Document:

Exhibit 10.3

 

QUARK ENTERPRISES, LTD.

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is dated
as of January 1, 2002 by and between QBI Enterprises, Ltd., an Israeli limited
liability company (“QBI”), and Daniel Zurr (“Executive”).

 

1.             Term. QBI hereby employs Executive and Executive
hereby accepts employment effective as of January 1, 2002 (the “Commencement
Date”), on the terms and conditions set forth herein. The term of this
Agreement shall begin on the Commencement Date and shall continue for a period
of three (3) years thereafter (the “Termination Date”).

 

2.             Duties. Executive agrees to serve QBI as its
President and Chief Executive Officer, or in such other executive capacity as
QBI’s Board of Directors (the “Board”) may from time to time request. During
the term of Executive’s employment under this Agreement, Executive will devote
all of his normal business time and attention to, and use his best efforts to
advance, the business of QBI (including the business of QBI’s parent company,
Quark Biotech, Inc. (“Parent”)). Services rendered by the Executive to Parent
shall not be considered contrary to or in breach of this Agreement and shall be
subject to a separate agreement entered into between Executive and the Parent.

 

Executive’s duties shall be in the nature of
management duties that demand a special level of loyalty and accordingly the
Law of Work Hours and Rest – 1951 shall not apply to the Agreement. The parties
hereto confirm that this is a personal services contract and that the relationship
between the parties hereto shall not be subject to any general or special
collective employment agreement or any custom or practice of QBI in respect of
any of its other employees or contractors.

 

3.             Confidential Information. Executive acknowledges
that he has executed the Proprietary Information Agreement of QBI (the “Proprietary
Information Agreement”) and agrees to be bound by its terms.

 

4.             Compensation and Fringe Benefits.

 

(a)           Base Compensation. During the
term of this Agreement the Company shall pay Executive an annual salary of one
hundred twenty five thousand dollars ($125,000) payable in equal installments
on the regular employment payroll dates of the Company. Executive’s annual
salary shall be adjusted on each one-year anniversary of the date of this
Agreement to compensate for changes in the cost of living. The amount of each
annual cost of living increase shall be the rate determined for such annual
period by the “Consumer Price Index for Urban Wage Earners and Clerical Workers
(All Items) published by the Bureau of Labor Statistics, U.S. Department of
Labor (1967 equals 100).”

 

(b)           Incentive Compensation:  Executive shall be entitled to an annual
bonus in an amount up to 100% of annual base compensation, based upon annual
milestones agreed to by the Executive and the Company’s Board of Directors that
are consistent with the Company’s 

 

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business plan for each year,
and subject to the sole discretion of the Company’s Board of Directors. The
agreed upon milestones and the Incentive Compensation attributable to the
milestones shall be set forth in a memo executed by the Executive and the
Company’s Board of Directors and it shall be attached as an addendum to this
Employment Agreement. The agreed upon milestones for the fiscal year ended
December 31, 2002 and the incentive compensation attributable to the
milestones, is attached to this Agreement.

 

(c)           In addition to the incentive
compensation described in Section 4 (b) above, the Company shall forgive fifty
percent (50%) of the home loan made to the Executive upon the occurrence of one
of the following:

 

(i)            In the event of an underwritten
Initial Public Offering whereby a minimum of $75 million is raised for the
Company; or

 

(ii)           In the event the Company enters in a
significant collaboration or joint venture agreement with a major United States
or European based pharmaceutical company, as determined by Company’s Board of
Directors. The Board’s decision shall be based upon the size of the cash
payment and financial commitments made by the pharmaceutical company and the
scope of the agreement and impact on the Company. The definitions of “significant”
and “major” shall be at the discretion of the Board.

 

(iii)          In the event of the Executive’s death.
The Company may, at its sole discretion, obtain and maintain one or more term
policies of life insurance on the life of the Executive providing an aggregate
benefit in the amount of 50% of the home loan. The Company, in its sole
discretion, may name itself or the Executive’s designee as the beneficiary
and/or owner of the policy or policies. In the event the Executive names the
beneficiary, the home loan will not be forgiven; but rather it will be repaid
from the insurance proceeds. The Executive agrees to fully cooperate with the
Company in its effort to obtain and maintain the above described policy or
policies of insurance.

 

(iv)          In the event the Executive becomes “permanently
disabled.” “Permanently disabled” shall mean a total physical or mental disability
that renders the Executive unable to perform his normal duties for the Company
for a period of 120 consecutive days and that the Executive is unlikely to be
able to return to work to perform his normal duties for the Company within 365
days, as determined by a licensed physician. The Company and the Executive, or
his legal representative, shall use their best efforts to agree on the
physician to determine physical disability. If they cannot agree within ten
(10) days after the first party makes a written proposal stating the name of a
physician, then the other party shall select a physician within ten (10) days
and within ten (10) days thereafter the two physicians shall select a third
physician. All such physicians must be board certified in the medical area
giving rise to the alleged disability. The determination of the third physician
shall be final and binding. If one party fails to select a physician within
said ten (10) day period, the physician named by the other party shall make the
determination of permanent disability.

 

5.             Expenses. QBI will pay or reimburse Executive for
reasonable travel, entertainment or other expenses incurred by Executive in the
furtherance of or in connection with the performance of Executive’s duties
hereunder in accordance with QBI’s established policies. 

 

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Executive shall furnish QBI
with evidence of the incurrence of such expenses within a reasonable period of
time from the date that they were incurred.

 

6.             Benefits. Executive shall be entitled to the
following benefits:

 

(a)           Manager’s Insurance.

