Exhibit 10.2

 

EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into as
of this 5th day of April, 2006 by and among Tapestry Pharmaceuticals, Inc., a
Delaware corporation (the “Company”), and the “Investors” named in that certain
Purchase Agreement by and among the Company and the Investors (the “Purchase
Agreement”).

 

The parties hereby agree as follows:

 

1.               CERTAIN DEFINITIONS.

 

As used in this Agreement, the following terms shall have the following
meanings:

 

“Affiliate” means, with respect to any person, any other person which directly
or indirectly controls, is controlled by, or is under common control with, such
person.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City and Boulder, Colorado are open for the general transaction of
business.

 

“Common Stock” shall mean the Company’s common stock, par value $0.0075 per
share, and any securities into which such shares may hereinafter be
reclassified.

 

“Investors” shall mean the Investors identified in the Purchase Agreement and
any Affiliate or permitted transferee of any Investor who is a subsequent holder
of any Warrants or Registrable Securities.

 

“Prospectus” shall mean the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post effective amendments and all material incorporated by
reference in such prospectus.

 

“Register,” “registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

 

“Registrable Securities” shall mean (i) the Shares, (ii) the Warrant Shares and
(iii) any other securities issued or issuable with respect to or in exchange for
Registrable Securities; provided, that, a security shall cease to be a
Registrable Security upon (A) sale pursuant to a Registration Statement or
Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale by
the Investors pursuant to Rule 144(k).

 

“Registration Statement” shall mean any registration statement of the Company
filed under the 1933 Act that covers the resale of any of the Registrable
Securities pursuant to the provisions of this Agreement, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.

 

“Required Investors” means the Investors holding a majority of the Registrable
Securities.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

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“Shares” means the shares of Common Stock issued pursuant to the Purchase
Agreement.

 

“1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Warrants” means, the warrants to purchase shares of Common Stock issued to the
Investors pursuant to the Purchase Agreement, the form of which is attached to
the Purchase Agreement as Exhibit A.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the Warrants.

 

2.               REGISTRATION.

 

(a)                                  Registration Statements.

 

(i)                                     Promptly following the closing of the
purchase and sale of the securities contemplated by the Purchase Agreement (the
“Closing Date”) but no later than thirty (30) days after the Closing Date (the
“Filing Deadline”), the Company shall prepare and file with the SEC one
Registration Statement on Form S-3 (or, if Form S-3 is not then available to the
Company, on such form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, subject to the Required
Investors’ consent), covering the resale of the Registrable Securities in an
amount at least equal to the Shares and the Warrant Shares. Such Registration
Statement shall include the plan of distribution attached hereto as Exhibit A.
Such Registration Statement also shall cover, to the extent allowable under the
1933 Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities. Such Registration Statement shall not include any shares of Common
Stock or other securities for the account of any other holder without the prior
written consent of the Required Investors. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Registrable Securities is not filed with the
SEC on or prior to the Filing Deadline, the Company will make pro rata payments
to each Investor, as liquidated damages and not as a penalty, in an amount equal
to 1.5% of the aggregate amount invested by such Investor for each 30-day period
or pro rata for any portion thereof following the Filing Deadline for which no
Registration Statement is filed with respect to the Registrable Securities. Such
payments shall constitute the Investors’ exclusive monetary remedy for such
events, but shall not affect the right of the Investors to seek injunctive
relief. Such payments shall be made to each Investor in cash.

