**Exhibit 10.1**

 

PRAECIS PHARMACEUTICALS INCORPORATED

 

Form of

Incentive Stock Option Agreement

 

PRAECISPHARMACEUTICALS INCORPORATED, a Delaware corporation (the “Company”), herebygrants as of this [**DATE**], to [**NAME**] (the “Employee”), an option to purchase a maximumamount of [**NUMBER OF SHARES**] shares of its commonstock, par value $.01 per share (“Common Stock”), at the price of $[**EXERCISE PRICE**] per share. To the extent the option granted hereby is exercisable pursuant to theterms hereof, such option may be exercised for a period of up to ten years fromthe date granted.  The option grantedhereby is subject to the following terms and conditions:

 

1.                                       Grant Under Third Amended and Restated 1995Stock Plan.  This option is granted pursuant to and isgoverned by the Company’s Third Amended and Restated 1995 Stock Plan (as it maybe amended from time to time, the “Plan”) and, unless the context otherwiserequires, terms used herein shall have the same meaning as in the Plan.

 

2.                                       Grant as Incentive Stock Option; OtherOptions.  This option is intended to qualify as anincentive stock option under Section 422(b) of the Internal Revenue Codeof 1986, as amended (the “Code”), to the full extent permitted thereunder andis otherwise a non-qualified stock option. This option is in addition to any other options heretofore or hereaftergranted to the Employee by the Company.

 

3.                                       Extent of Option If Employment Continues.  Solong as the Employee continues to be employed by the Company, this option shallbecome fully exercisable after a period of [**NUMBER OFYEARS**] years in accordance with the incentive stock option vesting schedule setforth in Annex A to this Agreement.

 

[**INSERT FORALL EXECUTIVE OFFICER GRANTS AND EMPLOYEE  ANNUAL RELOAD GRANTS -**Notwithstandingthe foregoing, this option shall automatically become fully vested andexercisable immediately upon the termination of the Employee’s employment upon,or within a one-year period following, a “Change of Control” either by (i) theCompany, other than for “Cause” or (ii) the Employee for “Good Reason” (as suchterms are defined herein).

 

A“Change of Control” shall occur or be deemed to have occurred if:

 

(i)any individual, entity or “person” (within the meaning of Section 13(d)(3)or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended(the “Exchange Act”)), other than the Company, any trustee or other fiduciaryholding securities under an employee 

 

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benefitplan of the Company, or any corporation owned directly or indirectly by thestockholders of Company in substantially the same proportion as their ownershipof stock of the Company, is or becomes the “beneficial owner” (as defined inRule 13d-3 under the Exchange Act), directly or indirectly, of securities ofthe Company representing more than 50% of the combined voting power of theCompany’s then outstanding securities entitled to vote generally for theelection of directors;

 

(ii)individuals who, as of the date hereof, constitute the Company’s Board ofDirectors (as of the date hereof, the “Incumbent Board”) cease for any reasonto constitute a majority of the Company’s Board of Directors, provided that anyperson becoming a director subsequent to the date hereof whose election, ornomination for election by the Company’s stockholders, was approved by a voteof at least a majority of the directors then comprising the Incumbent Board(other than an election or nomination of an individual whose initial assumptionof office is in connection with an actual or threatened election contestrelating to the election of the directors of the Company, as such terms areused in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, forpurposes of this Agreement, considered as though such person were a member ofthe Incumbent Board;

 

(iii)the stockholders of the Company approve a merger or consolidation of theCompany or any direct or indirect subsidiary of the Company with any otherentity or entities (whether or not the Company would be the survivingcorporation), other than a merger or consolidation which would result in thevoting securities of the Company outstanding immediately prior to such mergeror consolidation representing (either by remaining outstanding or by beingconverted into or exchanged for voting securities of the surviving entity orany parent thereof), immediately after such merger or consolidation, more than50% of the combined voting power of the voting securities of such survivingentity or any parent thereof entitled to vote generally for the election ofdirectors; or

 

(iv)the stockholders of the Company approve a plan of complete liquidation of theCompany or an agreement for the sale or disposition by the Company of all orsubstantially all of the Company’s assets.

