Document:

EXHIBIT 10.26

 

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

 

LICENSE AGREEMENT

 

BY AND BETWEEN

 

QUARK BIOTECH INC.

 

AND

 

PFIZER INC.

 

TABLE OF CONTENTS

 

	
  Section 1.

  	
  DEFINITIONS.

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  HSR.

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  LICENSES;
  EXCLUSIVITY.

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Exclusive Licenses

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Non-Exclusive Research Licenses

  	
  13

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Sublicenses.

  	
  13

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Negative Covenant; No Implied License.

  	
  13

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Exclusivity.

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  DEVELOPMENT,
  REGULATORY APPROVALS AND MARKETING.

  	
  13

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Committees; Development Plans

  	
  13

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Updates to Development Plans.

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Development [ * ]

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Development Activities

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Diligence

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  Regulatory Affairs

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.7

  	
  Manufacture and Supply

  	
  17

  
	
   

  	
   

  	
   

  
	
  4.8

  	
  Costs

  	
  17

  
	
   

  	
   

  	
   

  
	
  4.9

  	
  Commercialization.

  	
  17

  
	
   

  	
   

  	
   

  
	
  4.10

  	
  [ * ]
  of Licensed Products for Non-Ophthalmic Indications

  	
  18

  
	
   

  	
   

  	
   

  
	
  4.11

  	
  Transition Plan for Ophthalmic
  Uses

  	
  18

  
	
   

  	
   

  	
   

  
	
  4.12

  	
  Transition Plan for
  Non-Ophthalmic Uses

  	
  18

  

 

 

i

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

 

 

	
  Section 5.

  	
  FEES AND
  ROYALTIES.

  	
  18

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Milestone Payments for First Ophthalmic Use

  	
  18

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Milestone Payments for the Second Ophthalmic Use

  	
  19

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Milestone Payments for Non-Ophthalmic Uses

  	
  20

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Sales Milestone Payments for Ophthalmic Uses

  	
  20

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Sales Milestone Payments for Non-Ophthalmic Uses

  	
  21

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Milestone Payment Not Creditable.

  	
  21

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Royalty Payments for Ophthalmic Uses

  	
  21

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Royalty Payments for Non-Ophthalmic Uses

  	
  21

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Reduction in Royalty Payments

  	
  22

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Duration of Royalty Payments

  	
  22

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  Third Party Royalties.

  	
  22

  
	
   

  	
   

  	
   

  
	
  5.12

  	
  Royalty Floor

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.13

  	
  Notices of Termination.

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  ACCOUNTING
  AND PROCEDURES FOR PAYMENT.

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Inter-Company Sales

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Calculation of Net
  Sales

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Royalty Payments; Sales Milestone Payments

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Method of Payments

  	
  24

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Inspection of Records

  	
  24

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Tax Matters

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  PATENTS
  AND INFRINGEMENT.

  	
  26

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Third Party License Agreements.

  	
  26

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Title to Inventions

  	
  26

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Prosecution of Quark Patent Rights (Sole Inventions)

  	
  26

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Prosecution of Joint Patents

  	
  27

  

 

 

ii

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

 

 

	
  7.5

  	
  Patents Covering Biomolecules and Licensed Products

  	
  27

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  Notices and Encumbrances

  	
  27

  
	
   

  	
   

  	
   

  
	
  7.7

  	
  Patent Term Extensions

  	
  28

  
	
   

  	
   

  	
   

  
	
  7.8

  	
  Interpretation of Patent Judgments

  	
  28

  
	
   

  	
   

  	
   

  
	
  7.9

  	
  Infringement of Quark Patent Rights by a Third Party

  	
  28

  
	
   

  	
   

  	
   

  
	
  7.10

  	
  Paragraph IV Notices

  	
  29

  
	
   

  	
   

  	
   

  
	
  7.11

  	
  Other Actions by a Third Party

  	
  29

  
	
   

  	
   

  	
   

  
	
  7.12

  	
  Compensation to Inventors

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  CONFIDENTIALITY;
  PUBLICATION.

  	
  30

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Confidentiality

  	
  30

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Publications and Presentations

  	
  31

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Publicity

  	
  32

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Filing, Registration or Notification of the Agreement

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  REPRESENTATIONS
  AND WARRANTIES.

  	
  32

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Quark Representations and Warranties

  	
  32

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Pfizer Representations and Warranties

  	
  34

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Disclaimer of Warranty

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  COVENANTS.

  	
  35

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Quark Covenants

  	
  35

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Pfizer Covenants

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  CHANGE OF
  CONTROL

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  TERM.

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 13.

  	
  TERMINATION.

  	
  37

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Termination Rights

  	
  37

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Accrued Obligations

  	
  38

  
	
   

  	
   

  	
   

  
	
  13.3

  	
  Effect of Termination

  	
  38

  

 

 

iii

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

 

 

	
   

  	
   

  	
   

  
	
  13.4

  	
  Bankruptcy

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  INDEMNIFICATION.

  	
  40

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  General Indemnification

  	
  40

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Product Liability Indemnification

  	
  40

  
	
   

  	
   

  	
   

  
	
  14.3

  	
  Losses

  	
  40

  
	
   

  	
   

  	
   

  
	
  14.4

  	
  Defense Procedures; Procedures for Third Party Claims

  	
  41

  
	
   

  	
   

  	
   

  
	
  14.5

  	
  Disclaimer of Liability for Consequential Damages

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  GOVERNING
  LAW AND JURISDICTION.

  	
  42

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Governing Law

  	
  42

  
	
   

  	
   

  	
   

  
	
  15.2

  	
  Jurisdiction

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  MISCELLANEOUS.

  	
  43

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  Force Majeure

  	
  43

  
	
   

  	
   

  	
   

  
	
  16.2

  	
  Severability

  	
  43

  
	
   

  	
   

  	
   

  
	
  16.3

  	
  Waivers; Remedies

  	
  43

  
	
   

  	
   

  	
   

  
	
  16.4

  	
  Entire Agreements; Amendments

  	
  43

  
	
   

  	
   

  	
   

  
	
  16.5

  	
  Survival

  	
  44

  
	
   

  	
   

  	
   

  
	
  16.6

  	
  Assignment

  	
  44

  
	
   

  	
   

  	
   

  
	
  16.7

  	
  Independent Contractor

  	
  44

  
	
   

  	
   

  	
   

  
	
  16.8

  	
  Notices

  	
  44

  
	
   

  	
   

  	
   

  
	
  16.9

  	
  Third Party Beneficiaries

  	
  45

  
	
   

  	
   

  	
   

  
	
  16.10

  	
  Joint and Several Obligations

  	
  45

  
	
   

  	
   

  	
   

  
	
  16.11

  	
  Binding Effect

  	
  46

  
	
   

  	
   

  	
   

  
	
  16.12

  	
  Counterparts

  	
  46

  
	
   

  	
   

  	
   

  
	
  16.13

  	
  Headings

  	
  46

  

 

 

iv

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

 

 

LICENSE AGREEMENT

 

This
License Agreement (this “Agreement”), dated as of September 25, 2006, is by and
between Quark Biotech Inc., a California corporation with offices located at
6536 Kaiser Avenue, Fremont, California 94555, U.S.A.  (“Quark”)
and Pfizer Inc., a Delaware corporation with offices located at 235 East 42nd
Street, New York, New York, 10017, U.S.A. (“Pfizer”).

 

WHEREAS, Quark owns or controls certain patents,
patent applications, technology, know-how and scientific and technical
information relating to Biomolecules and Licensed Products (as defined below);
and

 

WHEREAS, Pfizer has extensive experience and
expertise in the development and commercialization of pharmaceutical products,
and desires to acquire an exclusive license in the Territory (as defined below)
to such patents, patent applications, technology, know-how and scientific and
technical information;

 

WHEREAS, Quark desires to grant such license to
Pfizer;

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements provided herein, Quark and Pfizer hereby agree as follows:

 

Section 1.              DEFINITIONS.

 

For
purposes of this Agreement, the following definitions shall be applicable:

 

1.1           “Additional Use” means any use for a Licensed Product
other than the first use for such Licensed Product.

 

1.2           “Affiliate” means any entity directly or indirectly
controlled by, controlling, or under common control with, a party to this
Agreement, but only for so long as such control shall continue. For purposes of
this definition of “Affiliate” only, “control” (including, with correlative
meanings, “controlled by”, “controlling” and “under common control with”) means
possession, direct or indirect, of  (a)
the power to direct or cause direction of the management and policies of an
entity (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), or (b) at least 50% of the
voting securities (whether directly or pursuant to any option, warrant or other
similar arrangement) or other comparable equity interests.

 

1.3           “Applicable Biomolecule” means a Biomolecule as to which
Pfizer or its Affiliate at any time during the Term [ * ].

 

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

 

 

1.4           “Applicable Licensed Product” means a Licensed Product as
to which Pfizer or its Affiliate at any time during the Term [ * ].

 

1.5           “Atugen License” means the Collaboration Agreement, dated
December 6, 2004, among Atugen AG, Quark and QBI Enterprises Ltd., as amended by
(i) the Memorandum of Understanding, dated January 19, 2006, (ii) the Amendment
to Collaboration Agreement dated May 25, 2006 and (iii) the Amendment and
Option, dated the date of this Agreement.

 

1.6           “Biomolecule” means any [ * ].
Biomolecule shall include the [ * ] molecules
set forth on Exhibit A hereto.

 

1.7           “BLA or NDA” means a Biologics License Application (as
defined in 21 C.F.R. 600 et. seq.) or a New Drug Application (as defined in 21
C.F.R. 314.5 et. seq.), in each case filed with the FDA with respect to a
pharmaceutical product or an analogous application or filing with any analogous
Government Authority outside of the United States (including any supra-national
agency such as in the European Union) necessary for approval of a
pharmaceutical product in such jurisdiction.

 

1.8           “Change of Control” means an event where:

 

(a)           any
person or group (other than a Biotech Company [ * ])
becomes the beneficial owner, directly or indirectly, of at least fifty percent
(50%) or more of the outstanding Voting Stock or voting power over Voting Stock
of (i) Quark or (ii) any Parent Company (other than, for purposes of this
clause (a), [ * ]; or

 

(b)           if
Quark has registered as an issuer under the Securities Exchange Act of 1934, as
amended (the “1934 Act”) or has become a public company under a comparable law
of a country other than the United States, and a majority of the seats (other
than vacant seats) on the board of directors or other governing body of Quark
(the “Board”) is occupied by any person or group who were neither (i) members
of the Board on the date that Quark first registered under the 1934 Act or
otherwise became publicly held or (ii) members thereafter appointed, nominated or
recommended by the Board; or

 

(c)           Quark
enters into an agreement with any person or entity (other than a Biotech
Company) providing for a merger, consolidation, reorganization or other similar
transaction (or series of related transactions) of Quark with another person or
other entity (other than any Biotech Company) as a result of which, immediately
following such transaction (or series of related transactions) at least a
majority of the outstanding Voting Stock or voting power over Voting Stock of
the surviving or newly-created entity in such transaction (or series of related
transactions) is beneficially owned by shareholders who were not shareholders
of Quark at any time during the two (2) years immediately prior to such
transaction (or series of related transactions); or

 

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

 

2

 

(d)           (x)
any pharmaceutical, biotechnology or biopharmaceutical company that had at
least [ * ] in aggregate annual
pharmaceutical net sales (based on data provided by IMS International, or, if
such data is not available, such other reliable data source as reasonably
determined by Pfizer and agreed to by Quark, with such agreement not to be
unreasonably withheld, conditioned or delayed), for (i) its most
recently-completed fiscal year (but, if such fiscal year consists of fewer than
12 months, the sales for such partial fiscal year shall be annualized) or (ii)
its current fiscal year if there is no immediately preceding fiscal year (in
which case the sales for such ongoing fiscal year shall be annualized), or (y)
any one or more persons or entities that are direct or indirect parent holding
companies or subsidiaries of the pharmaceutical, biotechnology or
biopharmaceutical company described in clause (x) above, or (z) any Affiliate
of the pharmaceutical, biotechnology or biopharmaceutical company described in
clause (x) above (collectively, any of the persons or entities described in
clauses (x), (y) or (z), a “Large Pharmaceutical Company”) acquires beneficial
ownership of [ * ] or more of the outstanding
Voting Stock or voting power over Voting Stock of any Parent Company; or

 

(e)           any
Parent Company sells or otherwise transfers to a Third Party all or
substantially all of its right, title and interest in the Quark Patent Rights
and the Quark Technology (subject to licenses back consistent with the licenses
to Pfizer set forth herein).

 

For purposes of this
definition of “Change of Control” only: (a) references to any Parent Company shall
be deemed to include all successors in any merger, consolidation,
reorganization or similar transaction (or series of related transactions)
preceding any transaction (or series of related transactions) described above;
(b) “beneficial ownership” (and other correlative terms) shall mean beneficial
ownership as defined in Rule 13d-3 under the 1934 Act and “group” shall have
the meaning defined in Section 13(d)(3) of the 1934 Act; it being understood
and agreed that “beneficial ownership” shall also include any securities which
any person or any of such person’s Affiliates or parent holding company or any
of its Affiliates (X) has the right to acquire directly or indirectly (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or
otherwise, and/or (Y) owns or controls, whether directly or indirectly, through
any subsidiary or other Affiliate; (c) “Biotech Company” means any
biotechnology, biopharmaceutical or biotechnology tool company (in no event to
include any Large Pharmaceutical Company) that in the case of any biotechnology
or biopharmaceutical company, is primarily engaged in the research and
development of novel pharmaceutical therapeutics for use in humans or in the
case of a biotechnology tool company, is primarily directed at human disease;
(d) “Voting
Stock” means securities of any class or
series of a corporation or other person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote generally in matters put
before the shareholders or members of such corporation or person; (e) “control”
(including, with correlative meanings, “controlled by”, “controlling” and “under
common control with”) of an entity means possession, direct or indirect,
of  (I) the power to direct or cause
direction of the management and policies of such entity (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise), or (II) at least 50% of the voting securities (whether
directly or pursuant to any option, warrant or other similar arrangement) or
other comparable equity interests of such entity;  (f) “parent holding company” means, with
respect to any referenced person, any corporation or other person which,
directly or indirectly, beneficially owns at least fifty percent (50%) or more

 

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

 

3

 

of the outstanding Voting Stock or voting power over Voting Stock of
such referenced person or otherwise controls, whether directly or indirectly,
such referenced person; and (g) “Parent Company” means any one or more persons
or entities which are direct or indirect parent holding companies of Quark or
Affiliates controlling Quark.

 

1.9           “Combination Product” means any pharmaceutical
product containing a Biomolecule and one or more other active pharmaceutical
ingredients.

 

1.10         “Commence” or “Commencement” when used
to describe a clinical study, means the first dosing of the first patient for
such clinical study.

 

1.11         “Commercially Reasonable Efforts” means
those efforts and resources that Pfizer would use were it developing or
commercializing its own pharmaceutical products that are of similar market
potential as the Licensed Products, taking into account product labeling or
anticipated labeling, present and future market potential, past performance of
Licensed Products and Pfizer’s own pharmaceutical products that are of similar
market potential, [ * ], medical
and clinical considerations, present and future regulatory environment and
competitive market conditions, all as measured by the facts and circumstances
at the time such efforts are due.

 

1.12         “Control” or “Controlled” means, with respect to any
intellectual property right, that the party owns or has a license to such
intellectual property right and has the ability to grant the other party access,
a license, or a sublicense (as applicable) to such intellectual property right
as provided herein, without violating the terms of any agreement or other
arrangement with any Third Party existing at the time such party would be first
required hereunder to grant the other party such access, license or sublicense.

 

1.13         “Effective Date” means the later of (i) the date upon which
the applicable waiting period under the HSR Act shall have expired or been
terminated with respect to this Agreement, (ii) the date on which any
investigations opened by means of a second request or otherwise shall have been
terminated, without action by a Governmental Authority to prevent the parties from
implementing the transactions contemplated by this Agreement with respect to
the United States and (iii) [ * ].

 

1.14         “Extended Royalty Term” shall mean, on a country-by-country
and Licensed Product-by-Licensed Product basis, the period of time from the
expiration of the Initial Royalty Term until [ * ].
For clarity, if at the expiration of the Initial Royalty Term there shall be [ * ], there would be no Extended Royalty Term for such
country.

 

1.15         “FDA” means the United States Food and Drug Administration
or any successor agency thereto.

 

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

 

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

 

4

 

1.17         “[ * ]” means,
with respect to a country in the Territory, a fraction (expressed as a
percentage), the numerator of which shall be the [ * ],
and the denominator of which shall be [ * ], based on
[ * ], or, if such [ * ];
provided, however, that, in the event [ * ], the [ * ].

 

1.18         “Generic Product”  means any pharmaceutical
product sold by a Third Party, not authorized by Pfizer, its Affiliate or any Sublicensee,
that contains a Biomolecule as its active pharmaceutical ingredient which has [ * ] contained within a Licensed Product and is approved in
reliance on the prior approval of a Licensed Product as determined by the
applicable Regulatory Authority.

 

1.19         “Governmental Authority” means any court, agency,
department, authority or other instrumentality of any foreign, federal, state,
county, city or other political subdivision.

 

1.20         “HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.

 

1.21         “IND”
means an Investigational New Drug Application submitted under the FDCA or an
analogous  application or filing with any
analogous agency or Government Authority outside of the United States
(including any supra-national agency such as in the European Union) under any
analogous foreign Law.

 

1.22         “Indemnified
Party” shall have the meaning assigned to it in Section 14.4.

 

1.23         “Indemnifying
Party” shall have the meaning assigned to it in Section 14.4.

 

1.24         “Initial Royalty Term” shall mean, on a country-by-country
and Licensed Product-by-Licensed Product basis, the period commencing on the
date of the first commercial sale of a Licensed Product in such country, and
ending on the later of (i) the date on which the manufacture, use, sale, offer
for sale or importation of such Licensed Product in such country ceases to be covered
by a Valid Claim in such country, or (ii) the date that is ten (10) years
following the date of the first commercial sale of a Licensed Product in such
country.

 

1.25         “Launch” means on a country-by-country and Licensed
Product-by-Licensed Product basis, the first date on which Pfizer, its
Affiliate or a Sublicensee has achieved aggregate Net Sales of such Licensed
Product in such country of at least [ * ], after
receipt by Pfizer of the first Regulatory Approval (and, in any country in
which Price Approval is necessary or relevant for a majority of the population
to obtain access to pharmaceutical products, Price Approval) for such Licensed
Product in such country.

 

1.26         “Law” or “Laws” means all laws, statutes, rules,
regulations, orders, judgments and/or ordinances of any Governmental Authority.

 

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

 

5

 

1.27         “Licensed Product” means any Product (i) the manufacture,
use, sale, offer for sale or importation of which in the absence of the
licenses granted to Pfizer under this Agreement, would infringe any of the
Quark Patent Rights, or (ii) the manufacture or use of which utilizes any Quark
Technology.

 

1.28         “Losses” shall have the meaning assigned to it in Section
14.3.

 

1.29         “Major EU Countries” means [ * ].

 

1.30         [ * ].

 

1.31         “Net Sales” means with respect to a Licensed Product, the
gross amount invoiced by Pfizer, its Affiliates, and the Sublicensees of such
Licensed Product to Third Parties, less any of the following related to such
sales of Licensed Product:  actual bad
debts, sales returns and allowances actually paid, granted or accrued, including
trade, quantity and cash discounts and any other adjustments, including granted
on account of price adjustments, billing errors, rejected goods, damaged or
defective goods, recalls, returns, rebates, chargebacks, reimbursements or
similar payments granted or given to wholesalers or other distributors, buying
groups, health care insurance carriers or other institutions, adjustments
arising from consumer discount programs or similar programs, or arising in
connection with any Pfizer Discount or Savings Program (as defined below), customs
or excise duties, sales tax, consumption tax, value added tax, and other
similar taxes (except income taxes) measured by the production, sale, or
delivery of goods in each case only if included as a specific line item on an
invoice to such Third Party or duties relating to sales and any payments in
respect of sales to the United States government, any State government or any
foreign government, or to any Governmental Authority, or with respect to any
government subsidized program or managed care organization, and charges for
freight and insurance related to the return of Licensed Products and not
otherwise paid by the customer. For purposes of this definition of “Net Sales”
only, “Pfizer Discount or Savings Program” means any discount, rebate or
reimbursement program applicable to a Licensed Product under which Pfizer or
its Affiliates provides to low income, uninsured or other patients the
opportunity to purchase Pfizer pharmaceutical products at discounted prices.

 

If Pfizer or any of its
Affiliates, or any Sublicensee sells any Licensed Product together with any
other product at a single price or rate or at a discount for collectively
buying such products, then Net Sales with respect to such Licensed Product
shall equal the number of units of the Licensed Product sold together with the
non-Licensed Products multiplied by the average Net Sales price at which Pfizer
or such Affiliate, or such Sublicensee sold the Licensed Product individually
to similar customers for similarly sized orders.

 

Net Sales shall be
determined from books and records maintained in accordance with generally
accepted accounting principles in the United States, consistently applied
throughout the organization and across all products of the entity whose sales
of Licensed Product are giving rise to Net Sales.

 

In the case of Net Sales of
a Combination Product:

 

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

 

6

 

(i)            [ * ];

 

(ii)           for all other
Combination Products [ * ], the
allocation of Net Sales of the Combination Product to the Licensed Product
shall be as follows:

 

(a)           if Pfizer, its
Affiliates, or any Sublicensee separately sells in such country during such
year when it sells such Combination Product both (1) one or more Licensed
Products as a single chemical entity and (2) other products containing active
pharmaceutical ingredient as a single chemical entity, which is also contained
in such Combination Product, then the Net Sales attributable to such
Combination Product during such year shall be calculated by [ * ];

 

(b)           if Pfizer, its
Affiliates, or any Sublicensee separately sells, in such country during such
year when it sells such Combination Product, one or more Licensed Products as a
single chemical entity but does not separately sell, in such country, other
products containing the other active pharmaceutical ingredient that is also
contained in such Combination Product, then the Net Sales attributable to such
Combination Product during such year shall be calculated by    [ * ];

 

(c)           if Pfizer, its
Affiliates or Sublicensees do not separately sell, in such country during such
year when it sells such Combination Products, each Licensed Product contained
in the Combination Product, then the Net Sales attributable to such Combination
Product during such year shall be [ * ].

 

1.32         “Non-Ophthalmic Use” means any use of a Licensed Product for
the treatment or prevention of any disease or condition, excluding in any case
any Ophthalmic Use. For example, each of [ * ] would be
a different Non-Ophthalmic Use, but both [ * ] would be
deemed within the [ * ]
Non-Ophthalmic Use.

 

1.33         “Ophthalmic Use” means any use of a Licensed Product for the
treatment or prevention of any disease or condition relating to the eye. For
example, each of [ * ] would be a different
Ophthalmic Use.

 

1.34         “Pfizer Confidential Information” means all information that
is disclosed (whether orally, electronically or in writing) by Pfizer to Quark
or its Affiliates and (a) in the case of oral information, is outlined in a
summary prepared by Pfizer and delivered to Quark promptly after disclosure and
(b) in the case of written or electronic information is designated “Confidential”
in writing by Pfizer at the time of disclosure to Quark, to the extent that such
information is not (i) as of the date of disclosure known to Quark, other than
by virtue of a prior confidential disclosure to Quark by Pfizer; or (ii)
disclosed in published literature, or otherwise generally known to the public
through no fault or omission of Quark; or (iii) obtained from a Third Party
free from any obligation of confidentiality to Pfizer; or (iv) independently
developed by Quark without access to the Pfizer Confidential Information; or
(v) in the reasonable opinion of legal counsel, required to be disclosed under applicable
Law; provided that, in the case of (v), Quark provides Pfizer sufficient prior
notice (to the extent practicable) of such disclosure and agrees to cooperate,
at the request and sole expense of Pfizer, with Pfizer’s efforts to preserve
the confidentiality of such information.

 

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

 

7

 

1.35         “Pfizer Patent Rights” means all patents and patent
applications (including, subject to the third sentence of Section 7.5, all
provisionals, divisionals, continuations, renewals, continuations-in-part,
re-examinations, patents of addition, supplementary protection certificates,
extensions, restorations of patent terms, letters of patent, registration or
confirmation patents and reissues granted by a Governmental Authority) to the
extent (i) owned, Controlled by or licensed to Pfizer or its Affiliates during
the Term, and (ii) used by Pfizer or its Affiliates in the research,
development or manufacture of Biomolecule or Licensed Products. Pfizer Patent
Rights shall include patents and patent applications described in this Section
1.35 which are jointly owned by Pfizer and Quark or their respective Affiliates
(or their respective assignees).

 

1.36         “Pfizer Quarter” means each of the four (4) thirteen (13)
week periods (i) with respect to the United States, commencing on January 1 of
any year, and (ii) with respect to any country in the Territory other than the
United States, commencing on December 1 of any year.

 

1.37         “Pfizer Technology” means all scientific and technical
information and data, including know-how, trade secrets and technology related
thereto now or hereafter during the Term owned, Controlled by or licensed to
Pfizer or any of its Affiliates that are used by Pfizer or its Affiliates in
the research, development and manufacture of Biomolecule or Licensed Products. Pfizer
Technology shall not include any Pfizer Patent Rights.

 

1.38         “Pfizer Year” means (i) in the United States, each of the
twelve (12) month periods commencing on January 1 of any year and ending on
December 31 and (ii) in any country in the Territory other than the United
States, each of the twelve (12) month periods commencing on December 1 of any
year and ending on November 30 of the following year.