 

(ii)                                  Additional Registrable Securities. Upon
the written demand of any Investor and upon any change in the Warrant Price (as
defined in the Warrant) such that additional shares of Common Stock become
issuable upon the exercise of the Warrants, the Company shall prepare and file
with the SEC one or more Registration Statements on Form S-3 or amend the
Registration Statement filed pursuant to clause (i) above, if such Registration
Statement has not previously been declared effective (or, if Form S-3 is not
then available to the

 

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Company, on such form of registration statement as is then available to effect a
registration for resale of such additional shares of Common Stock (the
“Additional Shares”), subject to the Required Investors’ consent) covering the
resale of the Additional Shares, but only to the extent the Additional Shares
are not at the time covered by an effective Registration Statement. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Shares. Such Registration Statement shall not include any shares of Common Stock
or other securities for the account of any other holder without the prior
written consent of the Required Investors. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Additional Shares is required to be filed
under this Section 2(a)(ii) and is not filed with the SEC within ten
(10) Business Days of the request of any Investor or upon the occurrence of any
of the events specified in this Section 2(a)(ii), the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.5% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof following the date by which
such Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Additional Shares. Such payments shall
constitute the Investors’ exclusive monetary remedy for such events, but shall
not affect the right of the Investors to seek injunctive relief. Such payments
shall be made to each Investor in cash.

 

(b)                                 Expenses. The Company will pay all expenses
associated with each registration, including filing and printing fees, the
Company’s counsel and accounting fees and expenses, costs associated with
clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, reasonable out-of-pocket fees and expenses of one counsel to
the Investors (which fees and expenses shall not exceed $35,000 in the
aggregate) and the Investors’ reasonable out-of-pocket expenses in connection
with the registration, but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being sold.

 

(c)                                  Effectiveness.

 

(i)                                     The Company shall use commercially
reasonable efforts to have the Registration Statement declared effective as soon
as practicable. The Company shall notify the Investors by facsimile or e-mail as
promptly as practicable, and in any event, within twenty-four (24) hours, after
any Registration Statement is declared effective and shall simultaneously
provide the Investors with copies of any related Prospectus to be used in
connection with the sale or other disposition of the securities covered thereby.
If (A)(x) a Registration Statement covering the Registrable Securities is not
declared effective by the SEC prior to the earlier of (i) five (5) Business Days
after the SEC shall have informed the Company that no review of the Registration
Statement will be made or that the SEC has no further comments on the
Registration Statement or (ii) the 90th day after the Closing Date (the 120th
day if the SEC reviews the Registration Statement), or (y) a Registration
Statement covering Additional Shares is not declared effective by the SEC within
ninety (90) days following the time such Registration Statement was required to
be filed pursuant to Section 2(a)(ii) (120 days

 

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if the SEC reviews the Registration Statement), or (B) after a Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to such Registration Statement for any reason (including without limitation by
reason of a stop order, or the Company’s failure to update the Registration
Statement), but excluding the inability of any Investor to sell the Registrable
Securities covered thereby due to market conditions and except as excused
pursuant to subparagraph (ii) below, then the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.5% of the aggregate amount invested by such Investor for each
30- day period or pro rata for any portion thereof following the date by which
such Registration Statement should have been effective (the “Blackout Period”).
Such payments shall constitute the Investors’ exclusive monetary remedy for such
events, but shall not affect the right of the Investors to seek injunctive
relief. The amounts payable as liquidated damages pursuant to this paragraph
shall be paid monthly within three (3) Business Days of the last day of each
month following the commencement of the Blackout Period until the termination of
the Blackout Period. Such payments shall be made to each Investor in cash.

 

(ii)                                  For not more than twenty (20) consecutive
days or for a total of not more than forty-five (45) days in any twelve (12)
month period, the Company may delay the disclosure of material non-public
information concerning the Company, by suspending the use of any Prospectus
included in any registration contemplated by this Section containing such
information, the disclosure of which at the time is not, in the good faith
opinion of the Company, in the best interests of the Company (an “Allowed
Delay”); provided, that the Company shall promptly (a) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay, (b) advise the Investors in writing to cease all sales under the
Registration Statement until the end of the Allowed Delay and (c) use
commercially reasonable efforts to terminate an Allowed Delay as promptly as
practicable.

