Document:

Exhibit 10.23

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (the “Agreement”)  is made as of December 17,
2004 by and between QUARK BIOTECH, INC., a
California corporation having its principal place of business at 6536 Kaiser
Drive, Fremont CA 94555, U.S.A. (hereinafter referred to as “Quark”)  and
SANWA KAGAKU KENKYUSHO CO., LTD., a
corporation organized and existing under the laws of Japan and having its
principal place of business at 35 Higashisotobori-cho, Higashi-ku, Nagoya
461-8631, Japan (hereinafter referred to as “SKK”).

 

SKK
and Quark are sometimes referred to herein individually as a party and
collectively as the parties.

 

WHEREAS, Quark, together with its Affiliates (as hereinafter defined), has
developed and owns or has the exclusive right to use the Quark Know-How and the
Patent Rights relating to the antidyslipidemic compound known as BT16 (as
hereinafter defined); and

 

WHEREAS, SKK, together with its Affiliates (as hereinafter defined) possesses
extensive capabilities in the development and commercialization of
pharmaceutical products in Japan and in certain countries in Asia; and

 

WHEREAS, SKK desires to obtain and Quark is willing to grant to SKK, an
exclusive license in the Territory under the Patent Rights and the Quark
Know-How (as such terms are hereinafter defined), on the terms and conditions
set forth herein.

 

Now, THEREFORE, in consideration of the foregoing premises and the mutual covenants
herein contained, SKK and Quark hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

As
used in this Agreement, the following initially capitalized terms, whether used
in the singular or plural, shall have the respective meanings set forth below:

 

1.1          “Affiliate”  shall mean, with respect to either party to
this Agreement, any individual or entity directly or indirectly controlled by
or under common control with, such party. For purposes of this Agreement, the
direct or indirect ownership of fifty percent (50%) or more of the outstanding
voting securities of an entity, or the right to receive fifty percent (50%) or
more of the profits or earnings of an entity shall be deemed to constitute “control.”
For the avoidance of doubt, [ * ].

 

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

 

1

 

1.2          “BTI6”
shall mean [*].

 

1.3          [*].

 

1.4          “Calendar Quarter” shall mean the respective
periods of three (3) consecutive calendar months ending on March 31, June 30,
September 30 or December 31 and such shorter period of time from the later of
each of the foregoing dates through the date this Agreement is terminated or
expires.

 

1.5          “Calendar Year” shall mean each successive
period of twelve (12) months commencing on January 1 and ending on December 31,
for so long as this Agreement is in effect.

 

1.6          “Development Time Table”  shall
mean that development time table that sets forth the schedule and major
milestones for SKK to develop Licensed Products in the Territory as further
described in and as may be amended pursuant to Section 2.3.1.

 

1.7          “Effective Date”  shall mean the next business day following the
delivery of full and duly executed counterparts of this Agreement.

 

1.8          “First Commercial Sale”  shall mean, with respect to
any Licensed Product, the first sale of such Licensed Product by SKK, or any
Affiliate or SKK Sublicensee, to any third party, in an arms length transaction
for use or consumption in a country in the Territory, provided that the “First
Commercial Sale”  shall
not be deemed to have commenced in any country until the annual Net Sales in
that country exceeds [ * ]

 

1.9          “Improvement”  shall mean any [ * ] for Licensed
Products or Licensed Compounds, in each case which is [ * ].

 

1.10        “Licensed Compound”  shall mean BT16.

 

1.11        “Licensed Product(s)”  shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method, which contains as an active
ingredient the Licensed Compound.

 

1.12        “NDA”
shall mean a New Drug Application or its equivalent, filed with any
regulatory authority in any country in the Territory seeking approval to market
and sell a Licensed Product in such country in the Territory.

 

1.13        “Net Sales”  shall mean the gross invoice prices for
all sales of Licensed Product on a country by country basis by SKK, its
Affiliates or SKK Sublicensees to an unaffiliated third party, less deductions
from such gross amounts for: (i) customary trade, quantity and cash discounts
actually taken, (ii) credits, rebates, allowances and adjustments actually
granted for rejections, recall or returns, (iii) duties, sales, use,
consumption, value-added, excise and similar taxes or duties, (iv)
transportation, insurance and other shipping expenses and (v) actual allowances
for bad debt or uncollectible amounts, provided that the total amount deducted
for items (i) to (v) above shall not exceed [ * ] of the gross invoiced value.

 

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

 

2

 

1.14        “Patent
Rights”  shall mean all patent applications (including
all provisional patent applications) and patents in each country of the
Territory and all PCT patent applications and patents relating in any way to
the Licensed Compound or Licensed Products (including, without limitation, the
formulation, ingredients, preparation, packaging, means of delivery,
manufacture, use or sale thereof) as listed in Schedule 1.14 hereto and all
Quark Improvement Patents and applications therefore for which SKK has
exercised its option, as set forth in Section 4.1) and all substitutions,
divisions, continuations, continued prosecution application,
continuations-in-part, reissues, renewals, registrations, confirmations, re-examinations,
extensions, divisions of or supplementary protection certificates for any of
the foregoing or any like filing therefore, and all international or foreign
equivalents or counterparts of any of the foregoing.

 

1.15        “PCT”  shall mean the Patent Cooperation Treaty done
at Washington on June 19, 1970, amended on September 28, 1979, modified on
February 3, 1984 and October 3, 2001 and as in force on April 1, 2002.

 

1.16        “Phase I
Clinical Study”  shall mean the clinical investigation of an
investigational new drug into humans which is designed to determine the
metabolism and pharmacologic actions of the drug in humans, the side effects
associated with increasing doses, and if possible, early evidence of
effectiveness, as approved by applicable regulatory authorities and conducted
in accordance with applicable law.

 

1.17        “Phase II
Clinical Study”  shall mean the clinical investigation of an
investigational new drug in humans and includes controlled clinical studies
conducted to evaluate the effectiveness of the drug for a particular indication
or indications in patients with the disease or condition under study and to
determine the short-term side effects and risks associated with the drug, as
approved by applicable regulatory authorities and conducted in accordance with
applicable law.

 

1.18        “Phase
III Clinical Study”  shall mean the controlled and uncontrolled
clinical studies in humans, typically involving several hundred to several
thousand subjects, which are intended to gather additional information about effectiveness
and safety that is needed by applicable regulatory authorities to evaluate the
overall benefit-risk relationship of the drug and provide an adequate basis for
physician labeling, as approved by applicable regulatory authorities and
conducted in accordance with applicable law.

 

1.19        “Quark
Improvement Patent”  shall mean any patent containing claims that
cover an Improvement developed by or for Quark or for which Quark has the right
to grant licenses to SKK as set forth herein.

 

1.20        “Quark
Know-How”  shall mean any of Quark’s, Quark Additional
Licensees’ or Quark’s Affiliates’ information and materials relating to the
research, development, registration, manufacture, marketing, use or sale of
Licensed Compound and/or Licensed Product which prior to or during the Term of
this Agreement are developed by or at the request of Quark, [ * ] or in Quark’s,
[ * ] possession or control through license or otherwise (provided that Quark
is permitted to make disclosure thereof to SKK without violating the terms of
any third party agreement), and which are not generally known. Quark Know-How
shall include, 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.

 

3

 

limitation, discoveries,
practices, methods, knowledge, Quark Improvements, processes, formulas, data,
ideas, skill, experience, inventions, know-how, technology, trade secrets,
manufacturing procedures, purification and isolation techniques, instructions,
test data and other intellectual property, patentable or otherwise, relating to
Licensed Compound and/or Licensed Product, including without limitation, test
procedures and other new technologies derived therefrom. Quark Know-How shall
also include, without limitation: (i) all  biological, chemical,
pharmacological, toxicological, pharmaceutical, physical and analytical,
clinical, safety, manufacturing and quality control data and information
related thereto; and (ii) compositions of matter, assays and biological
materials specifically relating to development, manufacture, use or sale of any
Licensed Compound and/or Licensed Product.

 

1.21        “Quark
Additional Licensees”  shall mean any party not an Affiliate of
Quark, which party is authorized directly or indirectly by Quark or its
Affiliates through express or implied license or consent to discover, develop,
make, have made, import, export, use, distribute, market, promote, offer for
sale and sell Licensed Product(s) outside the Territory.

 

1.22        “Regulatory
Approval”  shall mean any approval, license,
registration or authorization of any governmental entity necessary for the development,
manufacture, use, storage, distribution, marketing, import, export or sale of
Licensed Product(s) and/or the Licensed Compound.

 

1.23        “SKK
Sublicensee”  shall mean any party not an Affiliate of SKK,
which party is authorized directly or indirectly by SKK or its Affiliates
through express or implied license or consent to discover, develop, make, have
made, import, export, use, distribute, market, promote, offer for sale and sell
Licensed Product(s) in the Territory under Section 2.1.2.

 

1.24        “Territory”  shall mean Japan, South Korea, the People’s
Republic of China (including Hong Kong SAR) and Taiwan.

 

1.25        “Valid
Claim”  shall mean any claim of an issued and
unexpired patent in a country in the Territory included within the Patent
Rights, which has not been (i) revoked or held unenforceable or invalid by a
decision of a  court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal; or
(ii) [ * ].

 

ARTICLE 2

 

LICENSE; DISCLOSURE OF INFORMATION;
DEVELOPMENT AND

COMMERCIALIZATION

 

2.1          Exclusive License Grant.

 

2.1.1       License. Quark hereby grants to SKK, an exclusive license in the Territory to
use Quark Know-how and the Licensed Compound to develop, make, have made,
import, export, use, distribute, market, promote, offer for sale and sell
Licensed Product(s). Quark also hereby grants to SKK, an exclusive license in
the Territory under the Patent Rights to develop, make, have made, import,
export, use, distribute, market, promote, offer for sale and sell the Licensed
Compound (solely for use as an active ingredient in Licensed Product(s)) and

 

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

 

4

 

Licensed Product(s). Quark
shall not, and shall ensure that its Affiliates and Quark Additional Licensees
do not, directly or indirectly develop, make, have made, import, export, use,
distribute, market, promote, offer for sale or sell Licensed Compounds or
Licensed Products in the Territory. Quark retains the right to use Quark
Know-How and Patent Rights outside the Territory subject to the other
provisions of this Agreement. For the avoidance of doubt, none of the foregoing
restrictions on the rights licensed to SKK shall prevent SKK from contracting
with third parties to make, have made, import, export, distribute, market promote
offer for sale and sell the Licensed Compound if such third parties do not
utilize the Quark Know-How.

