Document:

Exhibit 10.18

 

QUARK PHARMACEUTICALS,
INC.

2007 EQUITY INCENTIVE PLAN

 

OPTION GRANT NOTICE

 

Quark Pharmaceuticals, Inc. (the “Company”), pursuant
to its 2007 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth
below. This option is subject to all of the terms and conditions as set forth
herein and in the Option Agreement, the Plan, and the Notice of Exercise, all
of which are attached hereto and incorporated herein in their entirety.

 

	
  Optionholder:

  	
                                         

                                          ,

  Trustees for the benefit 

  of 

  
	
  Date of Grant:

  	
   

  
	
  Vesting Commencement Date:

  	
   

  
	
  Number of Shares Subject to Option:

  	
   

  
	
  Exercise Price Per Share:

  	
   

  
	
  Total Exercise Price:

  	
   

  
	
  Expiration Date:

  	
   

  

 

	
  Type of
  Grant:

  	
   

  	
  Capital Gain
  Stock Award

  
	
   

  	
   

  	
   

  
	
  Exercise
  Schedule:

  	
   

  	
  Same as Vesting
  Schedule

  
	
   

  	
   

  	
   

  
	
  Vesting
  Schedule:

  	
   

  	
           

  
	
   

  	
   

  	
   

  
	
  Payment:

  	
   

  	
  By one or a
  combination of the following items (described in the Option Agreement):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o   By
  cash, check, bank draft or money order payable to the Company

  
	
   

  	
   

  	
  o   Pursuant
  to a Regulation T Program if the Shares are publicly traded

  
	
   

  	
   

  	
  o   By
  delivery of already-owned shares if the Shares are publicly traded

  
	
   

  	
   

  	
  o   By
  net exercise

  

 

Additional Terms/Acknowledgements:
The undersigned Optionholder acknowledges receipt of, and understands and
agrees to, this Option Grant Notice, the Option Agreement, the Plan and
specifically the provisions of Exhibit B of the Plan.

 

The Optionholder
hereby represents as follows:

 

(a)           The
Optionholder hereby agrees that the terms of Section 102 shall apply to this
option.

 

(b)           The
Optionholder is obliged not to sell or remove from the Trustee this option
prior to the end of Restricted Period Per Section 102.

 

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

 

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

 

(e)           The Optionholder acknowledges that during the
period in which this option is held by the Trustee (including any shares issued
to the Trustee on behalf of the Optionholder upon exercise of this option), in
the event that dividends payable in securities are declared on this option as
held by the Trustee, such securities shall also be subject to the provisions of
Section 102 and the provision of the Option Agreement and shall be held in
trust by the Trustee.

 

The undersigned
Optionholder further acknowledges and agrees as follows:

 

(a)  that any
tax consequences arising from the grant or exercise of this option, from
payment for the shares covered hereby or from any other event or act (of the
Company and/or its Affiliate, the Trustee or of the 

 

 

Optionholder), hereunder,
shall be borne solely by the Optionholder. The Company and/or its Affiliates
and/or the Trustee shall withhold taxes according to the requirements under the
applicable laws, rules, and regulations, including the withholding of taxes at
source;

 

(b) to indemnify the Company and/or its Affiliates
and/or the Trustee and hold them harmless against and from any and all
liability for any such tax, interest payment or penalty thereon, including
without limitation, liabilities relating to the necessity to withhold, or to
have withheld, any such tax from any payment made to the Optionholder;

 

(c) that the Optionholder will not be entitled to
receive from the Company and/or the Trustee any shares allocated or issued upon
the exercise of this option prior to the full payments of the Optionholder’s
tax liabilities arising from this option and/or shares issued upon the exercise
of this option. For the avoidance of doubt, neither the Company nor the Trustee
shall be required to release any share certificate until all payments required
to be made have been fully satisfied by the Optionholder; and

 

(d) Optionholder accepts the provisions of the trust
agreement signed between the Company and the Trustee, attached hereto, and
agrees to be bound by its terms.

 

Optionholder further acknowledges that as of the Date of Grant, this
Option Grant Notice, the Option Agreement, and the Plan set forth the entire
understanding between Optionholder and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and delivered
to Optionholder under the Plan, and (ii) the following agreements only:

 

OTHER AGREEMENTS:

 

 

 

	
  QUARK PHARMACEUTICALS,
  INC.

  	
   

  	
  OPTIONHOLDER:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Residential
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

 

 

QUARK PHARMACEUTICALS, INC.

2007 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

(CAPITAL GAIN STOCK AWARD)

 

Pursuant to your Option Grant
Notice (“Grant Notice”) and this Stock
Option Agreement, Quark Pharmaceuticals, Inc. (the “Company”)
has granted you an option under the Israeli Sub-Plan of the Company’s 2007
Equity Incentive Plan (the “Plan”) to
purchase the number of shares of the Company’s Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
Plan shall have the same definitions as in the Plan.

 

The details of your option are
as follows:

 

1.             VESTING. Subject
to the limitations contained herein, your option will vest as provided in your
Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.

 

2.             NUMBER OF SHARES AND EXERCISE PRICE.
The number of shares of Common Stock subject to your option
and your exercise price per share referenced in your Grant Notice may be
adjusted from time to time for Capitalization Adjustments.

 

3.             EXERCISE RESTRICTION FOR NON-EXEMPT
EMPLOYEES. In the event that you are an Employee eligible for
overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not
exercise your option until you have completed at least six (6) months of
Continuous Service measured from the Date of Grant specified in your Grant
Notice, notwithstanding any other provision of your option

 

4.             METHOD OF PAYMENT. Payment
of the exercise price is due in full upon exercise of all or any part of your
option. You may elect to make payment of the exercise price in cash or check
payable to the Company or in any other manner permitted
by your Grant Notice, which may include one or more of the
following:

 

(a)           In the Company’s
sole discretion at the time your option is exercised, and provided that at the
time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.

 

(b)           In the Company’s sole
discretion at the time your option is exercised, and provided that at the time
of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery to the Company (either
by actual delivery or attestation) of already-owned shares of Common Stock
either that you have held for the period required to avoid a charge to the
Company’s reported earnings (generally six (6) months) or that you did not
acquire, directly or indirectly from the Company, that are owned free and clear
of any liens, claims, encumbrances or security interests, and that are valued
at Fair Market Value on the date of exercise. “Delivery” for these purposes, in
the sole discretion of the Company at the time you exercise your option, shall
include delivery to the Company of your attestation of ownership of 

 

 

such shares of Common Stock in a form approved by the
Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock.

 

(c)           In the Company’s
sole discretion at the time your option is exercised, and provided that at the
time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by a “net exercise” arrangement
pursuant to which the Company will reduce the number of shares of Common Stock
issued upon exercise of your option by the largest whole number of shares with
a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the Company shall accept a cash or other
payment from you to the extent of any remaining balance of the aggregate
exercise price not satisfied by such reduction in the number of whole shares to
be issued; provided further, however, shares of
Common Stock will no longer be outstanding under your option and will not be
exercisable thereafter to the extent that (i) shares are used to pay the
exercise price pursuant to the “net exercise,” (ii) shares are delivered to you
as a result of such exercise, and (iii) shares are withheld to satisfy tax
withholding obligations.

