Document:

Exhibit 10.1

 

INDEMNITY AGREEMENT

 

THIS INDEMNITY AGREEMENT (this “Agreement”) dated as of                  
        , 20    ,
is made by and between QUARK BIOTECH, INC., a
Delaware corporation (the “Company”), and                                 
(“Indemnitee”).

 

RECITALS

 

A.                                    The Company desires
to attract and retain the services of highly qualified individuals as
directors, officers, employees and agents.

 

B.                                    The Company’s
bylaws (the “Bylaws”) require that the Company
indemnify its directors, and empowers the Company to indemnify its  officers, employees and agents, as authorized by the
Delaware General Corporation Law, as amended (the “Code”),
under which the Company is organized and such Bylaws expressly provide that the
indemnification provided therein is not exclusive and contemplates that the
Company may enter into separate agreements with its directors, officers and
other persons to set forth specific indemnification provisions.

 

C.                                    Indemnitee does not
regard the protection currently provided by applicable law, the Company’s
governing documents and available insurance as adequate under the present
circumstances, and the Company has determined that Indemnitee and other
directors, officers, employees and agents of the Company may not be willing to
serve or continue to serve in such capacities without additional protection.

 

D.                                    The Company desires
and has requested Indemnitee to serve or continue to serve as a director,
officer, employee or agent of the Company, as the case may be, and has
proferred this Agreement to Indemnitee as an additional inducement to serve in
such capacity.

 

E.                                      Indemnitee is
willing to serve, or to continue to serve, as a director, officer, employee or
agent of the Company, as the case may be, if Indemnitee is furnished the
indemnity provided for herein by the Company.

 

AGREEMENT

 

NOW THEREFORE, in consideration
of the mutual covenants and agreements set forth herein, the parties hereto,
intending to be legally bound, hereby agree as follows:

 

1.                                      Definitions.

 

(a)                                  Agent.
For purposes of this Agreement, the term “agent” of the Company means any
person who:  (i) is or was a
director, officer, employee or other fiduciary
of the Company or a subsidiary of the Company; or (ii) is or was serving
at the request or for the convenience of, or representing the interests of, the
Company or a subsidiary of the Company, as a director, officer, employee or
other fiduciary of a foreign or domestic corporation, partnership,  joint venture, trust or other enterprise.

 

 

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(b)                                  Expenses.
For purposes of this Agreement, the term “expenses” shall be broadly construed
and shall include, without limitation, all direct and indirect costs of any
type or nature whatsoever (including, without limitation, all attorneys’,
witness, or other professional fees and related disbursements, and other
out-of-pocket costs of whatever nature), actually and reasonably incurred by
Indemnitee in connection with the investigation, defense or appeal of a
proceeding or establishing or enforcing a right to indemnification under this
Agreement, the Code or otherwise, and amounts paid in settlement by or on
behalf of Indemnitee, but shall not include any judgments, fines or penalties
actually levied against Indemnitee for such individual’s violations of law. (1)
The term “expenses” shall also include reasonable compensation for time spent
by Indemnitee for which he is not compensated by the Company or any subsidiary
or third party (i) for any period during which Indemnitee is not an agent, in
the employment of, or providing services for compensation to, the Company or
any subsidiary; and (ii) if the rate of compensation and estimated time
involved is approved by the directors of the Company who are not parties to any
action with respect to which expenses are incurred, for Indemnitee while an
agent of, employed by, or providing services for compensation to, the Company
or any subsidiary.

 

(c)                                  Proceedings.
For purposes of this Agreement, the term “proceeding” shall be broadly
construed and shall include, without limitation, any threatened, pending, or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought in the right of the Company or
otherwise and whether of a civil, criminal, administrative or investigative
nature, and whether formal or informal in any case, in which Indemnitee was, is
or will be involved as a party or otherwise by reason of:  (i) the fact that Indemnitee is or was a
director or officer of the Company; (ii) the fact that any action taken by
Indemnitee or of any action on Indemnitee’s part while acting as director,
officer, employee or agent of the Company; or (iii) the fact that Indemnitee is
or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, and in any such case described above, whether
or not serving in any such capacity at the time any liability or expense is
incurred for which indemnification, reimbursement, or advancement of expenses
may be provided under this Agreement.

