Document:

Unassociated Document

     

    Exhibit
10.17

    Quark
Pharmaceuticals, Inc.

     

    2007
Equity Incentive Plan

     

    Approved
By Board on:  March 2, 2007 (“Effective Date”)

    Approved
By Shareholders: May 17, 2007

    Amended
by the Board on: May 24, 2007

    Amendment
Approved by Shareholders: June 1, 2007

    Termination
Date: March  1, 2017

     

    1.           General.

     

    (a)           Eligible Award
Recipients.  The persons eligible to receive Awards are
Employees, Directors and Consultants.

     

    (b)           Available
Awards.  The Plan provides for the grant of the following
Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii)
Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Stock
Appreciation Rights, (vi) Performance Stock Awards, (vii) Performance Cash
Awards, and (viii) Other Stock Awards. Israeli Optionees may be issued with
Awards in accordance with Exhibit B of the Plan.

     

    (c)           General
Purpose.  The Company, by means of the Plan, seeks to secure
and retain the services of the group of persons eligible to receive Awards as
set forth in Section 1(b), to provide incentives for such persons to exert
maximum efforts for the success of the Company and any Affiliate and to provide
a means by which such eligible recipients may be given an opportunity to benefit
from increases in value of the Common Stock through the granting of Stock
Awards.

     

    (d)           Compliance with Section 25102(o)
California Code of Corporations.  In the case of a Participant
who is a resident of the State of California, notwithstanding anything to the
contrary in the Plan or in such Participant’s Stock Award Agreement, the terms
and conditions set forth in Exhibit A hereto
shall apply to any Stock Award granted to such Participant in reliance on
Section 25102(o) of the California Corporate Securities Law of 1968, as amended
from time to time, (“Section
25102(o)”) and shall be deemed to be a part of the Plan, if and to the
extent compliance with the terms set forth on Exhibit A is required
under Section 25102(o).  In the event of any conflict or inconsistency
between the provisions of Exhibit A and any
provisions otherwise appearing in the Plan, the provisions of Exhibit A shall
control solely with respect to Stock Awards granted under the Plan to residents
of the State of California in reliance on Section 25102(o), if and to the extent
compliance with the terms set forth on Exhibit A required
under Section 25102(o), provided that, for the
avoidance of doubt, with respect to any requirement set forth on Exhibit A, the
corresponding provision set forth in the applicable Stock Award Agreement or the
Plan shall control in lieu of the minimum requirement set forth on Exhibit A as long as
such corresponding provision of the Stock Award Agreement or the Plan is no less
favorable to the Participant than the applicable minimum requirement set forth
on Exhibit
A.

    
      
         

      

      
        1.

        
          

        

      

      
         

      

    

    (e) Israeli Optionees In the
case of a Participant who is an Israeli Optionee (as defined in Exhibit B),
notwithstanding anything to the contrary in the Plan or in such Participant’s
Stock Award Agreement, the terms and conditions set forth in Exhibit B hereto
shall apply to any Stock Award granted to such Participant.

     

    2.           Administration.

     

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

     

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

     

    (i)           To
determine from time to time (A) which of the persons eligible under the Plan
shall be granted Awards; (B) when and how each Award shall be granted; (C) what
type or combination of types of Award shall be granted; (D) the provisions of
each Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive cash or Common Stock pursuant to a
Stock Award; and (E) the number of shares of Common Stock with respect to which
a Stock Award shall be granted to each such person.

     

    (ii)          To
construe and interpret the Plan and Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration (including rules
and regulations relating to sub-plans established for the purpose of qualifying
for preferred tax treatment under foreign tax laws).  The Board, in
the exercise of this power, may correct any defect, omission or inconsistency in
the Plan or in any Stock Award Agreement or in the written terms of a
Performance Cash Award, in a manner and to the extent it shall deem necessary or
expedient to make the Plan or Award fully effective.

     

    (iii)        To
settle all controversies regarding the Plan and Awards granted under
it.

     

    (iv)         To
accelerate the time at which a Stock Award may first be exercised or the time
during which an Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at which it may
first be exercised or the time during which it will vest.

     

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

    
      
         

      

      
        2.

        
          

        

      

      
         

      

    

    (vi)         To
amend the Plan in any respect the Board deems necessary or advisable, including,
without limitation, relating to Incentive Stock Options and certain nonqualified
deferred compensation under Section 409A of the Code and/or to bring the Plan or
Stock Awards granted under the Plan into compliance therewith, subject to the
limitations, if any, of applicable law. However, except as provided in Section
9(a) relating to Capitalization Adjustments, stockholder approval shall be
required for any amendment of the Plan that either (A) materially increases the
number of shares of Common Stock available for issuance under the Plan, (B)
materially expands the class of individuals eligible to receive Awards under the
Plan, (C) materially increases the benefits accruing to Participants under the
Plan or materially reduces the price at which shares of Common Stock may be
issued or purchased under the Plan, (D) materially extends the term of the Plan,
or (E) expands the types of Awards available for issuance under the Plan, but
only to the extent required by applicable law or listing requirements. Except as
provided above, rights under any Award granted before amendment of the Plan
shall not be impaired by any amendment of the Plan unless (1) the Company
requests the consent of the affected Participant, and (2) such Participant
consents in writing.

     

    (vii)        To
submit any amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of (A)
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to Covered Employees, (B) Section 422 of the
Code regarding Incentive Stock Options or (C) Rule 16b-3.

     

    (viii)       To
approve forms of Award Agreements for use under the Plan and to amend the terms
of any one or more Awards, including, but not limited to, amendments to provide
terms more favorable to the Participant than previously provided in the Award
Agreement, subject to any specified limits in the Plan that are not subject to
Board discretion; provided
however, that the Participant’s rights under any Award shall not be
impaired by any such amendment unless (A) the Company requests the consent of
the affected Participant, and (B) such Participant consents in
writing.  Notwithstanding the foregoing, subject to the limitations of
applicable law, if any, and without the affected Participant’s consent, the
Board may amend the terms of any one or more Awards if necessary to maintain the
qualified status of the Award as an Incentive Stock Option or to bring the Award
into compliance with Section 409A of the Code and the related guidance
thereunder.

     

    (ix)         Generally,
to exercise such powers and to perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan or Awards.

     

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

     

    (xi)         To
effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (1) the reduction of the exercise price of any
outstanding Option under the Plan, (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefore of (A) a new
Option under the Plan or another equity plan of the Company covering the same or
a different number of shares of Common Stock, (B) a Restricted Stock Award
(including a stock bonus), (C) a Stock Appreciation Right, (D) Restricted Stock
Unit, (E) an Other Stock Award, (F) cash and/or (G) other valuable consideration
(as determined by the Board, in its sole discretion), or (3) any other action
that is treated as a repricing under generally accepted accounting
principles.

    
      
         

      

      
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    (c)         Delegation
to Committee.

     

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

     

    (ii)         Section 162(m) and Rule 16b-3
Compliance.  In the sole discretion of the Board, the Committee
may consist solely of two (2) or more Outside Directors, in accordance with
Section 162(m) of the Code, or solely of two (2) or more Non-Employee Directors,
in accordance with Rule 16b-3.  In addition, the Board or the
Committee, in its sole discretion, may (A) delegate to a Committee of Directors
who need not be Outside Directors the authority to grant Awards to eligible
persons who are either (I) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such Stock
Award, or (II) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code, or (B) delegate to a Committee of Directors who
need not be Non-Employee Directors the authority to grant Stock Awards to
eligible persons who are not then subject to Section 16 of the Exchange
Act.

     

    (d)          Delegation to an
Officer.  The Board may delegate to one (1) or more Officers
the authority to do one or both of the following (i) designate Employees who are
not Officers to be recipients of Options (and, to the extent permitted by
applicable law, other Stock Awards) and the terms thereof, and (ii) determine
the number of shares of Common Stock to be subject to such Stock Awards granted
to such Employees; provided,
however, that the Board resolutions regarding such delegation shall
specify the total number of shares of Common Stock that may be subject to the
Stock Awards granted by such Officer and that such Officer may not grant a Stock
Award to himself or herself.  Notwithstanding anything to the contrary
in this Section 2(d), the Board may not delegate to an Officer authority to
determine the Fair Market Value of the Common Stock pursuant to Section
13(w)(ii) below.

     

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

    
      
         

      

      
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    3.           Shares
Subject to the Plan.

     

    (a)           Share
Reserve.  Subject to the provisions of Section 9 relating to
adjustments upon changes in stock, the aggregate number of shares of Common
Stock of the Company that may be issued pursuant to Stock Awards after the
Effective Date shall not exceed 5,655,056 shares (such number consisting of (i)
the 1,186,149 shares of Common Stock that have been reserved but not made
subject to any awards under the Quark Biotech, Inc. 1997 Stock Plan (such plan,
including its subplan (the 2003 Israeli Stock Option Plan), is referred to
herein as the “1997
Plan”) as of the Effective Date, (ii) up to 1,662,175 shares of Common
Stock that are subject to awards outstanding under the 1997 Plan as of the
Effective Date that expire or otherwise terminate without having been exercised
in full, and (iii) an additional 2,806,732 shares to be approved by the
stockholders of the Company as part of the approval of this Plan.  In
addition, the number of shares of Common Stock available for issuance under the
Plan shall automatically increase on January 1st of each
year commencing in 2008 and ending (and including) January 1, 2017, in an amount
equal to four percent (4%) of the total number of shares of Common Stock
outstanding on December 31st of the preceding calendar
year.  Notwithstanding the foregoing, the Board may act prior to the
first day of any calendar year, to provide that there shall be no increase in
the share reserve for such calendar year or that the increase in the share
reserve for such calendar year shall be a lesser number of shares of Common
Stock than would otherwise occur pursuant to the preceding
sentence.  For clarity, the limitation in this subsection 3(a) is a
limitation in the number of shares of the Company’s common stock that may be
issued pursuant to the Plan.  Accordingly, this subsection 3(a) does
not limit the granting of Stock Awards except as provided in subsection
7(a).  Shares may be issued in connection with a merger or acquisition
as permitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed
Company Manual Section 303A.08, or AMEX Company Guide Section 711 and such
issuance shall not reduce the number of shares available for issuance under the
Plan.  Furthermore, if a Stock Award (i) expires or otherwise
terminates without having been exercised in full or (ii) is settled in cash
(i.e., the holder of
the Stock Award receives cash rather than stock), such expiration, termination
or settlement shall not reduce (or otherwise offset) the number of shares of the
Company’s Common Stock that may be issued pursuant to the Plan.

     

    (b)           In
addition, if any shares of Common Stock issued pursuant to a Stock Award are
forfeited back to the Company because of the failure to meet a contingency or
condition required to vest such shares in the Participant, then the shares which
are forfeited shall revert to and again become available for issuance under the
Plan.  Also, any shares reacquired by the Company pursuant to
subsection 8(g) or as consideration for the exercise of an Option shall again
become available for issuance under the Plan.  Notwithstanding the
provisions of this subsection 3(b), any such shares shall not be subsequently
issued pursuant to the exercise of Incentive Stock
Options.  

     

    (c)           Share Reserve
Limitation.  Notwithstanding the provisions of Section 3(a) and
(b), to the extent it is necessary to comply with Section 260.140.45 of Title 10
of the California Code of Regulations, the total number of shares of Common
Stock issuable upon exercise of all outstanding Stock Awards and the total
number of shares of Common Stock provided for under any Common Stock bonus or
similar plan of the Company shall not exceed the applicable percentage as
calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, based on shares of
the Common Stock of the Company that are outstanding at the time the calculation
is made.

     

    (d)           Incentive Stock Option
Limit.  Notwithstanding anything to the contrary in this
Section 3(d), subject to the provisions of Section 9(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
granted after the Effective Date shall be 1,950,019 shares of Common Stock. 

    
      
         

      

      
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    (e)           Section 162(m) Limitation on Annual
Grants.  Subject to the provisions of Section 9(a) relating to
Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, no Employee shall be
eligible to be granted during any calendar year Stock Awards whose value is
determined by reference to an increase over an exercise or strike price of at
least one hundred percent (100%) of the Fair Market Value of the Common Stock on
the date the Stock Award is granted covering more than  689,655 shares of Common Stock.

     

    (f)           Source of
Shares.  The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Company on the market or otherwise.

     

    (g)           Arbitration.  Any
dispute or claim concerning any Stock Awards granted (or not granted) pursuant
to the Plan or any disputes or claims relating to or arising out of the Plan
shall be fully, finally and exclusively resolved by binding and confidential
arbitration conducted pursuant to the rules of Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) in
Sacramento, California.  The Company shall pay all arbitration
fees.  In addition to any other relief, the arbitrator may award to
the prevailing party recovery of its attorneys’ fees and costs.  By
accepting a Stock Award, Participants and the Company waive their respective
rights to have any such disputes or claims tried by a judge or
jury.

     

    4.           Eligibility.

     

    (a)           Eligibility for Specific Stock
Awards.  Incentive Stock Options may be granted only to
employees of the Company or a parent corporation or subsidiary corporation (as
such terms are defined in Code Sections 424(e) and (f)).  Stock Awards
other than Incentive Stock Options may be granted to Employees, Directors and
Consultants.

     

    (b)           Ten Percent
Stockholders.  A Ten Percent Stockholder shall not be granted
an Incentive Stock Option unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of the Common Stock on
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.

     

    (c)           Consultants.   A
Consultant shall be eligible for the grant of a Stock Award only if, at the time
of grant, (i) a Form S-8 Registration Statement under the Securities Act (“Form
S-8”) is available to register either the offer or the sale of the
Company’s securities to such Consultant, (ii) such grant complies with the
requirements of Rule 701 of the Securities Act, or (iii) the Company determines
that such grant will otherwise comply with the securities laws of all relevant
jurisdictions.

     

    5.           Option
Provisions.

     

    Each
Option shall be in such form and shall contain such terms and conditions as the
Board shall deem appropriate.  All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
shall be issued for shares of Common Stock purchased on exercise of each type of
Option. If an Option is not specifically designated as an Incentive Stock
Option, then the Option shall be a Nonstatutory Stock Option. The provisions of
separate Options need not be identical; provided, however, that each
Option Agreement shall include (through incorporation of provisions hereof by
reference in the Option Agreement or otherwise) the substance of each of the
following provisions:

    
      
         

      

      
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    (a)         Term.  Subject to
the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option
shall be exercisable after the expiration of ten (10) years from the date of its
grant or such shorter period specified in the Option Agreement.

     

    (b)         Exercise
Price.  Subject to the provisions of Section 4(b) regarding Ten
Percent Stockholders and the requirements set forth on Exhibit A, the
exercise price of each Option shall be generally not less than one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted.  Notwithstanding the
foregoing, an Option may be granted with an exercise price lower than one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Option if such Option is granted pursuant to an assumption of or
substitution for another option in a manner consistent with the provisions of
Section 424(a) of the Code (whether or not such options are Incentive Stock
Options) or is otherwise granted in a manner designed to satisfy the
requirements of Section 409A of the Code and applicable securities
laws.

     

    (c)         Consideration.  The
exercise price of Common Stock acquired pursuant to the exercise of an Option
shall be paid, to the extent permitted by applicable law and as determined by
the Board in its sole discretion, by any combination of the methods of payment
set forth below.  The Board shall have the authority to grant Options
that do not permit all of the following methods of payment (or otherwise
restrict the ability to use certain methods) and to grant Options that require
the consent of the Company to utilize a particular method of
payment.  The methods of payment permitted by this Section 5(c)
are:

     

    (i)           by
cash, check, bank draft or money order payable to the Company;

     

    (ii)          pursuant
to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of the stock subject to the Option, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds;

     

    (iii)        by
delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;

     

    (iv)         by
a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issued upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the aggregate
exercise price; provided,
however, that the Company shall accept a cash or other payment from the
Participant to the extent of any remaining balance of the aggregate exercise
price not satisfied by such reduction in the number of whole shares to be
issued; provided,
further, that shares of Common Stock will no longer be outstanding under
an Option and will not be exercisable thereafter to the extent that (A) shares
are used to pay the exercise price pursuant to the “net exercise,” (B) shares
are delivered to the Participant as a result of such exercise, and (C) shares
are withheld to satisfy tax withholding
obligations;  or

    
      
         

      

      
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    (v)           in
any other form of legal consideration that may be acceptable to the
Board.

     

    (d)         Transferability of
Options.  The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine,
subject to the provisions of Exhibit A, as
applicable.  In the absence of such a determination by the Board to
the contrary, the following restrictions on the transferability of Options shall
apply:

     

    (i)           Restrictions on
Transfer.  An Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder; provided, however, that
the Board may, in its sole discretion, permit transfer of the Option in a manner
consistent with applicable tax and securities laws upon the Optionholder’s
request.

     

    (ii)         Domestic Relations
Orders.  Notwithstanding the foregoing, an Option may be
transferred pursuant to a domestic relations order, provided, however, that an
Incentive Stock Option may be deemed to be a Nonqualified Stock Option as a
result of such transfer.

     

    (iii)        Beneficiary
Designation.  Notwithstanding the foregoing, the Optionholder
may, by delivering written notice to the Company, in a form provided by or
otherwise satisfactory to the Company, designate a third party who, in the event
of the death of the Optionholder, shall thereafter be the beneficiary of an
Option with the right to exercise the Option and receive the Common Stock or
other consideration resulting from an Option exercise.

     

    (e)         Vesting
Generally.  The total number of shares of Common Stock subject
to an Option may vest and therefore become exercisable in periodic installments
that may or may not be equal.  The Option may be subject to such other
terms and conditions on the time or times when it may or may not be exercised
(which may be based on the satisfaction of Performance Goals or other criteria)
as the Board may deem appropriate.  The vesting provisions of
individual Options may vary.  The provisions of this Section 5(e) are
subject to any Option provisions governing the minimum number of shares of
Common Stock as to which an Option may be exercised, including but not limited
to those provisions set forth on Exhibit
A.

     

    (f)          Termination of Continuous
Service.  Except as otherwise provided in the applicable Option
Agreement or other agreement between the Optionholder and the Company (which
provisions shall comply with the provisions of Exhibit A, as
applicable), in the event that an Optionholder’s Continuous Service terminates
(other than for Cause or upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination of Continuous
Service) but only within such period of time ending on the earlier of (i) the
date three (3) months following the termination of the Optionholder’s Continuous
Service (or such longer or shorter period specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement.  If, after termination of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall
terminate.

    
      
         

      

      
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    (g)         Extension of Termination
Date.  If the exercise of the Option following the termination
of the Optionholder’s Continuous Service (other than for Cause) would be
prohibited at any time during the post-termination exercise period solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of a period of three (3) months after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements, or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement.

     

    (h)         Disability of
Optionholder.  In the event that an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination of Continuous
Service), but only within such period of time ending on the earlier of (i) the
date twelve (12) months following such termination of Continuous Service (or
such longer or shorter period specified in the Option Agreement; provided,
however, that any shorter period shall comply with the provisions of Exhibit A, as
applicable), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement.  If, after termination of Continuous Service,
the Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall
terminate.

     

    (i)          Death of Optionholder. In
the event that (i) an Optionholder’s Continuous Service terminates as a result
of the Optionholder’s death, or (ii) the Optionholder dies within the period (if
any) specified in the Option Agreement after the termination of the
Optionholder’s Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated as the beneficiary of the Option upon the Optionholder’s
death, but only within the period ending on the earlier of (i) the date eighteen
(18) months following the date of death (or such longer or shorter period
specified in the Option Agreement; provided, however, that any shorter period
shall comply with the provisions of Exhibit A, as
applicable), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement.  If, after the Optionholder’s death, the Option
is not exercised within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate.  If the Optionholder
designates a third party beneficiary of the Option in accordance with Section
5(d)(iii), then upon the death of the Optionholder such designated beneficiary
shall have the sole right to exercise the Option and receive the Common Stock or
other consideration resulting from an Option exercise.

     

    (j)          Termination for
Cause.  Except as explicitly provided otherwise in an
Optionholder’s Option Agreement, in the event that an Optionholder’s Continuous
Service is terminated for Cause, the Option shall terminate upon the termination
date of such Optionholder’s Continuous Service, and the Optionholder shall be
prohibited from exercising his or her Option from and after the time of such
termination of Continuous Service.

     

    (k)         Non-Exempt
Employees.  No Option granted to an Employee that is a
non-exempt employee for purposes of the Fair Labor Standards Act shall be first
exercisable for any shares of Common Stock until at least six (6) months
following the date of grant of the Option.  The foregoing provision is
intended to operate so that any income derived by a non-exempt employee in
connection with the exercise or vesting of an Option will be exempt from his or
her regular rate of pay.

    
      
         

      

      
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    (l)          Early Exercise.  The
Option may, but need not, include a provision whereby the Optionholder may elect
at any time before the Optionholder’s Continuous Service terminates to exercise
the Option as to any part or all of the shares of Common Stock subject to the
Option prior to the full vesting of the Option.  Any unvested shares
of Common Stock so purchased may be subject to a repurchase option in favor of
the Company or to any other restriction the Board determines to be appropriate,
including but not limited to those set forth on Exhibit A
hereto.  The Company will not exercise its repurchase option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in the
Option.

     

    6.           Provisions
of Stock Awards other than Options.

     

    (a)          Restricted Stock
Awards.  Each Restricted Stock Award Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate (including the terms and conditions set forth on Exhibit A, as
applicable).  To the extent consistent with the Company’s Bylaws, at
the Board’s election, shares of Common Stock may be (x) held in book entry form
subject to the Company’s instructions until any restrictions relating to the
Restricted Stock Award lapse; or (y) evidenced by a certificate, which
certificate shall be held in such form and manner as determined by the
Board.  The terms and conditions of Restricted Stock Award Agreements
may change from time to time, and the terms and conditions of separate
Restricted Stock Award Agreements need not be identical; provided, however, that each
Restricted Stock Award Agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

     

    (i)           Consideration.  A
Restricted Stock Award may be awarded in consideration for (A) past (or, to the
extent permitted by applicable law, future) services actually or to be rendered
to the Company or an Affiliate, or (B) any other form of legal consideration
that may be acceptable to the Board in its sole discretion and permissible under
applicable law.

     

    (ii)         Vesting.  Shares of
Common Stock awarded under the Restricted Stock Award Agreement may be subject
to forfeiture to the Company in accordance with a vesting schedule to be
determined by the Board.