 

1.39         “Phase I” means any human clinical trial, the principal
purpose of which is preliminary determination of safety in healthy individuals
or patients as described under 21 C.F.R. §312.21(a) with respect to the United
States, or, with respect to a jurisdiction other than the United States, a
similar clinical study.

 

1.40         “Phase II” means any human clinical trial conducted for
purposes of preliminary determination of efficacy and/or preliminary
establishment of appropriate dosage ranges for efficacy and safety in patients,
as described under 21 C.F.R. §312.21(b) with respect to the United States, or,
with respect to a jurisdiction other than the United States, a similar clinical
study.

 

1.41         “Phase III” means any human clinical trial intended to be a pivotal
trial for obtaining approval of a BLA or NDA, or to otherwise establish safety
and efficacy in patients with the disease or condition being studied for
purposes of filing a BLA or NDA, with the FDA or other applicable Regulatory
Authority, as described under 21 C.F.R. §312.21(c) with respect to the United
States, or, with respect to a jurisdiction other than the United States, a
similar clinical study.

 

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

 

8

 

1.42         “Price Approval” means, in countries where Governmental
Authorities authorize for reimbursement, or approve or determine pricing for
pharmaceutical products for reimbursement or otherwise, receipt of such
reimbursement authorization or pricing approval or determination.

 

1.43         “Product” means any product, including any pharmaceutical
product or diagnostic product, which contains any Biomolecule, either alone or
in combination with any other active pharmaceutical ingredient, in all
formulations and strengths for all uses.

 

1.44         “Quark Confidential Information” means all information about
any element of Quark Technology, as well as any other information regarding the
business and operations of Quark, that is disclosed (whether orally,
electronically or in writing) by Quark to Pfizer or its Affiliates and (a) in
the case of oral information, is outlined in a summary prepared by Quark and
delivered to Pfizer promptly after disclosure and (b) in the case of written or
electronic information is designated “Confidential” in writing by Quark at the
time of disclosure to Pfizer, to the extent that such information is not (i) as
of the date of disclosure to Pfizer, known to Pfizer, other than by virtue of a
prior confidential disclosure to Pfizer by Quark; or (ii) disclosed in
published literature, or otherwise generally known to the public through no
fault or omission of Pfizer; or (iii) obtained from a Third Party free from any
obligation of confidentiality to Quark; or (iv) independently developed by
Pfizer without access to the Quark Confidential Information; or (v) in the
reasonable opinion of legal counsel, required to be disclosed under applicable Law;
provided that, in the case of (v), Pfizer provides Quark sufficient prior
notice (to the extent practicable) of such disclosure and agrees to cooperate,
at the request and sole expense of Quark, with Quark’s efforts to preserve the
confidentiality of such information.

 

1.45         “Quark Patent Rights” means (i) all patents and patent
applications listed on Exhibit B attached hereto and any patents which may
issue from, or claim priority to or through, the applications listed on Exhibit
B (which identifies separately the patents and patent applications (x) owned by
Quark and (y) licensed to and Controlled by Quark), (ii) all other patents and
patent applications in the Territory, now or hereafter during the Term
Controlled by Quark or any of its respective Affiliates that relate to Biomolecule
or any Licensed Product, and (iii) subject to the third sentence of Section
7.5, all provisionals, divisionals, continuations, renewals,
continuations-in-part, re-examinations, patents of addition, supplementary
protection certificates, extensions, restorations of patent terms, letters of
patent, registration or confirmation patents and reissues with respect to any
patents described in the foregoing clauses (i) or (ii) hereof granted by a Governmental
Authority. Quark Patent Rights shall include any patents and patent
applications described in this Section 1.45 which are jointly owned by Quark
and Pfizer or their respective Affiliates (or their respective assignees).

 

1.46         “Quark Technology” means all scientific and technical
information and data (whether or not patentable), including know-how, trade
secrets and technology related thereto now or hereafter during the Term
Controlled by Quark or any of its respective Affiliates that

 

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

 

9

 

relate
to Biomolecule or any Licensed Product, including: (i) medical, clinical,
toxicological or other scientific data, and (ii) processes and analytical
methodology useful in the research, development and manufacture of Biomolecule
or any Licensed Product. Quark Technology shall not include any Quark Patent
Rights.

 

1.47         “Regulatory Approval” means any and all approvals, excluding
any INDs, but including supplements and amendments, licenses, registrations or
authorizations (other than Price Approvals) of any national, supra-national
(e.g., the European Commission or the Council of the European Union), regional,
state or local regulatory agency, department, bureau, commission, council or
other Governmental Authority, that are necessary for the manufacture,
distribution, use, marketing or sale of a pharmaceutical product in a
regulatory jurisdiction.

 

1.48         “Regulatory Authority” shall mean, in respect of a
particular country or jurisdiction, the Governmental Authority having the
responsibility for granting Regulatory Approvals in such country or
jurisdiction.

 

1.49         “Royalty Term” shall mean, in respect of each country in the
Territory, the period commencing on the first day of the Initial Royalty Term
in such country and ending on the last day of the Extended Royalty Term in
respect of such country or, if there is no Extended Royalty Term in such
country, the last day of the Initial Royalty Term in such country.

 

1.50         “[ * ]” means [ * ] in the applicable country.

 

1.51         “Standby License” means the license agreement between Atugen
AG and Pfizer relating to certain Quark Patent Rights owned by Atugen AG.

 

1.52         “Sublicensee” means a Third Party, which has been granted
sublicense rights pursuant to this Agreement, which rights include at least the
rights to make and sell the Licensed Product. Third Parties that have the right
to formulate or package the Licensed Product shall be considered to have the
right to “make” the Product for purposes of this Section 1.52, excluding
however, Third Parties that have the right only to re-package Licensed Product
for resale. Third Parties that are permitted only to distribute and resell
Licensed Product, or that manufacture or package Licensed Product for supply to
Pfizer or its Affiliates are not “Sublicensees.”

 

1.53         “Term” shall have the meaning assigned to it in Section
12.1.

 

1.54         “Territory” means the entire world.

 

1.55         “Third Party” shall mean any natural person, corporation,
partnership, trust, limited liability company, or any other entity or organization
other than Pfizer, Quark and its respective Affiliates.

 

1.56         “Third Party Claim” shall have the meaning assigned to it in
Section 14.4.

 

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

 

10

 

1.57         “Valid Claim” means any claim of (i) an issued and unexpired
patent included within patents under the Quark Patent Rights which has not been
rejected, revoked or held unenforceable or invalid by a final, nonappealable
decision of a Governmental Authority of competent jurisdiction or unappealed
within the time allowable for appeal, and which has not been disclaimed, or
admitted by Quark to be invalid or unenforceable, or (ii) a pending patent
application within the Quark Patent Rights that has not been cancelled,
withdrawn, abandoned or pending for more than [ * ]
years after the earliest filing date to which such pending application claims
priority.

 

1.58         Construction. Except where expressly stated otherwise
in this Agreement, the following rules of interpretation apply to this
Agreement: (i) “include”, “includes” and “including” are not limiting; (ii)
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms; (iii) references to an agreement or
instrument mean such agreement or instrument as from time to time amended,
modified or supplemented; (iv) references to any entity or person are also to
its permitted successors and assigns; (v) references to an “Article”, “Section”,
“Exhibit” or “Schedule” refer to an Article or Section of, or any Exhibit or
Schedule to, this Agreement unless otherwise indicated; (vi) the word “will”
shall be construed to have the same meaning and effect as the word “shall”; and
(vii) the word “any” shall mean “any and all” unless otherwise indicated by
context.

 

1.59         Other Defined Terms. The following terms shall have
the meanings ascribed to them in the provisions of this Agreement indicated
opposite such term below:

 

 

	
  1934
  Act

  	
   

  	
  1.8(b

  	
  )

  
	
  Abandoned
  Patents

  	
   

  	
  7.3(b

  	
  )

  
	
  [ *
  ]

  	
   

  	
  4.7

  	
   

  
	
  [ *
  ] Agreement

  	
   

  	
  4.7

  	
   

  
	
  Biotech
  Company

  	
   

  	
  1.8

  	
   

  
	
  Committee

  	
   

  	
  4.1(a

  	
  )

  
	
  Courts

  	
   

  	
  15.2

  	
   

  
	
  Development
  Plan

  	
   

  	
  4.1(h

  	
  )

  
	
  DoJ

  	
   

  	
  2.1

  	
   

  
	
  First
  Licensed Product Development Plan

  	
   

  	
  4.1(h

  	
  )

  
	
  First
  Ophthalmic Use Milestone

  	
   

  	
  5.1

  	
   

  
	
  First
  Ophthalmic Use Milestone Payments

  	
   

  	
  5.1

  	
   

  
	
  FTC

  	
   

  	
  2.1

  	
   

  
	
  Infringement
  Claim

  	
   

  	
  7.9(a

  	
  )

  
	
  Initial
  JDC

  	
   

  	
  4.1(a

  	
  )

  
	
  JDC
  Chairman

  	
   

  	
  4.1(a

  	
  )

  
	
  JDC
  Vice Chairman

  	
   

  	
  4.1(b

  	
  )

  
	
  Joint
  Inventions

  	
   

  	
  7.2(a

  	
  )

  
	
  Joint
  Patents

  	
   

  	
  7.4

  	
   

  
	
  JRC

  	
   

  	
  4.1(a

  	
  )

  
	
  JRC
  Chairman

  	
   

  	
  4.1(a

  	
  )

  
	
  JRC
  Vice Chairman

  	
   

  	
  4.1(b

  	
  )

  
	
  Large
  Pharmaceutical Company

  	
   

  	
  1.8(d

  	
  )

  

 

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

 

11

 

	
  Litigation
  Conditions

  	
   

  	
  14.4(a

  	
  )

  
	
  long
  acting formulation

  	
   

  	
  5.1

  	
   

  
	
  Most
  Recent Milestone

  	
   

  	
  5.1

  	
   

  
	
  Non-Ophthalmic
  Pre-clinical Studies

  	
   

  	
  4.12

  	
   

  
	
  Non-Ophthalmic
  Use Milestone

  	
   

  	
  5.3

  	
   

  
	
  Non-Ophthalmic
  Use Milestone Payments

  	
   

  	
  5.3

  	
   

  
	
  Non-Ophthalmic
  Use Sales Milestone Payment

  	
   

  	
  5.5

  	
   

  
	
  Notice
  of Non-Ophthalmic Use

  	
   

  	
  4.10

  	
   

  
	
  Ophthalmic
  Use Sales Milestone Payment

  	
   

  	
  5.4

  	
   

  
	
  Paragraph
  IV Claim

  	
   

  	
  7.10

  	
   

  
	
  Parent
  Company

  	
   

  	
  1.8

  	
   

  
	
  Pfizer
  Withholding Tax Action

  	
   

  	
  6.6(b

  	
  )

  
	
  Quark
  Patent Filing Schedule

  	
   

  	
  7.3(a

  	
  )

  
	
  Representatives

  	
   

  	
  14.1

  	
   

  
	
  Second
  Ophthalmic Use

  	
   

  	
  5.2

  	
   

  
	
  Second
  Ophthalmic Use Milestone

  	
   

  	
  5.2

  	
   

  
	
  Second
  Ophthalmic Use Milestone Payments

  	
   

  	
  5.2

  	
   

  
	
  separate
  patent filings

  	
   

  	
  7.5

  	
   

  
	
  Shortfall
  Audit

  	
   

  	
  6.5

  	
   

  
	
  Sole
  Inventions

  	
   

  	
  7.2(a

  	
  )

  
	
  Supply
  Notice

  	
   

  	
  4.7(b

  	
  )

  
	
  [ * ]

  	
   

  	
  1.8(a

  	
  )

  
	
  Third
  Party Patent Licenses

  	
   

  	
  5.11(b

  	
  )

  
	
  Transition Plan

  	
   

  	
  4.11

  	
   

  
	
  VAT

  	
   

  	
  .6.6(a

  	
  )

  
	
  Voting
  Stock

  	
   

  	
  1.8

  	
   

  

 

Section 2.              HSR.

 

2.1           HSR. Promptly following signing of this Agreement,
Pfizer (or its Affiliate) and Quark (or its Affiliate) shall take (i) all
actions necessary to make the filing required under the HSR Act and (ii) reply
at the earliest practicable date to any requests for information received from
the United State Federal Trade Commission (“FTC”) or Antitrust Division of the
United States Department of Justice (“DoJ”) pursuant to the HSR Act. The
parties shall, to the extent reasonably practicable, consult with one another
prior to making any filings, responses to inquiries or other contacts with the
FTC or DoJ concerning the transactions contemplated hereby.

 

Section 3.              LICENSES; EXCLUSIVITY.

 

3.1           Exclusive
Licenses. Subject to the terms of this Agreement, Quark hereby grants to
Pfizer, and Pfizer hereby accepts, an exclusive license (even as to Quark and
its Affiliates, except for performance of the responsibilities assigned to them
under this Agreement), including the right to sublicense as provided in Section
3.3, under the Quark Patent Rights and Quark Technology to develop, make, have
made, use, sell, offer for sale and import Biomolecules and Licensed Products
in the Territory.

 

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

 

12

 

3.2           Non-Exclusive Research
Licenses. Without limiting any of the licenses granted in
Section 3.1, Quark hereby grants to Pfizer, and Pfizer hereby accepts, a
non-exclusive, irrevocable, royalty-free, perpetual license in the Territory,
to use solely for research done by Pfizer or its Affiliates or by Third Party
contractors for Pfizer or its Affiliates the Quark Technology (excluding any
Quark Technology that is now or hereafter during the Term covered by claims in
issued patents or published patent applications) disclosed to Pfizer during the
Term. For clarity, Pfizer shall not have any right to use or permit the use of
the Quark Technology for or in connection with the sale or manufacture for sale
of any products or processes. Pfizer hereby grants to Quark, and Quark hereby
accepts, a non-exclusive, irrevocable, royalty-free, perpetual license in the
Territory to use solely for research done by Quark or its Affiliates or by
Third Party contractors for Quark or its Affiliates the Pfizer Technology
(excluding any Pfizer Technology that is now or hereafter during the Term covered
by claims in issued patents or published patent applications) disclosed to
Quark during the Term. For clarity, Quark shall not have any rights to use or permit
the use of the Pfizer Technology for or in connection with the sale or
manufacture for sale of any products or processes.

 

3.3           Sublicenses. Pfizer
may grant sublicenses under the licenses set forth in Section 3.1, in whole or
in part, (i) to any of its Affiliates and (ii) to any Third Party; provided,
however, Pfizer shall not grant any sublicense to any Sublicensee with respect
to the Licensed Products in the United States, the Major EU Countries and Japan
without the prior approval of Quark, which approval shall not be unreasonably
withheld, conditioned or delayed. All sublicenses granted hereunder shall be
consistent with, and subordinate to, the terms and conditions of this
Agreement, and Pfizer shall be responsible for ensuring the compliance of its
Sublicensees and shall remain responsible to Quark for all its obligations
under this Agreement. In the event of a material default by any Sublicensee with
respect to the sale of Licensed Products in the United States, the Major EU
Countries or Japan, Pfizer will inform Quark and take such action, after
consultation with Quark, that in Pfizer’s reasonable business judgment is required
to address such default.

 

3.4           Negative
Covenant; No Implied License. Each party covenants that it
will not and shall ensure that its Affiliates and Sublicensees will not,
practice technology licensed to it under this Agreement outside the scope of
the licenses granted herein. Except as specifically provided herein, no party
grants to the other parties any license, express or implied, to any technology,
know-how, inventions, improvements, trade secrets or materials that it
possesses.

 

3.5           Exclusivity. During
the Term, neither Quark nor Pfizer shall, and neither of them shall permit any
of its Affiliates to, commercialize any Biomolecule or any Product, except
pursuant to this Agreement.

 

Section 4.              DEVELOPMENT, REGULATORY
APPROVALS AND MARKETING.

 

4.1           Committees;
Development Plans.

 

(a)           Committee. Within
[ * ] days following the Effective
Date, the parties will establish (i) a joint development committee for the
purpose of overseeing the development of Licensed Products for Ophthalmic Uses
(the “Initial JDC”) and (ii) a joint research committee [ * ]
(the “JRC”). If the JRC [ * ]. Pfizer
may, [ * ], and the JDC and the JRC may be
referred to as the “Committee” or “Committees”).

 

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

 

13

 

(b)           Membership;
Subcommittees. Each Committee shall consist of an equal number of
representatives from Pfizer and Quark, with each party entitled to one vote for
decision-making purposes. Each JDC and the JRC shall have a representative
designated by (i)  [ * ]
who shall serve as the chairman of such JDC and JRC (the “JDC Chairman” and the
“JRC Chairman,” as the case may be) and (ii) [ * ]
who shall serve as the vice chairman of such JDC and JRC (the “JDC Vice
Chairman” and the “JRC Vice Chairman,” as the case may be). The respective
individual representatives of either party to each Committee may be removed and
replaced from time to time at the discretion of the party he or she represents
by sending notice of such action to the other party. A representative from
either party may serve as his or her party’s representative on one or more JDCs
as well as on the JRC pursuant to the appointment by such party. An alternate
representative designated by a party may serve temporarily in the absence of a
permanent representative for each Committee for such party. Each Committee may
establish one or more subcommittees to oversee and implement specific
development activities related to the Licensed Product for which such Committee
is responsible. Each Committee shall establish the membership and operating
procedures of any subcommittees formed by such Committee.

 

(c)           JDC Responsibilities.
The role of each JDC shall be to oversee the development of each Licensed
Product for the indications within the scope of such JDC, including to:

 

(i)            Review and approve
the applicable Development Plan prepared by Pfizer for the Licensed Product for
which it is responsible;

 

(ii)           Review and approve material
amendments to the applicable Development Plan;

 

(iii)          Review and approve
the overall strategy for clinical studies;

 

(iv)          Monitor the progress
of all clinical trials and other studies for the Licensed Product for which it
is responsible, including reviewing activities against the applicable Development
Plan; and

 

(v)           To the extent
practicable, review material activities relating to Regulatory Approval of the
Licensed Product in question, including review pre-meeting briefing documents,
executive summaries and meeting minutes in connection with meetings with
Regulatory Authorities in the United States and the Major EU Countries; and

 

(vi)          Perform such other
functions as appropriate to further the purposes of this Agreement.

 

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

 

14

 

Upon receipt of the
Regulatory Approval of a Licensed Product for all of the indications within the
scope of a JDC in the United States and the Major EU Countries, such JDC and
its subcommittees shall terminate.

 

(d)           JRC
Responsibilities. The role of the JRC shall be to oversee the pre-clinical
development of the Licensed Products. [ * ], and any
material amendments to such strategies, plans and protocols; provided, however,
Quark shall have the right to complete the Non-Ophthalmic Pre-clinical Studies.
Quark shall update the JRC from time to time regarding the progress of its
Non-Ophthalmic Pre-Clinical Studies, and shall provide the JRC with the data
and other results of such studies as soon as practicable after such studies are
completed. The JRC shall review the data and results of such studies with the
goal of identifying Non-Ophthalmic Uses that are appropriate for further
development and (if successful) commercialization as Licensed Products. The JRC
shall decide whether to pursue further development, including clinical studies,
of the Licensed Product for each Non-Ophthalmic Use. Upon final decision following
review of all data for all Non-Ophthalmic Pre-clinical Studies, the JRC and its
subcommittees shall terminate.

 

(e)           Decision-making.
All matters subject to approval of or determination by each Committee shall be
decided by unanimous agreement. Subject to Section 4.1(f), in the event that any
Committee is unable to reach agreement on any matter, such matter shall be
considered in good faith, including taking into consideration any comments or
suggestions provided by [ * ]
representatives on such Committee, and decided by [ * ],
as the case may be.

 

(f)            [ * ]. Notwithstanding Section
4.1(e), [ * ] shall have a [ * ]
(i) [ * ] or (ii) [ * ]  In the case of [ * ].
In the case of [ * ]. In advance of such meeting,
[ * ] shall submit to [ * ], and [ * ] shall
respond with [ * ]. Thereafter (and in any
event within [ * ] of [ * ],
the [ * ] shall meet with the [ * ] to review the [ * ]. The [ * ] following [ * ].

 

(g)           Meetings. Each Committee shall meet at such times as the applicable JDC
Chairman or the JRC Chairman may reasonably request (it being expected that a
JDC shall meet at least once per calendar quarter during any period when there
are active development activities pertaining to such JDC). Each Committee shall
hold meetings at such times and places as shall be determined by such Committee
(it being expected that any in-person meetings will alternate between the
appropriate offices of each party). The applicable JDC Chairman and the JRC
Chairman shall endeavor to circulate an agenda for each meeting within a
reasonable time prior to such meeting, and will include all matters requested
to be included on such agenda by the JDC Vice Chairman or the JRC Vice Chairman.
The applicable JDC Chairman and the JRC Chairman will cause complete and
accurate minutes of all material discussions occurring at each meeting and all
matters decided upon at such meeting to be prepared. A copy of the draft
minutes of each meeting will be provided to each member of the applicable
Committee by the applicable JDC Chairman and the JRC Chairman, as the case may
be. Such minutes shall not be finalized until the JDC Chairman and the JDC Vice
Chairman, in the caser of JDC meeting minutes, and the JRC Chairman and the JRC
Vice Chairman, in the case of JRC meeting minutes, review and confirm the
accuracy of such minutes, provided that any minutes will be deemed approved
unless the responsible person objects to the accuracy of such minutes within

 

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

 

15

 

[ * ] of
receipt. Any Committee meeting may also be held by telephone or
videoconference, if agreed in advance by the applicable members of that Committee.
Each party may invite such other personnel of such party to attend any meeting
of any Committee as an observer as such party deems appropriate. The parties
shall each be responsible for its own costs and expenses to attend the
Committee meetings.

 

(h)           Development Plans.
Each JDC shall prepare a development plan for the development of the Licensed
Product it oversees (the “Development Plan”) and each party shall perform its
respective development activities for each Licensed Product subject to and in
accordance with the terms and conditions set forth in this Agreement and the
Development Plan established for such Licensed Product by the applicable JDC. No
later than [ * ] after the Effective Date,
the Initial JDC shall formally adopt (i) a clinical development plan for the
first Licensed Product for the treatment of [ * ],
and (ii) a preliminary clinical development plan for the first Licensed Product
for other Ophthalmic Use(s) (collectively, the “First Licensed Product
Development Plan”). In the event the JRC determines to proceed with the
development of a Licensed Product for any Additional Use, whether for
Ophthalmic Use or Non-Ophthalmic Use, the applicable JDC shall adopt a Development
Plan for the development of such Licensed Product for such Additional Use
within [ * ] after the formation of such JDC. The
components of each Development Plan for a Licensed Product shall be [ * ].

 

4.2           Updates to
Development Plans. As
needed from time to time, Pfizer may update the Development Plan to take into
account completion, commencement or cessation of development activities not contemplated
by the then-current Development Plan, and submit such proposed plan to the applicable
JDC. Such JDC will endeavor to meet and finalize the updated plan(s) within [ * ] of receipt of such proposal. Once approved by the applicable
JDC, such updated Development Plan shall replace the prior Development Plan.

 

4.3           Development [ * ].
Quark and its Affiliates shall have the right, at its sole discretion, to [ * ] for each Licensed Product in accordance with the [ * ]. Pfizer shall [ * ]
consistent with the [ * ] for each
Licensed Product. For each Licensed Product, the applicable JDC shall designate
at least one [ * ]; provided, however, if
Pfizer reasonably determines that the indication being studied is not [ * ], Quark’s right to [ * ] shall not
apply to any Licensed Product for such indication. For clarity, the parties
agree that there is [ * ].

 

4.4           Development
Activities. Pfizer
shall be responsible for overseeing all research and development of the
Biomolecules and Licensed Products. During the development of each Licensed
Products, Pfizer shall invite at least one (1) representative of Quark to [ * ], in each case in connection with the development of
such Licensed Product.

 

4.5           Diligence. Pfizer will use Commercially Reasonable Efforts
to develop, seek Regulatory Approval for, manufacture and commercialize
Licensed Products.

 

4.6           Regulatory Affairs.
Pfizer shall own and be responsible for preparing and submitting all regulatory
filings and seeking and maintaining all Regulatory Approvals for all Licensed
Products. In the event Quark shall have filed an IND with respect to a Licensed
Product prior to the Effective Date, upon Pfizer’s request Quark shall promptly
transfer such IND to Pfizer or its designated Affiliate.

 

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

 

16

 

4.7           Manufacture and Supply.

 

(a)           Pfizer shall be responsible for the
manufacture of all preclinical and clinical materials for each Licensed Product
and for the commercial supply of each Licensed Product. Quark shall use
reasonable efforts to promptly assign to Pfizer or its designated Affiliate the
development and supply agreement, dated [ * ] (the “[ * ] Agreement”), between Quark and [ * ].
If the [ * ], Pfizer shall use [ * ] until the earlier of (i) [ * ]
or (ii) [ * ]. Nothing herein shall restrict
Quark from engaging [ * ] to
manufacture any materials other than Biomolecules or Licensed Products.