 

(i)            QBI shall effect a Manager’s
Insurance Policy (the “Policy”) for Executive and shall pay a sum equal to
13.33% of Executive’s annual base compensation toward such Policy, (of which
8.33% will be on account of severance pay and 5% on account of pension fund
payments) and a further 2.5% of Executive’s annual base compensation on account
of disability pension payments. QBI shall deduct 5% from Executive’s annual
base compensation to be paid on behalf of Executive towards such Policy. Payments
by QBI towards the Policy under this Section 6(a) shall be in lieu of any
statutory obligations to pay severance pay, subject to the approval of the
Minister of Labor under Section 14 of the Severance Pay Law 5723-1963; provided
however, that all amounts due to Executive for severance pay under the law
shall be paid to Executive under the Policy.

 

(ii)           Notwithstanding any other provision
of this Agreement, upon termination of Executive’s employment hereunder for any
reason whatsoever (including, without limitation, termination for cause and
termination in event of illness or death) the Executive shall be entitled to
the release to his order of (and to receive and be paid) all amounts accumulated
under the Policy and in the Further Education Fund (referred to in clause 6(b)
below).

 

(b)           Further Education Fund
Contributions. Executive is entitled to elect to participate in a further
education fund. Should Executive so elect to participate in such a further
education fund, QBI shall pay a sum equal to 7.5% of Executive’s annual base
compensation and shall deduct 2.5% from Executive’s annual base compensation to
be paid on behalf of Executive toward a further education fund. Use of these
funds shall be in accordance with the by-laws of the fund.

 

(c)           Sick Leave. Executive shall be
entitled to fully paid sick leave pursuant to the Sick Pay Law -
1976.

 

(d)           Vacation. Executive shall be
entitled to an annual vacation of twenty (20) working days at full pay. Executive
shall not be entitled to receive from the Company any Sabbatical Year Leave.

 

(e)           Reserve Duty. Executive shall
continue to receive the annual salary provided for hereunder during periods of
military reserve duty. Executive hereby assigns and undertakes to pay to QBI
any amounts received from the National Insurance Institute as compensation of
such reserve duty service.

 

(f)            Stock Options. Executive
shall be eligible to receive grants of options to purchase shares of Parent on
the terms the Parent’s 1997 Stock Plan for Israeli Employees.

 

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(g)           Travel Expenses. It is
expressly agreed that Executive’s annual salary as set forth in Section 4
includes travel allowances to which Executive is entitled under applicable
Israeli law.

 

(h)           Automobile. QBI will provide
the Executive during the course of his employment with the use of an automobile
of 2600cc engine size (Audi or similar model), and shall bear and pay all
expenses relating thereto. All taxes assessed on the Executive with respect to
the use of a car and/or reimbursement of car expenses hereunder, shall be
grossed up and paid by QBI.

 

7.             Termination of Employment of Executive. If
Executive’s employment with Parent, pursuant to the Quark Employment Agreement,
is terminated, then Executive’s employment with QBI shall terminate as of the
date of such termination of employment with Parent. If Executive’s employment
with Parent was terminated without Cause under the Quark Employment Agreement,
then Executive shall continue to receive from QBI the full amount and scope of
compensation described in Section 4 for a period of (a) ten (10) months from
the date of such termination if the termination occurs within the first year of
Executives employment with Parent, (b) eight (8) months from the date of
termination if the termination occurs with the second year , and (c) six (6)
months from the date of termination if the termination occurs within the third
year. If Executive’s employment with Parent was terminated for Cause under the
Quark Employment Agreement, then Executive shall then not be considered an
employee of QBI for any purpose, and his salary and all other benefits shall
cease upon the termination of his employment. In addition to the above,
Executive’s employment hereunder may be terminated by the Board of Directors of
QBI, with or without cause, at any time during the term hereof upon thirty (30)
days advance written notice from the Board of Directors of QBI.

 

8.             Miscellaneous.

 

(a)           Assignment. This Agreement
shall be binding upon and inure to the benefit of (i) the heirs, executors and
legal representatives of Executive upon Executive’s death and (ii) any
successor or assignee of QBI. Notwithstanding the above, Executive’s duties and
responsibilities set forth in Section 2 above shall not be assignable or
delegable. Any successor of QBI shall be deemed substituted for QBI under the
terms of this Agreement for all purposes. As used herein, “successor” shall
include any person, firm, corporation or other business entity which at any
time, whether by purchase, merger or otherwise, directly or indirectly acquires
all or substantially all of the assets or business of QBI.

 

(b)           Notice. All notices and other
communications required or permitted hereunder shall be in writing and shall be
mailed by registered or certified mail, postage prepaid, or otherwise delivered
by hand or by messenger, addressed (a) if to Executive, at 58 Ben Nun Street,
Herzlia on the Beach, Israel or at such other address as Executive shall have
furnished to QBI in writing (including electronic mail address), or (b) if to
QBI, at P.O. Box 741, Nes-Ziona 74106, Israel, or to such other address as QBI
shall have furnished to Executive in writing (including electronic mail address).
Each such notice or communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally or sent by telegram, telefax or telex (receipt confirmed), or, if
sent by mail, at the earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained

 

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receptacle for the deposit of
the United States mail, address and mailed as described above, or if sent by
electronic mail, then one business day following delivery.

 

(c)           Severability. In the event
that any provision hereof becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall
continue in full force and effect without said provision.

 

(d)           Entire Agreement. This
Agreement represents the entire agreement and understanding between QBI and
Executive concerning Executive’s employment relationship with QBI, and
supersedes and replaces any and all prior agreements and understandings
concerning Executive’s employment relationship with QBI.