 

3.               COMPANY OBLIGATIONS. THE COMPANY WILL USE COMMERCIALLY
REASONABLE EFFORTS TO EFFECT THE REGISTRATION OF THE REGISTRABLE SECURITIES IN
ACCORDANCE WITH THE TERMS HEREOF, AND PURSUANT THERETO THE COMPANY WILL, AS
EXPEDITIOUSLY AS POSSIBLE:

 

(a)                                use commercially reasonable efforts to cause
such Registration Statement to become effective and to remain continuously
effective for a period that will terminate upon the earlier of (i) the date on
which all Registrable Securities covered by such Registration Statement as
amended from time to time, have been sold, and (ii) the date on which all
Registrable Securities covered by such Registration Statement may be sold
pursuant to Rule 144(k) (the “Effectiveness Period”) and advise the Investors in
writing when the Effectiveness Period has expired;

 

(b)                               prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement and the Prospectus
as may be necessary to keep the Registration Statement effective for the
Effectiveness Period and to comply with the provisions of the 1933 Act and the
1934 Act with respect to the distribution of all of the Registrable Securities
covered thereby;

 

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(c)                                provide copies to and permit counsel
designated by the Investors to review each Registration Statement and all
amendments and supplements thereto no fewer than seven (7) days prior to their
filing with the SEC and not file any document to which such counsel reasonably
objects;

 

(d)                               furnish to the Investors and their legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company (but not later than two (2) Business
Days after the filing date, receipt date or sending date, as the case may be)
one (1) copy of any Registration Statement and any amendment thereto, each
preliminary prospectus and Prospectus and each amendment or supplement thereto,
and each letter written by or on behalf of the Company to the SEC or the staff
of the SEC, and each item of correspondence from the SEC or the staff of the
SEC, in each case relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as each Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor
that are covered by the related Registration Statement;

 

(e)                                use commercially reasonable efforts to
(i) prevent the issuance of any stop order or other suspension of effectiveness
and, (ii) if such order is issued, obtain the withdrawal of any such order at
the earliest possible moment;

 

(f)                                  prior to any public offering of Registrable
Securities, use commercially reasonable efforts to register or qualify or
cooperate with the Investors and their counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions requested by the
Investors and do any and all other commercially reasonable acts or things
necessary or advisable to enable the distribution in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(f), (ii) subject itself
to general taxation in any jurisdiction where it would not otherwise be so
subject but for this Section 3(f), or (iii) file a general consent to service of
process in any such jurisdiction;

 

(g)                               use commercially reasonable efforts to cause
all Registrable Securities covered by a Registration Statement to be listed on
each securities exchange, interdealer quotation system or other market on which
similar securities issued by the Company are then listed;

 

(h)                               promptly notify the Investors, at any time
when a Prospectus relating to Registrable Securities is required to be delivered
under the 1933 Act (including during any period when the Company is in
compliance with Rule 172), upon discovery that, or upon the happening of any
event as a result of which, the Prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and at the request of any such holder,

 

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promptly prepare, file with the SEC pursuant to Rule 172 and furnish to such
holder a supplement to or an amendment of such Prospectus as may be necessary so
that such Prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing; and

 

(i)                                   otherwise use commercially reasonable
efforts to comply with all applicable rules and regulations of the SEC under the
1933 Act and the 1934 Act, including Rule 172, notify the Investors promptly if
the Company no longer satisfies the conditions of Rule 172 and take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder; and make available to its security holders, as
soon as reasonably practicable, but not later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12)
months, beginning after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act, including Rule 158 promulgated thereunder (for the purpose of this
subsection 3(i), “Availability Date” means the 45th day following the end of the
fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of the
Company’s fiscal year, “Availability Date” means the 90th day after the end of
such fourth fiscal quarter).

