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.

 

DEED

AMENDMENT
AND OPTION

This Deed of Amendment and Option (this “Amendment and
Option”) is dated as of September 25, 2006 among ATUGEN AG, (“Atugen”), a
corporation incorporated under the laws of Germany, Robert-Rössle-Str. 10,
D13125 Berlin Germany, QUARK BIOTECH, INC. (“QBI”), a corporation incorporated
under the laws of California, 6536 Kaiser Drive, Freemont CA 94555, USA, QBI
ENTERPRISES LTD (“QEL”), a corporation organized under the laws of Israel, Weizman
Science Park, P.O. Box 4071, Nes Ziona 70400, Israel (QBI and QEL collectively,
“Quark”), and PFIZER INC. (“Pfizer”), a corporation incorporated under the laws
of Delaware, 235 East 42nd Street, New York, NY 10017, USA.

 

WHEREAS, Atugen owns certain patents and/or patent
applications as well as related know-how, technology and scientific and
technical information relating to siRNA molecules directed to silencing the
RTP801 gene which have been licensed by Atugen to Quark pursuant to the Atugen
License (as hereinafter defined);

 

WHEREAS, Pfizer and Quark will be entering into the Quark
License (as hereinafter defined) relating to siRNA molecules directed to
silencing the RTP801 gene under which Quark grants to Pfizer, inter  alia,
exclusive sublicenses under patents and related know-how, and scientific and
technical information licensed by Atugen to Quark pursuant to the Atugen
License;

 

WHEREAS, in connection with the Quark License, Pfizer
has requested certain clarifications regarding the Atugen License; and

 

WHEREAS, in order to assure to Pfizer the full
enjoyment of all rights to be granted to Pfizer under the Quark License, Pfizer
desires to obtain an option to acquire under certain circumstances from Atugen
certain licenses from Atugen relating to siRNA molecules directed to silencing the
RTP801 gene.

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements provided herein, the parties have executed this
Amendment and Option:

 

I.      Definitions.
For purposes of this Amendment and Option the following definitions shall be
applicable:

 

 

A.    Save as otherwise
provided herein, all terms defined in the License Agreement (as hereinafter
defined) when used herein shall have their defined meanings as specified in the
License Agreement.

 

B.    “Atugen License” means
the Collaboration Agreement, dated December 6, 2004, among Atugen, QBI and QEL,
as amended by the Amendment dated May 25, 2006.

 

C.    “Quark License” means
the license agreement between QBI and Pfizer in the form set forth in Exhibit
A, or such amended form upon which QBI and Pfizer may agree from time to time,
subject to Section III C below, attached hereto and made a part hereof.

 

D.    “License Agreement”
means the license agreement between Atugen and Pfizer in the form set forth in
Exhibit B, attached hereto and made a part hereof, as amended from time to time
in accordance with its terms.

 

II.    Grant of
Option.   Atugen hereby grants to Pfizer, and Pfizer hereby
accepts, an option to acquire an exclusive license to the Atugen Existing IP
and the Joint Program IP subject to the terms and conditions of the License
Agreement. The terms of said license are those contained in the License
Agreement which shall become effective as provided herein. The option granted
hereunder shall be exercisable by Pfizer in the event the Atugen License is
terminated or under any circumstances under which Quark shall no longer,
pursuant to the Atugen License, have license rights to the Atugen Existing IP or
the Joint Program IP. Upon the occurrence of such termination of the Atugen
License or such loss of such license rights, Atugen shall promptly notify
Pfizer, and, within thirty (30) days of receipt of such notice, Pfizer shall
have the right, at its sole discretion, to exercise the option granted
hereunder. The option shall be exercised by Pfizer by sending a notice to Atugen,
stating Pfizer’s desire to exercise the option provided herein; thereafter Atugen
and Pfizer shall promptly sign and deliver in duplicate the License Agreement,
to be dated the date of such execution, whereupon the License Agreement shall
become effective as of the date on which Quark shall have no longer any license
rights to the Atugen Existing IP or the Joint Program IP.

 

III.   Amendment of Atugen
License and Approval and Terms of Quark License.

 

A.    Notwithstanding to the contrary
any provisions of the Atugen License, (i) Quark shall be deemed to be in full
compliance with the provisions of the Atugen License by entering into and
performing the Quark License in accordance with its terms, and (ii) Pfizer
shall have no obligations or liability to Atugen or to Quark pursuant to the Atugen
License.

 

B.    Atugen hereby consents and
agrees to the execution, delivery and performance by Quark and Pfizer of the Quark
License. To the extent that any of the
provisions of the Quark License are inconsistent or conflict with the terms of
the Atugen License, the terms of the Quark License shall take precedence, and
Atugen and Quark waive any such conflict. To the extent that any of the
provisions of the Quark License are inconsistent or conflict with the
terms of this Amendment and Option, the terms of this Amendment and Option
shall take precedence, and QBI and Pfizer waive any such conflict.

 

[ * ]  = 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

 

C.    Pfizer
and Quark agree not to amend or modify Sections 1.14 (Extended Royalty Term), 1.24 (Initial Royalty Term), 1.31 (Net Sales),
1.49 (Royalty Term), 5.1 to 5.13, 6.1 to 6.6 and 7.9 of the Quark License,
and Quark agrees not to waive any right or interest it has under any such provision
of the Quark License, in each case in any manner which would materially restrict,
limit, impede or prejudice the benefits which Atugen is entitled under the
Atugen Licence (as amended by this Amendment and Option) or the License
Agreement in connection with the Quark License. Pfizer and Quark further agree
to procure that no assign or successor in title at any time to their respective
rights under the Quark Licence makes any such amendment or modification or, in
the case of Quark, waiver. For clarity, the parties hereto agree that amendment,
modification or waiver of any section of the Quark License that is not listed
above in this Section III(C) would not materially restrict, limit, impede or
prejudice the benefits which Atugen is entitled under the Atugen Licence (as
amended by this Amendment and Option) or the License Agreement in connection
with the Quark License.

 

D.    Atugen and Quark agree not to
amend or modify the Atugen License which would restrict, limit, impede or
prejudice in a material manner the exercise by Pfizer of its rights under the Quark
License, this Amendment and Option or the License Agreement.

 

E.              Atugen and Quark
hereby amend and clarify, with Pfizer’s consent, the Atugen License, as
follows:

 

1.     All licenses granted by Quark
to Atugen under Section 6.1 of the Atugen License are hereby terminated and all
obligations of Atugen pursuant to the Atugen License, whose lawful performance
depends on Atugen having the continued benefit of any such license are also
hereby terminated.