 

“Cause”shall mean: (i) the Employee’s substantial and continuing willful failure toperform his or her assigned duties (other than any such failure resulting fromincapacity due to injury or physical or mental illness), which failure is notcured within 30 days after a written demand for substantial performance isdelivered to the Employee by the Company at the direction of the Company’sBoard of Directors which specifically identifies the manner in which theEmployee has not substantially performed his or her assigned duties, andprovided the Employee has had a reasonable opportunity, after receipt of suchwritten demand, to be heard (and to be represented by counsel) at a meeting ofthe Company’s Board of Directors, or (ii) (A) the Employee’s conviction of afelony (other than unintentional motor vehicle felonies) or (B) the Employee’sengaging in gross misconduct 

 

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whichis materially and demonstrably injurious to the Company, provided (in the caseof this clause (B)) the Employee has received written notice from the Companyat the direction of the Board of Directors specifically identifying the acts oromissions constituting such gross misconduct and the Employee has had areasonable opportunity, after receipt of such notice, to be heard (and to berepresented by counsel) at a meeting of the Company’s Board of Directors.  For purposes of this definition, no act orfailure to act shall be considered “willful” unless it is done, or omitted tobe done, in bad faith or without reasonable belief that the action or omissionwas in the best interests of the Company.

 

“Good Reason” shall mean: (i) any adverse and material alteration or diminution in the Employee’s position, title or responsibilities as they existed immediately prior to the Change of Control, if the Company does not remedy such alteration or diminution within 30 days following notice from the Employee; (ii) the Company’s material reduction of the Employee’s annual base salary or targeted bonus opportunity, in each case as in effect immediately prior to the Change of Control; or (iii) relocation of the Company’s offices at which the Employee is employed immediately prior to the Change of Control which increases the Employee’s daily commute by more than 50 miles on a round trip basis.]

 

Allof the foregoing rights are subject to Articles 4 and 5, as appropriate, if theEmployee ceases to be employed by the Company [**(except asprovided above in connection with certain terminations of employment upon orafter a Change of Control of the Company)**] or dies or becomesdisabled while in the employ of the Company.

 

4.                                       Termination of Employment.  Ifthe Employee ceases to be employed by the Company, [**except asprovided in Article 3,**] no further installments of this optionshall become exercisable and, except as provided in Article 5, this optionshall terminate after the passage of ninety (90) days from the date employmentceases, but in no event later than the scheduled expiration date.  In such a case, the Employee’s only rightshereunder shall be those which are properly exercised before the termination ofthe option.

 

5.                                       Death; Disability.  Ifthe Employee dies while in the employ of the Company, this option may beexercised, to the extent of the number of shares with respect to which theEmployee could have exercised it on the date of his or her death, by his or herestate, personal representative or beneficiary to whom this option has beenassigned pursuant to Article 9, at any time within 180 days after the dateof death, but not later than the scheduled expiration date.  If the Employee ceases to be employed by theCompany by reason of his or her disability (as defined in the Plan), thisoption may be exercised, to the extent of the number of shares with respect towhich the Employee could have exercised it on the date of the termination ofhis or her employment, at any time within 180 days after such termination, butnot later than the scheduled expiration date. At the expiration of such 180-day period or the scheduled expirationdate, whichever is the earlier, this option 

 

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shallterminate and the only rights hereunder shall be those as to which the optionwas properly exercised before such termination.

 

6.                                       Partial Exercise. Exercise of this option up to the extent above stated may be made inpart at any time and from time to time within the above limits, except thatthis option may not be exercised for a fraction of a share unless such exerciseis with respect to the final installment of stock subject to this option and,absent the provisions of this Article 6, a fractional share would berequired to be issued to permit the Employee to exercise completely such finalinstallment.  Any fractional share withrespect to which an installment of this option cannot be exercised because ofthe limitation contained in the preceding sentence shall remain subject to thisoption and shall be available for later purchase by the Employee in accordancewith the terms hereof.  No fractional shareshall be issued under the Plan and the Employee shall receive from the Companycash in lieu of such fractional shares.

 

7.                                       Payment of Price.  Theoption price is payable in United States dollars and may be paid (i) in cash,(ii) by check, (iii) at the discretion of the committee, by delivery of sharesof Common Stock (the value of which for this purpose shall be determined by theCommittee), (iv) at the discretion of the Committee, by delivery of theEmployee’s personal recourse note bearing interest payable not less thanannually at no less than 100% of the lowest applicable Federal rate, as definedin Section 1274(d) of the Code, or (v) subject to clauses (iii) and (iv),by any combination of the foregoing, equal in amount to the option price.

