Unassociated Document


    EXHIBIT
      10.1

     

    CONNETICS
      CORPORATION

     

    NON-QUALIFIED
      STOCK OPTION AGREEMENT

     

    Connetics
      Corporation, a Delaware corporation (“Connetics” or the “Corporation”), hereby
      grants to Doris Boesch (the “Optionee”) an option to purchase 12,000 shares of
      Common Stock (the “Option”) subject to the following terms and conditions of
      this Non-Qualified Stock Option Agreement (the “Option Agreement”):

     

    
      	
              I.

            	
              NOTICE
                OF STOCK OPTION GRANT

            	 
	 	 	 
	 	
              DORIS
                BOESCH

            	 
	 	
              3160
                Porter Drive

            	 
	 	
              Palo
                Alto, CA 94304

            	 
	 	 	 
	 	
              Date
                of Grant

            	
              March
                24, 2006

            
	 	 	 
	 	
              Vesting
                Commencement Date

            	
              March
                24, 2006

            
	 	 	 
	 	
              Exercise
                Price per Share

            	
              $
                17.03

            
	 	 	 
	 	
              Total
                Number of Shares of Common

            	 
	 	
              Stock
                Subject to the Option (the “Shares”) 

            	
              12,000
                Shares

            
	 	 	 
	 	
              Total
                Exercise Price

            	
              $
                204,360.00

            
	 	 	 
	 	
              Type
                of Option:

            	
              Nonstatutory
                Stock Option

            
	 	 	 
	 	
              Term/Expiration
                Date:

            	
              March
                24, 2016

            


    

     

    Vesting
      Schedule:

     

    This
      Option may be exercised, in whole or in part, in accordance with the following
      schedule:

     

    1/8
      of the Shares subject to the Option shall vest six months after the Vesting
      Commencement Date, and 1/48 of the Shares subject to the Option shall vest
      each
      month thereafter, subject to the Optionee continuing to be a Service Provider
      on
      such dates.

     

    Termination
      Period:

     

    This
      Option may be exercised for (3)
      three months
      after
      the Optionee ceases to be a Service Provider for any reason other than death
      or
      Disability. In the event the Optionee ceases to be a Service Provider as the
      result of death or Disability, this Option may be exercised for (12)
      twelve months after
      the
      Optionee ceases to be a Service Provider. In no event shall this Option be
      exercised later than the Term/Expiration Date as provided above.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	II.	
              AGREEMENT

            


    

     

    1.    Grant
      of Option.
      The
      Corporation hereby grants to the Optionee named in the Notice of Stock Option
      Grant (the “Notice”) attached as Part I of this Option Agreement an option (the
“Option”) to purchase the number of Shares, as set forth in the Notice, at the
      exercise price per share set forth in the Notice (the “Exercise Price”), subject
      to the terms and conditions of the Notice and this Option
      Agreement.

     

    This
      Option is subject to and conditioned upon Optionee’s acceptance of the Option by
      returning to the Corporation an executed original of this Option Agreement.
      This
      Option shall be null and void and of no force and effect, unless the Optionee
      executes and returns to the Corporation this Option Agreement.

     

    This
      Option is granted as an inducement material to the Optionee’s entering into
      service with the Corporation as an Employee. The Grantee has not previously
      been
      a Service Provider of the Company or any Parent or Subsidiary of the
      Company.

     

    This
      Option is not intended to be an incentive stock option under Section 422 of
      the
      Code.

     

    2.    Exercise
      of Option.

     

    (a)    Right
      to Exercise.
      This
      Option is exercisable during its term in accordance with the Vesting Schedule
      set out in the Notice and the applicable provisions of this Option
      Agreement.

     

    (b)    Method
      of Exercise.
      This
      Option is exercisable by delivery of an exercise notice or by such other
      procedure as specified from time to time by the Board, which shall state the
      election to exercise the Option and the number of Shares in respect of which
      the
      Option is being exercised (the “Exercised Shares”). The exercise notice shall be
      completed by the Optionee and delivered to Connetics
      in person, by certified mail, or by such other method (including electronic
      transmission) as determined from time to time by the Board. The exercise notice
      shall be accompanied by payment of the aggregate Exercise Price as to all
      Exercised Shares. This Option shall be deemed to be exercised upon receipt
      by
      Connetics of such fully executed exercise notice accompanied by such aggregate
      Exercise Price.

