Document:

Exhibit
10.31

 

THAI SUMMIT TOWER OFFICE BUILDING

 

BUILDING LEASE AGREEMENT

 

(Translation)

 

This Lease Agreement
is entered into on the 5th day of September 2006.

 

By and Between

 

Thai Summit Tower Co., Ltd., having its
office located at No. 1768 on New Phetburi Road, Khwaeng Bangkapi, Khet Houei
Khwuang, Bangkok Metropolis, hereinafter shall be referred to as the "Lessor" of the one party;

 

And

 

Philips Semi-conductor SMO
(Thailand) Co., Ltd., having its office located at No. 1768 on New
Phetburi Road, Khwaeng Bangkapi, Khet Huay Khuang, Bangkok Metropolis,
hereinafter shall be referred to as the "Lessee"
of the other party. The parties whereupon agree as follows:

 

1.     Definitions

 

1.1           "Building" means Thai
Summit Tower Building or "THAI SUMMIT TOWER", located at No. 1768 on
New Phetburi Road, Khwaeng Bangkapi, Khet Houei Khwuang, Bangkok Metropolis.

 

1.2           "Leased space" means the
space on the 5th floor of the total space of approximately 182.32
square meters, the details of which are as shown in Diagram of the Leased
Space, Appendix A annexed hereto, which forms part of this Lease Agreement.

 

2.     Lease of Leased Space

 

The Lessor agrees to let and
the Lessee agrees to accept the lease of space from the Lessor together with
all the rights to enter-exit the lease space as is the case with other tenants
and/or others who are accorded the rights to enter-exit the building by the
Lessor and the Lessee shall use the lease space exclusively for the Lessee's
office only.

 

3.     Period of Lease and Renewal
of Lease Agreement

 

3.1           Subject to the terms and conditions
to be hereafter mentioned, the period of lease shall be for 3 (three) years
with effect from the date of commencement of the Lease Period.

Lease
Period: 5 October 2006.

Commencement
of rental payment: 5 October 2006.

Expiry
of the Lease Agreement: 4 October 2009.

 

3.2 Upon expiration of this
Lease Agreement, the Lessor agrees that the Lessee shall have the right to
renew this Lease for another 3 (three) years under the terms and conditions
that the Lessee shall express its intent in writing to request for a renewal of
the lease in advance for not less than 90 (ninety) days prior to the expiry of
the Lease Agreement as specified in sub-clause 3.1. For this purpose, a new
Lease Agreement shall be executed and the Lessor shall have the right to
readjust the rental tariff according to the market price at that time; which
can be compared with the rental tariff for lease of office space in the same
area and according to the approximate benchmark; however, the increase in the
rental tariff shall not exceed 15% based on the current rental rate.

 

 

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4.     Rental and Rental Payment

 

4.1           Monthly rental payable for a lease
period as specified in sub-clause 3.1 in equal to 140 Baht per square meter per
month, amounting to 25,524.80 (Twenty Five Thousand Hundred Twenty Four point
Eighty) Baht per month.

 

4.2           The Lessee agrees to pay to the
Lessor the rental payment in advance on monthly basis for which the Lessor
shall send an invoice for collection of the rental payment within the 25th
(twenty-fifth) day of every calendar month; and the Lessee shall make rental
payment not later than the 5th (fifth) day of every following month
at the Lessor's office. If the 5th (fifth) day of every particular
month falls on a holiday or a public traditional holiday, the following
business day shall be regarded as the due date for rental payment. Late payment
of the rental shall be subject to a fine penalty at the rate of 1.5 percent per
month of the amount outstanding until the payment is made in full.

 

4.3           Lessor shall be liable for paying
building and land tax, and local taxes including stamp duty in relation to the
lease of space under this Lease Agreement.

 

5.     Security Deposit against
the Lease

 

The Lessee against to place
a security deposit against proper fulfillment of the Lease Agreement and
Service Agreement on the date of signing the Lease of Office Space Agreement
amounting to 3 times of the amount rental payment and service charge (excluding
VAT); and upon expiration of this Agreement, the Lessor shall refund to the Lessee
the said security deposit interest-free after deduction of rental payment or
other incidental expenses due payable to the Lessor pursuant to this Agreement
or Service Agreement (if there is any); and upon the Lessee having duly and
fully fulfilled its duty under this Agreement.