 

(e)           No Oral Modification, Cancellation
or Discharge. This Agreement may only be amended, canceled or discharged in
writing signed by Executive and QBI. Notwithstanding anything in this Agreement
to the contrary, any consent, waiver, amendment, modification or other
agreement delivered by electronic mail shall be effective.

 

(f)            Governing Law. This Agreement
shall be governed by the laws of Israel.

 

(g)           Acknowledgement. Executive acknowledges
that he has had the opportunity to discuss this matter with and obtain advice
from his private attorney, has had sufficient time to, and has carefully read
and fully understands all the provisions of this Agreement, and is knowingly
and voluntarily entering into this agreement.

 

(h)           Survivability. Notwithstanding
any other provision of this Agreement, the obligations, covenants and duties of
QBI and Executive under Section 3, and Section 5 of this Agreement, as well as
any obligations of QBI to pay accrued benefits to Executive prior to
termination of this Agreement, shall survive any termination of this Agreement.

 

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IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

 

	
  QUARK ENTERPRISES, LTD.

  	
   

  	
  DANIEL ZURR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip B. Simon

  	
   

  	
  /s/ Daniel Zurr

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  Title:

  	
  Philip B. Simon,

  	
   

  	
   

  
	
   

  	
  Member of Board of
  Directors and 

  Compensation Committee of 

  Quark Biotech, Inc.

  	
   

  	
   

  

 

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2002
INCENTIVE COMPENSATION

MILESTONES

QUARK
ENTERPRISES, LTD

 

As set forth in Section
4(b) of the Employment Agreement to which this is attached, Daniel Zurr shall
be entitled to incentive compensation of up to 100% of his base compensation,
as described in Section 4(a) of the Employment Agreement, based upon
achievement of the following milestones on or before 31 December 2002 and
subject to the provisions set forth in Section 4(b):

 

1.                                       An
underwritten initial public offering whereby a minimum of $75mm is raised for
the Company;

2.                                       Completion
of a significant collaboration or joint venture agreement with a major United
States or European based pharmaceutical company as described in Section
4(c)(ii) of the Employment Agreement;

3.                                       The
initiation of two products into Clinical Trials

4.                                       Successful
implementation of pre-IPO strategies, including, but not limited to, the hiring
of a chief financial officer, VP R&D, and VP Business Development for the
Company, the establishment of a United States based headquarters, the
initiation and execution of a public relations strategy, and such other
operational and business strategies necessary for, or an enhancement for, an
initial public offering.

 

Rather than establishing
specific incentives for the achievement of each milestone, the Company’s Board
of Directors shall evaluate the level of achievement and success in
implementing these milestones and the value that has been created for the
Company’s shareholders by the achievement of all or a portion of the
milestones.Exhibit 10.8

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made and entered into as of March 7,
2007, by and between, Q.B.I. Enterprises Ltd. (the “Company”) and Yaron Garmazi
(the “Executive”);

 

WITNESSETH THAT:

 

WHEREAS, the Company and the Executive desire to enter
into this Agreement pertaining to the employment of the Executive by the
Company effective as of February 21, 2007 (the “Effective Date”);

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth below and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Executive and
the Company hereby agree as follows:

 

1.             Performance of
Services. The Executive’s employment with the Company shall be subject to
the following:

 

(a)           Subject to the terms of
this Agreement, the Company hereby agrees to employ the Executive in the
position of Chief Financial Officer (“CFO”) of the Company and of its parent
company Quark Biotech Inc. (“Quark”) and the Executive hereby agrees to be in
the employ of the Company in such position.

 

(b)           While the Executive is
employed by the Company, the Executive shall devote his full time and best
efforts, energies and talents to serving the Company and shall not be engaged
in any other employment nor engage in any other business activities for any
other person, firm or company without the prior written consent of the Company.

 

(c)           The Executive shall
report to the Chief Executive of the Company and of Quark (the “CEO”) and shall
perform the duties, undertake the responsibilities and exercise the authority
customary for a CFO of a company and shall perform such duties as may be
assigned to him by the CEO.

 

(d)           The Executive agrees
that he shall perform his duties faithfully and efficiently subject to the
direction of the CEO. The Executive’s duties shall include providing services
for both the Company and its Affiliates (as defined below) as determined by the
Company. For purposes of this Agreement, the term “Affiliate” shall mean Quark
and any corporation, partnership, joint venture or other entity in which at
least a fifty percent interest in such entity is owned, directly or indirectly,
by Quark or the Company.

 

(e)           Notwithstanding the
foregoing provisions of paragraph 1(b), in the first four months after the
Effective Date, the Executive shall be entitled to provide services to his
previous employer.

 

(f)            The Executive’s place
of employment shall be in Israel, provided that the Company may require the
Executive to travel outside Israel in order to fulfill his duties with the
Company and Quark.

 

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(g)           The Executive’s
position is a “senior managerial position”, as defined in the Israeli Work and
Rest Hours Law, 1951, and requires a high level of trust. Accordingly, the
provisions of said law shall not apply to the Executive and the Executive
agrees that he may be required to work beyond the regular working hours of the
Company, for no additional compensation other than as specified in this
Agreement.

 

(h)           The term of employment
of the Executive under this Agreement shall commence on the Effective Date and
shall continue until terminated in accordance with the provisions of Section 5
below (the “Employment Period”).

 

2.             Compensation and
Benefits. Subject to the terms of this Agreement, during the Employment
Period, the Company shall compensate the Executive for his services as follows:

 

(a)           Base Salary. The
Executive shall receive base salary at a monthly rate of 19,167 US Dollars,
inclusive of travel expenses to which the Executive is entitled in accordance
with applicable laws. Said salary and travel expenses shall be paid in arrears
by the 9th day of each month in respect to a preceding month in
which the Executive was in employment (the “Salary”). The Salary shall be paid
in New Israeli Shekel (“NIS”) calculated in accordance with the representative
rate of exchange of the NIS against the Dollar published by the Bank of Israel
as in effect on the last day of the month in respect of which the Salary was
paid. In addition within seven (7) days from the Effective Date the Company
will pay the Executive a one time signature bonus in the amount of 15,700 US
Dollars.