 

2.     All intellectual property
rights of Quark arising under the Atugen License have been and remain vested
solely in QBI rather than QEL, which has been performing research and
development services on behalf of QBI.

 

3.     References in Sections 4.8.1
and 4.8.4 of the Atugen License to “best efforts” are hereby amended to be “commercially
reasonable efforts.”

 

4.     (a)   Section
8.1.2 of the Atugen License is hereby deleted and replaced by the following
wording:

 

“For Products that are developed and/or sold by sub-licensees, Atugen
shall be entitled to receive a royalty of [ * ] of the Sublicense Royalties. For
purposes of this Section, and in the case where Pfizer Inc. is the sublicensee,
the Sublicense Royalties shall be the payments due from Pfizer Inc. to Quark
under Sections 5.7 and/or 5.8, subject to Sections 5.9 to 5.12 inclusive and under
Section 7.9, of the sublicence from Quark to Pfizer Inc.”

 

(b)   In Section 8.2.2 of the Atugen
License, the words “...necessary to commercialize such Party’s Products (the “Royalty
Offset”) against the royalties payable by the

 

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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

 

commercializing Party to the other Party...” shall be deleted and
replaced with the words “...necessary to commercialize such Party’s Products (the
“Royalty Offset”) against the royalties payable by the Royalty Paying Party
under Sections 8.1.1 or 8.1.2...”.

 

(c)       In Section
8.2.3 of the Atugen License, the percentage figure of [ * ] shall be replaced
by the percentage figure of [ * ].

 

(d)       In Section 8.3
of the Atugen License, the percentage and percentage figure of [ * ] shall be
replaced by the percentage and percentage figure of [ * ] in respect of the
first milestone payment to be made by Pfizer to QBI pursuant to Section 5.1 of
the Quark License and by the percentage and percentage figure of [ * ] in
respect of all other milestone payments to be made by Pfizer to QBI pursuant to
Sections 5.1 to 5.5 inclusive of the Quark License. For clarity, no payments
shall be due to Atugen arising out of payments made under Sections 4.8 to 4.12 inclusive
of the Quark License.

 

(e)       The “Products”
definition in Section 1 of the Atugen License is hereby deleted and replaced by
the following:

 

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

 

5.     The second sentence of
Section 12 of the Atugen License is hereby amended to read in full as
follows:  “The arbitration shall be
conducted in London, England, according to the rules of the London Court of
International Arbitration (“LCIA”) and the laws of England.”

 

6.     Atugen consents to Quark’s
delegation to Pfizer, in accordance with the Quark License, of responsibility
and control over the prosecution and enforcement of the Joint Patents (as defined
in the Atugen License) which are currently being prosecuted by Quark. Atugen
shall not have the right or obligation to enforce Atugen Existing IP or the
Joint Patents relating to the QBI Products; provided, however, that Quark shall
pay to Atugen [ * ] of any damages, settlements, accounts of profits or other
financial compensation received by Quark pursuant to Section 7.9 of the Quark
License.

 

7.     So long as the Quark License
remains in effect, Quark shall be deemed to have satisfied the Development Milestones
of Section 11.4 of the Atugen License (as defined in the Atugen License). If
the Quark License terminates for any reason, then:

 

(a)   The sole remaining Development
Milestone under the Atugen License applicable to Quark shall be to [ * ] within
[ * ] from termination of the Quark License (and all other Development
Milestones shall be cancelled); and

 

(b)   If Quark thereafter grants a
sublicense under the Atugen License, there shall be no Development Milestones,
but Quark and the new sublicensee(s) shall remain

 

[ * ]  = 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

 

obligated to use commercially reasonable efforts to develop a QBI
Product (as defined in the Atugen License).

 

IV.   Atugen Warranties.
Atugen hereby warrants to Pfizer that:

 

A.    Other than the Atugen
License, Atugen has not entered into any agreement with any other person or
firm granting any rights or licenses to the Atugen Existing IP or the Joint
Program IP to conduct activities within the scope of the licenses granted to
Pfizer in Sections 3.1 and 3.2 of the License Agreement.

 

B.    Atugen has the
corporate power and authority to execute and deliver this Amendment and Option
and to perform its obligations hereunder, and the execution, delivery and
performance of this Amendment and Option by Atugen has been duly and validly
authorized and approved by proper corporate action on the part of Atugen.

 

C.    The Atugen
License is in full force and effect. To Atugen’s knowledge, all payments to
date required to be made under the Atugen License by Quark have been made.

 

D.    Schedules A1, A2
and A3 to the License Agreement contains a complete listing of all of the
patents and patent applications owned or controlled by Atugen or any of its
Affiliates relating to siRNA molecules directed to silencing of the RTP801 gene
which have been licensed to Quark under the Atugen License.

 

V.    Pfizer
Warranties. Pfizer hereby warrants to Atugen that:

 

A.    Pfizer has the
corporate power and authority to execute and deliver this Amendment and Option
and to perform its obligations hereunder, and the execution, delivery and
performance of this Amendment and Option by Pfizer has been duly and validly
authorized and approved by proper corporate action on the part of Pfizer.

 

B.    Other than the
Quark License, Pfizer has not entered into any agreement with Quark in relation
to the Atugen Existing IP or the Joint Program IP.

 

VI.   Pfizer
and Quark Warranty. Pfizer and Quark hereby jointly and severally warrant
to Atugen that no agreements, other than the Quark License in the form set
forth in Exhibit A, exist between them, and that such form is a complete and
accurate copy of the agreement to be entered into between them.

 

VII.  Term
and Termination. Sections I, VII and VIII of this Amendment and Option
shall be effective as of the date first set forth above. The remaining Sections
of this Amendment and Option shall be effective as of the later of the date
first set forth above and the date which the Quark Licence comes into full
force and effect. This Amendment and Option shall terminate if for any reason
the Quark License has not (a) been executed within [ * ] following the date
first set forth above and become effective by [ * ], or (b) the Quark License
has been terminated. Except in the event of such termination, this Amendment
and Option shall remain in effect. In addition, upon [ * ] notice to Quark and
Atugen, Pfizer shall have the right, at its sole discretion, to terminate all
of its rights and obligations under this Amendment and Option, without

 

[ * ]  = 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

 

prejudice to any rights or obligations which have
accrued hereunder prior to the effective date of such termination. The
provisions of Section III(E)(7)(a) above shall survive the termination of this
Amendment and Option.