 

5.             WHOLE SHARES. You
may exercise your option only for whole shares of Common Stock.

 

6.             SECURITIES LAW COMPLIANCE. Notwithstanding
anything to the contrary contained herein, you may not exercise your option
unless the shares of Common Stock issuable upon such exercise are then
registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. The
exercise of your option also must comply with other applicable laws and
regulations governing your option, and you may not exercise your option if the
Company determines that such exercise would not be in material compliance with
such laws and regulations.

 

7.             TERM. You may not
exercise your option before the commencement or after the expiration of its
term. The term of your option commences on the Date of Grant and, except as
expressly provided in Section 5(g) of the Plan, expires upon the earliest of
the following:

 

(a)           three (3) months
after the termination of your Continuous Service for any reason other than your
Disability or death;

 

(b)           one (1) year after
the termination of your Continuous Service due to your Disability;

 

(c)           one (1) year after
your death if you die either during your Continuous Service or within thirty
(30) days after your Continuous Service terminates;

 

(d)           the Expiration Date
indicated in your Grant Notice; or

 

(e)           the day before the
tenth (10th) anniversary of the Date of Grant.

 

8.             EXERCISE.

 

(a)           You may exercise
the vested portion of your option during its term by delivering a Notice of
Exercise (in a form designated by the Company) together with the exercise price
to the Secretary of the Company, or to such other person as the Company may
designate, 

 

 

during regular business hours, together with such
additional documents as the Company may then require.

 

(b)           By exercising your
option you agree that, as a condition to any exercise of your option, the
Company may require you to enter into an arrangement providing for the payment
by you to the Company of any tax withholding obligation of the Company arising
by reason of (1) the exercise of your option, (2) the lapse of any substantial
risk of forfeiture to which the shares of Common Stock are subject at the time
of exercise, or (3) the disposition of shares of Common Stock acquired upon
such exercise.

 

(c)           By exercising your
option you agree that you shall not sell, dispose of, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the managing underwriter(s) (not to exceed one hundred eighty
(180) days (or such longer period, not to exceed 18 days after the expiration
of the 180-day period, as the underwriters or the Company shall request in
order to facilitate compliance with NASD Rule 2711) following the effective
date of a registration statement of the Company filed under the Securities Act
(the “Lock Up Period”); provided, however, that nothing contained in this section
shall prevent the exercise of a repurchase option, if any, in favor of the
Company during the Lock Up Period. You further agree to execute and deliver
such other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period. The underwriters of the Company’s
stock are intended third party beneficiaries of this Section 9(d) and shall
have the right, power and authority to enforce the provisions hereof as though
they were a party hereto.

 

9.             TRANSFERABILITY. Your
option is not transferable, except by will or by the laws of descent and
distribution, and is exercisable during your life only by you. Notwithstanding
the foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.

 

10.          RIGHT OF FIRST REFUSAL. Shares
of Common Stock that you acquire upon exercise of your option are subject to any
right of first refusal that may be described in the Company’s bylaws in effect
at such time the Company elects to exercise its right. The Company’s right of
first refusal shall expire on the Listing Date. For purposes of this Agreement,
Listing Date shall mean the first date upon which any security of the Company
is listed (or approved for listing) upon notice of issuance on a national
securities exchange or on the National Market System of the Nasdaq Stock Market
(or any successor to that entity).

 

11.          RIGHT OF REPURCHASE. To
the extent provided in the Company’s bylaws in effect at such time the Company
elects to exercise its right, the Company shall have the right to repurchase
all or any part of the shares of Common Stock you acquire pursuant to the exercise
of your option.

 

12.          OPTION NOT A SERVICE CONTRACT. Your
option is not an employment or service contract, and nothing in your option
shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option
shall 

 

 

obligate the Company or an Affiliate, their respective
stockholders, Boards of Directors, Officers or Employees to continue any
relationship that you might have as a Director or Consultant for the Company or
an Affiliate.

 

13.          WITHHOLDING OBLIGATIONS.

 

(a)           At the time you
exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any
other amounts payable to you, and otherwise agree to make adequate provision
for (including by means of a “cashless exercise” pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board to the
extent permitted by the Company), any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with the exercise of your option,
or of the transfer of your option, or the transfer of any shares issued on the
exercise of your option, from the Trustee to you or to any third party.

 

(b)           Upon your request
and subject to approval by the Company, in its sole discretion, and compliance
with any applicable legal conditions or restrictions, the Company may withhold
from fully vested shares of Common Stock otherwise issuable to you upon the
exercise of your option a number of whole shares of Common Stock having a Fair
Market Value, determined by the Company as of the date of exercise, not in
excess of the minimum amount of tax required to be withheld by law (or such
lower amount as may be necessary to avoid classification of your option as a
liability award for financial accounting purposes).

 

(c)           You may not
exercise your option, or transfer your option, or transfer any shares issued on
the exercise of your option, from the Trustee to yourself or to any third party
unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no
obligation to issue a certificate for such shares of Common Stock or release
such shares of Common Stock from any escrow provided for herein unless such
obligations are satisfied.

 

14.          NOTICES. Any notices
provided for in your option or the Plan shall be given in writing and shall be
deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5) days after deposit in the Israel mail,
postage prepaid, addressed to you at the last address you provided to the
Company.

 

15.          GOVERNING PLAN DOCUMENT. Your
option is subject to all the provisions of the Plan (including the Israeli Sub-Plan),
the provisions of which are hereby made a part of your option, and is further
subject to all interpretations, amendments, rules and regulations, which may
from time to time be promulgated and adopted pursuant to the Plan. In the event
of any conflict between the provisions of your option and those of the Plan,
the provisions of the Plan shall control.

 

16.          APPLICATION OF SECTION 102. It
is the intention of the Company that the provisions and tax benefits of Section
102 apply to this option and any shares of Common Stock issued pursuant to this
option. You shall comply with the provisions of Section 102, and “Section 102
Rules” (which means the Income Tax rules (Tax Relief for Issuance of Shares to
Employees, 2003) and the escrow agreement to be entered into between the
Trustee and the Company.

 

 

(a)           In accordance with
the provisions of Section 102, the option and any shares of Common Stock
subject to the option shall be issued to a Trustee and held by such Trustee for
your benefit for a period of not less than two years from the date of issuance.

 

(b)           After the two year
holding period the Trustee shall not release or transfer the option or any
shares of Common Stock subject to the option before (i) withholding any
applicable tax due pursuant to the Ordinance and the Section 102 Rules; or (ii)
receipt of an authorization from the ITA certifying that all such applicable
taxes have been paid.

 

(c)           The option and all
shares of Common Stock subject to the option shall be subject to the terms and
conditions of Section 102 and the Section 102 Rules.

 

(d)           You may not claim
an exemption from Israeli tax pursuant to Section 97(a) of the Ordinance or
pursuant to Part E’2 of the Ordinance in connection with a transfer by you of
the option or any shares of Common Stock subject to the option prior to the end
of the Restricted Period Per Section 102.

 

(e)           You are obligated
to immediately notify the Company and the Trustee of your request, if any, to
the ITA pursuant to Section 6(b) of the Section 102 Rules in the event the
shares of Common Stock subject to the option are registered on any stock
exchange. Nothing herein shall obligate the Company to register the shares or
any of the Company’s stock on a stock exchange.

 

(f)            In the event a
stock split or stock dividend is declared on shares of Common Stock, all
post-split or post-dividend shares held by the Trustee for your benefit under
this Stock Option Agreement shall be subject to the provisions of this Section
16.