 

(j)                                     With a view to making available to the
Investors the benefits of Rule 144 (or its successor rule) and any other rule or
regulation of the SEC that may at any time permit the Investors to sell shares
of Common Stock to the public without registration, the Company covenants and
agrees to:  (i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) six months after
such date as all of the Registrable Securities may be resold pursuant to
Rule 144(k) or any other rule of similar effect or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
1934 Act; and (iii) furnish to each Investor upon request, as long as such
Investor owns any Registrable Securities, (A) a written statement by the Company
that it has complied with the reporting requirements of the 1934 Act, (B) a copy
of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on
Form 10-Q, and (C) such other information as may be reasonably requested in
order to avail such Investor of any rule or regulation of the SEC that permits
the selling of any such Registrable Securities without registration.

 

4.               DUE DILIGENCE REVIEW; INFORMATION. UPON REASONABLE PRIOR
NOTICE, THE COMPANY SHALL MAKE AVAILABLE, DURING NORMAL BUSINESS HOURS, FOR
INSPECTION AND REVIEW BY THE INVESTORS, ADVISORS TO AND REPRESENTATIVES OF THE
INVESTORS (WHO MAY OR MAY NOT BE AFFILIATED WITH THE INVESTORS AND WHO ARE
REASONABLY ACCEPTABLE TO THE COMPANY), ALL FINANCIAL AND OTHER RECORDS, ALL SEC
FILINGS (AS DEFINED IN THE PURCHASE AGREEMENT) AND OTHER FILINGS WITH THE SEC,
AND ALL OTHER CORPORATE DOCUMENTS AND PROPERTIES OF THE COMPANY AS MAY BE
REASONABLY NECESSARY FOR THE PURPOSE OF SUCH REVIEW, AND CAUSE THE COMPANY’S
OFFICERS, DIRECTORS AND EMPLOYEES, WITHIN A REASONABLE TIME PERIOD, TO SUPPLY
ALL SUCH INFORMATION REASONABLY REQUESTED BY THE INVESTORS OR ANY SUCH
REPRESENTATIVE, ADVISOR OR UNDERWRITER IN CONNECTION WITH SUCH REGISTRATION
STATEMENT (INCLUDING, WITHOUT LIMITATION, IN RESPONSE TO ALL QUESTIONS AND OTHER
INQUIRIES REASONABLY MADE OR SUBMITTED BY ANY OF THEM), PRIOR TO AND FROM TIME
TO TIME AFTER THE FILING AND EFFECTIVENESS OF THE REGISTRATION STATEMENT FOR THE
SOLE PURPOSE OF ENABLING THE INVESTORS AND SUCH REPRESENTATIVES,

 

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ADVISORS AND UNDERWRITERS AND THEIR RESPECTIVE ACCOUNTANTS AND ATTORNEYS TO
CONDUCT INITIAL AND ONGOING DUE DILIGENCE WITH RESPECT TO THE COMPANY AND THE
ACCURACY OF SUCH REGISTRATION STATEMENT.

 

The Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.

 

5.               OBLIGATIONS OF THE INVESTORS.

 

(a)                                Each Investor shall promptly furnish in
writing to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least five (5) Business Days prior to the first anticipated filing date of any
Registration Statement, the Company shall notify each Investor of the
information the Company requires from such Investor if such Investor elects to
have any of the Registrable Securities included in the Registration Statement.
An Investor shall provide such information to the Company at least two
(2) Business Days prior to the first anticipated filing date of such
Registration Statement if such Investor elects to have any of the Registrable
Securities included in the Registration Statement.

 

(b)                               Each Investor, by its acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of a
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from
such Registration Statement.

 

(c)                                Each Investor agrees that, upon receipt of
any notice from the Company of either (i) the commencement of an Allowed Delay
pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to
Section 3(h) hereof, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities, until the Investor is advised by the Company that a
supplemented or amended prospectus has been filed with the SEC and until any
related post-effective amendment is declared effective and, if so directed by
the Company, the Investor shall deliver to the Company or destroy (and deliver
to the Company a certificate of destruction) all copies in the Investor’s
possession of the Prospectus covering the Registrable Securities current at the
time of receipt of such notice.