 

(b)           Stock Awards. Within
30 days from the date hereof, the Executive shall be granted an award in the
form of a stock options (“Stock Options”) to purchase shares of common stock of
Quark, all in accordance with the terms and principles detailed in Exhibit A
and in Quark’s Stock Option Plan for Israeli Employees. The Stock Options will
be granted under Quark’s standard stock option agreement for QBI employees to
be entered into between the Executive and Quark.

 

(c)           Managers’ Insurance.
During the Employment Period, the Company shall take out a Managers’ Insurance
(Bituach Menahalim) policy and shall
contribute thereto, on a monthly basis, 18.33% of the Executive’s monthly
Salary, 8.33% of which shall be in respect of severance compensation (the “Severance
Component”), 5% of which shall be in respect of pension, and 5% of which shall
be deducted by the Company from the monthly payment of the Executive’s Salary
as the Executive’s contribution to said Managers’ Insurance. The parties
acknowledge and agree that in accordance with Section 14 to the Severance Pay
Law 5723-1963. the allocation to Managers’ Insurance under this Section 2(c) shall
be in lieu of severance pay according to the Severance Pay Law that Executive
may be entitled to.

 

(d)           Disability. During
the Employment Period, the Company shall take out Disability Insurance (Ovdan Kosher Avoda) as in effect immediately prior to the Effective
Date and contribute thereto, on a monthly basis, 2.5% of the Executive’s
monthly Salary.

 

(e)           Education Fund. During
the Employment Period, the Company shall contribute to an Education Fund (Keren Hishtalmut), on a monthly basis, 7.5% of the Executive’s
monthly Salary, subject to the Executive’s contribution of an additional 2.5%
of his 

 

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monthly Salary. All tax
obligations related to the Education Fund shall be borne by the Executive.

 

(f)            Recreation Funds.
During the Employment Period, the Company shall provide and pay the Executive
Recreation Funds (Dmei Havra’ah) at the rate
required by applicable law and regulations.

 

(g)           Vacation. During
each calendar year during the Employment Period, the Executive shall be
entitled to 20 working days of vacation (or a pro rata number of days for any
partial year that occurs during the Employment Period) determined in accordance
with applicable employment laws of Israel and Company policies.

 

(h)           Use of Company Car.
During his employ with the Company hereunder, the Executive shall have the use
of a Company car free of charge. Any income tax which may be assessed on such
use of the car shall be for the account of the Company. The Executive will be
responsible for the payment of fines (if any) imposed with respect to the use
of the car by him.

 

(i)            Expenses. The
Company will pay or reimburse Executive for reasonable travel or other expenses
incurred by Executive in the furtherance of or in connection with the performance
of Executive’s duties hereunder in accordance with the Company’s established
policies (including reimbursement for telephone expenses). Executive shall
furnish the Company with evidence of the incurrence of such expenses within a
reasonable period of time from the date that they were incurred.

 

(j)            Use of Company Cell
Phone. During his employ with the Company hereunder, the Executive shall
have the use of a Company cell phone free of charge. Any income tax which may
be assessed on such use of the cell phone shall be for the account of the
Company.

 

(k)           Taxes. All sums
mentioned in this Agreement are pre-tax. The Executive shall bear and pay any
and all taxes imposed on his Salary, the Stock Options and any all benefits
hereunder.

 

3.             Termination. The
Executive’s employment with the Company during the Agreement Term may be
terminated under the following circumstances:

 

(a)           Death. The
Executive’s employment hereunder shall terminate upon his death.

 

(b)           Disability. If
the Executive becomes Disabled, the Company may terminate his employment with
the Company. For purposes of this Agreement, the Executive shall be deemed to
be “Disabled” if he has a physical or mental disability which renders him
incapable of performing substantially all of his duties hereunder for a period
of 90 days (which need not be consecutive) in any 12-month period. In the event
of a dispute as to whether the Executive is Disabled, the Company may, at its
expense, refer him to a licensed practicing physician of the Company’s choice and
the Executive agrees to submit to such tests and examination as such physician
shall deem appropriate. The determination of such physician shall be final and
binding on the Company and Executive.

 

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(c)           Cause. The
Company may terminate the Executive’s employment hereunder immediately and at
any time for Cause by written notice to the Executive detailing the basis for
the Cause termination. For purposes of this Agreement, “Cause” means (i) gross
negligence or willful failure by the Executive to perform his duties as an
employee of the Company (other than any such failure resulting from incapacity
due to physical or mental illness), (ii) willful misconduct by the Executive
which is materially injurious to the Company or its Affiliates, monetarily or
otherwise, (iii) the engaging by the Executive in egregious misconduct
involving moral turpitude to the extent that his creditability and reputation
no longer conforms to the standard of senior executives of the Company and its
Affiliates, (iv) the commission by the Executive of an act of dishonesty or
breach of trust; or (v) a material breach of this Agreement.

 

(d)           Termination by
Executive. The Executive may terminate his employment hereunder at any time
for any reason by giving the Company prior written notice not less than 120
days prior to such termination.

 

(e)           Mutual Agreement.
This Agreement may be terminated at any time by mutual written agreement of the
parties.

