Exhibit 10.1


 


Tapestry
Pharmaceuticals, Inc.


2006 EQUITY INCENTIVE  PLAN




STOCK OPTION AGREEMENT

(NONSTATUTORY STOCK OPTION)


Pursuant
to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option
Agreement, Tapestry Pharmaceuticals, Inc.  (the “Company”)
has granted you an option under its 2006
Equity Incentive Plan (the “Plan”) to purchase the number of shares of
the Company’s Common Stock indicated in your Grant Notice at the exercise price
indicated in your Grant Notice.  Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
Plan shall have the same definitions as in the Plan.


The
details of your option are as follows:


1.             VESTING.  Subject to
Section 10 and to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.


2.             NUMBER OF SHARES AND EXERCISE PRICE. 
The number of shares of Common Stock subject to your option and your
exercise price per share referenced in your Grant Notice may be adjusted from
time to time for Capitalization Adjustments.


3.             EXERCISE PRIOR TO VESTING (“EARLY EXERCISE”). 
If permitted in your Grant Notice (i.e., the “Exercise Schedule”
indicates that “Early Exercise” of your option is permitted) and subject to the
provisions of your option, you may elect at any time that is both (i) during
the period of your Continuous Service and (ii) during the term of your option,
to exercise all or part of your option, including the nonvested portion of your
option; provided, however, that:


(a)           a partial exercise of your option shall
be deemed to cover first vested shares of Common Stock and then the earliest
vesting installment of unvested shares of Common Stock;


(b)           any shares of Common Stock so purchased
from installments that have not vested as of the date of exercise shall be
subject to the purchase option in favor of the Company as described in the
Company’s form of Early Exercise Stock Purchase Agreement; and


(c)           you shall enter into the Company’s form
of Early Exercise Stock Purchase Agreement with a vesting schedule that will
result in the same vesting as if no early exercise had occurred.


4.             METHOD OF PAYMENT. 
Payment of the exercise price is due in full upon exercise of all or any
part of your option.  You may elect to
make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice,
which may include one or more of the following:


 


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(a)           In the Company’s sole discretion and
provided that at the time of exercise the Common Stock is publicly traded,
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds.


(b)           In the Company’s sole discretion and
provided that at the time of exercise the Common Stock is publicly traded, by
delivery of already-owned shares of Common Stock either that you have held for
the period required to avoid a charge to the Company’s reported earnings
(generally six (6) months) or that you did not acquire, directly or indirectly
from the Company, that are owned free and clear of any liens, claims,
encumbrances or security interests, and that are valued at Fair Market Value on
the date of exercise.  “Delivery” for
these purposes, in the sole discretion of the Company at the time you exercise
your option, shall include delivery to the Company of your attestation of
ownership of such shares of Common Stock in a form approved by the
Company.  Notwithstanding the foregoing,
you may not exercise your option by tender to the Company of Common Stock to
the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.


(c)           In the Company’s sole discretion and
provided that at the time of exercise the Common Stock is publicly traded,
through a “net exercise” of your option, pursuant to which the Company will not
require payment of the exercise price of your option but will reduce the number
of shares of Common Stock issued to you upon the exercise by the largest number
of whole shares that has a Fair Market Value that does not exceed the aggregate
exercise price.  With respect to any
remaining balance of the aggregate exercise price, you shall make a cash
payment to the Company.  The shares of
Common Stock so used to pay the exercise price of your option under a “net
exercise” will be considered to have resulted from the exercise of the option,
and accordingly, the option will not again be exercisable with respect to such
shares, the shares actually delivered to you, and any shares withheld for
purposes of tax withholding.


(d)           In the Company’s sole discretion and
subject to compliance with applicable law (including Section 402 of the
Sarbanes Oxley Act of 2002), pursuant to the following deferred payment
alternative:


(i)            Not less than one hundred percent (100%)
of the aggregate exercise price, plus accrued interest, shall be due four (4)
years from date of exercise or, at the Company’s election, upon termination of
your Continuous Service.


(ii)           Interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to
avoid (1) the treatment as interest, under any applicable provisions of the
Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement and (2) the treatment of the option as a variable
award for financial accounting purposes.


(iii)         At any time that the Company is
incorporated in Delaware, payment of the Common Stock’s “par value,” as defined
in the Delaware General Corporation Law, shall be made in cash and not by
deferred payment.


 


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(iv)          In order to elect the deferred payment
alternative, you must, as a part of your written notice of exercise, give
notice of the election of this payment alternative and, in order to secure the
payment of the deferred exercise price to the Company hereunder, if the Company
so requests, you must tender to the Company a promissory note and a pledge
agreement covering the purchased shares of Common Stock, both in form and
substance satisfactory to the Company, or such other or additional
documentation as the Company may request.