     

    (iii)        Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company may receive via a forfeiture condition, any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination of Continuous Service under the terms of the
Restricted Stock Award Agreement.

     

    (iv)         Transferability.  Rights
to acquire shares of Common Stock under the Restricted Stock Award Agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the Restricted Stock Award Agreement, as the Board shall
determine in its sole discretion, so long as Common Stock awarded under the
Restricted Stock Award Agreement remains subject to the terms of the Restricted
Stock Award Agreement.

    
      
         

      

      
        10.

        
          

        

      

      
         

      

    

    (b)         Restricted Stock Unit
Awards.  Each Restricted Stock Unit Award Agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate (including the terms and conditions set forth on Exhibit A, as
applicable).  The terms and conditions of Restricted Stock Unit Award
Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Unit Award Agreements need not be identical; provided, however, that each
Restricted Stock Unit Award Agreement shall include (through incorporation of
the provisions hereof by reference in the Agreement or otherwise) the substance
of each of the following provisions:

     

    (i)           Consideration.  At
the time of grant of a Restricted Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each share
of Common Stock subject to the Restricted Stock Unit Award. The consideration to
be paid (if any) by the Participant for each share of Common Stock subject to a
Restricted Stock Unit Award may be paid in any form of legal consideration that
may be acceptable to the Board in its sole discretion and permissible under
applicable law.

     

    (ii)         Vesting.  At the
time of the grant of a Restricted Stock Unit Award, the Board may impose such
restrictions or conditions to the vesting of the Restricted Stock Unit Award as
it, in its sole discretion, deems appropriate.

     

    (iii)        Payment.  A
Restricted Stock Unit Award may be settled by the delivery of shares of Common
Stock, their cash equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the Restricted Stock
Unit Award Agreement.

     

    (iv)         Additional
Restrictions.  At the time of the grant of a Restricted Stock
Unit Award, the Board, as it deems appropriate, may impose such restrictions or
conditions that delay the delivery of the shares of Common Stock (or their cash
equivalent) subject to a Restricted Stock Unit Award to a time after the vesting
of such Restricted Stock Unit Award.

     

    (v)           Dividend
Equivalents.  Dividend equivalents may be credited in respect
of shares of Common Stock covered by a Restricted Stock Unit Award, as
determined by the Board and contained in the Restricted Stock Unit Award
Agreement.  At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by
the Restricted Stock Unit Award in such manner as determined by the
Board.  Any additional shares covered by the Restricted Stock Unit
Award credited by reason of such dividend equivalents will be subject to all the
terms and conditions of the underlying Restricted Stock Unit Award Agreement to
which they relate.

     

    (vi)         Termination of Participant’s
Continuous Service.  Except as otherwise provided in the
applicable Restricted Stock Unit Award Agreement, such portion of the Restricted
Stock Unit Award that has not vested will be forfeited upon the Participant’s
termination of Continuous Service.

    
      
         

      

      
        11.

        
          

        

      

      
         

      

    

    (vii)        Compliance with Section 409A of the
Code.   Notwithstanding anything to the contrary set forth
herein, any Restricted Stock Unit Award granted under the Plan that is not
exempt from the requirements of Section 409A of the Code shall contain such
provisions so that such Restricted Stock Unit Award will comply with the
requirements of Section 409A of the Code.  Such restrictions, if any,
shall be determined by the Board and contained in the Restricted Stock Unit
Award Agreement evidencing such Restricted Stock Unit Award.  For
example, such restrictions may include, without limitation, a requirement that
any Common Stock that is to be issued in a year following the year in which the
Restricted Stock Unit Award vests must be issued in accordance with a fixed
pre-determined schedule.

     

    (c)         Stock Appreciation
Rights.  Each Stock Appreciation Right Agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate (including the terms and conditions set forth on Exhibit A, as
applicable).  Stock Appreciation Rights may be granted as stand-alone
Stock Awards or in tandem with other Stock Awards.  The terms and
conditions of Stock Appreciation Right Agreements may change from time to time,
and the terms and conditions of separate Stock Appreciation Right Agreements
need not be identical; provided, however, that each
Stock Appreciation Right Agreement shall include (through incorporation of the
provisions hereof by reference in the Agreement or otherwise) the substance of
each of the following provisions:

     

    (i)           Term.  No Stock
Appreciation Right shall be exercisable after the expiration of ten (10) years
from the date of its grant or such shorter period specified in the Stock
Appreciation Right Agreement.

     

    (ii)         Strike Price. Each Stock
Appreciation Right will be denominated in shares of Common Stock
equivalents.  The strike price of each Stock Appreciation Right shall
generally not be less than one hundred percent (100%) of the Fair Market Value
of the Common Stock equivalents subject to the Stock Appreciation Right on the
date of grant.

     

    (iii)        Calculation of
Appreciation.  The appreciation distribution payable on the
exercise of a Stock Appreciation Right will be not greater than an amount equal
to the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Stock Appreciation Right) of a number of shares of Common Stock
equal to the number of Common Stock equivalents in which the Participant is
vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (B)
the strike price that will be determined by the Board at the time of grant of
the Stock Appreciation Right.

     

    (iv)         Vesting.  At the
time of the grant of a Stock Appreciation Right, the Board may impose such
restrictions or conditions to the vesting of such Stock Appreciation Right as
it, in its sole discretion, deems appropriate.

     

    (v)           Exercise.  To
exercise any outstanding Stock Appreciation Right, the Participant must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Appreciation Right Agreement evidencing such Stock Appreciation
Right.

    
      
         

      

      
        12.

        
          

        

      

      
         

      

    

    (vi)         Payment.  The
appreciation distribution in respect to a Stock Appreciation Right may be paid
in Common Stock, in cash, in any combination of the two or in any other form of
consideration, as determined by the Board and contained in the Stock
Appreciation Right Agreement evidencing such Stock Appreciation
Right.

     

    (vii)        Termination of Continuous
Service.  In the event that a Participant’s Continuous Service
terminates (other than for Cause), the Participant may exercise his or her Stock
Appreciation Right (to the extent that the Participant was entitled to exercise
such Stock Appreciation Right as of the date of termination) but only within
such period of time ending on the earlier of (A) the date three (3) months
following the termination of the Participant’s Continuous Service (or such
longer or shorter period specified in the Stock Appreciation Right Agreement),
or (B) the expiration of the term of the Stock Appreciation Right as set forth
in the Stock Appreciation Right Agreement.  If, after termination, the
Participant does not exercise his or her Stock Appreciation Right within the
time specified herein or in the Stock Appreciation Right Agreement (as
applicable), the Stock Appreciation Right shall terminate.

     

    (viii)       Termination for
Cause.  Except as explicitly provided otherwise in an
Participant’s Stock Appreciation Right Agreement, in the event that a
Participant’s Continuous Service is terminated for Cause, the Stock Appreciation
Right shall terminate upon the termination date of such Participant’s Continuous
Service, and the Participant shall be prohibited from exercising his or her
Stock Appreciation Right from and after the time of such termination of
Continuous Service.

     

    (ix)         Compliance with Section 409A of the
Code.   Notwithstanding anything to the contrary set forth
herein, any Stock Appreciation Rights granted under the Plan that are not exempt
from the requirements of Section 409A of the Code shall contain such provisions
so that such Stock Appreciation Rights will comply with the requirements of
Section 409A of the Code.  Such restrictions, if any, shall be
determined by the Board and contained in the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right.  For example, such
restrictions may include, without limitation, a requirement that a Stock
Appreciation Right that is to be paid wholly or partly in cash must be exercised
and paid in accordance with a fixed pre-determined schedule.

     

    (d)         Performance
Awards.

     

    (i)           Performance Stock
Awards.  A Performance Stock Award is a Stock Award that may be
granted, may vest, or may be exercised based upon the attainment during a
Performance Period of certain Performance Goals.  A Performance Stock
Award may, but need not, require the completion of a specified period of
Continuous Service.  Notwithstanding the foregoing, to the extent
required by applicable law, any Performance Stock Award will be subject to the
provisions of Exhibit
A, including provisions regarding minimum vesting
requirements  The length of any Performance Period, the Performance
Goals to be achieved during the Performance Period, and the measure of whether
and to what degree such Performance Goals have been attained shall be
conclusively determined by the Committee in its sole discretion.  The
maximum number of shares that may be granted to any Participant in a calendar
year attributable to Stock Awards described in this Section 6(d)(i) shall not
exceed 25,862 shares of Common Stock.  In addition, to the extent
permitted by applicable law and the applicable Award Agreement, the Board may
determine that cash may be used in payment of Performance Stock
Awards.

    
      
         

      

      
        13.

        
          

        

      

      
         

      

    

    (ii)         Performance Cash
Awards.  A Performance Cash Award is a cash award that may be
granted upon the attainment during a Performance Period of certain Performance
Goals.  A Performance Cash Award may also require the completion of a
specified period of Continuous Service.  The length of any Performance
Period, the Performance Goals to be achieved during the Performance Period, and
the measure of whether and to what degree such Performance Goals have been
attained shall be conclusively determined by the Committee in its sole
discretion.  The maximum value that may be granted to any Participant
in a calendar year attributable to cash awards described in this Section 6(d)(i)
shall not exceed one million dollars ($1,000,000).The Board may provide for or,
subject to such terms and conditions as the Board may specify, may permit a
Participant to elect for, the payment of any Performance Cash Award to be
deferred to a specified date or event.  The Committee may specify the
form of payment of Performance Cash Awards, which may be cash or other property,
or may provide for a Participant to have the option for his or her Performance
Cash Award, or such portion thereof as the Board may specify, to be paid in
whole or in part in cash or other property. In addition, to the extent
permitted by applicable law and the applicable Award Agreement, the Board may
determine that Common Stock authorized under this Plan may be used in payment of
Performance Cash Awards, including additional shares in excess of the
Performance Cash Award as an inducement to hold shares of Common
Stock.

     

    (e)         Other Stock
Awards.  Other forms of Stock Awards valued in whole or in part
by reference to, or otherwise based on, Common Stock may be granted either alone
or in addition to Stock Awards provided for under Section 5 and the preceding
provisions of this Section 6.  Subject to the provisions of the Plan
(including Exhibit
A, as applicable), the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Other Stock Awards and all
other terms and conditions of such Other Stock Awards.

     

    7.           Covenants
of the Company.

     

    (a)          Availability of
Shares.  During the terms of the Stock Awards, the Company
shall keep available at all times the number of shares of Common Stock
reasonably required to satisfy such Stock Awards.

     

    (b)          Securities Law
Compliance.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award.  If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority that
counsel for the Company deems necessary for the lawful issuance and sale of
Common Stock under the Plan, the Company shall be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such Stock Awards
unless and until such authority is obtained.

    
      
         

      

      
        14.

        
          

        

      

      
         

      

    

    (c)           No Obligation to
Notify.  The Company shall have no duty or obligation to any
holder of a Stock Award to advise such holder as to the time or manner of
exercising such Stock Award.  Furthermore, the Company shall have no
duty or obligation to warn or otherwise advise such holder of a pending
termination or expiration of a Stock Award or a possible period in which the
Stock Award may not be exercised.  The Company has no duty or
obligation to minimize the tax consequences of a Stock Award to the holder of
such Stock Award.

     

    8.           Miscellaneous.

     

    (a)           Use of Proceeds from Sales of Common
Stock.  Proceeds from the sale of shares of Common Stock
pursuant to Stock Awards shall constitute general funds of the
Company.

     

    (b)           Corporate Action Constituting Grant
of Stock Awards.  Corporate action constituting a grant by the
Company of a Stock Award to any Participant shall be deemed completed as of the
date of such corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter evidencing the Stock
Award is communicated to, or actually received or accepted by, the
Participant.

     

    (c)           Stockholder
Rights.  No Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such Stock Award unless and until such Participant has
exercised the Stock Award pursuant to its terms and the Participant shall not be
deemed to be a stockholder of record until the issuance of the Common Stock
pursuant to such exercise has been entered into the books and records of the
Company.

     

    (d)           No Employment or Other Service
Rights.  Nothing in the Plan, any Stock Award Agreement or
other instrument executed thereunder or in connection with any Award granted
pursuant to the Plan shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an Affiliate
to terminate (i) the employment of an Employee with or without notice and with
or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate, or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

     

    (e)           Incentive Stock Option $100,000
Limitation.  To the extent that the aggregate Fair Market Value
(determined at the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Optionholder
during any calendar year (under all plans of the Company and any Affiliates)
exceeds one hundred thousand dollars ($100,000), the Options or portions thereof
that exceed such limit (according to the order in which they were granted) shall
be treated as Nonstatutory Stock Options, notwithstanding any contrary provision
of the applicable Option Agreement(s).

    
      
         

      

      
        15.

        
          

        

      

      
         

      

    

    (f)           Investment
Assurances.  The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing
the Common Stock.  The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (x) the issuance of
the shares upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act, or (y) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities
laws.  The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.

     

    (g)           Withholding
Obligations.  Unless prohibited by the terms of a Stock Award
Agreement, the Company may, in its sole discretion, satisfy any federal, state,
local or foreign tax withholding obligation relating to an Award by any of the
following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (i) causing the Participant to tender a cash payment;
(ii)  withholding shares of Common Stock from the shares of Common
Stock issued or otherwise issuable to the Participant in connection with the
Award; provided, however, that no shares of Common Stock are withheld with a
value exceeding the minimum amount of tax requried to be withheld by law (or
such lower amount as may be necessary to avoid classification of the Award as a
liability for financial accounting purposes); (iii) withholding cash from an
Award settled in cash; (iv) withholding payment from any payments otherwise
payable to a Participant; or (v) by such other method as may be set forth in the
Award Agreement.

     

    (h)           Electronic
Delivery.  Any reference herein to a “written” agreement or
document shall include any agreement or document delivered electronically or
posted on the Company’s intranet.

     

    (i)           Deferrals.  To the
extent permitted by applicable law, the Board, in its sole discretion, may
determine that the delivery of Common Stock or the payment of cash, upon the
exercise, vesting or settlement of all or a portion of any Award may be deferred
and may establish programs and procedures for deferral elections to be made by
Participants.  Deferrals by Participants will be made in accordance
with Section 409A of the Code. Consistent with Section 409A of the Code, the
Board may provide for distributions while a Participant is still an
employee.  The Board is authorized to make deferrals of Stock Awards
and determine when, and in what annual percentages, Participants may receive
payments, including lump sum payments, following the Participant’s termination
of employment or retirement, and implement such other terms and conditions
consistent with the provisions of the Plan and in accordance with applicable
law.

    
      
         

      

      
        16.

        
          

        

      

      
         

      

    

    (j)           Compliance with Section 409A of the
Code.  To the extent that the Board determines that any Award
granted under the Plan is subject to Section 409A of the Code, the Award
Agreement evidencing such Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the
Code.  To the extent applicable, the Plan and Award Agreements shall
be interpreted in accordance with Section 409A of the Code and Department of
Treasury regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other guidance that may be
issued or amended after the Effective Date.  Notwithstanding any
provision of the Plan to the contrary, in the event that following the Effective
Date the Board determines that any Award may be subject to Section 409A of the
Code and related Department of Treasury guidance (including such Department of
Treasury guidance as may be issued after the Effective Date), the Board may
adopt such amendments to the Plan and the applicable Award Agreement or adopt
other policies and procedures (including amendments, policies and procedures
with retroactive effect), or take any other actions, that the Board determines
are necessary or appropriate to (1) exempt the Award from Section 409A of the
Code and/or preserve the intended tax treatment of the benefits provided with
respect to the Award, or (2) comply with the requirements of Section 409A of the
Code and related Department of Treasury guidance.

     

    9.           Adjustments
upon Changes in Common Stock; Other Corporate Events.

     

    (a)           Capitalization
Adjustments.  In the event of a Capitalization Adjustment, the
Board shall appropriately adjust: (i) the class(es) and maximum number of
securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and
maximum number of securities that may be issued pursuant to the exercise of
Incentive Stock Options pursuant to Section 3(d), (iii) the class(es) and
maximum number of securities that may be awarded to any person pursuant to
Section 3(d) and 6(d)(i), and (iv) the class(es) and number of securities and
price per share of stock subject to outstanding Stock Awards.  The
Board shall make such adjustments, and its determination shall be final, binding
and conclusive.

     

    (b)           Dissolution or
Liquidation.  Except as otherwise provided in the Stock Award
Agreement, in the event of a dissolution or liquidation of the Company, all
outstanding Stock Awards (other than Stock Awards consisting of vested and
outstanding shares of Common Stock not subject to the Company’s right of
repurchase) shall terminate immediately prior to the completion of such
dissolution or liquidation, and the shares of Common Stock subject to the
Company’s repurchase option may be repurchased by the Company notwithstanding
the fact that the holder of such Stock Award is providing Continuous Service,
provided, however, that
the Board may, in its sole discretion, cause some or all Stock Awards to become
fully vested, exercisable and/or no longer subject to repurchase or forfeiture
(to the extent such Stock Awards have not previously expired or terminated)
before the dissolution or liquidation is completed but contingent on its
completion.

     

    (c)           Corporate Transaction.
  The following provisions shall apply to Stock Awards in the
event of a Corporate Transaction unless otherwise provided in the instrument
evidencing the Stock Award or any other written agreement between the Company or
any Affiliate and the holder of the Stock Award or unless otherwise expressly
provided by the Board at the time of grant of a Stock Award.

    
      
         

      

      
        17.

        
          

        

      

      
         

      

    

    (i)           Stock Awards May Be
Assumed.  Except as otherwise stated in the Stock Award
Agreement, in the event of a Corporate Transaction, any surviving corporation or
acquiring corporation (or the surviving or acquiring corporation’s parent
company) may assume or continue any or all Stock Awards outstanding under the
Plan or may substitute similar stock awards for Stock Awards outstanding under
the Plan (including but not limited to, awards to acquire the same consideration
paid to the stockholders of the Company pursuant to the Corporate Transaction),
and any reacquisition or repurchase rights held by the Company in respect of
Common Stock issued pursuant to Stock Awards may be assigned by the Company to
the successor of the Company (or the successor’s parent company, if any), in
connection with such Corporate Transaction.  A surviving corporation
or acquiring corporation (or its parent) may choose to assume or continue only a
portion of a Stock Award or substitute a similar stock award for only a portion
of a Stock Award.  The terms of any assumption, continuation or
substitution shall be set by the Board in accordance with the provisions of
Section 2.

     

    (ii)         Stock Awards Held by Current
Participants.  Except as otherwise stated in the Stock Award
Agreement, in the event of a Corporate Transaction in which the surviving
corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for
such outstanding Stock Awards, then with respect to Stock Awards that have not
been assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction (referred to as the “Current
Participants”), the vesting of such Stock Awards (and, if applicable, the
time at which such Stock Awards may be exercised) shall (contingent upon the
effectiveness of the Corporate Transaction) be accelerated in full to a date
prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is
five (5) days prior to the effective time of the Corporate Transaction), and
such Stock Awards shall terminate if not exercised (if applicable) at or prior
to the effective time of the Corporate Transaction, and any reacquisition or
repurchase rights held by the Company with respect to such Stock Awards shall
lapse (contingent upon the effectiveness of the Corporate
Transaction).

     

    (iii)        Stock Awards Held by Persons other
than Current Participants.  Except as otherwise stated in the
Stock Award Agreement, in the event of a Corporate Transaction in which the
surviving corporation or acquiring corporation (or its parent company) does not
assume or continue such outstanding Stock Awards or substitute similar stock
awards for such outstanding Stock Awards, then with respect to Stock Awards that
have not been assumed, continued or substituted and that are held by persons
other than Current Participants, the vesting of such Stock Awards (and, if
applicable, the time at which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award consisting of vested
and outstanding shares of Common Stock not subject to the Company’s right of
repurchase) shall terminate if not exercised (if applicable) prior to the
effective time of the Corporate Transaction; provided, however, that any
reacquisition or repurchase rights held by the Company with respect to such
Stock Awards shall not terminate and may continue to be exercised
notwithstanding the Corporate Transaction.

    
      
         

      

      
        18.

        
          

        

      

      
         

      

    

    (iv)         Payment for Stock Awards in Lieu of
Exercise.  Notwithstanding the foregoing, in the event a Stock
Award will terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder of
any Stock Award that is not exercised prior to such effective time will receive
a payment, in such form as may be determined by the Board, equal in value to the
excess, if any, of (A) the value of the property the holder of the Stock Award
would have received upon the exercise of the Stock Award, over (B) any exercise
price payable by such holder in connection with such exercise.

     

    (d)         Change in
Control.  A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a Change in Control as
may be provided in the Stock Award Agreement for such Stock Award or as may be
provided in any other written agreement between the Company or any Affiliate and
the Participant, but in the absence of such provision, no such acceleration
shall occur.

     

    10.         Termination
or Suspension of the Plan.

     

    (a)         Plan Term.  Unless
sooner terminated by the Board pursuant to Section 2, the Plan shall
automatically terminate on the day before the tenth (10th) anniversary of the
date the Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier.  No Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.

     

    (b)         No Impairment of
Rights.  Termination of the Plan shall not impair rights and
obligations under any Award granted while the Plan is in effect except with the
written consent of the affected Participant.

     

    11.         Effective
Date of Plan.

     

    This Plan
shall become effective on the Effective Date (as set forth on the first page of
this Plan); provided, however, that no Award shall be exercised unless and until
the Plan has been approved by the shareholders of the Company, which approval
shall be within twelve (12) months before or after the date the Plan is adopted
by the Board.

     

    12.         Choice
of Law.

     

    Except as
(and solely to the extent) expressly provided in Exhibit B hereto, the
law of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.

     

    13.         Definitions.   As
used in the Plan, the definitions contained in this Section 13 shall apply to
the capitalized terms indicated below:

     

    (a)           “Affiliate”
means, at the time of determination, any “parent” or “subsidiary” of the Company
as such terms are defined in Rule 405 of the Securities Act.  The
Board shall have the authority to determine the time or times at which “parent”
or “subsidiary” status is determined within the foregoing
definition.