 

(f)            Termination by the
Company without Cause. The Company may terminate the Executive’s employment
hereunder at any time for any reason by giving the Executive prior written
notice not less than 120 days prior to such termination. During the Notice
Period, the Executive will continue in the employ of the Company pursuant to
the terms of this agreement and to receive the Salary and other benefits
hereunder. Notwithstanding the above, the Company may, at any time during any
Notice Period, waive at its sole discretion, the Executives obligation to continue
in the employment of the Company and to forthwith terminate his employment
hereunder, by paying the Executive an amount equal to the Executive’s Salary
multiplied by the number of months remaining until the end of the applicable
Notice Period.

 

(g)           Date of Termination.
“Date of Termination” means the last day that the Executive is employed by the
Company under the terms of this Agreement under circumstances in which his
employment is terminated in accordance with one of the foregoing provisions of
this paragraph 3.

 

4.             Rights Upon
Termination.

 

(a)           In the event of
Termination for any reason, the Company shall:

 

(i)            Pay the Executive’s
Salary for the period ending on the Date of Termination.

 

(ii)           Transfer to the
Executive, within 30 days following Date of Termination, any and all
allocations accrued under his Managers’ Insurance and Educational Fund.

 

(b)           Notwithstanding any
provision of this Section 4 to the contrary, the Company shall have no
obligation to transfer or release the Severance Component of the Managers’
Insurance in circumstances where Israeli laws denies the Executive’s right to

 

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severance payment by pursuant
to Sections 17 to the Israeli Severance Payment Law 5723 –1963.

 

(c)           The Company and
Executive agree and acknowledge that in the event the Company transfers
ownership of the Manager’s Insurance to the Executive, that such transfer shall
constitute the payment of any severance pay the Company is required to pay to
the Executive pursuant to the Severance Pay Law (5727-1963).

 

5.             Confidentiality
and Noncompetition. In consideration for the payments and benefits
contemplated by Section 2, the Executive acknowledges and agrees that
simultaneous with the execution of this Agreement, he will be required to
execute and comply with the Non-competition and Proprietary Information
Agreement in the form attached to this Agreement as Exhibit B.

 

6.             Representations
and Warranties.

 

(a)           The Executive
represents and warrants that: (i) the execution and delivery of this Agreement
and the fulfillment of the terms hereof will not constitute a default under or
breach of any agreement or other instrument to which he is a party or by which
he is bound, including without limitation, any confidentiality or non competition
agreement, and do not require the consent of any person or entity; (ii) he
shall not utilize, during his employment with the Company any proprietary
information of any of his previous employers.

 

(b)           The Executive shall
inform the Company, immediately upon becoming aware of every matter in which he
or a member of his immediate family or affiliate has a personal interest or
which might create a conflict of interests with his duties to the Company.

 

7.             Successors. This
Agreement shall be binding upon, and inure to the benefit of, the Company and
its successors and assigns and upon any person acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
Company’s assets and business.

 

8.             Notices. Notices
and all other communications provided for in this Agreement shall be in writing
and shall be delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid, or sent by facsimile or prepaid
overnight courier to the parties at the addresses set forth below (or such
other addresses as shall be specified by the parties by like notice):

 

To the Company:

 

Q.B.I. Enterprises Ltd.

PO Box 741,

Nes Ziona 74106

Israel

Attn:  Daniel Zurr

 

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To the Executive:

 

Yaron Garmazi, at the most recent address shown in the
records of the Company.

 

Notices hereunder shall
be deemed to be effective (a) upon receipt if delivered personally, (b) on the
tenth (10th) day following the date of mailing if sent by registered
or certified air mail; (c) on the second (2nd) day following the
date of transmission or delivery to the overnight courier if sent by overnight
courier; and (d) on the next day after the date sent by facsimile (with receipt
confirmation). A party may change its address listed above by sending notice to
the other party in accordance with this Section 8.

 

9.             Severability. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
and this Agreement will be construed as if such invalid or unenforceable
provision were omitted (but only to the extent that such provision cannot be
appropriately reformed or modified).

 

10.           Waiver of Breach.
No waiver of any party hereto of a breach of any provision of this Agreement by
any other party will operate or be construed as a waiver of any subsequent
breach by such other party. The failure of any party hereto to take any action
by reason of such breach will not deprive such party of the right to take
action at any time while such breach continues.

 

11.           Amendment. This
Agreement may not be amended, modified or canceled other than by a written
instrument executed by both Parties, or by their duly authorized
representatives.

 

12.           Survival of
Agreement. Except as otherwise expressly provided in this Agreement, the
rights and obligations of the parties to this Agreement shall survive the
termination of the Executive’s employment with the Company.

 

13.           Entire Agreement.
This Agreement constitutes the entire agreement between the parties concerning
the subject matter hereof and supersedes all prior and contemporaneous
agreements, if any, between the Executive and the Company or its Affiliates
relating to the subject matter hereof.

 

14.           Governing Law. This
Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of Israel without regard to principals of
conflict of laws. Any proceeding related to or arising out of this Agreement
shall be commenced, prosecuted or continued in Israel.

 

15.           Acknowledgement by
Executive. The Executive represents to the Company that he is knowledgeable
and sophisticated as to business matters, including the subject matter of this
Agreement, that he has read this Agreement and that he understands its terms. The
Executive acknowledges that, prior to assenting to the terms of this Agreement;
he has been given a reasonable time to review it, to consult with counsel of
his choice, and to negotiate at arm’s-length with the Company as to the
contents. The Executive and the Company agree that the language used in this
Agreement is the language chosen by the parties to express their mutual intent,
and that no rule of strict construction is to be applied against any party
hereto.

 

6

 

IN WITNESS WHEREOF, the Executive has hereunto set his
hand and the Company has caused these presents to be executed in its name and
on its behalf, as of the date above first written.