     

    No
      Shares
      shall be issued pursuant to the exercise of this Option unless such issuance
      and
      exercise complies with Applicable Laws. Assuming such compliance, for income
      tax
      purposes the Exercised Shares shall be considered transferred to the Optionee
      on
      the date the Option is exercised with respect to such Exercised
      Shares.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    3.    Method
      of Payment.
      Payment
      of the aggregate Exercise Price shall be by any of the following, or a
      combination thereof, at the election of the Optionee:

     

    (c)    cash;
      or

     

    (d)    check;
      or

     

    (e)    consideration
      received by Connetics under a cashless exercise program implemented by Connetics
      in connection with this Option Agreement; or 

     

    (f)    surrender
      of other Shares which (i) in the case of Shares acquired upon exercise of an
      option, have been owned by the Optionee for more than six (6) months on the
      date
      of surrender, and (ii) have a Fair Market Value on the date of surrender equal
      to the aggregate Exercise Price of the Exercised Shares.

     

    4.    Non-Transferability
      of Option.
      This
      Option may not be transferred in any manner otherwise than by will or by the
      laws of descent or distribution and may be exercised during the lifetime of
      Optionee only by the Optionee. The terms of this Option Agreement shall be
      binding upon the executors, administrators, heirs, successors and assigns of
      the
      Optionee.

     

    5.    No
      Obligation to Exercise Option.
      The
      grant and acceptance of this Option imposes no obligation on the Optionee to
      exercise it.

     

    6.    No
      Obligation to Continue Business Relationship.
      The
      Corporation and any its’ subsidiaries are not by this Option obligated to
      continue to maintain a business relationship with the Optionee.

     

    7.    Term
      of Option.
      This
      Option may be exercised only within the term set out in the Notice, and may
      be
      exercised during such term only in accordance with the terms of this Option
      Agreement.

     

    8.    Tax
      Consequences.
      Some of
      the federal tax consequences relating to this Option, as of the date of this
      Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
      TAX
      LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX
      ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

     

    (g)    Exercising
      the Option.
      The
      Optionee may incur regular federal income tax liability upon exercise of the
      Option. The Optionee will be treated as having received compensation income
      (taxable at ordinary income tax rates) equal to the excess, if any, of the
      Fair
      Market Value of the Exercised Shares on the date of exercise over their
      aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
      Connetics will be required to withhold from his or her compensation or collect
      from Optionee and pay to the applicable taxing authorities an amount in cash
      equal to a percentage of this compensation income at the time of exercise,
      and
      may refuse to honor the exercise and refuse to deliver Shares if such
      withholding amounts are not delivered at the time of exercise.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (h)    Disposition
      of Shares.
      The
      Optionee holds the Shares acquired upon exercise of the Option for at least
      one
      year, any gain realized on disposition of the Shares will be treated as
      long-term capital gain for federal income tax purposes.

     

    9.    No
      Rights as Stockholder until Exercise.
      The
      Optionee shall have no rights as a stockholder with respect to the Shares until
      a stock certificate has been issued to the Optionee and is fully paid for in
      accordance with paragraph 3. With respect to certain changes in the
      capitalization of the Corporation, no adjustment shall be made for dividends
      or
      similar rights for which the record date is prior to the date such stock
      certificate is issued.

     

    10.    Adjustments Upon Changes in Capitalization,
      Dissolution, Merger or Asset Sale.

     

    (a)    Changes
      in Capitalization.
      Subject
      to any required action by the stockholders of Connetics, the number of shares
      of
      Common Stock covered by the Option as well as the Exercise Price shall be
      proportionately adjusted for any increase or decrease in the number of issued
      shares of Common Stock resulting from a stock split, reverse stock split, stock
      dividend, combination or reclassification of the Common Stock, or any other
      increase or decrease in the number of issued shares of Common Stock effected
      without receipt of consideration by Connetics; provided,
      however,
      that
      conversion of any convertible securities of Connetics shall not be deemed to
      have been “effected without receipt of consideration.” Such adjustment shall be
      made by the Board, whose determination in that respect shall be final, binding
      and conclusive. Except as expressly provided in this Option Agreement, no
      issuance by Connetics of shares of stock of any class, or securities convertible
      into shares of stock of any class, shall affect, and no adjustment by reason
      thereof shall be made with respect to, the number or price of shares of Common
      Stock subject to an Option.