 

6.     The Lessee's Agreement

 

6.1           The Lessee agrees to pay electricity,
water and telephone bills or incidental expenses or other damages caused by the
Lessee; which have occurred to or sustained by the Lessor to full amount when
due payable. For this purpose, the Lessee shall not deduct any amount of
outstanding debt owed to the Lessor from the said rental payment or incidental
expenses.

 

6.2           To utilize the leased space for the
purpose of conducting the business exclusively as specified in this Agreement
only; and shall not use the leased space for residence of any person or for
cooking foods or for illegal activities which cause nuisances or troubles to other
tenants or possessors of the space within the building.

 

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6.3           To maintain the leased space to clean
and hygienic condition at all times by using the cleaning service provided by
cleaning contractor who service has been used or approved by the Lessor in
order to keep the leased space in good order, clean, tidy and in suitable
condition at the entire expense of the Lessee.

 

6.4           Neither to keep nor permit to keep or
bring into the leased space various animals and further agrees to take proper
care in keeping the leased space free of white ants, insects and other
disturbances.

 

6.5           To repair, restore any damage which
may have occurred in the leased space to original condition and to be responsible
for repair of all damages sustained by the leased space and/or the building due
to abuse or reckless use of the leased space or building by the Lessee or by
the Lessee's contractor who enters the leased space during the Lessee's
possession of the leased space at the entire expense of the Lessee.

 

6.6           To permit the Lessor or its
representative to enter the leased space for the purpose of inspection within
reasonable time. In the event of fire or the incident of the same degree of
severity, the Lessor or its representative may forcibly enter the leased space
immediately if necessary at any time without advance notice or notification.

 

6.7           Neither modify nor make any addition
to the leased space unless in case of decoration to be used as an office;
however, subject to the Lessor's rules in every respect; and upon termination
of this Lease Agreement, all property which have been fixed to or installed on
the floor of the leased space, which have not been dismantled or removed by the
Lessee shall become the property of the Lessor without any claims against the
Lessor. If the Lessor deems that such fixtures or installations should be
dismantled or removed, the Lessee shall proceed to do so and restore the leased
space to original condition or to the condition satisfactory to the Lessor; and
to surrender the leased space in good, tenantable condition except normal wear
and tear which is not considered the liability of the Lessee.

 

                In the case of the Lessee's
omission to do the said act, the Lessor may proceed to dismantle, repair the
leased space at the entire cost of the Lessee or the Lessor may deduct such
costs from the amount of the security deposit.

 

6.8           Not to store in the leased space,
whether or not, it is explosive, inflammable material, acid, alkali, or any
other products, things or materials that may cause possible damage to the
building or leased space or objects which are heavier than the dead load of the
leased space to accommodate (the accommodating capacity of the floor is 300
kilograms per square meter).

 

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6.9           Not to put up a signboard, photograph,
picture or written material outside of the leased premises which can be visible
generally without written consent of the Lessor. In the event of a levy of the
signboard tax, the Lessee shall pay for such signboard tax.

 

6.10         Neither use nor permit the use of or
cause damage to the leased space or any part thereof or carry out any activity
within the leased space for illegal or immoral purposes.

 

6.11         Neither sub-let nor surrender the
leased space, whether in whole or in part, to any person regardless of time
unless with express written consent of the Lessor. In this connection, the
Lessee shall notify the Lessor in writing of the details of such act; and the
Lessee shall further be liable therefore to the Lessor under this Lease
Agreement in every respect.

 

6.12         Not to construct any structure, lay any
piping, cable or pole upon the leased premises including neither making any
modification to nor any addition to the leased space without written consent of
the Lessor.

 

6.13         Neither cause nor permit any
obstruction to the common area of the building such as lift corridor, entrance,
walkway or stairway and a car-park, etc., without written consent of the
Lessor.

 

6.14         To change every broken or damaged
window frame including replacement of broken or damaged items of installations
or decorations; which have been caused by the Lessee's recklessness, or by any
causes of damage for which the Lessee shall be liable at the entire expense of
the Lessee. Such replacement items must be of the same type or of no less
inferior quality than the previous ones being replaced.

 

6.15         At all time to comply strictly with the
Building's rules, procedures and regulations which are currently established by
the Lessor or that which shall be established in the future or that which may
from time to time be defined by the Lessor.

 

6.16         Neither bring in nor permit any persons
to bring in any think which may be contravening the terms and conditions of the
Building's insurance policy and/or of the leased space, which may have rendered
the insurance agreement to become void or a breach of the insurance terms and
conditions to the extent that it may have rendered the increase in the
insurance premium; and comply with the recommendations of the insurer and of
fire officer in relation to prevention of the outbreak building fire.