 

(d)                                  Subsidiary.
For purposes of this Agreement, the term “subsidiary” means any corporation or
limited liability company of which more than 50% of the outstanding voting
securities or equity interests are owned, directly or indirectly, by the
Company and one or more of its subsidiaries, and any other corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan or
other enterprise of which Indemnitee is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary.

 

(e)                                  Independent
Counsel. For purposes of this Agreement, the term “independent counsel”
means a law firm, or a partner (or, if applicable, member) of such a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past

 

(1) It should be noted that the indemnification of
expenses does not specifically provide for a “gross-up” to the Indemnitee with
respect to income taxes incurred upon receipt of the indemnity amounts that are
not offset fully by allowable deductions, e.g., fines and penalty amounts.  However, an Indemnitee might argue that a tax
cost is “indirect expense” of the litigation.

 

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five (5) years has been,
retained to represent: (i) the Company or Indemnitee in any matter material to
either such party, or (ii) any other party to the proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
“independent counsel” shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to
determine Indemnitee’s rights under this Agreement.

 

2.                                      Agreement
to Serve. Indemnitee will serve, or continue to serve, as a director,
officer, employee or agent of the Company or any subsidiary, as the case may
be, faithfully and to the best of his or her ability, at the will of such
corporation (or under separate agreement, if such agreement exists), in the
capacity Indemnitee currently serves as an agent of such corporation, so long
as Indemnitee is duly appointed or elected and qualified in accordance with the
applicable provisions of the bylaws or other applicable charter documents of
such corporation, or until such time as Indemnitee tenders his or her
resignation in writing; provided, however, that nothing contained in this
Agreement is intended as an employment agreement between Indemnitee and the
Company or any of its subsidiaries or to create any right to continued
employment of Indemnitee with the Company or any of its subsidiaries in any
capacity.

 

The Company acknowledges that it has entered into this
Agreement and assumes the obligations imposed on it hereby, in addition to and
separate from its obligations to Indemnitee under the Bylaws, to induce
Indemnitee to serve, or continue to serve, as a director,  officer,
employee or agent of the Company, and the Company acknowledges that Indemnitee
is relying upon this Agreement in serving as a director, officer, employee or
agent of the Company.

 

3.                                      Indemnification.

 

(a)                                  Indemnification
in Third Party Proceedings. Subject to Section 10 below, the Company
shall indemnify Indemnitee to the fullest extent permitted by the Code, as the
same may be amended from time to time (but, only to the extent that such
amendment permits Indemnitee to broader indemnification rights than the Code
permitted prior to adoption of such amendment), if Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any proceeding, for
any and all expenses, actually and reasonably incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal of such
proceeding.

 

(b)                                  Indemnification
in Derivative Actions and Direct Actions by the Company. Subject to Section
10 below, the Company shall indemnify Indemnitee to the fullest extent
permitted by the Code, as the same may be amended from time to time (but, only
to the extent that such amendment permits Indemnitee to broader indemnification
rights than the Code permitted prior to adoption of such amendment), if
Indemnitee is a party to or threatened to be made a party to or otherwise
involved in any proceeding by or in the right of the Company to procure a
judgment in its favor, against any and all expenses actually and reasonably
incurred by Indemnitee in connection with the investigation, defense,
settlement, or appeal of such proceedings.

 

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4.                                      Indemnification
of Expenses of Successful Party. Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the merits
or otherwise in defense of any proceeding or in defense of any claim, issue or
matter therein, including the dismissal of any action without prejudice, the
Company shall indemnify Indemnitee against all expenses actually and reasonably
incurred in connection with the investigation, defense or appeal of such
proceeding.

 

5.                                      Partial
Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any
expenses actually and reasonably incurred by Indemnitee in the investigation,
defense, settlement or appeal of a proceeding, but is precluded by applicable
law or the specific terms of this Agreement to indemnification for the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.