     

    (b)    Dissolution
      or Liquidation.
      In the
      event of the proposed dissolution or liquidation of Connetics, the Board shall
      notify the Optionee prior to the effective date of such proposed transaction.
      The Board in its discretion may permit the Optionee to exercise the Option
      prior
      to such transaction as to all of the Shares, including Shares as to which the
      Option would not otherwise be vested and exercisable. To the extent it has
      not
      been previously exercised, an Option will terminate immediately prior to the
      consummation of such proposed action.

     

    (i)    Merger
      or Asset Sale.
      In the
      event of a merger of Connetics with or into another corporation, or the sale
      of
      substantially all of the assets of Connetics, the Option shall be assumed or
      an
      equivalent option or right substituted by the successor corporation or a Parent
      or Subsidiary of the successor corporation. In the event that the successor
      corporation refuses to assume or substitute for the Option, the Optionee shall
      fully vest in and have the right to exercise the Option as to all of the Shares,
      including Shares as to which it would not otherwise be vested and exercisable.
      If an Option becomes fully vested and exercisable in lieu of assumption or
      substitution in the event of a merger or sale of assets, the Board shall notify
      the Optionee in writing or electronically that the Option shall be fully vested
      and exercisable for a period of time as determined by the Board, and the Option
      shall terminate upon the expiration of such period. For the purposes of this
      paragraph, the Option shall be considered assumed if, following the merger
      or
      sale of assets, the option confers the right to purchase or receive, for each
      Share subject to the Option immediately prior to the merger or sale of assets,
      the consideration (whether stock, cash, or other securities or property)
      received in the merger or sale of assets by holders of Common Stock for each
      share held on the effective date of the transaction (and if holders were offered
      a choice of consideration, the type of consideration chosen by the holders
      of a
      majority of the outstanding shares of Common Stock); provided,
      however,
      that if
      such consideration received in the merger or sale of assets is not solely common
      stock of the successor corporation or its Parent, the Board may, with the
      consent of the successor corporation, provide for the consideration to be
      received upon the exercise of the Option, for each Share subject to the Option,
      to be solely common stock of the successor corporation or its Parent equal
      in
      fair market value to the per share consideration received by holders of Common
      Stock in the merger or sale of assets.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    11.    Entire
      Agreement; Governing Law.
      This
      Option Agreement constitutes the entire agreement of the parties with respect
      to
      the subject matter hereof and supersedes in its entirety all prior undertakings
      and agreements of Connetics and Optionee with respect to the subject matter
      hereof, and may not be modified adversely to the Optionee's interest except
      by
      means of a writing signed by Connetics and Optionee. This agreement is governed
      by the internal substantive laws, but not the choice of law rules, of
      California.

     

    12.    NO
      GUARANTEE OF CONTINUED SERVICE.
      OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
      VESTING SCHEDULE OF THIS AGREEMENT IS EARNED ONLY BY CONTINUING AS A SERVICE
      PROVIDER AT THE WILL OF CONNETICS (AND NOT THROUGH THE ACT OF BEING HIRED,
      BEING
      GRANTED AN OPTION OR PURCHASING SHARES UNDER THIS AGREEMENT). OPTIONEE FURTHER
      ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
      UNDER
      THIS AGREEMENT AND THE VESTING SCHEDULE SET FORTH IN THIS AGREEMENT DO NOT
      CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
      PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
      INTERFERE WITH OPTIONEE'S RIGHT OR CONNETICS’ RIGHT TO TERMINATE OPTIONEE'S
      RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
      CAUSE.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    


    
      	III.	
              DEFINITIONS

            


    

     

    A. “Applicable
      Laws”
means
      the requirements relating to the administration of stock options under U. S.
      state corporate laws, U.S. federal and state securities laws, the Code, any
      stock exchange or quotation system on which the Common Stock is listed or quoted
      and the applicable laws of any foreign country or jurisdiction where the
      Optionee may be resident.