 

(b)           If during the Term Pfizer determines that it desires to
produce one or both strands of any Biomolecule for the commercial supply of any
Licensed Product at a second site, whether such second site would be operated
by Pfizer or by a Third Party, Pfizer shall give written notice of such
determination to Quark (a “Supply Notice”). If within [ * ]
following receipt of the Supply Notice, Quark notifies Pfizer that Quark
desires to be considered as a supplier of such stand(s) of any Biomolecule set
forth in the Supply Notice, then Pfizer shall negotiate exclusively with Quark
and in good faith for a period of not less than [ * ]
to determine whether Quark can satisfy the requirements of Pfizer. Such [ * ] period shall commence with the first substantive
meeting between the parties to discuss the manufacturing requirements of Pfizer.
In the course of its negotiations, Pfizer shall not impose on Quark supply
conditions of quality, price, capacity or risk allocation that it would not
require of Third Party suppliers or impose upon itself. It is the intent of
this paragraph for Pfizer to select Quark as the supplier that provides a
second site for the manufacture of such strand(s) of any Biomolecule selected
by Pfizer if Quark desires to fill such role, is capable of doing so on
competitive terms and Quark’s manufacturing capabilities in terms of quality,
reliability and otherwise is reasonably satisfactory to Pfizer. For purposes of
this paragraph only, “site” shall mean a geographical location of manufacturing
facilities ([ * ]), and “second site” shall
mean any manufacturing site that is not the initial site for the manufacture of
Biomolecules for the commercial supply of Licensed Products. The initial site
shall include both [ * ]’s site (which
may be used solely to manufacture the registration batches and the launch
supply of Biomolecule for the country or the group of countries for which the
first Regulatory Approval is obtained) and Pfizer’s initial site, including the
expansion of a facility within such site.

 

4.8           Costs. Pfizer shall be responsible for all costs
associated with the research, development, manufacture and commercialization of
Licensed Products that are incurred after the Effective Date. Pfizer shall
reimburse Quark for costs incurred to research and develop Biomolecule and
Licensed Products [ * ] in an
amount not to exceed [ * ], which
amount shall be due and payable within [ * ] after the
Effective Date. Pfizer shall also reimburse Quark for those costs set forth in
Schedule 4.8 hereto, which shall be due and payable within [ * ]
after the Effective Date.

 

4.9           Commercialization. Subject to Section 4.10, Pfizer shall be responsible for all
commercialization activities relating to the Licensed Products, including
selection and ownership of all trademarks for all Licensed Products and pricing
and other terms of sale for all Licensed Products. Subject to the terms attached
as Schedule 4.9 hereto, Quark shall be the exclusive distributor of the
Licensed Products for Ophthalmic Uses and Non-Ophthalmic Uses in Israel.

 

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

 

17

 

4.10         [ * ] of Licensed Products for Non-Ophthalmic
Indications. Pfizer shall give Quark notice within [ * ]
following the filing of each BLA or NDA for a Licensed Product for a
Non-Ophthalmic Use in the United States or the Major EU Countries (“Notice of Non-Ophthalmic
Use”). Pfizer shall include with such Notice of Non-Ophthalmic Use a summary of
its proposed marketing plan for such use. Within [ * ]
of Quark’s receipt of such Notice of Non-Ophthalmic Use, the parties shall meet
to discuss [ * ]. For clarity, Pfizer shall
have no obligation to grant [ * ].

 

4.11         Transition
Plan for Ophthalmic Uses. In order to ensure the smooth transition
of ongoing development activities for the Ophthalmic Uses of the Licensed
Products, the parties hereby agree to the provisions of the transition plan
which is attached hereto as Exhibit C (the “Transition Plan”). If there is an
inconsistency or disagreement between the Transition Plan and this Agreement,
the terms of this Agreement shall prevail. Pfizer shall pay to Quark an amount equal to [ * ] within [ * ] after the
Effective Date as partial reimbursement of Quark’s research and development
costs and expenses incurred in connection with the research and development of
the Licensed Product for wet age-related macular degeneration.

 

4.12         Transition Plan for
Non-Ophthalmic Uses. In
order to ensure the smooth transition of ongoing development activities for the
Non-Ophthalmic Uses of the Licensed Products, Quark shall initially retain the right to [ * ] as set forth in Schedule 4.12 (the “Non-Ophthalmic
Pre-clinical Studies”); provided, however, [ * ]. Pfizer
shall pay to Quark an amount equal to [ * ] within [ * ] after the Effective Date in order to help fund the
Non-Ophthalmic Pre-clinical Studies. In addition, Quark shall [ * ], and Pfizer shall [ * ]. Quark
shall provide Pfizer a copy of [ * ].

 

Section 5.              FEES AND ROYALTIES.

 

5.1           Milestone
Payments for First Ophthalmic Use. In consideration of the rights granted hereunder, and subject to the
terms and conditions of this Agreement applicable to such payments, Pfizer
shall pay to Quark the following amounts (the “First Ophthalmic Use Milestone
Payments”) after the occurrence of the relevant milestone (the “First
Ophthalmic Use Milestone”) for the first Licensed Product developed for the
first Ophthalmic Use. Pfizer shall make the first First Ophthalmic Use Milestone
Payment within [ * ] after the Effective Date and
each of the other of such milestone payments within [ * ]
after each of the other First Ophthalmic Use Milestones. For clarity, each First
Ophthalmic Use Milestone shall be due and payable to Quark whether such
milestone is achieved by Pfizer, its Affiliates, or any Sublicensee. 

 

	
  First Ophthalmic Use Milestone

  	
   

  	
  First Ophthalmic Use

  Milestone Payment

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

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

 

18

 

Each
First Ophthalmic Use Milestone Payment shall be paid once, regardless of the
number of the Licensed Products achieving such milestones.

 

In
the event Pfizer develops a Licensed Product for Ophthalmic Use with [ * ], the First Ophthalmic Use Milestone Payments shall be [ * ]. For purposes of this paragraph only, [ * ].

 

If
any First Ophthalmic Use Milestone (the “Most Recent Milestone”) is achieved
without triggering any of the earlier First Ophthalmic Use Milestones, then
Pfizer shall pay to Quark any missed First Ophthalmic Use Milestone Payment at
the same time as the Most Recent Milestone payment is due, except that the
Launch of the first Licensed Product in any one country of the Territory shall
not be deemed to trigger any milestone payment related to the Launch of the first
Licensed Product in any other country of the Territory.

 

For
clarity, each milestone payment owed to Quark under this Section 5.1 which
refers to the first Ophthalmic Use shall be paid to Quark for the first
Licensed Product to achieve such milestone for an Ophthalmic Use.

 

5.2           Milestone
Payments for the Second Ophthalmic Use. In consideration of the rights granted hereunder, and subject to the
terms and conditions of this Agreement applicable to such payments, Pfizer
shall pay to Quark the following amounts (the “Second Ophthalmic Use Milestone
Payments”) after the occurrence of the relevant milestone (the “Second
Ophthalmic Use Milestone”) for the first Licensed Product developed for an
Ophthalmic Use other than the first Ophthalmic Use (the “Second Ophthalmic Use”).
Pfizer shall make the Second Ophthalmic Use Milestone Payment within [ * ] after each of the Second Ophthalmic Use Milestones.

 

	
  Second Ophthalmic Use Milestone

  	
   

  	
  Second

  Ophthalmic

  Use Milestone

  Payment

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

Each Second Ophthalmic Use
Milestone Payment shall be paid once, regardless of the number of Licensed
Products or the number of additional Ophthalmic Uses for any Licensed Product
achieving such milestones.

 

For clarity, if a Licensed
Product achieves any of the Second Ophthalmic Use Milestones before all of the First
Ophthalmic Use Milestones are triggered, then Pfizer shall pay to Quark such
Second Ophthalmic Use Milestone Payment without regard to which Licensed
Product(s) are involved in either Ophthalmic Use.

 

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

 

19

 

5.3           Milestone
Payments for Non-Ophthalmic Uses. In consideration of the rights granted hereunder, and subject to the
terms and conditions of this Agreement applicable to such payments, Pfizer
shall pay to Quark the following amounts (the “Non-Ophthalmic Use Milestone
Payments”) after the occurrence of the relevant milestone (the “Non-Ophthalmic
use Milestone”) for the first Licensed Product developed for each
Non-Ophthalmic Use, subject to modification as provided in the final three sentences
of this Section 5.3. Pfizer shall make the Non-Ophthalmic Use Milestone Payment
within [ * ] after each Non-Ophthalmic Use
Milestones.

 

	
  Non-Ophthalmic
  Use Milestone

  	
   

  	
  Non-Ophthalmic Use

  Milestone Payment

  
	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  
	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  
	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  
	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  
	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  

 

Each Non-Ophthalmic Use
Milestone Payment shall be paid once for each applicable Non-Ophthalmic Use,
regardless of the number of Licensed Products for the applicable Non-Ophthalmic
Use.

 

If any of the foregoing
milestones is achieved before the counterpart First Ophthalmic Use Milestone
occurs, the Non-Ophthalmic Use Milestone Payment for such event shall be [ * ] so long as the Non-Ophthalmic Use in question is [ * ] which, based solely on the [ * ].
If the Non-Ophthalmic Use in question is [ * ], then
this paragraph shall not apply. By way of example, [ * ].
Quark acknowledges that Pfizer may [ * ].

 

5.4           Sales Milestone
Payments for Ophthalmic Uses. In consideration of the rights granted hereunder, and subject to the
terms and conditions of this Agreement applicable to such payments, Pfizer
shall pay to Quark the following one-time payments (each, an “Ophthalmic Use
Sales Milestone Payment”) when aggregate Net Sales of all Licensed Products for
Ophthalmic Uses in any [ * ]
consecutive Pfizer Quarters in the Territory first reach the respective
thresholds indicated below:

 

	
  Worldwide Annual Net Sales

  	
   

  	
  Sales
  Milestone

  Payment

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  

 

Each
Ophthalmic Use Sales Milestone Payment shall be paid once, regardless of the
number of Licensed Products sold or the number of Ophthalmic Uses
commercialized.

 

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

 

20

 

5.5           Sales Milestone
Payments for Non-Ophthalmic Uses. In consideration of the rights granted hereunder, and subject to the
terms and conditions of this Agreement applicable to such payments, Pfizer
shall pay to Quark the following one-time payments (each, a “Non-Ophthalmic Use
Sales Milestone Payment”) when aggregate Net Sales of all Licensed Products for
Non-Ophthalmic Uses in any [ * ]
consecutive Pfizer Quarters in the Territory first reach the respective
thresholds indicated below:

 

	
  Worldwide Annual Net Sales

  	
   

  	
  Sales
  Milestone

  Payment

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  
	
  Net
  Sales in any [ * ] consecutive Pfizer
  Quarters reach [ * ]

  	
   

  	
  [ * ]

  

 

Each
Non-Ophthalmic Use Sales Milestone Payment shall be paid once, regardless of
the number of Licensed Products sold or the number of Non-Ophthalmic Uses
commercialized.

 

5.6           Milestone Payment
Not Creditable. Milestone payments made under Sections 5.1
through 5.5 shall be non-creditable and non-refundable.

 

5.7           Royalty Payments
for Ophthalmic Uses. In
consideration of the rights granted hereunder, and subject to the terms and
conditions of this Agreement applicable to such payments, Pfizer shall pay to
Quark, with respect to sales of the Licensed Products for Ophthalmic Uses, an
amount equal to:

 

(a)           [ * ] of Net Sales for the portion of Net Sales of such
Licensed Products in a calendar year in the Territory less than or equal to [ * ]; plus

 

(b)           [ * ] of Net Sales for the portion of Net Sales  of such Licensed Products in a
calendar year in the Territory greater than [ * ]
and less than or equal to [ * ]; plus

 

(c)           [ * ] of Net Sales for the portion of Net Sales  of such Licensed Products in a
calendar year in the Territory in excess of [ * ].

 

5.8           Royalty Payments
for Non-Ophthalmic Uses.
In consideration of the rights granted hereunder, and subject to the terms and
conditions of this Agreement applicable to such payments, Pfizer shall pay to
Quark, with respect to sales of the Licensed Products for Non-Ophthalmic Uses,
an amount equal to:

 

(a)           [ * ] of Net Sales for the portion of Net Sales of such
Licensed Products in a calendar year in the Territory less than or equal to [ * ]; plus

 

 

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

 

21

 

(b)           [ * ] of Net Sales for the portion of Net Sales  of such Licensed Products in a
calendar year in the Territory greater than [ * ]
and less than or equal to [ * ]; plus

 

(c)           [ * ] of Net Sales for the portion of Net Sales  of such Licensed Products in a
calendar year in the Territory in excess of [ * ].

 

If Quark commences [ * ], the royalties set forth in this Section 5.8 shall be [ * ].

 

5.9           Reduction in Royalty
Payments. For Net Sales of a Licensed Product in the United States, any payments
owed with respect to such Licensed Product pursuant to Sections 5.7 and
5.8 above during the Initial Royalty Term shall be reduced by [ * ] for the remainder of the Term if at any time the
following events occur or are in existence: (x) [ * ],
or (y) [ * ]. For Net Sales of a Licensed
Product in a country in the Territory other than the United States, any
payments owed with respect to such Licensed Product pursuant to Sections 5.7
and 5.8 above during the Initial Royalty Term shall be reduced by [ * ] for the remainder of the Term if at any time [ * ].

 

5.10         Duration of Royalty Payments. Payments under Sections 5.7 and 5.8 above
shall continue until the expiration of the Initial Royalty Term in such country
for the Licensed Product concerned. After the Initial Royalty Term, Pfizer shall
make payments to Quark [ * ] above
until the expiration of the Extended Royalty Term in such country for the
Licensed Product concerned; provided, however, Pfizer’s obligations to make any
payments with respect to sales of Licensed Products in the Territory under
Sections 5.7 and 5.8 above after the Initial Royalty Term shall expire when [ * ]. Upon expiration of the Royalty Term for a particular
Licensed Product, Pfizer shall have a royalty-free, perpetual, irrevocable,
worldwide, non-exclusive license, with the right to sublicense, under the Quark
Technology to make, have made, use, sell, offer for sale and import such Biomolecule
and such Licensed Product in the countries where the Royalty Term has expired.

 

5.11         Third Party Royalties.

 

(a)           [ * ] all payments and other obligations to Third Parties
existing as of the date hereof relating to Quark Patent Rights and Quark
Technology, including the Atugen License. In the event the Standby License
shall become effective, Pfizer shall have the right to [ * ].

 

(b)           If Pfizer (i)
reasonably determines that, in order to avoid infringement of any patent not
licensed hereunder, it is necessary for Pfizer to obtain a license from a Third
Party, or at Pfizer’s direction, for Quark to obtain a license from a Third Party
(with a sublicense or an assignment of such license to Pfizer) in order to
develop, make, use, sell, offer for sale or import a Biomolecule or a Licensed
Product in a country in the Territory and to pay a royalty or other payment under
such license (including in connection with settlement of a patent infringement
claim), or (ii) shall be subject to a final court or other binding order or
ruling requiring the payment of a royalty or other payment to a Third Party
patent holder in respect of any Biomolecule or Licensed Product in a country in
the Territory (“Third Party Patent Licenses”), [ * ]
of any consideration paid under Third Party Patent Licenses by Pfizer, its
Affiliates or Sublicensees shall be fully creditable against royalties and
other payments payable to Quark

 

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

 

22

 

hereunder; provided, however, in no event shall such credit cause the
royalties paid to Quark for any particular Pfizer Quarter to be reduced to less
than [ * ] of the amount that would
otherwise be payable to Quark for such Pfizer Quarter pursuant to Sections 5.7
and 5.8; provided, further, that [ * ]. This
Section 5.11(b) shall not apply to any Net Sales in the United States for any
period of time during which [ * ]. In the
event Quark obtains a license from a Third Party at Pfizer’s direction pursuant
to clause (i) above, Pfizer shall reimburse Quark, within [ * ]
following receipt of an invoice from Quark, for [ * ]
of the royalties and other payments made by Quark under such agreement, or (in
the case of royalties) such greater percentage as may be necessary to give
effect to the provisos of the first sentence of this Section 5.11(b) (royalty
floor provisions) or to the second sentence of this Section 5.11(b) (referring
to clause (x) of Section 5.9). [ * ]. In the
event Quark obtains a license from a Third Party at Pfizer’s direction pursuant
to clause (i) above, (X) Quark shall not amend the terms of such license
agreement without Pfizer’s approval and (Y) Pfizer shall provide Quark with the
information sufficient to enable it to calculate and pay royalties under its
Third Party Patent Licenses, if any, and shall otherwise reasonably cooperate
to enable compliance with such agreements.

 

5.12         Royalty Floor. During the
Initial Royalty Term, in no event shall the royalty reduction provisions of
Sections 5.9 and 5.11(b) work together in a manner that causes the payments
owed under Sections 5.7 and 5.8 with respect to Net Sales of a Licensed Product
in any particular Pfizer Quarter to be equal to an amount less than [ * ] of the amount that would be due under
Sections 5.7 and 5.8 without the application of any royalty reduction. During
the Extended Royalty Term, the royalty rate shall not be reduced below the rate
provided for in Section 5.10, except by means of application of Section 5.11(b),
and in that case the net royalty payable to Quark shall not be reduced to less
than [ * ] of the rate provided for in
Section 5.10. In either case, [ * ]. For
clarity, any reduction in payments to Quark pursuant to Section 5.11(a) shall
not affect this Section 5.12.

 

5.13         Notices of Termination. In the event that Pfizer has given Quark any notice of termination of
this Agreement under Section 13 below, [ * ] payments
under Sections 5.1, 5.2 and 5.3 above shall become due during such notice
period.

 

Section 6.              ACCOUNTING AND PROCEDURES FOR
PAYMENT.

 

6.1           Inter-Company
Sales. Sales between
or among Pfizer, its Affiliates and Sublicensees shall not be subject to
royalties under Section 5; royalties shall only be calculated upon Net Sales to
a Third Party that is not a Sublicensee. Pfizer shall be responsible for accounting
for and paying milestone payments and royalties on Net Sales by its Affiliates
and Sublicensees.

 

6.2           Calculation of Net Sales. All royalty payments
shall be computed and paid in United States dollars. For the purposes of
determining the amount of any sales milestone payments under Sections 5.4 and
5.5 or royalties due for the relevant Pfizer Quarter, the amount of Net Sales
in any foreign currency shall be converted into United States dollars in a
manner consistent with Pfizer’s normal practices used to prepare its audited
financial reports; provided that such practices use a widely accepted
source of published exchange rates.

 

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

 

23

 

6.3           Royalty Payments;
Sales Milestone Payments.

 

(a)           Pfizer
shall make royalty payments to Quark with respect to each Pfizer Quarter within
[ * ] after the end of each Pfizer
Quarter, and each payment shall be accompanied by a report identifying for each
Licensed Product, the Net Sales for such Licensed Product for each country, and
the computation of the amount payable to Quark. In addition, within [ * ] after the end of each Pfizer Year, Pfizer shall
deliver to Quark a report, in the form attached hereto as Schedule 6.3, for
each of the United States, Major EU Countries and Japan.

 

(b)           Pfizer
shall make any Ophthalmic Use Sales Milestone Payment and any Non-Ophthalmic
Use Sales Milestone Payment payable with respect to any [ * ]
consecutive Pfizer Quarters within [ * ] after the
end of the [ * ] Pfizer Quarter, and such
payment shall be accompanied by a report identifying for each Licensed Product,
the Net Sales for such Licensed Product for each country.

 

(c)           All
reports provided under this Section 6.3 shall be kept confidential by Quark and
not disclosed to any other party, other than Quark’s accountants which shall be
obligated to keep such information confidential, and such information and
reports shall only be used for purposes of this Agreement.

 

6.4           Method of
Payments. All
payments hereunder shall be made by electronic transfer in immediately
available funds via either a bank wire transfer, an ACH (automated clearing
house) mechanism, or any other means of electronic funds transfer, at Pfizer’s
election, to the bank account set forth in Schedule 6.4, or to such other bank
account as Quark shall designate in a notice at least fifteen (15) days before
the payment is due. All payments under this Agreement which is not paid on the date due until [ * ] past such date shall bear interest
from the date due until paid at a rate equal to the [ * ].
All payments under this Agreement which
is not paid on the [ * ] past the
date due shall bear interest from the date due until paid
at a rate equal to the [ * ]

 

6.5           Inspection of
Records. Pfizer
shall, and shall cause its Affiliates and Sublicensees to, keep accurate books
and records setting forth gross sales of each Licensed Product, Net Sales of
each Licensed Product, and amounts payable hereunder to Quark for each such
Licensed Product. Pfizer shall permit Quark, by independent qualified public
accountants employed by Quark and reasonably acceptable to Pfizer, to examine
such books and records at any reasonable time, upon reasonable notice, but not
later than [ * ] following the rendering of
any such reports or making of any payments to Quark hereunder. The foregoing
right of examination may be exercised only [ * ] during
any [ * ] period. In the event any audit
shows a shortfall of more than [ * ] in any
sales report submitted pursuant to Section 6.3 (the “Shortfall Audit”), Quark
shall have the right to examine such books and records [ * ]
during any [ * ] period; provided, however,
if Quark’s examinations do not show a shortfall of more than [ * ] in any sales report submitted pursuant to Section 6.3
for a period of [ * ] following the Shortfall
Audit, then the foregoing right of examination may be exercised only [ * ] during any [ * ] period. Such
accountants may be required by Pfizer to enter into a reasonably acceptable
confidentiality agreement, and in no event shall such accountants disclose to
Quark any information, other than the accuracy of reports and payments made or
due hereunder. The opinion of said independent accountants regarding such
reports and payments shall be binding on the parties, other than in the case of
manifest error. Quark shall bear the cost of any such examination and review;
provided that if

 

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

 

24

 

the examination shows an underpayment of royalties of more than [ * ] of the amount due for the applicable period, then
Pfizer shall promptly reimburse Quark for all costs incurred in connection with
such examination. Pfizer shall promptly pay to Quark the amount of any
underpayment of royalties revealed by such examination, together with interest
calculated pursuant to Section 6.4. Any overpayment of royalties by Pfizer
revealed by an examination shall be fully creditable against future royalty
payments.

 

6.6           Tax Matters.

 

(a)           VAT.
The parties agree to cooperate with one another and use reasonable efforts to
avoid or reduce obligations to pay any value added tax or similar payment (“VAT”)
in respect of any royalties, milestone payments and other payments made by
Pfizer to Quark under this Agreement.  In the event that any VAT is owing
in any jurisdiction in respect of any such payment, then Pfizer shall pay such
VAT, then (i) if such VAT is owing as a result of any action by Pfizer,
including any assignment or sublicense, or any failure on the part of Pfizer or
its Affiliates to comply with applicable Laws or filing or record retention
requirements, that has the effect of modifying the tax treatment of the parties
hereto, or to the extent such VAT may be recovered by Pfizer or credited to
Pfizer, then the payment in respect of which such VAT is owing shall be made
without deduction for or on account of such VAT to ensure that Quark receives a
sum equal to the sum which it would have received had not such VAT been due or
(ii) otherwise, such payment shall be made after deduction of such VAT.  Any
increase in payments to Quark under this Section 6.6(a) shall reflect only the
incremental increase in VAT directly resulting from clause (i) above. In the
event that any VAT is owing in any jurisdiction in respect of any such payment,
Quark will provide to Pfizer invoices showing the correct amount of VAT in
respect of such payments hereunder.

 

(b)           The
parties agree to cooperate with one another and use reasonable efforts to avoid
or reduce tax withholding or similar obligations on the part of Pfizer in
respect of any royalties, milestone payments and other payments made by Pfizer
to Quark under this Agreement.  If Pfizer is required to make a payment to
Quark subject to a deduction of tax or withholding tax, (i) if such withholding
or deduction obligation arises as a result of any action by Pfizer, including
any assignment or sublicense, or any failure on the part of Pfizer to comply
with applicable Laws or filing or record retention requirements, that has the
effect of modifying the tax treatment of the parties hereto (a “Pfizer
Withholding Tax Action”), then the sum payable by Pfizer (in respect of which
such deduction or withholding is required to be made) shall be increased to the
extent necessary to ensure that Quark receives a sum equal to the sum which it
would have received had no such Pfizer Withholding Tax Action occurred, (ii)
otherwise, the sum payable by Pfizer (in respect of which such deduction or
withholding is required to be made) shall be made to Quark after deduction of
the amount required to be so deducted or withheld, which deducted or withheld
amount shall be remitted in accordance with applicable Law.  Any increase
in the payments to Quark under this Section 6.6(b) shall reflect only the
incremental increase in withholding tax directly resulting from Pfizer’s
Withholding Tax Action.

 

(c)           Tax
Cooperation.  To the extent Pfizer is required to deduct and withhold
taxes on any payments to Quark, Pfizer shall pay the amounts of such taxes to
the proper Governmental Authority in a timely manner and promptly transmit to
Quark an official tax

 

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

 

25

 

certificate or other evidence of such withholding sufficient to enable
Quark to claim such payments of taxes.  Quark shall provide to Pfizer any
tax forms that may be reasonably necessary in order for Pfizer to not withhold
tax or to withhold tax at a reduced rate under an applicable bilateral income
tax treaty.  Quark shall use reasonable efforts to provide any such tax
forms to Pfizer at least thirty (30) days prior to the due date for any
payments for which Quark desires that Pfizer apply a reduced withholding
rate.  Each party shall provide the other with reasonable assistance to
enable the recovery, as permitted by Law, of withholding taxes, VAT, or similar
obligations resulting from payments made under this Agreement, such recovery to
be for the benefit of the party bearing such withholding tax or VAT.

 

Section 7.              PATENTS AND INFRINGEMENT.

 

7.1           Third Party
License Agreements. The Parties acknowledge that to the extent
Quark Patent Rights are held by Quark under license from Third Parties, Quark
will allow Pfizer to exercise the rights set forth in this Section 7 which are
granted to Pfizer to the extent the same rights have been granted to Quark under
such Third Party license agreement(s).