 

6.                                      Advancement
of Expenses. To the extent not prohibited by law, the Company shall
advance  the expenses incurred by
Indemnitee in connection with any proceeding, and such advancement shall be
made within twenty (20) days after the receipt by the Company of a statement or
statements requesting such advances (which shall include invoices received by
Indemnitee in connection with such expenses but, in the case of invoices in
connection with legal services, any references to legal work performed or to
expenditures made that would cause Indemnitee to waive any privilege accorded
by applicable law shall not be included with the invoice) and upon request of
the Company, an undertaking to repay the advancement of expenses if and to the
extent that it is ultimately determined by a court of competent jurisdiction in
a final judgment, not subject to appeal, that Indemnitee is not entitled to be
indemnified by the Company. Advances shall be unsecured, interest free and
without regard to Indemnitee’s ability to repay the expenses. Advances shall
include any and all expenses actually and reasonably incurred by Indemnitee
pursuing an action to enforce Indemnitee’s right to indemnification under this
Agreement, or otherwise and this right of advancement, including expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. Indemnitee acknowledges that the execution and delivery of
this Agreement shall constitute an undertaking providing that Indemnitee shall,
to the fullest extent required by law, repay the advance if and to the extent
that it is ultimately determined by a court of competent jurisdiction in a
final judgment, not subject to appeal, that Indemnitee is not entitled to be
indemnified by the Company. The right to advances under this Section shall
continue until final disposition of any proceeding, including any appeal
therein. This Section 6 shall not apply to any claim made by Indemnitee for
which indemnity is excluded pursuant to Section 10(b).

 

7.                                      Notice
and Other Indemnification Procedures.

 

(a)                                  Notification
of Proceeding. Indemnitee will notify the Company in writing promptly upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any proceeding or matter which may be
subject to indemnification or advancement of expenses covered hereunder. The
failure of Indemnitee to so notify the Company shall not relieve the Company of
any obligation which it may have to Indemnitee under this Agreement or
otherwise.

 

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(b)                                  Request
for Indemnification and Indemnification Payments. Indemnitee shall notify
the Company promptly in writing upon receiving notice of any demand, judgment
or other requirement for payment that Indemnitee reasonably believes to the
subject to indemnification under the terms of this Agreement, and shall request
payment thereof by the Company. Indemnification payments requested by
Indemnitee under Section 3 hereof shall be made by the Company no later
than sixty (60) days after receipt of the written request of Indemnitee. Claims
for advancement of expenses shall be made under the provisions of Section 6
herein.

 

(c)                                  Application
for Enforcement. In the event the Company fails to make timely payments as
set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to apply
to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s
right to indemnification or advancement of expenses pursuant to this Agreement.
In such an enforcement hearing or proceeding, the burden of proof shall be on
the Company to prove that indemnification or advancement of expenses to
Indemnitee is not required under this Agreement or permitted by applicable law.
Any determination by the Company (including its Board of Directors, stockholders
or independent counsel) that Indemnitee is not entitled to indemnification hereunder,
shall not be a defense by the Company to the action nor create any presumption
that Indemnitee is not entitled to indemnification or advancement of expenses
hereunder.

 

(d)                                  Indemnification
of Certain Expenses. The Company shall indemnify Indemnitee against all
expenses incurred in connection with any hearing or proceeding under this
Section 7 unless the Company prevails in such hearing or proceeding on the
merits in all material respects.

 

8.                                      Assumption
of Defense. In the event the Company shall be requested by Indemnitee to
pay the expenses of any proceeding, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, or to participate to the
extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee.
Upon assumption of the defense by the Company and the retention of such counsel
by the Company, the Company shall not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that Indemnitee shall have the right
to employ separate counsel in such proceeding at Indemnitee’s sole cost and
expense. Notwithstanding the foregoing, if Indemnitee’s counsel delivers a
written notice to the Company stating that such counsel has reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or the Company shall not, in
fact, have employed counsel or otherwise actively pursued the defense of such proceeding
within a reasonable time, then in any such event the fees and expenses of
Indemnitee’s counsel to defend such proceeding shall be subject to the
indemnification and advancement of expenses provisions of this Agreement.

 

9.                                      Insurance.
To the extent that the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, or agents of
the Company or of any subsidiary (“D&O Insurance”), Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee or agent under such policy or policies. If, at the time of the receipt
of a notice of a claim pursuant to the terms hereof, the Company has D&O
Insurance

 

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in effect, the Company
shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of Indemnitee, all amounts payable as a result of
such proceeding in accordance with the terms of such policies.