 

(g)           Under Section 102
and the Section 102 Rules, the tax relief thereunder shall not apply and you
shall be required to promptly pay any applicable tax at such time as: (i) your
employment is terminated during, the two year Restricted Period Per Section 102
(other than because of death or other reasons beyond your control which are
acceptable to the Income Tax Authorities), (ii) you or the Company fail to
comply with any of the conditions of Section 102, the Section 102 Rules or
other conditions prescribed by the ITA; or (iii) the ITA withdraws or cancels its
approval for the plan in which event, the Trustee shall continue to hold the
shares of Common Stock subject to this option or the option (to the extent the
option remains exercisable following termination of employment) for the
remainder of the applicable Restricted Period Per Section 102.

 

(h)           You acknowledge
that the option has been granted to you in lieu of wages.

 

17.          CURRENCY CONTROL ACT RESTRICTIONS. Any
payment made by you to the Company in connection with the exercise of this
option shall be made through an account in your name (the “Account”) with such
commercial bank as is designated by the Company from time to time, and shall
comply in all respects with the Currency Control Law, 1978 of Israel (the “CCL”). Any shares or
other proceeds to be delivered to you by the Company upon exercise of this
option shall also be delivered to the Account. Similarly, all sales of shares
of Common Stock subject to the option will be made out of the Account. YOU
REPRESENT THAT YOU HAVE READ, UNDERSTAND AND AGREE TO BE BOUND BY THE
PROVISIONS OF THIS SECTION 17, AND UNDERSTAND AND AGREE THAT THIS SECTION 17
MAY BE AMENDED FROM TIME TO TIME TO COMPLY WITH CHANGES IN THE CCL.

 

 

ATTACHMENT
I

 

2007 EQUITY INCENTIVE PLAN

 

 

ATTACHMENT
II

 

NOTICE OF EXERCISE

 

	
  QUARK PHARMACEUTICALS, INC.

  6501 DUMBARTON CIRCLE.

  FREMONT, CA 94555

  UNITED STATES OF AMERICA

  	
   

  	
  Date of Exercise:

  	
   

  	
   

  

 

Ladies and
Gentlemen:

 

This constitutes notice under my stock option that I
elect to purchase the number of shares for the price set forth below.

 

	
  Type
  of option:

  	
   

  	
  Nonstatutory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stock option dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number of shares as to
  which option is exercised:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Certificates to be
  issued in name of:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total exercise price(1):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash payment delivered
  herewith:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Value of         shares
  of Quark Pharmaceuticals, Inc.
  common stock delivered herewith(2):

  	
   

  	
  $

  	
   

  	
   

  
						

 

By this exercise, I agree (i) to provide such
additional documents as you may require pursuant to the terms of the Quark Pharmaceuticals, Inc. 2007 Equity Incentive
Plan and the Israeli Sub-Plan attached as Exhibit B thereto, and
(ii) to provide for the payment by me to you (in the manner designated by
you) of your withholding obligation, if any, relating to the exercise of this
option.

 

(1)           All currency references
herein are denominated in United States dollars unless expressly provided
otherwise.

(2)           Shares must meet the
public trading requirements set forth in the option.  Shares must be valued in accordance with the
terms of the option being exercised, must have been owned for the minimum
period required in the option, and must be owned free and clear of any liens,
claims, encumbrances or security interests. 
Certificates must be endorsed or accompanied by an executed assignment
separate from certificate.

 

 

I hereby make the following certifications and
representations with respect to the number of shares of Common Stock of the
Company listed above (the “Shares”),
which are being acquired by me for my own account upon exercise of the Option
as set forth above:

 

I acknowledge that the Shares have not been registered
under the United States Securities Act of 1933, as amended (the “Securities Act”), and are deemed to
constitute “restricted securities” under Rule 701 and Rule 144 promulgated
under the Securities Act. I warrant and represent to the Company that I have no
present intention of distributing or selling said Shares, except as permitted
under the Securities Act and any applicable state securities laws.

 

I further acknowledge that I will not be able to resell
the Shares for at least ninety days (90) after the stock of the Company becomes
publicly traded (i.e., subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934) under Rule 701 and that more restrictive conditions apply to affiliates
of the Company under Rule 144.

 

I further acknowledge that all certificates
representing any of the Shares subject to the provisions of the Option shall
have endorsed thereon appropriate legends reflecting the foregoing limitations,
as well as any legends reflecting restrictions pursuant to the Company’s
Articles of Incorporation, Bylaws and/or applicable securities laws.

 

I further agree that, if required by the Company (or a
representative of the underwriters) in connection with the first underwritten
registration of the offering of any securities of the Company under the
Securities Act, I will not sell, dispose of, transfer, make any short sale of,
grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale, any shares of Common Stock
or other securities of the Company for a period of one hundred eighty (180)
days following the effective date of a registration statement of the Company
filed under the Securities Act or such longer period as necessary to permit
compliance with NASD Rule 2711 and similar or successor regulatory rules and
regulations (the “Lock Up Period”). I further
agree to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) that are consistent with the
foregoing or that are necessary to give further effect thereto. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 

QUARK PHARMACEUTICALS, INC.

2007 EQUITY INCENTIVE PLAN

 

OPTION GRANT NOTICE

 

Quark Pharmaceuticals, Inc.
(the “Company”),
pursuant to its 2007 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth
below.  This option is subject to all of
the terms and conditions as set forth herein and in the Option Agreement, the
Plan, and the Notice of Exercise, all of which are attached hereto and incorporated
herein in their entirety.

 

 

	
  Optionholder:

  	
   

  
	
  Date of Grant:

  	
   

  
	
  Vesting Commencement Date:

  	
   

  
	
  Number of Shares Subject to Option:

  	
   

  
	
  Exercise Price Per Share:

  	
   

  
	
  Total Exercise Price:

  	
   

  
	
  Expiration Date:

  	
   

  

 

	
  Type of Grant:

  	
   

  	
   ̈  Incentive Stock Option(1)
                    ̈  Nonstatutory Stock Option

  
	
   

  	
   

  	
   

  
	
  Exercise Schedule:

  	
   

  	
  Same as Vesting Schedule

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
                  

  
	
   

  	
   

  	
   

  
	
  Payment:

  	
   

  	
  By one or a combination of the following items
  (described in the Option Agreement):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o   By
  cash, check, bank draft or money order payable to the Company

  
	
   

  	
   

  	
  o   Pursuant
  to a Regulation T Program if the Shares are publicly traded

  
	
   

  	
   

  	
  o   By
  delivery of already-owned shares if the Shares are publicly traded

  
	
   

  	
   

  	
  o   By
  net exercise

  

 

Additional Terms/Acknowledgements:
The undersigned Optionholder acknowledges receipt of, and understands and
agrees to, this Option Grant Notice, the Option Agreement and the Plan.

 

Optionholder further acknowledges that as of the Date of Grant, this
Option Grant Notice, the Option Agreement, and the Plan set forth the entire
understanding between Optionholder and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and
delivered to Optionholder under the Plan, and (ii) the following
agreements only:

 

	
  OTHER
  AGREEMENTS:

  	
   

  
	
   

  	
   

  

 

	
  QUARK PHARMACEUTICALS,
  INC.

  	
   

  	
  OPTIONHOLDER:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Residential
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

(1)                                  If
this is an Incentive Stock Option, it (plus other outstanding Incentive Stock
Options) cannot be first exercisable for more than $100,000 in value (measured
by exercise price) in any calendar year. 
Any excess over $100,000 is a Nonstatutory Stock Option.