 

VIII.        Miscellaneous.

 

A.    Force Majeure. No party
shall be liable for failure of or delay in performing obligations set forth in
this Amendment and Option, and no party shall be deemed in breach of its
obligations, if such failure or delay is due to natural disasters or any causes
reasonably beyond the control of such party.

 

B.    Assignment. This Amendment
and Option shall not be assignable by any party without the prior consent of
the other, except that any party may assign this Amendment and Option, in whole
or in part, (i) to any affiliate of such party, provided, that in all cases the
assigning party shall remain responsible for all obligations hereunder if its
affiliate shall fail to perform hereunder, (ii) to any successor to
substantially all of such party’s business or assets, (iii) to a third party in
circumstances where such party is required to, or reasonably believes based on
advice of counsel, that it will be required to, divest any of the Licensed
Products (as defined in the Quark License) in order to comply with applicable
laws or the order of any governmental authority as a result of a merger or
acquisition, or (iv) by Atugen, QBI or QEL to a permitted assignee of the
Atugen License.

 

C.    Governing Law. This Amendment and Option shall be governed by the laws of England in
all respects of validity, construction and performance thereof. The parties
submit to the non-exclusive jurisdiction of the English courts.

 

D.    Notices.
Any notice, consent, approval reports, requests and communication hereunder
this Amendment and Option shall be in writing sent by registered airmail or by facsimile
(confirmed by such registered mail) and addressed as follows:

 

	
  If to Pfizer:

  	
   

  	
  If to Atugen:

  
	
   

  	
   

  	
   

  
	
  Pfizer Inc.

  	
   

  	
  Atugen AG

  
	
  235 East 42nd Street

  	
   

  	
  Robert-Rössle-Str. 10

  
	
  New York, N.Y. 10017

  	
   

  	
  D13125 Berlin Germany

  
	
  Attention: General
  Counsel

  	
   

  	
  Attention:
  Thomas Christély

  
	
  Fax: 212-808-8924

  	
   

  	
  Fax:
  +49 30 9489 2801

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Quark:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Quark Biotech Inc.

  	
   

  	
  QBI Enterprises Limited

  
	
  6536 Kaiser Drive

  	
   

  	
  Weizman Science Park

  
	
  Freemont, CA 94555

  	
   

  	
  P.O. Box 4071

  
	
  Attention: Daniel Zurr, Ph.D.

  	
   

  	
  Nes Ziona 70400, Israel

  
	
  Fax: (510) 402-4021

  	
   

  	
  Attention: Daniel Zurr, Ph.D.

  
	
   

  	
   

  	
  Fax: 972-8.940.6476

  

 

[ * ]  = 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

 

All notices shall be deemed to be effective five days after posting if
sent by registered post, and upon delivery as indicated on the facsimile
activity report if sent by facsimile. In case any party changes its address at
which notice is to be received, written notice of such change shall be given
without delay to the other party.

 

E.     Entire Agreements,
Amendments. This Amendment and Option (together with the Schedule and
Exhibits hereto and all other agreements referred to herein or in said
Exhibits) sets forth the entire agreement and understanding among the parties
hereto as to the subject matter hereof and supercedes all agreements or
understandings, verbal or written, made among Atugen, QBI, QEL and Pfizer
before the date hereof with respect to the subject matter hereof. None of the
terms or this Amendment and Option shall be amended, supplemented or modified except
in writing signed by the parties hereto.

 

F.     Severability. If and
solely to the extent that any provision of this Amendment and Option shall be
invalid or unenforceable, or shall render this Amendment and Option to be
unenforceable or invalid, such offending provision shall be of no effect and
shall not effect the validity of the remainder of this Amendment and Option 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.

 

G.    Waivers. Any term or
condition of this Amendment and Option 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. The waiver by any party of any
term or condition of this Amendment and Option or the failure on the part of
any party, on one or more instances, to enforce any of the provisions of this Amendment
and Option or to exercise any right or privilege, shall not 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 Amendment and Option
shall be cumulative and none of them shall be a limitation of any other remedy,
right, undertaking, obligation or agreement.

 

H.    Binding Effect. This Amendment
and Option shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.

 

I.      Counterparts. This Amendment
and Option 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.

 

J.     Headings. Headings in
this Amendment and Option are included herein for ease of reference only and
shall have no legal effect. References to Sections, Schedules and Exhibits are
to Sections, Schedules and Exhibits of this Amendment and Option unless
otherwise specified.

 

K.    Publicity. No party hereto
shall make any public announcements regarding the terms of this Amendment and
Option or events or performance hereunder except as may be required by a

 

[ * ]  = 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

 

party to comply with any legal requirements or as the parties may agree
in writing. The parties hereby agree that a public announcement in the form of
that set out in Exhibit C may be released by Atugen following execution and
delivery of this Amendment and Option by the parties and the execution and
delivery of the Quark License by Quark and Pfizer.

 

L.     Third Party Rights. The Contracts
(Rights of Third Parties) Act 1999 shall not apply to this agreement and no
rights or benefits expressly or impliedly conferred by it shall be enforceable
under that Act against the parties to it by any other person.

 

M.   Waivers. Quark and
Atugen each confirms that the other is in compliance in all respects with its
obligations under the Atugen License and waives, in full and final
satisfaction, any claims and entitlements whatsoever that it may have in
respect of any breach by the other of any such obligation.

 

{Remainder of page
intentionally left blank}

 

[ * ]  = 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

 

IN
WITNESS WHEREOF, the parties hereto have caused this Deed of Amendment
and Option to be executed as of the date first written above by their duly
authorized officers.

 

 

	
  Executed as a Deed by

  	
   

  	
  Executed as a Deed by

  
	
  ATUGEN AG acting by its

  	
   

  	
  PFIZER INC. acting by its

  
	
  authorized signatory

  	
   

  	
  authorized signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ T. Christely,
  /s/ K. Giese

  	
   

  	
   

  	
  By:

  	
    /s/ Lisa Ricciardi

  	
   

  
	
  Name: T. Christely, K. Giese

  	
   

  	
  Name: Lisa Ricciardi

  
	
  Title: CEO, CSO

  	
   

  	
  Title: SVP Licensing &
  Development

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executed as a Deed by

  	
   

  	
  Executed as a Deed by

  
	
  QUARK BIOTECH, INC.