 

2.1.2       Right to
Sublicense. SKK shall
be entitled to grant sublicenses to third parties in the Territory under the
license granted pursuant to Section 2.1.1 above “Sublicense”), subject to the following conditions:

 

(a)           Sublicense Agreements. Sublicenses
shall only be granted pursuant to written agreements, which shall be in
compliance with and subject to the terms and conditions of this Agreement. SKK
will provide Quark with notice of the signing of such agreement that will
indicate the name of the SKK Sublicensee, the territory and the duration of the
agreement.

 

(b)           If the license set forth in Section
2.1.1 above terminates, any Sublicense that has been granted by SKK shall
terminate to the extent that the license is terminated; provided, however, that, for each SKK Sublicensee, upon
termination of the Sublicense with such SKK Sublicensee, if the SKK Sublicensee
is not then in breach of its sublicense agreement with SKK such that SKK would
have the right to terminate such sublicense, Quark shall be obligated, at the
request of such SKK Sublicensee, to enter into a new license agreement with
such SKK Sublicensee which shall be in compliance with and consistent with the
terms and conditions of this Agreement, as required under Section 2.1.2(a)), provided
that such terms shall be amended, if necessary, to the extent required to
ensure that such sublicense agreement does not impose any obligations or liabilities
on Quark which are not included in this Agreement.

 

(c)           Any act or omission by an SKK
Sublicensee which would constitute a breach of this Agreement had it been an
act or omission of SKK shall constitute a breach of this Agreement by SKK.

 

2.2          Quark’s
Obligations.

 

2.2.1       Disclosure
of Information. Promptly
after the Effective Date, Quark shall, at its own cost use good faith
commercially reasonable efforts to, disclose to SKK in writing, or via mutually
acceptable electronic media, copies or reproductions of all Quark Know-How not
previously disclosed to SKK if any in order to enable SKK to exploit its rights
granted under Section 2.1. In addition, during the term of this Agreement Quark
shall [ * ] in accordance with the terms of this Agreement. Quark’s [ * ] shall
be subject to [ * ]. At the request of SKK, Quark shall use commercially
reasonable efforts to comply with SKK’s requests, including, but not limited
to, SKK’s request to supply SKK with specific information, data, or
certificates of authors relating to or for the GLP studies that Quark has or
will provide to SKK pursuant 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.

 

5

 

2.2.2       Quark
Current Intentions Regarding Development. Notwithstanding anything to the contrary in
this Agreement, it is acknowledged and agreed by the parties that Quark [ * ].

 

2.2.3       Development
of Licensed Products Outside the Territory. Quark shall [ * ]. For the avoidance of
doubt, Quark shall be [ * ].

 

2.2.4       Registration
of INN. Quark shall
use commercially reasonable efforts to register an INN (International
Nonproprietary Name) with the World Health Organization for the Licensed
Compound before SKK initiates the Phase II Clinical Study for a Licensed
Product in the Territory.

 

2.2.5       Reports.
Within [ * ] after the end of each Calendar Year, Quark shall
provide SKK with a written report of the status of the research and
development, clinical development activities and progress of any Regulatory
Approval, as applicable, in connection with the development of Licensed
Products outside the Territory. Each report shall describe [ * ]. Quark’s
obligation to report on the progress of the research and development activities
[ * ]. Notwithstanding the provisions of Section 2.2.2 above, if Quark or any
of Quark’s Affiliates [ * ].

 

2.2.6       [ * ].

 

2.2.7       GLP
Statements. Quark shall use its reasonable commercial efforts to
obtain and supply SKK with GLP Statements, as defined by the OECD Guidelines,
for the following GLP studies for the Licensed Compound within [ * ] from the
Effective Date:

 

	
  (i)

  	
   

  	
  [ * ];

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  [ * ];

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  [ * ];

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  [ * ]; and

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  [ * ].

  

 

If
Quark is unable to supply SKK with the GLP Statement for any of the above GLP
studies, SKK shall use commercially reasonable efforts to carry out or have
carried out such studies for which Quark was unable to supply SKK with the GLP
Statement in time to try to ensure that completion of such studies will not
cause a delay in the development plan for the Licensed Product(s) in the
Territory. [ * ]. SKK shall provide a copy Quark with a copy of the report for
each study within [ * ] after the study report is completed. Such study report
shall constitute SKK Data for purposes of this Agreement, provided however,
that Quark may use such reports subject to and in accordance with the
provisions of this Agreement.

 

2.3          SKK’s
Development Obligations.

 

[ * ] = 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

 

2.3.1       SKK
Diligence. Promptly
following the Effective Date, Quark and SKK will discuss in good faith and
attempt to reach agreement on the Development Time Table within a period of [ *
], that when agreed to by the parties shall be initialed by the parties and
attached as hereto as Schedule 2.3.1 to this Agreement.

 

SKK
shall, at SKK’s expense, use its commercially reasonable efforts (directly or through
SKK’s Affiliates or SKK Sublicensees) to develop, obtain Regulatory Approval
for, and commercialize the Licensed Product(s) in the Territory in accordance
with the Development Time Table. If SKK is delayed by more than [ * ] in
achieving the milestones set forth in the Development Time Table, SKK shall
promptly thereafter provide written notice thereof to Quark. Thereafter, the
parties shall meet to discuss in good faith the reasons and causes for such
delay and discuss any adjustments that may need to be made to the Development
Time Table. If the parties agree to amend the Development Time Table, the
parties shall signify their agreement by initialing a revised Development Time
Table which will then replace the then existing Development Time Table. The
parties acknowledge and agree that all business decisions including, without
limitation, decisions relating to SKK’s research, development, registration,
manufacture, sale, commercialization, design, price, distribution, marketing
and promotion of Licensed Products in the Territory, covered under this
Agreement, shall be within the sole discretion of SKK.

 

2.3.2       Research and
Development Activities. Subject
to its diligence obligations set forth in Section 2.3.1, SKK shall be
responsible, at its cost and expense, and in its sole judgment, for all
research and development activities which are necessary to obtain Regulatory
Approval for a Licensed Product in the Territory and any post-approval studies
required as a condition of obtaining any Regulatory Approval for a Licensed
Product in the Territory. In addition, SKK shall be responsible for any other
studies (or portions of studies) necessary or desirable, in its sole judgment,
for maintaining any Regulatory Approval in the Territory, as well as any pre-marketing
studies prior to such Regulatory Approval and post-marketing studies conducted
following such Regulatory Approval.

 

2.3.3       Licensed
Product Registrations. Subject
to its diligence obligations set forth in Section 2.3.1, SKK shall be
responsible, at its cost and expense, and in its sole judgment, for determining
the appropriate regulatory strategy, for obtaining and maintaining all
Regulatory Approvals in the Territory and for obtaining and maintaining any
pricing and reimbursement approvals required for the sale of Licensed Product
in the Territory.

 

2.4          Additional
Obligations. For the
avoidance of doubt, nothing in this Agreement shall be construed as the grant
of a right or license to SKK to research, develop, manufacture, distribute,
sell, or have sold Licensed Products outside of the Territory, provided
however, that SKK shall have the right to procure Licensed Compound from
sources outside the Territory.

 

2.5          Data and
Improvements. SKK
shall own all data arising out of studies and research performed by SKK with
respect to the Licensed Compound or Licensed Products (“SKK Data”).
[ * ]. Without limiting the generality of the foregoing, Quark
agrees to use its good faith commercially reasonable efforts to [ * ]. Quark
shall provide to SKK the results from any research or studies that
(notwithstanding the provisions of Section 2.2.2) Quark [ * ]. SKK

 

[ * ] = 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

 

shall consider requests by
Quark to share SKK’s test results or other results of its development efforts
for the Licensed Products. Notwithstanding any other provision of this
Agreement,  [ * ].

 

2.6          Reports. Within [ * ] after the end
of each Calendar Year, SKK shall provide Quark with a report of the status of
the research and development, clinical development activities and progress of
any Regulatory Approval, as applicable, in connection with the development of
Licensed Products in the Territory. Each report shall describe SKK’s (and, if
applicable, SKK’s Affiliates and SKK Sublicensees’) progress in such
development activities during the prior Calendar Year and planned programs for
the current year. At Quark’s request during the term of this Agreement, the
parties shall meet at SKK’s facilities in Japan to discuss such development and
commercialization plans; provided, however,
that such meetings shall not occur more frequently than semi-annually,
unless SKK agrees otherwise. [ *
].

 

ARTICLE 3

 

PAYMENTS; ROYALTIES AND RECORDS

 

3.1          License
Fee. In partial
consideration for the licenses granted to SKK hereunder, SKK shall pay to Quark
a license fee (“License Fee”)  of [ * ], which payment shall be due within [ * ] following the
Effective Date.

 

3.2          Clinical
Development Milestone Payments. In further consideration for the licenses granted to SKK hereunder, SKK
shall pay to Quark clinical development milestone payments as set forth below (“Milestone
Payments”).

 

3.2.1       [ * ] upon
the earlier of (i) [ * ] or (ii) [ * ];

 

3.2.2       [ * ] upon [ * ].

 

3.2.3       [ * ] upon [ * ].

 

3.2.4       [ * ] upon [ * ].

 

3.2.5       [ * ] upon [ * ].

 

For
the avoidance of doubt, SKK shall have no obligation to pay Quark the foregoing
Milestone Payments more than one time.