 

10.                               Exceptions.

 

(a)                                  Certain
Matters. Any provision herein to the contrary notwithstanding, the Company
shall not be obligated pursuant to the terms of this Agreement to indemnify
Indemnitee on account of any proceeding with respect to (i) remuneration paid
to Indemnitee if it is determined by final judgment or other final adjudication
that such remuneration was in violation of law (and, in this respect, both the
Company and Indemnitee have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication, as indicated in Section 10(d) below); (ii)
a final judgment rendered against Indemnitee for an accounting, disgorgement or
repayment of profits made from the purchase or sale by Indemnitee of securities
of the Company against Indemnitee or in connection with a settlement by or on
behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the
Company that such amount paid in settlement resulted from Indemnitee’s conduct
from which Indemnitee received monetary personal profit, pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
or other provisions of any federal, state or local statute or rules and
regulations thereunder; (iii) a final judgment or other final adjudication that
Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately
dishonest or constituted willful misconduct (but only to the extent of such
specific determination); or (iv) on account of conduct that is established by a
final judgment as constituting a breach of Indemnitee’s duty of loyalty to the
Company or resulting in any personal profit or advantage to which Indemnitee is
not legally entitled. For purposes of the foregoing sentence, a final judgment
or other adjudication may be reached in either the underlying proceeding or
action in connection with which indemnification is sought or a separate
proceeding or action to establish rights and liabilities under this Agreement.

 

(b)                                  Claims
Initiated by Indemnitee. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated to indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought by Indemnitee against the Company or its directors, officers, employees
or other agents and not by way of defense, except (i) with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or under any other agreement, provision in the Bylaws or
Certificate of Incorporation or applicable law, or (ii) with respect to any
other proceeding initiated by Indemnitee that is either approved by the Board
of Directors or Indemnitee’s participation is required by applicable law. However,
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors determines it to be appropriate.

 

(c)                                  Unauthorized
Settlements. Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to

 

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indemnify Indemnitee
under this Agreement for any amounts paid in settlement of a proceeding
effected without the Company’s written consent. Neither the Company nor
Indemnitee shall unreasonably withhold consent to any proposed settlement;
provided, however, that the Company may in any event decline to consent to (or
to otherwise admit or agree to any liability for indemnification hereunder in
respect of) any proposed settlement if the Company is also a party in such
proceeding and determines in good faith that such settlement is not in the best
interests of the Company and its stockholders.

 

(d)                                  Securities
Act Liabilities. Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to
indemnify Indemnitee or otherwise act in violation of any undertaking appearing
in and required by the rules and regulations promulgated under the Securities
Act of 1933, as amended (the “Act”), or in any registration statement filed
with the SEC under the Act. Indemnitee acknowledges that paragraph (h) of
Item 512 of Regulation S-K currently generally requires the Company to
undertake in connection with any registration statement filed under the Act to
submit the issue of the enforceability of Indemnitee’s rights under this
Agreement in connection with any liability under the Act on public policy
grounds to a court of appropriate jurisdiction and to be governed by any final
adjudication of such issue. Indemnitee specifically agrees that any such
undertaking shall supersede the provisions of this Agreement and to be bound by
any such undertaking.

 

11.                               Nonexclusivity
and Survival of Rights. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which Indemnitee may at any time be entitled under any provision
of applicable law, the Company’s Certificate of Incorporation, Bylaws or other
agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s
action as an agent of the Company, in any court in which a proceeding is
brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has
ceased acting as an agent of the Company and shall inure to the benefit of the
heirs, executors, administrators and assigns of Indemnitee. The obligations and
duties of the Company to Indemnitee under this Agreement shall be binding on
the Company and its successors and assigns until terminated in accordance with
its terms. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.