 

7.2           Title to
Inventions.

 

(a)           Each party shall own
and retain the entire right, title and interest in and to all inventions made
solely by such party’s and/or any of its Affiliates’ employee(s) or agent(s)
and all intellectual property rights in such inventions (“Sole Inventions”). During
the Term, each party shall own an undivided one-half  interest in and to any inventions that are made jointly by
each of the parties’ and/or their Affiliates’ employees or agents, and in all
intellectual property rights in such jointly-made inventions (“Joint Inventions”).
Inventorship of inventions (including whether such inventorship is sole or
joint) will be determined by the applicable Laws of the United States. If there
is a dispute between the parties as to which party shall own any particular
invention, the parties shall engage a qualified independent Third Party patent
attorney jointly selected by the parties as an expert to resolve such dispute.

 

(b)           Subject to the
licenses of Section 3.1, each party shall retain the unrestricted right to use
Joint Inventions and to grant licenses thereto, without the consent of or a
duty of accounting to the other party.

 

7.3           Prosecution of
Quark Patent Rights (Sole Inventions).

 

(a)           With respect to
Quark Patent Rights that are owned solely by Quark, Quark and Pfizer shall
cooperate in connection with the continued prosecution and maintenance by Quark
of such Quark Patent Rights; provided, however, that if there are any Quark
Patent Rights that [ * ]. The out-of-pocket
costs and expenses incurred to obtain, prosecute and maintain Quark Patent
Rights that are solely owned by Quark shall be: 
(a) [ * ], and (b) [ * ]. Quark shall notify Pfizer at least [ * ] prior to the deadline for entering into national phase
with respect to any PCT application included in Quark Patent Rights. No later
than [ * ] prior to entry into national
phase, Pfizer shall provide Quark with a list of countries not identified on
the Quark Patent Filing Schedule and the patent applications for each such
country that Pfizer would like Quark to file. Quark shall file international
patent applications, or designate for national filing and file, in all such
countries the patent applications requested by Pfizer. Pfizer shall have access

 

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

 

26

 

to
all documentation, filings and communications to or from the respective patent
offices, at reasonable times and upon reasonable notice. Quark shall keep
Pfizer informed of the status of all pending patent applications that pertain
to any Biomolecule or any Licensed Product. Quark, its agents and attorneys
shall give due consideration to all suggestions and comments of Pfizer
regarding any aspect of such patent prosecutions.

 

(b)           Quark shall not
abandon any Quark Patent Rights without at least [ * ]
prior notice to Pfizer. If Quark decides to abandon any Quark Patent Rights
(the “Abandoned Patents”), Pfizer shall have the option to [ * ]
such patents and patent applications, [ * ] and to
continue the prosecution and maintenance of such patents and patent applications
[ * ]. Quark Patent Rights shall not
include any Abandoned Patents, and if Pfizer elects to continue the prosecution
and maintenance of the Abandoned Patents, Quark shall [ * ].
In such event, [ * ].

 

7.4           Prosecution of
Joint Patents. The
JDC shall determine which party shall be responsible for obtaining, prosecuting
and/or maintaining patents and patent applications, in appropriate countries in
the Territory, covering Joint Inventions owned by Quark and Pfizer (“Joint
Patents”). The out-of-pocket costs and expenses incurred to obtain, prosecute
and maintain Joint Patents shall be:  (a)
[ * ], and (b) [ * ].
Either party may decline to bear its share of the costs and expenses to file,
prosecute and/or maintain any particular Joint Patent in one or more countries.
In that case, the other party may undertake the responsibility for filing,
prosecuting and/or maintaining such Joint Patent at its own expense, and if it
does so, the declining party shall assign to the other party all its right,
title and interest to any such Joint Patent(s), and upon such assignment such
Joint Patent(s) shall become solely Pfizer Patent Rights or Quark Patent Rights,
as the case may be.

 

7.5           Patents Covering Biomolecules and
Licensed Products. Whenever permitted by applicable Laws, the patent
applications that cover Biomolecules or Licensed Products shall be split from
patent applications that cover other molecules or products in all countries in
the Territory where such patent applications have been filed. The parties shall
attempt to cover Biomolecules and Licensed Products in patent applications with
claims that are as broad as possible, taking into account the desire not to
cover, generally or specifically, other molecules or products to the extent
such other molecules or products can be covered by separate patent applications.
Divisionals or other patent applications that have been filed to cover
molecules or products other than Biomolecules and Licensed Products (“separate
patent filings”) shall be excluded from the definition of Pfizer Patent Rights
or Quark Patent Rights, as the case may be, even though they may claim priority
dates based on, or otherwise derive from, patent filings that included or
related to Biomolecules and Licensed Products, and each Party shall have the
right to prosecute and enforce such separate patent filings in its own name, in
its sole discretion, for its sole benefit and at its sole expense. Quark shall
keep Pfizer informed of the status regarding the split of patent applications
contemplated in this Section, including providing access to all related
documentation, filings and communications. Quark, its agents and attorneys
shall give due consideration to all suggestions and comments of Pfizer regarding
any aspect of such patent prosecutions. If any separate patent filings are
Joint Patents, they shall be subject to Section 7.4.

 

7.6           Notices and
Encumbrances. Quark
agrees that it will execute and file those notices and other filings as Pfizer
shall request be made, from time to time with the United States Patent and
Trademark Office (or any successor agency) or any analogous patent office in
the Territory with respect to the rights granted under this Agreement.

 

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

 

27

 

7.7           Patent Term
Extensions.

 

(a)           Subject to Section
7.7(b), Pfizer shall have the exclusive right and obligation to seek patent
term extensions or supplemental patent protection, including supplementary
protection certificates, in any country in the Territory in relation to the Quark
Patent Rights in Quark’s name, but at Pfizer’s expense. Quark and Pfizer shall
cooperate in connection with all such activities, and Pfizer, its agents and
attorneys will give due consideration to all timely suggestions and comments of
Quark regarding any such activities; provided, all final decisions shall be
made by Pfizer.

 

(b)           At least [ * ] after the first Regulatory Approval or patent grant,
whichever is the later applicable reference point for patent term extensions, Pfizer
shall notify Quark of its intention to seek a patent term extension or
supplemental patent protection with respect to any patent within Quark Patent
Rights. If the patents within Quark Patent Rights do not cover any
then-marketed products other than Licensed Product, the decision of Pfizer
shall be final. However, if any patent within Quark Patent Rights also covers then-marketed
products other than Licensed Products, Pfizer does not intend to seek extended
protection for such patent, and Quark desires to seek a patent term extension
or supplemental protection with respect to such patent, then Quark may, upon
notice to Pfizer, assume responsibility for seeking a patent term extension or
supplemental patent protection. If the original Pfizer notice under this
Section 7.7(b) indicated an intention to pursue a patent term extension or
supplemental patent protection, Pfizer shall thereafter pursue such extended
protection diligently and in good faith.

 

7.8           Interpretation of
Patent Judgments. If
any claim relating to a patent under the Quark Patent Rights becomes the
subject of a judgment, decree or decision of a court, tribunal, or other
authority of competent jurisdiction in any country, which judgment, decree, or
decision is or becomes final (there being no further right of review) and
adjudicates the validity, enforceability, scope, or infringement of the same,
the construction of such claim in such judgment, decree or decision shall be
followed thereafter in such country in determining whether a product is a Licensed
Product hereunder, not only as to such claim but also as to all other claims in such
country to which such construction reasonably applies. If at any time there are two or more conflicting final judgments,
decrees, or decisions with respect to the same claim, the decision of the
higher tribunal shall thereafter control, but if the tribunal be of equal rank,
then the final judgment, decree, or decision more favorable to such claim shall
control unless and until the majority of such tribunals of equal rank adopt or
follow a less favorable final judgment, decree, or decision, in which event the
latter shall control.

 

7.9           Infringement of Quark
Patent Rights by a Third Party.

 

(a)           Each
of the parties will promptly notify the other in the event of any actual,
potential or suspected infringement of a patent under the Quark Patent Rights
by any Third Party (an “Infringement Claim”). Pfizer shall have the right, but
not the obligation, to institute litigation in connection with an Infringement
Claim, and any such litigation shall be at Pfizer’s

 

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

 

28

 

expense; provided that Quark shall be entitled to receive [ * ] of any damages, settlements, accounts of profits, or
other financial compensation recovered by Pfizer from a Third Party based upon
any such Infringement Claim after deducting Pfizer’s out-of-pocket expenses
(including counsel fees and expenses) incurred in pursuing such Infringement
Claim. Any suit by Pfizer shall be either in the name of Quark or its
Affiliate, the name of Pfizer or its Affiliate, or jointly by Pfizer, Quark or
their respective Affiliates, as may be required by the Law of the forum,
provided, however, that if such suit is filed in the name of Quark or an
Affiliate (either solely or jointly), [ * ]. For this
purpose, Quark shall execute such legal papers and cooperate in the prosecution
of such suit as may be reasonably requested by Pfizer.

 

(b)           If
Pfizer elects not to assume control over enforcing any Infringement Claim,
Quark may, but shall not be required to, assume sole control over enforcing
such Infringement Claim using counsel of its choice.  Any suit by Quark
shall be either in the name of Quark or its Affiliate, the name of Pfizer or
its Affiliate, or jointly by Pfizer, Quark or their respective Affiliates, as
may be required by the Law of the forum, provided, however, that if such suit
is filed in the name of Pfizer or an Affiliate (either solely or jointly), [ * ].  For this purpose, Pfizer shall execute such
legal papers and cooperate in the prosecution of such suit as may be reasonably
requested by Quark. In the event Quark assumes control over enforcing any
Infringement Claim, Pfizer shall be entitled to receive [ * ]
of any damages, settlements, accounts of profits, or other financial
compensation recovered from a Third Party based upon any such Infringement
Claim after deducting Quark’s out-of-pocket expenses (including counsel fees
and expenses) incurred in pursuing such Infringement Claim, and Quark may
retain the balance.

 

7.10         Paragraph IV Notices. If any party receives a notice under 21
U.S.C. §355(b)(2)(A)(iv) or 355(j)(2)(A)(vii)(IV), or any notice under any
future analogous provisions of United States Law relating to regulation or
approval of biological products, concerning a Quark Patent Right, as it relates
to a Licensed Product (a “Paragraph IV Claim”), then it shall provide a copy of
such notice to the other parties within [ * ] after its
receipt thereof. Pfizer shall have the right, but not the obligation, to
initiate patent infringement litigation for such Paragraph IV Claim, at its own
expense. If Pfizer elects not to assume control over enforcing any Paragraph IV
Claim, Pfizer shall notify Quark as soon as practicable but in any event not
later than [ * ] before the first action required
to enforce or preserve such Paragraph IV Claim so that Quark may, but shall not
be required to, assume sole control over enforcing such Paragraph IV Claim
using counsel of its own choice. The parties shall cooperate in the prosecution
of any Paragraph IV Claim, and share any compensation recovered as a result of
such prosecution, as set forth in Section 7.9 above.

 

7.11         Other Actions by a Third Party. Each of the parties shall promptly notify
the other in the event of any legal or administrative action by any Third Party
against a Joint Patent or Quark Patent Right of which it becomes aware,
including any nullity, revocation, reexamination or compulsory license
proceeding. Pfizer shall have the first right, but not the obligation, to
defend against any such action involving a Quark Patent Right or a Joint Patent,
in its own name, and the costs of any such defense shall be at Pfizer’s expense.
Quark, upon request of Pfizer, agrees to join in any such action and to
cooperate reasonably with Pfizer. If Pfizer fails to defend against any such
action involving such Quark Patent Right or Joint Patent, then Quark shall have
the right, but not the obligation, to defend such action, in its own name, and
any such defense shall be at Quark’s expense. Pfizer, upon request of Quark,
shall cooperate reasonably with Quark in any such action.

 

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

 

29

 

7.12         Compensation to Inventors. As between Quark
and Pfizer only, Quark shall be responsible for any compensation and any other
payments due to the inventors of any Quark Patent Rights, including any Quark
Patent Rights licensed to Quark by a Third Party, and Pfizer shall be
responsible for any compensation and any other payments due to the inventors of
any Pfizer Patent Rights, including any Pfizer Patent Rights licensed to Pfizer
by a Third Party. In the case of Joint Patents, each Party shall be responsible
for any compensation and any other payments due to its respective inventors.

 

Section 8.              CONFIDENTIALITY; PUBLICATION.

 

8.1           Confidentiality.

 

(a)           Quark
agrees that, during the Term and for [ * ] thereafter,
it will keep confidential, and will cause its Affiliates to keep confidential,
all Quark Confidential Information and Pfizer Confidential Information that is
disclosed pursuant to this Agreement. Quark agrees to take such action, and to
cause its Affiliates to take such action, to preserve the confidentiality of
Quark Confidential Information and Pfizer Confidential Information,
respectively, as it would customarily take to preserve the confidentiality of
its own similar types of confidential information. Quark represents that all of
its employees and any of its consultants, scientific collaborators, or
sub-contractors who shall have access to Pfizer Confidential Information or
Quark Confidential Information are, or will be, bound by an agreement to
maintain such information in confidence. Quark shall, and shall cause its
Affiliates, (i) to use Pfizer Confidential Information only as expressly
permitted in this Agreement and (ii) not disclose Quark Confidential
Information or Pfizer Confidential Information to any Third Parties under any
circumstance without the prior consent of Pfizer, except as expressly permitted
in this Agreement.

 

(b)           Notwithstanding
Section 8.1(a), (i) Quark shall be permitted to use Quark Confidential
Information for any purpose other than those purposes exclusively licensed to
Pfizer pursuant to Section 3.1, and (ii) except as provided in the final
sentence of this Section 8.1(b), may disclose Quark Confidential Information to
actual and prospective contractors, licensees, advisors, investigators or
investors, as well as potential acquirors, that have signed confidentiality
agreements containing, or are otherwise bound by, confidentiality obligations
as restrictive as those contained herein, or as necessary or desirable to
obtain patents, enforce its rights, or to communicate with Governmental
Authorities. Quark shall not disclose Quark Confidential Information which is
related solely to Biomolecules or Licensed Products except as necessary or
reasonable to carry out the purposes of this Agreement or to obtain patents,
enforce its rights, or to communicate with Governmental Agencies.

 

(c)           Pfizer
agrees that, during the Term and for [ * ] thereafter,
it will keep confidential, and will cause its Affiliates to keep confidential,
all Quark Confidential Information that is disclosed pursuant to this Agreement.
Pfizer agrees to take such action, and to cause its Affiliates to take such
action, to preserve the confidentiality of Quark Confidential Information

 

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

 

30

 

as it would customarily take to preserve the confidentiality of its own
similar types of confidential information. Pfizer represents that all of its
employees and any of its consultants or sub-contractors who shall have access
to Quark Confidential Information are, or will be, bound by an agreement to
maintain such information in confidence. Pfizer shall, and shall cause its
Affiliates, (i) to use Quark Confidential Information only as expressly permitted
in this Agreement and (ii) not disclose Quark Confidential Information to any
Third Parties under any circumstance without the prior consent of Quark, except
as expressly permitted in this Agreement.

 

(d)           For
clarity, Pfizer may disclose Quark Confidential Information (i) to Governmental
Authorities (a) to the extent desirable to obtain or maintain INDs or
Regulatory Approvals for any Biomolecule or Licensed Product within the
Territory and (b) in order to respond to inquiries, requests or investigations
by Governmental Authorities; (ii) to outside consultants, scientific advisory
boards, managed care organizations, non-clinical and clinical investigators,
and to the extent desirable to patent, trademark, develop, register or market
any Biomolecule or Licensed Product; provided that Pfizer shall obtain the same
confidentiality obligations from such Third Parties as it obtains with respect
to its own similar types of confidential information; and (iii) to the extent
necessary in order to enforce its rights under this Agreement. Notwithstanding
anything to the contrary in this Section 8.1, Quark may disclose Pfizer
Confidential Information to Governmental Authorities in order to respond to
inquiries, requests or investigations.

 

(e)           Subject
to Sections 3.2, 5.10 and 13.3 which grant Pfizer and/or Quark continuing
rights of use of Quark Confidential Information and Pfizer Confidential
Information, as the case may be, after the termination of this Agreement
pursuant to Section 13, Pfizer and Quark each agree, upon the other’s request,
to return or destroy all Quark Confidential Information or Pfizer Confidential
Information, as the case may be, disclosed to it pursuant to this Agreement,
including all copies and extracts of documents, as promptly as practicable
following its receipt of such request, except that one (1) copy may be kept for
the purpose of complying with continuing obligations under this Agreement.

 

8.2           Publications and
Presentations. Quark
shall not, and (subject to existing commitments set forth in Schedule 8.2) shall cause its
Affiliates and its Affiliates’ employees, consultants, contractors, licensees
and agents not to, publish or publicly present any results of any preclinical
or clinical studies with respect to any Biomolecule or Licensed Product without
Pfizer’s prior consent [ * ], except
as may be required by applicable Law or legal proceedings. Pfizer recognizes
that Quark has an interest in the publication of preclinical studies (particularly
the results of proof of concept and efficacy experiments) related to
Biomolecules conducted by itself and its collaborators, and agrees that the [ * ]. Subject to the foregoing, Quark shall provide to
Pfizer the opportunity to review any proposed abstracts, manuscripts or
summaries of presentations that cover any Biomolecule or Licensed Product at
least [ * ] prior to Quark’s submission of
such proposed abstract, manuscript or summary for publication or presentation. Pfizer
shall designate a person who shall be responsible for reviewing and approving
such publications or presentations. Such designated person shall respond
promptly and in no event later than [ * ] after
receipt of the proposed material. With respect to any proposed abstracts,
manuscripts or summaries for publication or presentation by investigators or
other Third Parties,

 

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

 

31

 

such materials shall be subject to review under the principles of this
Section 8.2 to the extent reasonably practicable. Nothing in this Section 8
shall be construed to limit the right of Pfizer’s or Quark’s clinical
investigators to publish the results of their own studies.

 

8.3           Publicity. The public announcement of the execution of
this Agreement is set forth in Schedule 8.3 attached hereto and may be promptly
disseminated following the execution of this Agreement by any party. Except as
set forth in Sections 8.1(b), 8.1(d) and 8.2, no party may make a public statement
or disclosure (written or oral), including in analyst meetings, concerning the
terms of this Agreement, except where such statement: (a) is required by applicable
Law or legal proceedings, or (b) in the case of any public statement or
disclosure pursuant to clause (a) above, the party required to make such
statement or disclosure shall (i) use reasonable efforts to include in such
statement or disclosure only the information that, after consultation with counsel,
such party believes is required by applicable Law to be disclosed and (ii)
provide the other party with a copy of such statement sufficiently in advance
of dissemination so that the other party will have the opportunity to comment
upon the statement, and shall give due consideration to any comments of the
other party in the final statement.

 

8.4           Filing,
Registration or Notification of the Agreement. If a party determines that it is required
by applicable Law to publicly file, register or notify this Agreement with a
Governmental Authority, including public filings pursuant to securities laws, it
shall provide the proposed redacted form of the Agreement to the other party
with a reasonable amount of time for the other party to review such draft and agree
upon such redacted form of the Agreement. The party making such filing,
registration or notification shall request, and use commercially reasonable
efforts to obtain, confidential treatment of all terms redacted from this
Agreement for a term of at least five (5) years. Each party shall be
responsible for its own legal and other external costs in connection with any
such filing, registration or notification.

 

Section 9.              REPRESENTATIONS AND WARRANTIES.

 

9.1           Quark
Representations and Warranties. As of the date hereof and as of the Effective Date, Quark hereby
represents and warrants to Pfizer as follows:

 

(a)           Exhibit
B contains a complete and correct list of all patents and patent applications
in the Territory owned, Controlled by or licensed to Quark (and pursuant to
Section 1.45, indicating which (x) are owned and (y) which are licensed)
relating to the research, development, manufacture, use, sale, offer for sale or
importation of Biomolecules or Licensed Products. To Quark’s knowledge, the
research, development, manufacture, use, sale, offer for sale or importation by
Pfizer of the Biomolecules, including in finished dosage form, does not and
will not infringe any claim in any issued patent of any Third Party, or, if and
when issued, claims within published patent applications of any Third Party,
except as heretofore disclosed to Pfizer. Quark has furnished to Pfizer all
material information in its possession relating to (i) infringement, if any, of
Quark Patent Rights or (ii) claims within patents or published patent
applications of Third Parties covering the composition of matter or use of
Biomolecules. To the knowledge of Quark, no claim or litigation has been brought
or is threatened by any person or entity alleging that (i) any of the Quark
Patent Rights in the Territory is invalid or unenforceable, or (ii) practice of
any of the Quark Technology in the Territory infringes or otherwise conflicts
or interferes with any intellectual property or proprietary right of any Third
Party (including by way

 

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

 

32

 

of example through the institution or written threat of institution of
interference, nullity, revocation or similar invalidity proceedings before the
United States Patent and Trademark Office or any equivalent foreign entity). Quark
has complied with applicable Laws, including any disclosure requirements, in
connection with the filing, prosecution and maintenance of Quark Patent Rights
in the Territory.

 

(b)           Except
as listed on Exhibit B for patents and patent applications subject to the
licenses granted to Quark pursuant to the Atugen License, Quark is the sole
legal and beneficial owner of the Quark Patent Rights, free of any lien, encumbrance,
charge, security interest, mortgage or other similar restriction. No Third
Party has any right, interest or claims in or to, and neither Quark nor its
Affiliate has not entered into any agreement granting any right, interest,
license or claim in or to, the Quark Patent Rights or Quark Technology insofar
as such rights pertain to Biomolecules or Licensed Products. All assignments to
Quark of inventorship rights relating to the Quark Patent Rights owned by Quark
are valid and enforceable.

 

(c)           Except
for the Atugen License, there are no agreements to which Quark is a party
pursuant to which Quark has a license, an option to obtain a license, or holds
an immunity from suit, with respect to patents which are pending, applied for,
granted or registered and reasonably could be asserted by any Third Party to be
infringed by the research, development, manufacture, use, sale, offer for sale
or importation of the Biomolecules. The Atugen License (i) constitutes a valid
and legally binding obligation of each of the parties thereto, enforceable in
accordance with its terms and is in full force and effect, (ii) will continue
to be in full force and effect on identical terms immediately following the
execution and performance of this Agreement, except as modified by the Amendment
and Option of even date herewith by and among Atugen AG, Pfizer and Quark, and
(iii) represents the complete agreement and understanding between Quark and
Atugen AG relating to the patent rights that are the subject of the Atugen
License. Quark has performed all of its obligations under the Atugen License
and Quark is not (with or without the lapse of time or the giving of notice, or
both) in breach or default under the Atugen License, and, to the knowledge of
Quark, Atugen AG is not (with or without the lapse of time or the giving of
notice, or both) in breach or default thereunder. Quark has not received and is
not aware of any notice or claim against it with respect to any breach or
default under the Atugen License. Complete and correct copies of the Atugen
License (including all amendments, supplements and waivers thereto) have
heretofore been delivered to Pfizer.

 

(d)           Quark
has heretofore disclosed to Pfizer all material scientific and technical
information known to it or its Affiliates with respect to the Biomolecules and
the Licensed Products.

 

(e)           All
agreements between Quark and Third Parties regarding the supply and manufacture
of the Biomolecules (including intermediate molecules) and the Licensed
Products (including all amendments, supplements and waivers thereto) have
heretofore been delivered to Pfizer.

 

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

 

33

 

(f)            Quark
has heretofore disclosed to Pfizer all material correspondence and contact
information between Quark and the FDA and any other Governmental Authorities
regarding the Biomolecules or the Licensed Products.

 

(g)           Quark
has the corporate power and authority to execute and deliver this Agreement and
to perform its obligations hereunder, and the execution, delivery and
performance of this Agreement by Quark  have been duly
and validly authorized and approved by proper corporate actions on the part of
Quark, and Quark  has taken all other action
required by applicable Law, its certificate of incorporation, by-laws or other
organizational documents or any agreement to which it is a party or to which it
may be subject required to authorize such execution, delivery and performance
(other than compliance with all applicable requirements of the HSR Act and
other Laws implicated by the performance by Quark and its Affiliates of their
obligations hereunder at the time of such performance). Assuming due authorization,
execution and delivery on the part of Pfizer, this Agreement constitutes a
legal, valid and binding obligation of Quark, enforceable against Quark  in accordance with its terms.

 

(h)           The
execution and delivery of this Agreement by Quark and the performance by Quark
contemplated hereunder does not and will not violate any applicable Laws or any
order of any Governmental Authority (assuming compliance with all applicable
requirements of the HSR Act and other Laws implicated by the performance by
Quark and its Affiliates of their obligations hereunder at the time of such
performance), and will not conflict with or constitute a material default under
any contractual obligation of Quark or its Affiliates.

 

(i)            Neither
the execution and delivery of this Agreement nor the performance hereof by
Quark requires Quark or any of its Affiliates to obtain any permits,
authorizations or consents from any Governmental Authority (assuming compliance
with all applicable requirements of the HSR Act and other Laws implicated by
the performance by Quark and its Affiliates of their obligations hereunder at
the time of such performance) or from any other person, firm or corporation and
such execution, delivery and performance will not result in the breach of or
give rise to any termination of, rescission, renegotiation or acceleration
under or trigger any other rights under 
any agreement or contract to which Quark or any of its Affiliates may be
a party.