     

    (b)           “Applicable
Laws” means the requirements relating to the administration of
compensatory cash and equity-based award plans under United States federal,
state and local laws, the rules and regulations of any stock exchange or
quotation system on which the Common Stock is listed or quoted and/or the
applicable laws of any other country or jurisdiction where Awards are granted
under the Plan.

    
      
         

      

      
        19.

        
          

        

      

      
         

      

    

    (c)           “Award”
means a Stock Award or a Performance Cash Award.

     

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

     

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

     

    (f)           “Cause”
means with respect to a Participant, the occurrence of any of the
following events:  (i) such Participant’s commission of any felony or
any crime involving fraud, dishonesty or moral turpitude under the laws of the
United States or any state thereof; (ii) such Participant’s attempted commission
of, or participation in, a fraud or act of dishonesty against the Company; (iii)
such Participant’s intentional, material violation of any contract or agreement
between the Participant and the Company or of any statutory duty owed to the
Company; (iv)  such Participant’s unauthorized use or disclosure of
the Company’s confidential information or trade secrets; or (v) such
Participant’s gross misconduct. The determination that a termination of the
Participant’s Continuous Service is either for Cause or without Cause shall be
made by the Company in its sole discretion.  Any determination by the
Company that the Continuous Service of a Participant was terminated by reason of
dismissal without Cause for the purposes of outstanding Awards held by such
Participant shall have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other
purpose.

     

    Notwithstanding
the foregoing or any other provision of this Plan, the definition of Cause (or
any analogous term) in an individual written agreement between the Company or
any Affiliate and the Participant shall supersede the foregoing definition with
respect to Awards subject to such agreement; provided, however, that if no
definition of Cause or any analogous term is set forth in such an individual
written agreement, the foregoing definition shall apply.

    
      
         

      

      
        20.

        
          

        

      

      
         

      

    

    (g)         “Change in
Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

     

    (i)           any
Exchange Act Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities other than by virtue of a
merger, consolidation or similar transaction .  Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Company by an investor, any affiliate
thereof or any other Exchange Act Person from the Company in a transaction or
series of related transactions the primary purpose of which is to obtain
financing for the Company through the issuance of equity securities or (B)
solely because the level of Ownership held by any Exchange Act Person (the
“Subject
Person”) exceeds the designated percentage threshold of the outstanding
voting securities as a result of a repurchase or other acquisition of voting
securities by the Company reducing the number of shares outstanding, provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of voting securities by the Company, and after
such share acquisition, the Subject Person becomes the Owner of any additional
voting securities that, assuming the repurchase or other acquisition had not
occurred, increases the percentage of the then outstanding voting securities
Owned by the Subject Person over the designated percentage threshold, then a
Change in Control shall be deemed to occur;

     

    (ii)         there
is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of
such merger, consolidation or similar transaction, the stockholders of the
Company immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or (B) more than fifty percent (50%) of the
combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction;

     

    (iii)        there
is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its
Subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries
to an Entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease, license or
other disposition; or

     

    (iv)         individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
members of the Board; (provided, however, that if
the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be
considered as a member of the Incumbent Board).

     

    For the
avoidance of doubt, the term Change in Control shall not include a sale of
assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company.

     

    Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Awards subject to such agreement; provided, however, that if no
definition of Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall
apply.

    
      
         

      

      
        21.

        
          

        

      

      
         

      

    

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

     

    (i)          “Committee”
means a committee of two (2) or more Directors to whom authority has been
delegated by the Board in accordance with Section 2(c).

     

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

     

    (k)         “Company”
means Quark Pharmaceuticals, Inc., a California corporation.

     

    (l)          “Consultant”
means any person, including an advisor, who is (i) engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such
services, or (ii) serving as a member of the board of directors of an Affiliate
and is compensated for such services.  However, service solely as a
Director, or payment of a fee for such service, shall not cause a Director to be
considered a “Consultant” for purposes of the Plan.

     

    (m)        “Continuous
Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or
terminated.  A change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee, Consultant or Director or
a change in the entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s service with
the Company or an Affiliate, shall not terminate a Participant’s Continuous
Service.  For example, a change in status from an employee of the
Company to a consultant to an Affiliate or to a Director shall not constitute an
interruption of Continuous Service.  To the extent permitted by law,
the Board or the chief executive officer of the Company, in that party’s sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal
leave.  Notwithstanding the foregoing, a leave of absence shall be
treated as Continuous Service for purposes of vesting in a Stock Award only to
such extent as may be provided in the Company’s leave of absence policy, in the
written terms of any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
        22.

        
          

        

      

      
         

      

    

    (o)         “Covered
Employee” shall have the meaning provided in Section 162(m)(3) of the
Code and the regulations promulgated thereunder.

     

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

     

    (q)         “Disability”
means, with respect to a Participant,  the inability of such
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of
the Code.

     

    (r)         “Effective
Date” means the effective date of this Plan document, which is the
earlier of (i) the date that this Plan is first approved by the Company’s
shareholders or (ii) the date this Plan is approved by the Board.

     

    (s)         “Employee”
means any person employed by the Company or an Affiliate.  However,
service solely as a Director, or payment of a fee for such services, shall not
cause a Director to be considered an “Employee” for purposes of the
Plan.

     

    (t)          “Entity”
means a corporation, partnership, limited liability company or other
entity.

     

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

     

    (v)          “Exchange Act
Person” means any natural person, Entity or “group” (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act
Person” shall not include (i) the Company or any Subsidiary of the Company, (ii)
any employee benefit plan of the Company or any Subsidiary of the Company or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any Subsidiary of the Company, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, (iv) an Entity
Owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their Ownership of stock of the Company;
or (v) any natural person, Entity or “group” (within the meaning of Section
13(d) or 14(d) of the Exchange Act) that, as of the Effective Date of the Plan
as set forth in Section 11, is the Owner, directly or indirectly, of securities
of the Company representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities.

     

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

     

    (i)           If
the Common Stock is listed on any established stock exchange or traded on any
established market, unless otherwise determined by the Board, the Fair Market
Value of a share of Common Stock shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
market (or the exchange or market with the greatest volume of trading in the
Common Stock) on the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable.  Unless otherwise
provided by the Board, if there is no closing sales price (or closing bid if no
sales were reported) for the Common Stock on the date of determination, then the
Fair Market Value shall be the closing selling price (or closing bid if no sales
were reported) on the last preceding date for which such quotation
exists.

    
      
         

      

      
        23.

        
          

        

      

      
         

      

    

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

     

    (x)         “Incentive Stock
Option” means an option granted pursuant to Section 5 of the Plan that is
intended to be, and qualifies as, an “incentive stock option” within the meaning
of Section 422 of the Code and the regulations promulgated
thereunder.

     

    (y)         “Non-Employee
Director” means a Director who
either (i) is not a current employee or officer of the Company or an Affiliate,
does not receive compensation, either directly or indirectly, from the Company
or an Affiliate for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction for which
disclosure would be required under Item 404(a) of Regulation S-K, and is not
engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered
a “non-employee director” for purposes of Rule 16b-3.

     

    (z)         “Nonstatutory
Stock Option” means any option granted pursuant to Section 5 of the Plan
that does not qualify as an Incentive Stock Option.

     

    (aa)       “Officer”
means any person designated by the Company as an officer; provided, however,
that at any time that any class of the equity securities of the Company is
registered pursuant to Section 12 of the Exchange Act, “Officer” shall mean a
person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.

     

    (bb)       “Option”
means an Incentive Stock Option or a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.

     

    (cc)       “Option
Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an Option
grant.  Each Option Agreement shall be subject to the terms and
conditions of the Plan.

     

    (dd)       “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
permitted under the terms of this Plan, such other person who holds an
outstanding Option.

     

    (ee)       “Other Stock
Award” means an award based in whole or in part by reference to the
Common Stock which is granted pursuant to the terms and conditions of Section
6(e).

     

    (ff)         “Other Stock
Award Agreement” means a written agreement between the Company and a
holder of an Other Stock Award evidencing the terms and conditions of an Other
Stock Award grant.  Each Other Stock Award Agreement shall be subject
to the terms and conditions of the Plan.

    
      
         

      

      
        24.

        
          

        

      

      
         

      

    

    (gg)       “Outside
Director” means a Director who either (i) is not a current employee of
the Company or an “affiliated corporation” (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year, has not been an officer of the Company or an
“affiliated corporation,” and does not receive remuneration from the Company or
an “affiliated corporation,” either directly or indirectly, in any capacity
other than as a Director, or (ii) is otherwise considered an “outside director”
for purposes of Section 162(m) of the Code.

     

    (hh)       “Own,” “Owned,”
“Owner,” “Ownership” A person or Entity shall
be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired
“Ownership” of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

     

    (ii)         “Participant”
means a person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     

    (jj)         “Performance Cash
Award” means an award of cash granted pursuant to the terms and
conditions of Section 6(d)(ii).

     

    (kk)       “Performance
Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance
Period.  The Performance Criteria that shall be used to establish such
Performance Goals may be based on any one of, or combination of, the following:
(i) earnings per share; (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization; (iv) total
stockholder return; (v) return on equity; (vi) return on assets, investment, or
capital employed; (vii) operating margin; (viii) gross margin; (ix) operating
income; (x) net income (before or after taxes); (xi) net operating income; (xii)
net operating income after tax; (xiii) pre-tax profit; (xiv) operating cash
flow; (xv) sales or revenue targets; (xvi) increases in revenue or product
revenue; (xvii) expenses and cost reduction goals; (xviii) improvement in or
attainment of working capital levels; (xix) economic value added (or an
equivalent metric); (xx) market share; (xxi) cash flow; (xxii) cash flow per
share; (xxiii) share price performance; (xxiv) debt reduction; (xxv)
implementation or completion of projects or processes; (xxvi) customer
satisfaction; (xxvii) stockholders’ equity; and (xxviii) to the extent that an
Award is not intended to comply with Section 162(m) of the Code, other measures
of performance selected by the Board.  Partial achievement of the
specified criteria may result in the payment or vesting corresponding to the
degree of achievement as specified in the Stock Award Agreement or the written
terms of a Performance Cash Award.  The Board shall, in its sole
discretion, define the manner of calculating the Performance Criteria it selects
to use for such Performance Period.

    
      
         

      

      
        25.

        
          

        

      

      
         

      

    

    (ll)         “Performance
Goals” means, for a Performance Period, the one or more goals established
by the Board for the Performance Period based upon the Performance
Criteria.  Performance Goals may be based on a Company-wide basis,
with respect to one or more business units, divisions, Affiliates, or business
segments, and in either absolute terms or relative to the performance of one or
more comparable companies or the performance of one or more relevant
indices.  At the time of the grant of any Award, the Board is
authorized to determine whether, when calculating the attainment of Performance
Goals for a Performance Period: (i) to exclude restructuring and/or other
nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for
non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude
the effects of changes to generally accepted accounting standards required by
the Financial Accounting Standards Board; (iv) to exclude the effects of any
statutory adjustments to corporate tax rates; and (v) to exclude the effects of
any “extraordinary items” as determined under generally accepted accounting
principles.  In addition, the Board retains the discretion to reduce
or eliminate the compensation or economic benefit due upon attainment of
Performance Goals.

     

    (mm)     “Performance
Period” means the period of time selected by the Board over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to and the payment of a Stock Award or a
Performance Cash Award.  Performance Periods may be of varying and
overlapping duration, at the sole discretion of the Board.

     

    (nn)       “Performance
Stock Award” means a Stock Award granted under the terms and conditions
of Section 6(d)(i).

     

    (oo)        “Plan”
means this Quark Pharmaceuticals, Inc. 2007 Equity Incentive Plan.

     

    (pp)        “Restricted Stock
Award” means an award of shares of Common Stock which is granted pursuant
to the terms and conditions of Section 6(a).

     

    (qq)        “Restricted Stock
Award Agreement” means a written agreement between the Company and a
holder of a Restricted Stock Award evidencing the terms and conditions of a
Restricted Stock Award grant.  Each Restricted Stock Award Agreement
shall be subject to the terms and conditions of the Plan.

     

    (rr)        “Restricted Stock
Unit Award” means a right to receive shares of Common Stock which is
granted pursuant to the terms and conditions of Section 6(b).

     

    (ss)       “Restricted Stock
Unit Award Agreement” means a written agreement between the Company and a
holder of a Restricted Stock Unit Award evidencing the terms and conditions of a
Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award
Agreement shall be subject to the terms and conditions of the Plan.

     

    (tt)         “Rule
16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

     

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

     

    (vv)        “Stock
Appreciation Right” means a right to receive the appreciation on Common
Stock that is granted pursuant to the terms and conditions of Section
6(c).

    
      
         

      

      
        26.

        
          

        

      

      
         

      

    

    (ww)      “Stock
Appreciation Right Agreement” means a written agreement between the
Company and a holder of a Stock Appreciation Right evidencing the terms and
conditions of a Stock Appreciation Right grant.  Each Stock
Appreciation Right Agreement shall be subject to the terms and conditions of the
Plan.

     

    (xx)        “Stock
Award” means any right to receive Common Stock granted under the Plan,
including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted
Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a
Performance Stock Award or any Other Stock Award.

     

    (yy)        “Stock Award
Agreement” means a written agreement between the Company and a
Participant evidencing the terms and conditions of a Stock Award
grant.  Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan.

     

    (zz)        “Subsidiary”
means, with respect to the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company, and
(ii) any partnership, limited liability company or other entity in which the
Company has a direct or indirect interest (whether in the form of voting or
participation in profits or capital) of more than fifty percent
(50%).

     

    (aaa)      “Ten Percent
Stockholder” means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
Affiliate.

    
      
         

      

      
        27.

        
          

        

      

      
         

      

    

    Exhibit
A

    Provisions
Applicable For Awards Made Pursuant to

    Section
25102(o) of the California Corporate Securities Law of 1968

    

    As
provided in Section 1(d) of the Plan, in the case of a Participant who is a
resident of the State of California, notwithstanding anything to the contrary in
the Plan or in such Participant’s Stock Award Agreement, the following terms
shall apply to any Stock Award granted to such Participant in reliance on
Section 25102(o) and shall be deemed to be a part of the Plan, if and to the
extent compliance with the terms set forth below is required under Section
25102(o).  In the event of any conflict or inconsistency between the
following provisions and any provisions otherwise appearing in the Plan, the
following provisions shall control solely with respect to Stock Awards granted
under the Plan to residents of the State of California in reliance on Section
25102(o) , if and to the extent compliance with the terms set forth below is
required under Section 25102(o), provided that, for the
avoidance of doubt, with respect to any requirement set forth herein, the
corresponding provision set forth in the applicable Stock Award Agreement or the
Plan shall control in lieu of the minimum requirement set forth herein as long
as such corresponding provision of the Stock Award Agreement or the Plan is no
less favorable to the Participant than the applicable minimum requirement set
forth herein:

    

    1.           Exercise Price.  The
Exercise Price shall not be less than 100% of the Fair Market Value of the
Common Stock subject to the Stock Award at the time the Stock Award is granted,
except that the Exercise Price shall not be less than (i) one hundred ten
percent (110%) of the Fair Market Value of the Common Stock in the case of any
Participant who owns securities possessing more than 10% of the total combined
voting power (as defined in Section 194.5 of the California Corporations Code in
the case of a corporate issuer) of all classes of securities of the Company or
its Affiliates possessing voting power, or (ii) such lower percentage of the
Fair Market Value of the Common Stock on the date of grant as is permitted by
Section 260.140.41 of Title 10 of the California Code of Regulations at the time
of the grant of the Stock Award. The Fair Market Value of
the Common Stock shall be determined by the Board in a manner consistent with
Section 260.140.50 of Title 10 of the California Code of
Regulations.

    

    2.           Term.  No Stock
Award shall have an exercise period of more than 120 months from the date such
Stock Award is granted.

    

    3.           Minimum Vesting.  To
the extent that the following restrictions on vesting are required by Section
260.140.41(f) of Title 10 of the California Code of Regulations at the time of
the grant of the Stock Award, then:

    

    (a)           Stock
Awards granted to a Participant who is not an officer, director, manager or
consultant of the Company or its Affiliates shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Stock Award was granted,
subject to reasonable conditions such as continued employment;
and

    
      
         

      

      
        28.

        
          

        

      

      
         

      

    

    (b)           Stock
Awards granted to officers, directors, managers or consultants of the Company or
its Affiliates may be made fully exercisable, subject to reasonable conditions
such as continued employment, at any time or during any period established by
the Company.

    

    4.           Extended
Exercise.  A Participant who ceases to be an employee or
service provider to the Company or of an Affiliate for any reason other than for
Cause may exercise any Stock Award, to the extent that the Stock Award is
exercisable on the date of such termination:

    

    (a)           at
least 6 months from the date of termination if termination was caused by death
or disability;

    

    (b)           at
least 30 days from the date of termination if termination was caused by other
than death or disability.

    

    5.           Repurchase
Limitation.  The repurchase price for any shares subject to a
Stock Award to be repurchased pursuant to Section 5(l) or Section 6 of the Plan
may be either the Fair Market Value of such Common Stock on the date of the
Participant’s termination of Continuous Service or the lower of (i) the Fair
Market Value of the Common Stock on the date of repurchase, or (ii) the original
purchase price of the Common Stock.  Notwithstanding anything in the
Plan or herein to the contrary, to the extent required by Section 260.140.41 and
Section 260.140.42 of Title 10 of the California Code of Regulations at the time
a Stock Award is granted, any repurchase right contained in a Stock Award
Agreement granted to a person who is not an officer, director, manager or
consultant of the Company or its Affiliates shall be upon the terms described
below:

    

    (a)           Fair Market
Value.  If the repurchase right gives the Company the right to
repurchase the Common Stock upon termination of service at not less than the
Fair Market Value of the Common Stock to be purchased on the date of termination
of service, then (i) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the Common Stock within ninety
(90) days of termination of service (or in the case of Common Stock issued upon
exercise of Stock Awards after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant, and (ii) the right terminates when the Company’s
securities become publicly traded.

    

    (b)           Original Purchase
Price.  If the repurchase right gives the Company the right to
repurchase the Common Stock upon termination of service at the lower of (i) the
Fair Market Value of the Common Stock on the date of repurchase or (ii) their
original purchase price, then (x) the right to repurchase at the original
purchase price shall lapse at the rate of at least twenty percent (20%) of the
Common Stock per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (y) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the Common Stock within ninety
(90) days of termination of service (or in the case of Common Stock issued upon
exercise of Stock Awards after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant.

    
      
         

      

      
        29.

        
          

        

      

      
         

      

    

    6.           Information
Obligation.  To the extent required by Section 260.140.46 of
Title 10 of the California Code of Regulations, the Company shall deliver
financial statements to Participants covered by this Exhibit A at least
annually.  This Section shall not apply to key employees whose duties
in connection with the Company assure them access to equivalent
information.

    

    7.           Restriction on Transfer.  A Stock
Award granted to a California resident shall not be transferable, other than by
will or the laws of descent and distribution, or as permitted by rule 701 of the
Securities Act of 1933, as amended.

    

    8.           Voting Rights.  The
Common Stock subject to Stock Awards under the Plan will carry equal voting
rights on all matters where such vote is permitted by applicable
law.

    
      
         

      

      
        30.

        
          

        

      

      
         

      

    

    Exhibit
B

    Israeli
Sub-Plan

    

    1.           General Terms.

    

    (a)           This
Exhibit B to
the Quark Pharmaceuticals, Inc. 2007 Equity Incentive Plan (the “Plan”)
shall apply only to Participants who are residents of the state of Israel upon
the date of grant of the Stock Award by the Employing Corporation, or those who
are deemed to be residents of the state of Israel for tax purposes upon the date
of grant of the Stock Award by the Employing Corporation (collectively, “Israeli
Participants”). The provisions specified hereunder shall form an integral
part of the Plan.

    

    (b)           This
Exhibit B is
effective with respect to Stock Awards to be granted to Israeli Participants
according to the resolutions of the Board.

    

    (c)           This
Exhibit B is to
be read as a continuation of the Plan and modifies Stock Awards granted to
Israeli Participants to the extent necessary to comply with the requirements set
by the Israeli law in general, and in particular with the provisions of the
Ordinance and Section 102 thereof and any regulations, rules, orders or
procedures promulgated thereunder, as may be amended or replaced from time to
time. For the avoidance of doubt, this Exhibit B does not
add to or modify the Plan in respect of any other category of
Participants.

    

    (d)           The
Plan and this Exhibit
B are complementary to each other and shall be deemed as
one.  In any case of contradiction, whether express or implied,
between the provisions of this Exhibit B and the
Plan, the provisions set out in this Exhibit B shall
prevail.

    

    (e) Any
capitalized term used herein but not specifically defined in this Exhibit B shall be
construed according to the interpretation given to it in the Plan and any
capitalized term defined in the Ordinance and used herein but not specifically
defined in the Plan or in this Exhibit B shall be
construed according to the interpretation given to it in the
Ordinance.

    

    2.           Definitions.

    

    (a)           "Approved
102 Stock Award" means a Stock Award
granted pursuant to Section 102(b) of the Ordinance and held in trust by a
Trustee for the benefit of the Participant. Approved 102 Stock Awards may either
be classified as Capital Gain Stock Awards (“CGA”) or
Ordinary Income Stock Award (“OIA”).

    

    (b)           "Capital
Gain Stock Award" or
"CGA"
means an Approved 102 Stock Award elected and designated by the Company to
qualify under the capital gain tax treatment in accordance with the provisions
of Section 102(b)(2) of the Ordinance.

    

    (c)           “Approved
102 Option” means an Option granted pursuant to Section 102(b) of the
Ordinance and held in trust by a Trustee for the benefit of the
Participant.

    
      
         

      

      
        31.

        
          

        

      

      
         

      

    

    (d)           “Controlling
Shareholder” shall have the meaning ascribed to it in Section 32(9) of
the Ordinance.

    

    (e)           "Employee",
as defined in the Plan, but shall also include an individual who is serving as
an Officer Holder, and shall exclude a Controlling Shareholder.

    

    (f)           "Employing
Corporation" means Q.B.I. Enterprises Ltd., the Company and any Affiliate
all within the meaning of Section 102(a) of the Ordinance.

    

    (g)           
“ITA”
means the Israeli Tax Authorities.

    

    (h)           "Non-Employee"
means an Israeli Participant that is not an Employee (as defined herein) and
includes a Controlling Shareholder, or Consultant.