  	
   

  	
  QBI ENTERPRISES, LTD.

  
	
  acting by its authorized
  signatory

  	
   

  	
  acting by its authorized
  signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/
  Daniel Zurr

  	
   

  	
   

  	
  By:

  	
    /s/
  Daniel Zurr

  	
   

  
	
  Name: Daniel Zurr

  	
   

  	
  Name: Daniel Zurr

  
	
  Title: CEO

  	
   

  	
  Title: 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.

 

9

 

{EXHIBIT
10.27}

 

{This
Exhibit 10.27 has been filed separately as an exhibit to the Quark Biotech,
Inc. Registration Statement on Form S-1 in executed form.}

 

[ * ]  = 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

 

EXHIBIT B

 

DEED

 

LICENSE
AGREEMENT

 

This DEED OF LICENSE AGREEMENT (this “Agreement”),
dated                  ,        (“Effective
Date”), between ATUGEN AG (“Atugen”), a corporation incorporated under the laws
of Germany, Robert-Rössle-Str. 10, D13125 Berlin, Germany, and PFIZER INC.
(“Pfizer”), a corporation organized under the laws of Delaware, 235 East 42nd
Street, New York, New York 10017, USA.

 

WHEREAS, Atugen owns certain patents and/or patent
applications as well as related know-how, technology and scientific and
technical information relating to siRNA molecules directed to silencing the
RTP801 gene; and

 

WHEREAS, Pfizer desires to acquire from Atugen an
exclusive license under said patents, applications, know-how, technology and
scientific and technical information, and Atugen is agreeable to granting such
license pursuant to the terms of this Agreement.

 

NOW, THEREFORE, Pfizer and Atugen have executed this
Agreement:

 

ARTICLE 1

 

DEFINITIONS

 

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

 

1.1           “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, “control” (including,
with correlative meanings, “controlled by”, “controlling” and “under common
control with”) of an entity means possession, direct or indirect, of  (a) 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 (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 of such entity.

 

1.2           “Amendment and
Option” means the Amendment and Option, dated as of September 25, 2006,
among Atugen, Pfizer and Quark and QEL, of which this License Agreement is
Exhibit B attached thereto.

 

1.3           “Atugen Background Technology”  means any and all inventions,
discoveries, methods

 

[ * ]  = 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

 

and processes, improvements, Know-How, technical information, data or
other technology that is heretofore or hereafter discovered, conceived, made,
developed and/or reduced to practice by Atugen or its Affiliates, or owned in
whole or in part by, or licensed (with a right to sublicense) to Atugen or its
Affiliates and relates to: (i) [ * ], as well as any and all intellectual
property rights therein, including without limitation Patent Rights, copyright,
trademark or trade secret rights. Atugen Background Technology includes,
without limitation, the Patent Rights as of December 6, 2004 as identified in Schedule  Al.
The term Atugen Background Technology does not include the Atugen Program IP.

 

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

 

1.5           “Atugen
License” means the Collaboration Agreement, dated December 6, 2004, among
Atugen, Quark and QEL, as amended by (i) the Amendment to Collaboration
Agreement, dated May 25, 2006 and (ii) the Amendment and Option.

 

1.6           “Atugen Program
IP”  means certain stabilized, chemically modified
siRNA molecule(s) directed to silencing the human 801 gene and the mouse 801
gene that have been developed by Atugen prior to December 6, 2004 and certain
lipids and liposome based formulations, as identified in Schedule A2 hereto, and any and all
intellectual property rights therein, including, without limitation, the Patent
Rights identified in Schedule A2, copyright, trade-mark or trade secret rights.

 

1.7           “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, [ * ], 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.

 

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

 

1.9           “Joint
Program IP” means all inventions, discoveries, Know-How, trade secrets,
Patent Rights, methods, information, data, or materials that are first made,
invented, discovered or reduced to practice by either Atugen or Quark/QEL in
the conduct of the Joint Research Program or the Joint Development Program, as
defined in the Atugen License. The Joint Program IP shall include, without
limitation, the Patent Rights directed 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.

 

12

 

specific anti-801
siRNAs, as set forth in Schedule A3.

 

1.10         “Know-How”  means unpatented technical and other information, including information
comprising or relating to concepts, discoveries, inventions, data, designs,
formulae, ideas, methods, models, assays, research plans, procedures, designs
for experiments and tests and results of experimentation and testing (including
results of research or development) processes (including manufacturing
processes, specifications and techniques), laboratory records, chemical,
pharmacological, toxicological, clinical, analytical and quality control data,
trial data, case report forms, data analyses, reports or summaries and
information contained in submissions to, and information from, ethical
committees and regulatory authorities.

 

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

 

1.12         “Net Sales” means
nets sales of Pfizer, its Affiliates and sublicenses as defined in the Quark
License.

 

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

 

1.14         “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 other than the United States, commencing on December 1 of any year.

 

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

 

1.16         “QEL” means QBI
Enterprises Ltd.

 

1.17         “Quark” means
Quark Biotech, Inc.

 

1.18         “Quark License”
means the License Agreement between Pfizer and Quark in the form

 

[ * ]  = 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

 

attached as Exhibit A to the Agreement and Option.

 

1.19         “Quark Existing IP”
means the present and future Patent Rights and Know-How owned by Quark and
directed to [ * ] and methods of treatment of diseases using these, including
but not limited to rights to patents and patent applications listed in Schedule
B.

 

ARTICLE 2

 

LICENSE

 

2.1           Subject to the terms of this Agreement,
Atugen hereby grants to Pfizer an exclusive, royalty bearing, world-wide
license, with the right to sublicense as set forth in Section 2.2, under the
Atugen Existing IP and the Joint Program IP to develop, make, have made, use,
sell, offer for sale and import Licensed  Products.

 

2.2           The granting and acceptance of the above
license is subject to the following conditions:

 

(a)           Pfizer
shall pay all future costs connected with the development, regulation and
commercialization of the Licensed Products, including but not limited to the costs
of complying with applicable government testing, approvals and regulations; and

 

(b)           Pfizer
shall use Commercially Reasonable Efforts with respect to the development,
registration and commercialization of the Licensed Products.

 

(c)           Pfizer
shall have the right to grant sublicenses hereunder; provided, however, Pfizer
shall remain fully responsible for all its obligations under this Agreement.

 

(d)           Upon
the expiration of the term with respect to each country as provided in Article
7 Pfizer shall have a fully paid up license to all Atugen Existing IP and Joint
Program IP with respect to such country.