 

3.3          Royalties. In further consideration for the licenses
granted to SKK hereunder, subject to the terms and conditions of this
Agreement, SKK shall pay to Quark royalties equal to [ * ] of the Net
Sales of Licensed Products in each country of the Territory. Notwithstanding
the foregoing, if SKK reasonably determines that [ * ], from the first day of
the month following the month in which SKK [ * ]. The
royalties shall be payable quarterly for a period commencing in the Calendar
Quarter in which the First Commercial Sales occur and shall continue on a
country-by-country basis for the longer, in each country, of a period of ten
(10) years or the expiry of the last to expire in such country of a Valid
Claim. No  royalties shall be due upon the sale or other transfer
among SKK, its Affiliates or SKK Sublicensees, but in such cases the royalty
shall be 

 

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

 

8

 

due
and calculated upon SKK’s or its Affiliates’ or SKK Sublicensees’ Net Sales to
the first independent third party.

 

3.4          Payments of
Royalty; Payment Exchange Rate and Currency Conversions.

 

3.4.1       Royalties
Paid Quarterly. Within
[ * ] following the end of each Calendar Quarter, following the First
Commercial Sale of a Licensed Product, SKK shall furnish to Quark a written
report for the Calendar Quarter showing the Net Sales of Licensed Product(s)
sold by SKK, its Affiliates and SKK Sublicensees in the Territory during such
Calendar Quarter and the royalties payable under this Agreement for such
Calendar Quarter. Within [ * ] after the submission of such written report, SKK
shall pay to Quark, for the account of SKK or the applicable Affiliate or SKK
Sublicensee, as the case may be, a sum equal to the aggregate royalty due for
such Calendar Quarter.

 

3.4.2       Method of
Payment. Payments to
be made by SKK to Quark under this Agreement shall be paid by bank wire
transfer in immediately available funds to such bank account as is designated
in writing by Quark from time to time. Royalty payments shall be made in United
States dollars. The rate of exchange to be used in any conversion from the
currency in the country where the applicable Net Sales are made to United
States dollars shall be [ * ]. Such [ * ] may only be changed by the mutual
written agreement of the parties.

 

3.4.3       Maintenance
of Record; Audits. During
the term of this Agreement and for a period of [ * ] after the Calendar Year in
which sales of Licensed Products took place, SKK shall keep and shall cause its
Affiliates and any SKK Sublicensees to keep complete and accurate records
pertaining to the sale or other disposition of the Licensed Products
commercialized by it, in sufficient detail to permit Quark to confirm the
accuracy of all payments due hereunder. Quark shall have the right to cause an
independent, certified public accountant to whom SKK has no reasonable
objection, to audit such records to confirm SKK’s Net Sales and royalty
payments; provided, however,  that such auditor shall enter into
a confidentiality agreement acceptable to SKK and not disclose SKK’s
confidential information to Quark, except to the extent such disclosure is
necessary to verify the amount of royalties due under this Agreement. Quark may
exercise such audit right for a Calendar Year [ * ] in a given Calendar Year
and only within [ * ] after the royalty period to which such records relate,
upon notice to SKK and during normal business hours. Quark shall bear the full
cost of such audit unless such audit discloses a variance of more than [ * ]
from the amount of the Net Sales or royalties previously paid. In such case,
SKK shall bear the full cost of such audit. The independent, certified public
accountant conducting such audit shall only report the results of its audit and
shall not disclose to Quark the facts relied upon in making such computation.
The terms of this Section 3.4.3 shall survive any termination or expiration of
this Agreement for a period of three (3) years.

 

3.4.4       Record Keeping
by SKK Sublicensee. SKK
shall include in each Sublicense granted by it pursuant to this Agreement a
provision requiring the SKK Sublicensee to make reports to SKK, to keep and
maintain records of sales made pursuant to such Sublicense and to grant access
to such records by Quark’s independent accountant to the same extent required
of SKK under this Agreement.

 

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

 

9

 

3.4.5       Income Tax
Withholding. If at
any time, SKK is required to withhold, under Japanese law, income taxes or other
taxes imposed upon payments set forth in this Agreement, Quark shall bear such
taxes and SKK shall make such withholding payments as required and subtract
such withholding payments from the payments due to Quark. The parties shall
discuss any other withholding taxes imposed on payments made hereunder in order
to find a reasonable solution for minimizing and allocating the burden of any
withholding taxes.

 

ARTICLE 4

 

PATENTS

 

4.1          Filing,
Prosecution and Maintenance of Patents by Quark. Quark shall diligently file, prosecute and
maintain in the Territory, or cause to be diligently filed, prosecuted and
maintained in the Territory, all Patent Rights, including, without limitation,
all Quark Improvement Patent(s) at Quark’s expense. Furthermore, if Quark applies
for a Quark Improvement Patent outside the Territory, Quark shall apply for the
same Quark Improvement Patent in the Territory. Quark shall keep SKK regularly
and fully advised of the status of all pending patent applications. Without
limiting the generality of the foregoing, Quark shall promptly disclose to SKK
in writing, or via mutually acceptable electronic media, on an ongoing basis,
information regarding all Patent Rights in the Territory, including all
applications for Quark Improvement Patents (including the details of the claims
set forth in such applications), the status of all such applications, including
comments and office actions received from relevant patent offices, the dates
such patents issue and such other information as may reasonably be requested by
SKK. Upon the reasonable written request of SKK, Quark shall provide copies of
any substantive papers related to the filing, prosecution and maintenance of
such patent filings. SKK shall treat all information, papers, and other materials
provided by Quark pursuant to this Section 4.1 in accordance with the
confidentiality provisions of this Agreement. SKK shall have a period of [ * ]
from the date SKK receives written notice from Quark of the filing of an
application for a Quark Improvement Patent in the Territory that describes the
invention covered by such application (including the claims set forth in such
application) to exercise its rights to include such application and the Quark
Improvement Patent(s) that may issue on such application in the license granted
by Quark to SKK pursuant to Section 2.1. SKK shall exercise its option by
sending written notice to Quark.

 

4.2          Option of
SKK to Prosecute and Maintain Patents. Quark shall give written notice to SKK of any
desire to cease prosecution and/or maintenance of a particular Quark
Improvement Patent or application therefore and, in such case, shall permit
SKK, at its sole discretion, to continue prosecution or maintenance at its own
expense. If SKK elects to continue prosecution or maintenance, Quark shall
execute such documents and perform such acts, at SKK’s expense, as may be
reasonably necessary to [ * ] to allow SKK to continue such prosecution or
maintenance. Any patents or patent applications [ * ] shall, after such
assignment, not be considered Quark Improvement Patents.

 

4.3          SKK’s Right
to Terminate License of Specific Patents. At any time during the term of this Agreement
SKK shall have the right to terminate its license of any patents or patent
applications included in the Patent Rights licensed to SKK under Section 2.1
(including, without limitation, any of the Quark Improvement Patent for which
SKK has exercised its option under

 

[ * ] = 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

 

Section 4.1). If SKK
exercises such rights, Quark acknowledges and agrees that the effect under
Section 3.3 may be to shorten the period of time during which SKK is obligated
to pay royalties to Quark. Except as set forth in the preceding sentence, SKK’s
exercise of its rights in this Section 4.3, will not affect SKK’s obligations
set forth in this Agreement.

 

4.4          Enforcement.

 

4.4.1       Notice and
Discontinuance of Infringement. In the event that either SKK or Quark becomes aware of any infringement
involving Licensed Products within the Territory of any issued patent within
the Patent Rights (including any Quark Improvement Patents for which SKK has
exercised its option set forth in Section 4.1), it will notify the other party
in writing to that effect. Quark shall have the first right, but not the
obligation, to bring suit against the third party infringer at its own expense.
SKK will reasonably cooperate with Quark in any such suit or action and shall
have the right to consult with Quark and be represented by its own counsel at
its own expense. Any recovery or damages derived from any suit under this
Section shall be used first to reimburse each of Quark and SKK for its
documented out-of-pocket legal expenses relating to the suit, second [ * ].

 

4.4.2       Continuance
of Infringement. If
Quark has neither obtained a discontinuance of such infringement nor brought
suit against such infringer within 6 months of any notice under Section 4.4.1,
SKK shall have the right, but not the obligation, to bring suit against such
infringer under the Patent Rights and join Quark as a party plaintiff, provided
that SKK shall bear all the expenses of such suit. Quark shall cooperate with
SKK in any such suit for infringement of a Patent Right brought by SKK against
a third party, and shall have the right to consult with SKK and to participate
in and be represented by independent counsel in such litigation at its own
expense. SKK shall incur no liability to Quark as a consequence of such
litigation or any unfavorable decision resulting therefrom, including any
decision holding any of the Quark Improvement Patents invalid or unenforceable.
In the event that SKK recovers any sums in such litigation by way of damages or
in settlement thereof, SKK shall retain all such sums.

 

4.4.3       Third Party
Infringement Suit. In
the event that a third party initiates legal action alleging that SKK’s, its
Affiliates’ or SKK Sublicensees’ making, having made, importing, exporting,
using, distributing, marketing, promoting, offering for sale or selling
Licensed Compound and/or Licensed Product infringes or will infringe such third
party’s intellectual property rights, then SKK may elect to defend such suit at
its sole expense and discretion. Upon SKK’s request and in connection with SKK’s
defense of any such third party infringement suit. Quark shall reasonably
cooperate with SKK for such defense provided, that SKK shall promptly reimburse
Quark for reasonable out-of-pocket costs and expenses incurred by Quark in
providing such cooperation. In addition to any other remedies that SKK may have
pursuant to other provisions of this Agreement or by reason of law or equity,
SKK shall be entitled 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.