 

(j)            There
is no action, claim, demand, suit, proceeding, arbitration, grievance,
citation, summons, subpoena, inquiry or investigation of any nature, civil,
criminal, regulatory or otherwise, in Law or in equity, pending or relating to
or, to the knowledge of Quark, threatened against Quark or any of its
Affiliates, in each case in connection with the Quark Patent Rights, the Quark
Technology, the Biomolecules or Licensed Products or relating to the
transactions contemplated by this Agreement.

 

9.2           Pfizer Representations and Warranties. As of the date hereof and as of the
Effective Date, Pfizer hereby represents and warrants to Quark as follows:

 

(a)           Pfizer
has the corporate power and authority to execute and deliver this Agreement and
to perform its obligations hereunder, and the execution, delivery and

 

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

 

34

 

performance of this Agreement by Pfizer have been duly and validly
authorized and approved by proper corporate action on the part of Pfizer, and
Pfizer has taken all other actions required by applicable Law, its certificate
of incorporation or by-laws or any agreement to which it is a party or to which
it may be subject required to authorize such execution, delivery and
performance (other than compliance with all applicable requirements of the HSR
Act and other Laws implicated by the performance by Pfizer and its Affiliates
of their obligations hereunder at the time of such performance). Assuming due
authorization, execution and delivery on the part of Quark, this Agreement
constitutes a legal, valid and binding obligation of Pfizer, enforceable against
Pfizer in accordance with its terms.

 

(b)           The
execution and delivery of this Agreement and the performance by Pfizer
contemplated hereunder does not and will not violate any applicable Laws or any
order of any Governmental Authority (assuming compliance with all applicable
requirements of the HSR Act and other Laws implicated by the performance by
Pfizer and its Affiliates of their obligations hereunder at the time of such
performance) and will not conflict with or constitute a material default under
any contractual obligation of Pfizer or its Affiliates.

 

(c)           Neither
the execution and delivery of this Agreement nor the performance hereof by
Pfizer requires Pfizer or any of its Affiliates to obtain any permits,
authorizations or consents from any Governmental Authority (subject to
obtaining all necessary Regulatory Approvals with respect to the manufacture,
use or sale of Biomolecules and Licensed Products and assuming compliance with
all applicable requirements of the HSR Act and other Laws implicated by the
performance by Pfizer and its Affiliates of their obligations hereunder at the
time of such performance) or from any other person, firm or corporation and
such execution, delivery and performance will not result in the breach of or
give rise to any termination of, rescission, renegotiation or acceleration
under or trigger any other rights under any agreement or contract to which
Pfizer or any of its Affiliates may be a party.

 

(d)           There
is no action, claim, demand, suit, proceeding, arbitration, grievance,
citation, summons, subpoena, inquiry or investigation of any nature, civil,
criminal, regulatory or otherwise, in Law or in equity, pending or relating to
or, to the knowledge of Pfizer, threatened against Pfizer or any of its
Affiliates in each case in connection with the Pfizer Patent Rights, the Pfizer
Technology, the Biomolecules or Licensed Products or relating to the
transactions contemplated by this Agreement.

 

9.3           Disclaimer of Warranty. EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, NO PARTY
MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO BIOMOLECULES,
LICENSED PRODUCTS, QUARK PATENT RIGHTS, QUARK TECHNOLOGY, PFIZER PATENT RIGHTS
OR PFIZER TECHNOLOGY. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 9, PARTIES
EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE.

 

Section
10.            COVENANTS.

 

10.1         Quark
Covenants. Quark hereby
covenants and agrees with Pfizer that:

 

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

 

35

 

(a)           Quark
shall maintain in effect the Atugen License and shall not take any actions (or
omit to take any actions) that would result in a breach of the Atugen License
or any termination thereof prior to the applicable stated term of the Atugen
License. Quark agrees that it shall not amend, modify or supplement the Atugen
License or waive any terms or conditions thereunder that would have an adverse
effect on Pfizer’s rights hereunder, without the prior consent of Pfizer. In
addition, except as permitted by Section 16.6, Quark shall not sell, assign,
convey, pledge, hypothecate or otherwise transfer the Atugen License or Quark’s
rights or obligations thereunder, or otherwise make any commitment in a manner
that conflicts with Pfizer’s rights hereunder without the prior consent of
Pfizer. Quark shall immediately notify Pfizer upon receipt by Quark of any
notice from Atugen AG of any actual or alleged default or breach or of its
intent to terminate the Atugen License, exercise of its rights or remedies
thereunder, or otherwise take any action that may adversely affect Pfizer’s
rights under this Agreement.

 

(b)           Subject
to Section 16.6, during the Term, Quark shall not sell or assign to any person
(i) any Quark Patent Rights that are registered in the name of or owned or
Controlled by Quark, or (ii) any Quark Technology which is material to the
activities of Quark or Pfizer under this Agreement; provided, however, Quark and any Affiliate of Quark may sell or assign
Quark Patent Rights and/or Quark Technology to any wholly-owned direct or
indirect subsidiary of Quark that (x) is and continues to be at all times
incorporated and domiciled (including with respect to principal headquarters)
in any state of the United States and (y) prior to any such sale or assignment to
such person described in clause (x), has acknowledged and confirmed in writing
to Pfizer, all in a manner reasonably acceptable to Pfizer, that, effective as
of such sale or assignment, such transferee shall be bound by this Agreement as
if it were a party to it and to the identical extent applicable to the
transferor with respect to Quark Patent Rights and/or Quark Technology. In
addition, except as permitted by Section 16.6, during the Term, Quark shall not
incur or permit to exist (and shall cause each Affiliate not to incur or permit
to exist) any indebtedness for which any Quark Patent Rights and/or Quark
Technology (A) constitutes collateral for such indebtedness, or (B) is subject
to any lien, encumbrance, charge, security interest, mortgage, liability, or
other restriction with respect to such indebtedness. Nothing in this Section
10.1 shall restrict Quark from granting licenses to Third Parties under the
Quark Patent Rights or Quark Technology outside the scope of the exclusive
licenses to Pfizer contained in this Agreement.

 

(c)           Quark
shall conduct, and shall use reasonable efforts to cause its contractors and
consultants to conduct, all its activities contemplated under this Agreement in
accordance with (i) all applicable Laws of the country in which such activities
are conducted, and (ii) known or published standards of the applicable
Governmental Authority of such country.

 

10.2         Pfizer
Covenants. Pfizer hereby
covenants and agrees with Quark that Pfizer shall conduct, and shall use
reasonable efforts to cause its contractors and consultants to conduct, all its
activities contemplated under this Agreement in accordance with (i) all
applicable Laws of the country in which such activities are conducted, and (ii)
known or published standards of the applicable Governmental Authority of such
country. Pfizer further covenants and agrees that it will conduct its
activities pursuant to this Agreement in a manner that complies with the terms
and conditions of the Atugen Agreement applicable to Sublicensees thereunder,
and shall not take (or fail to take) any action that would cause Quark to be in
breach of such agreement.

 

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

 

36

 

Section
11.            CHANGE
OF CONTROL.

 

11.1         In the event Quark becomes aware
of any Change of Control, Quark shall notify Pfizer promptly, but in no event
later than [ * ], following any transaction
that constitutes a Change of Control and Pfizer shall have the right upon [ * ] notice following any Change of Control to elect that
any one or more of the following shall be deleted, in whole or in part, from
this Agreement:  [ * ].
In the event that Pfizer makes any election as provided in this Section 11 to
delete any Section (in whole or in part), neither party shall have any further
obligations with respect to such deleted Sections or parts thereof. For
clarity, Pfizer shall be entitled, in its sole discretion, to make the
elections provided for in this Section 11 upon each occurrence of Change of
Control.

 

Section
12.            TERM.

 

12.1         Unless terminated earlier pursuant to
Section 13, the term of this Agreement (the “Term”) shall be the period
commencing on the Effective Date of this Agreement and ending (i) with respect
to a particular country in the Territory, upon the expiration of the Royalty
Term applicable to such country and (ii) with respect to this Agreement, the
expiration of the last Royalty Term to expire.

 

12.2         Prior to the Effective Date, Quark and
Pfizer shall not have any rights or obligations hereunder. Notwithstanding
anything to the contrary in Section 12, effective as of the date of this
Agreement, each of Pfizer and Quark covenant and agree that (a) [ * ], and (b) Quark or its Affiliates will not negotiate,
engage in or otherwise enter into any transaction involving (i) the sale or
grant of any rights or licenses to the Quark Patent Rights or the Quark
Technology that will conflict with the rights and licenses granted to Pfizer
hereunder or (ii) any joint venture, co-promotion or similar relationship
involving the Quark Patent Rights or the Quark Technology that will conflict
with the rights and licenses granted to Pfizer hereunder. The obligations set
forth in this Section 12.2 shall terminate [ * ] after the
date of this Agreement if the Effective Date has not occurred on or before such
date.

 

Section
13.            TERMINATION.

 

13.1         Termination
Rights. This Agreement may
be terminated as follows:

 

(a)           If
either Pfizer or Quark materially breaches or materially defaults in the
performance or observance of any of the provisions of this Agreement, such
breach or default has a material adverse effect on the benefits reasonably
anticipated by the non-breaching party, and such breach or default is not cured
within [ * ] after the giving of notice by the
other party specifying such breach or default, then the other party shall have
the right to terminate this Agreement forthwith, such termination to be
effective upon the expiration of such [ * ] notice
period. For the purpose of this Section 13.1(a), a material breach or material
default in the performance of any of the provisions of this Agreement shall
include a material inaccuracy in any warranty or representation contained
herein.

 

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

 

37

 

(b)           At
any time upon [ * ] notice to Quark, Pfizer
shall have the right, at Pfizer’s sole discretion, to terminate this Agreement,
such termination to be effective upon expiration of such [ * ]
notice period. During such [ * ] period,
Pfizer and Quark shall endeavor in all reasonable respects to effect a smooth
transition to Quark (to the extent requested by Quark) of the activities being
conducted by Pfizer under this Agreement.

 

13.2         Accrued
Obligations. Expiration or
termination of this Agreement for any reason (i) shall be without prejudice to
Quark’s right to receive all payments accrued under this Agreement prior to the
effective date of such termination and to any other remedies which a party may
otherwise have and (ii) shall not release a party hereto from any indebtedness,
liability or other obligation incurred hereunder by such party prior to the
effective date of termination or expiration.

 

13.3         Effect
of Termination. Upon any
termination of this Agreement pursuant to Section 13.1, all licenses and rights
granted herein to Pfizer shall terminate, [ * ]. In
addition, unless Pfizer terminates this Agreement under Section 13.1(a), Pfizer
shall, promptly after such termination:

 

(a)           Regulatory
Matters. Transfer to Quark ownership of all regulatory filings and
Regulatory Approvals relating to the Biomolecules or the Licensed Products,
including related correspondence with Regulatory Authorities, and provide
copies thereof;

 

(b)           Pre-clinical
and Clinical Matters. Transfer to Quark all pre-clinical and clinical data
in Pfizer’s possession or control relating to Biomolecules or Licensed
Products;

 

(c)           Manufacturing
Matters. At Quark’s option, to be exercised no later than [ * ] after the effective date of termination,

 

(i)            use reasonable
efforts to [ * ],

 

(ii)           not object if Quark
desires to contract directly with any Third Party supplier of Biomolecules or
Licensed Products whose agreements are not assigned pursuant to paragraph (i)
above for the supply of such Biomolecules and Licensed Products,

 

(iii)          cooperate with
Quark in reasonable respects to transfer manufacturing documents and materials
which are used by Pfizer in the manufacture of Applicable Biomolecules or
Applicable Licensed Products to the extent such manufacturing documents and
materials are not obtained by Quark pursuant to the assignment of agreements
pursuant to paragraph (i) above,

 

(iv)          for a period of up
to [ * ] following the effective date of
termination, cooperate with Quark, at Quark’s request, in reasonable respects
to transfer manufacturing know how which are used by Pfizer in the manufacture
of Applicable Biomolecules or Applicable Licensed Products, provided Quark
shall

 

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

 

38

 

reimburse
Pfizer for Pfizer’s reasonable internal and out-of-pocket expenses incurred to
provide such requested assistance, to the extent such manufacturing know how is
not obtained by Quark pursuant to the assignment of agreements pursuant to
paragraph (i) above, and

 

(v)           sell Pfizer’s then
existing inventory of Biomolecules and Licensed Products to Quark, at [ * ], but only if the following conditions have been
met:  (A) such Biomolecules and Licensed
Products meets the applicable release specifications; and (B) Pfizer does not
believe the continued use of such Biomolecules and Licensed Products reasonably
causes safety concerns;

 

(d)           License Grant. At Quark’s
option, to be exercised no later than [ * ] after the
effective date of termination,

 

(i)            Subject to Section
13.3(d)(iii) below, grant an exclusive, fully paid-up, irrevocable, perpetual
license, with the right to sublicense and enforce, under the Pfizer Technology
solely to develop, make, have made, use, sell, offer for sale and import the
Applicable Biomolecule and the Applicable Licensed Products in the Territory;
provided, that, [ * ], and [ * ];
provided, further, Quark shall execute such documentation reasonably
satisfactory to Pfizer to effectuate such agreement;

 

(ii)           Subject to Section
13.3(d)(iii) below, grant an exclusive, royalty-bearing license, with the right
to sublicense and enforce, under the Pfizer Patent Rights solely to develop,
make, have made, use, sell, offer for sale and import the Applicable
Biomolecule and the Applicable Licensed Product in the Territory. In
consideration of such license, Quark shall pay to Pfizer [ * ],
and (B) the duration of such [ * ];
provided, that, with respect to [ * ], and [ * ];

 

(iii)          If any device was
used by Pfizer in conjunction with the Applicable Biomolecule or the Applicable
Licensed Product, then the licenses granted to Quark under this Section 13.3(d)
shall [ * ]; and

 

(e)           Assignment
of Trademark. Assign to Quark all of Pfizer’s right, title and interest in
any trademarks used solely in connection with Licensed Products;

 

provided that (x) the parties agree that any good faith failure by
Pfizer to provide immaterial data, information, reports, records,
correspondence or other materials to Quark shall not be a breach of Pfizer’s
obligations under this Section 13.3, and (y) in no event shall Pfizer be
required to retain any obligations or liabilities under agreements assigned to
Quark pursuant to this Section 13.3 except for those arising prior to the date
of assignment of such agreements.

 

If Pfizer terminates this Agreement pursuant to Section 13.1(a), Pfizer
shall, promptly after such termination, perform the activities set forth in
Sections 13.3(a), (b) and (c) above.

 

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

 

39

 

13.4         Bankruptcy. Pfizer may, in addition to any other
remedies available to it by law or in equity, exercise the rights set forth
below by notice to Quark, in the event Quark shall have become insolvent or
bankrupt, or shall have made a general assignment for the benefit of its
creditors, or there shall have been appointed a trustee or receiver of Quark or
for all or a substantial part of its property, or any case or proceeding shall
have been commenced or other action taken by or against Quark in bankruptcy or
seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction
now or hereafter in effect, and any such event shall have continued for sixty
(60) days undismissed, unbonded and undischarged. All rights and licenses
granted under or pursuant to this Agreement by Quark are, and shall otherwise
be deemed to be, for purposes of Article 365(n) of the U.S. Bankruptcy Code,
licenses of rights to “intellectual property” as defined under Article 101 of
the U.S. Bankruptcy Code. The parties agree that Pfizer, as licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the U.S. Bankruptcy Code. The parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or against
Quark under the U.S. Bankruptcy Code, Pfizer shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, and, if not already
in its possession, Quark shall promptly deliver to Pfizer all such intellectual
property and all embodiments of such intellectual property (a) upon any such
commencement of a bankruptcy proceeding upon its request therefore, unless
Quark elects to continue to perform all of its obligations under this Agreement
or (b) if not delivered under (a) above, upon the rejection of this Agreement
by or on behalf of Quark upon request therefore by Pfizer, provided, however,
that delivery of such intellectual property and related embodiments to Pfizer
shall not convey any additional rights to Pfizer or relieve it of payment
obligations or other obligations under this Agreement except to the extent  permitted by bankruptcy laws in the event
Quark rejects this Agreement.

 

Section 14.            INDEMNIFICATION.

 

14.1         General Indemnification. Pfizer and Quark will indemnify, defend and
hold each other and each other’s Affiliates, directors, officers and employees
(collectively, “Representatives”) harmless from any and all Losses (as defined
below) arising out of or resulting from a claim by a Third Party against either
party based on any action or omission of the Indemnifying Party’s agents,
employees or officers related to its obligations under this Agreement;
provided, however, that except as provided in Section 14.2 the foregoing shall
not apply if the claim is found to be based upon the negligence, recklessness
or willful misconduct of the Indemnified Party.

 

14.2         Product
Liability Indemnification.
Pfizer will indemnify, defend and hold Quark and its Affiliates, directors,
officers and employees harmless from any and all Losses arising out of or
resulting from a claim by a Third Party for death or bodily injury arising in
connection with the development, testing, manufacture, or commercialization of
Biomolecules or Licensed Products.

 

14.3         Losses. For purposes of this Agreement, “Losses”
shall mean any and all actions, costs, losses, claims, liabilities, fines,
interest, awards, judgments, penalties, demands, damages (including special,
indirect, incidental, punitive and consequential damages) and expenses
(including court costs, costs of investigation and reasonable fees and
disbursements of counsel, consultants and expert witnesses) incurred by a party
hereto.

 

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

 

40

 

14.4         Defense
Procedures; Procedures for Third Party Claims. In the event that any Third Party asserts a claim with respect to any
matter for which a party (the “Indemnified Party”) is entitled to
indemnification hereunder (a “Third Party Claim”), then the Indemnified Party
shall promptly notify the party obligated to indemnify the Indemnified Party
(the “Indemnifying Party”) thereof; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then only to the
extent that) the Indemnifying Party is prejudiced thereby.

 

(a)           Subject
to Section 14.4(c), the Indemnifying Party shall have the right, exercisable by
notice to the Indemnified Party within ten (10) days of receipt of notice from
the Indemnified Party of the commencement of or assertion of any Third Party
Claim, to assume direction and control of the defense, litigation, settlement,
appeal or other disposition of the Third Party Claim (including the right to
settle the claim solely for monetary consideration) with counsel selected by the Indemnifying Party and reasonably acceptable
to the Indemnified Party; provided that (i) the Indemnifying Party has
sufficient financial resources, in the reasonable judgment of the Indemnified
Party, to satisfy the amount of any adverse monetary judgment that may
reasonably result from such claim, (ii) the Third Party Claim does not seek
equitable or other non-monetary relief from the Indemnified Party and (iii) the
Indemnifying Party expressly agrees in writing that as between the Indemnifying
Party and the Indemnified Party, the Indemnifying Party shall be solely
obligated to satisfy and discharge the Third Party Claim in full (the
conditions set forth in clauses (i), (ii) and (iii) above are collectively
referred to as the “Litigation Conditions”).

 

(b)           Within
ten (10) days after the Indemnifying Party has given notice to the Indemnified
Party of its intended exercise of its right to defend a Third Party Claim, the
Indemnified Party shall give notice to the Indemnifying Party of any objection
thereto based upon the Litigation Conditions. If the Indemnified Party
reasonably so objects, the Indemnified Party shall continue to defend the Third
Party Claim, at the expense of the Indemnifying Party, until such time as such
objection is withdrawn. If no such notice is given, or if any such objection is
withdrawn, the Indemnifying Party shall be entitled, at its sole cost and
expense, to assume direction and control of such defense, with counsel selected
by the Indemnifying Party and reasonably acceptable to the Indemnified Party.
During such time as the Indemnifying Party is controlling the defense of such
Third Party Claim, the Indemnified Party shall cooperate, and shall cause its
Affiliates and agents to cooperate upon request of the Indemnifying Party, in
the defense or prosecution of the Third Party Claim, including by furnishing
such records, information and testimony and attending such conferences,
discovery proceedings, hearings, trials or appeals as may reasonably be requested
by the Indemnifying Party. In the event that the Indemnifying Party does not
satisfy the Litigation Conditions or does not notify the Indemnified Party of
the Indemnifying Party’s intent to defend any Third Party Claim within ten (10)
days after notice thereof, the Indemnified Party may (without further notice to
the Indemnifying Party) undertake the defense thereof with counsel of its
choice and at the Indemnifying Party’s reasonable expense (including
reasonable, out-of-pocket attorneys’ fees and costs and expenses of enforcement
or defense). The Indemnifying Party or the Indemnified Party, as the case may
be, shall have the right to join in (including the right to conduct discovery,
interview and

 

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

 

41

 

examine witnesses and participate in all settlement conferences), at
its own expense, but not control, the defense of any Third Party Claim that the
other party is defending as provided in this Agreement.

 

(c)           The
Indemnifying Party shall not, without the prior consent of the Indemnified
Party, enter into any compromise or settlement which commits the Indemnified
Party to take, or to forbear to take, any action. The Indemnified Party shall
have the sole and exclusive right to settle any Third Party Claim, on such
terms and conditions as it deems reasonably appropriate, to the extent such
Third Party Claim involves equitable or other non-monetary relief from the
Indemnified Party, but shall not have the right to settle such Third Party
Claim to the extent such Third Party Claim involves monetary damages, or
equitable or non-monetary relief from the Indemnifying Party, without the prior
consent of the Indemnifying Party. The Indemnified Party shall not make any
admission of liability in respect of the Third Party Claim without the prior
consent of the Indemnifying Party and shall use reasonable endeavors to
mitigate its loss arising from the Third Party Claim. Notwithstanding anything
to the contrary herein, in no event may an Indemnified Party settle or
compromise any Third Party Claim for which it intends to seek indemnification
from the Indemnifying Party hereunder without the prior consent of the
Indemnifying Party, or the indemnification provided under Section 14.1 as to
such Third Party Claim shall be null and void.

 

14.5         Disclaimer
of Liability for Consequential Damages. IN NO EVENT SHALL ANY PARTY OR ANY OF ITS RESPECTIVE AFFILIATES BE
LIABLE UNDER THIS AGREEMENT FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR
OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR REVENUE,  SUFFERED BY PFIZER, QUARK OR ANY OF THEIR
RESPECTIVE REPRESENTATIVES, UNDER THIS AGREEMENT, EXCEPT (A) TO THE EXTENT OF
ANY SUCH DAMAGES PAID TO A THIRD PARTY AS PART OF A THIRD PARTY CLAIM, AND (B)
FOR PURPOSES OF INDEMNIFICATION PURSUANT TO SECTION 14, IN THE EVENT OF AN
INTENTIONAL AND WILLFUL BREACH IN BAD FAITH OF ANY REPRESENTATION, WARRANTY,
COVENANT OR AGREEMENT BY QUARK OR PFIZER OR THEIR RESPECTIVE AFFILIATES (AS THE
CASE MAY BE) OF THIS AGREEMENT.

 

Section
15.            GOVERNING
LAW AND JURISDICTION.

 

15.1         Governing
Law. This Agreement shall be
governed by and construed in accordance with the Laws of the State of New York,
without regard to conflicts of law rules.

 

15.2         Jurisdiction. With the exception of those matters
referred for resolution by independent accountants under Section 6.5, in the
event of any controversy, claim or counterclaim arising out of or relating to
this Agreement, the parties shall first attempt to resolve such controversy or
claim through good faith negotiations for a period of not less than thirty (30)
days following notification of such controversy or claim to the other party. If
such controversy or claim cannot be resolved by means of such negotiations
during such period, then such 
controversy or claim shall be resolved by the United States District
Court for the Southern District of New York or a local court sitting in New
York, New York (collectively, the “Courts”).

 

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

 

42

 

Each party (a) irrevocably submits to the non-exclusive jurisdiction in
the Courts for purposes of any action, suit or other proceeding relating to or
arising out of this Agreement and (b) agrees not to raise any objection at any
time to the laying or maintaining of the venue of any such action, suit or
proceeding in any of the Courts, irrevocably waives any claim that such action,
suit or other proceeding has been brought in an inconvenient forum and further
irrevocably waives the right to object, with respect to such action, suit or
other proceeding, that such Court does not have any jurisdiction over such
party. Each of QBI and QBI Enterprises hereby irrevocably designates, appoints
and empowers Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real,
Palo Alto, CA 94306, Attention:  Robert
L. Jones, Esq., Facsimile No. (650) 849-7400, as its true and lawful agent and
attorney-in-fact in its name, place and stead to receive and accept on its
behalf service of process in any action, suit or proceeding in the Courts with
respect to any matters as to which it has submitted to jurisdiction as set
forth in the immediately preceding sentence.

 

Section
16.            MISCELLANEOUS.

 

16.1         Force
Majeure. No party hereto
shall be liable to any other party for any losses or damages attributable to a
default in or breach of this Agreement which is the result of war (whether
declared or undeclared), acts of God, revolution, acts of terror, fire,
earthquake, flood, pestilence, riot, accident(s), labor trouble, or shortage of
or inability to obtain material, equipment or transport or any other cause
beyond the reasonable control of such party (in no event to include the
obligation to pay money, unless such force majeure specifically precludes the
payment process); provided that if such a cause occurs, then the party affected
will promptly notify the other parties of the nature and likely result and
duration (if known) of such cause and use commercially reasonable efforts to
reduce the effect.

 

16.2         Severability. If and solely to the extent that any
provision of this Agreement shall be deemed invalid or unenforceable by a
Governmental Authority, such offending provision shall be of no effect and
shall not affect the validity of the remainder of this Agreement or any of its provisions;
provided, however, the parties shall use their respective reasonable efforts to
renegotiate the offending provisions to best accomplish the original intentions
of the parties.