 

 

QUARK PHARMACEUTICALS, INC.

2007 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant
to your Option Grant Notice (“Grant Notice”)
and this Stock Option Agreement, Quark Pharmaceuticals, Inc. (the “Company”) has granted you an option
under its 2007 Equity Incentive Plan (the “Plan”) to
purchase the number of shares of the Company’s Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in this
Stock Option Agreement but defined in the Plan shall have the same definitions
as in the Plan.

 

The
details of your option are as follows:

 

1.             VESTING.  Subject to the limitations contained herein,
your option will vest as provided in your Grant Notice, provided that vesting
will cease upon the termination of your Continuous Service.

 

2.             NUMBER
OF SHARES AND EXERCISE PRICE. 
The number of shares of Common Stock subject to your option and your
exercise price per share referenced in your Grant Notice may be adjusted from
time to time for Capitalization Adjustments.

 

3.             EXERCISE
RESTRICTION FOR NON-EXEMPT EMPLOYEES.  In the event that you are an Employee
eligible for overtime compensation under the Fair Labor Standards Act of 1938,
as amended (i.e., a “Non-Exempt Employee”),
you may not exercise your option until you have completed at least six (6) months
of Continuous Service measured from the Date of Grant specified in your Grant
Notice, notwithstanding any other provision of your option.

 

4.             METHOD
OF PAYMENT.  Payment of
the exercise price is due in full upon exercise of all or any part of your
option.  You may elect to make payment of
the exercise price in cash or check payable to the Company or in any other
manner permitted by your Grant Notice,
which may include one or more of the following:

 

(a)           In
the Company’s sole discretion at the time your option is exercised, and
provided that at the time of exercise the Common Stock is publicly traded and
quoted regularly in The Wall Street Journal,
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds.

 

(b)           In
the Company’s sole discretion at the time your option is exercised, and
provided that at the time of exercise the Common Stock is publicly traded and
quoted regularly in The Wall Street Journal,
by delivery to the Company (either by actual delivery or attestation) of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six (6) months)
or that you did not acquire, directly or indirectly from the Company, that are
owned free and clear of any liens, claims, encumbrances or security interests,
and that are valued at Fair Market Value on the date of exercise.  “Delivery” for these purposes, in the sole
discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of 

 

 

such shares of Common Stock in a form approved by the
Company.  Notwithstanding the foregoing,
you may not exercise your option by tender to the Company of Common Stock to
the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.

 

(c)           In
the Company’s sole discretion at the time your option is exercised, and
provided that at the time of exercise the Common Stock is publicly traded and
quoted regularly in The Wall Street Journal,
by a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issued upon exercise of your option by the
largest whole number of shares with a Fair Market Value that does not exceed
the aggregate exercise price; provided, however,
the Company shall accept a cash or other payment from you to the extent of any
remaining balance of the aggregate exercise price not satisfied by such
reduction in the number of whole shares to be issued; provided
further, however, shares of Common Stock will no longer be
outstanding under your option and will not be exercisable thereafter to the
extent that (i) shares are used to pay the exercise price pursuant to the “net
exercise,” (ii) shares are delivered to you as a result of such exercise,
and (iii) shares are withheld to satisfy tax withholding obligations.

 

5.             WHOLE
SHARES.  You may
exercise your option only for whole shares of Common Stock.

 

6.             SECURITIES
LAW COMPLIANCE. 
Notwithstanding anything to the contrary contained herein, you may not
exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of
Common Stock are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.  The exercise of your
option also must comply with other applicable laws and regulations governing
your option, and you may not exercise your option if the Company determines
that such exercise would not be in material compliance with such laws and
regulations.

 

7.             TERM.  You may not exercise your option before the
commencement or after the expiration of its term.  The term of your option commences on the Date
of Grant and, except as expressly provided in Section 5(g) of the
Plan, expires upon the earliest of the following:

 

(a)           three
(3) months after the termination of your Continuous Service for any reason
other than your Disability or death;

 

(b)           one
(1) year after the termination of your Continuous Service due to your
Disability;

 

(c)           one
(1) year after your death if you die either during your Continuous Service
or within thirty (30) days after your Continuous Service terminates;

 

(d)           the
Expiration Date indicated in your Grant Notice; or

 

(e)           the
day before the tenth (10th) anniversary of the Date of Grant.

 

If
your option is an Incentive Stock Option, note that to obtain the federal
income tax advantages associated with an Incentive Stock Option, the Code
requires that at all times beginning on the date of grant of your option and
ending on the day three (3) months before the date of your option’s
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability.  The
Company has provided for extended exercisability 

 

 

of your option under certain
circumstances for your benefit but cannot guarantee that your option will
necessarily be treated as an Incentive Stock Option if you continue to provide
services to the Company or an Affiliate as a Consultant or Director after your
employment terminates or if you otherwise exercise your option more than three (3) months
after the date your employment with the Company or an Affiliate terminates.

 

8.             EXERCISE.

 

(a)           You
may exercise the vested portion of your option during its term by delivering a
Notice of Exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require.

 

(b)           By
exercising your option you agree that, as a condition to any exercise of your
option, the Company may require you to enter into an arrangement providing for
the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares of Common Stock
are subject at the time of exercise, or (3) the disposition of shares of
Common Stock acquired upon such exercise.

 

(c)           If
your option is an Incentive Stock Option, by exercising your option you agree
that you will notify the Company in writing within fifteen (15) days after the
date of any disposition of any of the shares of the Common Stock issued upon
exercise of your option that occurs within two (2) years after the date of
your option grant or within one (1) year after such shares of Common Stock
are transferred upon exercise of your option.

 

(d)           By
exercising your option you agree that you shall not sell, dispose of, transfer,
make any short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any
shares of Common Stock or other securities of the Company held by you, for a
period of time specified by the managing underwriter(s) (not to exceed one
hundred eighty (180) days (or such longer period, not to exceed 18 days after
the expiration of the 180-day period, as the underwriters or the Company shall
request in order to facilitate compliance with NASD Rule 2711) following
the effective date of a registration statement of the Company filed under the
Securities Act (the “Lock Up Period”);
provided, however, that nothing
contained in this section shall prevent the exercise of a repurchase
option, if any, in favor of the Company during the Lock Up Period.  You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto.  In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to your shares of Common Stock until the end of such
period.  The underwriters of the Company’s
stock are intended third party beneficiaries of this Section 8(d) and
shall have the right, power and authority to enforce the provisions hereof as
though they were a party hereto.

 

9.             TRANSFERABILITY.  Your option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you.  Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.  In addition, if permitted by the Company you
may transfer your option to a trust if you are considered to be the sole
beneficial owner (determined under Section 671 of the 

 

 

Code and applicable state law) while the option is
held in the trust, provided that you and the trustee enter into a transfer and
other agreements required by the Company.

 

10.          OPTION
NOT A SERVICE CONTRACT. 
Your option is not an employment or service contract, and nothing in
your option shall be deemed to create in any way whatsoever any obligation on
your part to continue in the employ of the Company or an Affiliate, or of the
Company or an Affiliate to continue your employment.  In addition, nothing in your option shall
obligate the Company or an Affiliate, their respective stockholders, Boards of
Directors, Officers or Employees to continue any relationship that you might
have as a Director or Consultant for the Company or an Affiliate.