 

	
  EXECUTIVE

  	
   

  	
  Q.B.I. ENTERPRISES LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Yaron Garmazi

  	
   

  	
  By

  	
  /s/ Daniel Zurr

  
	
  Yaron Garmazi

  	
   

  	
  Its

  	
   

  

 

7

 

Exhibit A

 

ESOP PARTICIPATION

 

1.             The Executive shall
be entitled to an option award in accordance with the Company’s 2007 ESOP plan
(the “Plan”) and subject to the terms and conditions of such plan as adopted by
the Company, or as amended from time to time.

 

2.             The number of Quark
shares of common stock to be awarded to the Executive is 1,401,305 shares of
common stock of Quark (the “Stock Options”).

 

3.             The Stock Option
award shall be Approved 102 Awards as defined in the Plan and shall accordingly
be issued to a Trustee to be held in accordance with the requirements
applicable to Approved 102 Awards.

 

4.             The exercise price
per share of Quark common stock that shall derive from the exercise of the
Stock Options shall be $0.75 per share.

 

5.             The Stock Options
shall be subject to a four (4) year vesting period commencing January 29,
2007, all in accordance with the provisions of the Plan (25% of the Stock
Options shall vest after 12 months and 1/48th of the Stock Options
shall vest each month thereafter, subject to Executive’s continued employment).

 

6.             The Executive shall
be entitled to acceleration of the option vesting period as follows:

 

a.             In the event of the
consummation of the initial public offering (“IPO”) of Quark prior to the
vesting of forty percent (40%) of the total number of shares that shall derive
on the exercise of the Stock Options, the vesting provisions shall be
accelerated so that upon the consummation of the IPO forty percent (40%) of the
total number of shares that derive from the exercise of the Stock Options shall
be vested. The balance of the shares that derive from the exercise of the Stock
Options shall then vest on a monthly basis until the end of the vesting period
(1/48th of the Stock Options shall vest each month thereafter subject to
Executive’s continued employment).

 

b.             In the event that (i)
Quark is merged with any other entity in which the shareholders of Quark
receive distributions in cash, property or securities of another entity as a
result of such merger, and in which the shareholders of Quark immediately prior
to such merger will not hold at least fifty percent (50%) of the voting power
of the surviving, continuing or purchasing entity following such merger, or
(ii) all or substantially all of the issued share capital of Quark is acquired
by a third party, (collectively: an “M&A Transaction”) then all shares that
derive from the exercise of the Stock Options shall vest on the consummation of
the M&A Transaction.

 

For the purposes hereof IPO shall mean: Qualified IPO
as defined in Quark’s Amended and Restated Articles of Incorporation (as in
force immediately prior to the IPO.

 

Exhibit B

 

QBI ENTERPRISES, LTD.

 

QUARK BIOTECH, INC.

 

NON-COMPETITION AND PROPRIETARY

INFORMATION AGREEMENT

 

This Non-Competition And
Proprietary Information Agreement, is made as of the     
day of February, 2007, by and between QBI Enterprises, Ltd., a corporation
organized under the laws of Israel (“QBI”) and its
parent company Quark Biotech Inc., a California corporation (“Quark Biotech”), (together, the “Company”),
and Yaron Garmazi, an employee of QBI (the “Employee”).

 

As an employee of QBI and
in consideration of the compensation now and hereafter paid to me by QBI, I
agree to the following:

 

1.             Confidential Information.

 

(a)           Company
Information. I agree at all times during the term of my
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of Quark
Biotech (the “Board”), any trade secrets,
confidential knowledge, data or other proprietary information (collectively
refereed to as the “Confidential Information”)
relating to products, processes, know-how, designs, formulas, development of
experimental work, computer programs, data bases, other original works of authorship,
customer lists, business plans, financial information or other subject matter
pertaining to the business of the Company. I understand that Confidential
Information does not include any of the foregoing items which have become
publicly known and made generally available through no wrongful act of mine or
of others who were under confidentiality obligations as to the item or items
involved.

 

(b)           Former
Employer Information. I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employers or
companies, if any and that I will not bring onto the premises of the Company
any unpublished document or proprietary information belonging to my former or
concurrent employers or companies, if any unless consented to in writing by
such employers or companies.

 

(c)           Third
Party Information. I recognize that the Company has received and
in the future will receive from third parties their confidential or proprietary
information subject to a duty on the Company’s part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree that I owe the Company and such third parties, during the
term of my employment and thereafter, a duty to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to
any person, firm or corporation (except as necessary in carrying out my work
for the Company consistent with the Company’s agreement with such third party)
or use it for the benefit of anyone other than for the Company or such third
party (consistent with the Company’s agreement with such third party) without
the express written authorization of the Board.

 

 

2.             Retaining and Assigning Inventions and Original
Works.

 

(a)           Inventions
and Original Works Retained by Me. I have attached hereto, as
Exhibit A, a list describing all patents, patent applications, inventions,
improvements, developments, original works of authorship, trademarks, trademark
applications, copyrights, copyright applications, trade secrets or other
proprietary information which were made by me prior to my employment with the
Company, (collectively referred to as “Prior Inventions”) which belong to me,
which relate to the Company’s proposed business, products or research and
development, and which are not assigned to the Company hereunder; or, if no
such list is attached, I represent that there are no such Prior Inventions. If
in the course of my employment with the Company, I incorporate into a Company
product, process or machine a Prior Invention or creation in which I have an
interest, The Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such invention or creation as part of or in connection
with such product, process or machine.