 

16.3         Waivers;
Remedies. Any term or
condition of this Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party or
parties waiving such term or condition. Neither the waiver by any party of any
term or condition of this Agreement nor the failure on the part of any party,
in one or more instances, to enforce any of the provisions of this Agreement or
to exercise any right or privilege, shall be deemed or construed to be a waiver
of such term or condition for any similar instance in the future or of any
subsequent breach hereof. All rights, remedies, undertakings, obligations and
agreements contained in this Agreement shall be cumulative and none of them
shall be a limitation of any other remedy, right, undertaking, obligation or
agreement.

 

16.4         Entire
Agreements; Amendments. This
Agreement, together with the Amendment and Option, dated the date hereof, among
Quark, QBI Enterprises Ltd, Atugen AG and Pfizer, sets forth the entire
agreement and understanding among the parties as to the subject matter hereof
and supersedes all agreements or understandings, verbal or written, made
between

 

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

 

43

 

Quark and Pfizer before the date hereof with respect to the subject
matter hereof, including the Confidentiality Agreement between the parties,
dated December 6, 2005. None of the terms of this Agreement shall be amended,
supplemented or modified except in writing signed by the parties.

 

16.5         Survival. The provisions of Sections 3.2 (Research
License), 6.5 (Inspection of Records), 8.1 (Confidentiality), 13.3 (Effect of
Termination), 14 (Indemnification) and, 15 (Governing Law and Jurisdiction), as well as any other Sections or defined terms referred to in such Sections
or necessary to give them effect
shall survive
termination or expiration of this Agreement and remain in force until
discharged in full. Furthermore, any
other provisions required to interpret and enforce the parties’ rights and
obligations or to wind up their outstanding obligations under this Agreement
shall survive to the extent required.

 

16.6         Assignment. Neither this Agreement nor any rights or
obligations hereunder may be assigned or otherwise transferred by any party
without the consent of the other parties; provided, however, any party may,
without such consent, assign this Agreement, in whole or in part: (i) to any of
its respective Affiliates; provided that such party shall remain jointly and
severally liable with such Affiliate in respect of all obligations so assigned
and such Affiliate has acknowledged and confirmed in writing that effective as
of such assignment or other transfer, such Affiliate shall be bound by this
Agreement as if it were a party to it as and to the identical extent applicable
to the transferor; (ii) any successor in interest by way of merger, acquisition
or sale of all or substantially all of its assets provided that such successor
agrees in writing to be bound by the terms of this Agreement as if it were the
assigning party; (iii) any sale or other transfer by Quark to a Third Party of
all (and not less than all) of its right, title and interest in the Quark
Patent Rights and the Quark Technology (subject to licenses back consistent
with the licenses to Pfizer set forth herein), provided (x) such Third Party is
and continues to be at all times incorporated and domiciled (including with
respect to principal headquarters) in any state of the United States and (y)
prior to such sale or transfer, has acknowledged and confirmed in writing to
Pfizer, all in a manner reasonably acceptable to Pfizer, that, effective as of
such sale or transfer, such Third Party shall be bound by this Agreement as if
it were a party to it and to the identical extent applicable to Quark with respect
to Quark Patent Rights and/or Quark Technology, or (iv) to a Third Party in
circumstances where a party or its Affiliates is required to, or reasonably
believes based on advice of counsel, that it will be required to, divest any of
the Licensed Products in order to comply with applicable Law or the order of
any Governmental Authority as a result of a merger or acquisition. [ * ]. Any purported assignment in violation of this Section
16.6 shall be void. Any permitted assignee shall assume all obligations of its
assignor under this Agreement.

 

16.7         Independent Contractor. The relationship between Quark and Pfizer is that of independent
contractors. Quark and Pfizer are not joint venturers, partners, principal and
agent, employer and employee, and have no other relationship other than
independent contracting parties.

 

16.8         Notices. Each communication and document made or delivered by one party to
another under this Agreement shall be made in the English language. All notices, consents, approvals, requests or
other communications required hereunder given by one party to the other

 

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

 

44

 

hereunder
shall be in writing and made by registered or certified air mail, facsimile,
express overnight courier or delivered personally to the following addresses of
the respective parties:

 

	
   

  	
  If to Quark:

  	
   

  	
  Quark Biotech, Inc.

  
	
   

  	
   

  	
   

  	
  6536 Kaiser Drive

  
	
   

  	
   

  	
   

  	
  Freemont, CA 94555

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attention:   Daniel Zurr, Ph.D.

  
	
   

  	
   

  	
   

  	
  Facsimile:   (510) 402-4021

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Cooley Godward LLP

  
	
   

  	
   

  	
   

  	
  Five Palo Alto Square

  
	
   

  	
   

  	
   

  	
  3000 El Camino Real

  
	
   

  	
   

  	
   

  	
  Palo Alto, CA 94306

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attention:   Robert
  L. Jones, Esq.

  
	
   

  	
   

  	
   

  	
  Facsimile:   (650) 849-7400

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to Pfizer:

  	
   

  	
  Pfizer Inc.

  
	
   

  	
   

  	
   

  	
  235 East 42nd Street

  
	
   

  	
   

  	
   

  	
  New York, New York 10017-5755

  
	
   

  	
   

  	
   

  	
  U.S.A.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attention: President, Pfizer Human Health

  
	
   

  	
   

  	
   

  	
  Facsimile:      1-212-808-8652

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Attention: Executive Vice President and General Counsel

  
	
   

  	
   

  	
   

  	
  Facsimile:      1-212-808-8924

  

 

Notices
hereunder shall be deemed to be effective (a) upon receipt if personally
delivered, (b) on the tenth (10th) day following the date of mailing
if sent by registered or certified air mail; (c) on the second (2nd)
day following the date of transmission or delivery to the overnight courier if
sent by overnight courier; and (d) on the next day after the date sent by
facsimile (with receipt confirmation). A party may change its address listed
above by sending notice to the other party in accordance with this Section
16.8.

 

16.9         Third
Party Beneficiaries. None of
the provisions of this Agreement shall be for the benefit of or enforceable by
any Third Party, including, any creditor of either party. No such Third Party
shall obtain any right under any provision of this Agreement or shall by
reasons of any such provision make any claim in respect of any debt, liability
or obligation (or otherwise) against either party.

 

16.10       Joint
and Several Obligations. All
obligations of QBI and QBI Enterprises under this Agreement shall be joint and
several.

 

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

 

45

 

16.11       Binding
Effect. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns.

 

16.12       Counterparts. This Agreement may be executed in any two
or more counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same document.

 

16.13       Headings. Headings in this Agreement are included
herein for ease of reference only and shall have no legal effect.

 

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

 

46

 

IN WITNESS WHEREOF the parties hereto have caused
this Agreement to be executed by their duly authorized officers on the date
first written above.

 

	
  QUARK BIOTECH, INC.

  	
  PFIZER INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Daniel Zurr

  	
   

  	
  By: 

  	
  /s/ Lisa Ricciardi

  	
   

  
	
   

  	
   

  
	
  Name: 

  	
  Daniel Zurr

  	
  Name:

  	
  Lisa Ricciardi

  
	
   

  	
   

  
	
  Title:

  	
  President and Chief Executive Officer

  	
  Title:

  	
  Senior Vice President, 

  
	
   

  	
   

  	
  Licensing & Development 

  
	
   

  	
   

  	
  Pfizer, Inc.

  
								

 

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

 

47

 

EXHIBIT A

 

BIOMOLECULES

 

[ * ]

 

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

 

1

 

EXHIBIT B

 

QUARK PATENT RIGHTS

 

(i)
owned by Quark

 

	
  PUBLICATION/PATENT

  NO.

  	
   

  	
  APPLICATION

  NO.

  	
   

  	
  FILING
  DATE

  	
   

  	
  PROSECUTING

  PARTY

  
	
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(ii)
licensed to Quark

 

	
  PUBLICATION
  NO.

  	
   

  	
  APPLICATION

  NOS.

  	
   

  	
  FILING

  DATE

  	
   

  	
  PROSECUTING

  PARTY

  
	
  [ * ]

  	
   

  	
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  [ * ]

  	
   

  	
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  [ * ]

  

 

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

 

2

 

	
  PUBLICATION
  NO.

  	
   

  	
  APPLICATION

  NOS.

  	
   

  	
  FILING

  DATE

  	
   

  	
  PROSECUTING

  PARTY

  
	
  [ * ]

  	
   

  	
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  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  

 

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

 

3

 

EXHIBIT C

 

TRANSITION PLAN

 

1.                                       Transition
Services

 

1.1                                 Document,
Information, and Material Transfer

 

1.1.1                        Request. Quark will
use reasonable efforts to provide the following to Pfizer no later than [ * ] after the Effective Date (unless otherwise specified
herein or agreed to by the parties): [ * ]

 

1.2                                 Regulatory
Applications 

 

1.2.1                        United States
INDs. Within [ * ] after written notification
from Pfizer that [ * ]

 

1.2.2                        Non-U.S. INDs. With respect
to all non-US INDs for [ * ], within [ * ] after written notification from Pfizer, [ * ]

 

1.2.3                        Maintenance by
Quark. For the period beginning on the Effective Date and ending on the
earlier of (i) [ * ]

 

1.2.4                        Word Documents. Within [ * ] after the Effective Date, Quark will deliver [ * ].

 

1.2.5                        Interaction
with Regulatory Authorities. After the Effective Date, [ * ]

 

1.3                                 Safety
Reporting

 

1.3.1                        Unless
otherwise directed [ * ]

 

1.3.2                        The parties
will designate representatives from Pfizer and Quark [ * ]

 

1.4                                 Conduct of
Ongoing Clinical Trials 

 

1.4.1                        Until Quark
receives written notification from Pfizer [ * ]

 

1.5                                 Quality
Assurance 

 

1.5.1                        Completion of
Audit Reports. Quark shall use reasonable efforts to complete all
preclinical, clinical, and manufacturing quality assurance audit reports for any
audits completed or ongoing as of the Effective Date relating to [ * ]

 

1.6                                 Pharmaceutical
Sciences/Manufacturing

 

1.6.1                        Stability
Program Management. Quark will transfer [ * ]

 

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

 

4

 

1.6.2                        Document
Transfer and Management. Quark will transfer [ * ]

 

1.7                                 Third Party
Contracts

 

1.7.1                        No later than [ * ] after the Effective Date, Quark will provide Pfizer
with [ * ]

 

1.7.2                        Pfizer agrees
to [ * ]

 

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

 

5

 

ATTACHMENT 1

 

[ * ]

 

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

 

1

 

ATTACHMENT II

 

THIRD PARTY CONTRACTS

 

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

 

2

 

SCHEDULE 4.8

 

REIMBURSEMENT OF CERTAIN EXPENSES

 

	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

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

 

3

 

SCHEDULE 4.9

 

CERTAIN TERMS OF ISRAEL DISTRIBUTION

 

I.                                         Quark shall
have the exclusive right to market, promote, distribute and sell the Licensed
Product, at its expense.

 

II.                                     Pfizer shall
obtain and maintain the Regulatory Approval for the Licensed Product, at its
expense. If permitted by applicable Laws, Pfizer shall obtain the Price
Approval for the Licensed Products, at its expense. If Pfizer is not permitted
by applicable Laws to obtain Price Approval for the Licensed Products, then
Quark shall obtain the Price Approval for the Licensed Products. Pfizer shall
manufacture and supply the Licensed Product to Quark on terms to be agreed.

 

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

 

4

 

SCHEDULE 4.12 

 

Non-Ophthalmic Indications for siRNAs Inhibiting RTP801 

Workplan 2006 — 2007

 

[ * ]

 

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

 

5

 

SCHEDULE 6.3

 

FORM OF ANNUAL SALES REPORT FOR US

 

[ * ]

 

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

 

6

 

FORM OF ANNUAL SALES REPORT FOR MAJOR EU
COUNTRIES AND JAPAN

 

Annual Report-Major Countries — Non-US

 

[ * ]

 

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

 

7

 

SCHEDULE 6.4

 

QUARK’S BANK ACCOUNT INFORMATION

 

[ * ]

 

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

 

8

 

SCHEDULE 7.3

 

QUARK PATENT FILING SCHEDULE

 

[ * ]

 

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

 

9

 

SCHEDULE 8.2

 

THIRD PARTY AGREEMENTS WITH EXISTING
COMMITMENTS TO PERMIT PUBLICATION

 

[ * ]

 

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

 

10

 

SCHEDULE 8.3

 

PRESS RELEASE

 

	
  For immediate release:

  	
  Contacts:

  	
  Pfizer:

  
	
  September 26, 2006

  	
   

  	
  Paul Fitzhenry

  
	
   

  	
   

  	
  (212) 733-4637

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Quark Biotech:

  
	
   

  	
   

  	
  Juliana Friedman

  
	
   

  	
   

  	
  (972-8-9305-111)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ogilvy PR:

  
	
   

  	
   

  	
  Cynthia Isaac

  
	
   

  	
   

  	
  (212) 880-5206

  

 

PFIZER EXPANDS RESEARCH COMMITMENT TO
OPHTHALMOLOGY THROUGH LICENSING AGREEMENT WITH QUARK BIOTECH

 

Novel gene target RTP-801 offers a new
approach for a potential treatment of age-related macular degeneration

 

NEW YORK, NY, FREMONT, CA and NESS-ZIONA, ISRAEL September 26 - Pfizer
Inc and Quark Biotech, Inc., announced today that they have entered into an
agreement under which Pfizer acquires an exclusive worldwide license to Quark’s
novel human gene RTP-801 and to molecules that modify its expression or
function. RTP-801 is involved in the development of pathologic blood vessels
which accelerate the progression of age-related macular degeneration (AMD).

 

Financial terms of the agreement were not announced. The agreement is
subject to clearance by the U.S. Federal Trade Commission.

 

AMD is the leading cause of blindness in the developed world affecting
about 15 million Americans over the age of 50. The target for RTP-801 is
neovascular or wet AMD. Wet AMD is the most devastating form of the disease and
occurs due to the formation of an abnormal vascular network beneath the retina
of the eye. These blood vessels are excessively leaky and lead to an
accumulation of fluid and blood beneath and within the retina resulting in a
loss of visual acuity.

 

“Despite advances in research and the availability of new treatment
options, there remains a need for new approaches to improve the lives of
patients with AMD,” said Martin Mackay, Ph.D., Pfizer senior vice president
Worldwide Research and Technology. “We are excited about the

 

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

 

11

 

potential of RTP-801i to preserve vision in patients with wet AMD who
have an increased risk of progressive eye damage and vision loss.”

 

“We are pleased that Pfizer has chosen our novel target RTP801 and
biomolecules for its drug development program” said Daniel Zurr, CEO of Quark.
“This agreement provides further recognition for Quark’s creative approach to
discover conceptually new drugs to treat devastating diseases. We are dedicated
to help society with innovative medicines by moving from novel gene targets to
unique compounds and eventually commercial products.”

 

Based on pre-clinical models, it is believed that AMD can be treated by
blocking the expression of the RTP-801 gene through RNA interference or RNAi.
RNAi is a naturally occurring mechanism within cells for selectively silencing
and regulating specific genes. The ability to silence genes through RNAi could
provide a new way to treat a wide range of human diseases - including AMD -
that are caused by the inappropriate activity of specific genes.

 

Pfizer Inc: Working for a healthier worldTM  

Founded in 1849, Pfizer is the world’s largest research-based pharmaceutical
company taking new approaches to better health. We discover and develop innovative
medicines to treat and help prevent disease for both people and animals.
Through consistent, high-quality manufacturing and distribution operations, our
medicines reach patients in 180 nations. We also partner with healthcare
providers, governments and local communities around the world to expand access
to our medicines and to provide better quality healthcare and health system
support. At Pfizer, our colleagues work every day to help people stay happier
and healthier longer and to reduce the human and economic burden of disease
worldwide.

 

About Quark Biotech, Inc.

 

Quark Biotech, Inc. is a privately held development-stage,
biopharmaceutical company headquartered in Fremont, CA. Through an innovative
combination of gene silencing and DNA microarray technology, Quark has
pioneered and patented its BiFARTM platform for high-throughput functional
profiling, allowing significant advances in the identification of target genes
and proteins. This technology allows the company to develop conceptually novel
drugs that could provide previously unavailable benefits to patients. Quark
development efforts are focused on treatment of fibrotic and ischemic diseases
of the eye, kidney and lungs, in indications with clear unmet medical needs.

 

Quark corporate product development teams are based in Fremont, CA and
research facilities in Ness-Ziona, Israel

 

# # # # #

 

PFIZER DISCLOSURE NOTICE: The information contained in this document is
as of September 26, 2006. Pfizer assumes no obligation to update any
forward-looking statements contained in this document as a result of new
information or future events or developments.

 

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

 

12

 

This release contains forward-looking information about a research and
development program and the potential efficacy of product candidates that might
result from the program that involve substantial risks and uncertainties. Such
risks and uncertainties include, among other things, the uncertainty inherent
in research and development activities, decisions by regulatory authorities
regarding whether and when to approve any drug applications that may result
from the program as well as their decisions regarding labeling and other
matters that could affect the commercial potential of product candidates that
may result from the program; and competitive developments.

 

A further list and description of risks and uncertainties can be found
in the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2005, and in its reports on Form 10-Q and Form 8-K.

 

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

 

13EXHIBIT 10.27

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

LICENSE
AGREEMENT

This License
Agreement (this “Agreement”) is entered into by and between ALNYLAM
PHARMACEUTICALS, INC., a corporation organized under the laws of the State of
Delaware having a principal office at 300 Third Street, Cambridge MA 02142
U.S.A. (“ALNYLAM”), and Quark Biotech, Inc. a corporation organized under the
laws of the State of California having offices located at 6536 Kaiser Avenue,
Fremont CA 94555 U.S.A. (“QUARK”).

INTRODUCTION

ALNYLAM owns or has
rights to certain intellectual property covering technology useful for the
discovery, development, manufacture, characterization, or use of therapeutic
products that function through RNA interference (“RNAi”).

QUARK desires to research
and potentially develop and commercialize products that function through RNAi
directed at inhibition of expression of the target identified as RTP801,
and QUARK seeks a non-exclusive license under certain intellectual property of
ALNYLAM to research, develop and commercialize such products.

ALNYLAM is willing to
grant the non-exclusive license to research, develop and commercialize products
as described above to QUARK under the terms and conditions of this Agreement,
and a related agreement of even date concerning other intellectual property.

In consideration
of the mutual covenants contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, ALNYLAM and QUARK
agree as follows:

 

 

TABLE OF
CONTENTS

	
   

  	
   

  	
  PAGE

  
	
  ARTICLE 1 — DEFINITIONS

  	
  1

  
	
  1.1

  	
  Act

  	
  1

  
	
  1.2

  	
  Affiliate

  	
  1

  
	
  1.3

  	
  ALNYLAM

  	
  1

  
	
  1.4

  	
  ALNYLAM Patent Rights

  	
  1

  
	
  1.5

  	
  Approval

  	
  1

  
	
  1.6

  	
  Commercialize or Commercialization

  	
  1

  
	
  1.7

  	
  Commercially Reasonable Efforts

  	
  1

  
	
  1.8

  	
  Confidential Information

  	
  2

  
	
  1.9

  	
  Develop, Developing or Development

  	
  2

  
	
  1.10

  	
  Effective Date

  	
  2

  
	
  1.11

  	
  FDA

  	
  2

  
	
  1.12

  	
  Field

  	
  2

  
	
  1.13

  	
  First Commercial Sale

  	
  2

  
	
  1.14

  	
  GAAP

  	
  2

  
	
  1.15

  	
  Group I Patent Rights

  	
  2

  
	
  1.16

  	
  Group II Patent Rights

  	
  2

  
	
  1.17

  	
  IND or Investigational New Drug Application

  	
  2

  
	
  1.18

  	
  Licensed RNAi Product

  	
  2

  
	
  1.19

  	
  Major Market

  	
  3

  
	
  1.20

  	
  Net Sales

  	
  3

  
	
  1.21

  	
  Party

  	
  4

  
	
  1.22

  	
  Phase I Clinical Trial

  	
  4

  
	
  1.23

  	
  Phase II Clinical Trial

  	
  4

  
	
  1.24

  	
  Phase III Clinical Trial

  	
  5

  
	
  1.25

  	
  QUARK

  	
  5

  
	
  1.26

  	
  Research or Researching

  	
  5

  
	
  1.27

  	
  RNAi Product

  	
  5

  
	
  1.28

  	
  Royalty Quarter

  	
  5

  
	
  1.29

  	
  siRNA

  	
  5

  
	
  1.30

  	
  Sublicensee

  	
  5

  
	
  1.31

  	
  Target

  	
  5

  
	
  1.32

  	
  Term

  	
  5

  
	
  1.33

  	
  Territory

  	
  6

  
	
  1.34

  	
  Valid Claim

  	
  6

  
	
  ARTICLE 2 — LICENSE GRANT

  	
  6

  
	
  2.1

  	
  Licenses of
  ALNYLAM Patent Rights

  	
  6

  
	
  2.2

  	
  Retained Rights of ALNYLAM

  	
  6

  
	
  2.3

  	
  Commercially Reasonable Efforts

  	
  6

  
	
  2.4

  	
  Regulatory Filings

  	
  7

  

 

i

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

 

 

	
  ARTICLE 3 — FEES AND ROYALTIES

  	
  7

  
	
  3.1

  	
  Upfront Fee

  	
  7

  
	
  3.2

  	
  Maintenance Fee

  	
  7

  
	
  3.3

  	
  Milestone Payments

  	
  7

  
	
  3.4

  	
  Royalties

  	
  8

  
	
  3.6

  	
  Reduction in Royalty Payments

  	
  10

  
	
  ARTICLE 4 — INTELLECTUAL PROPERTY

  	
  10

  
	
  4.1

  	
  Prosecution and
  Maintenance of Patent Rights

  	
  10

  
	
  4.2

  	
  Infringement of ALNYLAM Rights

  	
  10

  
	
  4.3

  	
  Claimed Infringement of Third Party Rights

  	
  11

  
	
  4.4

  	
  Other Infringement Resolutions

  	
  11

  
	
  4.5

  	
  Interpretation of Patent Judgments

  	
  11

  
	
  ARTICLE 5 — CONFIDENTIAL INFORMATION

  	
  12

  
	
  5.1

  	
  Non-Use and
  Non-Disclosure of Confidential Information

  	
  12

  
	
  5.2

  	
  Limitation on Disclosures

  	
  12

  
	
  ARTICLE 6 — REPORTS, TAXES AND PAYMENTS

  	
  13

  
	
  6.1

  	
  Reports

  	
  13

  
	
  6.2

  	
  Tax Withholding

  	
  13

  
	
  6.3

  	
  Payments

  	
  13

  
	
  6.4

  	
  Audits

  	
  13

  
	
  ARTICLE 7 — INDEMNIFICATION AND INSURANCE

  	
  14

  
	
  7.1

  	
  QUARK
  Indemnification

  	
  14

  
	
  7.2

  	
  Insurance

  	
  15

  
	
  ARTICLE 8 — EXPORT

  	
  15

  
	
  8.1

  	
  General

  	
  15

  
	
  8.2

  	
  Delays

  	
  15

  
	
  8.3

  	
  Assistance

  	
  15

  
	
  ARTICLE 9 — TERM AND TERMINATION

  	
  16

  
	
  9.1

  	
  Term

  	
  16

  
	
  9.2

  	
  Expiration

  	
  16

  
	
  9.3

  	
  Material Breach

  	
  16

  
	
  9.4

  	
  Termination by QUARK

  	
  16

  
	
  9.5

  	
  Consequences of Termination; Survival

  	
  16

  
	
  9.6

  	
  License upon Termination

  	
  16

  
	
  ARTICLE 10 — MISCELLANEOUS

  	
  17

  
	
  10.1

  	
  Representations by QUARK and ALNYLAM

  	
  17

  
	
  10.2

  	
  Dispute Resolution

  	
  18

  

 

ii

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

 

 

	
  10.3

  	
  Publicity

  	
  19

  
	
  10.4

  	
  Force Majeure

  	
  20

  
	
  10.5

  	
  Consequential Damages

  	
  20

  
	
  10.6

  	
  Assignment

  	
  20

  
	
  10.7

  	
  Notices

  	
  21

  
	
  10.8

  	
  Independent Contractors

  	
  22

  
	
  10.9

  	
  Governing Law; Jurisdiction

  	
  22

  
	
  10.10

  	
  Severability

  	
  22

  
	
  10.11

  	
  No Implied Waivers

  	
  22

  
	
  10.12

  	
  Entire Agreement

  	
  22

  
	
  10.13

  	
  Counterparts

  	
  22

  
	
  EXHIBIT A

  	
  ALNYLAM PATENT RIGHTS

  	
  1

  
	
  EXHIBIT B

  	
  IN-LICENSES COVERING ALNYLAM PATENT RIGHTS

  	
  1

  
	
  APPENDIX I

  	
  TARGET

  	
  1

  

 

iii

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

 

 

ARTICLE I —
DEFINITIONS

General.  When used in this Agreement, each of the
following terms, whether used in the singular or plural, will have the meanings
set forth in this Article I.

1.1                                 Act
means the United States Food, Drug and Cosmetic Act of 1938, 21 U.S.C.  §§ 301, 42 U.S.C., as such may be amended
from time to time, and its implementing regulations.

