld, 

  JTWROS

  	
   

  	
  5304 Blackhawk Drive

  Dandle, CA 94506

  
	
   

  	
   

  	
   

  
	
  Claire F. Gunn, Custodian for Chloe Rose 

  Fineman under the California Uniform 

  Transfers to Minors Act

  	
   

  	
  Quark Biotech, Inc.

  6536 Kaiser Dr.

  Fremont, CA 94555

  
	
   

  	
   

  	
   

  
	
  Claire F. Gunn, Custodian for Emma Hart 

  Fineman under the California Uniform 

  Transfers to Minor Act

  	
   

  	
  Quark Biotech, Inc.

  6536 Kaiser Dr.

  Fremont, CA 94555