5.             WHOLE SHARES. 
You may exercise your option only for whole shares of Common Stock.


6.             SECURITIES LAW COMPLIANCE. 
Notwithstanding anything to the contrary contained herein, you may not
exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of
Common Stock are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.  The exercise of your
option also must comply with other applicable laws and regulations governing
your option, and you may not exercise your option if the Company determines
that such exercise would not be in material compliance with such laws and
regulations.


7.             TERM.  You may not
exercise your option before the commencement or after the expiration of its
term.  The term of your option commences
on the Date of Grant and expires upon the earliest of the following:


(a)           one hundred eighty (180) days after the
termination of your Continuous Service for any reason other than your
Disability or death, provided that if during any part of such period your
option is not exercisable solely because of the condition set forth in Section
6, your option shall not expire until the earlier of the Expiration Date (as
defined in your Grant Notice) or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of your Continuous
Service;


(b)           twelve (12) months after the termination
of your Continuous Service due to your Disability;


(c)           eighteen (18) months after your death if
you die either during your Continuous Service or within one hundred eighty
(180) days after your Continuous Service terminates;


(d)           the Expiration Date indicated in your
Grant Notice;


(e)           in accordance with the provisions of
Section 12 of the Plan; or


(f)            the day before the tenth (10th)
anniversary of the Date of Grant (as
defined in your Grant Notice).


 


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8.             EXERCISE.


(a)           You may exercise the vested portion of
your option (and the unvested portion of your option if your Grant Notice so
permits) during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require.


(b)           By exercising your option you agree that,
as a condition to any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to the Company of
any tax withholding obligation of the Company arising by reason of (1) the
exercise of your option, (2) the lapse of any substantial risk of forfeiture to
which the shares of Common Stock are subject at the time of exercise, or (3)
the disposition of shares of Common Stock acquired upon such exercise.


9.             TRANSFERABILITY. 
Your option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you.  Notwithstanding the foregoing, by delivering
written notice to the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall thereafter be
entitled to exercise your option.


10.          CHANGE
IN CONTROL.


(a)           If a Change in Control occurs and as of,
or within [25 months, for Named Executive Officers][13 months, for
Controller and other officers Vice President and above] after, the effective
time of such Change in Control your Continuous Service terminates due to an
involuntary termination (not including death or Disability) without Cause or
due to a voluntary termination with Good Reason, then, as of the date of
termination of Continuous Service, the vesting and exercisability of your
option shall be accelerated in full.


(b)           “Cause” means the occurrence of any one
or more of the following: (i) your commission of any crime involving
fraud, dishonesty or moral turpitude; (ii) your attempted commission of or
participation in a fraud or act of dishonesty against the Company that results
in (or might have reasonably resulted in) material harm to the business of the
Company; (iii) your intentional, material violation of any contract or
agreement between you and the Company or any statutory duty you owe to the
Company; or (iv) your conduct that constitutes gross insubordination,
incompetence or habitual neglect of duties and that results in (or might have
reasonably resulted in) material harm to the business of the Company; provided, however, that the action or
conduct described in clauses (iii) and (iv) above will constitute “Cause”
only if such action or conduct continues after the Company has provided you
with written notice thereof and thirty (30) days to cure the same.


(c)           “Good Reason” means that one or more of
the following are undertaken by the Company without your express written
consent: (i) the assignment to you of any duties or responsibilities that
results in a material diminution in your function as in effect immediately
prior to the effective date of the Change in Control; (ii) a reduction by
the Company in your annual base salary, as in effect on the effective date of
the Change in Control or as increased thereafter; (iii) any failure by the
Company to continue in effect any benefit plan or program, including incentive
plans or plans with respect to the receipt of securities of the Company, in


 


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which you were
participating immediately prior to the effective date of the Change in Control
(hereinafter referred to as “Benefit Plans”), or the taking of any action by
the Company that would adversely affect your participation in or reduce your
benefits under the Benefit Plans or deprive you of any fringe benefit that you
enjoyed immediately prior to the effective date of the Change in Control; provided, however, that Good Reason shall
not be deemed to have occurred if the Company provides for your participation
in benefit plans and programs that, taken as a whole, are comparable to the
Benefit Plans; (iv) a relocation of your business office to a location
more than fifty (50) miles from the location at which you performed your
duties as of the effective date of the Change in Control, except for required
travel by you on the Company’s business to an extent substantially consistent
with your business travel obligations prior to the effective date of the Change
in Control; or (v) a material breach by the Company of any provision of
the Plan or the Option Agreement or any other material agreement between you
and the Company concerning the terms and conditions of your employment.