 

ARTICLE 3

 

ROYALTIES
AND MILESTONES

 

3.1           Notwithstanding the
fact that the Atugen License is no longer in effect, or that Quark and QEL no
longer have license rights to the Atugen Existing IP or the Joint Program IP
pursuant to the Atugen License, as applicable, Pfizer shall pay to Atugen the
following percentages of the amounts payable by Pfizer to Quark under the terms
of the Quark License:

 

[ * ]  = 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

 

(a)   [ * ] of the initial milestone
payment to which Quark is or would be entitled under Section 5.1 of the Quark
License to the extent such relates to Licensed Products; and

 

(b)   [ * ] of all other milestone
payments to which Quark is or would be entitled under Sections 5.1, 5.2, 5.3,
5.4 and/or 5.5 of the Quark License to the extent such relate to Licensed
Products, excluding the initial milestone payment referred to in article 3.1(a)
above; and

 

(c)   [ * ] of the royalty payments
to which Quark is or would be entitled under Sections 5.7 and/or 5.8, subject
to Sections 5.9 to 5.12 inclusive, of the Quark License to the extent such
relate to Licensed Products.

 

3.2           All of the amounts
specified in Section 3.1 shall be computed as specified in the Quark License
and shall be otherwise subject to all of the provisions of the Quark License. Any
such amounts paid or due to Atugen prior to termination of the Atugen License,
or Quark and QEL no longer having license rights to the Autgen Existing IP or
the Joint Program IP pursuant to the Atugen License, as applicable, shall not
be subject to the provisions of Section 3.1, and Atugen shall have no claims
against Pfizer regarding such amounts. Nothing herein shall affect Atugen’s
right to its share of the milestone and royalty payments received by Quark from
Pfizer under the Quark License prior to the date hereof, as set forth in the
Atugen License.

 

ARTICLE 4

 

ACCOUNTING
AND PROCEDURES FOR PAYMENTS

 

Payments hereunder shall be subject to the following
provisions:

 

4.1           Sales
between or among Pfizer or its Affiliates shall not be subject to royalties
under Section 3; royalties shall only be calculated upon bona fide Net Sales to
an independent third party.

 

4.2           Pfizer
shall make royalty payments (payable under Sections 3.1 and 3.2) to Atugen on
Net Sales with respect to each Pfizer Quarter within [ * ] after the end of
each such period,

 

15

 

and each payment shall be
accompanied by a report identifying the Licensed Products, Net Sales, and the
amount payable to Atugen, as well as computation thereof. Said reports shall be
kept confidential by Atugen and not disclosed to any other party other than
Atugen’s accountants and Atugen’s governing board, and such accountants and
board members shall be obligated to keep such information confidential.

 

4.3           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 such bank accounts as Atugen shall designate in writing at least
five (5) Business Days before the payment is due. All payments under this Agreement shall bear interest from the date due
until paid at a rate equal to the [ * ]. All payments shall be computed and
paid in United States dollars. For the purpose of determining the amount of royalty
payments 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 the methodology used to
prepare Pfizer’s audited financial statements for external reporting purposes.

 

4.4           If
any of the payments made by Pfizer hereunder become subject to withholding
taxes under the laws of any jurisdiction, Pfizer shall deduct and withhold the
amount of such taxes for the account of Atugen to the extent required by law,
all such amounts payable to Atugen shall be reduced by the amount of taxes
deducted and withheld, and Pfizer shall pay the amounts of such taxes to the
proper governmental authority in a timely manner and promptly transmit to
Atugen an official tax certificate or other evidence of such tax obligations,
together with proof of payment from the relevant governmental authority of all
amounts deducted and withheld sufficient to enable Atugen to claim such payment
of taxes.

 

4.5           Pfizer
shall, and shall cause its Affiliates and sublicensees to, keep full and
accurate books and records setting forth gross sales, Net Sales, and amounts
payable to Atugen. Pfizer shall permit Atugen, at Atugen’s expense, by
independent qualified public accountants employed by Atugen and acceptable to
Pfizer, to examine such books and records at any reasonable time, but not later
than [ * ] following the rendering of any such reports, accountings and
payments. The foregoing right of review may be exercised only once with respect
to each such periodic report and payment. Such accountants may be required by
Pfizer to enter into a reasonably acceptable confidentiality agreement, and in
no event shall such accountants disclose to Atugen any information other than
such as relates to the accuracy of reports and payments made or due hereunder. The
opinion of said independent accountants regarding such reports, accountings and
payments shall be binding on the parties hereto. Atugen shall bear the cost of
any such examination; provided that if the examination shows an underpayment of
royalty payments of more than [ * ] of the amount due for the applicable
period, then Pfizer shall promptly reimburse Atugen for all costs incurred in
connection with such examination. Pfizer shall promptly pay to Atugen the
amount of any underpayment of royalty payments (plus interest as provided in
Section 4.3 above) revealed by an examination and review. Any overpayment of
royalty payments by Pfizer revealed by an examination shall be fully

 

[ * ]  = 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

 

creditable against future
royalty payments due under Section 3.1.

 

ARTICLE 5

 

DISCLOSURE

 

Except as required
by law, neither party shall (i) disclose to any third party any financial or
other terms or conditions of this Agreement nor (ii) originate any publicity,
news release or public announcement, written or oral, whether to the public,
press, stockholders or otherwise, communicating the economic terms of this
Agreement, or any of its specific terms or conditions, without the express
prior consent of the other party which shall not be unreasonably withheld or
delayed.

 

ARTICLE 6

 

PATENTS

 

6.1           Atugen and Pfizer shall
cooperate in connection with the continued prosecution and maintenance by
Atugen or Pfizer, as the case may be, of the Patent Rights listed on Schedules
A1, A2 and A3 which identifies which party shall be responsible for the
prosecution and maintenance of such Patent Rights. Each party shall pay all
prosecution and maintenance costs for the full life of the Patent Rights for
which it is responsible. Neither party shall abandon any Patent Rights without
at least [ * ] prior written notice to the other. If either chooses to abandon
such Patent Rights, the other party shall have the option to [ * ] such Patent
Rights [ * ] and to continue the prosecution and maintenance of such Patent
Rights and related applications [ * ]. Each party shall have reasonable access
to all documentation, filings and communications to or from the respective
patent offices and shall, upon request, be kept advised as to the status of all
pending applications to the extent pertaining to Patent Rights licensed
hereunder. Each party, its agents and attorneys will give due consideration to
all suggestions and comments of the other party regarding any aspect of such
patent prosecutions.