 

11.          WITHHOLDING
OBLIGATIONS.

 

(a)           At
the time you exercise your option, in whole or in part, or at any time
thereafter as requested by the Company, you hereby authorize withholding from
payroll and any other amounts payable to you, and otherwise agree to make
adequate provision for (including by means of a “cashless exercise” pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or
an Affiliate, if any, which arise in connection with the exercise of your
option.

 

(b)           Upon
your request and subject to approval by the Company, in its sole discretion,
and compliance with any applicable legal conditions or restrictions, the Company
may withhold from fully vested shares of Common Stock otherwise issuable to you
upon the exercise of your option a number of whole shares of Common Stock
having a Fair Market Value, determined by the Company as of the date of
exercise, not in excess of the minimum amount of tax required to be withheld by
law (or such lower amount as may be necessary to avoid classification of your
option as a liability award for financial accounting purposes).

 

(c)           You
may not exercise your option unless the tax withholding obligations of the
Company and/or any Affiliate are satisfied. 
Accordingly, you may not be able to exercise your option when desired
even though your option is vested, and the Company shall have no obligation to
issue a certificate for such shares of Common Stock or release such shares of
Common Stock from any escrow provided for herein unless such obligations are
satisfied.

 

12.          NOTICES.  Any notices provided for in your option or
the Plan shall be given in writing and shall be deemed effectively given upon
receipt or, in the case of notices delivered by mail by the Company to you,
five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.

 

13.          GOVERNING
PLAN DOCUMENT.  Your
option is subject to all the provisions of the Plan, the provisions of which
are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to
time be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the
provisions of your option and those of the Plan, the provisions of the Plan
shall control.

 

 

ATTACHMENT I

 

2007 EQUITY INCENTIVE PLAN

 

 

ATTACHMENT II

 

NOTICE OF EXERCISE

 

	
  QUARK PHARMACEUTICALS, INC.

  	
   

  	
   

  
	
  6501 DUMBARTON CIRCLE.

  	
   

  	
   

  
	
  FREMONT, CA 94555

  	
   

  	
   

  
	
  UNITED STATES OF AMERICA

  	
  Date of Exercise: 

  	
   

  	
   

  

 

Ladies and Gentlemen:

 

This constitutes notice
under my stock option that I elect to purchase the number of shares for the
price set forth below.

 

 

	
  Type of option (check one):

  	
   

  	
  Incentive  ̈

  	
   

  	
  Nonstatutory  ̈

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stock option dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Number of shares as to which option is exercised:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Certificates to be issued in name of:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total exercise price(2):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash payment delivered herewith:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Value of         
  shares of Quark Pharmaceuticals, Inc.
  common stock delivered herewith(3):

  	
   

  	
  $

  	
   

  	
   

  

 

By this exercise, I agree
(i) to provide such additional documents as you may require pursuant to
the terms of the Quark Pharmaceuticals, Inc.
2007 Equity Incentive Plan, (ii) to provide for the payment by me to you
(in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this option, and (iii) if this exercise
relates to an incentive stock option, to notify you in writing within fifteen
(15) days after the date of any disposition of any of the shares of Common
Stock issued upon exercise of this option that occurs within two (2) years

 

(2)           All currency
references herein are denominated in United States dollars unless expressly
provided otherwise.

(3)           Shares must meet the
public trading requirements set forth in the option.  Shares must be valued in accordance with the
terms of the option being exercised, must have been owned for the minimum
period required in the option, and must be owned free and clear of any liens,
claims, encumbrances or security interests. 
Certificates must be endorsed or accompanied by an executed assignment
separate from certificate.

 

 

after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.

 

I hereby make the
following certifications and representations with respect to the number of
shares of Common Stock of the Company listed above (the “Shares”),
which are being acquired by me for my own account upon exercise of the Option
as set forth above:

 

I acknowledge that the
Shares have not been registered under the United States Securities Act of 1933,
as amended (the “Securities Act”), and are
deemed to constitute “restricted securities” under Rule 701 and Rule 144
promulgated under the Securities Act.  I
warrant and represent to the Company that I have no present intention of
distributing or selling said Shares, except as permitted under the Securities
Act and any applicable state securities laws.

 

I further acknowledge
that I will not be able to resell the Shares for at least ninety days (90)
after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.

 

I further acknowledge
that all certificates representing any of the Shares subject to the provisions
of the Option shall have endorsed thereon appropriate legends reflecting the
foregoing limitations, as well as any legends reflecting restrictions pursuant
to the Company’s Articles of Incorporation, Bylaws and/or applicable securities
laws.

 

I further agree that, if
required by the Company (or a representative of the underwriters) in connection
with the first underwritten registration of the offering of any securities of
the Company under the Securities Act, I will not sell, dispose of, transfer,
make any short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any
shares of Common Stock or other securities of the Company for a period of one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act or such longer period
as necessary to permit compliance with NASD Rule 2711 and similar or
successor regulatory rules and regulations (the “Lock
Up Period”).  I further
agree to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) that are consistent with the
foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.

 

	
   

  	
  Very truly yours,Exhibit 10.35

 

QUARK PHARMACEUTICALS, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS:  MAY 24, 2007

APPROVED
BY THE SHAREHOLDERS: JUNE 1, 2007

 

ADJUSTED
TO REFLECT 2.9:1 REVERSE

STOCK SPLIT EFFECTIVE JUNE 4, 2007

 

1.             GENERAL.

 

(a)           The purpose of the
Plan is to provide a means by which Eligible Employees of the Company and
certain designated Related Corporations may be given an opportunity to purchase
shares of Common Stock. The Plan is intended to permit the Company to grant a
series of Purchase Rights to Eligible Employees under an Employee Stock
Purchase Plan.

 

(b)           The Company, by
means of the Plan, seeks to retain the services of such Employees, to secure
and retain the services of new Employees and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its Related
Corporations.

 

2.             ADMINISTRATION.

 

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

 

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

 

(i)            To determine how
and when Purchase Rights to purchase shares of Common Stock shall be granted
and the provisions of each Offering comprised of such Purchase Rights (which
need not be identical).

 

(ii)           To designate from
time to time which Related Corporations of the Company shall be eligible to
participate in the Plan.

 

(iii)         To construe and
interpret the Plan and Purchase Rights, and to establish, amend and revoke
rules and regulations for administration of the Plan. The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in
the Plan, in a manner and to the extent it shall deem necessary or expedient to
make the Plan or Purchase Rights fully effective.

 

(iv)          To settle all
controversies regarding the Plan and Purchase Rights granted under it.

 

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

 

 

(vi)          To amend the Plan in
any respect the Board deems necessary or advisable. However, except as provided
in Section 12(a) relating to Capitalization Adjustments, stockholder approval
shall be required for any amendment of the Plan that either (1) materially
increases the number of shares of Common Stock available for issuance under the
Plan, (2) materially expands the class of individuals eligible to receive
Purchase Rights under the Plan, (3) materially increases the benefits accruing
to Participants under the Plan or materially reduces the price at which shares
of Common Stock may be purchased under the Plan, (4) materially extends the
term of the Plan, or (5) expands the types of awards available for issuance
under the Plan, but in each of (1) through (5) only to the extent required by
applicable law or listing requirements. Except as provided above, the rights
and obligations under any Purchase Rights granted before amendment of the Plan
shall not be impaired by any amendment of the Plan except: (a) with the consent
of the person to whom such Purchase Rights were granted, or (b) as necessary to
comply with any laws or governmental regulations (including, without
limitation, the provisions of the Code and the regulations promulgated
thereunder relating to Employee Stock Purchase Plans).