 

6.17         To return all keys to the Leased Space
to the Lessor upon expiration of this Lease Agreement and the Lessee shall have
completely fulfilled the terms and conditions of this Lease Agreement in every
respect.

 

6.18         To use the lift according to the
procedure established by the Lessor, that is to say, in the case of removal of
various materials, equipment, tools and appliances belonging to the Lessee, the
lift exclusively provided for as the service lift only shall be used; the use
of passenger lift for that purpose shall not be permitted.

 

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6.19         The Lessee agrees to be responsible for
accidents or injuries or death or personal injury or damage to property
occurred in the leased space or in the building as result of the Lessee's
willful act or recklessness.

 

7.     The Lessor's agreement

 

The Lessor agrees to take
action and makes a representation as follows:

 

7.1           The Lessor has the legal title to and
lawful power to let the building space to the Lessee.

 

7.2           To permit the Lessee to enjoy the
benefits of utilizing the leased space under the Leased Agreement throughout
the Lease Period without any obstructions by the Lessor.

 

7.3           The Lessor shall undertake to
maintain, repair and manage the leased space to normal useable and in orderly
condition appropriate to the lease at all times.

 

7.4           In consideration of payment made by
the Lessee to the Lessor by virtue of this Lease Agreement, the Lessor shall
issue a receipt to the Lessee for any payment so made.

 

7.5           The Lessor shall be responsible for
and undertake to do any acts not to permit any persons to disturb and
contradict the lease rights of the Lessee throughout the leased period under
this Agreement.

 

8.     Liability

 

8.1           The Lessor agrees to be responsible
for accidents or injuries or death or personal injury or damage to property
occurred in the leased space or in the building as result of willful act or
recklessness on the part of the Lessor or the Lessor's employees.

 

8.2           Although whether there have been an
agreement herein this Agreement to the contrary or not, the Lessor shall not be
liable for the cause of malfunctions, regardless of circumstances, which
necessitate repair or maintenance of the property, things, tools, appliances
belonging to the Lessee, due to burning by fire, force majeure, or other
causes, which are beyond the control of the Lessor; or due to technical reason,
defects or breakage or extreme cold or heat; or in the circumstance with severe
impact or unavoidable, in all circumstances, shortage of fuel, materials, water
or labor.

 

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9.     Early termination of the
Lease prior to the expiry of the Lease Agreement

 

9.1           If the Lessee breaches this Lease
Agreement or infringes any one or several clauses of the practical procedure in
the building; or neglect to duly remedy the said breach or infringement
according to the Lease Agreement or the said practical procedure to good order
within 7 days of the receipt of the notice from the Lessor to that effect; or
the Lessee has been placed in the official receivership or has become bankrupt
or has been subject to liquidation process for winding up or has defaulted on
rental payment or payment of service charges correctly according to the payment
timeframe stipulated in the Agreement, the Lessor shall have the right to
terminate the lease agreement by means of service of notice to the Lessee;
however, without prejudice to the right of the Lessor to claim for damages
sustained by virtue of the Lessee's breach of agreement or the effect of the
law.

 

9.2           It shall be deemed that the Lease
Agreement shall automatically be terminated in the case of damage or loss of
the leased space by fire or other catastrophe, which shall have rendered the
leased space unsuitable for use according to the stated purpose of the
Agreement pursuant to the facts or provisions of the law or the bye-law of
Bangkok Metropolis. In this case, the Lessee shall not be able to claim for damages
from the Lessor. The Lessor shall refund to the Lessee the security deposit
against the Lease under the terms and conditions of Clause 5 in the event that
the grounds for termination of the Agreement are not the Lessee's liability.

 

9.3           It shall be deemed that this
Agreement terminates automatically in the event of the parcel of the land on
which the leases space is located is expropriated by the Government Agency.
This being the case, the Lessor shall refund the security deposit against the
Lease to the Lessee under the terms of Clause 5.

 

9.4           If the Lessee abandons the leased
space, whether in whole or in part, to the condition unsuitable for normal
possession or to non-utilization for more than 7 (seven) days, the Lessor shall
have the right to terminate this Agreement by service of written notice to the
Lessee.

 

9.5           In the event that the Lessor exercises
the right to terminate this Lease Agreement in virtue of the Lessee's breach of
agreement, the Lessee shall not have the right to claim for any damages from
the Lessor; and the Lessee shall be liable for damage sustained by the Lessor
or by any other persons.