 

6.               INDEMNIFICATION.

 

(a)                                Indemnification by the Company. The Company
will indemnify and hold harmless each Investor and its officers, directors,
members, employees and agents, successors and assigns, and each other person, if
any, who controls such Investor within the

 

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meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof; (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information
herein called a “Blue Sky Application”); (iii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; (iv) any violation by the Company or
its agents of any rule or regulation promulgated under the 1933 Act applicable
to the Company or its agents and relating to action or inaction required of the
Company in connection with such registration; or (v) any failure to register or
qualify the Registrable Securities included in any such Registration in any
state where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company will undertake such registration or qualification on an
Investor’s behalf and will reimburse such Investor, and each such officer,
director or member and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Investor or any such
controlling person in writing specifically for use in such Registration
Statement or Prospectus.

 

(b)                               Indemnification by the Investors. Each
Investor agrees, severally but not jointly, to indemnify and hold harmless, to
the fullest extent permitted by law, the Company, its directors, officers,
employees, stockholders and each person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expense (including reasonable attorney fees) resulting from any untrue statement
of a material fact or any omission of a material fact required to be stated in
the Registration Statement or Prospectus or preliminary prospectus or amendment
or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement or
omission is contained in any information furnished in writing by such Investor
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto. In no event shall the liability
of an Investor be greater in amount than the dollar amount of the proceeds (net
of all expense paid by such Investor in connection with any claim relating to
this Section 6 and the amount of any damages such Investor has otherwise been
required to pay by reason of such untrue statement or omission) received by such
Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.

 

(c)                                Conduct of Indemnification Proceedings. Any
person entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ

 

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separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless
(a) the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.

 

(d)                               Contribution. If for any reason the
indemnification provided for in the preceding paragraphs (a) and (b) is
unavailable to an indemnified party or insufficient to hold it harmless, other
than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

 

7.               MISCELLANEOUS.

 

(a)                                Amendments and Waivers. This Agreement may be
amended, modified or waived only by a writing signed by the Company and the
Required Investors; provided that if any such amendment, modification or waiver
would adversely affect in any material respect any Investor or group of
Investors who have comparable rights under this Agreement disproportionately to
the other Investors having such comparable rights, such amendment, modification,
or waiver shall also require the written consent of the Investor(s) so adversely
affected. Notwithstanding the foregoing, no amendment or modification of this
Agreement that would restrict or otherwise limit any Investor’s registration
rights hereunder shall be effective against such Investor without its written
consent.

 

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(b)                               Notices. All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section 9.4 of
the Purchase Agreement.

 

(c)                                Assignments and Transfers by Investors. The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Investors and their respective successors and assigns. An Investor
may transfer or assign, in whole or from time to time in part, to one or more
persons its rights hereunder in connection with the transfer of Registrable
Securities by such Investor to such person, provided that (i) such Investor
complies with all laws applicable thereto and provides written notice of
assignment to the Company promptly after such assignment is effected and
(ii) the transferee agrees in writing to be bound by this Agreement as if it
were a party hereto.

 

(d)                               Assignments and Transfers by the Company. This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation, without the prior written consent of the Required
Investors, after notice duly given by the Company to each Investor.

 

(e)                                Benefits of the Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

 

(f)                                  Counterparts; Faxes. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement may also be executed via facsimile, which shall be deemed an original.

 

(g)                               Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

 

(h)                               Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof but shall
be interpreted as if it were written so as to be enforceable to the maximum
extent permitted by applicable law, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provisions hereof
prohibited or unenforceable in any respect.

 

10

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(i)                                   Further Assurances. The parties shall
execute and deliver all such further instruments and documents and take all such
other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

 

(j)                                   Entire Agreement. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

 

(k)                                Governing Law; Consent to Jurisdiction;
Waiver of Jury Trial. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York without regard to
the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated
hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement. Each of
the parties hereto irrevocably consents to the jurisdiction of any such court in
any such suit, action or proceeding and to the laying of venue in such court.
Each party hereto irrevocably waives any objection to the laying of venue of any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY
RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.