    

    (i)           "Ordinary
Income Stock Award" or "OIA",
which means an Approved 102 Stock Award elected and designated by the Company to
qualify under the ordinary income tax treatment in accordance with the
provisions of Section 102(b)(1) of the Ordinance.

    

    (j)           "102
Stock Award" means a Stock Award that the Board intends to be a “102
Stock Award” and which shall only be granted to Employees of the Company or any
Affiliate who are not Controlling Shareholders, and shall be subject to and
construed consistently with the requirements of Section 102.

    

    (k)           "3(i)
Stock Award" means Stock Awards issued to Israeli Participants that do
not contain such terms as will qualify under Section 102.

    

    (l)           "Office
Holders" ("Nose Misra") - as such term is defined in the Companies Law,
5759-1999, including, inter alia, any person who is part of the upper management
of the Company or an Affiliate and who grants managerial services to the
Company, or to an Affiliate.

    

    (m)          "Ordinance"
means the 1961 Israeli Income Tax Ordinance (New Version), as now in effect or
as hereafter amended.

    

    (n)           "Section
102" means Section 102 of the Ordinance, as now in effect or as hereafter
amended.

    

    (o)           "Trustee"
means a trustee to be approved by the ITA pursuant to Section 102.

    

    (p)           "Unapproved
102 Stock Award" means a Stock Award granted pursuant to Section 102(c)
of the Ordinance and not held in trust by a Trustee.

    

    3.           Eligibility;
Issuance of Stock Awards.

    

    (a)           The
persons eligible for participation in the Plan as Israeli Participants shall
include any Employees, Office Holders and/or Non-Employees of the Company and
its Affiliates (as such term is defined in the Plan); provided, however,
that (i) Employees may only be granted 102 Stock Awards and Office Holders may
be granted 102 Stock Awards; and (ii) Non-Employees and/or Controlling
Shareholders may only be granted 3(i) Stock Awards.

    
      
         

      

      
        32.

        
          

        

      

      
         

      

    

    (b)           The
Company may designate Stock Awards granted to Israeli Employees pursuant to
Section 102 as Unapproved 102 Stock Awards or Approved 102 Stock
Awards.

    

    (c)           The
grant of Approved 102 Stock Awards shall be made under this Exhibit B adopted by
the Board, and shall be conditioned upon the approval of this Exhibit B by the
ITA.

    

    (d)           Approved
102 Stock Awards may either be classified as Capital Gain Stock Awards or
Ordinary Income Awards.

    

    (e)           The
Company’s election of the type of Approved 102 Stock Awards as CGAs or OIAs
granted to Israeli Employees (the "Election"), shall be
appropriately filed with the ITA before the date of grant of an Approved 102
Option under such Election. Such Election shall become effective beginning the
first date of grant of an Approved 102 Stock Award under such Election and shall
remain in effect until the end of the year following the year during which the
Company first granted Approved 102 Stock Awards under such Election. For the
avoidance of doubt, such Election shall not prevent the Company from granting
Unapproved 102 Stock Awards simultaneously.

    

    (f)           The
Company shall have no liability to an Israeli Participant or to any other party,
if a Stock Award (or any part thereof), which is intended to be a 102 Stock
Award, is not a 102 Stock Award.

    

    (g)           All
Approved 102 Stock Awards, must be held in trust by a Trustee as described in
Section 4 below.

    

    (h)           For
the avoidance of any doubt, the designation of Unapproved 102 Stock Awards and
Approved 102 Stock Awards shall be subject to the terms and conditions set forth
in Section 102 of the Ordinance and the regulations promulgated
thereunder.

    

    (i)           Anything
in the Plan to the contrary notwithstanding, all grants of Stock Awards to
directors and Office Holders shall be authorized and implemented in accordance
with the provisions of the Companies Law, 5759-1999, or any successor act or
regulation, as in effect from time to time, to the extent that these provisions
are applicable.

    

    (j)           Shares
issued upon exercise of a Stock Award shall be issued in the name of the Trustee
(if issued on exercise of Stock Awards held by the Trustee at the time of
exercise) or in the name of the Israeli Participant or; if requested by the
Israeli Participant, in the name of the Israeli Participant and his or her
spouse.

    

    (k)           Subject
to the provision of Section 102, the Board may at any time offer to buy out for
a payment in cash or shares of Common Stock, a  Stock Award previously
granted, based on such terms and conditions as the Board shall establish and
communicate to the Israeli Participant at the time that such offer is
made.

    
      
         

      

      
        33.

        
          

        

      

      
         

      

    

    (l)           The
grant of a Stock Award hereunder shall neither entitle an Israeli Participant to
participate, nor disqualify an Israeli Participant from participating in any
other grant of Stock Awards pursuant to the Plan, or any other option or share
plan of the Company or any Affiliate.

    

    
      	
               
      

            	
              4.

            	
              Trustee

            

    

    

    (a)           Approved
102 Stock Awards which shall be granted under the Plan and/or any shares
allocated or issued upon exercise of such Approved 102 Stock Awards and/or other
shares received subsequently following any realization of rights including,
without limitation, bonus shares, shall be allocated or issued to the Trustee
(and registered in the Trustee's name in the register of members of the Company)
and held for the benefit of the Israeli Participants for such period of time as
required by Section 102 (the "Restricted Period
Per Section 102"). All certificates representing shares issued to the
Trustee under the Plan shall be deposited with the Trustee, and shall be held by
the Trustee until such time that such shares are released from the aforesaid
trust as herein provided. In the event that the requirements for Approved 102
Stock Awards are not met, then the Approved 102 Stock Awards may be treated as
Unapproved 102 Stock Awards, all in accordance with the provisions of Section
102.

    

    (b)           Notwithstanding
anything to the contrary, the Trustee shall not release any shares allocated or
issued upon exercise of Approved 102 Stock Awards prior to the full payment of
the Israeli Participant's tax liabilities arising from the Approved 102 Stock
Awards that were granted to such Israeli Participant, and/or any shares
allocated or issued upon exercise of such Stock Awards.

    

    (c)           With
respect to any Approved 102 Stock Award, subject to the provisions of Section
102, a Participant shall not be entitled to sell or release from trust any Share
received upon the exercise of an Approved 102 Stock Award and/or any share
received subsequently following any realization of rights, including without
limitation, bonus shares, until the lapse of the Restricted Period Per Section
102. Notwithstanding the foregoing, in the event that any such sale or release
from trust occurs during the Restricted Period Per Section 102, then the
sanctions under Section 102 shall apply and shall be borne by the Israeli
Participant.

    

    (d)           Upon
receipt of Approved 102 Stock Award, the Participant will sign an undertaking to
release the Trustee from any liability in respect of any action or decision duly
taken and bona fide executed in relation with the Plan and this Exhibit B, or any
Approved 102 Stock Award or share granted, or issued, to him
thereunder.

    

    5.           Fair Market Value for Tax
Purposes.  Without derogating from the above, solely for the
purpose of determining the tax liability pursuant to Section 102(b)(3) of the
Ordinance, if at the date of grant the Company’s shares are listed on any
established stock exchange or a national market system or if the Company’s
shares will be registered for trading within ninety (90) days following the date
of grant, the Fair Market Value of a Share at the date of grant shall be
determined in accordance with the average value of the Company’s shares in the
thirty (30) trading days preceding the date of grant or in the thirty (30)
trading days following the date of registration for trading, as the case may
be.

    
      
         

      

      
        34.

        
          

        

      

      
         

      

    

    6.           Integration
of Section 102 and Tax Commissioner’s Permit

    

    (a)           With
regards to Approved 102 Stock Awards, the provisions of the Plan and/or any
Stock Award Agreement shall be subject to the provisions of Section 102 and the
Income Tax Commissioner's permit, and the said provisions and permit shall be
deemed an integral part of the Plan and of the Stock Award
Agreement.

    

    (b)           Any
provision of Section 102 and/or the said permit which is necessary in order to
receive and/or to maintain any tax benefit pursuant to Section 102, which is not
expressly specified in the Plan or the Stock Award Agreement, shall be
considered binding upon the Company and the Israeli Participants.

    

    7.           Tax
Consequences

    

    (a)           To
the extent permitted by Applicable Laws, any tax consequences arising from the
grant or exercise of any Stock Award, from the payment for shares covered
thereby or from any other event or act (of the Company, and/or its Affiliates,
and/or the Trustee or the Participant), hereunder, shall be borne solely by the
Israeli Participant. The Company and/or its Affiliates and/or the Trustee shall
withhold taxes according to the requirements under the applicable laws, rules,
and regulations, including withholding taxes at source. Furthermore, the Israeli
Participants agrees to indemnify the Company and/or its Affiliates and/or the
Trustee and hold them harmless against and from any and all liability for any
such tax or interest or penalty thereon, including without limitation,
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from any payment made to the Israeli Participant.

    

    (b)           The
Company and/or the Trustee shall not be required to release any Share
certificate to an Israeli Participant until all required payments have been
fully made by the Israeli Participant.

    

    8.           Restricted Period Per Section
102.  The following provisions shall apply for the purpose of
the tax benefits under Section 102 of the ordinance:

    

    (a)           In
accordance with the requirements of Section 102 as now in place and as may
be amended in the future, the Stock Awards to be issued shall be issued to the
Israeli Participant and held in trust by the Trustee for the benefit of Israeli
Participant for a period of no less than twenty four (24) months for CGAs and no
less than twelve (12) months for OIAs, from the date of which the Stock Awards
were granted and placed with the Trustee (during the Restricted Period Per
Section 102 the Participant will not be allowed to order the Trustee to sell the
Stock Awards held by him/her on behalf of the Participant or to transfer the
Stock Awards from Trustee’s trust).

    
      
         

      

      
        35.

        
          

        

      

      
         

      

    

    (b)           As
long as the Stock Awards are held by the Trustee on behalf of an Israeli
Participant, all rights of the Israeli Participant over the Stock Awards and the
shares that may derive on the exercise of the Stock Awards are personal and can
not be transferred, assigned, pledged, or mortgaged other than by testament or
pursuant to the laws of descent and distribution.

    

    (c)           In
order to receive the tax benefits of Section 102, the Stock Awards may not
be sold or transferred (other than through a transfer by testament or by
operation of law), and no power of attorney or transfer deed shall be given in
respect thereof (other than a power of attorney for the purpose of participation
in general meetings of shareholders).

    

    (c)           End of Restricted Period Per Section
102. Upon the termination of the Restricted Period Per Section 102, as
now in place and as may be amended in the future, an Israeli Participant shall
be entitled to receive from the Trustee the Stock Awards, or the shares acquired
in the exercise thereof, which have vested, subject to the provisions of the
Plan concerning the continued employment of the Israeli Participant by the
Company or any Affiliate, and subject to any other provisions set forth herein
or in the Plan, and the Israeli Participant shall be entitled to exercise the
Stock Awards and/or to sell the Stock Awards or shares thereby obtained subject
to the other terms and conditions of the Stock Award Agreement and the Plan,
including the provisions relating to the payment of taxes as set forth
below.

    

    9.           Israeli Participant's
Representations.  The following representations will be
included in the Stock Award Agreement with Israeli Participants who are
Employees, or if not included, shall be deemed to have been given by any Israeli
Participant Employees to the extent that any such Israeli Participant Employee
accepts any Stock Award issued under the Plan:

    

    (a)           The
Israeli Participant hereby agrees that the terms of Section 102 shall apply
regarding the Stock Awards granted.

    

    (b)           The
Israeli Participant is obliged not to sell or remove from the Trustee the Stock
Awards granted to the Israeli Participant prior to the end of Restricted Period
Per Section 102.

    

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

    

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

    

    (e)           The
Israeli Participant acknowledges that during the period in which Stock Awards
are held by the Trustee (including any shares issued to the Trustee on behalf of
the Israeli Participant upon exercise of an Approved 102 Stock Award), in the
event that dividends payable in securities are declared on Approved 102 Stock
Awards held by the Trustee, such securities shall also be subject to the
provisions of Section 102 and the provision of the Stock Award Agreement and
shall be held in trust by the Trustee. Notwithstanding anything to the contrary,
in the event that an Israeli Participant that holds Approved 102 Stock Awards is
entitled to receive a dividend in cash, the proceeds of such dividend may be
wired to the Israeli Participant, after deduction of all applicable
taxes.

    
      
         

      

      
        36.

        
          

        

      

      
         

      

    

    10.         Governing
Law & Jurisdiction

    

    (a)           The
Plan, and the granting and exercise of Stock Awards hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock under such
Stock Awards, shall be subject to all Applicable Laws, whether of the State of
Israel or of the United States or any other State having jurisdiction over the
Company and the Israeli Participant, including the registration of the shares of
Common Stock under the Securities Act and the Ordinance and to such approvals by
any governmental agencies or national securities exchanges as may be required.
Nothing herein shall be deemed to require the Company to register the shares of
Common Stock under the securities laws of any jurisdiction.

    

    (b)           This
Exhibit B shall
be governed by and construed and enforced in accordance with the laws of the
State of Israel applicable to contracts made and to be performed therein,
without giving effect to the principles of conflict of laws. The competent
courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters
pertaining to this Exhibit
B.

    

    (c)           The
adoption of the Plan (including this Exhibit B) by the
Board shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangements or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of options otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases. For the avoidance of doubt, prior grant of Stock Awards to
Israeli Participants of the Company under their employment agreements, and not
in the framework of any previous option plan, shall not be deemed an approved
incentive arrangement for the purpose of this Exhibit
B.

    

    (d)           Exhibit B may be
amended from time to time by the Company and the Trustee provided however that
any amendment that adversely effects the rights of the holders of Stock Awards,
shall not be made without the approval of the holders of a majority in interest
of the then issued and outstanding Stock Awards.

    

    
      
        	
                      

              
	
                Q.B.I. Enterprises ,
      Ltd.

              

      

    

    
      
         

      

      
        37.EXHIBIT 10.21

 

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

 

EXCLUSIVE LICENSE AGREEMENT

 

“ISOLATION AND APPLICATION OF P53 INHIBITORS TO CONTROLLING TISSUE
RESPONSE TO A VARIETY OF STRESSES AND FACILITATING ANTI-CANCER TREATMENT”

(UIC Tech ID #CS01)

 

TABLE OF CONTENTS

 

	
  PREAMBLE

  ARTICLES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  DEFINITIONS

  
	
  II

  	
   

  	
  GRANT

  
	
  III

  	
   

  	
  DUE DILIGENCE

  
	
  IV

  	
   

  	
  PAYMENTS

  
	
  V

  	
   

  	
  REPORTS AND RECORDS

  
	
  VI

  	
   

  	
  PATENT MAINTENANCE, ENFORCEMENT AND DEFENSE

  
	
  VII

  	
   

  	
  CONFIDENTIALITY

  
	
  VIII

  	
   

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  
	
  IX

  	
   

  	
  INDEMNIFICATION, PRODUCT LIABILITY

  
	
  X

  	
   

  	
  EXPORT CONTROLS

  
	
  XI

  	
   

  	
  NON-USE OF NAMES

  
	
  XII

  	
   

  	
  ASSIGNMENTS

  
	
  XIII

  	
   

  	
  TERMINATION

  
	
  XIV

  	
   

  	
  DISPUTE RESOLUTION

  
	
  XV

  	
   

  	
  PAYMENTS, NOTICES AND OTHER COMMUNICATIONS

  
	
  XVI

  	
   

  	
  MISCELLANEOUS PROVISIONS

  

 

i

 

This EXCLUSIVE LICENSE
AGREEMENT is effective on the date last subscribed below (the “Effective
Date”), and is by and between THE BOARD OF TRUSTEES OF
THE UNIVERSITY OF ILLINOIS, a body corporate and politic of the
State of Illinois (“UNIVERSITY”) with offices in Chicago, Illinois 60612, and QUARK BIOTECH, INC., a California corporation with principal
offices at 1059 Serpentine Lane, Pleasanton, California 94566, (“QBI”).

 

WITNESSETH

 

WHEREAS, in the course of
research conducted under UNIVERSITY auspices, Dr. Andrei Gudkov and Elena
Komarova in the Department of Molecular Genetics of UNIVERSITY (the “INVENTORS”),
have produced an invention entitled [ * ] (the “INVENTION”) which is covered by
the Patent Rights as defined in Article 1.5 below;

 

WHEREAS, pursuant to an
assignment by Drs. Gudkov and Komarova to UNIVERSITY of all their right, title
and interest in and to the INVENTION and any patents resulting therefrom,
UNIVERSITY is the owner of the INVENTION and the corresponding Patent Rights,
and has the right to grant licenses under said Patent Rights;

 

WHEREAS, UNIVERSITY desires to
have the Patent Rights utilized in the public interest and QBI seeks to
commercially develop the Patent Rights, and accordingly, the UNIVERSITY is
willing to grant to QBI an exclusive license to its interest in the INVENTION
and the Patent Rights on the terms and conditions set forth herein;

 

WHEREAS, LICENSEE seeks to
commercially develop the Patent Rights through a thorough, vigorous and
diligent program of exploiting the Patent Rights whereby public utilization
shall result therefrom; and

 

NOW, THEREFORE, in consideration
of the premises and the mutual covenants contained herein, the parties hereto
agree as follows:

 

ARTICLE I – DEFINITIONS

 

For the purpose of this Agreement, the following words
and phrases shall have the following meanings:

 

1.1                               “LICENSEE” shall mean QBI.

 

1.2                               “Affiliate” shall mean any person,
firm, corporation or other entity controlling, controlled by, or under common
control with a party hereto. The term “control” wherever used throughout this
Agreement shall mean ownership, directly or indirectly, of more than 50% of the
equity capital. Other than LICENSEE, any corporation, company, partnership,
joint venture, firm, individual or other entity which does not come within this
definition shall be a “Non-Affiliate”.

 

1.3                               “University Existing Technology” and “Sponsor Existing Technology” have
the meaning given to them in the Research Agreement between UNIVERSITY and QBI
effective September 1, 1999, attached hereto as Appendix A and incorporated
herein by reference (“Research Agreement”).

 

1.4                               “Confidential Information” means (i)
any proprietary or confidential information or material in tangible form
disclosed hereunder that is marked as “Confidential” at the time it is
delivered to the receiving party, (ii) any proprietary or confidential
information disclosed orally hereunder that is identified as confidential or
proprietary when disclosed and such disclosure is confirmed in writing to the
receiving party within 30 days by the disclosing party, and (iii) any information
concerning the terms of this Agreement.

 

1.5                               “Patent Rights” shall mean all of the
following UNIVERSITY owned intellectual property:

 

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

 

1

(a)                                  the
United States patent application entitled [ * ] and all foreign patent applications
based on this U.S. application;

 

(b)                                  United
States and foreign patents issued from this application, and divisionals and
continuations of this application;

 

(c)                                  claims
of U.S. and foreign continuation-in-part applications, and of the resulting
patents which are directed to subject matter specifically described in the U.S.
patent application Serial Number [ * ]; and

 

(d)                                  any
reissues or re-examinations of patents described in (a), (b), or (c), above.

 

1.6                               A
“Licensed Product” shall mean any
product or part thereof developed by or on behalf of LICENSEE which:

 

(a)                                  is
covered in whole or in part by an issued, unexpired claim or a pending claim
contained in the Patent Rights which have not been held unenforceable or
invalid by a court or other governmental agency of competent jurisdiction and
which have not been admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise in any country in which such product is made, used or
sold relative to said product or part; or

 

(b)                                  is
manufactured by using a process which is covered in whole or in part by an
issued, unexpired claim or a pending claim contained in the Patent Rights which
have not been held unenforceable or invalid by a court or other governmental
agency of competent jurisdiction and which have not been admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise in the country in
which any such process is used or in which any such product is used or sold
relative to said process.

 

1.7                               A
“Licensed Process” shall mean any
process which is covered in whole or in part by an issued, unexpired claim or a
pending claim contained in the Patent Rights in any country in which such
process is practiced.

 

1.8                               “Net Sales” shall mean the gross
amount invoiced by LICENSEE or Affiliate for sales of Licensed Products or
Licensed Processes to Non-Affiliate independent third parties, less the sum of
the following:

 

(a)                                  promotional
allowances, rebates, credits and cash, trade and quantity discounts, in amounts
customary in the trade, actually taken;

 

(b)                                  excise
taxes, sales, use, value added, and other consumption taxes and other
compulsory payments to governmental authorities, actually paid;

 

(c)                                  outbound
transportation charges and related insurance costs prepaid or allowed;

 

(d)                                  amounts
allowed or credited due to returns and uncollectible amounts;

 

(e)                                  cost
of any shipping packages and packing, if billed separately;

 

(f)                                    import
and/or export duties and tariffs actually paid;

 

(g)                                 rebates;
and

 

(h)                                 interest,
service, finance, or sales or carrying charges paid by customers for extension
of credit

 

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

 

2

 

No deductions shall be made for commissions paid to
individuals whether they be with independent sales agencies or regularly
employed by LICENSEE or Affiliates and on its payroll, or for cost of
collections. Licensed Products shall be considered “sold” when billed or
invoiced.

 

1.9                               “Sublicense” shall mean the right to
make, use or sell Licensed Products or Licensed Processes, other than by
outright sale to any Non-Affiliate (including any Non-Affiliated distributor).

 

ARTICLE 2

GRANT

 

2.1                               UNIVERSITY
hereby grants to LICENSEE an exclusive worldwide right and license in any field
of use, including the right to sublicense, to make, have made, use, lease,
offer to sell, export and otherwise exploit UNIVERSITY’s right, title and
interest in the Licensed Products or Licensed Processes derived from the Patent
Rights, on a royalty-bearing basis until the end of the last to expire patent
of the Patent Rights on a country by country basis, subject to the rights
reserved in Section 2.2 below.

 

2.2                               Notwithstanding
any other provisions of this Agreement, it is agreed that UNIVERSITY shall
retain the right to use (subject to LICENSEE’s right to use) the technology
being licensed under the Patent Rights, including any improvements, solely for
its own non-commercial teaching and research activities; subject, however, to
confidentiality obligations as set forth in Article VII.

 

2.3                               LICENSEE
hereby agrees that every Sublicense to which it shall be party and which shall
relate to the rights, privileges and license granted hereunder shall contain a
statement describing the date upon which LICENSEE’S exclusive rights,
privileges and license hereunder shall terminate.