 

6.2           If any claim relating
to the Patent Rights licensed hereunder becomes within any country the subject
of a judgment, decree or decision of a court, tribunal, or other authority of
competent jurisdiction, 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 any product is licensed 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

 

17

 

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.

 

6.3           Each of the parties
will promptly notify the other in the event of any potential infringement of
the Patent Rights licensed hereunder by any third party or any claims of
alleged infringement by Pfizer or Atugen with respect to the manufacture, use,
sale, offer for sale or importation of Licensed Products. Pfizer shall have the
right, but not the obligation, to defend or institute litigation in connection
therewith, and any such litigation shall be at Pfizer’s expense; provided,
however Atugen shall be entitled to receive [ * ] of any amounts to which Quark
is or would be entitled under Section 7.9 of the Quark License. Atugen, upon
request of Pfizer, agrees to join in any such litigation at Pfizer’s expense
and to cooperate reasonably with Pfizer. If Pfizer fails to defend any action
for alleged infringement by Pfizer or Atugen with respect to the manufacture,
use, sale, offer for sale or importation of Licensed Products, Atugen shall
have the right (but not the obligation) upon [ * ] prior notice to Pfizer, at
Atugen’s expense, to defend any such litigation. Atugen shall not have the
right to enforce any potential infringement of the Patent Rights licensed
hereunder relating to the Licensed Products.

 

ARTICLE 7

 

TERM

 

This Agreement
shall be effective as of the Effective Date and, unless earlier terminated as
provided herein, shall remain in effect with respect to each country until the
longer of (1) the expiration of the last to expire of the Patent Rights
included within Atugen Existing IP or Joint Program IP with claims embracing
the Licensed Products sold in such country and (2) other than with respect to
the United States, a period of ten (10) years from the date of first commercial
sale of the Licensed Products in such country. The provisions of Articles 1, 4,
5, 9 and 10 shall survive the expiration or termination of this Agreement, and
the provisions of Section 2.2(d) shall survive expiration of this Agreement.

 

ARTICLE 8

 

TERMINATION

 

8.1           THIS AGREEMENT SHALL TERMINATE AS FOLLOWS:

 

[ * ]  = 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

 

(a)           At any time Pfizer,
upon [ * ] notice to Atugen, shall have the right, for any reason and at
Pfizer’s sole discretion, to terminate this Agreement, whereupon this Agreement
shall terminate [ * ] after the date of such notice, and all rights granted
hereunder to Pfizer shall terminate.

 

(b)           Any default by Pfizer
of its payment obligations hereunder that shall have continued for [ * ] after
notice thereof was provided to Pfizer by Atugen; provided, that, in the event
of a good faith payment dispute, such [ * ] cure period shall be extended until
the [ * ] following the date on which such dispute is resolved; provided, further,
that Pfizer shall pay Atugen any amounts not in dispute.

 

(c)           If either Pfizer or
Atugen breaches or defaults (other than payment obligation under Article 3) in
the performance or observance of any of the provisions which are material to
this Agreement taken as a whole, and such breach or default is not cured within
[ * ] after the giving of notice by the other party specifying such breach or
default, the other party shall have the right to terminate this Agreement
forthwith.

 

8.2           TERMINATION OF THIS AGREEMENT FOR ANY REASON SHALL
BE WITHOUT PREJUDICE TO ATUGEN’S RIGHT TO RECEIVE ALL PAYMENTS ACCRUED UNDER
SECTION 3 HEREOF PRIOR TO THE EFFECTIVE DATE OF SUCH TERMINATION AND ANY OTHER
REMEDIES WHICH EITHER PARTY MAY OTHERWISE HAVE.

 

ARTICLE 9

 

INDEMNIFICATION

 

9.1   Pfizer agrees to
indemnify, defend and hold harmless Atugen, its Affiliates and its and their
directors, officers, agents and employees (the “Atugen Parties”) from and
against any and all Losses (as hereinafter defined) incurred, suffered or sustained
by the Atugen Parties from any claims, actions, suits, proceedings, liabilities
or obligations arising out of or resulting from the development (including
clinical trials), marketing, manufacture, use, processing, packaging, sale,
offer for sale, importation, distribution of any Licensed Product, in each case
by Pfizer, its Affiliates or sublicensees. The foregoing indemnity shall not
apply to the extent that any Loss arises from or is the result of gross
negligence or intentional misconduct on the part 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.

 

19

 

Atugen Parties. The
foregoing indemnity shall also be subject to the provisions of Section 9.2.

 

9.2   In the event any
third party asserts any claim in respect to any matter to which the
indemnification in Section 9.1 relates, the Atugen Parties shall not make any
admission concerning such claim, but shall promptly notify Pfizer of the claim,
and Pfizer shall be entitled, but not obliged, to manage and control, at its
sole expense, the defense of the claim and its settlement. The benefit of any
indemnity by Pfizer under this Agreement in respect of any claim shall not
apply to the Atugen Parties if any admission made by such party or any failure
by such party to notify Pfizer of the claim materially prejudices the defense
of such claim. If Pfizer elects to defend such claim, it shall give prompt
notice to Atugen. If Pfizer does not give such notice and does not proceed
diligently to defend the Atugen Parties within twenty (20) days after receipt
of notice of the claim, Pfizer shall be bound by any defense or settlement made
by the Atugen Parties and shall reimburse the Atugen Parties for its expenses
related to the defense or settlement of the third party claim. If Pfizer elects
to defend the claim and gives notice to Atugen and proceeds diligently to
defend the Atugen Parties, then the Atugen Parties shall not settle any claim
for which it is seeking indemnification without the prior consent of Pfizer. The
Atugen Parties shall, if requested by Pfizer, and at Pfizer’s expense,
cooperate in all reasonable respects in the defense of such a third party claim
which is being managed and controlled by Pfizer. The Atugen Parties may, at its
option and expense, be represented by counsel of its own choice in any action
or proceeding arising out of such claim; provided, however, Pfizer shall not be
liable for any litigation costs or expenses incurred without its consent, by
the Atugen Parties, where such action or proceeding is under the control and
management of Pfizer.