 

11

 

ARTICLE 5

CONFIDENTIALITY AND PUBLICATION

 

5.1          Confidentiality.

 

5.1.1       Nondisclosure
Obligation. Each of
Quark and SKK shall use only accordance with this Agreement and shall not
disclose to any third party any Proprietary Information received by it from the
other party, without the prior written consent of the other party. For the
purposes of this Article V, “Proprietary Information”  shall mean Quark Know-How and
all other scientific, clinical, regulatory, marketing, financial and commercial
information or data, whether communicated in writing, verbally or
electronically, which is provided by one party to the other party in connection
with this Agreement. When Propriety Information is disclosed in a manner other
than in writing, it shall be reduced to written form, marked “Confidential”  and
transmitted to the receiving party within twenty (20) business days of
disclosure to the receiving party. Notwithstanding the foregoing, “Proprietary information”  shall
include all reports that SKK provides to Quark pursuant to this Agreement,
including without limitation the status reports referred to in Section 2.6 and
the royalty reports furnished in accordance with Section 3.4.1 as well as all
information SKK may furnish in connection with an audit, regardless of whether
such information is marked as “Confidential.”

 

The
foregoing obligations shall survive the expiration or termination of this
Agreement for a period of [ * ]. These obligations shall not apply when and to
the extent Proprietary Information: (i) is known by the receiving party at the
time of its receipt, and not through a prior disclosure by the disclosing
party, as documented by written records; (ii) is at the time of disclosure or
thereafter becomes published or otherwise part of the public domain without
breach of this Agreement by the receiving party; (iii) is subsequently
disclosed to the receiving party by a third party that has the right to make
such disclosure; (iv) is developed by the receiving party independently of
Proprietary Information or other information received from the disclosing party
and such independent development can be documented by the receiving party; (v)
is disclosed to any institutional review board of any entity conducting
clinical trials or any governmental or other regulatory agencies in order to
obtain patents or to gain approval to conduct clinical trials or to market
Licensed Compound and/or Licensed Product, but such disclosure may be made only
to the extent reasonably necessary to obtain such patents or authorizations; or
(vi) is required by law, regulation, rule, act or order of any governmental
authority or agency to be disclosed by a party, provided that notice is
promptly delivered to the other party in order to provide an opportunity to
seek a protective order or other similar order with respect to such Proprietary
Information and thereafter the disclosing party discloses to the requesting
entity only the minimum Proprietary Information required to be disclosed in
order to comply with the request, whether or not a protective order or other
similar order is obtained by the other party.

 

5.1.2       Disclosure
to Agents. Notwithstanding
the provisions of Section 5.1.1 and subject to the other terms of this
Agreement, SKK shall have the right to disclose Quark Proprietary Information
to SKK Sublicensees, agents, consultants, Affiliates or other third parties (collectively
“Agents”)  in
accordance with this Section 5.1.2. Such disclosure shall be limited only to
those Agents directly involved in the research, development, manufacturing,
marketing or promotion of Licensed Compound or Licensed Products (or for such
Agents to determine their interest in performing such activities) in accordance
with this Agreement. Any such Agents must agree in writing to be bound by
confidentiality and non-use obligations which contain terms that are similar in
all material respects to those contained in this Agreement.

 

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

 

12

 

5.1.3       Return of
Proprietary Information. Upon termination of this Agreement the receiving party shall return all
documents, and copies thereof, (including those in the possession of SKK’s
Agents pursuant to Section 5.1.2) containing the disclosing party’s Proprietary
Information at any time upon request of the disclosing party. However, the
receiving party may retain one (1) copy of such documents in a secure location
solely for the purpose of determining its obligations hereunder, to comply with
any applicable regulatory requirements, or to defend against any product
liability or other claims.

 

5.2          Publicity. Quark and SKK shall jointly issue a press
release, the content of which shall be mutually agreed, concerning this
Agreement promptly after the Effective Date. Each party may subsequently issue
press releases related to this Agreement but only if substantially approved
before release by the other party. Quark may use the substance of the joint
press release, SKK’s public announcements, and any other materials approved by
SKK in writing, in Quark’s investor relations and public relations activities.
Nothing in the foregoing, however, shall prohibit a party from making
disclosures to the extent deemed necessary under applicable federal or state securities
laws or any rule or regulation of any nationally recognized securities
exchange, provided such disclosure is accurate and complete. In such event,
however, the disclosing party shall use good faith efforts to consult with the
other party prior to such disclosure and shall request confidential treatment
to the extent available.

 

5.3          Publication.
SKK and Quark each
acknowledge the potential benefit in publishing results of certain studies to
obtain recognition within the scientific community and to advance the state of
scientific knowledge. Each party also recognizes the mutual interest in
obtaining valid patent protection and in protecting business interests and
trade secret information. No publication of Quark Know-How or Quark Proprietary
information may be made without the prior written consent of Quark [ * ]. No
publication of SKK Data may be made without prior written consent of SKK. The
parties agree that SKK, its Affiliates, employees or consultants shall be free
to make any publication which does not disclose Quark Know-How. In the event
that any proposed publication (as defined below) discloses Quark Know-How, the
following procedure shall apply: Either party, its Affiliates, employees or
consultants wishing to make a publication shall deliver to the other party (and
in the case SKK desires to make a proposed publication, [ * ] a copy of the
proposed written publication or an outline of an oral disclosure at least [ * ]
prior to submission for publication or presentation. For purposes of this
Agreement, the term “publication” shall include, without limitation, abstracts
and manuscripts for publication, slides and texts of oral or other public
presentations, and texts of any transmission through any electronic media, e.g.
any computer access system such as the Internet, including the World Wide Web.
The reviewing party shall have the right to (i) propose modifications to the
publication for patent reasons, trade secret reasons or business reasons, (ii)
request delay of the publication or presentation in order to protect patentable
information or (iii) reasonably object to such publication for patent, trade
secret or business reasons. If the reviewing party requests a delay, the
publishing party shall delay submission or presentation for a period not less
than [ * ] from the filing date of the first patent application covering the
information contained in the proposed publication or presentation.

 

[
* ] = 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

 

ARTICLE 6

 

REPRESENTATIONS AND WARRANTIES

 

6.1          Representations and Warranties of Each Party. Each of Quark and SKK hereby represents,
warrants and covenants to the other party hereto as follows:

 

6.1.1       it is a corporation or entity duly
organized and validly existing under the laws of the state or other
jurisdiction of incorporation or formation;

 

6.1.2       this Agreement has been duly authorized,
executed and delivered and constitutes such party’s legal, valid and binding
obligation enforceable against it in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to the
availability of particular remedies under general equity principles; and

 

6.1.3       it shall comply with all applicable
material laws and regulations relating to its activities under this Agreement.

 

6.2          Quark’s
Representations. In
addition to its representations, warranties and covenants set forth in Section
6.1 above, Quark hereby represents and warrants to SKK as follows:

 

6.2.1       Quark has the full right, power and
authority to enter into and perform all of its obligations under the terms of
this Agreement, including without limitation, the right, power and authority to
grant the licenses set forth in this Agreement;

 

6.2.2       Quark owns or has an exclusive license to
the Patent Rights and the Quark Know-How in the Territory, which to the best of
its knowledge is free and clear of any claims of third parties, including,
without limitation, any liens and encumbrances and Quark has not granted any
right, license or interest in, to or under the Quark Know-How to any third
party which restricts or is inconsistent with the rights and licenses granted
to SKK pursuant to this Agreement;

 

6.2.3       As of the date hereof, the patents and
patent applications listed in Schedule 1.14 are all the Patent Rights that
Quark owns or has a license to use in the Territory relating to the Licensed
Compound and Licensed Products;

 

6.2.4       Quark has used commercially reasonable
efforts to maintain and prosecute the Patent Rights in the ordinary course of
business and to maintain the secrecy of all Quark Know-How;

 

6.2.5       Quark has not received any notice or
claim that use of the Patent Rights or Quark Know-How or the development,
manufacture, use or sale of the Licensed Compound or Licensed Products
infringes any third party intellectual property rights in the Territory and the
use of the Patent Rights, Quark Know-How and the development, manufacture, use
and sale of the Licensed Compound and Licensed Products by SKK and its Affiliates
and/or the SKK Sublicensees, as contemplated in this Agreement, shall not
infringe any intellectual property rights of any third 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.

 

14

 

6.2.6       To the best of Quark’s knowledge, all
documentation and other information, including, but not limited to the
documentation and information included in the Quark Know-How, was or will be,
at the time it was or will be conveyed or provided to SKK, accurate and
complete in light of the purposes for which it was intended to be used; and

 

6.2.7       To the best of its knowledge no third party
is infringing the Patent Rights or has misappropriated any of the Quark
Know-How.

 

6.3          Continuing
Representations. The
representations and warranties of each party contained in Sections 6.1 and 6.2
shall survive the execution of this Agreement.

 

6.4          No
Inconsistent Agreements. Except as set forth in Schedule 6.4, neither party has in effect, and
after the Effective Date neither party shall enter into, any oral or written
agreement or arrangement that would be inconsistent with its obligations under
this Agreement.

 

ARTICLE 7

 

INDEMNIFICATION AND LIMITATION ON LIABILITY

 

7.1          Indemnification
by SKK. SKK shall
indemnify, defend and hold harmless Quark and its Affiliates, and each of its
and their respective employees, officers, directors and agents (each, a “Quark Indemnified Party”)  from
and against any and all third party claims, demands, lawsuits, proceedings,
settlement amounts, liability, loss, damage, cost, and expense (including
reasonable attorneys’ fees), subject to the limitations in Section 7.5
(collectively, a “Liability”)  which may be
asserted against the Quark Indemnified Party or which the Quark Indemnified
Party may incur, suffer or be required to pay resulting from or arising out of
(i) the discovery, development, manufacture, promotion, distribution, use,
testing, marketing, sale or other disposition of Licensed Compound and/or
Licensed Product(s) by SKK, its Affiliates or SKK Sublicensees in the
Territory, including, without limitation, any personal injury, death, or other
injuries suffered by users of Licensed Compound or Licensed Product, or (ii)
the breach by SKK of any covenant, representation or warranty contained in this
Agreement. Notwithstanding the foregoing, SKK shall have no obligation under
this Agreement to indemnify, defend or hold harmless any Quark Indemnified
Party with respect to any Liability which results from willful misconduct or
negligent acts or omissions of Quark, its Affiliates, Quark Sublicensee or any
of their respective employees, officers, directors or agents, or breach of this
Agreement by Quark.