 

2.4                               LICENSEE
agrees that any Sublicenses granted will be in terms consistent and not in
conflict with any of the material terms and conditions of this Agreement
including, without limitation the provisions under Articles III, V, VII, VIII,
IX, X, XI, XIII and XVI of this Agreement.

 

2.5                               LICENSEE
agrees to forward to UNIVERSITY a copy of any and all fully executed sublicense
agreements within [ * ] of execution of same, and further agrees to forward to
UNIVERSITY within [ * ] a copy of such reports received by LICENSEE from its
sublicensees during the preceding [ * ] period under the Sublicenses as shall
be pertinent to a royalty accounting under said Sublicense agreements.

 

2.6                               Subject
to the Research Agreement and other than the Existing Technology, the license
granted hereunder shall not be construed to confer any rights upon LICENSEE by
implication, estoppel or otherwise as to any technology not included in the
Patent Rights and to which or in which LICENSEE does not otherwise have rights,
title or an interest.

 

ARTICLE 3

DUE DILIGENCE

 

3.1                               LICENSEE
and its sublicensees shall use commercially reasonable efforts to bring
Licensed Products or Licensed Processes to market [ * ] exploitation of the
Patent Rights. Non-compliance with this Section 3.1 shall be grounds for
termination.

 

3.2                               In
addition, LICENSEE and UNIVERSITY shall adhere to the following:

 

(a)                                  LICENSEE
shall deliver to UNIVERSITY within [ * ] of Effective Date of this Agreement a
business plan including [ * ], to the extent formed by LICENSEE. Similar
reports shall be provided to UNIVERSITY within [ * ] to relay update and status
information on LICENSEE’s progress on development of the Patent Rights,
including projections of activity anticipated for the next reporting year.

 

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

 

3

 

(b)                                  LICENSEE
shall be responsible for diligently and promptly taking all reasonable steps to
secure all required and/or necessary governmental approvals to sell, exploit,
or market any and all Licensed Products. Subject to the terms and conditions of
the Research Agreement, the Licensee shall meet the Milestones set forth below.
Licensee can request extension of each Milestone deadline for a period of one
(1) year upon payment of a fee of [ * ] for each extension requested (“Extended
Deadline”).

 

(i)                                    If
Licensee fails to [ * ], or within the Extended Deadline, than the licenses set
forth in Section 2.1 for that particular Licensed Product shall terminate and
be no longer valid, unless Licensee shall have earlier demonstrated to the
satisfaction of the University that there is a valid cause for delaying the [ *
].

 

(ii)                                If
Licensee fails to [ * ], or within the Extended Deadline, than the licenses set
forth in Section 2.1 for that particular Licensed Product shall terminate and
be no longer valid, unless Licensee shall have earlier demonstrated to the
satisfaction of the University that there is a valid cause for delaying the [ *
].

 

(c)                                  UNIVERSITY
agrees to provide existing back-up data and documentation as may be required by
regulatory agencies for purposes of supporting applications under government
review.

 

(d)                                  LICENSEE
shall advise UNIVERSITY, through [ * ] reports to be provided [ * ] pursuant to
Section 5.2 below, of its program of development for and status of obtaining
said approvals.

 

ARTICLE 4

PAYMENTS

 

4.1                               For
the rights, privileges and licenses granted hereunder, LICENSEE shall pay to
the UNIVERSITY, in the manner hereinafter provided, until the end of the last
to expire patent of the Patent Rights on a country by country basis or until
this Agreement shall be terminated, as hereinafter provided, whichever occurs
first:

 

(a)                                  a
royalty in an amount equal to [ * ] of the aggregate Net Sales by LICENSEE or
any Affiliate of the Licensed Products or Licensed Processes;

 

(b)                                  a
[ * ] payments received by LICENSEE from sublicensees, based on Net Sales of
Licensed Products or Licensed Processes by sublicensees, exclusive of [ * ]
covered by Section 4.1(c) below; and

 

(c)                                  a
[ * ]. No payments will be made under this Section 4.1(c) to the extent already
covered under Section 4.1(b).

 

4.2                               In
the event a competitive product is sold in a country by an unlicensed
thirdpart, and such third party’s activities demonstrably diminish LICENSEE’s
capability to compete in the market, UNIVERSITY agrees to meet with LICENSEE to
negotiate a reduction of royalties due for sales in that country, provided
LICENSEE provides to the UNIVERSITY, prior to such meeting, [ * ].

 

4.3                               Only
one royalty shall be payable with respect to any unit of Licensed Product
regardless of whether it is covered by more than one of the Patent Rights
patent applications or Patent Rights patents licensed under this Agreement, or
to be covered in more than one subsection of Section 4.1 hereof.

 

4.4                               Royalty
payments shall be paid quarterly within [ * ] of the close of each calendar
quarter ending March 31, June 30, September 30 and December 31, in United
States dollars in Chicago, Illinois,

 

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

 

4

 

or at such other place as UNIVERSITY may reasonably
designate consistent with the laws and regulations controlling in any foreign
country, but not in any other currency. If any currency conversion shall be
required in connection with the payment of royalties hereunder, such conversion
shall be made by using the exchange rate prevailing at [ * ] on the last
business day of the calendar quarterly reporting period to which such royalty
payments relate.

 

4.5                               Any
taxes required to be paid or withheld on account of amounts payable to
UNIVERSITY under this Agreement shall be deducted from the amounts due pursuant
to Section 4.1 at the rates specified by applicable law or treaty. LICENSEE
shall provide to UNIVERSITY, as soon as practical, receipts of payment of any
such taxes from the appropriate taxing authority.

 

4.6                               In
the event that the LICENSEE’s, the Affiliates or its Sublicensees development,
manufacture, use or sale of a Product would constitute an infringement of any
patent right or intellectual property right of any third party, the Parties
shall together use their reasonable endeavors to obtain an appropriate license
from such third party. If such license requires LICENSEE to pay royalties to
such third party, the royalty due and payable to the University under this
Agreement for sale of the Product shall be reduced by [ * ] the amount which
the Licensee is required to pay to said third party, provided that no royalty
due to the University hereunder shall be reduced by more than [ * ].

 

ARTICLE 5

REPORTS AND RECORDS

 

5.1                               LICENSEE
shall keep full, true and accurate records pertaining to the sale or other
disposition of the Licensed Products or Licensed Processes in sufficient detail
as may be necessary to show the amounts payable to UNIVERSITY hereunder. Said
records shall be kept at LICENSEE’s principal place of business. For the term
of this Agreement, upon receipt of [ * ] prior written notice, UNIVERSITY shall
have the right to cause an independent, certified public accountant to audit
such records to confirm LICENSEE’s, affiliate’s and sublicensee’s Net Sales and
royalty payments and all other payments or exchanges related to Patent Rights
for the preceding year at UNIVERSITY’s expense. Such audits may be exercised
during normal business hours once a year.

 

5.2                               LICENSEE,
within [ * ] after [ * ] of each year, shall deliver to UNIVERSITY true and
accurate reports, giving such particulars of the business conducted by LICENSEE
and its sublicensees during the preceding [ * ] period under this Agreement as
shall be pertinent to a royalty accounting hereunder. These shall include at
least the following, to be itemized per Licensed Product or Licensed Process:

 

(a)                                  number
of Licensed Products commercially used, manufactured and sold, rented or
leased;

 

(b)                                  total
billings for Licensed Products and Licensed Processes commercially used, sold,
rented or leased;

 

(c)                                  deductions
applicable as provided in Paragraph 1.8.

 

(d)                                  total
royalties due;

 

(e)                                  [
* ];

 

(f)                                    [
* ].

 

(g)                                 [
* ]; and

 

(h)                                 [
* ].

 

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

 

5

 

5.3                               If
no royalties shall be due, LICENSEE shall so report.

 

ARTICLE 6

PATENT MAINTENANCE, ENFORCEMENT AND DEFENSE

 

6.1                               Subject
to this Article VI, UNIVERSITY shall control all decisions and activities
related to the preparation, pursuit, filing, issuance, maintenance, enforcement
and prosecution of the Patent Rights. UNIVERSITY shall diligently take all
reasonable steps to obtain issuance of pending patent application(s) included
in the Patent Rights in the name of The Board of Trustees of the University of
Illinois. UNIVERSITY shall promptly provide LICENSEE with copies of all
relevant documentation so that LICENSEE may be informed and appraised of the
status of the Patent Rights at all times. The parties shall coordinate and
communicate with each other during the term of this Agreement with respect to
the filing and prosecution of patent applications and foreign counterparts
thereto in respect of any invention in order to promote comprehensive
cost-efficient patent coverage. UNIVERSITY agrees it will not abandon any
patent application or issued patent if LICENSEE desires to continue prosecution
or maintenance, provided LICENSEE is not in default of its payment obligations
hereunder.

 

6.2                               UNIVERSITY
shall use its best efforts to amend any patent application to include claims
reasonably requested by LICENSEE and required to protect the Licensed Products
contemplated to be sold under this agreement.

 

6.3                               LICENSEE
shall be responsible for and pay all costs and expenses incurred by UNIVERSITY
for the preparation, filing, prosecution, issuance, and maintenance of the
Patent Rights pre-dating the Effective Date and post-dating the Effective Date
for the term of this Agreement.

 

6.4                               LICENSEE
and UNIVERSITY shall promptly notify the other in writing of any alleged or
threatened infringement of any Patent included in the Patent Rights or claiming
the Invention. Both parties shall use their best efforts in cooperating with
each other to terminate such infringement without litigation. LICENSEE shall
have the first right to bring and control any action or proceeding with respect
to such infringement at its own expense and by counsel of its own choice, and UNIVERSITY
shall have the right, at its own expense, to be represented in any action
involving any Patent Rights by counsel of its choice. If LICENSEE fails to
bring an action or proceeding within (i) [ * ] following the notice of alleged
infringement or (ii) [ * ] before the time limit, if any, set forth in the
appropriate laws and regulations for the filing of such actions, whichever
comes first, UNIVERSITY shall have the right to bring and control any such
action at its own expense and by counsel of its own choice, and LICENSEE shall
have the right, at its own expense, to be represented in any such action by
counsel of its own choice. In the event a party brings an infringement action,
the other party shall cooperate fully, including if required to bring such
action, the furnishing of a power of attorney. Neither party shall have the
right to settle any patent infringement litigation under this Section 6.4 in a
manner that diminishes the rights or interests of the other party without the
consent of such other party, which consent shall not be unreasonably withheld. All
costs of any action to enforce the Patent Rights taken by LICENSEE shall be
borne by LICENSEE and LICENSEE shall keep any recovery of damages derived
therefrom, [ * ]. All costs of any action to enforce the Patent Rights taken by
UNIVERSITY shall be borne be UNIVERSITY and UNIVERSITY shall share with
LICENSEE any recovery of damages derived therefrom on a pro rata basis per
costs incurred by UNIVERSITY and LICENSEE respectively in such policing
activity.

 

6.5                               LICENSEE,
during the exclusive period of this Agreement, shall have the sole right in
accordance with the terms and conditions herein to sublicense any alleged
infringer for future use of the Patent Rights, with any royalty covered by Section
4.1 above to be paid to UNIVERSITY as required.

 

6.6                               LICENSEE
and UNIVERSITY shall promptly notify the other in writing of any allegation by
a third party that the activity of either of the parties infringes or may
infringe the intellectual property rights on such third party. LICENSEE shall
defend the claim at its own expense and by counsel of its own choice including,
without limitation, the right to settle, compromise or otherwise pursue such
defense in any manner and on such terms as LICENSEE shall determine. UNIVERSITY
agrees to provide

 

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

 

6

 

assistance to LICENSEE as may be reasonably necessary
or appropriate to pursue such actions. If LICENSEE fails to proceed with regard
to such defense within (i) [ * ] following the notice of alleged infringement
or [ * ] before the time limit, if any, set forth in the appropriate laws and
regulations for the filing of such actions, whichever comes first, or otherwise
elects not to defend such a claim, UNIVERSITY shall have the right to defend
the claim at its own expense and by counsel of its choice including, without
limitation, the right to settle, compromise or otherwise pursue such defense in
any manner and on such terms as UNIVERSITY shall determine. [ * ] of the
royalty payments due from LICENSEE to UNIVERSITY hereunder shall be placed in
escrow pending a resolution of the action. If it is determined by judgment or
settlement that LICENSEE is required to make payments to said third party in
order to continue to market, distribute or sell or otherwise use the Licensed
Products, than any such payments owing to such third party shall be credited
and offset against the escrowed royalty payments and LICENSEE may, at its
option, terminate this Agreement pursuant to Section 13.2.

 

ARTICLE 7

CONFIDENTIALITY

 

7.1                               During
the term of this Agreement and for a period of [ * ] after termination thereof,
each party will maintain all Confidential Information in trust and confidence
and will not disclose any Confidential Information to any third party or use
any Confidential Information for any purpose except as expressly authorized by
this Agreement. Each party may use such Confidential Information only to the
extent required to accomplish the purposes of this Agreement, including
sublicensing. Each party will use the highest standard of care to protect
Confidential Information and to ensure that its employees, agents, consultants
and other representatives or, in the case of the UNIVERSITY, students, do not
disclose or make any unauthorized use of the Confidential Information. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.

 

7.2                               Confidential
Information shall not include information that:

 

(a)                                  is
now, or hereafter becomes, through no act or failure to act on the part of the
receiving party, in the public domain or published;

 

(b)                                  is
in possession of the receiving party at the time of receiving such information,
as evidenced by its prior written records;

 

(c)                                  is
hereafter furnished to the receiving party by a third party, as a matter of
right and without restriction on disclosure; or

 

(d)                                  is
required by law or a court order to be disclosed or is the subject of a written
permission to disclose provided by the disclosing party.

 

7.3                               Notwithstanding
the above, a party may disclose Confidential Information of the other party:

 

(a)                                  to
potential sublicensees to the extent such disclosure is reasonably necessary
and provided sublicensee personnel are bound by obligations of confidentiality
no less restrictive than those provided hereunder; or

 

(b)                                  if
required by law or a court order to be disclosed or is the subject of a written
permission to disclose provided by the disclosing party; to regulatory agencies
in order to obtain registrations required; and to professional advisors,
consultants and/or potential investors in connection with a private placement
or public offering.

 

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

 

7

 

ARTICLE 8

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

8.1                               Each
party hereby represents and warrants that such party is duly organized and
validly existing under the laws of the state of its incorporation and has full
power and authority to enter into this Agreement and to carry out the
provisions hereof.

 

8.2                               Each
party hereby represents and warrants that such party is duly authorized to
execute and deliver this Agreement and to perform its obligations hereunder and
that this Agreement is a legal and valid obligation binding upon each party,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court, governmental
body or administrative or other agency having authority over it.

 

8.3                               UNIVERSITY
hereby represents that, to the best of its knowledge, no University patents or
patent applications, other than the rights granted to LICENSEE hereunder to the
Patent Rights, conflict with the representations and rights given to LICENSEE
under this Agreement.

 

ARTICLE 9

INDEMNIFICATION, PRODUCT LIABILITY

 

9.1                               LICENSEE
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold UNIVERSITY, its trustees, officers, employees and affiliates,
harmless against all claims, expenses, damages or liability (collectively, the “Losses”)
including legal expenses and reasonable attorneys’ fees, resulting from the
production, manufacture, sale, use, lease, consumption or advertisement of the
Licensed Product(s) or arising from any obligation of LICENSEE hereunder,
except to the extent that such Losses result from UNIVERSITY’s gross negligence
or willful misconduct.

 

9.2                               For
the term of this Agreement, upon the commencement of production, sale, or
transfer, whichever occurs first, of any Licensed Product, LICENSEE shall
obtain and carry in full force and effect liability insurance which shall
protect LICENSEE and UNIVERSITY in regard to events covered by Section 8.1
above, the nature and extent of which insurance coverage shall be commensurate
with usual and customary industry practices, as determined by LICENSEE’s good
faith assessment.

 

9.3                               Except
as otherwise expressly set forth in this Agreement, UNIVERSITY AND SPONSOR MAKE
NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING.

 

ARTICLE 10

EXPORT CONTROLS

 

It is understood that UNIVERSITY is subject to United
States laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities (including the Arms
Export Control Act, as amended and the Export Administration Act of 1979), and
that its obligations hereunder are contingent on compliance with applicable
United States export laws and regulations. The transfer of certain technical
data and commodities may require a license from the cognizant agency of the
United States Government and/or written assurances by LICENSEE that LICENSEE
shall not export data or commodities to certain foreign countries without prior
approval of such agency. UNIVERSITY neither represents that a license shall not
be required nor that, if required, it shall be issued, but shall provide to

 

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

 

8

 

LICENSEE reasonable
assistance for determining the need for and the procuring of such license or
other consent. LICENSEE agrees to comply with all applicable export and import
control laws governing sales of Licensed Products and Licensed Processes.

 

ARTICLE 11

NON-USE OF NAMES

 

LICENSEE shall not use the names of the University of
Illinois nor any of its employees, nor any adaptation thereof, in any
advertising, promotional or sales literature without prior written consent
obtained from UNIVERSITY in each case, except that LICENSEE may state that it
is licensed by UNIVERSITY under one or more of the Patents comprising the Patent
Rights and, if appropriate, that research related to the INVENTION or Patent
Rights is ongoing at UNIVERSITY.

 

ARTICLE 12

ASSIGNMENT

 

12.1                        This
Agreement may not be assigned by LICENSEE other than to QBI Enterprises Ltd.,
an Israeli limited liability company and a subsidiary of LICENSEE, without
prior written consent from UNIVERSITY.

 

12.2                        Notwithstanding
the foregoing prohibition, LICENSEE may, without UNIVERSITY’s consent, merge
into, consolidate with, or transfer substantially all of its assets (“substantially”
being respectively [ * ] or more thereof) as an entirety to any corporation, so
long as the successor surviving corporation in any such merger, consolidation,
transfer or reorganization assumes in writing the obligations of this Agreement.
Such merger, consolidation, transfer or reorganization shall not in any way be
a breach of this Article XII, nor be any default under this Agreement.

 

ARTICLE 13

TERMINATION

 

13.1                        Either
party may terminate this Agreement upon [ * ] written notice upon the occurrence
of any of the following:

 

(a)                                  Upon
or after the bankruptcy, insolvency, dissolution or winding-up of the other
party (other than dissolution or winding-up for the purposes of reconstruction
or amalgamation); or

 

(b)                                  Upon
or after the breach of any material provision of this Agreement by the other
party if the breaching party has not cured such breach within [ * ] following
written notice of termination by the other party.

 

13.2                        LICENSEE
shall have the right to terminate this Agreement with or without cause at any
time upon [ * ] advance written notice to UNIVERSITY subject to LICENSEE’s
remittance of payments that may be due under this Agreement up to the effective
date of termination. All rights granted to LICENSEE hereunder shall revert to
UNIVERSITY upon the effective date of such termination.

 

13.3                        Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination. LICENSEE shall return to UNIVERSITY all materials
containing Licensed Product (exclusive of materials relating to Sponsor
Existing Technology); provided, however, that LICENSEE shall have the right for
one year thereafter to dispose of all Licensed Products then in its inventory,
and shall pay royalties thereon, in accordance with the provisions of Article
IV and shall submit the related reports as required by Article V, as though
this Agreement had not terminated. Each party shall, promptly upon termination,
return to the

 

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

 

9

 

other party Confidential Information received from the
other party and still subject to obligations of confidentiality hereunder, and
neither party shall thereafter be entitled under this Agreement to use any such
Confidential Information of the other party for any purpose.

 

ARTICLE 14

DISPUTE RESOLUTION

 

Other than any claim arising from LICENSEE’s failure
to pay royalties due under this Agreement, any controversy or bonafide disputed
claim arising under this Agreement between the parties, which dispute cannot be
resolved by mutual agreement, shall, by the election of either party, be
resolved by submitting to dispute resolution before a fact-finding body
composed of one or more experts in the field, selected by mutual agreement
within thirty days of written request by either party. Said dispute resolution
shall be held in Chicago or at such other place as shall be mutually agreed
upon in writing by the parties. The fact-finding body shall determine who shall
bear the cost of said resolution. In the event that the parties cannot mutually
agree within said thirty (30) days on the dispute resolution body, the parties
will apply the procedural rules of a mutually agreeable forum.

 

ARTICLE 15

PAYMENTS, NOTICES AND OTHER COMMUNICATIONS

 

Any payment, notice or other communication pursuant to
this Agreement shall be sufficiently made or given on the date of receipt if
sent to such party by telefax or overnight courier, or on the date three days
after mailing if sent by certified mail, postage prepaid, addressed to it at
its address below or as it shall designate by written notice given to the other
party:

 

In the case of
UNIVERSITY:

 

Intellectual Property Office

Office of the Vice Chancellor of Research

University of Illinois at Chicago

1737 West Polk Street, 312 AOB (M/C 672)

Chicago, Illinois 60612

ATTN: Director, Intellectual Property Office

 

In the case of LICENSEE:

 

Quark Biotech, Inc.

c/o QBI Enterprises, Ltd.

Weizmann Scientific Park

Building 3, 4th Floor

P. O. Box 741

Nes Ziona, Israel 74106

ATTN: Daniel Zurr, President & CEO

FAX: 011-972-8-940-6476

 

ARTICLE 16

MISCELLANEOUS PROVISIONS

 

16.1                        This
Agreement shall be construed, governed, interpreted and applied in accordance
with the laws of the State of Illinois, U.S.A., except that questions affecting
the construction and effect of any patent shall be determined by the law of the
country in which the patent was granted.

 

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

 

10

 

16.2                        The
parties hereto acknowledge that this Agreement together with the Research
Agreement set forth the entire Agreement and understanding of the parties
hereto as to the subject matter hereof, and shall not be subject to any change
or modification except by the execution of a written instrument subscribed to
by the parties hereto.

 

16.3                        The
provisions of this Agreement are severable, and in the event that any
provisions of this Agreement shall be determined to be invalid or unenforceable
under any controlling body of the law, such invalidity or unenforceability
shall not in any way affect the validity or enforceability of the remaining
provisions hereof.

 

16.4                        LICENSEE
agrees to mark the Licensed Products sold in the United States with all
applicable United States patent numbers. All Licensed Products shipped to or
sold in other countries shall be marked in such a manner as to conform with the
patent laws and practice of the country of manufacture or sale.