 

9.3   Any indemnification
hereunder shall be made net of any insurance proceeds recovered by the Atugen
Parties; provided, however, that if, following the payment of the Atugen
Parties of any amount under this Section 9, such Atugen Party recovers any
insurance proceeds in respect of the claim for which such indemnification
payment was made, the Atugen Party shall promptly pay an amount equal to the
amount of such proceeds (but not exceeding the amount of such indemnification
payment) to Pfizer.

 

9.4   For purposes of this
Section 9, “Losses” shall mean any and all damages, fines, fees, penalties,
judgments, deficiencies, losses and expenses (including without limitation
interest, court costs, reasonable fees of attorneys, accountants and other
experts or other expenses of litigation or other proceedings or of any claim,
default or assessment).

 

ARTICLE
10

 

MISCELLANEOUS

 

10.1         Force Majeure. No
party shall be liable for failure of or delay in performing obligations set
forth in this Agreement, and no party shall be deemed in breach of its
obligations, if such failure or delay is due to natural disasters or any causes
reasonably beyond the control of such 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

 

10.2         Assignment. This
Agreement may not be assigned or otherwise transferred by either party without
the prior written consent of the other party; provided, however, subject to
this Section 10.2, either party may, without such consent, assign this
Agreement and its rights and obligations hereunder in whole or in part: (i) to
any of its respective Affiliates so long as such party shall remain jointly and
severally liable with such Affiliate in respect of all obligations so assigned;
(ii) in connection with the transfer or sale of all or substantially all of its
assets or stock, or in the event of its merger or consolidation or similar
transaction; or (iii) if such party or its Affiliates is required to, or
reasonably believes that it will be required to, divest any of the Licensed
Products or a competing product in order to comply with law or the order of any
governmental authority as a result of a merger or acquisition. Any purported
assignment in violation of this Section 10.2 shall be void. Subject to this
Section 10.2, any permitted assignee shall assume all obligations of its assignor
under this Agreement.

 

10.3         Governing Law. This
Agreement shall be governed by the English law in all respects of validity,
construction and performance thereof. The parties submit to the non-exclusive
jurisdiction of the courts of England and Wales.

 

10.4         Notices. Any
notice, consent, approval reports, requests communication hereunder this
Agreement shall be in writing sent by registered airmail, postage prepaid, or
by telex or facsimile (confirmed by such registered mail) and addressed as
follows:

 

 

	
  If to Pfizer:

  	
   

  	
  If to Atugen:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pfizer Inc.

  235 East 42nd Street

  New York, New York 10017-5703

  USA

  	
   

  	
  Atugen AG

  Robert-Rössle-Str. 10

  Berlin, Germany

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fax: 212-808-8924

  	
   

  	
  Fax: +49 30 9489 2801

  
	
  Attention: General Counsel

  	
   

  	
  Attention: Thomas Christély

  

 

[ * ]  = 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

 

All notices shall
be deemed to be effective on the date of mailing. In case any party changes its
address at which notice is to be received, notice of such change shall be given
without delay to the other party.

 

10.5         Entire Agreements;
Amendments. This Agreement, together with the Amendment and Option, sets
forth the entire agreement and understanding between the parties hereto as to
the subject matter hereof. None of the terms or this Agreement shall be
amended, supplemented or modified except in writing signed by the parties
hereto.

 

10.6         Severability. If
and solely to the extent that any provision of this Agreement shall be invalid
or unenforceable, or shall render this entire Agreement to be unenforceable or
invalid, such offending provision shall be of no effect and shall not effect
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.

 

10.7         Waivers. 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,
on 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.

 

10.8         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.

 

10.9         Further Assurances.
Following the date hereof, Atugen and Pfizer shall, and shall cause each of
their respective Affiliates to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such
other actions as shall be necessary or otherwise reasonably requested by Pfizer
or Atugen, to confirm and assure the rights and obligations provided for in
this Agreement, and render effective the consummation of the transactions
contemplated thereby.

 

10.10       Third Party
Beneficiaries. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any third party including, without limitation, any
creditor of either party hereto. No 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 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.

 

22

 

10.11       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.

 

10.12       Headings. Headings
in this Agreement are included herein for ease of reference only and shall have
no legal effect. References to Sections and Schedules are to Sections and
Schedules of this Agreement unless otherwise specified.

 

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

 

 

	
  EXECUTED AS A DEED BY

  	
   

  	
  EXECUTED AS A DEED BY

  
	
   

  	
   

  	
   

  
	
  ATUGEN AG ACTING BY ITS

  	
   

  	
  PFIZER INC. ACTING BY ITS

  
	
  AUTHORIZED SIGNATORY

  	
   

  	
  AUTHORIZED SIGNATORY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Title:

  
							

 

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

 

23

 

Schedule A1 – Atugen Background Technology

 

	
  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.

 

24

 

	
  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.

 

 

25

 

Schedule A2 – Atugen Program IP

 

	
  

  PUBLICATION NO.

  	
   

  	
  APPLICATION

  NOS.

  	
   

  	
  FILING

  DATE

  	
   

  	
  PROSECUTING

  PARTY

  
	
  [
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**Italicized documents in ( )  are claimed as priority.

 

[ * ]  = 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

 

Schedule B – Quark Existing IP

 

	
  Publication/Patent

  No.

  	
   

  	
  

  Application No.

  	
   

  	
  

  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.

 

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Exhibit 10.1 to 8-K - dated June 22, 2007

EXECUTIVE TRANSITION AGREEMENT

THIS EXECUTIVE TRANSITION AGREEMENT (this “Agreement”) is dated as of June 22, 2007 by and among A. Douglas Gilbert (“Gilbert”), Seacoast National Bank (the “Bank”), and the Bank’s parent company, Seacoast Banking Corporation of Florida (the “Company”).  Individually, each of Gilbert, the Bank and the Company is a “Party”, and collectively they are the “Parties”.

BACKGROUND

Gilbert has determined to retire from his positions with the Bank and the Company on January 31, 2009, or such earlier date as may be mutually agreed by the parties (the “Retirement Date”), and to thereafter serve as a consultant pursuant to a separate Consulting and Restrictive Covenants Agreement among Gilbert, the Bank and the Company of even date herewith.

The Parties are also parties to an Executive Employment Agreement among Gilbert, the Bank and the Company dated as of March 22, 1991 (the “Employment Agreement”), and a Change of Control Employment Agreement dated as of December 24, 2003 (the “Change of Control Agreement”, and collectively with the Employment Agreement, the “Existing Agreements”).