 

(vii)         Generally, to
exercise such powers and to perform such acts as it deems necessary or
expedient to promote the best interests of the Company and its Related
Corporations and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.

 

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

 

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

 

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

 

3.             SHARES OF COMMON
STOCK SUBJECT TO THE PLAN.

 

(a)           Subject to the
provisions of Section 12(a) relating to Capitalization Adjustments, the
aggregate number of shares of Common Stock that may be sold pursuant to
Purchase Rights shall not exceed two hundred thousand (200,000) shares (as
adjusted to reflect the June 4, 2007 2.9:1 reverse split of the Company’s
Common Stock). In addition, the number of shares of Common Stock available for
issuance under the Plan shall automatically increase on January 1st of each
year commencing in 2008 and ending on (and including) January 1, 2017, in an
amount equal to one hundred thousand (100,000) shares of Common Stock (as
adjusted to reflect the

 

2

 

June 4, 2007 2.9:1
reverse split of the Company’s Common Stock). Notwithstanding the foregoing,
the Board may act prior to the first day of any calendar year, to provide that
there shall be no increase in the share reserve for such calendar year or that
the increase in the share reserve for such calendar year shall be a lesser
number of shares of Common Stock than would otherwise occur pursuant to the
preceding sentence.

 

(b)           If any Purchase
Right granted under the Plan shall for any reason terminate without having been
exercised, the shares of Common Stock not purchased under such Purchase Right
shall again become available for issuance under the Plan.

 

(c)           The stock
purchasable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Company on the
open market.

 

4.             GRANT OF PURCHASE
RIGHTS; OFFERING.

 

(a)           The Board may from
time to time grant or provide for the grant of Purchase Rights to purchase
shares of Common Stock under the Plan to Eligible Employees in an Offering
(consisting of one or more Purchase Periods) on an Offering Date or Offering Dates
selected by the Board. Each Offering shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate, which shall
comply with the requirement of Section 423(b)(5) of the Code that all Employees
granted Purchase Rights shall have the same rights and privileges. The terms
and conditions of an Offering shall be incorporated by reference into the Plan
and treated as part of the Plan. The provisions of separate Offerings need not
be identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which
period shall not exceed twenty-seven (27) months beginning with the Offering
Date, and the substance of the provisions contained in Sections 5 through 8.

 

(b)           If a Participant
has more than one Purchase Right outstanding under the Plan, unless he or she
otherwise indicates in agreements or notices delivered hereunder: (i) each
agreement or notice delivered by that Participant shall be deemed to apply to
all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right
with a lower exercise price (or an earlier-granted Purchase Right, if different
Purchase Rights have identical exercise prices) shall be exercised to the
fullest possible extent before a Purchase Right with a higher exercise price
(or a later-granted Purchase Right if different Purchase Rights have identical
exercise prices) shall be exercised.

 

(c)           The Board shall
have the discretion to structure an Offering so that if the Fair Market Value
of a share of Common Stock on any Purchase Date within that Offering is less
than or equal to the Fair Market Value of a share of Common Stock on the
Offering Date for that Offering, then (i) that Offering shall terminate
immediately following the purchase of shares of Common Stock on such Purchase
Date, and (ii) Participants in the terminated Offering automatically shall be
enrolled in the Offering that commences immediately after such Purchase Date.

 

3

 

5.             ELIGIBILITY.

 

(a)           Purchase Rights may
be granted only to Employees of the Company or, as the Board may designate as
provided in Section 2(b), to Employees of a Related Corporation. Except as
provided in Section 5(b), an Employee shall not be eligible to be granted
Purchase Rights under the Plan unless, on the Offering Date, such Employee has
been in the employ of the Company or the Related Corporation, as the case may
be, for such continuous period preceding such Offering Date as the Board may
require, but in no event shall the required period of continuous employment be
greater than two (2) years. In addition, the Board may provide that no Employee
shall be eligible to be granted Purchase Rights under the Plan unless, on the
Offering Date, such Employee’s customary employment with the Company or the
Related Corporation is more than twenty (20) hours per week and more than five
(5) months per calendar year or such other criteria as the Board may determine
consistent with Section 423 of the Code.

 

(b)           The Board may
provide that each person who, during the course of an Offering, first becomes
an Eligible Employee shall, on a date or dates specified in the Offering which coincides
with the day on which such person becomes an Eligible Employee or which occurs
thereafter, receive a Purchase Right under that Offering, which Purchase Right
shall thereafter be deemed to be a part of that Offering. Such Purchase Right
shall have the same characteristics as any Purchase Rights originally granted
under that Offering, as described herein, except that:

 

(i)            the date on which
such Purchase Right is granted shall be the “Offering Date” of such Purchase
Right for all purposes, including determination of the exercise price of such
Purchase Right;

 

(ii)           the period of the
Offering with respect to such Purchase Right shall begin on its Offering Date
and end coincident with the end of such Offering; and

 

(iii)         the Board may provide
that if such person first becomes an Eligible Employee within a specified
period of time before the end of the Offering, he or she shall not receive any
Purchase Right under that Offering.

 

(c)           No Employee shall
be eligible for the grant of any Purchase Rights under the Plan if, immediately
after any such Purchase Rights are granted, such Employee owns stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any Related Corporation. For purposes of
this Section 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding Purchase Rights and options shall be treated
as stock owned by such Employee.

 

(d)           As specified by
Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase
Rights under the Plan only if such Purchase Rights, together with any other
rights granted under all Employee Stock Purchase Plans of the Company and any
Related Corporations, do not permit such Eligible Employee’s rights to purchase
stock of the Company or any Related Corporation to accrue at a rate which
exceeds twenty five thousand dollars ($25,000) of Fair Market Value of such
stock (determined at the time such rights are granted, and

 

4

 

which, with respect to
the Plan, shall be determined as of their respective Offering Dates) for each
calendar year in which such rights are outstanding at any time.

 

(e)           Officers of the
Company and any designated Related Corporation, if they are otherwise Eligible
Employees, shall be eligible to participate in Offerings under the Plan.
Notwithstanding the foregoing, the Board may provide in an Offering that Employees
who are highly compensated Employees within the meaning of Section 423(b)(4)(D)
of the Code shall not be eligible to participate.

 

6.             PURCHASE RIGHTS;
PURCHASE PRICE.

 

(a)           On each Offering
Date, each Eligible Employee, pursuant to an Offering made under the Plan,
shall be granted a Purchase Right to purchase up to that number of shares of
Common Stock purchasable either with a percentage or with a maximum dollar
amount, as designated by the Board, but in either case not exceeding fifteen percent (15%) of such Employee’s
earnings (as defined by the Board in each Offering) during the period that
begins on the Offering Date (or such later date as the Board determines for a
particular Offering) and ends on the date stated in the Offering, which date
shall be no later than the end of the Offering.

 

(b)           The Board shall
establish one (1) or more Purchase Dates during an Offering as of which
Purchase Rights granted pursuant to that Offering shall be exercised and
purchases of shares of Common Stock shall be carried out in accordance with
such Offering.