 

7.2          Indemnification
by Quark. Quark shall
indemnify, defend and hold harmless SKK and its Affiliates and SKK
Sublicensees, and each of its and their respective employees, officers,
directors and agents (each, a “SKK Indemnified Party”)  from and against
any Liability which the SKK Indemnified Party may incur, suffer or be required
to pay resulting from or arising out of (i) the discovery, development,
manufacture, promotion, distribution, use, testing, marketing, sale or other
disposition of Licensed Compound and/or Licensed Product(s) by Quark, its
Affiliates or Quark Additional Licensees outside the Territory, including,
without limitation, any personal injury, death, or other injuries suffered by
users of Licensed Compound or Licensed Product, (ii) any claim or legal action
described in Section 4.4.3 in which a third party alleges that any exercise of
SKK’s rights pursuant to this Agreement (x) infringes such third party’s
intellectual property rights to the Licensed Compound or (y) infringes such
third

 

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

 

15

 

party’s patents having the
same or similar claims as those contained or embodied in any of the Patent
Rights, or (iii) the breach by Quark of any covenant, representation or
warranty contained in this Agreement. Notwithstanding the foregoing, Quark
shall have no obligation under this Agreement to indemnify, defend or hold
harmless any SKK Indemnified Party with respect to any Liability which results
from willful misconduct or negligent acts or omissions of SKK, its Affiliates,
SKK Sublicensee or any of their respective employees, officers, directors or
agents.

 

7.3          Conditions
to Indemnification. Each
party agrees to promptly give the other party notice of any claim for which
indemnification might be sought. Failure of an indemnified party to provide
notice of a claim to the indemnifying party shall affect the indemnified party’s
right to indemnification only to the extent that such failure has a material
adverse effect on the indemnifying party’s ability to defend or the nature or
the amount of the Liability. Subject to the provisions of Article IV, the
indemnifying party shall have the right to assume the defense of any suit or
claim related to the Liability if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of the indemnified
party, such suit or claim involves an issue or matter which could have a
materially adverse effect on the business operations or assets of the
indemnified party, the indemnified party may waive its rights to indemnity
under this Agreement and control the defense or settlement thereof, but in no
event shall any such waiver be construed as a waiver of any indemnification
rights such party may have at law or in equity. If the indemnifying party
defends the suit or claim, the indemnified party may participate in (but not
control) the defense thereof at its sole cost and expense.

 

7.4          Settlements.
Subject to the provisions of Article IV, neither party may settle a
claim or action related to a Liability without the consent of the other party,
if such settlement would impose any monetary obligation on the ether party or
require the other party to submit to an injunction or otherwise limit the other
party’s rights under this Agreement; provided that such consent shall not
unreasonably be withheld or delayed. Any payment made by a party to settle any
such claim or action shall be at its own cost and expense.

 

7.5          Limitation of
Liability. With
respect to any claim by one party against the other arising out of the
performance or failure of performance of the other party under this Agreement,
the parties expressly agree that the liability of such party to the other party
for such breach shall be limited under this Agreement or otherwise at law or
equity to direct damages only and in no event shall a party be liable for,
punitive, exemplary or consequential damages suffered or incurred by the other
party. Without limiting the foregoing, each party’s maximum liability to the
other party pursuant to the foregoing shall be limited to the aggregate amounts
actually paid by SKK to Quark pursuant to this Agreement, expect in cases of
fraud, in which case no such limitation shall apply.

 

7.6          Insurance.
Each party acknowledges and agrees that during the Term of this
Agreement it shall maintain adequate insurance and/or a self-insurance program
for contractual liability insurance to cover such party’s obligations under
this Agreement. In addition, each party shall maintain adequate products
liability insurance to cover its obligations under this Agreement. Each party
shall provide the other party with evidence of such insurance and/or
self-insurance program, upon request.

 

[ * ] = 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

 

ARTICLE 8

 

TERM AND TERMINATION

 

8.1          Term and
Expiration. This
Agreement shall be effective as of the Effective Date and unless terminated
earlier by mutual written agreement of the parties or pursuant to Sections 8.2
below, the term of this Agreement shall continue until the termination of SKK’s
obligation to pay Quark royalties pursuant to Section 3.3. Upon expiration of
this Agreement, SKK’s licenses pursuant to Section 2.1 shall become fully
paid-up, perpetual, non-exclusive licenses.

 

8.2          Termination.

 

8.2.1       Termination
for Cause. This
Agreement may be terminated by written notice by the terminating party at any
time during the term of this Agreement:

 

(i)            by either party with [ * ] prior
written notice, if the other party is in material breach of its material
obligations hereunder (but specifically excluding in the case of SKK, any
breach by SKK of SKK’s diligence obligations set forth in Section 2.3.1) and
has not cured such breach within [ * ] after notice requesting cure of the
breach with reasonable detail of the particulars of the alleged breach or
initiated actions reasonably expected to cure the cited failure within [ * ] of
receiving notice and thereafter diligently pursued such actions to cure the
failure [ * ]; or

 

(ii)           by either party, upon the filing or
institution of bankruptcy, reorganization, liquidation or receivership
proceedings, or upon an assignment of a substantial portion of the assets for
the benefit of creditors by the other party, or in the event a receiver or custodian
is appointed for such party’s business, or if a substantial portion of such
party’s business is subject to attachment or similar process; provided, however, that in the case
of any involuntary bankruptcy proceeding such right to terminate shall only become
effective if the proceeding is not dismissed within sixty (60) days after the filing
thereof.

 

8.2.2       Termination
for Breach of Diligence, Obligations. If after SKK has provided written notice in accordance with Section
2.3.1 of a delay of [ * ] in meeting a milestone set forth in the Development
Time Table, then SKK and Quark shall each cause a scientific representative
from each of the parties to study the reasons for such delay and attempt to
determine for a period not to exceed [ * ] on whether a justifiable reason
exists for such delay. If the scientific representatives are unable to agree on
whether a justifiable reason exists for any such delay during such [ * ]
period, then Quark may refer the matter for resolution in accordance with the
dispute resolution provisions of Section 9.3. If ultimately the matter is the
subject of arbitration and the arbitral award specifies that no justifiable
reason exists for such delay or if the scientific representatives mutually
determine in writing that no justifiable reason exists for such delay, then SKK
shall promptly upon receipt of any such arbitral award or written
determination, remedy the delay. If SKK fails to remedy such delay, or
initiated actions reasonably expected to remedy such delay, within [ * ] after
receipt of such written decision, then Quark may immediately terminate this
Agreement by providing written notice of termination to SKK.

 

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

 

17

 

8.2.3       Termination
by SKK. SKK may
terminate this Agreement at any time by providing Quark with sixty (60) days
prior written notice, provided that SKK has paid Quark the License Fee set
forth in Section 3.1 and the milestone payment set forth in Section 3.2.1.

 

8.3          Effect of
Termination. Expiration
or termination of the Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination, and the provisions of Article
V and VII shall survive the expiration of the Agreement. Furthermore, if SKK
terminates this Agreement pursuant to (a) Section 8.2.1 (i) for material breach
of any obligation of Quark under Section 2.1.1 or any provision of Section 6.2,
or (b) Section 8.2.1(ii), in addition to any other remedies available to SKK
pursuant to the other provisions of this Agreement or by reason of law or
equity, the licenses granted to SKK pursuant to Section 2.1 shall immediately
and automatically become fully paid-up, perpetual, irrevocable licenses and SKK
shall have no further obligation to make any payment to Quark pursuant to this
Agreement. Except as set forth in the preceding sentence, any expiration or
early termination of this Agreement shall be without prejudice to the rights of
either party against the other accrued or accruing under this Agreement prior
to termination, including the obligation to pay royalties for Licensed
Product(s) or Licensed Compound sold prior to such termination.

 

ARTICLE 9

 

MISCELLANEOUS

 

9.1          Assignment.
Neither this
Agreement nor any or all of the rights and obligations of a party hereunder
shall be assigned, delegated, sold, transferred, sublicensed (except as
otherwise provided herein) or otherwise disposed of, by operation of law or
otherwise, to any third party (other than an Affiliate of an assigning party
under the condition that the assignor remain responsible to the other party
under this Agreement), without the prior written consent of the other party,
and any attempted assignment, delegation, sale, transfer, sublicense or other
disposition, by operation of law or otherwise, of this Agreement or of any
rights or obligations hereunder contrary to this Section 9.1 shall be a
material breach of this Agreement by the attempting party, and shall be void
and without force or effect; provided,
however, either party may, without such consent, assign the Agreement
and its rights and obligations hereunder to an Affiliate or in connection with
the transfer or sale of all or substantially all of its assets related to the
division or the subject business, or in the event of its merger or
consolidation or change in control or similar transaction. This Agreement shall
be binding upon, and inure to the benefit of, each party, its Affiliates, and
its permitted successors and assigns. Each party shall be responsible for the
compliance by its Affiliates with the terms and conditions of this Agreement.

 

9.2          Governing
Law. This Agreement
shall be governed, interpreted and construed in accordance with the laws of the
State of California, without giving effect to conflict of law principles.

 

9.3          Dispute
Resolution. Subject
to the terms of this Agreement, in the event of any dispute, controversy or
claim arising out of or relating to this Agreement, the parties shall try to
settle it amicably between themselves including first referring such dispute,
controversy or claim by notice to the other, to their respective chief
executive officers for attempted resolution by good faith negotiations within
thirty (30) days after such notice. In the event the chief executive

 

[ * ] = 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

 

officers are not able to
resolve such dispute controversy or claim, either party may at any time after
the thirty (30)-day period invoke the arbitration provisions of this Section
9.3.