1.2                                 Affiliate
means any corporation, company, partnership, joint venture and/or firm which
controls, is controlled by, or is under common control with a Party.  For purposes of the foregoing sentence, “control”
will mean (a) in the case of corporate entities, direct or indirect ownership
of at least fifty percent (50%) of the stock or shares having the right to vote
for the election of directors, (b) in the case of non-corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the equity
interest with the power to direct the management and policies of such
non-corporate entities, and (c) in any country where local law does not permit
foreign entities to own stock or shares or have equity interest of fifty
percent (50%) or more in such entities, the direct or indirect ownership or
control of the maximum percentage of such stock or shares or equity interest as
is permitted under local law.

1.3                                 ALNYLAM
means Alnylam Pharmaceuticals, Inc., a Delaware corporation, its Affiliates
(including its subsidiaries, Alnylam U.S., Inc. and Alnylam Europe AG), and
their respective successors and assigns.

1.4                                 ALNYLAM
Patent Rights means the patents and patent applications listed on Exhibit A
and all patent applications hereafter filed that derive from the patents and
patent applications listed on Exhibit A, including all continuations,
continuations-in-part, divisions, applications for certificate of invention,
provisionals, or any substitute applications, any patents issued with respect
to any such patent applications; and all reissues, substitutions,
confirmations, re-registrations, re-examinations, invalidations, supplementary
protection certificates, certificates of invention and patents of addition of
any such patents; and all foreign equivalents of any of the foregoing.

1.5                                 Approval
means, with respect to each Licensed RNAi Product Developed and Commercialized,
the receipt of sufficient authorization from the appropriate regulatory
authority on a country-by-country basis to market such Licensed RNAi Product in
a country, including (where necessary in a particular country prior to
marketing a Licensed RNAi Product) all separate pricing and/or reimbursement
approvals that may be required for marketing.

1.6                                 Commercialize
or Commercialization means any and all activities directed to manufacturing
(including, without limitation, by means of contract manufacturers), marketing,
promoting, distributing, importing, exporting and selling an RNAi Product, in
each case for commercial purposes, and activities directed to obtaining pricing
and reimbursement approvals, as applicable.

1.7                                 Commercially
Reasonable Efforts means the level of efforts and resources that would be 

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

 

1

 

                                                employed
by a biotechnology company with equivalent resources to QUARK in connection
with Researching, Developing, and Commercializing its own products of similar
market potential at a similar stage of its product life, taking into account
the apparent attributes of the molecule, the competitiveness of the relevant
marketplace, the proprietary positions of third parties, regulatory structures,
including the likelihood of obtaining an Approval, and the anticipated
profitability of such product.

1.8                                 Confidential
Information means all proprietary or confidential information and
materials, patentable or otherwise, of a Party which are disclosed by or on
behalf of such Party to the other Party hereunder, including, without
limitation, chemical substances, formulations, techniques, methodology,
equipment, data, reports, know how, sources of supply, patent positioning,
business plans, and also including without limitation proprietary and confidential
information of third parties in possession of such Party under an obligation of
confidentiality, whether or not related to making, using or selling Licensed
RNAi Products.

1.9                                 Develop,
Developing or Development means with respect to an RNAi Product,
preclinical and clinical drug development activities, including: test method
development and stability testing, toxicology, formulations, quality
assurance/quality control development, statistical analysis and report writing;
clinical studies and regulatory affairs; Approval and registration.

1.10                           Effective
Date means September 26, 2006.

1.11                           FDA
means the United States Food and Drug Administration or any successor agency
thereto.

1.12                           Field  means the use of therapeutic RNAi Products
against the Target for the treatment in humans of [ * ]

1.13                           First
Commercial Sale means, with respect to each Licensed RNAi Product, the
first commercial sale in a country as part of a nationwide introduction after
receipt by Quark or any of its Affiliates or Sublicensees of Approval in such
country, excluding de minimis named patient and compassionate use sales.

1.14                           GAAP
means United States generally accepted accounting principles applied on a
consistent basis.  Unless otherwise
defined or stated, financial references shall be calculated by the accrual
method under GAAP.

1.15                           Group
I Patent Rights means the ALNYLAM Patent Rights identified on Exhibit A as
Group I Patent Rights.

1.16                           Group
II Patent Rights means the ALNYLAM Patent Rights identified on Exhibit A as
Group II Patent Rights.

1.17                           IND
or Investigational New Drug Application means a United States
investigational new drug application or its equivalent or any corresponding
foreign application.

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

 

2

 

1.18                           Licensed
RNAi Product means an RNAi Product, the identification, characterization,
validation, synthesis, development, use, formulation, manufacture, production
or sale of which would infringe a Valid Claim but for the grant of the licenses
set forth in this Agreement.

1.19                           Major
Market means, individually and collectively, [ * ].

1.20                           Net
Sales means, with respect to Licensed RNAi Products, the gross amount
invoiced by QUARK or its Affiliates or Sublicensees on sales or other
dispositions of such Licensed RNAi Products to third parties which are not
Affiliates in those countries where at least a Valid Claim covering such
Licensed RNAi Product then exists, less actual bad debts, sales returns and
allowances actually paid, granted or accrued, including trade, quantity and
cash discounts and any other adjustments, including granted on account of price
adjustments, billing errors, rejected goods, damaged or defective goods,
recalls, returns, rebates, chargebacks, reimbursements or similar payments
granted or given to wholesalers or other distributors, buying groups, health
care insurance carriers or other institutions, adjustments arising from
consumer discount programs or similar programs, or arising in connection with
any Discount or Savings Program (as defined below), customs or excise duties, sales
tax, consumption tax, value added tax, and other similar taxes (except income
taxes) measured by the production, sale, or delivery of goods in each case only
if included as a specific line item on an invoice to such third party or duties
relating to sales and any payments in respect of sales to the United States
government, any State government or any foreign government, or to any
governmental authority, or with respect to any government subsidized program or
managed care organization, and charges for freight and insurance related to the
return of Licensed RNAi Products and not otherwise paid by the customer.  For purposes of this definition of “Net Sales”
only, “Discount or Savings Program” means any discount, rebate or reimbursement
program applicable to a Licensed RNAi Product under which QUARK or its
Affiliates or Sublicensees provides to low income, uninsured or other patients
the opportunity to purchase pharmaceutical products at discounted prices.

In the event that
a Licensed RNAi Product is sold in any country in the form of a combination
product containing one or more therapeutically active ingredients in addition
to such Licensed RNAi Product in any year, Net Sales of such combination
product will be adjusted by multiplying actual Net Sales of such combination
product in such country by the fraction A/(A+B), where A is the average Net
Sales prices per daily dose during such year of the Licensed RNAi Product in
such country, if sold separately in such country, and B is the average Net
Sales prices per daily dose of any product containing the other therapeutically
active ingredients in the combination product in such country, if sold
separately in such country.  If, in a
specific country, the product containing the other therapeutically active
ingredients in the combination product are not sold separately in such country,
Net Sales will be calculated by multiplying actual Net Sales of such
combination product by the fraction A/C, where A is the average Net Sales
prices per daily dose of the Licensed RNAi Product in such country and C is the
average Net Sales prices per daily dose of the combination product in such
country.  If, in a specific country, the
Licensed RNAi Product is not sold separately in such country, Net Sales will be
calculated by multiplying actual Net Sales of such combination product by the
fraction

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

 

3

 

(C-B)/C, where B
is the average Net Sales prices per daily dose of the product containing the
other therapeutically active ingredients in the combination product in such
country and C is the average Net Sales prices per daily dose of the combination
product in such country.  If, in a
specific country, both the Licensed RNAi Product and the product containing the
other therapeutically active ingredients in the combination product are not
sold separately in such country, the Net Sales price for the Licensed RNAi
Product and the product containing the other therapeutically active ingredients
in the combination product will be negotiated by the Parties in good faith
based upon the costs, overhead and profit as are then incurred for the Licensed
RNAi Product and all similar substances then being made and marketed by the
selling Party and having an ascertainable market price.

In the event QUARK
or any of its Affiliates or Sublicensees receive non-monetary consideration in
exchange for the sale or other disposition of Licensed RNAi Products to Third
Parties which are not Affiliates, Net Sales for such sale or other disposition
shall include the fair market value of the non-cash consideration received as a
result of such sale or other disposition. 
If such sale or other disposition occurred in a country where QUARK or
such Affiliate or Sublicensee sold the same Licensed RNAi Product in commercial
quantities solely for monetary consideration, the fair market value of the
non-cash consideration received for such Licensed RNAi Product shall be
determined on the basis of the value received in such solely monetary
transactions.  If QUARK or its Affiliate
or Sublicensee did not have sales or other dispositions of Licensed RNAi
Product in such country solely for monetary consideration, then the fair market
value of such products shall be determined on the basis of all relevant facts
and circumstances.

In the event that
QUARK or any of its Affiliates or Sublicensees price and sell Licensed RNAi
Products in conjunction with other products of QUARK or its Affiliates or
Sublicensees at a single price or rate or at a discount for collectively buying
such products, then Net Sales with respect to such Licensed RNAi Product shall
equal the number of units of the Licensed RNAi Product sold together with the
non-Licensed RNAi Products multiplied by the average Net Sales price at which
QUARK or any of its Affiliates or Sublicensees sold the Licensed RNAi Product
individually to similar customers for similarly sized orders.

Net Sales shall be
determined from books and records maintained in accordance with generally
accepted accounting principles in the United States, consistently applied throughout
the organization and across all products of the entity whose sales of Licensed
RNAi Product are giving rise to Net Sales.

1.21                           Party
means either ALNYLAM or QUARK; Parties means both ALNYLAM and QUARK.

1.22                           Phase
I Clinical Trial means a study of a Licensed RNAi Product in humans the
purpose of which includes the determination of safety and/or pharmacokinetic
and pharmacodynamic profile in healthy individuals or patients.

1.23                           Phase
II Clinical Trial means a study of a Licensed RNAi Product in patients of
dose range and efficacy of a Licensed RNAi Product, which is intended to
generate sufficient 

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

 

4

 

                                                data
to commence a Phase III Clinical Trial.

1.24                           Phase
III Clinical Trial means a controlled study of a Licensed RNAi Product in
patients of the efficacy and safety of a Licensed RNAi Product which is
prospectively designed to demonstrate statistically whether such Licensed RNAi
Product is effective and safe for use in a particular indication in a manner
sufficient to obtain Approval to market such Licensed RNAi Product.

1.25                           QUARK
means Quark Biotech, Inc., a California corporation, and its successors and
assigns.

1.26                           Research
or Researching means identifying, evaluating, validating and optimizing
RNAi Products.

1.27                           RNAi
Product means a therapeutic product containing, comprised or based on
siRNAs or siRNA derivatives or other moieties effective in gene function
modulation and designed to modulate the function of the Target through RNA
interference.

1.28                           Royalty
Quarter means each of the four (4) thirteen (13) week periods (i) with
respect to the United States, commencing on January 1 of any year, and (ii)
with respect to any country in the Territory other than the United States,
commencing on December 1 of any year.

1.29                           siRNA
means a double-stranded ribonucleic acid (RNA) 
composition designed to act primarily through an RNA interference
mechanism that consists of either (a) two separate oligomers of native or
chemically modified RNA that are hybridized to one another along a substantial
portion of their lengths, or (b) a single oligomer of native or chemically
modified RNA that is hybridized to itself by self-complementary base-pairing
along a substantial portion of its length to form a hairpin.

1.30                           Sublicensee
means a third party which is not an Affiliate of QUARK and to whom QUARK has
granted a sublicense of all or a portion of the rights granted hereunder.  Without limiting the generality of the
foregoing, a Sublicensee will be deemed to include any third party (a) who is granted
a sublicense hereunder by QUARK pursuant to the terms of the outcome or
settlement of any infringement or threatened infringement action and (b) who
enters into any form of agreement with QUARK under which such third party will
distribute a Licensed RNAi Product in any country in the Territory and who has
twenty-five percent (25%) or more of the market share for such Licensed RNAi
Product in such country.

1.31                           Target
means RTP801 as more specifically described in Appendix I, and its
encoded gene products, including any fragment or common genetic variants
thereof that result from or prevent mutation in, or a single nucleotide
polymorphism with respect to such gene.

1.32                           Term
means the period of time that begins upon the Effective Date and ends upon the
expiration or abandonment of all issued patents and filed applications within
the ALNYLAM Patent Rights.

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

 

5

 

1.33                           Territory
means worldwide.  For clarity, at any
time the Territory will not include any country to which the exportation or
re-exportation of materials, products and related technical data covered by
this Agreement is restricted under U.S. export laws, which restriction has not
been removed or waived.

1.34                           Valid
Claim means any claim [ * ].

ARTICLE II —
LICENSE GRANT

2.1                                 Licenses
of ALNYLAM Patent Rights.

(a)                                  ALNYLAM
grants to QUARK: a non-exclusive royalty-bearing right and license under the
ALNYLAM Patent Rights, subject to the terms and conditions of the in-license(s)
identified on Exhibit B governing ALNYLAM’s rights, for the sole and exclusive
purposes of Researching, Developing and Commercializing Licensed RNAi Products
for the Target in the Field in the Territory. 
The license granted in this Section 2.1(a) will be for the Term and such
license will include the right to grant sublicenses within the Field, subject
to Section 2.1(b) of this Agreement and other terms and conditions of this
Agreement and the in-license(s) identified on Exhibit B governing ALNYLAM’s
rights under the ALNYLAM Patent Rights.

(b)                                 In
the event that QUARK sublicenses the rights granted under Section 2.1(a) above,
QUARK will notify ALNYLAM within [ * ] after
such sublicense becomes effective and provide a copy of the fully executed
sublicense agreement to ALNYLAM within the same time frame (with such
reasonable redactions as QUARK may make, provided that such redactions do not
include provisions necessary to demonstrate compliance with the requirements of
this Agreement), which shall be treated as Confidential Information of QUARK,
provided that ALNYLAM may disclose such sublicense agreement(s) to third
parties under confidence if and to the extent required in order to comply with
ALNYLAM’s contractual obligations.

2.2                                 Retained
Rights of ALNYLAM.  Any rights of
ALNYLAM not expressly granted to QUARK under this Agreement will be retained by
ALNYLAM.  For clarity, this license does
not include a license under ALNYLAM trade secrets, and no communication of
significant technical information of either Party is expected to occur pursuant
to this Agreement.

2.3                                 Commercially
Reasonable Efforts.  QUARK shall use
Commercially Reasonable Efforts to carry out Research, Development, and
Commercialization of Licensed RNAi Products [ * ]
Development and Commercialization during the Term.  The activities of QUARK’s Affiliates,
Sublicensees, subcontractors, collaborators, transferees, and successors shall
be attributed to QUARK for purposes of determining QUARK’s satisfactions of the
foregoing diligence obligations.  QUARK
will [ * ] in written progress reports to be
provided [ * ]. 
Such reports will include a summary of all significant Development and
Commercialization events in respect of Licensed RNAi Products, including
without limitation, the status of clinical trials underway (but not the results
of such trials) and the 

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

 

6

 

                                                achievement
of any of the milestone events set forth in Article III of this Agreement;
[ * ].

2.4                                 Regulatory
Filings.  QUARK, its Affiliates or
Sublicensees will prepare, file, and prosecute all appropriate governmental
applications and/or filings to obtain Approval of Licensed RNAi Products in the
Field.  QUARK, its Affiliates or
Sublicensees will own and maintain all such applications and/or filings and
Approvals of the Licensed RNAi Products in the Field.

ARTICLE III — FEES
AND ROYALTIES

3.1                                 Upfront
Fee.  Within [ * ]
of the Effective Date of this Agreement, QUARK will pay to ALNYLAM an upfront,
non-refundable fee of [ * ] as
consideration for the license granted in Section 2.1(a).

3.2                                 Maintenance
Fee.  Until the First Commercial Sale
of a Licensed RNAi Product, QUARK will pay to ALNYLAM an annual maintenance fee
in the amount of [ * ] for the license granted
under this Agreement.  Such annual
maintenance fee shall be due within  [ * ] after the anniversary of the Effective Date of this
Agreement.

3.3                                 Milestone
Payments.  With respect to Licensed
RNAi Products and the achievement by QUARK, its Affiliates or Sublicensees of
the milestones in the table below for Licensed RNAi Products, QUARK will
provide notice to ALNYLAM of the occurrence of a milestone event within [ * ] of such event, and make the indicated milestone
payment to ALNYLAM within [ * ] after the
occurrence of the relevant event. 
Milestone payments will be due only once for the first RNAi Product
against the Target being developed by QUARK, or an Affiliate or Sublicensee of
QUARK, to achieve the relevant milestone event that is a Licensed RNAi Product
or would be a Licensed RNAi Product if all of the claims included in the patent
applications under ALNYLAM Patent Rights in existence in Major Market countries
as of the date such milestone event is achieved were to issue in their
then-current form.  For clarity, only one
payment shall be due hereunder with respect to each of the following milestone events
against the Target, regardless of the number of such RNAi Products that achieve
such milestone.

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

 

7

 

	
  Milestone Event

  	
   

  	
  Payment

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

In the event one
or more milestone events set out above are skipped for any reason, the payment
for such skipped milestone events(s) will be due at the same time as the
payment for the next achieved milestone event.

3.4                                 Royalties.

(a)                                  Royalties
on Net Sales will be due and payable by QUARK to ALNYLAM on a Licensed RNAi
Product-by-Licensed RNAi Product basis and on a country-by-country basis in the
Territory until the expiration of the last Valid Claim covering such Licensed
RNAi Product in such country.  Beginning
with the first Royalty Quarter in which a First Commercial Sale in a country
occurs, and during subsequent Royalty Quarters, running royalties are payable
on Net Sales in the Territory in accordance with the applicable running royalty
rates set out in subsections (b) and (c) of this Section 3.4.  If at the time of the First Commercial Sale
or at any time thereafter all Valid Claims covering a Licensed RNAi Product
expire in a particular country, then such RNAi Product shall be royalty-free in
such country; [ * ].

(b)                                 Subject
to subsections (a) and (c) of this Section 3.4, the following royalties will be
due to ALNYLAM (all references are to U.S. dollars):

	
  Royalty Rate for Net Sales of Licensed RNAi Product in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for Net Sales of Licensed RNAi Product in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for Net Sales of Licensed RNAi Products in the Territory
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for Net Sales of Licensed RNAi Products in the Territory
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for Net Sales of Licensed RNAi Product in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for Net Sales of Licensed RNAi Product in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

(c)                                  In
the event a Licensed RNAi Product is covered by the license granted under that 

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

 

8

 

                                                agreement
between the Parties of even date with this Agreement which provides for the
grant of rights to QUARK under patent rights in-licensed by ALNYLAM from Cancer
Research Technology Limited, subject to subsection (a) of this Section 3.4, the
applicable running royalty rates set out below will apply (all references are
to U.S. dollars): 

	
  Royalty Rate for
  Net Sales  of Licensed RNAi Product in
  the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for
  Net Sales of Licensed RNAi Product in the Territory [ * ]
  

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for
  Net Sales of Licensed RNAi Products in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for
  Net Sales of Licensed RNAi Products in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for
  Net Sales of Licensed RNAi Product in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Royalty Rate for
  Net Sales of Licensed RNAi Product in the Territory [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

3.5                                 Reduction
in Royalty Payments.  In the event
QUARK or any Affiliate or Sublicensee has Net Sales of Licensed RNAi Product in
a country during the Term at a time when there are also sales of Generic
Product in such country in the same calendar year, the Parties shall meet and
confer for the purpose of determining an equitable reduction in the royalties
payable by QUARK in respect of such Net Sales, taking into consideration
factors such as the reduced margins realized by QUARK or its Affiliate or
Sublicensee and also any Third Party obligations of ALNYLAM.  As used herein, the term “Generic Product”
means any pharmaceutical product sold by a third party, not authorized by QUARK
or any Affiliate or Sublicensee, that contains the same active pharmaceutical
ingredient as a Licensed RNAi Product and is approved in reliance on the prior
approval of a Licensed RNAi Product as determined by the applicable regulatory
authority.

ARTICLE IV —
INTELLECTUAL PROPERTY

4.1                                 Prosecution
and Maintenance of Patent Rights. 
ALNYLAM will have the right and responsibility to file, prosecute and
maintain patent protection in the Territory for all ALNYLAM Patent Rights.  [ * ].

4.2                                 Infringement
of ALNYLAM Rights.

(a)                                  Each
Party will promptly report in writing to the other Party during the Term any
known or suspected infringement by a third party of any of the ALNYLAM Patent
Rights of which such Party becomes aware, as such infringement relates to
Research, Development or Commercialization of Licensed RNAi Products in the
Field directed to the Target (a “Licensed Rights Infringement”) and will
provide the other Party with all available evidence supporting such Licensed
Rights Infringement.

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

 

9

 

(b)                                 ALNYLAM
will have the sole and exclusive right to initiate an infringement or other
appropriate suit in the Territory against any third party who at any time has
infringed, or is suspected of infringing, any of the ALNYLAM Patent Rights.

(c)                                  ALNYLAM
will have the sole and exclusive right to select counsel for any suit referred
to in subsection (b) above initiated by it and will pay all expenses of the
suit, including without limitation attorneys’ fees and court costs.

4.3                                 Claimed
Infringement of Third Party Rights.

(a)                                  In
the event that a third party at any time provides written notice of a claim to,
or brings an action, suit or proceeding against, either Party, or any of their
respective Affiliates or Sublicensees, claiming infringement of its patent
rights based upon an assertion or claim arising out of the development, use,
manufacture, distribution, importation or sale of Licensed RNAi Products (“Third
Party Claim”), such Party will promptly notify the other Party of the claim or
the commencement of such action, suit or proceeding, enclosing a copy of the
claim and all papers served.  Each Party
agrees to make available to the other Party its advice and counsel regarding
the technical merits of any such claim at no cost to the other Party and to
offer reasonable assistance to the other Party at no cost to the other Party.

(b)                                 Each
Party shall have sole and exclusive responsibility for the defense of its own
interests in actions in which they are named in connection with any Third Party
Claim brought against either Party or any of their respective Affiliates or
Sublicensees.  All litigation costs and
expenses incurred by either Party in connection with the defense of such Third
Party Claim will be borne by such Party. 
Each Party will keep the other Party promptly informed, and may from
time to time consult with the other Party regarding the status of any such
Third Party Claims.

(c)                                  Neither
Party will settle any Third Party Claim in a manner that is in derogation of
the rights of the other Party without obtaining the prior written consent of
such other Party.

(d)                                 THE
PROVISIONS OF THIS SECTION 4.3 STATE THE ENTIRE RESPONSIBILITY OF THE PARTIES,
AND THE SOLE AND EXCLUSIVE REMEDY OF THE PARTIES, IN THE CASE OF ANY THIRD
PARTY CLAIMS OR VIOLATION OF ANY THIRD PARTY’S RIGHTS.

4.4                                 Other
Infringement Resolutions.   In the
event of a dispute or potential dispute which has not ripened into a demand,
claim or suit of the types described in Sections 4.2 and 4.3 of this Agreement,
the same principles governing control of the resolution of the dispute, consent
to settlements of the dispute, and implementation of the settlement of the
dispute will apply.

4.5                                 Interpretation
of Patent Judgments. If any claim relating to a patent under the 

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

 

10

 

                                                ALNYLAM
Patent Rights becomes the subject of a judgment, decree or decision of a court,
tribunal, or other authority of competent jurisdiction in any country, which
judgment, decree, or decision is or becomes final (there being no further right
of review) and adjudicates the validity, enforceability, scope, or infringement
of the same, the construction of such claim in such judgment, decree or
decision shall be followed thereafter in such country in determining whether a
product is a Licensed RNAi Product hereunder, not only as to such claim but
also as to all other claims in such country to which such construction
reasonably applies.  If at any time there
are two or more conflicting final judgments, decrees, or decisions with respect
to the same claim, the decision of the higher tribunal shall thereafter
control, but if the tribunal be of equal rank, then the final judgment, decree,
or decision more favorable to such claim shall control unless and until the
majority of such tribunals of equal rank adopt or follow a less favorable final
judgment, decree, or decision, in which event the latter shall control.

ARTICLE V — CONFIDENTIAL INFORMATION

5.1                                 Non-Use
and Non-Disclosure of Confidential Information.  Each Party agrees that all Confidential
Information of a Party that is disclosed by a Party to the other Party (a) will
not be used by the receiving Party except in connection with the activities
contemplated by this Agreement or in order to further the purposes of this
Agreement (b) will be maintained in confidence by the receiving Party and (c)
will not be disclosed by the receiving Party to any third party who is not a
consultant or advisor under an obligation of confidentiality to, the receiving
Party or an Affiliate or Sublicensee of the receiving Party, without the prior
written consent of the disclosing Party. 
Notwithstanding the foregoing, the receiving Party will be entitled to
use and disclose Confidential Information of the disclosing Party which (i) was
known by the receiving Party or its Affiliates prior to its date of disclosure
by the disclosing Party to the receiving Party as demonstrated by legally
admissible evidence available to the receiving Party or its Affiliates, (ii) either
before or after the date of the disclosure such Confidential Information is
lawfully disclosed to the receiving Party or its Affiliates by sources other
than the disclosing Party, (iii) either before or after the date of the
disclosure by the disclosing Party to the receiving Party such Confidential
Information becomes published or otherwise part of the public domain through no
fault or omission on the part of the receiving Party or its Affiliates, (iv) is
independently developed by or for the receiving Party or its Affiliates without
reference to or in reliance upon the Confidential Information as demonstrated
by legally admissible evidence available to the receiving Party or its
Affiliates, (v) is reasonably necessary to conduct clinical trials or to obtain
regulatory approval of Licensed RNAi Products or for the prosecution and
maintenance of Patent Rights, (vi) is reasonably required in order for a Party
to obtain financing or conduct discussions with Development or
Commercialization partners so long as such third party recipients are bound by
an obligation of confidentiality or (vii) is required to be disclosed by the
receiving Party to comply with applicable laws or regulations or legal process,
including without limitation by the rules or regulations of the United States
Securities and Exchange Commission or similar regulatory agency in a country
other than the United States or of any stock exchange or NASDAQ, provided that
the receiving Party provides prior written notice of such disclosure to the
disclosing Party and takes 

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

 

11

 

                                                reasonable
and lawful actions to avoid or minimize the extent of such disclosure.