 

9.6           If, at any time, during the valid
leased period of the lease renewal, the Lessee has been revoked of the License,
or is barred from continuing the business in virtue of the decision or the
order of the government agency; or in the event of the Lessee winding up its
business as a result of the government agency's order, the Lessor may terminate
this Agreement by service of written notice to the Lessee in advance of not
less than 60 (sixty) days. If the Lessee must wind up its business in virtue of
the order of the said Government Agency wherein the Lessee is at fault, the
Lessor shall have the right to confiscate the security deposit against the
Lease pursuant to Clause 5.

 

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10.  Requirements governing the
vacating of the Leased Space

 

The Lessee shall vacate the
leased space and surrender the leased space to the Lessor and remove entire
Lessee's property within 30 (thirty) days of the expiration or termination of
this Lease Agreement. The Lessee shall have no right to claim for expense for
removal of the said property from the leased space.

Any piece of the Lessee's
property left behind within the leased space after the expiration of the said
period as mentioned above shall be deemed to become the Lessor's property and
the Lessor shall have the right to do anything therewith as it deems appropriate.

The Lessee agrees to
indemnify the Lessor in full amount as the result of total loss or damage which
has happened from not removing such property from the Leased Space.

If the Lessee neglects to
vacate the leased space within the time frame as mentioned above, the Lessor
shall have the right to take action as may be necessary to regain possession of
the leased property for which the Lessee shall pay compensation for any damage
which may have occurred in virtue of failure to do such act until such time all
the property are removed from the leased space in good order.

 

11.  Miscellaneous clause

 

11.1         The Lessee shall pay expense to the
Lessor immediately upon demand for the cost of installation, repair or
replacement as may be necessary in connection with the letters of the Lessee's
name plate placed on display at various points within the Building; for
instance, in the reception area, in the hall in front of the elevator in the
Leased Area Compartment.

 

11.2         The fact that the Lessor accepts the
rental payment shall not be held to be a waiver of the Lessor towards taking
actions with the Lessee in the event of infringement of clauses of the
Agreement, limitations, the terms and conditions stipulated in this Agreement.

 

11.3         Any notice or communication under or in
relation to this Agreement shall be made in writing and signed by the Party or
authorized person delivering the notice to be sent by hand-delivery or by
registered mail addressed to the recipient at the recipient's address as
specified in this Agreement or to any other address of the recipient as may be
notified in writing to such party or may be delivered to the Lessee at the
Leased Premises.

 

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12.  Validity of the Agreement

 

This agreement including the
attached diagram under Appendix A shall form the composition of the validity of
this Agreement between the Parties; and any amendment to the Agreement shall
not be valid and enforceable unless executed in writing and signed by the
parties.

 

13.  Force Majeure

 

In the event of the
fulfillment by either party of the obligations under this Agreement has been
hindered or hampered by an outbreak of fire, explosion, injury or death,
collapse of the leased space and/or the building, labor strike, lock-out, industrial
dispute, injury or death, accident, epidemics, floods, shortage of labor,
electricity and food supply; action from the enemy of the government,
discrimination or embargo or the law, order, announcement, regulations, demands
or requirements of any government agency, the party affected by such events of
force majeure shall be released of the requirement to fulfill the obligations
according to the existing condition of such obstructive events.

 

14.  The governing law

 

This
Agreement shall be governed by and construed in accordance with the law of
Thailand.

 

8

 

This Agreement is made in 2
duplicate copies; both parties having duly and thoroughly read, inspected and
understood the contents of this Agreement; to witness, they have affixed their
respective signature in the presence of the witnesses; and one duplicate copy
of the Agreement is held by each party.

 

In the Name of:

 

The LESSOR

Thai Summit Tower Co., Ltd.

 

                                            
Authorized signature

(Miss Pattravadee Roywirat)

 

 

In the Name of:

 

The LESSEE

Philips Semi-conductor SMO (Thailand) Co.,
Ltd.

 

                                            
Director

(Mr. Peter Eckkerbene) Director

 

 

                                            
Director

(Mr. Phumant Panraksa)

 

Witness

 

                                            

(Miss Orasa Pratakkulvongsa)

 

Witness

 

                                            

(Miss Rawiwan Pongprot)

 

9Exhibit 10.7  

TAPESTRY PHARMACEUTICALS, INC.  