 

All
arbitration proceedings shall be conducted in San Francisco, California, under
the procedural rules of the International Chamber of Commerce. The party
requesting arbitration shall serve upon the other party a demand for
arbitration stating the substance of the controversy, dispute or claim, and the
contention of the party requesting arbitration. Within sixty (60) days after
the demand, the parties shall each select one arbitrator, which arbitrators
shall together select a third arbitrator. The three arbitrators are to act as
neutral arbitrators and shall have no past, present or anticipated future
affiliation with the parties, which would unduly influence the independence of
an arbitrator. The decision of the arbitrators shall be in writing setting
forth the basis therefore.

 

The
arbitrators shall have the authority to award compensatory damages, interest,
tort damages (but not punitive or similar damages nor consequential or
incidental damages) and specific performance and other equitable relief. The
parties shall abide by the award rendered in such arbitration proceeding, and
such award may be enforced and executed upon in any court having jurisdiction
over the party against whom enforcement of such award is sought. During such
arbitration proceedings, each party shall pay its arbitrators’ fees,
administration charges and related expenses of arbitration. The losing party
shall thereafter reimburse the prevailing party for all such costs incurred in
connection with such arbitration.

 

9.4          Waiver. Any delay or failure in enforcing a party’s
rights under this Agreement or any waiver as to a particular default or other matter
shall not constitute a waiver of such party’s rights to the future enforcement
of its rights under this Agreement, nor operate to bar the exercise or
enforcement thereof at any time or times thereafter, excepting only as to an
express written and signed waiver as to a particular matter for a particular
period of time.

 

9.5          Independent
Relationship. Nothing
herein contained shall be deemed to create an employment, agency, joint venture
or partnership relationship between the parties hereto or any of their agents
or employees, or any other legal arrangement that would impose liability upon
one party for the act or failure to act of the other party. Neither party shall
have any power to enter into any contracts or commitments or to incur any
liabilities in the name of, or on behalf of, the other party, or to bind the
other party in any respect whatsoever.

 

9.6          Entire
Agreement; Amendment. This
Agreement, including the Appendices and Schedules hereto and all the covenants,
promises, agreements, warranties, representations, conditions and
understandings contained herein sets forth the complete, final and exclusive
agreement between the parties and supersedes and terminates all prior and
contemporaneous agreements and understandings between the parties, whether oral
or in writing. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the parties other than as are set forth herein. No subsequent alteration,
amendment, change, waiver or addition to this Agreement shall be binding upon
the parties unless reduced to writing and signed by an authorized officer of
each party. Either party in deciding to execute this Agreement has relied on no
understanding, agreement, representation or promise, not explicitly set forth
herein.

 

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

 

19

 

9.7          Notices. Except as otherwise set forth in this
Agreement, any notice required or permitted to be given or sent under this
Agreement shall be hand delivered or sent by express delivery service or
certified or registered mail, postage prepaid, or by facsimile or e-mail
transmission (with written confirmation copy by registered first-class mail) to
the parties at the addresses, facsimile and e-mail numbers indicated below.

 

If
to Quark, to:

 

Quark
Biotech, Inc.

6526
Kaiser Drive

Fremont,
CA 94555

USA

Attn:
Daniel Zurr, Ph.D., CEO

Telephone
+1-510-402-4020

Facsimile
: +1-510-402-4021

 

If
to SKK to:

 

Sanwa
Kagaku Kenkyusho Co., Ltd.

35
Higashisotobori-cho, Higashi-ku

Nagoya,
Japan 461-8631

Attn:
Mr. Masuo Kato, 

General
Manager, Business Development Dept.

Telephone:+81-52-951-8130

Facsimile;
+81-52-950-1860

 

With
copies to:

 

Squire,
Sanders and Dempsey L.L.P.

1-1-39 Hiroo, Shibuya-ku

Tokyo, Japan 150-0012

Attn: Stephen E, Chelberg, Esq.

Telephone: +81-3-5774-1800

Facsimile: +81-3-5774-1818

E-Mail: schelberg@ssd.com

 

Any
such notice shall be deemed to have been received on the date actually
received. Either party may change its address or its facsimile number by giving
the other party written notice, delivered in accordance with this Section.

 

9.8          Force
Majeure. Failure of
any party to perform its obligations under this Agreement (except the
obligation to make payments when properly due) shall not subject such party to
any liability or place them in breach of any term or condition of this
Agreement to the other party if such failure is due to any cause beyond the
reasonable control of such non-performing party (“force majeure”). Causes of
non-performance constituting force majeure shall include, without limitation,
acts of God, fire, explosion, flood, earthquake, drought, war, riot, act of
terror, sabotage, embargo, strikes or other labor trouble, failure in whole or
in part of suppliers to deliver on schedule materials, equipment or machinery,
interruption of or delay in

 

[ * ] = 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

 

transportation, a national
health emergency, spread of communicable disease or compliance with any order
or regulation of any government entity acting with color of right. The party
affected shall promptly notify the other party of the condition constituting
force majeure as defined herein and shall exert reasonable efforts to
eliminate, cure and overcome any such causes and to resume performance of its
obligations with all possible speed. If a condition constituting force majeure
as defined herein exists for more than ninety (90) consecutive days, the
parties shall meet to negotiate a mutually satisfactory resolution to the
problem, if practicable

 

9.9          Severability.
If any provision of
this Agreement is declared illegal, invalid or unenforceable by a court having
competent jurisdiction, it is mutually agreed that this Agreement shall endure
except for the part declared invalid or unenforceable by order of such court, provided, however, that in the event
that the terms and conditions of this Agreement are materially altered, the
parties will,  in good faith, renegotiate the terms and conditions of
this Agreement to reasonably substitute such invalid or unenforceable
provisions in light of the intent of this Agreement.

 

9.10        Counterparts.
This Agreement shall
become binding when any one or more counterparts hereof, individually or taken
together, shall bear the signatures of each of the parties hereto. This
Agreement may be executed in any number of counterparts, each of which shall be
an original as against either party whose signature appears thereon, but all of
which taken together shall constitute but one and the same instrument.

 

9.11        Further
Actions. Each party
agrees to execute, acknowledge and deliver such further instruments and to do
all other acts, as may be necessary or appropriate in order to carry out the
purposes and intent of this Agreement including, without limitation, any
filings with any antitrust agency which may be required.

 

IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized representatives
of the parties as of the date set forth below.

 

	
  QUARK
  BIOTECH, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Daniel Zurr

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Daniel Zurr, Ph.D.

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

	
  SANWA
  KAGAKU KENKYUSHO CO., LTD.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Kazuo Yamamoto

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Kazuo Yamamoto 

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
   

  	
   

  
						

 

[ * ] = 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

 

SCHEDULE 1.14

 

EXISTING QUARK PATENTS AND PATENT
APPLICATIONS

 

1.             [
* ].

 

2.             [
* ].

 

3.             [
* ].

 

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

 

22EXHIBIT 10.24

 

[ * ]  = 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.

 

Option and Licence Agreement

 

between

 

Atugen AG, a company incorporated under
the laws of Germany, whose registered office is at Robert-Rössle-Str. 10, D13125 Berlin, Germany of the first Part;

(hereinafter
referred to as “Atugen”),

 

and

 

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

 

of

 

xx March 2005

 

1

 

WHEREAS

 

A.                         Atugen has established proprietary technology
and patent rights related to the development and manufacture of siRNA molecules
(atuRNAiTM) potentially silencing any gene in any species and has prepared or
will prepare liposome-based formulations (atuFect) as inhibitors for specific
molecular drug targets (atuRNAi) and has filed patent applications for these
technologies (Atugen IP) as listed in Annex 1 to this Agreement; and

 

B.                           QBI owns patent rights and know-how
directed to the structure and function of five genes and its role in diseases
(QBI Targets) as listed in the Annex 2 to this Agreement; and

 

C.                       QBI wishes to obtain a licence under
Atugen IP in the event that the evaluation of the specific atuRNAi against QBI
Targets shows positive results and that QBI wishes to implement a drug development
project based on the specific atuRNAi inhibiting a QBI Target; and

 

D.                      Atugen is prepared to develop and
supply QBI with five atuRNAis inhibiting specific QBI Targets, to provide to
QBI certain appertaining research and development services as hereinafter
defined and to grant QBI options for non-exclusive licences under Atugen IP;

 

NOW, THEREFORE, it is agreed as
follows:

 

1.             Definitions

 

As used herein, capitalised
terms shall have the respective meaning set forth below:

 

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

 

1.2                                 “Atugen
IP” means the Atugen patents and patent applications as of the date
of this Agreement as identified in Annex 1.
For the purposes of this Agreement “Atugen Patent” shall be considered to be an
issued patent if issued to Atugen in the US or the European Union (European
Patent) and having valid claims which
claims would otherwise be infringed by the QBI Product.

 

1.3                                 “atuRNAi(s)” shall mean the siRNAs developed by
or for Atugen and supplied to QBI under this Agreement as potential inhibitors
of certain molecular drug targets for therapeutic intervention.

 

1.4                                 “Clinical
Development” means the trials conducted in human subjects to
determine the safety, efficacy and pharmacokinetics of a compound as required
by the US FDA. Clinical Development includes Phase I, Phase II, Phase III (and
IV if

 

[ * ]  = 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

 

required), and the New Drug
Application (NDA) for Regulatory Approval by the FDA .

 

1.5                                 “Evaluation”
means those in vivo animal studies testing the efficacy and safety
of a Product candidate in a disease model that a Party developing such Product
deems necessary and sufficient to proceed to Formal Preclinical Development
stage of the Product towards filing of an IND.

 

1.6                                 “First
Commercial Sale” means the first sale to a third party in an arm’s
length transaction for use or consumption in such country after required
Regulatory Approval has been granted by the relevant regulatory authority in
such country.