     

    B. “Board”
means
      the Board of Directors of Connetics.

     

    C. “Code”
means
      the Internal Revenue Code of 1986, as amended.

     

    D. “Common
      Stock”
means
      the common stock of Connetics.

     

    E. “Corporation”
means
      Connetics Corporation, a Delaware corporation.

     

    F. “Consultant”
means
      any person, including an advisor, engaged by Connetics or a Parent or Subsidiary
      to render services to such entity.

     

    G. “Director”
means
      a
      member of the Board.

     

    H. “Disability”
means
      total and permanent disability as defined in Section 22(e)(3) of the
      Code.

     

    I. “Employee”
means
      any person, including Officers and Directors, employed by Connetics or any
      Parent or Subsidiary of Connetics. A Service Provider shall not cease to be
      an
      Employee in the case of (i) any leave of absence approved by Connetics or
      (ii) transfers between locations of Connetics or between Connetics, its
      Parent, any Subsidiary, or any successor. Neither service as a Director nor
      payment of a director's fee by Connetics shall be sufficient to constitute
      “employment” by Connetics.

     

    J. “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    K. “Fair
      Market Value”
means,
      as of any date, the value of Common Stock determined as follows:

     

    (i)  If
      the Common Stock is listed on any established stock exchange or a national
      market system, including without limitation the Nasdaq National Market or The
      Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
      be the closing sales price for such stock (or the closing bid, if no sales
      were
      reported) as quoted on such exchange or system on the date of determination,
      as
      reported in The
      Wall Street Journal
      or such
      other source as the Board deems reliable;

     

    (ii) If
      the Common Stock is regularly quoted by a recognized securities dealer but
      selling prices are not reported, the Fair Market Value of a Share of Common
      Stock shall be the mean between the high bid and low asked prices for the Common
      Stock on the date of determination, as reported in The
      Wall Street Journal
      or such
      other source as the Board deems reliable; or

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    (iii) In
      the absence of an established market for the Common Stock, the Fair Market
      Value
      shall be determined in good faith by the Board.

     

    L. “Officer”
means
      a
      person who is an officer of Connetics within the meaning of Section 16 of the
      Exchange Act and the rules and regulations promulgated under the Exchange
      Act.

     

    M. “Parent”
means
      a
“parent corporation,” whether now or hereafter existing, as defined in
      Section 424(e) of the Code.

     

    N. “Service
      Provider”
means
      an Employee, Director or Consultant.

     

    O. “Subsidiary”
means
      a
“subsidiary corporation”, whether now or hereafter existing, as defined in
      Section 424(f) of the Code.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    By
      your
      signature and the signature of Connetics’ representative below, you and
      Connetics agree that this Option is granted under and governed by the terms
      and
      conditions of the this Option Agreement. Optionee has reviewed this Option
      Agreement in its’ entirety, has had an opportunity to obtain the advice of
      counsel prior to executing this Option Agreement and fully understands all
      provisions of this Option Agreement. Optionee hereby agrees to accept as
      binding, conclusive and final all decisions or interpretations of the Board
      upon
      any questions relating to this Option Agreement. Optionee further agrees to
      notify Connetics upon any change in the residence address indicated
      below.

     

    
      	
              OPTIONEE:

            	 	
              CONNETICS
                CORPORATION

            
	 	 	 
	 	 	 
	
              /s/
                Doris Boesch

            	 	
              /s/
                Thomas G. Wiggans

            
	
              Signature

            	 	
              By:
                Thomas G. Wiggans

            
	 	 	 
	
              Doris
                Boesch

            	 	
              Chairman
                of the Board & CEO

            
	
              Print
                Name

            	 	
              Title

            
	 	 	 
	
              3160
                Porter Drive

            	 	 
	
              Residence
                Address

            	 	 
	 	 	 
	
              Palo
                Alto, CA 94304

            	 	 


    

     

     

    
      
        
        

      

      -8-