 

(b)           Inventions
and Original Works Assigned to the Company. I agree that I will
promptly make full written disclosure to the Company, will hold in trust for
the sole right and benefit of the Company, and hereby assign to the Company, or
its designee, all my right, title, and interest in and to any and all
inventions, discoveries, improvements, technology, trade-secrets, computer
programs, know-how, designs, formulas, original works of authorship, or any
other confidential materials, data, information, or instructions, technical or
otherwise and whether or not patentable or registrable under copyright or
similar laws and whether or not reduced to practice (collectively referred to
as “Inventions”), which I may solely or jointly conceive or develop or reduce
to practice, or cause to be conceived or developed or reduced to practice,
during the period of time I am in the employ of the Company. I recognize,
however that to the extent I am employed in California, Section 2870 of the
California Labor Code exempts from this provision and Inventions that I develop
entirely on my own time, without using the Company’s equipment, supplies,
facilities, or trade secret information except for those Inventions that either
relate at the time of conception or reduction to practice of the Invention to
the Company’s business, or actual or demonstrably anticipated research or
development of the Company’s or results from any work performed by me for the
Company.

 

I acknowledge that all
original works of authorship which are made by me (solely or jointly with
others) within the scope of my employment with the Company and which are
protectable by copyright are “works made for hire,” as that term is defined in
the United States Copyright Act (17 USCA Section 101).

 

(c)           Inventions
Assigned to the United States. I agree to assign to the United
States government or other third party all my right, title, and interest in and
to any and all Inventions, original works of authorship, developments,
improvements or trade secrets whenever such full title is required to be in the
United States or other third party by a contract between the Company and the
United States or any of its agencies or such third parties.

 

(d)           Maintenance
of Records. I agree to keep and maintain adequate and current
written records of all Inventions made by me (solely or jointly with others)
during the term of my employment with the Company. The records will be in the
form of notes, sketches, 

 

2

 

drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.

 

(e)           Obtaining
Letters Patent and Copyright Registrations. I agree that,
whenever requested by the Company, I shall assist the Company, or its designee,
in obtaining United States or foreign letters patent and copyright
registrations as the case may be, covering Inventions assigned hereunder to the
Company, and I shall execute any patent or copyright applications or such other
documents as the Company, or its counsel, to apply for and obtain such letters
patent or copyrights.

 

I agree that my
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement, but the Company shall compensate me at a reasonable rate for time
actually spent by me at the Company’s request on such assistance.

 

If the Company is unable
because of my mental or physical incapacity or for any other reason to secure
my signature to apply for or to pursue any application for any United States or
foreign letters patents or copyright registrations, as the case may be,
covering Inventions assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney in fact, to act for and in my behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
me.

 

I hereby waive and quitclaim
to the Company and all claims, of any nature whatsoever, which I now or may
hereafter have for infringement of any patents or copyright resulting from any
such application for letters patent or copyright registrations assigned
hereunder to the Company.

 

(f)            Exception
to Assignments. To the extent that I am employed in California,
I understand that the provisions of this Agreement requiring assignment of
Inventions to the Company do not apply to any invention which qualifies fully
under the provisions of California Labor Code Section 2870 (See Exhibit B). I
will advise the Company promptly in writing of any inventions that I believe
meet the criteria in Subparagraph 2(b) above; and I will at the time provide to
the Company all evidence necessary to substantiate that belief. I understand
that that the Company will keep in confidence and will not disclose to third
parties without my consent any confidential information disclosed in writing to
the Company relating to Inventions that qualify fully under the provisions of
Section 2870 of the California Labor Code.

 

3.             Conflicting Employment. I agree
that, during the term of my employment with the Company, I will not engage in
any other employment, occupation, consulting or other business activity that is
directly related to the business in which the Company is now involved or
becomes involved during the term of my employment, nor will I engage in any
other activities that conflict with my obligations to the Company.

 

4.             Restriction on Competing Activities.
Beginning on the date I commence my employment with the Company and ending
twelve months after the end of my employment with 

 

3

 

the Company (the “Non-Competition
Period”), I will not, directly or indirectly, alone or as a partner, officer,
director, owner, employee, or consultant of any business or other entity, be
engaged in any business or other enterprise that competes, directly or
indirectly, in any way with the Company’s business as currently conducted or as
may be conducted on the date my employment with the Company terminates.

 

5.             Returning Company Documents. I
agree that, at the time of leaving the employ of the Company, I will deliver to
the Company (and will not keep in my possession, recreate or deliver to anyone
else) any and all devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items developed by me pursuant to my employment with the Company or otherwise
belonging to the Company, its successors or assigns, including, without
limitation, those records maintained pursuant to paragraph 3(d). In the event
of the termination of my employment, I agree to sign and deliver the “Termination
Certification” attached hereto as Exhibit C.

 

6.             Notification of New Employer. In
the event that I leave the Company, I hereby grant consent to notification by
the Company to my new employer about my rights and obligations under this
Agreement.

 

7.             Non-Solicitation. I agree that for
a period of twelve (12) months immediately following the termination of my
relationship with the Company for any reason, whether with or without cause, I
shall not either directly or indirectly solicit, induce, recruit or encourage
any of the Company’s employees to leave their employment, or any customers,
clients, or other entities to terminate their relationship with the Company, or
attempt to solicit, induce, recruit, encourage or take away employees,
customers, or clients of the Company, either for myself or for any other person
or entity.

 

8.             Conflict of Interest Guidelines. I
agree to diligently adhere to the Conflict of Interest Guidelines attached as Exhibit
D hereto.

 

9.             Representations. I agree to execute
any proper oath or verify any proper document required to carry out the terms
of this Agreement. I represent that my performance of all the terms of this
Agreement will not breach any agreement to keep in confidence proprietary information
acquired by me in confidence or in trust prior to my employment by the Company.
I have not entered into, and I agree I will not enter into, any oral or written
agreement in conflict herewith.