 

Notwithstandingthe foregoing, the Employee may not pay any part of the exercise price hereofby transferring Common Stock to the Company if such Common Stock is bothsubject to a substantial risk of forfeiture and not transferable within themeaning of Section 83 of the Code. If the Employee delivers a personal recourse note as provided above, theEmployee shall concurrently execute and deliver to the Company a pledgeagreement in a form reasonably satisfactory to the Company, together with astock certificate or certificates representing shares of Common Stock (havingan aggregate fair market value (as determined by the Committee) equal as of thedate of exercise to at least the value of the principal amount of the note),duly endorsed or accompanied by a stock power or powers duly endorsed, to securethe Employee’s obligations under such personal recourse note.

 

8.                                       Method of Exercising Option. Subject to the terms and conditions of this Agreement, this option maybe exercised by written notice to the Company, at the principal executiveoffice of the Company at 830 Winter Street, Waltham, MA 02451-1420, or suchother address at which the principal executive offices of the Company arelocated, or to such transfer agent as the Company shall designate.  Such notice shall state the election toexercise this option and the number of shares in respect of which it is beingexercised and shall be signed by the person or persons so exercising thisoption.  Such 

 

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noticeshall be accompanied by payment of the full purchase price of such shares, andthe Company shall deliver a certificate or certificates representing suchshares as soon as practicable after the notice shall be received.  The certificate or certificates for theshares as to which this option shall have been so exercised shall be registeredin the name of the person or persons so exercising this option (or, if thisoption shall be exercised by the Employee and if the Employee shall so requestin the notice exercising this option, shall be registered in the name of theEmployee and another person jointly, with right of survivorship) and shall bedelivered as provided above to or upon the written order of the person orpersons exercising this option.  In theevent this option shall be exercised pursuant to Article 5 hereof by anyperson or persons other than the Employee, such notice shall be accompanied byappropriate proof of the right of such person or persons to exercise thisoption.  All shares that shall bepurchased upon the exercise of this option as provided herein shall be fullypaid and non-assessable.

 

9.                                       Option Not Transferable.  Thisoption is not transferable or assignable except by will or by the laws ofdescent and distribution, or as otherwise permitted by the Committee in itssole discretion.  During the Employee’slifetime, only the Employee or his or her guardian or legal representative canexercise this option.

 

10.                                 No Obligation to Exercise Option.  Thegrant and acceptance of this option imposes no obligation on the Employee toexercise it.

 

11.                                 No Obligation to Continue Employment.  TheCompany and any Related Corporation (as defined in the Plan) are not by thePlan or this option obligated to continue the Employee in employment.

 

12.                                 No Rights as Stockholder until Exercise.  TheEmployee shall have no rights as a stockholder with respect to shares subjectto this Agreement until a stock certificate therefore has been issued to theEmployee and is fully paid for.  Exceptas is expressly provided in the Plan with respect to certain changes in thecapitalization of the Company, no adjustment shall be made for dividends orsimilar rights for which the record date is prior to the date such stockcertificate is issued.

 

13.                                 Capital Changes and Business Successions.  ThePlan contains provisions covering the treatment of options in a number ofcontingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to stock subject tooptions and the related provisions with respect to successors to the businessof the Company are hereby made applicable hereunder and are incorporated hereinby reference.  In general, you should notassume that options necessarily would survive the acquisition of the Company.  In particular, without affecting thegenerality of the foregoing, it is understood that for the purposes of Articles3 through 5 hereof, both inclusive, employment by the Company includesemployment by a Related Corporation as defined in the Plan.

 

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14.                                 Early Disposition.  TheEmployee agrees to notify the Company in writing immediately after the Employeemakes a Disqualifying Disposition of any Common Stock received pursuant to theexercise of this option.  A DisqualifyingDisposition is any disposition (including any sale) of such Common Stock beforethe later of (a) two years after the date the Employee was granted thisoption or (b) one year after the date the Employee acquired Common Stock byexercising this option.  If the Employeehas died before such stock is sold, these holding period requirements do notapply and no Disqualifying Disposition can occur thereafter.  The Employee also agrees to provide theCompany with any information which it shall request concerning any suchdisposition.  The Employee acknowledgesthat he or she will forfeit the favorable income tax treatment otherwiseavailable with respect to the exercise of this incentive stock option if he orshe makes a Disqualifying Disposition of the stock received on exercise of thisoption.