 

11

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SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

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

 

The Company:

TAPESTRY PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

By:

 

/s/ Kai P. Larson

 

 

Name:

Kai P. Larson

 

Title:

Vice President, General Counsel and Secretary

 

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

 

SIGNATURE PAGES TO
REGISTRATION RIGHTS AGREEMENT

 

 

BAKER BROS. INVESTMENTS II, L.P.

 

 

 

 

 

 

 

By:

Baker Bros. Capital, L.P., its general partner

 

 

By:

Baker Bros. Capital (GP), LLC, its general partner

 

 

 

 

By:

/s/ Julian Baker

 

 

 

Name:

Julian Baker

 

 

 

Title:

Managing Member

 

 

 

 

 

 

 

 

 

 

 

 

BAKER BIOTECH FUND II (Z), L.P.

 

 

 

 

 

By:

Baker Biotech Capital II (Z), L.P., its general partner

 

By:

Baker Biotech Capital II (Z) (GP), LLC, its general
partner

 

 

 

 

By:

/s/ Julian Baker

 

 

 

Name:

Julian Baker

 

 

 

Title:

Managing Member

 

 

 

 

 

 

 

 

 

 

 

 

BAKER BIOTECH FUND III, L.P.

 

 

 

 

 

 

 

By:

Baker Biotech Capital III, L.P., its general partner

 

By:

Baker Biotech Capital III (GP), LLC, its general
partner

 

 

 

 

 

 

By:

/s/ Julian Baker

 

 

 

Name:

Julian Baker

 

 

 

Title:

Managing Member

 

 

 

 

 

 

 

 

 

 

 

 

BAKER BIOTECH FUND III (Z), L.P.

 

 

 

 

 

 

 

By:

Baker Biotech Capital III (Z), L.P., its general partner

 

By:

Baker Biotech Capital III (Z) (GP), LLC, its general
partner

 

 

 

 

 

 

By:

/s/ Julian Baker

 

 

 

Name:

Julian Baker

 

 

 

Title:

Managing Member

 

 

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

 

 

14159 L.P.

 

 

 

 

 

 

 

By:

14159 Capital, L.P., its general partner

 

 

By:

14159 Capital (GP), LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Julian Baker

 

 

 

Name:

Julian Baker

 

 

 

Title:

Managing Member

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

BIOTECHNOLOGY VALUE FUND, L.P.

 

 

 

 

 

 

 

By:

BVF Partners, L.P., its general partner

 

 

By:

BVF Inc., its general partner

 

 

 

 

 

 

 

By:

/s/ Mark N. Lampert

 

 

 

Name:

Mark N. Lampert

 

 

 

Title:

President

 

 

 

 

BIOTECHNOLOGY VALUE FUND II, L.P.

 

 

 

 

 

 

 

By:

BVF Partners, L.P., its general partner

 

 

By:

BVF Inc., its general partner

 

 

 

 

 

 

 

By:

/s/ Mark N. Lampert

 

 

 

Name:

Mark N. Lampert

 

 

 

Title:

President

 

 

 

 

BVF INVESTMENTS, L.L.C.

 

 

 

 

 

 

 

By:

BVF Partners, L.P., its manager

 

 

By:

BVF Inc., its general partner

 

 

 

 

 

 

 

By:

/s/ Mark N. Lampert

 

 

 

Name:

Mark N. Lampert

 

 

 

Title:

President

 

 

 

 

INVESTMENT 10, L.L.C.