 

10.           General Provisions.

 

(a)           Governing
Law; Consent to Personal Jurisdiction. This Agreement will be
governed by the laws of the State of Israel. I hereby expressly consent to the
personal and exclusive jurisdiction of the appropriate courts in Israel (as
applicable) for any lawsuit filed by me against the Company or against me by
the Company arising from or relating to this Agreement.

 

(b)           Entire
Agreement. This Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and all prior 

 

4

 

representations,
understandings, and agreements concerning the subject matter of this Agreement
have been merged into this Agreement. Any subsequent changes in my duties,
salary, or compensation will not effect the validity or scope of this
Agreement.

 

(c)           Severability.
If one or more of the provisions in this Agreement are deemed void by law, then
the remaining provisions will continue in full force and effect.

 

(d)           Successors
and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TYPE
  NAME

  
	
  Witness:

  	
   

  	
   

  	
   

  
					

 

5

 

Exhibit A

 

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

 

	
  Title

  	
   

  	
  Date

  	
   

  	
  Identifying Number or Brief Description

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  No
  inventions or improvements

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Additional
  Sheets Attached

  

 

	
  By:

  	
   

  	
   

  
	
  TYPE NAME

  
	
   

  
	
  Date:

  	
   

  	
   

  
					

 

 

Exhibit B

 

CALIFORNIA LABOR CODE SECTION
2870

INVENTION ON OWN TIME - EXEMPTION
FROM AGREEMENT

 

(a) Any provision in an
employment agreement which provides that an employee shall assign, or offer to
assign, any of his or her rights in an invention to his or her employer shall
not apply to an invention that the employee developed entirely on his or her
own time without using the employer’s equipment, supplies, facilities, or trade
secret information except for those inventions that either:

 

(1)           Relate
at the time of conception or reduction to practice of the invention to the
employer’s business, or actual or demonstrably anticipated research or
development of the employer; or

 

(2)           Result
from any work performed by the employee for the employer.

 

(b) To the extent a
provision in an employment agreement purports to require an employee to assign
an invention otherwise excluded from being required to be assigned under
subdivision (a), the provision is against the public policy of this state and
is unenforceable.”

 

 

Exhibit C

 

TERMINATION CERTIFICATION

 

This is to certify that I do not have in my
possession, nor have I failed to return, any devices, records, data, notes,
reports, proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, other documents or property, or reproductions
of any aforementioned items belonging to Quark Biotech, Inc., Q.B.I.
Enterprises Ltd. and their subsidiaries, affiliates, successors or assigns
(together, the “Company”).

 

I further certify that I have complied with all the
terms of the Company’s Employment, Confidential Information, Invention
Assignment and Arbitration Agreement signed by me, including the reporting of
any inventions and original works of authorship (as defined therein), conceived
or made by me (solely or jointly with others) covered by that agreement.

 

I further agree that, in compliance with the
Employment and Proprietary Information, Agreement I will preserve as
confidential all trade secrets, confidential knowledge, data or other
proprietary information relating to products, processes, know-how, designs,
formulas, developmental or experimental work, computer programs, data bases,
other original works of authorship, customer lists, business plans, financial information
or other subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.

 

I further agree that, in compliance with the
Employment and Proprietary Information, Agreement, for twelve (12) months from
this date, (i) I will not, directly or indirectly, be engaged in any business
or other enterprise that competes, directly or indirectly, in any way with the
Company’s business (ii) hire any employees of the Company and I will not
solicit, induce, recruit or encourage any of the Company’s employees to leave
their employment.

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TYPE NAME

  

 

 

Exhibit D

 

CONFLICT OF INTEREST GUIDELINES

 

It is the policy of Quark to conduct its affairs in
strict compliance with the letter and spirit of the law and to adhere to the
highest principles of business ethics. Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give
the appearance of being in conflict, with these principles and with the
interests of the Company. The following are potentially compromising situations
which must be avoided. Any exceptions must be reported to the President and
written approval for continuation must be obtained.

 

1.             Revealing
confidential information to outsiders or misusing confidential information. Unauthorized
divulging of information is a violation of this policy whether or not for
personal gain and whether or not harm to the Company is intended.

 

2.             Accepting
or offering substantial gifts, excessive entertainment, favors or payments
which may be deemed to constitute undue influence or otherwise be improper or
embarrassing to the Company.

 

3.             Participating
in civic or professional organizations that might involve divulging
confidential information of the Company.

 

4.             Initiating
or approving personnel actions affecting reward or punishment of employees or
applicants where there is a family relationship or is or appears to be a
personal or social involvement.

 

5.             Initiating
or approving any form of personal or social harassment of employees.

 

6.             Investing
or holding outside directorship in suppliers, customers, or competing
companies, including financial speculations, where such investment or
directorship might influence in any manner a decision or course of action of
the Company.

 

7.             Borrowing
from or lending to employees, customers or suppliers.

 

8.             Acquiring
real estate of interest to the Company.

 

9.             Improperly
using or disclosing to the Company any proprietary information or trade secrets
of any former or concurrent employer or other person or entity with whom
obligations of confidentiality exist.

 

10.           Unlawfully
discussing prices, costs, customers, sales or markets with competing companies
or their employees.

 

11.           Making
any unlawful agreement with distributors with respect to prices.

 

12.           Improperly
using or authorizing the use of any inventions which are the subject of patent
claims of any other person or entity.

 

 

13.           Engaging
in any conduct which is not in the best interest of the Company.

 

Each officer, employee and independent contractor must
take every necessary action to ensure compliance with these guidelines and to
bring problem areas to the attention of higher management for review. Violations
of this conflict of interest policy may result in discharge without warning.

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