 

No amendment, alteration or repeal of this Agreement
or of any provision hereof shall limit or restrict any right of Indemnitee
under this Agreement in respect of any action taken or omitted by such
Indemnitee in his or her corporate status prior to such amendment, alteration
or repeal. To the extent that a change in the Code, whether by statute or
judicial decision, permits greater indemnification or advancement of expenses
than would be afforded currently under the Company’s Certificate of
Incorporation, Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall
be cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, by Indemnitee

 

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shall not prevent the
concurrent assertion or employment of any other right or remedy by Indemnitee.

 

12.                               Term.
This Agreement shall continue until and terminate upon the later of: (a) five (5)
years after the date that Indemnitee shall have ceased to serve as a director
or and/or officer, employee or agent of the Company; or (b) one (1) year after
the final termination of any proceeding, including any appeal then pending, in
respect to which Indemnitee was granted rights of indemnification or
advancement of expenses hereunder.

 

No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company against an
Indemnitee or an Indemnitee’s estate, spouse, heirs, executors or personal or
legal representatives after the expiration of five (5) years from the date of
accrual of such cause of action, and any claim or cause of action of the
Company shall be extinguished and deemed released unless asserted by the timely
filing of a legal action within such five-year period; provided, however, that
if any shorter period of limitations is otherwise applicable to such cause of
action, such shorter period shall govern.

 

13.                               Subrogation.
In the event of payment under this Agreement, the Company shall be subrogated
to the extent of such payment to all of the rights of recovery of Indemnitee,
who, at the request and expense of the Company, shall execute all papers
required and shall do everything that may be reasonably necessary to secure
such rights, including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.

 

14.                               Interpretation
of Agreement. It is understood that the parties hereto intend this
Agreement to be interpreted and enforced so as to provide indemnification to
Indemnitee to the fullest extent now or hereafter permitted by law.

 

15.                               Severability.
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever, (a) the validity, legality and
enforceability of the remaining provisions of the Agreement (including without
limitation, all portions of any paragraphs of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions of
any paragraph of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable and to give effect to
Section 14 hereof.

 

16.                               Amendment
and Waiver. No supplement, modification, amendment, or cancellation of this
Agreement shall be binding unless executed in writing by the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.

 

17.                               Notice.
Except as otherwise provided herein, any notice or demand which, by the provisions
hereof, is required or which may be given to or served upon the parties hereto
shall be in writing and, if by telegram, telecopy or telex, shall be deemed to
have been validly served,

 

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given or delivered when
sent, if by overnight delivery, courier or personal delivery, shall be deemed
to have been validly served, given or delivered upon actual delivery and, if
mailed, shall be deemed to have been validly served, given or delivered three
(3) business days after deposit in the United States mail, as registered or
certified mail, with proper postage prepaid and addressed to the party or
parties to be notified at the addresses set forth on the signature page of this
Agreement (or such other address(es) as a party may designate for itself by
like notice). If to the Company, notices and demands shall be delivered to the
attention of the Secretary of the Company.

 

18.                               Governing
Law. This Agreement shall be governed exclusively by and construed
according to the laws of the State of Delaware, as applied to contracts between
Delaware residents entered into and to be performed entirely within Delaware.

 

19.                               Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.

 

20.                               Headings. The headings of the sections of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect the construction hereof.

 

21.                               Entire
Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements, understandings and negotiations, written and oral, between the
parties with respect to the subject matter of this Agreement; provided,
however, that this Agreement is a supplement to and in furtherance of the
Company’s Certificate of Incorporation, Bylaws, the Code and any other
applicable law, and shall not be deemed a substitute therefor, and does not
diminish or abrogate any rights of Indemnitee thereunder.

 

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IN WITNESS WHEREOF, the parties
hereto have entered into this Agreement effective as of the date first above
written.

 

	
   

  	
   

  	
  QUARK BIOTECH, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INDEMNITEE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature of Indemnitee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Print or Type Name of IndemniteeExhibit 10.2

 

QUARK BIOTECH, INC.

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (THE “AGREEMENT”) is dated
as of January 1, 2002 by and between Quark Biotech, Inc., a California
corporation (the “Company”), and Daniel Zurr (“Executive”).