 2006 EQUITY INCENTIVE PLAN  

 ADOPTED: JANUARY 26, 2006

APPROVED BY STOCKHOLDERS: APRIL 4, 2006

TERMINATION DATE: JANUARY 26, 2016  

1.    PURPOSES.    

        (a)    Eligible Stock Award Recipients.    The persons eligible to
receive Stock Awards are Employees, Directors and Consultants. The persons eligible to receive non-discretionary Stock Awards under the Non-Discretionary Grant Program are
Eligible Directors. 

        (b)    Available Stock Awards.    The purpose of the Plan is to
provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Purchase Awards, (iii) Stock Bonus Awards, (iv) Stock Appreciation Rights, (v) Stock
Unit Awards and (vi) Other Stock Awards. 

        (c)    General Purpose.    The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this
group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. 

2.    DEFINITIONS.    

        (a)   "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. 

        (b)   "Board" means the Board of Directors of the Company. 

        (c)   "Capitalization Adjustment" has the meaning ascribed to that term in Section 12(a). 

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

        (i)    any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction; 

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

        (iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the
Company, or a complete dissolution or liquidation of the Company shall otherwise occur; 

1

 

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

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

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

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

        (e)   "Code" means the Internal Revenue Code of 1986, as amended. 

        (f)    "Committee" means a committee of one (1) or more members of the Board appointed by the
Board in accordance with Section 3(c). 

        (g)   "Common Stock" means the common stock of the Company. 

        (h)   "Company" means Tapestry Pharmaceuticals, Inc., a Delaware corporation. 

        (i)    "Consultant" means any person other than a Director or Employee (i) who acts as a
consultant or advisor to the Company or an Affiliate and who is compensated for such services or (ii) who serves as a member of the Board of Directors of an Affiliate and who is compensated for
such services. 

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

2

 

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

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

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

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

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

        (l)    "Covered Employee" means a covered employee as defined in Section 162(m) of the Code. 

        (m)  "Director" means a member of the Board. 

        (n)   "Disability" means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code. 

        (o)   "Eligible Director" has the meaning ascribed to that term in
Section 6(a). 

        (p)   "Employee" means any person employed by the Company or an Affiliate. Service as a Director or
payment of a director's fee by the Company for such service or for service as a member of the Board of Directors of an Affiliate shall not be sufficient to constitute "employment" by the Company or an
Affiliate. 

        (q)   "Entity" means a corporation, partnership or other entity. 

        (r)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        (s)   "Exchange Act Person" means any natural person, Entity or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that "Exchange Act Person" shall not include (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of
the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an
underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their Ownership of stock of the Company. 

        (t)    "Fair Market Value" means, as of any date, the value of the Common Stock as follows: 

        (i)    If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq
Capital Market, the Fair Market Value of a share of Common Stock, unless otherwise determined by the Board, shall be either: 

        (1)   the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or
market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination (or if such date of determination does not fall on a market trading day, then
the last market trading day prior to the day of determination), as reported in The Wall Street Journal or such other source as the Board deems reliable; 

3

 

        (2)   the average of such closing sales prices (or closing bid, if no sales were reported) over a five (5) trading day
period commencing on a date following the date of determination that is specified by the Board. 

If
paragraph (i) applies and the Board does not specify that Fair Market Value will be determined in accordance with one of the foregoing clauses, clause (1) shall apply. 

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

        (u)   "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations promulgated thereunder. 

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

        (w)  "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. 

        (x)   "Officer" means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder. 

        (y)   "Option" means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the
Plan. 

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

        (aa) "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option. 

        (bb) "Other Stock Award" means an award based in whole or in part by reference to the Common Stock
which is granted pursuant to the terms and conditions of Section 8(e). 

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

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

        (ee) "Own," "Owned," "Owner," "Ownership" A person or Entity shall be deemed to "Own," to have
"Owned," to be the "Owner" of, or to have acquired "Ownership" of securities if such person or 

4

 

Entity,
directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with
respect to such securities. 

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

        (gg) "Plan" means this Tapestry Pharmaceuticals, Inc. 2006 Equity Incentive Plan, as amended
from time to time. 

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

        (ii)   "Securities Act" means the Securities Act of 1933, as amended. 

        (jj)  "Stock Appreciation Right" means a right to receive the appreciation on Common Stock that is
granted pursuant to the terms and conditions of Section 8(c). 

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

        (ll)   "Stock Award" means any right granted under the Plan, including an Option, a Stock Purchase
Award, a Stock Bonus Award, a Stock Appreciation Right, a Stock Unit Award or any Other Stock Award. 