(d)           If any payment or benefit you would
receive pursuant to a Change in Control from the Company or otherwise (“Payment”)
would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject
to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”),
then such Payment shall be equal to the Reduced Amount. The “Reduced Amount”
shall be either (x) the largest portion of the Payment that would result
in no portion of the Payment being subject to the Excise Tax or (y) the
largest portion, up to and including the total, of the Payment, whichever
amount, after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate), results in your receipt, on an after-tax basis, of
the greater amount of the Payment notwithstanding that all or some portion of
the Payment may be subject to the Excise Tax. If a reduction in payments or
benefits constituting “parachute payments” is necessary so that the Payment
equals the Reduced Amount, reduction shall occur in the following order unless
you elect in writing a different order (provided,
however, that such election shall be subject to Company approval if
made on or after the effective date of the event that triggers the Payment):
reduction of cash payments; cancellation of accelerated vesting of Stock
Awards; reduction of employee benefits. In the event that acceleration of
vesting of Stock Award compensation is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant of your
Stock Awards (i.e., earliest granted Stock Award cancelled last) unless you
elect in writing a different order for cancellation.


The accounting firm
engaged by the Company for general audit purposes as of the day prior to the
effective date of the Change in Control shall perform the foregoing
calculations. If the accounting firm so engaged by the Company is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, the Company shall appoint a nationally recognized accounting firm
to make the determinations required hereunder. The Company shall bear all
expenses with respect to the determinations by such accounting firm required to
be made hereunder.


The accounting firm
engaged to make the determinations hereunder shall provide its calculations,
together with detailed supporting documentation, to you and the Company within
fifteen (15) calendar days after the date on which your right to a
Payment is triggered (if requested at that time by you or the Company) or such
other time as requested by you or the


 


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Company. If the
accounting firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall
furnish you and the Company with an opinion reasonably acceptable to you that
no Excise Tax will be imposed with respect to such Payment. Any good faith
determinations of the accounting firm made hereunder shall be final, binding
and conclusive upon you and the Company.


11.          OPTION NOT A SERVICE CONTRACT. 
Your option is not an employment or service contract, and nothing in
your option shall be deemed to create in any way whatsoever any obligation on
your part to continue in the employ of the Company or an Affiliate, or of the
Company or an Affiliate to continue your employment.  In addition, nothing in your option shall
obligate the Company or an Affiliate, their respective stockholders, Boards of
Directors, Officers or Employees to continue any relationship that you might
have as a Director or Consultant for the Company or an Affiliate.


12.          WITHHOLDING OBLIGATIONS.


(a)           At the time you exercise your option, in
whole or in part, or at any time thereafter as requested by the Company, you
hereby authorize withholding from payroll and any other amounts payable to you,
and otherwise agree to make adequate provision for (including by means of a “cashless
exercise” pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with the exercise of your option.


(b)           Upon your request and subject to approval
by the Company, in its sole discretion, and compliance with any applicable
legal conditions or restrictions, the Company may withhold from fully vested
shares of Common Stock otherwise issuable to you upon the exercise of your
option a number of whole shares of Common Stock having a Fair Market Value,
determined by the Company as of the date of exercise, not in excess of the
minimum amount of tax required to be withheld by law (or such lower amount as
may be necessary to avoid variable award accounting).  If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your
option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred,
to accelerate the determination of such tax withholding obligation to the date
of exercise of your option.  Notwithstanding
the filing of such election, shares of Common Stock shall be withheld solely
from fully vested shares of Common Stock determined as of the date of exercise
of your option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in
connection with such share withholding procedure shall be your sole
responsibility.


(c)           You may not exercise your option unless
the tax withholding obligations of the Company and/or any Affiliate are
satisfied.  Accordingly, you may not be
able to exercise your option when desired even though your option is vested,
and the Company shall have no obligation to issue a certificate for such shares
of Common Stock or release such shares of Common Stock from any escrow provided
for herein unless such obligations are satisfied.


 


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13.          NOTICES.  Any notices
provided for in your option or the Plan shall be given in writing and shall be
deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5) days after deposit in the United States
mail, postage prepaid, addressed to you at the last address you provided to the
Company.


14.          GOVERNING PLAN DOCUMENT. 
Your option is subject to all the provisions of the Plan, the provisions
of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time
be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the
provisions of your option and those of the Plan, the provisions of the Plan
shall control.


 


 


 


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