 

1.             Term. The Company 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 the Company as
its President and Chief Executive Officer, or in such other executive capacity
as the Company’s Board of Directors (the “Board”) may from time to time request.
During the term of this Agreement, Executive will devote all of his normal
business time and attention to, and use his best efforts to advance, the
business of the Company and its subsidiary QBI Enterprises, Ltd. Executive agrees
not to engage actively in any other employment, occupation or consulting
activity for any direct or indirect remuneration without the prior approval of
the Board. Additionally, subject to the Board’s prior approval, the Executive
may serve on the board of directors of other companies if in so doing Executive
does not materially adversely affect Executive’s performance as an employee of
the Company.

 

3.             Confidential Information. Executive acknowledges
that he has executed the Proprietary Information Agreement of the Company (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 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

 

1

 

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 into
a significant collaboration or joint venture agreement with a major United
States or European based pharmaceutical company, as determined by the 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 name by the other party shall
make the determination of permanent disability.

 

(d)           Executive shall be entitled to
participate in such group life, pension, disability, accident, hospital and
medical insurance plans, and such other plan or plans which may be instituted
by the Company for the benefit of its executive employees generally, upon such
terms as may be therein provided of general application to all executive
employees of the Company and such other benefits as are mutually deemed
appropriate to the position held by Executive and to the discharge of Executive’s
duties. Executive shall be entitled to not less than twenty (20) business days’
vacation per year, with remuneration, which shall be coordinated with

 

2

 

the vacation periods of other
officers of the Company in a manner that will minimize disruption of Company’s
management efforts. Executive shall further be entitled to the use of a car
(with retail value not greater than $25,000) during the term of his employment
with the Company. In addition, the Company shall provide Executive with social
benefits equivalent to what Executive receives under Israel law including, but
not limited to, severance pay, pension fund contributions, disability insurance
and contributions to the “Further Education Fund.”

 

(e)           In order for the Company to determine
the portion of Executive’s compensation above which is United States source
income, Executive agrees to keep accurate records of the time spent working in
the United States and on the last day of each fiscal quarter, shall submit to
the Company a written report of such time.

 

5.             Expenses. The Company 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 the Company’s established
policies. 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. The company will further provide Executive with a relocation
reimbursement of up to $80,000 for out-of-pocket expenses in connection with
his relocation to the United States from Israel, in the event Executive makes
such a move.

 

6.             Termination Without Cause. Executive’s employment
hereunder may be terminated by the Company, with or without Cause (as defined
in Section 7 below), at any time during the term hereof upon thirty (30) days
advance written notice from the Board; provided, however, that in the event of
a termination without Cause, Executive shall continue to receive from the
Company the full amount and scope of compensation and benefits 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 Executive’s employment with
the Company, (b) eight (8) months from the date of termination if the
termination occurs within the second year, and (c) six (6) months from the date
of termination if the termination occurs within the third year. For purposes of
this Agreement, a Constructive Termination (as defined below) shall be deemed
to be a termination without Cause. The term “Constructive Termination” means
Executive’s voluntary resignation from employment following the occurrence
(without Executive’s express written consent) of any of the following events:
(i) an adverse change of Executive’s title to other than the President or Chief
Executive Officer, or (ii) a significant reduction in Executive’s duties,
position or responsibilities, or the removal of Executive from such position or
responsibilities (including without limitation Executive’s position on the
Board), provided, however, that Executive shall provide prior written notice to
the Company of his intent to resign due to clause (i) or (ii) above, and the
Company shall have five (5) days to cure (or reverse) the events described in
clause (i) or (ii), as applicable.

 

7.             Termination for Cause. Executive’s employment
hereunder may be terminated at any time during the term of this Agreement by
the Company for “Cause.” The term “Cause” is defined as any one or more of the
following occurrences:

 

3

 

(a)           Executive’s conviction by, or entry
of a plea of guilty or nolo contendere in, a court of competent and final
jurisdiction for any crime which constitutes a felony in the jurisdiction
involved, which convicted or plea materially injures the Company; or

 

(b)           Executive’s commission of an act of
fraud or misappropriation of funds or property, whether prior to or subsequent
to the date hereof, upon the Company; or

 

(c)           Gross negligence by Executive in the
scope of Executive’s employment resulting in a material injury to the Company,
violation by Executive of any duty of loyalty to the Company resulting in a
material injury to the Company, or any other misconduct on the part of
Executive resulting in a material injury to the Company; or

 

(d)           Breach of Proprietary Information
Agreement.