        (mm) "Stock Award Agreement" means a written agreement between the Company and a Participant
evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

        (nn) "Stock Bonus Award" means an award of shares of Common Stock which is granted pursuant to the
terms and conditions of Section 8(b). 

        (oo) "Stock Bonus Award Agreement" means a written agreement between the Company and a holder of a
Stock Bonus Award evidencing the terms and conditions of a Stock Bonus Award grant. Each Stock Bonus Award Agreement shall be subject to the terms and conditions of the Plan. 

        (pp) "Stock Purchase Award" means an award of shares of Common Stock which is granted pursuant to the
terms and conditions of Section 8(a). 

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

        (rr)  "Stock Unit Award" means a right to receive shares of Common Stock which is granted pursuant to
the terms and conditions of Section 8(c). 

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

        (tt)  "Subsidiary" means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether, at the time, stock of any
other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and
(ii) any partnership in 

5

 

which
the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%). 

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

3.    ADMINISTRATION.    

        (a)    Administration by Board.    The Board shall administer the Plan
unless and until the Board delegates administration of the Plan to a Committee, as provided in Section 3(c). 

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

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

        (ii)   To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective. 

        (iii) To amend the Plan or a Stock Award as provided in Section 13. 

        (iv)  To terminate or suspend the Plan as provided in Section 14. 

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

(c)    Delegation to Committee.    

        (i)    General.    The Board may delegate some or all of the
administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that has been
delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board
may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board any or all of the powers previously delegated. 

        (ii)    Section 162(m) and Rule 16b-3
Compliance.    In the discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the
Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In addition, the Board or the Committee, in their discretion, may
(1) delegate to a committee of one or more members of the Board who need not be Outside Directors the authority to grant Stock Awards to eligible persons who are either (a) not then
Covered Employees and are not expected to be Covered Employees at the time of recognition of income 

6

 

resulting
from such Stock Award, or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate to a committee of one
(1) or more members of the Board who need not be Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act. 

        (d)    Delegation to an Officer.    The Board may delegate to one or
more Officers of the Company the authority to do one or both of the following (i) designate Employees of the Company or any of its Subsidiaries who are not Officers to be recipients of Stock
Awards and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Employees of the Company; provided,
however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such
Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding the foregoing, the Board may not delegate authority to an Officer to determine the Fair Market Value of
the Common Stock. 

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

4.    SHARES SUBJECT TO THE PLAN.    

        (a)    Share Reserve.    Subject to the provisions of
Section 12(a) relating to Capitalization Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards initially shall not exceed in the aggregate 6,577,106
shares of Common Stock. That number shall increase, by an amount not to exceed 1,600,000 shares in the aggregate, immediately following any issuance of common stock by the Company during the three
year period following approval by stockholders of the Incentive Plan (other than issuances of shares of common stock upon the exercise of any of the warrants issued pursuant to that certain Purchase
Agreement dated as of February 2, 2006 between the Company and the purchasers named therein or issued to the Company's financial advisors in connection with such purchase agreement) such that
the shares available under the Incentive Plan will be equal to (i) 20% of fully diluted shares of common stock immediately following any such issuance of shares less (ii) the number of
shares of common stock subject to existing options issued pursuant to the Company's 2004 Equity Incentive Plan, 2004 Non-Employee Directors' Stock Option Plan, the 1998 Stock Incentive
Plan and the 1994 Long-Term Performance Incentive Plan. 

        (b)    Reversion of Shares to the Share Reserve.    If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, or if any shares of Common Stock issued to a Participant pursuant to a Stock Award are
forfeited back to or repurchased by the Company, including, but not limited to, any repurchase or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such
shares, then the shares of Common Stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan; provided,
however, that subject to the provisions of Section 12(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be
issued as Incentive Stock Options shall be three million (3,000,000) shares of Common Stock. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld
for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., "net exercised"), then the
number of shares that are not delivered shall revert to and again become available for issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common
Stock held by the Participant (either by actual deliver or attestation), then the number of such tendered shares shall revert to and again become available for issuance under the Plan. 

        (c)    Source of Shares.    The shares of Common Stock subject to the
Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 

7

 

5.    ELIGIBILITY.    

        (a)    Eligibility for Specific Stock Awards.    Incentive Stock
Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted to Employees and Consultants. Automatic and discretionary Options granted under
Section 6 may be granted only to Eligible Directors. 