 

15.                                 Withholding Taxes.  Ifthe Company in its discretion determines that it is obligated to withhold taxwith respect to a Disqualifying Disposition (as defined in Article 14) ofCommon Stock received by the Employee on exercise of this option, the Employeehereby agrees that the Company may withhold from the Employee’s wages theappropriate amount of federal, state and local withholding taxes attributableto such Disqualifying Disposition.  Ifany portion of this option is treated as a Non-Qualified Option, the Employeehereby agrees that the Company may withhold from the Employee’s wages theappropriate amount of federal, state and local withholding taxes attributableto the Employee’s exercise of such Non-Qualified Option.  At the Company’s discretion, the amountrequired to be withheld may be withheld in cash from such wages, or (withrespect to compensation income attributable to the exercise of this option) inkind from the Common Stock otherwise deliverable to the optionee on exercise ofthis Option.  The Employee further agreesthat, if the Company does not withhold an amount from the Employee’s wagessufficient to satisfy the Company’s withholding obligation, the Employee willreimburse the Company on demand, in cash, for the amount underwithheld.

 

16.                                 No Exercise of Option if EmploymentTerminated for Misconduct.  If the employment of the Employee isterminated for “Misconduct,” this option shall terminate on the date of suchtermination of employment and shall thereupon not be exercisable to any extentwhatsoever.  “Misconduct” is conduct, asdetermined by the Company’s Board of Directors, involving one or more of thefollowing:  (i) the substantial andcontinuing failure of the Employee to render services to the Company inaccordance with his or her assigned duties; (ii) disloyalty, gross negligence,dishonesty or breach of fiduciary duty to the Company; (iii) the commission ofan act of embezzlement, fraud, disloyalty, dishonesty or deliberate disregardof the rules or policies of the Company which results in loss, damage or injuryto the Company, whether directly or indirectly; (iv) the unauthorizeddisclosure of any trade secret or confidential information of the Company; or(v) the commission of an act which constitutes unfair competition with theCompany or 

 

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whichinduces any customer of the Company to break a contract with the Company.  In making such determination, the Board ofDirectors shall act fairly and in utmost good faith and shall give the Employeean opportunity to appear and to be heard at a hearing before the Board ofDirectors and present evidence on his or her behalf.  For the purposes of this Article 16,termination of employment shall be deemed to occur when the Employee receivesnotice that his or her employment is terminated.  [**Notwithstanding theforegoing, immediately upon a Change of Control, this Section 16 shallautomatically cease to be of any force or effect, and, accordingly, notermination of the Employee’s employment with the Company upon or after aChange of Control will be, or will be deemed to be, a termination forMisconduct for the purposes of this Article 16.**]

 

17.                                 Lock-up Agreement.  Inthe event of an underwritten public offering of the Company’s securities, theEmployee (or any permitted transferee pursuant to Article 9), whether ornot such Employee’s shares issuable upon exercise of the option granted hereinare included in such registration, hereby agrees not to effect any public saleor distribution, including any sale pursuant to Rule 144 under the Act, of anyshares (other than as part of such underwritten offering), without the consentof the managing underwriter(s) for such offering (the “Managing Underwriter”),during a period commencing on the effective date of such registration andending 180 calendar days thereafter, or such lesser period as the Company andthe Managing Underwriter shall reasonably determine is required to effect asuccessful offering.

 

18.                                 Incorporation of Plan.  ThePlan is hereby incorporated herein by reference and made a part hereof and theoption and this Agreement are subject to all terms and conditions of the Plan.

 

19.                                 Provision of Documentation to Employee.  Bysigning this Agreement or a counterpart hereof, the Employee acknowledges receiptof a copy of this Agreement and a copy of the Plan.

 

20.                                 Failure to Enforce Not a Waiver.  Thefailure of the Company to enforce at any time any provision of this Agreementshall in no way be construed to be a waiver of such provision or of any otherprovision hereof.

 

21.                                 Governing Law.  ThisAgreement shall be governed by and interpreted in accordance with the laws ofthe Commonwealth of Massachusetts, without regard to the conflicts of lawsprovisions thereof.

 

22.                                 Counterparts.  ThisAgreement may be executed in counterparts, each of which shall be an originalbut all of which shall represent one and the same agreement.

 

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INWITNESS WHEREOF, the Company and the Employee have caused this Agreement to beexecuted, and the Employee whose signature appears below acknowledges receiptof a copy of the Plan incorporated herein by reference and acceptance of anoriginal copy of the Agreement.

 

 
| PRAECIS  PHARMACEUTICALS |   |
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| INCORPORATED             |   |
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| Employee                 |   |
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| Print  Name of Employee  |   |
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| Street  Address          |   |
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