 

Notwithstanding of
foregoing, as to clauses (c) and (d) only Executive shall not be deemed to have
been terminated for Cause without (i) five (5) days written notice to Executive
setting forth the reasons for the Company’s intention to terminate for Cause,
and (ii) an opportunity for Executive, within such five (5) day period, to cure
(if the matter is susceptible to cure).

 

If Executive’s employment
hereunder shall be terminated by the company for Cause pursuant to this Section
7, except as set forth in Sections 8 and 9, this Agreement shall terminate as
of the date of such termination of employment and Executive shall then not be
considered an employee of the Company for any purpose, and his salary and all
other benefits shall cease upon the termination of his employment.

 

8.             Miscellaneous.

 

(a)           Arbitration.

 

(i)            At the option of the Company or
Executive, any and all disputes of controversies whether of law or fact of any
nature whatsoever rising from or respecting this Agreement shall be decided by
arbitration by the American Arbitration Association (the “Association”) and in
accordance with the rules and regulations of the Association.

 

(ii)           The arbitrators shall be selected as
follows: the Company and Executive shall mutually agree upon one independent
qualified arbitrator. The Company reserves the right to object to any
individual arbitrator who shall be employed by or affiliated with a competing
organization.

 

(iii)          Arbitration shall take place at San
Francisco, California, or any other location mutually agreeable to the parties.
At the request of the Company, arbitration proceedings will be conducted in the
utmost secrecy; in such case all documents, testimony and records shall be
received, heard and maintained by the arbitrators in secrecy under seal,
available for the inspection only of the Company or Executive and their
respective attorneys and the respective experts who shall agree in advance and
in writing to receive all such information confidentially and to maintain such
information in secrecy until such information shall become generally known. The
arbitrator shall be able to decree any and all relief of an equitable nature, 

 

4

 

including but not limited to
such relief as a temporary restraining order, a temporary and/or a permanent
injunction, and shall also be able to award damages, with or without an
accounting and costs. The decree or judgment of an award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.

 

(iv)          Reasonable notice of the time and
place of arbitration shall be given to all persons, other than the parties, as
shall be required by law, in which case such persons or those authorized
representatives shall have the right to attend, and/or participate in all the
arbitration hearings in such manner as the law shall require.

 

(v)           All expenses relating to arbitration
shall be split by the parties; provided, however, that the prevailing party in
such arbitration shall reimburse the other party for its costs and expenses,
including reasonable attorneys fees, incurred in connection with such
arbitration.

 

(b)           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 the Company. Notwithstanding the above, Executive’s
duties and responsibilities set forth in Section 2 above shall not be
assignable or delegable. Any successor of the Company shall be deemed
substituted for the Company 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 the Company.

 

(c)           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 11000 Cedar Avenue,
Suite 140, Cleveland, Ohio 44106, or at such other address as Executive shall
have furnished to the Company in writing (including electronic mail address),
or (b) if to the Company, at 11000 Cedar Avenue, Suite 140, Cleveland, Ohio
44106, or to such other address as the Company 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 receipts or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as described above, or if sent by electronic mail, then one business day
following delivery.

 

(d)           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.

 

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

 

5

 

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

 

(g)           Governing Law. This Agreement
shall be governed by the laws of the State of California.

 

(h)           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.

 

(i)            Survivability. Notwithstanding
any other provision of this Agreement, the obligations, covenants and duties of
the Company and Executive under Section 3, Section 4(d) and Section 5 of this
Agreement, as well as any obligations of the Company to pay accrued benefits to
Executive prior to termination of this Agreement, shall survive any termination
of this Agreement.

 

6

 

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

 

	
  QUARK BIOTECH, INC.

  	
   

  	
  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.

  	
   

  	
   

  
					

 

 

For purposes of Section 8
only:

 

GODDARD & EPHRAT,
F/B/O/ZWI ZURR

 

7

 

2002
INCENTIVE COMPENSATION

MILESTONES

QUARK
BIOTECH, INC.

A
CALIFORNIA CORPORATION

 

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.

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