The Company and the Bank desire to provide for Gilbert’s continued employment through his Retirement Date and to change, at Gilbert’s request, his compensation in light of his pending retirement and long service to the Company and the Bank.  Gilbert has requested the changes made herein to his Existing Agreements, and desires to continue to devote his full time best efforts to the Bank and the Company between the date hereof and his Retirement Date on the terms and conditions hereof.

NOW THEREFORE, in consideration of the premises and the mutual covenants and conditions herein contained, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties, intending to be legally bound, agree as follows:

     1        Amendment of Executive Employment Agreement

       (a)     Notwithstanding anything to the contrary contained in either the Employment Agreement, the Change of Control Agreement or any Company or Bank plan or practice, from the date of this Agreement through the Retirement Date, Gilbert waives any and all rights to receive any additional stock-based compensation, including, without limitation, stock options, restricted stock awards, restricted stock units, stock appreciation rights or any other incentives based upon Company common stock (“Shares”) or the performance of Company Shares (collectively, “Stock Awards”).

      (b)      For the years 2007 and 2008 plus the month of January 2009, Gilbert, as long as he is employed by the Bank, will receive the following:

          (i)   

His current base salary through December 31, 2007, which will be increased by 6% effective June 1, 2007 through the Retirement Date;

        (ii)    On each of January 31, 2008 and January 31, 2009, Gilbert will receive an annual cash bonus of $376,000 which equals his highest bonus earned over the past 3 years;

        (iii)   On each of January 31, 2008 and January 31, 2009 Gilbert will receive a cash bonus of $150,000 in lieu of any Stock Awards; and

             (iv)     On the Retirement Date, the Company will pay to Gilbert a cash amount on account of any then unvested restricted shares that will be forfeited by Gilbert as a result of his retirement.  To the extent the unvested restricted shares are “time-vesting” restricted shares, the cash amount shall equal the number of unvested “time-vesting” restricted shares multiplied by the closing price on the Retirement Date of a share of the Company’s common stock.  To the extent the unvested restricted shares are “performance-vesting” restricted shares, the cash amount shall equal the number of unvested “performance-vesting” restricted shares multiplied by the closing price on the Retirement Date of a share of the Company’s common stock multiplied by a percentage, determined by the Company, based on the performance vesting schedule set forth in the original award agreement, adjusting the performance period and performance targets (pro rata) to reflect a performance period ending at the end of the fiscal year immediately preceding the Retirement Date.

                (c)

     Section 2 of the Employment Agreement is amended hereby to specify a term ending on the Retirement Date and not later than January 31, 2009, without renewal or extension.

2.     Change of Control Agreement.  The Change of Control Agreement shall remain in full force and effect through the Retirement Date; provided that in the event of a Change of Control, “Gilbert’s “annual base salary” and the “annual bonus” for purposes of the Change of Control Agreement for 2007 and 2008 shall be the respective amounts specified in Sections 1(b)(i) and 1(b)(ii) of this Agreement, without taking into account any amounts payable pursuant to Section 1(b)(iii) and 1(b)(iv).  Upon the Retirement Date, the Change of Control Agreement shall terminate and have no further force or effect.

3.

Other Changes to the Existing Agreements

(a)

In addition to the other amendments provided herein, this Agreement expressly amends Gilbert’s Employment Agreement to change the first sentence of Section 4(d) to read in its entirety as follows:

“Upon notice by Gilbert to the Bank following a “Change in Control” as defined in this Section 4(d), provided Gilbert terminates his employment within the earlier of one (1) year following the Effective Date of such Change of Control or the Retirement Date, upon which time, his Consulting Agreement shall commence.”

(b)

The Change of Control Agreement is amended by changing “Change of Control Period” in Section 1(b) to mean the date commencing on the date of this Agreement and ending on the Retirement Date and to delete the automatic renewal on each anniversary of such date.  The Change of Control Agreement is further amended by specifying that the Employment Period referenced in Section 3 of the Change of Control Agreement shall mean solely the date from the date of this Transition Agreement through the Retirement Date.  Section 4(b) of the Change of Control Agreement is amended to provide that the annual base salary is the salary specified in Section 1(b) of this Agreement and to provide that the annual base salary shall not be subject to further review or adjustment by the Salary and Benefits Committee of the Company or the Bank prior to the Retirement Date.  Notwithstanding anything to the contrary in Section 4(b) of the Change of Control Agreement, the “salary” and “annual bonus” specified in Sections 4(b)(i) and 4(b)(ii) shall be amended to be the base salary and annual cash bonus provided in Section 1(b) of this Agreement.  Section 5(a) of the Change of Control Agreement is amended to change the definition of “Retirement” to mean a termination of employment pursuant to this Agreement upon the Retirement Date as provided herein.

4.

Waivers.  Except for the bonuses and payments expressly provided in Section 1 of this Agreement, Gilbert waives participation in, or any claim to, any Stock Awards or cash awards or other incentives or bonuses payable to executives of the Company or the Bank for the period beginning January 1, 2007 through the Retirement Date.

5.

Miscellaneous.

(a)

Governing Law.  Except to the extent preempted by federal law, and without regard to the conflict of laws principles, the laws of the State of Florida shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

(b)

Notices.  All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid:

             To the Company or the Bank        Seacoast Banking Corporation of Florida

                                                                   815 Colorado Avenue

                                                                   P.O. Box 9012

                                                                   Stuart, FL 34995

                                                                   Attention: Chief Executive Officer

               To Mr. Gilbert                            A. Douglas Gilbert

                                                                   7379 Reserve Creek Drive

                                                                   Port St. Lucie, Florida 34986

Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein.

(c)

Amendments and Modifications.  This Agreement may be amended or modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement.  This Agreement is deemed to modify and supersede, as special certain provisions, the Employment Agreement and the Change of Control Agreement specified herein.  Otherwise, the Employment Agreement and the Change of Control Agreement shall remain in full force and effect unmodified hereby.  This Agreement is not intended to and shall not effect Gilbert’s rights under any stock-based compensation or other incentive awards except as expressly provided in Section 1 hereof.

 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Executive Transition Agreement as of the date first above written.

/s/ Debra Policino, Witness

---------------------------------

/s/ A. Douglas Gilbert

A. Douglas Gilbert

/s/ Sharon Mehl, Witness

------------------------------

/s/ Sharon Mehl, Witness

SEACOAST NATIONAL BANK

By:  /s/ Dennis S. Hudson, III

----------------------------------------------------

Name:  Dennis S. Hudson, III

Title:  Chairman & Chief Executive Officer

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