5.2                                 Limitation
on Disclosures.  Each Party agrees
that it will provide Confidential Information received from the other Party
solely to its employees, consultants and advisors, and the employees,
consultants and advisors of its Affiliates or Sublicensees as applicable, who
have a legitimate business need to know and an obligation to maintain in
confidence the Confidential Information of the disclosing Party.  The disclosing Party is liable for any breach
of the non-disclosure obligation of its consultants, advisors, Affiliates and
Sublicensees as applicable.

ARTICLE VI — REPORTS, TAXES AND PAYMENTS

6.1                                 Reports.  As to each Royalty Quarter commencing with
the Royalty Quarter during which the First Commercial Sale occurs, [ * ] after the end of such Royalty Quarter (if QUARK has
not entered into an agreement with a Sublicensee) and within [ * ] after the receipt by QUARK from a Sublicensee of such
Sublicensee’s report, as required by such Sublicensee’s sublicense for each
Royalty Quarter (if QUARK has entered into an agreement with a Sublicensee),
QUARK will deliver to ALNYLAM a written report showing, on a country-by-country
basis, the Net Sales of Licensed RNAi Products calculated under GAAP and its
royalty obligation for such quarter with respect to such Net Sales under this
Agreement together with wire transfer of an amount equal to such royalty
obligation.  All Net Sales will be
segmented in each such report according to sales by QUARK and each Affiliate
and Sublicensee, as well as on a product-by-product basis, including the rates
of exchange used to convert Net Sales to United States Dollars from the
currency in which such sales were made. 
For the purposes of this Agreement, the rates of exchange to be used for
converting Net Sales to United States Dollars will be [ * ].

6.2                                 Tax
Withholding.  QUARK will use all
reasonable and legal efforts to reduce tax withholding with respect to payments
to be made to ALNYLAM.  Notwithstanding
such efforts, if QUARK concludes that tax withholdings under the laws of any
country are required with respect to payments to ALNYLAM, QUARK will make the
full amount of the required payment to ALNYLAM after any tax withholding.  In any such case, QUARK shall provide ALNYLAM
with a written explanation of such withholding and original receipts or other
evidence reasonably desirable and sufficient to allow ALNYLAM to document such
tax withholdings for purposes of claiming foreign tax credits and similar
benefits.  For purposes of clarity, any
payment due to ALNYLAM in respect of fees set out in Article III of this
Agreement will be paid in the full amount specified after any tax withholding,
with the amount of any tax withholding associated with such payments to be paid
by QUARK to the appropriate government authority.

6.3                                 Payments.  Unless otherwise agreed by the Parties, all
payments required to be made under this Agreement will be made in United States
Dollars via wire transfer to an account designated in advance by the receiving
Party.

6.4                                 Audits.

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

 

12

 

(a)                                  At
any given point in time, QUARK will have on file and will require its
Affiliates and Sublicensees to have on file complete and accurate records for
the last [ * ] of all Net Sales of Licensed RNAi
Products (including associated data). 
ALNYLAM will have the right, [ * ] during
each [ * ] period, to retain at its own
expense an independent qualified certified public accountant reasonably
acceptable to QUARK to review such records upon reasonable notice, during
regular business hours.  If the audit
demonstrates that the payments owed under this Agreement have been understated,
QUARK will pay the balance to ALNYLAM together with interest on such amounts
from the date on which such payment obligation accrued at a rate equal to [ * ].  If the
underpayment is greater than [ * ] of the
amount owed, then QUARK will reimburse ALNYLAM for its reasonable out-of-pocket
costs of the audit. If the audit demonstrates that the payments owed under this
Agreement have been overstated, ALNYLAM will credit the balance against the
next payment due from QUARK (without interest).

(b)                                 QUARK
shall require that the terms of any sublicense under its rights in this
Agreement are fully in compliance with the terms and conditions of the
in-licenses governing ALNYLAM’s rights under the ALNYLAM Patent Rights
identified on Exhibit B, including without limitation, all obligations with
respect to maintenance of records and audit rights.  ALNYLAM will provide QUARK in a timely manner
with a true and complete copy (subject to redaction of financial and other
information not material to ALNYLAM’s ability to sublicense rights licensed
thereunder to QUARK under this Agreement) of all such in-licenses.

ARTICLE VII —
INDEMNIFICATION AND INSURANCE

7.1                                 QUARK
Indemnification.  QUARK agrees to
indemnify and hold harmless ALNYLAM and its Affiliates, and their respective
agents, directors, officers and employees and their respective successors and
assigns (the “ALNYLAM Indemnitees”) from and against any and all losses, costs,
damages, fees or expenses (“Losses”) incurred by an ALNYLAM Indemnitee arising
out of or in connection with any claim, suit, demand, investigation or
proceeding brought by a third party (“Claim”) based on (a) the development,
use, manufacture, distribution or sale of any Licensed RNAi Product by QUARK or
any of its Affiliates or Sublicensees, including, but not limited to, any
claims made against ALNYLAM by third parties alleging infringement, injury,
damage, death or other consequence occurring to any person claimed to result,
directly or indirectly, from the possession, use or consumption of, or
treatment with, any Licensed RNAi Product, whether claimed by reason of breach
of warranty, negligence, product defect or otherwise, and regardless of the
form or forum in which any such claim is made, (b) any breach of any
representation, warranty or covenant of QUARK in this Agreement, and (c) actions
taken or omitted to be taken by QUARK or its Affiliates, subcontractors or
Sublicensees, or the employees, agents or representatives of any of them in
performing QUARK’s obligations under this Agreement.

The above
indemnification shall not apply to the extent that any Losses are due to a
material breach of any of ALNYLAM’s representations, warranties, covenants
and/or obligations under this Agreement.

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

 

13

 

7.2                                 Insurance.  With respect to its activities under this
agreement, QUARK will secure and maintain in full force and effect throughout
the term of this Agreement (and for at least   
[ * ] thereafter for claims made
coverage), the following types and amounts of insurance coverage with carriers
having a minimum AM Best rating of A, with per claim deductibles that do not
exceed twenty thousand U.S. dollars ($20,000):

Comprehensive
General Liability and Personal Injury, including coverage for contractual
liability assumed by QUARK and coverage for QUARK independent contractor(s),
with limits of at least [ * ] per
occurrence and a general aggregate limit of [ * ].

Umbrella
Liability, exclusive of the coverage provided by the policies listed above,
with a limit of at least [ * ].

Products/Clinical/Professional
Liability, exclusive of the coverage provided by the Comprehensive General
Liability policy, with an aggregate limit of at least     [ * ] with
ALNYLAM to be named as an additional insured party with respect to each
Licensed RNAi Product under such coverage.

Notwithstanding the above, the obligations under this Section 7.2 shall
not apply to (i) QUARK after such time that QUARK achieves aggregate annual
revenues for all pharmaceutical and diagnostic products in excess of [ * ], or (ii) any Affiliate or Sublicensee that has aggregate
annual revenues for all pharmaceutical and diagnostic products in excess of one
billion U.S. dollars [ * ]; provided,
however, that QUARK shall provide written notice to ALNYLAM at such time
as it determines this Section is in effect.

ARTICLE VIII —
EXPORT

8.1                                 General.  The Parties acknowledge that the exportation
from the United States of materials, products and related technical data (and
the re-export from elsewhere of United States origin items) may be subject to
compliance with United States export laws, including without limitation the
United States Bureau of Export Administration’s Export Administration
Regulations, the Act and regulations of the FDA issued thereunder, and the
United States Department of State’s International Traffic and Arms Regulations
which restrict export, re-export, and release of materials, products and their
related technical data, and the direct products of such technical data.  The Parties agree to comply with all
applicable exports laws and to commit no act that, directly or indirectly,
would violate any United States law, regulation, or treaty, or any other
international treaty or agreement, relating to the export, re-export, or
release of any materials, products or their related technical data to which the
United States adheres or with which the United States complies.

8.2                                 Delays.  The Parties acknowledge that they cannot be
responsible for any delays attributable to export controls which are beyond the
reasonable control of either Party.

8.3                                 Assistance.  The Parties agree to provide assistance to
one another in connection with each Party’s efforts to fulfill its obligations
under this Article VIII.

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

 

14

 

ARTICLE IX — TERM
AND TERMINATION

9.1                                 Term.  This Agreement will remain in effect until it
expires as set forth in Section 9.2 unless terminated in accordance with this
Article IX.

9.2                                 Expiration.  Unless terminated earlier, this Agreement
will expire at the end of the Term.

9.3                                 Material
Breach.

(a)                                  ALNYLAM
will have the right to terminate this Agreement, upon written notice to QUARK,
in the event QUARK materially breaches its obligations under this Agreement and
does not remedy such breach within [ * ] after
receipt of written notice from ALNYLAM specifically identifying the breach and
stating that ALNYLAM intends to terminate the Agreement if QUARK fails to
remedy the breach within the [ * ] time
period.

(b)                                 In
the event that ALNYLAM materially breaches its obligations under this
Agreement, and does not remedy such breach within [ * ]
after receipt of written notice from QUARK specifically identifying the breach,
[ * ].

9.4                                 Termination
by QUARK.  QUARK will have the right
to terminate this Agreement for any reason upon [ * ]
prior written notice to ALNYLAM.

9.5                                 Consequences
of Termination; Survival.  Subject to
Section 9.6, in the event this Agreement is terminated under Section 9.4 above,
or by ALNYLAM under Section 9.3(a) above, all licenses and rights granted by
ALNYLAM to QUARK under this Agreement will terminate; provided, however,
that to the extent such licenses and rights are required in respect of clinical
trials that are ongoing and cannot reasonably be terminated promptly due to
health or safety reasons or the requirements of applicable law, such licenses
and rights will continue in effect until such clinical trials are properly
terminated.  Expiration or termination of
this Agreement shall not relieve the Parties of any obligation accruing prior
to such expiration or termination.  Any
expiration or termination of this Agreement shall be without prejudice to the
rights of either Party against the other accrued or accruing under this
Agreement prior to expiration or termination, including without limitation the
obligation to pay royalties for Licensed RNAi Product sold prior to such expiration
or termination.  The provisions of
Article V shall survive the expiration or termination of this Agreement and
shall continue in effect as applicable for [ * ] from the
date of initial disclosure.  In addition,
the provisions of Article VII and Article X (other than 10.1), and Sections 9.5
and 9.6 shall survive any expiration or termination of this Agreement.

9.6                                 License
upon Termination.  Upon any
termination of this Agreement pursuant to Sections 9.3, ALNYLAM shall enter
into an agreement containing substantially the same provisions as this
Agreement with any Sublicensees of QUARK existing at the time of such
termination, covering the RNAi Products that had been licensed to such
Sublicensee by QUARK, provided that at the time of any termination of this
Agreement, such Sublicensees are in full compliance with the terms and
conditions of the sublicense 

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

 

15

 

                                                agreement.  ALNYLAM acknowledges that such Sublicensees
of QUARK that are then in full compliance with the terms and conditions of
their respective sublicense agreement are third party beneficiaries of this
Agreement, including this Section 9.6.

ARTICLE X — MISCELLANEOUS

10.1                           Representations
by QUARK and ALNYLAM.

(a)                                  Subject
to Section 10.1 (e) below, each Party hereby represents and warrants to the
other Party as of the Effective Date:

(i)                                     Such
Party is a corporation duly organized under the laws of the state of its
incorporation, and has all necessary power and authority to conduct its
business in the manner in which it is currently being conducted, to own and use
its assets in the manner in which its assets are currently owned and used, and
to enter into and perform its obligations under this Agreement.

(ii)                                  The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary action on the part of such Party and its Board of Directors
and no consent, approval, order or authorization of, or registration,
declaration or filing with any third party or governmental authority is
necessary for the execution, delivery or performance of this Agreement.

(iii)                               This
Agreement constitutes the legal, valid and binding obligation of such Party,
enforceable against it in accordance with its terms, subject to (A) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (B) rules of law governing specific performance, injunctive relief
and other equitable remedies.

(b)                                 QUARK
represents and warrants to ALNYLAM that as of the Effective Date:

(i)                                     Neither
QUARK nor any of its Affiliates has been found in breach of any laws or
regulations governing the production of medicinal products in the United States
or any other jurisdiction within the Territory.

(ii)                                  Neither
QUARK nor any of its Affiliates has been debarred (nor is QUARK or any of its
Affiliates using in any capacity in connection with its activities under this
Agreement any person who has been debarred) by the FDA from working for or
providing services to any pharmaceutical or biotechnology company under Section
306 of the United States Food, Drug and Cosmetic Act.

(iii)                               QUARK
has never approved or commenced any proceeding, or made any election
contemplating, the winding up or cessation of QUARK’s business or affairs or
the assignment of QUARK’s material assets for the benefit of creditors.  To QUARK’s knowledge, no such proceeding is
pending or

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

 

16

 

                                                threatened.

(c)                                  QUARK
acknowledges and agrees that ALNYLAM has not made any representation or
warranty that it has or can provide all the rights that are necessary or useful
to Research, Develop or Commercialize (as applicable) a Licensed RNAi Product.

(d)                                 ALNYLAM
represents and warrants to QUARK that as of the Effective Date of this
Agreement it has the right to grant QUARK, its Affiliates and Sublicensees the
licenses granted hereunder and has not granted any conflicting rights to any
other person or entity.  ALNYLAM has
delivered to QUARK a true and complete copy (except for the redaction of
financial and other information not relevant to QUARK’s understanding of its
rights and obligations under this Agreement) of each in-license identified on
Exhibit B of this Agreement.  ALNYLAM
shall maintain such in-licenses in effect and shall not amend any such in-license
in a manner that is detrimental to the rights of QUARK under this Agreement
without the prior written consent of QUARK.

10.2                           Dispute
Resolution; Arbitration Procedures.

(a)                                  In
the event of any dispute, controversy or claim arising out of or relating to
this Agreement or the breach thereof, the Parties will try to settle such
dispute, controversy or claim amicably between themselves, including referring
such dispute, controversy or claim to the Chief Operating Officer of ALNYLAM or
his designee, and the Chief Executive Officer of QUARK, or any other officer
designated by such Chief Executive Officer. 
In the event that after [ * ] the
designated officers of both Parties fail to resolve the matter, either Party
may submit such dispute, controversy or claim that is not an “Excluded Claim”
for resolution by binding arbitration under the Rules of Arbitration of the
International Chamber of Commerce. 
Judgment on the arbitration award may be entered in any court of
competent jurisdiction.  The arbitration
will be conducted in New York, New York and the language of all communications
and proceedings relating to the arbitration will be English.

(b)                                 The
arbitration shall be conducted by a panel of three persons experienced in the
pharmaceutical business.  Within thirty
(30) days after initiation of arbitration, each Party shall select one person
to act as arbitrator and the two Party-selected arbitrators shall select a
third arbitrator within thirty (30) days of their appointment.  If the arbitrators selected by the Parties
are unable or fail to agree upon the third arbitrator, the Parties shall select
two replacement arbitrators to replace the arbitrators originally selected,
which replacement arbitrators shall select a third arbitrator within thirty
(30) days of their appointment.  The
Parties agree (a) to meet with the arbitrator(s) within thirty (30) days of
selection and (b) to agree at that meeting or before upon procedures for
discovery and as to the conduct of the hearing which will result in the hearing
being concluded within no more than six (6) months after selection of the
arbitrator(s) and in the award being rendered within thirty (30) days of any
post-hearing briefing, which briefing will 

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

 

17

 

                                                be
completed by both sides within thirty (30) days after the conclusion of the
hearings, or within sixty (60) days of the conclusion of the hearings if there
is no post-hearing briefing.   In the
event the Parties cannot agree upon procedures for discovery as set forth in
(a) above, the arbitrator(s) shall provide that discovery be limited so that
the schedule may be met without difficulty and so that neither side obtains
more than a total of twenty-five (25) hours of deposition testimony from all
witnesses, including both fact and expert witnesses, or serves more than ten (10)
individual requests for documents or ten (10) individual requests for admission
or interrogatories.  In no event will the
arbitrator(s), absent agreement of the Parties, allow more than three (3) days
per side for the hearing or more than a total of six (6) days for the
hearing.  Multiple hearing days will be
scheduled consecutively to the greatest extent possible.

(c)                                  Either
Party may apply to the arbitrators for interim injunctive relief until the
arbitration award is rendered or the controversy is otherwise resolved.  Either Party also may, without waiving any
remedy under this Agreement, seek from any court having jurisdiction any
injunctive or provisional relief necessary to protect the rights or property of
that Party pending the arbitration award. 
The arbitrators shall have no authority to award punitive or any other
type of damages not measured by a Party’s compensatory damages.  Each Party shall bear its own costs and
expenses and attorneys’ fees and an equal share of the arbitrators’ fees and
any administrative fees of arbitration.

(d)                                 Except
to the extent necessary to confirm an award or as may be required by law,
neither a Party nor an arbitrator may disclose the existence, content, or
results of an arbitration without the prior written consent of both
Parties.  In no event shall an
arbitration be initiated after the date when commencement of a legal or
equitable proceeding based on the dispute, controversy or claim would be barred
by the applicable New York statute of limitations.

(e)                                  The
Parties agree that, in the event of a dispute over the nature or quality of
performance under this Agreement, neither Party may terminate this Agreement
until final resolution of the dispute through arbitration or other judicial
determination.  The Parties further agree
that any payments made pursuant to this Agreement pending resolution of the
dispute shall be refunded if an arbitrator or court determines that such
payments are not due.

(f)                                    As
used in this Section 10.2, the term “Excluded Claim” shall mean a dispute,
controversy or claim that concerns (a) the validity or infringement of a
patent, trademark or copyright; or (b) any antitrust, anti-monopoly or
competition law or regulation, whether or not statutory.  Excluded Claims shall be resolved in a court
of competent jurisdiction.

10.3                           Publicity.  No disclosure of the existence of, or the
terms of, this Agreement may be made by either Party, and no Party shall use
the name, trademark, trade name or logo of the other Party or its employees in
any publicity, news release or disclosure relating to this Agreement or its
subject matter, without the prior express written permission of the 

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

 

18

 

                                                other
Party, except as may be required by law or as set forth in this Section 10.3.
The Parties acknowledge and agree that, upon and following the Effective Date,
one or both of the Parties intends to issue a press release announcing the
execution of this Agreement. 
Notwithstanding the foregoing, the Parties agree to consult with each
other reasonably and in good faith with respect to the text and timing of such
press releases prior to the issuance thereof. 
Either Party may issue such press releases or otherwise make such public
statements or disclosures (such as in annual reports to stockholders or filings
with the Securities and Exchange Commission) as it determines, based on advice
of counsel, are reasonably necessary to comply with applicable laws and
regulations.  In addition, following any
initial press release(s) announcing this Agreement or other public disclosure
approved by both Parties, either Party shall be free to disclose, without the
other Party’s prior written consent, the existence of this Agreement, the
identity of the other Party and those terms of the Agreement which have already
been publicly disclosed in accordance herewith.

10.4                           Force
Majeure.  No failure or omission by
the Parties in the performance of any obligation of this Agreement will be
deemed a breach of this Agreement or create any liability if the same will
arise from any cause or causes beyond the control of the Parties, including,
but not limited to, the following: acts of God; acts or omissions of any
government; any rules, regulations or orders issued by any governmental
authority or by any officer, department, agency or instrumentality thereof;
fire; flood; storm; earthquake; accident; war; rebellion; insurrection; riot;
and invasion.  The affected Party shall
notify the other Party of such force majeure circumstances as soon as
reasonably practical, and shall promptly undertake all reasonable efforts
necessary to cure such force majeure circumstances.

10.5                           Consequential
Damages.  NEITHER PARTY (INCLUDING
ITS AFFILIATES AND SUBLICENSEES) SHALL BE LIABLE UNDER THIS AGREEMENT FOR ANY
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OR FOR LOSS OF PROFIT OR LOST
REVENUE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.  NOTWITHSTANDING THE FOREGOING,
NOTHING IN THIS SECTION 10.5 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE
INDEMNIFICATION RIGHTS OF A PARTY OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF
CONFIDENTIALITY OBLIGATIONS IN ARTICLE V.

10.6                           Assignment.

(a)                                  This
Agreement and any of its rights and obligations may not be assigned or
otherwise transferred by either Party without the prior written consent of the
other Party, which consent may not be unreasonably withheld, delayed or
conditioned; provided, however, that either Party may assign this
Agreement, without the consent of the other Party, in connection with such
Party’s merger, consolidation or transfer or sale of all or substantially all
of the assets of such Party; provided further that the successor,
surviving entity, purchaser of assets, or transferee, as applicable, expressly
assumes in writing such Party’s obligations under this Agreement.  Any purported assignment in contravention of
this Section 10.6 shall, 

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

 

19

 

                                                at
the option of the non-assigning Party, be null and void and of no effect.

(b)                                 This
Agreement will be binding upon and inure to the benefit of the Parties and
their permitted successors and assigns.

10.7                           Notices.

Notices to ALNYLAM
will be addressed to:

Alnylam Pharmaceuticals, Inc.

300 Third Street

Cambridge, Massachusetts  02142

U.S.A.

Attention: Chief Operating Officer

Facsimile No.:
(617) 551-8101

With copy to:

Faber Daeufer & Rosenberg PC

950 Winter Street, Suite 4500

Waltham, Massachusetts  02451

Attention: James R. McGarrah,
Esq.

Facsimile No.:
(781) 795-4747

Notices to QUARK
will be addressed to:

Quark Biotech Inc.

6536 Kaiser Avenue

Fremont, CA 94555

Attention: Chief Executive Officer

Facsimile
No.:  (510) 402-4021

With copy to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA  94306

Attention: Robert L. Jones, Esq.

Facsimile No.:
(650) 849-7400

Any Party may change
its address by giving notice to the other Party in the manner provided in this
Section 10.7.  Any notice required or
provided for by the terms of this Agreement will be in writing and will be (a)
sent by certified mail, return receipt requested, postage prepaid, (b) sent via
a reputable international express courier service, or (c) sent by facsimile
transmission, with a copy by regular mail. 
The effective date of the notice will be the actual date of receipt by
the receiving Party.

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

 

20

 

10.8                           Independent
Contractors.  It is understood and
agreed that the relationship between the Parties is that of independent
contractors and that nothing in this Agreement will be construed as
authorization for either Party to act as the agent for the other Party.

10.9                           Governing
Law; Jurisdiction.  This Agreement
will be governed and interpreted in accordance with the substantive laws of the
State of New York, notwithstanding the provisions governing conflict of laws
under such law of the State of New York to the contrary, provided that matters
of intellectual property law will be determined in accordance with the national
intellectual property laws relevant to the intellectual property in
question.  Each Party agrees to submit to
the jurisdiction of the state and federal courts located in the State of New
York and waives any defense of inconvenient forum to the maintenance of any
action or proceeding in such courts.

10.10                     Severability.  In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of the relevant jurisdiction,
the validity of the remaining provisions will not be affected and the rights
and obligations of the Parties will be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable,
provided that the Parties will negotiate in good faith a modification of this
Agreement with a view to revising this Agreement in a manner which reflects, as
closely as is reasonably practicable, the commercial terms of this Agreement as
originally signed.

10.11                     No
Implied Waivers.  The waiver by
either Party of a breach or default of any provision of this Agreement by the
other Party will not be construed as a waiver of any succeeding breach of the
same or any other provision, nor will any delay or omission on the part of
either Party to exercise or avail itself of any right, power or privilege that
it has or may have hereunder operate as a waiver of any right, power or
privilege by such Party.

10.12                     Entire
Agreement.  This Agreement, along
with that certain Confidential Disclosure Agreement by and between the Parties
dated as of June 1, 2004, as amended, and the related License Agreement by and
between the Parties of even date herewith related to the Target and covering
sublicense of patent rights owned by Cancer Research Technology Limited,
constitute the entire agreement between the Parties with respect to its subject
matter and supersedes all previous written or oral representations, agreements
and understandings between the Parties. 
This Agreement may be amended only by a writing signed by both Parties.

10.13                     Counterparts.  This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.

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

 

21

 

IN WITNESS
WHEREOF, the Parties hereto have set their hand as of the Effective Date.

 

	
   

  	
  ALNYLAM PHARMACEUTICALS, INC.

  
	
   

  	
  By:

  	
  /s/ Barry Greene

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  QUARK BIOTECH INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Zurr

  
	
   

  	
   

  	
  Name: Daniel Zurr, Ph.D.

  
	
   

  	
   

  	
  Title: President and CEO

  

 

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

 

22

 

EXHIBIT A

ALNYLAM Patent Rights

Group I

	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  

 

Group II 

	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  	
  [ * ]

  

 

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

 

1

 

EXHIBIT
B

IN-LICENSES
COVERING ALNYLAM PATENT RIGHTS

 

[ * ]

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

 

1

 

APPENDIX
I

TARGET

RTP 801

[ * ]

`

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

 

1

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