 

 

 

 

 

 

 

By:

BVF Partners, L.P., its attorney-in-fact

 

 

By:

BVF Inc., its general partner

 

 

 

 

 

 

 

By:

/s/ Mark N. Lampert

 

 

 

Name:

Mark N. Lampert

 

 

 

Title:

President

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

FORT MASON MASTER, LP

 

 

 

 

 

 

 

By:

Fort Mason Capital, LLC, its General

 

 

 

Partner

 

 

 

 

 

 

 

By:

/s/ Den Gorman

 

 

 

Name:

Den Gorman

 

 

 

Title:

Managing Member

 

 

 

 

FORT MASON PARTNERS, LP

 

 

 

 

 

 

 

By:

Fort Mason Capital, LLC, its General

 

 

 

Partner

 

 

 

 

 

 

 

By:

/s/ Den Gorman

 

 

 

Name:

Den Gorman

 

 

 

Title:

Managing Member

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

CAPITAL VENTURES INTERNATIONAL

 

 

 

 

 

 

 

By:

Heights Capital Management, Inc., its
authorized agent

 

 

 

 

 

 

 

By:

/s/ Martin Kobinger

 

 

 

Name:

Martin Kobinger

 

 

 

Title:

Investment Manager

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

MERLIN BIOMED LONG TERM
APPRECIATION, LP

 

 

 

 

 

 

 

By:

/s/ Norman Schleifer

 

 

 

Name:

Norman Schleifer

 

 

 

Title:

Chief Financial Officer

 

 

 

 

MERLIN BIOMED OFFSHORE MASTER
FUND

 

 

 

 

 

 

 

By:

/s/ Norman Schleifer

 

 

 

Name:

Norman Schleifer

 

 

 

Title:

Chief Financial Officer

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

SPECIAL SITUATIONS FUND III Q.P. L.P.

 

 

 

 

 

 

 

By:

/s/ David Greenhouse

 

 

 

Name:

David Greenhouse

 

 

 

Title:

 

 

 

 

 

SPECIAL SITUATIONS LIFE SCIENCE FUND
L.P.

 

 

 

 

 

 

 

By:

/s/ David Greenhouse

 

 

 

Name:

David Greenhouse

 

 

 

Title:

 

 

 

 

 

SPECIAL SITUATIONS PRIVATE EQUITY
FUND L.P.

 

 

 

 

 

 

 

By:

/s/ David Greenhouse

 

 

 

Name:

David Greenhouse

 

 

 

Title:

 

 

 

 

 

SPECIAL SITUATIONS FUND III L.P.

 

 

 

 

 

 

 

By:

/s/ David Greenhouse

 

 

 

Name:

David Greenhouse

 

 

 

Title:

 

 

 

 

 

SPECIAL SITUATIONS CAYMAN FUND L.P.

 

 

 

 

 

 

 

By:

/s/ David Greenhouse

 

 

 

Name:

David Greenhouse

 

 

 

Title:

 

 

 

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

 

SIGNATURE PAGES TO
REGISTRATION RIGHTS AGREEMENT

 

 

IRA FBO CHUNG W. KONG DB SECURITIES
INC. CUSTODIAN ROTH CONVERSION
ACCOUNT

 

 

 

 

 

 

 

By:

/s/ Chung W. Kong

 

 

 

Name:

Chung W. Kong

 

 

 

Title:

Beneficiary

 

 

 

 

IRA FBO CHANG L. KONG DB SECURITIES
INC. CUSTODIAN ROTH CONVERSION
ACCOUNT

 

 

 

 

 

 

 

By:

/s/ Chang L. Kong

 

 

 

Name:

Chang L. Kong

 

 

 

Title:

Beneficiary

 

 

 

 

TANG CAPITAL PARTNERS, LP

 

 

 

 

 

 

 

 

 

 

By:

/s/ Kevin C. Tang

 

 

 

Name:

Kevin C. Tang

 

 

 

Title:

Managing Member

 

 

 

 

KEVIN C. TANG AS CUSTODIAN FOR JUSTIN
LEE TANG UNDER THE CA TRANSFER TO
MINORS ACT

 

 

 

 

 

 

 

 

 

 

By:

/s/ Kevin C. Tang

 

 

 