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

        (c)    Section 162(m) Limitation on Annual Grants.    Subject
to the provisions of Section 12(a) relating to Capitalization Adjustments, no Employee shall be eligible to be granted Options or Stock Appreciation Rights covering more than 3 million
(2,000,000) shares of Common Stock during any calendar year. 

        (d)    Consultants.    A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8") is not available to register either the
offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person,
or because of any other rule governing the use of Form S-8. 

6.    DIRECTOR AUTOMATIC AND DISCRETIONARY OPTION GRANTS.    

        (a)    Automatic Option Grants.    

        (i)    Options covering 1,500 shares of Common Stock shall be automatically granted to each Non-Employee Director
who (A) is elected or reelected as a director of the Company at an annual meeting of the Company's stockholders, (B) continues service as a director of the Company after an annual
meeting of the Company's stockholders at which the director is not subject to reelection, or (C) is appointed as a director of the Company in accordance with its Bylaws following an annual
meeting (each, an "Eligible Director"), on the next business day following each such annual meeting or appointment. 

        (ii)   In addition, Options covering 1,500 shares of Common Stock shall be automatically granted to each Eligible Director who
is appointed or who continues services as chair of the Audit, Compensation or Nominating and Corporate Governance Committee of the Board (or any other permanent committee of the Board other than the
Research and Development Committee, whose grants are addressed in Section 6(a)(iii)) following an annual meeting of the Company's stockholders, on the business day next succeeding each such
appointment or continuation of services, as the case may be. 

        (iii) In addition, Options covering 1,000 shares of Common Stock shall be automatically granted to each Eligible Director who
is appointed to the Research and Development Committee of the Board, on the next business day following such appointment. Thereafter, Options covering 450 shares of Common Stock shall automatically be
granted to each Eligible Director who continues service as a member of the Research and Development Committee of the Board following an annual meeting of the Company's stockholders, on the business
day next succeeding such Eligible Director's continuation of service. 

        Options
automatically granted to an Eligible Director pursuant to this Section 6(a) shall be subject to the applicable provisions of Section 7. 

        (b)    Discretionary Option
Grants.    In addition to the automatic grant of Options to Eligible Directors set forth in Section 6(a), the Board shall have the
authority to grant Eligible Directors 

8

 

Options
at such times and on such terms as it may determine in its sole discretion, subject however, to the applicable provisions of Section 7. 

7.    OPTION PROVISIONS.    

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

        (a)    Term.    The Board shall determine the term of any Option
granted under the Plan; provided that, subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, no Incentive Stock Option
shall be exercisable after the expiration of ten (10) years from the date on which it was granted. 

        (b)    Exercise Price of an Incentive Stock Option.    Subject to the
provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. 

        (c)    Exercise Price of a Nonstatutory Stock Option.    The exercise
price of each Nonstatutory Stock Option shall be not less than one-hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. 

        (d)    Consideration.    The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash or check at the time the Option is exercised or (ii) at the
discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock at the time the Option is exercised, (2) according to a deferred payment or
other similar arrangement with the Optionholder or (3) by a "net exercise" of the Option (as further described below) (4) 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 or (5) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided
in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall
be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes). 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 not be
made by deferred payment. 

        In
the case of any deferred payment arrangement, 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 

9

 

under
the deferred payment arrangement and (2) the treatment of the Option as a variable award for financial accounting purposes. 

        In
the case of a "net exercise" of an Option, the Company will not require a payment of the exercise price of the Option from the Participant but will reduce the number of shares of
Common Stock issued 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, the Company shall accept a cash payment from the Participant. Shares of Common Stock will no longer be outstanding under an Option (and therefore not thereafter be
exercisable) following the exercise of such Option to the extent of (i) shares used to pay the exercise price of an Option under a "net exercise" (ii) shares actually delivered to the
Participant as a result of such exercise, and (iii) shares withheld for purposes of tax withholding. 

        (e)    Transferability of an Incentive Stock Option.    An Incentive
Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the
event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. 

        (f)    Transferability of a Nonstatutory Stock Option.    A
Nonstatutory Stock Option shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock
Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option. 

        (g)    Vesting Generally.    The total number of shares of Common
Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary.
The provisions of this Section 7(g) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised. 