 

16.5                        The
failure of either party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall not constitute a
waiver of that right or excuse a similar subsequent failure to perform any such
term or condition by the other party.

 

16.6                        This
Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be an original and all such counterparts
shall together constitute but one and the same agreement.

 

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

 

11

 

IN WITNESS WHEREOF, the parties
have hereunto set their hands and seals and duly executed this Agreement the
day and year set forth below.

 

THE BOARD OF TRUSTEES OF THE
UNIVERSITY OF ILLINOIS

 

 

	
  By:

  	
  /s/
  Craig S. Bazzani

  	
   

  	
  Date:

  	
  9/1/99

  	
   

  
	
    Craig
  S. Bazzani, Comptroller

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
    /s/
  Michele M. Thompson          9/2/99

  	
   

  	
  Date:

  	
  APPROVED:

  	
   

  
	
   

  	
  Michele
  M. Thompson, Secretary

  	
   

  	
  /s/
  Jill A. Tarzian Sorensen

  	
   

  	
  9-1-99

  	
   

  
	
   

  	
   

  	
  Jill A. Tarzian Sorensen

  	
  Date

  
	
   

  	
   

  	
  Director

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Intellectual Property Office

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  QUARK
  BIOTECH, INC.

  	
  Date:

  	
  9.3.99

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Daniel Zurr

  	
   

  	
   

  	
   

  
	
   Dr. Daniel Zurr, President and CEO

  	
   

  	
   

  
														

 

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

 

12

 

APPENDIX A

RESEARCH AGREEMENT

 

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

 

13

 

RESEARCH
AGREEMENT

 

This Research Agreement is entered into as of
September 1, 1999 (“Effective
Date”) by and between The Board of Trustees of The University of
Illinois, a body corporate and politic of the State of Illinois, with principal
offices at Urbana, Illinois, and offices in Chicago, Illinois 60612 (“University”), and
Quark Biotech, Inc., a California corporation with principal offices at 1059
Serpentine Lane, Pleasanton, California 94566 (“Sponsor”).

 

WHEREAS, the University and Sponsor desire to
undertake a collaborative research program (“Research Program”) based on application
of Existing Technologies (as defined in Schedule I); and

 

WHEREAS, the Research Program is to be funded by
Sponsor and carried out, in part, in the University’s laboratories pursuant to
the terms and conditions set forth herein, and in part in the Sponsor’s
laboratories.

 

NOW, THEREFORE, in consideration of the premises
hereof and the mutual covenants and agreements contained herein, the parties
hereto agree as follows:

 

1.                                      STATEMENT
OF WORK

 

a.                                       Objectives. The University and the
Sponsor shall collaborate in the research according to this Agreement directed
towards [ * ], based on p53 gene [ * ].

 

b.                                       Resource Commitment. The
University shall, with the funds and/or equipment and/or technology made
available by the Sponsor, furnish the necessary and appropriate personnel,
materials, services, laboratories and other facilities and equipment for the
conduct of its part of the work and initial Research Program (“Program”) described
in Schedule II hereto and incorporated herein by reference. The Program may be
amended or modified from time to time as the parties shall mutually agree. The
University and Sponsor shall each permit the other party and any of its
personnel to visit the laboratories or other facilities where the Research
Program is being conducted at reasonable times and make all personnel who are
engaged in the Research Program available to consult with the other party and
any of its personnel during such visits or by telephone and/or by
correspondence during the term of the Research Program.

 

c.                                       Conduct of Research. The Research
Program shall be conducted in accordance with the Program and the Budget (as
defined below) within the time periods contemplated therein as set forth in
Schedule II(a) and (b) respectively. The Sponsor and the University agree to
commence performance of the Research Program within [ * ] of the Effective Date
hereof and each agrees to conduct the Research Program in a prudent and
skillful manner in accordance [ * ] with the Program and Budget and all
applicable federal, state and local laws, rules or regulations, and subject to
the terms and conditions hereof. With respect to the Research Program set forth
in Schedule II(a), Sponsor agrees that the University will [ * ] provided that,
(i) Sponsor shall, [ * ]; (ii) the University shall [ * ]; and (iii) Sponsor [
* ].

 

2.                                      PRINCIPAL
INVESTIGATOR. All research at the University in the subject matter of the
Research Program shall be performed by Dr. Andrei Gudkov, as Principal
Investigator, and the research team under his supervision, and subject to this
Agreement. The University hereby

 

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

 

14

 

assigns Dr. Andrei Gudkov
as the Principal Investigator for directing the performance of the Research
Program. The University shall notify Sponsor immediately if such Principal
Investigator becomes unavailable and shall identify a successor, subject to
Sponsor’s approval. If Sponsor does not approve the successor identified by the
University or the University does not or cannot identify a successor, this
Agreement may be terminated by Sponsor subject to Section 13 hereof.

 

3.                                      PERIOD
OF PERFORMANCE.

 

a.                                       Term of Research Program. The
period of performance of the Research Program set forth in Schedule II(a) will
be three (3) years, commencing on September 1, 1999, and ending on August 31,
2002. The period of performance of the Research Program set forth in Schedule
II(b) will be one (1) year, commencing on September 1, 1999, and ending on
August 31, 2000. The term of the Research Program may be extended upon mutual
written consent.

 

b.                                       Sponsor’s Right to Terminate Research Program.
The Research Program may be terminated at any time prior to its expiration if
Sponsor determines, at its sole discretion, that the Research Program is no
longer viable or commercially feasible. In such case. Sponsor will notify
University of that decision in writing, and the parties will work together to
(i) [ * ].

 

4.                                      RESEARCH
PROGRAM FUNDING.

 

a.                                       Budget. The Sponsor will pay the
University up to the amounts set forth in the budget attached hereto as
Schedule III and incorporated herein by reference (“Budget”), which
Budget shall reflect the actual costs incurred in carrying out the performance
of this Agreement plus the indirect costs assessed at the rate(s) agreed to by
the parties. The University shall certify in writing, upon presentment of each
Report (as defined below) that work as budgeted has been actually performed and
that the University is in fact complying with all other provisions of this
Agreement, and shall provide Sponsor with a written expense report for all
amounts expended, pursuant to the Budget during the previous quarterly period. The
aggregate annual cost under this Agreement shall not exceed the amount stated
therefor in the Budget. The University is not obligated to expend any other
funds on the Program nor is the Sponsor obligated to pay the University in
excess of the stated amount set forth in the Budget, or to otherwise increase
the Budget. The University, together with the Principal Investigator, shall be
responsible for the correct and appropriate distribution and/or allocation of
the funds in accordance with the Budget.

 

b.                                       Payments. The University shall be
reimbursed within [ * ] after it submits its quarterly Report and expense
report pursuant to Section 5(a) to Sponsor for costs incurred during the
previous quarter with final payment to the University due upon Sponsor’s
receipt of a final Report, marked as such, from the University no later than [
* ] after the expiration of the term of the Research Program. Payments shall be
by check payable to the University of Illinois, and mailed to:

 

University of Illinois at Chicago

Office of Research Services

304 AOB, M/C 672

1737 W. Polk Street

Chicago, Illinois 60612-7227

ATTN:  Paula
Means, Director

 

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

 

15

 

c.                                       Equipment. Subject to Schedule II,
[ * ] under this Agreement.

 

5.                                      FISCAL MANAGEMENT. The University shall maintain
complete and accurate accounting records in accordance with accepted accounting
practices for institutions of higher education. These records shall be
available for inspection, review and audit at reasonable times during the term
of this Agreement and for a period of [ * ] after the termination hereof by the
Sponsor or any of its duly authorized representatives, at Sponsor’s expense.

 

6.                                      WORK
PRODUCT. Subject to the provisions
of Section 8 herebelow, each party shall own the work product, tangible and
intangible, that it generates under this Agreement, and shall maintain records
of its activities with respect to the Research Program in sufficient detail so
as to properly reflect all work done and results achieved in the performance of
the Research Program. Each party shall have reasonable access to all materials
and data generated by or on behalf of the other party with respect to any and
all work carried out under the Research Program, for each party’s internal,
non-commercial use, not including work product licensed by Sponsor from
University hereunder, subject to the confidentiality obligations in Section 9
hereof.

 

7.                                      REPORTS. The
University and Sponsor, as collaborators in the Research Program, shall each provide
to the other party a written report within [ * ] after the end of each calendar
quarter, commencing after the end of the first full calendar quarter following
the Effective Date of this Agreement, summarizing the progress and status of
the Program set forth in Schedule II(a) (each, a “Report”). Within [ * ] following the end of the
term of the Research Program set forth in Schedule II(a), the University
and Sponsor will each furnish to the other party a final technical Report
summarizing the work performed pursuant to the Program and the results thereof.

 

8.                                      INTELLECTUAL
PROPERTY.

 

a.                                       Ownership of Technology. It is
hereby acknowledged and agreed that each party has rights (including patent and
other intellectual property rights) to certain technologies related to the
Research Program (“University
Existing Technology” as defined in Schedule I(a) hereto, and “Sponsor Existing Technology”
as defined in Schedule I (b) hereto, collectively the “Existing Technologies”),
and each party acknowledges that it does not have nor shall have any rights,
title or interest to the other party’s Existing Technology. With the exception
of the Existing Technologies, Sponsor and University agree that each shall
notify the other of inventions, discoveries and intellectual property
conceived, reduced to practice or otherwise developed under the Research
Program (i) by the Principal Investigator and his personnel (“UIC Invention”);
(ii) by Sponsor and its personnel at its laboratories in connection with
the Research Program set forth in Schedule II(a) (“Sponsor Invention”);
or (iii) jointly by personnel of the Sponsor and the Principal Investigator and
his personnel under the Research Program (“Joint Inventions”), collectively referred to
as “Inventions”.

 

b.                                       Notification of Inventions and Discoveries.
Each party shall promptly notify the other in writing of any Invention within [
* ] of such discovery. Disclosure to and from University shall be made by
filing of an Invention Disclosure statement with the University’s

 

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

 

16

 

Intellectual Property
Office. Copy of each such Invention Disclosure statement and the respective
application filed with the patent office shall be sent promptly to Sponsor. All
disclosures and notifications made pursuant to this clause 8(b) shall be deemed
Confidential Information, as defined below, and subject to the provisions
respecting confidentiality in Section 9 below.

 

c.                                       License. The University hereby
grants the Sponsor (i) an exclusive worldwide license to the University’s right,
title and interest in the UIC Invention set forth in the Exclusive License
Agreement between the University and Sponsor dated as of the date hereof and
attached hereto as Exhibit A (“License A”), and (ii) an exclusive option to obtain
exclusive worldwide licenses to the University’s right, title and interest in
any other UIC Invention or Joint Invention disclosed. Such option shall be for
a [ * ] period, commencing with the date the notification of such Invention is
received by Sponsor, and shall be exercised in writing by Sponsor, at which
time the parties agree to execute license agreements (“License B”) in the
same form and of the same terms and conditions as the Future Exclusive License
Agreement attached hereto as Exhibit B.

 

d.                                       Patents. University shall control
the preparation, filing, issuance, maintenance and prosecution of any U.S. or
foreign patent application, including any division, continuation,
continuation-in-part and substitution thereof, and any U.S. or foreign patent,
including any reexamination, reissue, renewal, extension, confirmation,
registration, revalidation and addition thereof with respect to any UIC
Invention (the “UIC
Patents”). Sponsor shall control the preparation, filing,
issuance, maintenance and prosecution of any U.S. or foreign patent
application, including any division, continuation, continuation-in-part and
substitution thereof, and any U.S. or foreign patent, including any
reexamination, reissue, renewal, extension, confirmation, registration,
revalidation or addition thereof with respect to any Joint Invention (the “Joint Patents”). The
party controlling patenting shall be free to decide in its sole discretion
whether or not to file or continue prosecution or maintain any patent and shall
engage counsel of its choice and at its expense to prepare, file, prosecute and
maintain any such patents, in full consultation with the other party. The party
controlling patenting shall communicate and coordinate with the other party its
preparation, filing and prosecution of patent applications and shall provide
the other party with copies of draft patent applications in sufficient time for
the other party to comment thereon prior to filing, and shall give proper
attention to any comments offered by the other party in preparing the final
draft of the application for submission. The controlling party shall use its
best efforts to amend any patent application to include claims reasonably
requested by the other party and required to protect the UIC Inventions or
Joint Inventions. The controlling party shall promptly provide the other party
with copies of all relevant documentation and shall promptly share all patent
filing and prosecution information, including notifying the other party of all
filing and response deadlines so that the other party may be informed and
appraised of the continuing prosecution, and the other party agrees to keep
this documentation confidential. Should the controlling party elect not to
prepare, file, prosecute or maintain a patent or discontinues its support of
any of these activities, it shall promptly notify the other party but in no
event later than [ * ] predating any response, filing or abandonment deadline,
and the other party shall be free to decide, in its sole discretion and at its
expense, whether or not to support or continue any such activities. The
controlling party agrees to [ * ] promptly upon written request from the other
party after it receives notice from the controlling

 

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

 

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party of its intention to
abandon any patent rights in whole or in part, subject to any pre-existing
rights of the federal government.

 

9.                                      CONFIDENTIALITY.

 

a.                                       Confidential information. During
the course of the Research Program, the parties may each reveal to the other
(i) any proprietary or confidential information or material in tangible form
disclosed hereunder that is marked as “Confidential” at the time it is
delivered to the receiving party, (ii) any proprietary or confidential
information disclosed orally hereunder that is identified as confidential or
proprietary when disclosed and such disclosure is confirmed in writing to the
receiving party within 30 days by the disclosing party, and (iii) any
information concerning the existence of this Agreement or its terms or the
Research Program (including the Program, the Budget and any information or data
generated pursuant thereto) (collectively, “Confidential Information”). Except
as expressly provided herein, the parties agree that during the term of the
Research Program and for a period of [ * ] thereafter, neither party shall use
or disclose Confidential Information to any third party except for the purposes
contemplated in this Agreement and the License. Notwithstanding the foregoing,
the parties agree that Confidential Information useful or necessary for the
conduct of the Program may be disclosed to the Principal Investigator and the
authorized personnel working under his direct supervision and to Sponsor’s
personnel in the course of conducting the Research Program, subject to such
individuals being bound by confidentiality restrictions at least as restrictive
as those herein.

 

b.                                       Protection of Confidential Information. Sponsor
and University agree to protect all Confidential Information received from the
other party from unauthorized use or disclosure with the highest degree of care
and shall not copy or disseminate any Confidential Information or allow it to
be copied or disseminated and shall return any Confidential Information given
to it when requested to do so. Each party shall promptly notify the other upon
discovery of any unauthorized use or disclosure of the other’s Confidential
Information. The University shall cause the Principal Investigator and each
individual working under his supervision with respect to the Research Program
(including any graduate or other students and whether or not such individuals
are employees of the University) to execute and deliver appropriate
Non-Disclosure Agreements in the form attached hereto as Exhibit C. No
individual shall be permitted to work on the Research Program unless he/she has
executed such agreement.

 

c.                                       Exceptions. Confidential
Information shall not include any information that (i) is now, or hereafter
becomes, through no act or failure to act on the part of the receiving party,
in the public domain or published; (ii) is in the possession of the receiving
party prior to disclosure by the disclosing party, as evidenced by its written
records; or (iii) is hereafter furnished to the receiving party by a third
party, as a matter of right and without restriction on disclosure.

 

d.                                       Permitted Disclosures. Notwithstanding
the above, a party may disclose Confidential Information of the other party:

 

(i)                                    to
its personnel to the extent such disclosure is reasonably necessary to achieve
the objectives of the Program and provided such personnel are bound by
obligations of confidentiality no less restrictive than those provided
hereunder;

 

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

 

18

 

(ii)                                to
potential sublicensees to the extent such disclosure is reasonably necessary and
provided sublicensee personnel are bound by obligations of confidentiality no
less restrictive than those provided hereunder;

 

(iii)                            if
required by law or a court order to be disclosed or is the subject of a written
permission to disclose provided by the disclosing party; to regulatory agencies
in order to obtain registrations required; and to professional advisors,
consultants and/or potential investors in connection with a private placement
or public offering.

 

10.                               PUBLICATION;
PUBLICITY. University shall have the right to publish or otherwise present
the results of the Research Program at symposia or academic meetings; provided
that it first submit all proposed publications and presentations to the Sponsor
[ * ] prior to submission of such proposed publication or presentation to a
journal, editor or other third party. Sponsor shall have [ * ] after the
receipt of the publication or presentation to review and comment upon it. Upon
notice by Sponsor that Sponsor reasonably believes a patent application relating
to an Invention should be filed prior to the publication or presentation or
that exigent circumstances exist necessitating a delay in publication or
presentation. Sponsor may request the University to delay and the University
agrees to delay submission of the publication or presentation for up to an
additional [ * ] from the date of Sponsor’s notification to the University or
until a patent application or applications are filed, whichever come first. University
shall give Sponsor appropriate recognition and credit for its contributions in
all such publications and presentations at symposia or meetings including,
without limitation, right of authorship and acknowledgement of QBI’s
sponsorship. Any publicity, including press releases, press conferences or
other disclosures, about the Research Program (including, without limitation,
the establishment of any aspects of the Program, its progress or any results
generated therefrom) shall be permitted only with the prior written approval of
both the Sponsor and the University.

 

11.                               RELATIONSHIP OF PARTIES. The University’s relationship to the Sponsor under this Agreement shall
be that of independent contractor and not as an agent, joint venturer or
partner of Sponsor, notwithstanding the joint ownership by University and
Sponsor of certain Inventions hereunder.

 

12.                               WARRANTIES
AND INDEMNIFICATION. The University and Sponsor disclaim any guaranty that
the Research Program shall be successful, in whole or in part. THE UNIVERSITY
AND SPONSOR EXPRESSLY DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, WITH RESPECT TO THE RESEARCH PROGRAM, INCLUDING BUT NOT
LIMITED TO, THE MARKETABILITY, USE OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE
RESEARCH RESULTS DEVELOPED UNDER THE RESEARCH PROGRAM, OR THAT SUCH RESULTS DO
NOT INFRINGE UPON ANY THIRD PARTY’S INTELLECTUAL PROPERTY RIGHTS. Sponsor
agrees to indemnify and hold harmless the University and its employees and
agents against any and all costs, damages and expenses, including reasonably attorneys’
fees, arising from any claim, damages and liabilities asserted by third parties
arising from Sponsor’s use of the research results from the Research Program,
except to the extent that the same is caused by any negligent or willful act or
omission by or on behalf of the University. The University agrees to be
responsible for any and all costs, damages and expenses, including reasonably
attorneys’ fees, arising from any misrepresentation or breach by University of
any of its covenants hereunder or

 

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

 

19

 

the performance of any of
its obligations under this Agreement, except to the extent that the same, is
caused by any negligent or willful act or omission by or on behalf of the
Sponsor. Notwithstanding anything to the contrary in the foregoing, neither
party assumes any responsibility or liability for the nature, conduct or
results of any research, testing or other work performed by the other party on
such party’s premises.

 

13.                               TERMINATION.

 

a.                                       Termination upon Default. Either
party may terminate this Agreement upon [ * ] written notice upon the
occurrence of any of the following:

 

(i)                                    Upon
or after the bankruptcy, insolvency, dissolution or winding-up of the other
party (other than dissolution or winding-up for the purposes of reconstruction
or amalgamation); or

 

(ii)                                Upon
or after the breach of any material provision of this Agreement by the other
party if the breaching party has not cured such breach within the [ * ]
following written notice of termination by the other party.

 

b.                                       Sponsor’s Right to Terminate. Sponsor
shall have the right to terminate this Agreement (i) upon [ * ] written notice
to the University if Sponsor does not approve of a successor Principal
Investigator or no such successor is identified in accordance with Section 2;
or (ii) upon [ * ] written notice to the University if Sponsor determines that
the Research Program is no longer feasible in accordance with Section 3(b) and
subject to the provisions of Section 3(b).

 

c.                                       Effect
of Termination.

 

(i)                                    In
the event of termination of this Agreement under the provisions of
Section 13(b)(i) hereabove, University shall issue a final Report and,
within [ * ] of receipt thereof, Sponsor shall pay to University the Pro rata portion of any direct or
applicable indirect costs due to the University pursuant to the Budget which
have been incurred up to and including the effective date of termination, or
the University shall reimburse the Sponsor, on a pro rata basis, for any direct or applicable indirect costs
that have been prepaid by Sponsor and which cover costs that have not been
incurred by or at the time of termination. The termination of this Agreement
under Section 13(b)(i) shall not relieve any party of any obligation or
liability accrued hereunder prior to such termination nor affect or impair the
rights of any party arising under this Agreement prior to and as of such
termination including, without limitation, the right of Sponsor to obtain an
exclusive license to Inventions and related patent and other intellectual
property rights pursuant to the terms hereof. Any termination or cancellation
of this Agreement or the Research Program under Section 13(b)(i) shall not
terminate or cancel the License A or any License B executed, or options
exercised for Inventions disclosed pursuant to Sections 8(b) and 8(c) above,
prior to such termination. Without limiting the foregoing, Sections 7, 8, 9 and
12 shall survive termination of this Agreement as provided therein.

 

(ii)                                In
the event of termination of this Agreement under the provisions of Section
13(b)(ii) hereabove, University shall issue a final Report. The termination of
this Agreement under Section 13(b)(ii) shall not relieve any party of any
obligation or liability

 

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

 

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accrued hereunder prior
to such termination nor affect or impair the rights of any party arising under
this Agreement prior to and as of such termination including, without
limitation, the right of Sponsor to obtain an exclusive license to Inventions
and related patent and other intellectual property rights pursuant to the terms
hereof. Any termination or cancellation of this Agreement or the Research
Program hereunder shall not terminate or cancel the License A or any License B
executed, or options exercised for Inventions disclosed pursuant to Sections
8(b) and 8(c) above, prior to such termination, with the exception that
termination of the Research Program under the provisions of Section 3(b)(i) or
3(b)(iii) will result in termination or cancellation of all options exercised
for Inventions disclosed pursuant to Sections 8(b) and 8(c) above for which
license agreements have not been executed. Without limiting the foregoing,
Sections 7, 8, 9 and 12 shall survive termination of this Agreement as provided
therein.