Name:

Kevin C. Tang

 

 

 

Title:

Trustee

 

 

 

KEVIN TANG AND HAEYOUNG TANG
TRUSTEES THE TANG FAMILY TRUST

DATED 8-27-02

 

 

 

 

 

 

 

By:

/s/ Kevin C. Tang

 

 

 

Name:

Kevin C. Tang

 

 

 

Title:

Trustee

 

 

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

 

 

KEVIN C. TANG AS CUSTODIAN FOR
JULIAN KONG TANG UNDER THE CA
TRANSFER TO MINORS ACT

 

 

 

 

 

 

 

By:

/s/ Kevin C. Tang

 

 

 

Name:

Kevin C. Tang

 

 

 

Title:

Trustee

 

 

 

 

KEVIN C. TANG AS CUSTODIAN FOR NOA
YOUNG TANG UNDER THE CA TRANSFER
TO MINORS ACT

 

 

 

 

 

 

 

By:

/s/ Kevin C. Tang

 

 

 

Name:

Kevin C. Tang

 

 

 

Title:

Trustee

 

 

 

 

IRA FBO KEVIN TANG DB SECURITIES INC.
CUSTODIAN ROLLOVER ACCOUNT

 

 

 

 

 

 

 

By:

/s/ Kevin C. Tang

 

 

 

Name:

Kevin C. Tang

 

 

 

Title:

Beneficiary

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

VERSANT CAPITAL MANAGEMENT LLC

 

 

 

 

 

 

 

By:

/s/ Herriot Tabuteau

 

 

 

Name:

Herriot Tabuteau

 

 

 

Title:

Managing Member

 

 

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

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

XMARK JV INVESTMENT PARTNERS, LLC

 

 

 

 

 

 

 

By:

 /s/ Mitchell D. Kaye

 

 

 

Name:

Mitchell D. Kaye

 

 

 

Title:

Chief Investment Officer

 

 

 

 

XMARK OPPORTUNITY FUND, LTD.

 

 

 

 

 

 

 

By:

 /s/ Mitchell D. Kaye

 

 

 

Name:

Mitchell D. Kaye

 

 

 

Title:

CIO

 

 

 

 

XMARK OPPORTUNITY FUND, L.P.

 

 

 

 

 

 

 

By:

 /s/ Mitchell D. Kaye

 

 

 

Name:

Mitchell D. Kaye

 

 

 

Title:

CIO

 

 

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

 

Exhibit A

 

Plan of Distribution

 

The selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock or interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.

 

The selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:

 

• ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

• block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;

 

• purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

• an exchange distribution in accordance with the rules of the applicable
exchange;

 

• privately negotiated transactions;

 

• short sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the SEC;

 

• through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 

• broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share; and

 

• a combination of any such methods of sale.

 

The selling stockholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock, from time to time, under
this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as

 

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

 

selling stockholders under this prospectus. The selling stockholders also
may transfer the shares of common stock in other circumstances, in which case
the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

 

In connection with the sale of our common stock or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

 

The aggregate proceeds to the selling stockholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.

 

The selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.

 

The selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
“underwriters” within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are “underwriters” within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.

 

To the extent required, the shares of our common stock to be sold, the names of
the selling stockholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

 

In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock
may not be sold unless it has been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.

 

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

 

We have advised the selling stockholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling stockholders and their affiliates. In
addition, we will make copies of this prospectus (as it may be supplemented or
amended from time to time) available to the selling stockholders for the purpose
of satisfying the prospectus delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.

 

We have agreed to indemnify the selling stockholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.

 

We have agreed with the selling stockholders to keep the registration statement
of which this prospectus constitutes a part effective until the earlier of
(1) such time as all of the shares covered by this prospectus have been disposed
of pursuant to and in accordance with the registration statement or (2) the date
on which the shares may be sold pursuant to Rule 144(k) of the Securities Act.

 

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