 

(c)           In connection with
each Offering made under the Plan, the Board may specify a maximum number of
shares of Common Stock that may be purchased by any Participant on any Purchase
Date during such Offering. In connection with each Offering made under the
Plan, the Board may specify a maximum aggregate number of shares of Common
Stock that may be purchased by all Participants pursuant to such Offering. In
addition, in connection with each Offering that contains more than one Purchase
Date, the Board may specify a maximum aggregate number of shares of Common
Stock that may be purchased by all Participants on any Purchase Date under the
Offering. If the aggregate purchase of shares of Common Stock issuable upon
exercise of Purchase Rights granted under the Offering would exceed any such
maximum aggregate number, then, in the absence of any Board action otherwise, a
pro rata allocation of the shares of Common Stock available shall be made in as
nearly a uniform manner as shall be practicable and equitable.

 

(d)           The purchase price
of shares of Common Stock acquired pursuant to Purchase Rights shall be not
less than the lesser of:

 

(i)            an amount equal to
eighty-five percent (85%) of the Fair Market Value of the shares of Common
Stock on the Offering Date; or

 

(ii)           an amount equal to
eighty-five percent (85%) of the Fair Market Value of the shares of Common
Stock on the applicable Purchase Date.

 

5

 

7.             PARTICIPATION;
WITHDRAWAL; TERMINATION.

 

(a)           A Participant may
elect to authorize payroll deductions pursuant to an Offering under the Plan by
completing and delivering to the Company, within the time specified in the
Offering, an enrollment form (in such form as the Company may provide). Each
such enrollment form shall authorize an amount of Contributions expressed as a
percentage of the submitting Participant’s earnings (as defined in each
Offering) during the Offering (not to exceed the maximum percentage specified
by the Board). Each Participant’s Contributions shall be credited to a
bookkeeping account for such Participant under the Plan and shall be deposited
with the general funds of the Company except where applicable law requires that
Contributions be deposited with a third party. To the extent provided in the
Offering, a Participant may begin such Contributions after the beginning of the
Offering. To the extent provided in the Offering, a Participant may thereafter
reduce (including to zero) or increase his or her Contributions. To the extent
specifically provided in the Offering, in addition to making Contributions by
payroll deductions, a Participant may make Contributions through the payment by
cash or check prior to each Purchase Date of the Offering.

 

(b)           During an Offering,
a Participant may cease making Contributions and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
may provide. Such withdrawal may be elected at any time prior to the end of the
Offering, except as provided otherwise in the Offering. Upon such withdrawal
from the Offering by a Participant, the Company shall distribute to such
Participant all of his or her accumulated Contributions (reduced to the extent,
if any, such Contributions have been used to acquire shares of Common Stock for
the Participant) under the Offering, and such Participant’s Purchase Right in
that Offering shall thereupon terminate. A Participant’s withdrawal from an
Offering shall have no effect upon such Participant’s eligibility to
participate in any other Offerings under the Plan, but such Participant shall
be required to deliver a new enrollment form in order to participate in
subsequent Offerings.

 

(c)           Purchase Rights
granted pursuant to any Offering under the Plan shall terminate immediately
upon a Participant ceasing to be an Employee for any reason or for no reason
(subject to any post-employment participation period required by law) or other
lack of eligibility. The Company shall distribute to such terminated or otherwise
ineligible Employee all of his or her accumulated Contributions (reduced to the
extent, if any, such Contributions have been used to acquire shares of Common
Stock for the terminated or otherwise ineligible Employee) under the Offering.

 

(d)           Purchase Rights
shall not be transferable by a Participant except by will, the laws of descent
and distribution, or by a beneficiary designation as provided in Section 10.
During a Participant’s lifetime, Purchase Rights shall be exercisable only by
such Participant.

 

(e)           Unless otherwise
specified in an Offering, the Company shall have no obligation to pay interest
on Contributions.

 

6

 

8.             EXERCISE OF PURCHASE
RIGHTS.

 

(a)           On each Purchase
Date during an Offering, each Participant’s accumulated Contributions shall be
applied to the purchase of shares of Common Stock up to the maximum number of
shares of Common Stock permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of Purchase Rights unless
specifically provided for in the Offering.

 

(b)           If any amount of
accumulated Contributions remains in a Participant’s account after the purchase
of shares of Common Stock and such remaining amount is less than the amount
required to purchase one share of Common Stock on the final Purchase Date of an
Offering, then such remaining amount shall be held in such Participant’s
account for the purchase of shares of Common Stock under the next Offering
under the Plan, unless such Participant withdraws from such next Offering, as
provided in Section 7(b), or is not eligible to participate in such Offering,
as provided in Section 5, in which case such amount shall be distributed to
such Participant after the final Purchase Date, without interest. If the amount
of Contributions remaining in a Participant’s account after the purchase of
shares of Common Stock is at least equal to the amount required to purchase one
(1) whole share of Common Stock on the final Purchase Date of the Offering,
then such remaining amount shall be distributed in full to such Participant at
the end of the Offering without interest.

 

(c)           No Purchase Rights
may be exercised to any extent unless the shares of Common Stock to be issued
upon such exercise under the Plan are covered by an effective registration
statement pursuant to the Securities Act and the Plan is in material compliance
with all applicable federal, state, foreign and other securities and other laws
applicable to the Plan. If on a Purchase Date during any Offering hereunder the
shares of Common Stock are not so registered or the Plan is not in such
compliance, no Purchase Rights or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the shares of
Common Stock are subject to such an effective registration statement and the
Plan is in such compliance, except that the Purchase Date shall not be delayed
more than twelve (12) months and the Purchase Date shall in no event be more
than twenty-seven (27) months from the Offering Date. If, on the Purchase Date
under any Offering hereunder, as delayed to the maximum extent permissible, the
shares of Common Stock are not registered and the Plan is not in such
compliance, no Purchase Rights or any Offering shall be exercised and all
Contributions accumulated during the Offering (reduced to the extent, if any,
such Contributions have been used to acquire shares of Common Stock) shall be
distributed to the Participants without interest.

 

9.             COVENANTS OF THE
COMPANY.

 

The Company shall seek to obtain from each federal,
state, foreign or other regulatory commission or agency having jurisdiction
over the Plan such authority as may be required to issue and sell shares of
Common Stock upon exercise of the Purchase Rights. If, after commercially
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority that counsel for the Company deems necessary
for the lawful issuance and sale of Common Stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell Common Stock
upon exercise of such Purchase Rights unless and until such authority is
obtained.

 

7

 

10.          DESIGNATION OF
BENEFICIARY.

 

(a)           A Participant may
file a written designation of a beneficiary who is to receive any shares of
Common Stock and/or cash, if any, from the Participant’s account under the Plan
in the event of such Participant’s death subsequent to the end of an Offering
but prior to delivery to the Participant of such shares of Common Stock or
cash. In addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant’s account under the
Plan in the event of such Participant’s death during an Offering. Any such
designation shall be on a form provided by or otherwise acceptable to the
Company.

 

(b)           The Participant may
change such designation of beneficiary at any time by written notice to the
Company. In the event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
Participant’s death, the Company shall deliver such shares of Common Stock and/or
cash to the executor or administrator of the estate of the Participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such shares of
Common Stock and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.

 

11.          MISCELLANEOUS
PROVISIONS.

 

(a)           The Plan and Offering
do not constitute an employment contract. Nothing in the Plan or in the
Offering shall in any way alter the at will nature of a Participant’s
employment or be deemed to create in any way whatsoever any obligation on the
part of any Participant to continue in the employ of the Company or a Related
Corporation, or on the part of the Company or a Related Corporation to continue
the employment of a Participant.