 

14.                               AMENDMENTS.
This Agreement, together with the License and the Schedules and Exhibits
attached hereto, embodies the entire understanding of the parties and shall
supersede all previous communication, either verbal or written, between the
parties relating to this Agreement. This Agreement may only be amended by the
mutual written agreement of the parties hereto.

 

15.                               ASSIGNMENT.
This Agreement may not be assigned by either party without the prior
written consent of the other; provided, however, that Sponsor may assign its
rights, interest and obligations under this Agreement at any time and without
the University’s consent, to QBI Enterprises, Ltd., an Israeli limited
liability company and a subsidiary of Sponsor.

 

16.                               GOVERNING
LAW. This Agreement is to be governed by and construed in accordance with
the laws of the State of Illinois.

 

17.                               NOTICES. Any payment, notice or
other communication pursuant to this Agreement shall be sufficiently made or
given on the date of receipt if sent to such party by telefax or overnight
courier, or on the date three days after mailing if sent by certified mail,
postage prepaid, addressed to it at its address below or as it shall designate
by written notice given to the other party:

 

In the case of UNIVERSITY:

 

University of Illinois at Chicago

Office of Research Services

304 AOB, M/C 672

1737 W. Polk Street

Chicago, Illinois 60612-7227

ATTN:  Paula
Means, Interim Director

 

In the case of SPONSOR:

 

Quark Biotech, Inc.

c/o QBI Enterprises, Ltd.

Weizmann Scientific Park

Building 3, 4th Floor

P.O. Box 741

Nes Ziona, Israel 74106

Attn: Daniel Zurr,
President & CEO

FAX: 011-972-8-940-6476

 

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

 

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18.                               DISPUTE
RESOLUTION. Any controversy or bonafide dispute arising under this
Agreement between the parties, which dispute cannot be resolved by mutual
agreement, shall, by the election of either party, be resolved by submitting to
dispute resolution before a fact-finding body composed of one or more experts
in the field, selected by mutual agreement within thirty (30) days of written
request by either party. Said dispute resolution shall be held in Chicago or at
such other place as shall be mutually agreed upon in writing by the parties. The
fact-finding body shall determine who shall bear the cost of said resolution. In
the event that the parties cannot mutually agree within said thirty (30) days
on the dispute resolution body, the parties will apply the procedural rules of
a mutually agreeable forum.

 

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

 

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IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement by affixing, their respective signatures below as of
the day and year there noted.

 

 

THE BOARD OF TRUSTEES OF THE
UNIVERSITY OF ILLINOIS

 

 

	
  /s/ Craig S. Bazzani

  	
   

  	
   

  	
   

  
	
  Craig S. Bazzani, Comptroller

  	
   

  	
  Date:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Michele M. Thompson

  	
   

  	
  9/15/99

  	
   

  
	
  Michele M. Thompson, Secretary

  	
   

  	
  Date:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APPROVED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Jill A. Tarzian
  Sorensen

  	
   

  	
  9-1-99

  	
   

  
	
  Jill A. Tarzian Sorensen

  	
   

  	
  Date

  
	
  Director

  	
   

  	
   

  
	
  Intellectual Property
  Office

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  QUARK BIOTECH, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Daniel Zurr

  	
   

  	
  9/15/99

  	
   

  
	
  Dr. Daniel Zurr, President & CEO

  	
   

  	
  Date:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGREED
  AND ACKNOWLEDGED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PRINCIPAL
  INVESTIGATOR

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Andrei Gudkov

  	
   

  	
  9-14-99

  	
   

  
	
  Dr. Andrei Gudkov

  	
   

  	
  Date:

  
						

 

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

 

23

 

	
  SCHEDULE I:

  	
  DEFINITION OF EXISTING
  TECHNOLOGIES

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)                                  UNIVERSITY
  EXISTING TECHNOLOGY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)                                 SPONSOR
  EXISTING TECHNOLOGY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE II:

  	
  RESEARCH PROGRAM

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)                                  UNIVERSITY
  RESEARCH PROGRAM

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)                                 QBI
  BIOCHIP TECHNOLOGY FACILITY PROGRAM

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE III:

  	
  BUDGET FOR UNIVERSITY
  RESEARCH PROGRAM

  
	
   

  	
   

  

 

EXHIBIT A:                               EXCLUSIVE
LICENSE AGREEMENT (“LICENSE A”)

 

EXHIBIT B:                                 FUTURE
EXCLUSIVE LICENSE AGREEMENT (“LICENSE B”)

 

EXHIBIT C:                                 NON-DISCLOSURE
AGREEMENT

 

Schedules & Exhibits

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

 

 

 

SCHEDULE
I(a)

 

UNIVERSITY
EXISTING TECHNOLOGY

 

The United States patent application entitled [ * ]

 

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

 

 

SCHEDULE
I(b)

 

SPONSOR
EXISTING TECHNOLOGY

 

“Sponsor
Existing Technologies” shall mean QBI [ * ].

 

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

 

 

SCHEDULE
II(a)

 

UNIVERSITY
RESEARCH PROGRAM

 

[ * ].

 

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

 

 

SCHEDULE
II(b)

 

[ * ].

 

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

 

 

SCHEDULE
III

 

BUDGET
FOR UNIVERSITY RESEARCH PROGRAM

 

for the
program of studies of Pifithrin-a

(September 1, 1999 – August 31, 2002)

 

	
  Year 1

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

 

	
  Year 2

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

 

	
  Year 3

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

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

 

 

EXHIBIT
A

 

EXCLUSIVE
LICENSE AGREEMENT (“LICENSE A”)

 

{This License A is identical to the Exclusive License
Agreement at the front of this Exhibit 10.21 to the Quark Pharmaceuticals, Inc.
Registration Statement on Form S-1 in executed form.}

 

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

 

 

EXHIBIT
B

 

FUTURE
EXCLUSIVE LICENSE AGREEMENT (LICENSE B)

 

(UIC Tech ID #               )

 

TABLE OF
CONTENTS

 

	
  PREAMBLE

  	
   

  
	
  ARTICLES

  	
   

  	
   

  
	
   

  	
  I

  	
  DEFINITIONS

  
	
   

  	
  II

  	
  GRANT

  
	
   

  	
  III

  	
  DUE DILIGENCE

  
	
   

  	
  IV

  	
  PAYMENTS

  
	
   

  	
  V

  	
  REPORTS AND RECORDS

  
	
   

  	
  VI

  	
  PATENT MAINTENANCE,
  ENFORCEMENT AND DEFENSE

  
	
   

  	
  VII

  	
  CONFIDENTIALITY

  
	
   

  	
  VIII

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  
	
   

  	
  IX

  	
  INDEMNIFICATION,
  PRODUCT LIABILITY

  
	
   

  	
  X

  	
  EXPORT CONTROLS

  
	
   

  	
  XI

  	
  NON-USE OF NAMES

  
	
   

  	
  XII

  	
  ASSIGNMENTS

  
	
   

  	
  XIII

  	
  TERMINATION

  
	
   

  	
  XIV

  	
  DISPUTE RESOLUTION

  
	
   

  	
  XV

  	
  PAYMENTS, NOTICES AND
  OTHER COMMUNICATIONS

  
	
   

  	
  XVI

  	
  MISCELLANEOUS
  PROVISIONS

  
				

 

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

 

1

 

This EXCLUSIVE LICENSE AGREEMENT is effective on the
date last subscribed below (the “Effective Date”), and is by and between THE
BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS, a body corporate and politic
of the State of Illinois (“UNIVERSITY”)
with offices in Chicago, Illinois 60612, and QUARK BIOTECH, INC., a California
corporation with principal offices at 1059 Serpentine Lane, Pleasanton,
California 94566, (“QBI”).

 

WITNESSETH

 

WHEREAS, pursuant to a Research Agreement between the
UNIVERSITY and QBI of even date herewith, attached as Appendix A hereto and
incorporated herein by reference (“Research Agreement”), QBI has agreed to
sponsor certain research program, a portion of which to be conducted in the
UNIVERSITY’s laboratories (“Research Program”), based on the application of certain
technologies and intellectual property in which and to which UNIVERSITY and QBI
has certain rights; and

 

WHEREAS, Dr.                       
in the Department of Molecular genetics of UNIVERSITY {and                                                                    of QBI} (the “INVENTORS”) have
produced an invention entitled “                                                                  ”
(the “INVENTION”)
which is covered by the Patent Rights as defined in Article 1.5 below;

 

WHEREAS, the UNIVERSITY is the owner of the INVENTION
and the corresponding Patent Rights, and has the right to grant licenses under
said Patent Rights OR the
UNIVERSITY and QBI own the Invention and the corresponding Patent Rights, which
pursuant to the Research Agreement, constitutes a Joint Invention (strike out inapplicable portion);

 

WHEREAS, UNIVERSITY desires to have the Patent Rights
utilized in the public interest and QBI seeks to commercially develop the
Patent Rights, and accordingly, the UNIVERSITY is willing to grant to QBI an
exclusive license to its interest in the INVENTION and the Patent Rights on the
terms and conditions set forth herein;

 

WHEREAS, LICENSEE seeks to commercially develop the
Patent Rights through a thorough, vigorous and diligent program of exploiting
the Patent Rights whereby public utilization shall result therefrom; and

 

NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

For the purpose of this Agreement, the following words
and phrases shall have the following meanings:

 

1.1                               “LICENSEE” shall mean
QBI.

 

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

 

2

 

1.2                               “Affiliate” shall mean
any person, firm, corporation or other entity controlling, controlled by, or
under common control with a party hereto. The term “control” wherever used
throughout this Agreement shall mean ownership, directly or indirectly, of more
than 50% of the equity capital. Other than LICENSEE, any corporation, company,
partnership, joint venture, firm, individual or other entity which does not
come within this definition shall be a “Non-Affiliate”.

 

1.3                               “University Existing Technology”
and “Sponsor Existing
Technology” have the meaning given to them in the Research
Agreement between UNIVERSITY and QBI effective August 12, 1999, attached hereto
as Appendix A and incorporated herein by reference (“Research Agreement”).

 

1.4                               “Confidential Information”
means (i) any proprietary or confidential information or material in tangible
form disclosed hereunder that is marked as “Confidential” at the time it is
delivered to the receiving party, (ii) any proprietary or confidential
information disclosed orally hereunder that is identified as confidential or
proprietary when disclosed and such disclosure is confirmed in writing to the
receiving party within 30 days by the disclosing party, and (iii) any
information concerning the terms of this Agreement.

 

1.5                               “Patent Rights” shall
mean all of the following intellectual property:

 

(a)                                  the
United States patent application entitled “                      ”,
filed in the United States Patent Office on                       ,
and assigned Serial Number                       
and all foreign patent applications based on this U.S. application;

 

(b)                                  United
States and foreign patents issued for this application, and divisionals and
continuations of this application;

 

(c)                                  claims
of U.S. and foreign continuation-in-part applications, and of the resulting
patents which are directed to subject matter specifically described in the U.S.
patent application Serial Number                       ;
and

 

(d)                                  any
reissues or re-examinations of patents described in (a), (b), or (c), above.

 

1.6                               A
“Licensed Product”
shall mean any product or part thereof developed by or on behalf of LICENSEE
which:

 

(a)                                  is
covered in whole or in part by an issued, unexpired claim or a pending claim
contained in the Patent Rights which have not been held unenforceable or
invalid by a court or other governmental agency of competent jurisdiction and
which have not been admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise in any country in which such product is made, used or
sold relative to said product or part; or

 

(b)                                  is
manufactured by using a process which is covered in whole or in part by an
issued, unexpired claim or a pending claim contained in the Patent Rights which
have not been held unenforceable or invalid by a court or other governmental
agency of competent jurisdiction and which have not been admitted to be invalid
or unenforceable through reissue, 

 

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

 

3

 

disclaimer or otherwise in the country in which any
such process is used or in which any such product is used or sold relative to
said process.

 

1.7                               A
“Licensed Process”
shall mean any process which is covered in whole or in part by an issued,
unexpired claim or a pending claim contained in the Patent Rights in any
country in which such process is practiced.

 

1.8                               “Net Sales” shall mean
the gross amount invoiced by LICENSEE or Affiliate for sales of Licensed
Products or Licensed Processes to Non-Affiliate independent third parties, less
the sum of the following:

 

(a)                                  promotional
allowances, rebates, credits and cash, trade and quantity discounts, in amounts
customary in the trade, actually taken;

 

(b)                                  excise
taxes, sales, use, value added, and other consumption taxes, and other compulsory
payments to governmental authorities, actually paid;

 

(c)                                  outbound
transportation charges and related insurance costs prepaid or allowed;

 

(d)                                  amounts
allowed or credited due to returns and uncollectible amounts;

 

(e)                                  cost
of any shipping packages and packing, if billed separately;

 

(f)                                    import
and/or export duties and tariffs actually paid;

 

(g)                                 rebates;
and

 

(h)                                 interest,
service, finance, or sales or carrying charges paid by customers for extension
of credit

 

No deductions shall be made for commissions paid to
individuals whether they be with independent sales agencies or regularly
employed by LICENSEE or Affiliates and on its payroll, or for cost of
collections. Licensed Products shall be considered “sold” when billed or
invoiced.

 

1.9                               “Sublicense” shall
mean the right to make, use or sell Licensed Products or Licensed Processes,
other than by outright sale to any Non-Affiliate (including any Non-Affiliated
distributor).

 

ARTICLE 2

 

GRANT

 

2.1                               UNIVERSITY
hereby grants to LICENSEE an exclusive worldwide right and license in any field
of use, including the right to sublicense, to make, have made, use, lease,
offer to sell, export and otherwise exploit UNIVERSITY’s right, title and
interest in the Licensed Products or Licensed Processes derived from the Patent
Rights, on a royalty-bearing basis until 

 

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

 

4

 

the end of the last to expire patent of the Patent
Rights on a country by country basis, subject to the rights reserved in Section
2.2 below.

 

2.2                               Notwithstanding
any other provisions of this Agreement, it is agreed that UNIVERSITY shall
retain the right to use (subject to LICENSEE’s right to use) the technology
being licensed under the Patent Rights, including any improvements, solely for
its own non-commercial teaching and research activities; subject, however, to
confidentiality obligations as set forth in Article VII.

 

2.3                               LICENSEE
hereby agrees that every Sublicense to which it shall be party and which shall
relate to the rights, privileges and license granted hereunder shall contain a
statement describing the date upon which LICENSEE’S exclusive rights,
privileges and license hereunder shall terminate.

 

2.4                               LICENSEE
agrees that any Sublicenses granted will be in terms consistent and not in
conflict with any of the material terms and conditions of this Agreement
including, without limitation the provisions under Articles III, V, VII, VIII,
IX, X, XI, XIII and XVI of this Agreement.

 

2.5                               LICENSEE
agrees to forward to UNIVERSITY a copy of any and all fully executed sublicense
agreements within [ * ] of execution of same, and further agrees to forward to
UNIVERSITY within [ * ] a copy of such reports received by LICENSEE from its
sublicensees during the preceding [ * ] period under the Sublicenses as shall
be pertinent to a royalty accounting under said Sublicense agreements.

 

2.6                               Subject
to the Research Agreement and other than the Existing Technology, the license
granted hereunder shall not be construed to confer any rights upon LICENSEE by
implication, estoppel or otherwise as to any technology owned by the UNIVERSITY
that is not included in the Patent Rights and to which or in which LICENSEE
does not otherwise have rights, title or an interest.

 

ARTICLE 3

 

DILIGENCE

 

3.1                               LICENSEE
and its sublicensees shall use commercially reasonable efforts to bring
Licensed Products or Licensed Processes to market through a [ * ] exploitation
of the Patent Rights. Non-compliance with this Section 3.1 shall be grounds for
termination.

 

3.2                               in
addition, LICENSEE and UNIVERSITY shall adhere is the following:

 

(a)                                  LICENSEE
shall deliver to UNIVERSITY within [ * ] of Effective Date of this Agreement a
business plan including [ * ], to the extent formed by LICENSEE. Similar
reports shall be provided to UNIVERSITY within [ * ] to relay update and status
information on LICENSEE’s progress on development of the Patent Rights,
including projections of activity anticipated for the next reporting year.

 

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

 

5

 

(b)                                  LICENSEE
shall be responsible for diligently and promptly taking all reasonable steps to
secure all required and/or necessary governmental approvals to sell, exploit,
or market any and all Licensed Products. Subject to the terms and conditions of
the Research Agreement, the Licensee shall meet the Milestones set forth below.
Licensee can request extension of each Milestone deadline for a period of one
(1) year upon payment of a fee of [ * ] for each extension requested (“Extended Deadline”).

 

(i)                                    If
Licensee fails to [ * ], or within the Extended Deadline, than the licenses set
forth in Section 2.1 for that particular Licensed Product shall terminate and
be no longer valid, unless Licensee shall have earlier demonstrated to the
satisfaction of the University that there is a valid cause for delaying the [ *
].

 

(ii)                                If
Licensee fails to [ * ], or within the Extended Deadline, than the licenses set
forth in Section 2.1 for that particular Licensed Product shall terminate and
be no longer valid, unless Licensee shall have earlier demonstrated to the
satisfaction of the University that there is a valid cause for delaying the [ *
].

 

(c)                                  UNIVERSITY
agrees to provide existing back-up data and documentation as may be required by
regulatory agencies for purposes of supporting applications under government
review.

 

(d)                                  LICENSEE
shall advise UNIVERSITY, through [ * ] reports to be provided [ * ] pursuant to
Section 5.2 below, of its program of development for and status of obtaining
said approvals.

 

ARTICLE 4

 

PAYMENTS

 

4.1                               For
the rights, privileges and licenses granted hereunder, LICENSEE shall pay to
the UNIVERSITY, in the manner hereinafter provided, until the end of the last
to expire patent of the Patent Rights on a country by country basis or until
this Agreement shall be terminated, as hereinafter provided, whichever occurs first:

 

(a)                                  a
royalty in an amount to be negotiated in good faith, but not less than [ * ]
and not more than [ * ], of the aggregate Net Sales by LICENSEE or any
Affiliate of the Licensed Products or Licensed Processes;

 

(b)                                  for
Licensed Products or Licensed Processes derived from UNIVERSITY Inventions, a [
* ] payments received by LICENSEE from sublicensees, based on Net Sales of
Licensed Products or Licensed Processes by sublicensees, exclusive of [ * ]
covered by Section 4.1(d) below;

 

(c)                                  for
Licensed Products or Licensed Processes derived from Joint Inventions, a [ * ]
payments received by LICENSEE from sublicensees, based on Net Sales of Licensed
Products or Licensed Processes by sublicensees, exclusive of [ * ] covered by
Section 4.1(d) below;

 

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

 

6

 

(d)                                  a
[ * ]. No payments will be made under this Section 4.1(d) to the extent
already covered under Sections 4.1(b) and (c).

 

4.2                               In
the event a competitive product is sold in a country by an unlicensed third
part, and such third party’s activities demonstrably diminish LICENSEE’s
capability to compete in the market, UNIVERSITY agrees to meet with LICENSEE to
negotiate a reduction of royalties due for sales in that country, provided
LICENSEE provides to the UNIVERSITY, prior to such meeting, [ * ].

 

4.3                               Only
one royalty shall be payable with respect to any unit of Licensed Product
regardless of whether it is covered by more than one of the Patent Rights
patent applications or Patent Rights patents licensed under this Agreement, or
to be covered in more than one subsection of Section 4.1 hereof.

 

4.4                               Royalty
payments shall be paid quarterly within [ * ] of the close of each calendar
quarter ending March 31, June 30, September 30 and December 31, in United
States dollars in Chicago, Illinois, or at such other place as UNIVERSITY may
reasonably designate consistent with the laws and regulations controlling in
any foreign country, but not in any other currency. If any currency conversion
shall be required in connection with the payment of royalties hereunder, such
conversion shall be made by using the exchange rate prevailing at [ * ] on the
last business day of the calendar quarterly reporting period to which such
royalty payments relate.

 

4.5                               Any
taxes required to be paid or withheld on account of amounts payable to
UNIVERSITY under this Agreement shall be deducted from the amounts due pursuant
to Section 4.1 at the rates specified by applicable law or treaty. LICENSEE
shall provide to UNIVERSITY, as soon as practical, receipts of payment of any
such taxes from the appropriate taxing authority.

 

4.6                               In
the event that the LICENSEE’s, the Affiliates or its Sublicensees development,
manufacture, use or sale of a Product would constitute an infringement of any
patent right or intellectual property right of any third party, the Parties
shall together use their reasonable endeavors to obtain an appropriate license
from such third party. If such license requires LICENSEE to pay royalties to
such third party, the royalty due and payable to the University under this
Agreement for sale of the Product shall be reduced by [ * ] the amount which
the Licensee is required to pay to said third party, provided that no royalty
due to the University hereunder shall be reduced by more than [ * ].

 

ARTICLE 5

 

REPORTS AND RECORDS

 

5.1                               LICENSEE
shall keep full, true and accurate records pertaining to the sale or other
disposition of the Licensed Products or Licensed Processes in sufficient detail
as may be necessary to show the amounts payable to UNIVERSITY hereunder. Said
records shall be kept at LICENSEE’s principal place of business. For the term
of this Agreement, upon receipt of [ * ] prior written notice, UNIVERSITY shall
have the right to cause an independent, certified public 

 

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

 

7

 

accountant to audit such records to confirm LICENSEE’s,
affiliate’s and sublicensee’s Net Sales and royalty payments and all other
payments or exchanges related to Patent Rights for the preceding year at
UNIVERSITY’s expense. Such audits may be exercised during normal business hours
once a year.

 

5.2                               LICENSEE,
within [ * ] after [ * ] of each year, shall deliver to UNIVERSITY true and
accurate reports, giving such particulars of the business conducted by LICENSEE
and its sublicensees during the preceding [ * ] period under this Agreement as
shall be pertinent to a royalty accounting hereunder. These shall include at
least the following, to be itemized per Licensed Product or Licensed Process:

 

(a)                                  number
of Licensed Products commercially used, manufactured and sold, rented or
leased;

 

(b)                                  total
billings for Licensed Products and Licensed Processes commercially used, sold,
rented or leased;

 

(c)                                  deductions
applicable as provided in Paragraph 1.8.