 

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

 

1.8                                 “IMPD” means an Investigational Medical
Product Development filed with the EMEA in Europe.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

1.14                           “QBI
IP” means the present and future Patent Rights and Know-How owned by
QBI and directed to the [ * ] to the
QBI Target genes and methods of treatment of diseases using these, including
but not limited to rights to patents and patent applications listed in Annex 2.

 

1.15                           “QBI
Products” means Products and Drug Products for the treatment of
human diseases covered by QBI IP.

 

1.16                           “QBI Targets” shall mean the genes covered by QBI
IP listed in Annex 2 to this Agreement.

 

1.17                           “Regulatory
Approval” shall mean any and all NDA (New Drug Approval), MAA
(Marketing Authorization Application) approvals or post-MAA approvals
(including any applicable governmental price and reimbursement approvals),
licenses, registrations, or authorizations of any federal, national,
multinational, state, provincial or local regulatory agency, department, bureau
or other governmental entity necessary for the development, manufacture, use,
storage, import, transport, promotion, marketing and sale of a product in a
country.

 

1.18                           “Sublicense
Revenues” shall
mean all revenues from any royalties or similar payments that QBI or an
Affiliate of QBI receives from a sub-licensee on account of sales of Products
by such sub-licensee or its sub-licensee, including, but not limited to,
down-payments, milestone payments and royalties.

 

1.19                           “Territory” shall mean any of the (i) USA, (ii)
a Major Country) and (iii) Japan.

 

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

 

2.                       Evaluation
Stage

 

2.1                                 In the initial stage of the Agreement Atugen agrees to provide QBI
certain services and to supply specific atuRNAis and liposomal transfection
reagents for five (5) defined QBI Targets for Evaluation.

 

2.2                                 Four of these QBI Targets have been defined in Annex 2 to this
Agreement. QBI shall have the right to select the fifth QBI Target to be
included in this Agreement

 

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

 

4

 

and
such target shall be added to Annex 2 unless it would violate Atugen’s existing
contractual obligations to third parties existing at the time of notification
by QBI of its target selection, in which event BI shall be entitled to select
another target that does not conflict with such contractual obligations of
Atugen.

 

2.3                                 Furthermore, Atugen understands that QBI might wish to obtain
licences under Atugen IP for additional genes in which QBI has an intellectual
property position and agrees, when requested by QBI, to consider such request
and negotiate in good faith the inclusion of such additional genes as QBI
Targets at terms and conditions to be discussed, provided [ * ].

 

2.4                                 Any atuRNAi supplied by Atugen to QBI during the Evaluation stage
will be used by QBI solely for conducting research and evaluation studies
including in vivo studies in animals for the purpose of obtaining proof of
concept under the QBI IP. QBI is specifically not authorized to and is
forbidden from: (i) reselling, transferring or distributing the material either
as a stand- alone product or as a component of another product, (ii) using the
material for diagnostic or therapeutic purposes. With respect to research use,
QBI will be permitted to transfer material to a bona fide third party
performing contracted research and consulting services for QBI, or an
alternative supplier in accordance with the provisions of Sections 2.8 and 2.9
below, provided that the third party performing such services is bound by
limited use obligations consistent with this Agreement.

 

2.5                                 QBI agrees to use [ * ] to enter
into an appropriate R&D Program for evaluation of the atuRNAis supplied by
Atugen, and to report and to make available to Atugen all the findings, results
and data obtained in the evaluation and R&D Program.

 

2.6                                 Any improvements to Atugen technology, as defined by Atugen IP,
resulting from the QBI R&D Programs shall be owned by Atugen with the right
to apply for patents in its name and at its own expense and such results, data
and improvements shall be a partial compensation for the rights granted by
Atugen to QBI under this Agreement.

 

QBI shall own all other results, data and intellectual property obtained
by QBI in the QBI R&D Programs. QBI shall have the right to use such
results for any purpose in its discretion and shall have the right to file
patents for such results in its name and at its own expense.

 

2.7                                 In
consideration of the right to evaluate the atuRNAis inhibiting the QBI Targets
and the right to obtain options for licences under Atugen IP as hereinafter
specified, QBI agrees to pay to Atugen upon the non-refundable sum of [ * ] one half of which shall be creditable against the
option fee for the first QBI Target selected by QBI according to section 3
below.

Within [ * ]
from receipt by Atugen of such payment, Atugen shall deliver to QBI the
atuRNAis that have been ordered and synthesized to date.

 

2.8                                 For the quantities of atuRNAi required for the Evaluation
and further development the Parties agree upon preliminary target prices as
follows:

•                                Initial quantity of [ * ] atuRNAi [ * ]

 

[ * ]  =
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

 

•                                Quantity of [ * ] atuRNAi [ * ]

•                                Quantity of [ * ] atuRNAi [ * ]

•                                Quantity of [ * ] atuRNAi [ * ]

 

The
prices for liposomal transfection reagents shall be determined separately.

 

Atugen agrees to use [ * ]
to supply the atuRNAi for quantities of [ * ] at the target
prices and to inform QBI after synthesis of the initial quantity of [ * ] whether these price levels may be kept. In the event
that the cost of synthesis of specific atuRNAi sequences of quantities of [ * ] should be higher, QBI shall have the right to (i)
select a different siRNA for the same target which might be synthesized at a
lower cost, or (ii) source the same RNAi from an alternative supplier, provided
that such alternative supplier is able to synthesize the siRNA [ * ] required by QBI.

 

2.9                                 Atugen agrees to use its
commercially reasonable efforts to supply or have supplied any specific QBI
order for quantities of [ * ] of
atuRNAi in accordance with the specifications and quality requirements of QBI
and within [ * ] of the receipt by Atugen of
QBI’s order therefor and any specific order for quantities of [ * ] of atuRNAi within [ * ] on
receipt by Atugen of QBI’s order therefor. Atugen will inform QBI as soon as
possible of any potential delay of delivery, and QBI shall be entitled to
source the atuRNAi from an alternative supplier provided that such alternative
supplier is able to [ * ] required
by QBI.

 

2.10                           Atugen agrees to render to QBI upon
QBI’s request certain development services such as the optimisation of cell
lines and the screening of siRNA molecules.

 

2.11                           QBI agrees to compensate Atugen for
such services with fees as follows:

 

•                  For the [ * ] a monthly
FTE rate of [ * ]

•                  For the [ * ]
a fee of [ * ]

•                  For the [ * ]
a fee of [ * ]

 

Fees for other services mutually
agreed upon shall be determined in good faith by the Parties.

 

3.             Option

 

3.1                                Grant

 

Atugen hereby grants QBI the
right to request from Atugen for each of the QBI Targets an option on a
non-exclusive and worldwide licence for Atugen IP with the right to sub-license
at terms consistent with this Agreement to evaluate, develop and commercialise
therapeutic atuRNAis inhibiting the specific QBI Target agreed upon (the “QBI
Option”) at the terms and conditions hereinafter specified.

 

3.2                                 It is understood by the Parties that
a QBI Option will be separately granted by Atugen for each QBI Target under the
conditions specified below but does not include the QBI Target RTP 801 covered
by a separate agreement between the Parties.

 

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

 

6

 

3.3                                 Option Period

 

QBI shall be entitled to obtain
the option for each QBI Targetupon achieving proof of concept [ * ] for the specific QBI Target to QBI’s satisfaction,
however, not later than (i) [ * ] from the
date of the [ * ] delivery of a quantity of
more than [ * ] of atuRNAi required by QBI to
allow the achievement of proof of concept [ * ] (the “POC
Quantity”), or (ii) [ * ] from the
date of the delivery by Atugen of the [ * ] quantity
of the respective atuRNAi ordered by QBI (“First Delivery”)  in the event that QBI does not order the POC
Quantity within [ * ].

 

3.4                                 The request for any such option
shall be made by QBI in writing (the “QBI Option Notice”).

 

3.5                                 Each QBI Option is granted to QBI
for the period starting from achieving proof of concept [ * ]
or the date specified in section 3.3 above until thirty days after obtaining an
IND or any similar approval by the health authorities (IMPD) allowing clinical
phase I trials required by the EMEA or FDA as prerequisite of a drug approval
for a product developed by QBI hereunder inhibiting a QBI Target (a “QBI
Product”), or until twenty-four (24) months after delivery by QBI to
Atugen of the relevant QBI Option Notice, whichever is earlier (the “Option
Period”), and shall automatically expire thereafter unless QBI has exercised
the option by delivery to Atugen of written notice thereof.

 

3.6                                 Diligence

 

During the option period QBI
shall diligently pursue the development of the specific atuRNAi under the QBI
Option and agrees to submit quarterly reports and a final report on the results.

 

3.7           Option Fees

 

For
each single QBI Option requested by QBI and granted by Atugen for the option
period, QBI agrees to pay Atugen a non-refundable option fee as follows:

 

3.7.1                        [ * ] if at the time
the QBI Option is granted [ * ], a sum
which shall be increased to

 

3.7.2                        [
* ] if (i) [ * ] at the
time the relevant QBI Option is granted or (ii) if [ * ]
but prior to [ * ] with respect to the relevant
QBI Target. The difference due according to 3.7.2 (ii) shall be [ * ] from receipt by QBI of Atugen’s notice of [ * ]..

 

The
option fee shall be payable within [ * ] from
delivery of the respective QBI Option Notice.

 

3.8           Exercise of the QBI Options

 

3.8.1                        QBI can exercise each of the QBI
Options granted hereunder at any time during the Option Period. The exercise of
the QBI Option is contingent upon payment of the exercise fee of:

 

[ * ]  = 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

 

3.8.2                         [ * ] if at the time the relevant QBI
Option is exercised [ * ], a sum
which shall be increased to

 

3.8.3                         [ * ] if (i) [ * ]
at the time the relevant QBI Option is exercised or (ii) if [ * ] but prior to [ * ] with
respect to the relevant QBI Target. The difference due according to 3.8.3.(ii)
shall be [ * ] from receipt by QBI of Atugen’s
notice of [ * ].