 

(b)           The provisions of
the Plan shall be governed by the laws of the State of Delaware without resort to that state’s conflicts of laws rules.

 

(c)           Proceeds from the
sale of shares of Common Stock pursuant to Purchase Rights shall constitute
general funds of the Company.

 

(d)           A Participant shall
not be deemed to be the holder of, or to have any of the rights of a holder
with respect to, shares of Common Stock subject to Purchase Rights unless and
until the Participant’s shares of Common Stock acquired upon exercise of
Purchase Rights are recorded in the books of the Company (or its transfer
agent).

 

12.          ADJUSTMENTS UPON CHANGES
IN COMMON STOCK; CORPORATE TRANSACTIONS.

 

(a)           In the event of a
Capitalization Adjustment, the Board shall appropriately and proportionately
adjust: (i) the class(es) and maximum number of securities subject to the Plan
pursuant to Section 3(a), (ii) the class(es) and maximum number of securities
by which the share reserve is to increase automatically each year pursuant to
Section 3(a), (iii) the class(es) and number of securities subject to
outstanding Purchase Rights, and (iv) the class(es) and number of securities
imposed by purchase limits under each ongoing Offering. The Board shall make
such adjustments, and its determination shall be final, binding and conclusive.

 

8

 

(b)           In the event of a
Corporate Transaction, then: (i) any surviving corporation or acquiring
corporation (or the surviving or acquiring corporation’s parent company) may
assume or continue Purchase Rights outstanding under the Plan or may substitute
similar rights (including a right to acquire the same consideration paid to the
stockholders in the Corporate Transaction) for those outstanding under the
Plan, or (ii) if any surviving or acquiring corporation (or its parent company)  does not assume or continue such Purchase
Rights or does not substitute similar rights for Purchase Rights outstanding
under the Plan, then the Participants’ accumulated Contributions shall be used
to purchase shares of Common Stock within ten (10) business days prior to the
Corporate Transaction under any ongoing Offerings, and the Participants’
Purchase Rights under the ongoing Offerings shall terminate immediately after
such purchase.

 

13.          TERMINATION OR
SUSPENSION OF THE PLAN.

 

(a)           The Board may
suspend or terminate the Plan at any time. Unless sooner terminated, the Plan
shall terminate at the time that all of the shares of Common Stock reserved for
issuance under the Plan, as increased and/or adjusted from time to time, have
been issued under the terms of the Plan. No Purchase Rights may be granted
under the Plan while the Plan is suspended or after it is terminated.

 

(b)           Any benefits,
privileges, entitlements and obligations under any Purchase Rights while the
Plan is in effect shall not be impaired by suspension or termination of the Plan
except (i) as expressly provided in the Plan or with the consent of the person
to whom such Purchase Rights were granted, (ii) as necessary to comply with any
laws, regulations or listing requirements, or (iii) as necessary to ensure that
the Plan and/or Purchase Rights comply with the requirements of Section 423 of
the Code.

 

14.          EFFECTIVE DATE OF PLAN.

 

The Plan shall become effective on the IPO
Date, but no Purchase Rights shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.

 

15.          DEFINITIONS.

 

As used in the Plan, the following definitions shall
apply to the capitalized terms indicated below:

 

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

 

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

 

9

 

convertible securities of
the Company shall not be treated as a transaction “without the receipt of
consideration” by the Company.

 

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

 

(d)           “Committee”  means
a committee of one (1) or more members of the Board to whom authority has been
delegated by the Board in accordance with Section 2(b)(viii).

 

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

 

(f)            “Company” means Quark Biotech Inc., a
Delaware corporation.

 

(g)           “Contributions” means the payroll
deductions and other additional payments specifically provided for in the
Offering, that a Participant contributes to fund the exercise of a Purchase
Right. A Participant may make additional payments into his or her account, if
specifically provided for in the Offering, and then only if the Participant has
not already had the maximum permitted amount withheld during the Offering
through payroll deductions.

 

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

 

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

 

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

 

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

 

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

 

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

 

(j)            “Eligible Employee”  means an Employee who meets the requirements set forth in
the Offering for eligibility to participate in the Offering, provided that such
Employee also meets the requirements for eligibility to participate set forth
in the Plan.

 

(k)           “Employee”  means
any person, including Officers and Directors, who is employed for purposes of
Section 423(b)(4) of the Code by the Company or a Related Corporation. However,
service solely as a Director, or payment of a fee for such services, shall not
cause a Director to be considered an “Employee” for purposes of the Plan.

 

10

 

(l)            “Employee Stock Purchase Plan”  means a plan that grants Purchase Rights intended to be
options issued under an “employee stock purchase plan,” as that term is defined
in Section 423(b) of the Code.

 

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

 

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

 

(i)            If the Common
Stock is listed on any established stock exchange or traded on the Nasdaq
Global Select Market or the Nasdaq Global Market (formerly the Nasdaq National
Market), the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange (or the exchange or market with the greatest volume of
trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.

 

(ii)           If the Common Stock
is listed or traded on the Nasdaq Capital Market (formerly the Nasdaq SmallCap
Market), the Fair Market Value of a share of Common Stock shall be the mean
between the bid and asked prices for the Common Stock on the date of
determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
Unless otherwise provided by the Board, if there is no closing sales price (or
closing bid if no sales were reported) for the Common Stock on the date of
determination, then the Fair Market Value shall be the mean between the bid and
asked prices for the Common Stock on the last preceding date for which such
quotation exists.

 

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

 

(o)           “IPO Date”  means
the date of the underwriting agreement between the Company and the
underwriter(s) managing the initial public offering of the Common Stock,
pursuant to which the Common Stock is priced for the initial public offering.

 

(p)           “Offering”  means
the grant of Purchase Rights to purchase shares of Common Stock under the Plan
to Eligible Employees.

 

(q)           “Offering Date” means a date selected
by the Board for an Offering to commence.

 

(r)           “Officer”  means  a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

 

(s)           “Participant”  means
an Eligible Employee who holds an outstanding Purchase Right granted pursuant
to the Plan.

 

(t)            “Plan”  means
this Quark Pharmaceuticals, Inc. 2007 Employee Stock Purchase Plan.

 

11

 

(u)           “Purchase Date”  means
one or more dates during an Offering established by the Board on which Purchase
Rights shall be exercised and as of which purchases of shares of Common Stock
shall be carried out in accordance with such Offering.

 

(v)            “Purchase Period” means a period of
time specified within an Offering beginning on the Offering Date or on the next
day following a Purchase Date within an Offering and ending on a Purchase Date.
An Offering may consist of one or more Purchase Periods.

 

(w)           “Purchase Right”  means
an option to purchase shares of Common Stock granted pursuant to the Plan.

 

(x)           “Related Corporation”  means any “parent corporation” or “subsidiary corporation”
of the Company whether now or subsequently established, as those terms are
defined in Sections 424(e) and 424(f), respectively, of the Code.

 

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

 

(z)           “Trading Day”  means
any day on which the exchange(s) or market(s) on which shares of Common Stock
are listed, including an established stock exchange, the Nasdaq Global Select
Market or the Nasdaq Global Market (formerly the Nasdaq National Market), the
Nasdaq Capital Market (formerly the Nasdaq Small Cap Market), is open for
trading.

 

12

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