 

(d)                                  total
royalties due;

 

(e)                                  [
* ];

 

(f)                                    [
* ].

 

(g)                                 [
* ]; and

 

(h)                                 [
* ].

 

5.3                               If
no royalties shall be due, LICENSEE shall so report.

 

ARTICLE 6

 

PATENT MAINTENANCE, ENFORCEMENT AND DEFENSE

 

6.1                               Subject
to this Article VI, UNIVERSITY shall control all decisions and activities
related to the preparation, pursuit, filing, issuance, maintenance, enforcement
and prosecution of the Patent Rights for University Inventions. UNIVERSITY
shall diligently take all reasonable steps to obtain issuance of pending patent
application(s) included in the Patent Rights in the name of The Board of
Trustees of the University of Illinois. UNIVERSITY shall communicate and
coordinate with LICENSEE during the term of this Agreement with respect to the
filing and prosecution of patent applications and foreign counterparts thereto
in respect of any UNIVERSITY Invention in order to promote comprehensive
cost-efficient patent coverage. UNIVERSITY shall give proper attention to any
comments offered by LICENSEE in preparing the final draft of the application
for submission, and shall use its best efforts to amend any patent application
to include claims reasonably requested by LICENSEE and required to protect the
Licensed Products or Licensed Processes contemplated to be sold under this
Agreement. UNIVERSITY shall promptly provide LICENSEE with copies of all
relevant documentation so 

 

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

 

8

 

that LICENSEE may be informed and appraised of the
status of the Patent Rights at all times. UNIVERSITY agrees it will not abandon
any patent application or issued patent if LICENSEE desires to continue
prosecution or maintenance, provided LICENSEE is not in default of its payment
obligations hereunder.

 

6.2                               LICENSEE
shall be responsible for and pay all costs and expenses incurred by UNIVERSITY
for the preparation, filing, prosecution, issuance, and maintenance of the
Patent Rights pre-dating the Effective Date and post-dating the Effective Date
for the term of this Agreement.

 

6.3                               LICENSEE
shall control the preparation, filing, issuance, maintenance, enforcement and
prosecution of the Patent Rights for Joint Inventions. LICENSEE shall be free
to decide in its sole discretion whether or not to file or continue prosecution
or maintain any Patent and shall engage counsel of its choice and its expense
to prepare, file, prosecute and maintain any such Patents. University shall
have a right of accounting for all Patents and income generated from such
Patents. LICENSEE shall communicate and coordinate with the University its
preparation, filing and prosecution of patent applications and shall provide
the University with copies of draft patent applications in sufficient time for
the University to comment thereon prior to filing, and shall give proper
attention to any comments offered by the University in preparing the final
draft of the application for submission. LICENSEE shall promptly provide
University with copies of all relevant documentation and shall promptly share
all patent filing and prosecution information, including notifying University
of all filing and response deadlines so that University may be informed and
appraised of the continuing prosecution, and University agrees to keep this
documentation confidential. Should LICENSEE elect not to prepare, file,
prosecute or maintain a Patent or discontinues its support of any of these
activities, it shall promptly notify the University but in no event later than
[ * ] predating any response, filing or abandonment deadline, and the
University shall be free to decide, in its sole discretion and at its expense,
whether or not to support or continue any such activities. LICENSEE agrees to
assign all right, title and interest it holds in any claim or patent
application abandoned by LICENSEE, which assignment shall be made by LICENSEE
to University promptly upon written request from University after it receives
notice from LICENSEE of its intention to abandon any patent rights in whole or
in part.

 

6.4                               LICENSEE
and UNIVERSITY shall promptly notify the other in writing of any alleged or
threatened infringement of any Patent included in the Patent Rights or claiming
the Invention. Both parties shall use their best efforts in cooperating with
each other to terminate such infringement without litigation. LICENSEE shall
have the first right to bring and control any action or proceeding with respect
to such infringement at its own expense and by counsel of its own choice, and
UNIVERSITY shall have the right, at its own expense, to be represented in any
action involving any Patent Rights by counsel of its choice. If LICENSEE fails
to bring an action or proceeding within (i) [ * ] following the notice of
alleged infringement or (ii) [ * ] before the time limit, if any, set forth in
the appropriate laws and regulations for the filing of such actions, whichever
comes first, UNIVERSITY shall have the right to bring and control any such
action at its own expense and by counsel of its own choice, and LICENSEE shall
have the right, at its own expense, to be represented in any such action by
counsel of its own choice. In the event a party brings an infringement action,
the other party shall cooperate fully, including if required to bring such
action, the furnishing of a power of attorney. Neither party shall have the 

 

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

 

9

 

right to settle any patent infringement litigation
under this Section 6.4 in a manner that diminishes the rights or interests of
the other party without the consent of such other party, which consent shall
not be unreasonably withheld. All costs of any action to enforce the Patent
Rights taken by LICENSEE shall be borne by LICENSEE and LICENSEE shall keep any
recovery of damages derived therefrom, [ * ]. All costs of any action to
enforce the Patent Rights taken by UNIVERSITY shall be borne be UNIVERSITY and
UNIVERSITY shall share with LICENSEE any recovery of damages derived therefrom
on a pro rata basis per costs incurred by UNIVERSITY and LICENSEE respectively
in such policing activity.

 

6.5                               LICENSEE,
during the exclusive period of this Agreement, shall have the sole right in
accordance with the terms and conditions herein to sublicense any alleged
infringer for future use of the Patent Rights, with any royalty covered by
Section 4.1 above to be paid to UNIVERSITY as required.

 

6.6                               LICENSEE
and UNIVERSITY shall promptly notify the other in writing of any allegation by
a third party that the activity of either of the parties infringes or may
infringe the intellectual property rights on such third party. LICENSEE shall
defend the claim at its own expense and by counsel of its own choice including,
without limitation, the right to settle, compromise or otherwise pursue such
defense in any manner and on such terms as LICENSEE shall determine. UNIVERSITY
agrees to provide assistance to LICENSEE as may be reasonably necessary or
appropriate to pursue such actions. If LICENSEE fails to proceed with regard to
such defense within (i) [ * ] following the notice of alleged infringement
or [ * ] before the time limit, if any, set forth in the appropriate laws and
regulations for the filing of such actions, whichever comes first, or otherwise
elects not to defend such a claim, UNIVERSITY shall have the right to defend
the claim at its own expense and by counsel of its choice including, without
limitation, the right to settle, compromise or otherwise pursue such defense in
any manner and on such terms as UNIVERSITY shall determine. [ * ] of the
royalty payments due from LICENSEE to UNIVERSITY hereunder shall be placed in
escrow pending a resolution of the action. If it is determined by judgement or
settlement that LICENSEE is required to make payments to said third party in
order to continue to market, distribute or sell or otherwise use the Licensed
Products, than any such payments owing to such third party shall be credited
and offset against the escrowed royalty payments and LICENSEE may, at its
option, terminate this Agreement pursuant to Section 13.2.

 

ARTICLE 7

 

CONFIDENTIALITY

 

7.1                               During
the term of this Agreement and for a period of [ * ] after termination thereof,
each party will maintain all Confidential Information in trust and confidence
and will not disclose any Confidential Information to any third party or use
any Confidential Information for any purpose except as expressly authorized by
this Agreement. Each party may use such Confidential Information only to the
extent required to accomplish the purposes of this Agreement, including
sublicensing. Each party will use the highest standard of care to protect
Confidential Information and to ensure that its employees, agents, consultants
and other representatives or, in the case of the UNIVERSITY, students, do not
disclose or make any 

 

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

 

10

 

unauthorized use of the Confidential Information. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.

 

7.2                               Confidential
Information shall not include information that:

 

(a)                                  is
now, or hereafter becomes, through no act or failure to act on the part of the
receiving party, in the public domain or published;

 

(b)                                  is
in possession of the receiving party at the time of receiving such information,
as evidenced by its prior written records;

 

(c)                                  is
hereafter furnished to the receiving party by a third party, as a matter of
right and without restriction on disclosure; or

 

(d)                                  is
required by law or a court order to be disclosed or is the subject of a written
permission to disclose provided by the disclosing party.

 

7.3                               Notwithstanding
the above, a party may disclose Confidential Information of the other party:

 

(a)                                  to
potential sublicensees to the extent such disclosure is reasonably necessary
and provided sublicensee personnel are bound by obligations of confidentiality
no less restrictive than those provided hereunder; or

 

(b)                                  if
required by law or a court order to be disclosed or is the subject of a written
permission to disclose provided by the disclosing party; to regulatory agencies
in order to obtain registrations required; and to professional advisors,
consultants and/or potential investors in connection with a private placement
or public offering.

 

ARTICLE 8

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

8.1                               Each
party hereby represents and warrants that such party is duly organized and
validly existing under the laws of the state of its incorporation and has full
power and authority to enter into this Agreement and to carry out the
provisions hereof.

 

8.2                               Each
party hereby represents and warrants that such party is duly authorized to
execute and deliver this Agreement and to perform its obligations hereunder and
that this Agreement is a legal and valid obligation binding upon each party,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.

 

8.3                               UNIVERSITY
hereby represents that, to the best of its knowledge, no University patents or
patent applications, other than the rights granted to LICENSEE hereunder to the
Patent Rights, conflict with the representations and rights given to LICENSEE
under this Agreement.

 

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

 

11

 

ARTICLE 9

 

INDEMNIFICATION, PRODUCT LIABILITY

 

9.1                               LICENSEE
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold UNIVERSITY, its trustees, officers, employees and affiliates,
harmless against all claims, expenses, damages or liability (collectively, the “Losses”) including
legal expenses and reasonable attorneys’ fees, resulting from the production,
manufacture, sale, use, lease, consumption or advertisement of the Licensed
Product(s) or arising from any obligation of LICENSEE hereunder, except to the
extent that such Losses result from UNIVERSITY’s gross negligence or willful
misconduct.

 

9.2                               For
the term of this Agreement, upon the commencement of production, sale, or
transfer, whichever occurs first, of any Licensed Product, LICENSEE shall
obtain and carry in full force and effect liability insurance which shall
protect LICENSEE and UNIVERSITY in regard to events covered by Section 8.1
above, the nature and extent of which insurance coverage shall be commensurate
with usual and customary industry practices, as determined by LICENSEE’s good
faith assessment.

 

9.3                               Except
as otherwise expressly set forth in this Agreement, UNIVERSITY AND SPONSOR MAKE
NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR
PENDING.

 

ARTICLE 10

 

EXPORT CONTROLS

 

It is understood that UNIVERSITY is subject to United
States laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities (including the Arms
Export Control Act, as amended and the Export Administration Act of 1979), and
that its obligations hereunder are contingent on compliance with applicable United
States export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United
States Government and/or written assurances by LICENSEE that LICENSEE shall not
export data or commodities to certain foreign countries without prior approval
of such agency. UNIVERSITY neither represents that a license shall not be
required nor that, if required, it shall be issued, but shall provide to
LICENSEE reasonable assistance for determining the need for and the procuring
of such license or other consent. LICENSEE agrees to comply with all applicable
export and import control laws governing sales of Licensed Products and
Licensed Processes.

 

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

 

12

 

ARTICLE 11

 

NON-USE OF NAMES

 

LICENSEE shall not use the names of the University of
Illinois nor any of its employees, nor any adaptation thereof, in any
advertising, promotional or sales literature without prior written consent
obtained from UNIVERSITY in each case, except that LICENSEE may state that it
is licensed by UNIVERSITY under one or more of the Patents comprising the
Patent Rights and, if appropriate, that research related to the INVENTION or
Patent Rights is ongoing at UNIVERSITY.

 

ARTICLE 12

 

ASSIGNMENT

 

12.1                        This
Agreement may not be assigned by LICENSEE other than to QBI Enterprises Ltd.,
an Israeli limited liability company and a subsidiary of LICENSEE, without
prior written consent from UNIVERSITY.

 

12.2                        Notwithstanding
the foregoing prohibition, LICENSEE may, without UNIVERSITY’s consent, merge
into, consolidate with, or transfer substantially all of its assets (“substantially”
being respectively [ * ] or more thereof) as an entirety to any corporation, so
long as the successor surviving corporation in any such merger, consolidation,
transfer or reorganization assumes in writing the obligations of this Agreement.
Such merger, consolidation, transfer or reorganization shall not in any way be
a breach of this Article XII, nor be any default under this Agreement.

 

ARTICLE 13

 

TERMINATION

 

13.1                        Either
party may terminate this Agreement upon [ * ] written notice upon the
occurrence of any of the following:

 

(a)                                  Upon
or after the bankruptcy, insolvency, dissolution or winding-up of the other
party (other than dissolution or winding-up for the purposes of reconstruction
or amalgamation); or

 

(b)                                  Upon
or after the breach of any material provision of this Agreement by the other
party if the breaching party has not cured such breach within [ * ] following
written notice of termination by the other party.

 

13.2                        LICENSEE
shall have the right to terminate this Agreement with or without cause at any
time upon [ * ] advance written notice to UNIVERSITY subject to LICENSEE’s
remittance of payments that may be due under this Agreement up to the effective
date of termination. All rights granted to LICENSEE hereunder shall revert to
UNIVERSITY upon the effective date of such termination.

 

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

 

13

 

13.3                        Upon
termination this Agreement for any reason, nothing herein shall be construed to
release either party from any obligation that matured prior to the effective
date of such termination. LICENSEE shall return to UNIVERSITY all materials
containing Licensed Product derived from a UNIVERSITY Invention (exclusive of
materials relating to Sponsor Existing Technology); provided, however, that
LICENSEE shall have the right for one year thereafter to dispose of all
Licensed Products then in its inventory, and shall pay royalties thereon, in
accordance with the provisions of Article IV and shall submit the related
reports as required by Article V, as though this Agreement had not terminated. Each
party shall, promptly upon termination, return to the other party Confidential
Information received from the other party and still subject to obligations of
confidentiality hereunder, and neither party shall thereafter be entitled under
this Agreement to use any such Confidential Information of the other party for
any purpose.

 

ARTICLE 14

 

DISPUTE RESOLUTION

 

Other than any claim arising from LICENSEE’s failure
to pay royalties due under this Agreement, any controversy or bonafide disputed
claim arising under this Agreement between the parties, which dispute cannot be
resolved by mutual agreement, shall, by the election of either party, be
resolved by submitting to dispute resolution before a fact-finding body
composed of one or more experts in the field, selected by mutual agreement
within thirty days of written request by either party. Said dispute resolution
shall be held in Chicago or at such other place as shall be mutually agreed
upon in writing by the parties. The fact-finding body shall determine who shall
bear the cost of said resolution. In the event that the parties cannot mutually
agree within said thirty (30) days on the dispute resolution body, the parties
apply the procedural rules of a mutually agreeable forum.

 

ARTICLE 15

 

PAYMENTS, NOTICES AND OTHER COMMUNICATIONS

 

Any payment, notice or other communication pursuant to
this Agreement shall be sufficiently made or given on the date of receipt if
sent to such party by telefax or overnight courier, or on the date three days
after mailing if sent by certified mail, postage prepaid, addressed to it at
its address below or as it shall designate by written notice given to the other
party:

 

In the case of UNIVERSITY:

 

Intellectual Property Office

Office of the Vice Chancellor of Research

University of Illinois at Chicago

1737 W. Polk Street, 312 AOB (M/C 672)

Chicago, Illinois 60612

ATTN:  Director,
Intellectual Property Office

 

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

 

14

 

In the case of LICENSEE:

 

Quark Biotech, Inc.

c/o QBI Enterprises, Ltd.

Weizmann Scientific Park

Building 3, 4th Floor

P.O. Box 741

Nes Ziona, Israel 74106

Attn: Daniel Zurr, President & CEO

FAX: 011-972-8-940-6476

 

ARTICLE 16

 

MISCELLANEOUS PROVISIONS

 

16.1                        This
Agreement shall be construed, governed, interpreted and applied in accordance
with the laws of the State of Illinois, U.S.A., except that questions affecting
the construction and effect of any patent shall be determined by the law of the
country in which the patent was granted.

 

16.2                        The
parties hereto acknowledge that this Agreement together with the Research
Agreement set forth the entire Agreement and understanding of the parties
hereto as to the subject matter hereof, and shall not be subject to any change
or modification except by the execution of a written instrument subscribed to
by the parties hereto.

 

16.3                        The
provisions of this Agreement are severable, and in the event that any
provisions of this Agreement shall be determined to be invalid or unenforceable
under any controlling body of the law, such invalidity or unenforceability
shall not in any way affect the validity or enforceability of the remaining
provisions hereof.

 

16.4                        LICENSEE
agrees to mark the Licensed Products sold in the United States with all
applicable United States patent numbers. All Licensed Products shipped to or
sold in other countries shall be marked in such a manner as to conform with the
patent laws and practice of the country of manufacture or sale.

 

16.5                        The
failure of either party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall not constitute a
waiver of that right or excuse a similar subsequent failure to perform any such
term or condition by the other party.

 

16.6                        This
Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be an original and all such counterparts
shall together constitute but one and the same agreement.

 

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

 

15

 

IN WITNESS WHEREOF, the parties have hereunto set
their hands and seals and duly executed this Agreement the day and year set
forth below.

 

 

THE BOARD OF TRUSTEES OF THE
UNIVERSITY OF ILLINOIS

 

 

	
  By

  	
   

  	
   

  	
  Date

  	
   

  	
   

  
	
  Craig S. Bazzani,
  Comptroller

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest

  	
   

  	
   

  	
  Date

  	
   

  	
   

  
	
  Michele M. Thompson,
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  QUARK BIOTECH, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  Date

  	
   

  	
   

  
	
  Dr. Daniel Zurr, President
  & CEO

  	
   

  	
   

  
							

 

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

 

16

 

EXHIBIT
C

 

NONDISCLOSURE
AGREEMENT

 

THIS AGREEMENT is effective this                 
day of                 ,
1999 (“Effective Date”)
by and between THE BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS, Office of
the Vice Chancellor for Research, 1737 West Polk Street, Chicago, Illinois
60612, (hereinafter referred to as “UNIVERSITY”) and                                                                 
having a place of business at                                                                 
(hereinafter referred to as “COMPANY”);

 

WITNESSETH:

 

WHEREAS, members of the faculty of the UNIVERSITY have
created the following:

 

“                                                ”                                (Tech
ID#                                 )

 

(hereinafter referred to
as the “Inventions”,
and are the property of the UNIVERSITY; and

 

WHEREAS, UNIVERSITY has the right to disclose to
others the Inventions, supporting disclosure materials, and other written
materials relating thereto, and prototypes and/or samples thereof (the “Technical Information”);

 

WHEREAS, COMPANY wishes to review the Technical
Information for the purpose of determining whether or not it is interested in
acquiring a license and/or other rights from the UNIVERSITY which would enable
COMPANY to undertake further development of products or services embodying the
Inventions;

 

NOW, THEREFORE, in consideration of the premises and
covenants herein contained, the parties hereto agree as follows:

 

1.                                      UNIVERSITY
shall disclose to COMPANY the Technical Information regarding the Inventions.

 

2.                                      Upon
execution of this Agreement, a confidential relationship shall arise between
UNIVERSITY and COMPANY, and COMPANY agrees to hold in confidence all Technical
Information disclosed to it by UNIVERSITY and not to disclose such Technical
Information to anyone except such of its employees as may be necessary and not
use such Technical information for a purpose not by this Agreement, unless:

 

a.                                       such
Technical Information is part of the public domain prior to the Effective Date;
or

 

b.                                       such
Technical Information becomes part of the public domain not due to some
unauthorized act by or omission of COMPANY after this Agreement is executed; or

 

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

 

1

 

c.                                       such
Technical Information is disclosed to COMPANY by a third party who has the
right to make such disclosure; or

 

d.                                       permission
to disclose said Technical Information or to make use thereof is obtained by
COMPANY from UNIVERSITY in writing; or

 

e.                                       such
Technical Information is independently developed by persons in COMPANY’s employ
or otherwise who have no contact with Technical Information furnished by
UNIVERSITY hereunder, as proven with written records.

 

3.                                      COMPANY
shall use its best efforts to preserve the confidentiality of the Technical
Information disclosed as it would if the Technical Information had been
developed by COMPANY and was to be retained in confidence by it. If COMPANY
elects or desires to pursue its evaluation of the Technical Information by
presenting that information in whole or in part to a third party, then prior to
said presentation and as a condition precedent thereto the COMPANY shall
execute with said third party a comprehensive confidentiality agreement
containing, at a minimum, the same terms and conditions as this Agreement and
providing that said third party shall be responsible to COMPANY and UNIVERSITY
to the same extent that COMPANY is responsible to UNIVERSITY hereunder.

 

4.                                      It
is understood and agreed that the Technical Information referred to hereunder
shall be furnished to COMPANY for internal evaluation in order that COMPANY may
determine its interest in developing products under an agreement to be
negotiated with UNIVERSITY and for no other purpose. No express or implied
license to use the Inventions or Technical Information for any purpose other
than said evaluations is permitted hereunder.

 

5.                                      Either
party may terminate this Agreement at will. Upon termination, and at the
request of the UNIVERSITY, COMPANY shall return to UNIVERSITY all Technical
Information furnished by UNIVERSITY to COMPANY under this Agreement except that
COMPANY may retain a copy thereof in the files of its legal counsel solely for
archival purposes. The termination shall not affect the obligations of COMPANY
to treat the Technical Information disclosed to COMPANY as confidential and not
use same, which shall continue for a period of three (3) years from receipt of
such information by COMPANY. Upon the expiration of such period, all of COMPANY’s
obligations hereunder shall expire.

 

6.                                      This
Agreement shall he binding upon and inure to the benefit of the successors and
assigns of the parties hereto, but neither of the parties hereto shall assign
this Agreement without the prior written consent of the other party.

 

7.                                      No
modification or waiver of any of the provisions of this Agreement shall be
valid unless in writing and signed by the parties hereto.

 

8.                                      Illinois
law shall govern this agreement.

 

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

 

2

 

The COMPANY agrees to these terms through signature by
an authorized representative of the COMPANY, affixed below.

 

 

THE BOARD OF TRUSTEES OF THE
UNIVERSITY OF ILLINOIS

 

 

	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Craig S. Bazzani

  	
   

  	
   

  
	
  Comptroller

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FOR COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
								

 

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

 

3

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