 

3.9           Development Plan / Milestones

 

QBI
agrees to submit to Atugen QBI’s development plan describing QBI’s best estimate
of the time schedule for reaching the following milestones: [ * ].

 

4.             License

 

Upon exercise of each specific
option in accordance with section 3.8 above Atugen shall grant a non-exclusive
license under Atugen IP in accordance with the terms and conditions specified below:

 

4.1           Grant

 

Atugen agrees to grant to QBI a
non-exclusive and worldwide license with the right to sub-license at terms and
conditions consistent with this Agreement under the Atugen IP and the know-how
relating to the atuRNAi(s) to research, develop, have developed, manufacture,
have manufactured, market and sell QBI Products.

 

4.2           Diligence

 

QBI undertakes to diligently
pursue the development work in accordance with the QBI Plan.

 

4.3                                 Milestone Payments

 

4.3.1                        As long as [ * ], QBI agrees to make the milestone payments set forth below for the first indication of a
QBI Product to reach such milestone with respect to each QBI Target :

 

4.3.1.1               [ * ]

 

4.3.1.2               [ * ]

 

4.3.1.3               [ * ]

 

4.3.2                        If [ * ]
by the time any milestone payments defined in 4.3.1.1 through 4.3.1.3 are due,
the amounts specified as milestone payments on such date shall be [ * ].

 

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

 

8

 

4.3.3                      For the removal of doubt, it is
clarified that these milestone payments are payable once only for each QBI
Product, and only for the first indication of a QBI Product developed for each
QBI Target that achieves the relevant milestone.

 

Milestone payments 4.3.1.2 and
4.3.1.3 are payable for [ * ], to a
maximum amount payable per milestone of [ * ] if the
Atugen IP has issued.

 

4.4   Royalties

 

4.4.1                         Should any QBI Product covered by
this license be marketed by QBI or by any of its Affiliates and as long as [ * ], QBI agrees to pay to Atugen on Net Sales of any QBI
Product covered by this license, royalties as follows:

 

•                  [ * ] for the first [ * ]
of annual Net Sales;

•                  [ * ] for the next [ * ]
of annual Net Sales; and

•                  [ * ] for all annual Net Sales above [ * ]

 

4.4.2                                            As soon as [ * ]
the royalty rates specified shall [ * ] with
respect to sales in that part of the Territory [ * ].

 

4.4.3                                            [ * ]

 

4.5                                                     Sub-Licence Revenues

 

In
the event of sub-licensing of a specific QBI Product by QBI in the Territory or country within a Territory, QBI agrees to pay to Atugen in lieu of all payments to be made
hereunder after such sub-licence in respect to such QBI Product and Territory
or country within a Territory, a share of all Sub-Licence Revenues received by
QBI from such sub-licence. This share of the Sub-Licence Revenues shall depend
on the status of the development of the respective QBI Product at the time of
the grant of the sub-licence as follows:

 

4.5.1                                            [ * ] of the
Sub-License Revenues if the sub-licensing to a third party happens prior to [ * ];

 

4.5.2                                            [ * ]
of the Sub-License Revenues, if the sub-licensing to a third party happens
after [ * ].

 

4.6                  Supplies
of Materials

 

In order to guarantee a
continuous supply of GMP quality atuRNAis used by QBI in development of QBI
Products, Atugen shall provide manufacturing information to a third party GMP producer
selected by QBI to supply all of QBI’s or its sub-licensee’s requirements of
the specific atuRNAi.

 

In the event the Atugen Patent
is finally rejected in any Territory and such rejection is not appealed or
appealable by Atugen, QBI shall have the right to forthwith terminate the
license agreement in such Territory.

 

5.                                                                       Atugen Options

 

[ * ]  = 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

 

5.1                                                                 In consideration of the rights granted under the Licence Agreement
QBI agrees to grant to Atugen [ * ] licence [ * ] to any improvement of the atuRNAi and liposome
formulation technology, in
accordance with section 2.6 above.

 

5.2                                                                 Atugen shall have, furthermore, the option to enter into an
agreement with QBI related to the joint development for oncology applications
of atuRNAi inhibiting the QBI Targets being subject matter of this Agreement
with worldwide licences and with the right to sub-license. QBI agrees that such
negotiations shall be held in good faith along the lines of the terms and
principles outlined in the 801-Agreement between the parties hereto e.g. time
periods and percentages [ * ] of the
development of the respective QBI project at the time of the request for
negotiations. For the avoidance of doubt it is clarified that therapeutic
products related to the treatment of side effects of radiology, chemotherapy or
other forms of treatment of cancer, are not oncology applications and are not
subject to such option.

 

6.             Liability / Disclaimer

 

All materials and information are provided on an “as
is” basis, and the parties expressly disclaim all implied warranties, including
without limitation any warranty of non-infringement, any obligation to defend
any action or suit brought by any third party, and any warranty with respect to
quality of the results, and fitness of the results for any particular purpose.

 

Neither party shall be liable for any damages caused
by simple negligence of any of its officers; employees or subcontractors except
for negligence in the performance of essential obligations of this agreement.

 

Each party expressly disclaims any warranty that the
results will not be subject to prior rights, including patents, of any other
entity including that party itself or entities related thereto, nor that
another party, including the party itself or an entity related thereto, is not
researching the same genomic, expressed and/or protein sequence data or has not
reached the same results, whether through analyses performed by the party,
through use of the party’s databases and software or otherwise.

 

7.                                     Miscellaneous Provisions

 

7.1          Assignment

 

Neither
Party shall be entitled to assign its rights hereunder without the express
written consent of the other Party hereto, except that both QBI and Atugen may
otherwise assign their respective rights and transfer their respective duties
hereunder to any assignee of all or substantially all of their respective
businesses (or that portion thereof to which this Agreement relates) or in the
event of their respective merger or consolidation or similar transaction. No
assignment and transfer shall be valid or effective unless and until the
assignee/transferee shall

 

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

 

10

 

agree
in writing to be bound by the provisions of this Agreement in which case the
Agreement will inure to the benefit of such successors and assigns.

 

7.2           Further Actions

 

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

 

7.3                                 Use of Name

 

Except
as otherwise provided herein, neither Party shall have any right, express or
implied, to use in any manner the name or other designation of the other Party
or any other trade name or trademark of the other Party for any purpose in
connection with the performance of this Agreement.

 

7.4                                 Public Announcements

 

Except
as required by law (including, without limitation, disclosure requirements of
the U.S. Securities and Exchange Commission, Nasdaq or any other stock exchange,
neither Party shall make any public announcement concerning this Agreement or
the subject matter hereof without the prior written consent of the other, which
shall not be unreasonably withheld. It shall not be unreasonable for a Party to
withhold consent with respect to any public announcement containing any of such
Party’s confidential information. In the event of a required public
announcement, to the extent practicable under the circumstances, the Party
making such announcement shall provide the other Party with a copy of the proposed
text prior to such announcement sufficiently in advance of the scheduled
release of such announcement to afford such other PARTY a reasonable opportunity
to review and comment upon the proposed text.

 

7.5           Waiver

 

A
waiver by either Party of any of the terms and conditions of this Agreement in
any instance shall not be deemed or construed to be a waiver of such term or
condition for 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 in limitation of any other
remedy, right, undertaking, obligation or agreement of either PARTY.

 

7.6           Severability

 

When
possible, each provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement and the
parties shall negotiate, in good faith, a new provision which will, as closely
as possible, carry out the intentions of the parties provided for in the
invalidated provision. In the event that any invalidated or prohibited
provision materially affects the rights and

 

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

 

11

 

obligations
of a Party and the Parties fail to agree to a new provision, the Party thus
affected shall have the right to terminate this Agreement by written notice to
the other Party.

 

7.7           Amendment

 

No
amendment, modification or supplement of any provisions of this Agreement shall
be valid or effective unless made in writing and signed by a duly authorized
officer of each Party.

 

7.8           Entire Agreement

 

This Agreement,
together with the Annexes hereto, sets forth the entire agreement and
understanding between the Parties as to the subject matter hereof and merges
all prior discussions and negotiations between them, and neither of the Parties
shall be bound by any conditions, definitions, warranties, understandings or
representations with respect to such subject matter other than as expressly
provided herein or as duly set forth on or subsequent to the date hereof in
writing and signed by a proper and duly authorized officer or representative of
the Party to be bound thereby.

 

7.9           Parties in Interest

 

All the
terms and provisions of this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the Parties hereto and their respective
permitted successors and assigns.

 

7.10         Descriptive Headings

 

The
descriptive headings of this Agreement are for convenience only, and shall be
of no force or effect in construing or interpreting any of the provisions of
this Agreement.

 

8.             Law
and Venue

 

8.1                                 This Agreement shall be construed in
accordance with the Laws of Switzerland.

 

8.2                                 The parties agree to submit any
dispute, controversy or claim arising out of or relating to this Agreement to
arbitration to be held in the English language in accordance with the rules of
conciliation and arbitration of the International Chamber of Commerce to the
exclusion of all other jurisdiction. Arbitration shall be held in Zurich, Switzerland, in the English
language.

 

[ * ]  = 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

 

	
  QBI

  	
   

  	
  Atugen AG

  
	
  Quark Biotech Inc./

  	
   

  	
   

  
	
  QBI Enterprises
  Ltd.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
     /s/ Daniel Zurr

  	
   

  	
   

  	
  By

  	
   

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

  	
   

  
	
  Name

  	
    Daniel Zurr

  	
   

  	
   

  	
  Name

  	
  T. Christely , P. Buckel

  	
   

  
	
  Title

  	
    CEO

  	
   

  	
   

  	
  Title

  	
   

  	
  COO/CFO, CEO

  	
   

  
	
  Date

  	
    April 18, 2005

  	
   

  	
   

  	
  Date

  	
   

  	
  April 19, 2005

  	
   

  
													

 

 

[ * ]  = 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

 

Annex 1

 

1.               [ * ]

 

2.               [ * ]

 

 

[ * ]  = 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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}]]