        (h)    Vesting for Eligible Directors.    Options granted pursuant to
Section 6(a) shall become exercisable in full on the first anniversary following the date of grant; provided, however, that an Option granted
pursuant to Section 6(a) to an Eligible Director who is first appointed by the Board (rather than elected by the stockholders at an annual meeting of stockholders) will become exercisable in
full on the first business day immediately following the later of the Company's annual meeting of stockholders next following the date of grant or six months following the date of grant; and  provided, further, however,
 that such Options shall become exercisable only if the service of such Eligible Director with the Company or an Affiliate,
whether as an Employee, Director or Consultant, continues through such date. For Options granted pursuant to Section 6(b), (1) the total number of shares of Common Stock subject to an
Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal as determined by the Board, and (2) the Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual
Options granted pursuant to Section 6(b) may vary. The Board may accelerate vesting of any Option granted pursuant to Section 6(b), but not those granted pursuant to Section 6(a),
whose vesting will be governed by the Plan. 

10

 

(i)    Termination of Continuous Service.    

        (i)    For Eligible Directors.    In the event that an Eligible
Director's Continuous Service terminates (other than upon the Eligible Director's removal for cause), the Eligible Director may exercise his or her Option (to the extent that the Eligible Director was
entitled to exercise such Option as of the date of termination or with respect to such greater number of shares as determined by the Board) but only within such period of time ending on the earlier of
(i) the date three (3) years following the termination of the Eligible Director's Continuous Service (or such longer or shorter period specified in the Option Agreement) or
(ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Eligible Director does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate. In the event that an Eligible Director's Continuous Service terminates upon his or her removal for cause, all Options
held by that Eligible Director shall immediately terminate. 

        (ii)    For Others.    In the event that an Optionholder's Continuous
Service terminates (other than upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination) but only within such period of time ending on the earlier of (i) the expiration of the term of the Option as set forth in the Option Agreement or (ii) the
date one hundred eighty (180) days (ninety (90) days in the case of Incentive Stock Options) following the termination of the Optionholder's Continuous Service (or such longer or shorter
period specified in the Option Agreement). If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement
(as applicable), the Option shall terminate. 

        (j)    Extension of Termination Date.    An Optionholder's Option
Agreement may (but need not) provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability)
would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in Section 6(a) or (ii) the expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would not be in violation of such registration requirements. 

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

        (l)    Death of Optionholder.    In the event that (i) an
Optionholder's Continuous Service terminates as a result of the Optionholder's death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the
termination of the Optionholder's Continuous Service, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder's death pursuant to
Section [6(e) or 6(f),] but only within the period ending on the earlier of (i) the expiration of the term of such Option as set forth in the Option Agreement or
(ii) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the 

11

 

Option
Agreement). If, after the Optionholder's death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate. 

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

8.    PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.    

        (a)    Stock Purchase Awards.    Each Stock Purchase Award Agreement
shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. At the Board's election, shares of Common Stock may be (i) held in book entry form subject
to the Company's instructions until any restrictions relating to the Stock Purchase Award lapse; or (ii) evidenced by a certificate, which certificate shall be held in such form and manner as
determined by the Board. The terms and conditions of Stock Purchase Award Agreements may change from time to time, and the terms and conditions of separate Stock Purchase Award Agreements need not be
identical, provided, however, that each Stock Purchase Award Agreement shall include (through incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions: 

        (i)    Purchase Price.    At the time of the grant of a Stock Purchase
Award, the Board will determine the price to be paid by the Participant for each share subject to the Stock Purchase Award. To the extent required by applicable law, the price to be paid by the
Participant for each share of the Stock Purchase Award will not be less than the par value of a share of Common Stock. 

        (ii)    Consideration.    At the time of the grant of a Stock Purchase
Award, the Board will determine the consideration permissible for the payment of the purchase price of the Stock Purchase Award. The purchase price of Common Stock acquired pursuant to the Stock
Purchase Award shall be paid either: (i) in cash at the time of purchase or (ii) in any other form of legal consideration that may be acceptable to the Board and permissible under the
Delaware General Corporation Law. 

        (iii)    Vesting.    Shares of Common Stock acquired under a Stock
Purchase Award may be subject to a share repurchase right or option in favor of the Company in accordance with a vesting schedule to be determined by the Board. 

        (iv)    Termination of Participant's Continuous Service.    In the
event that a Participant's Continuous Service terminates, the Company shall have the right, but not the obligation, to repurchase or otherwise reacquire, any or all of the shares of Common Stock held
by the Participant that have not vested as of the date of termination under the terms of the Stock Purchase Award Agreement. At the Board's election, the repurchase right may be at the least of:
(i) the Fair Market Value on the relevant date or (ii) the Participant's original cost. The Company shall not be required to exercise its repurchase option until at least six
(6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following the purchase of the restricted stock unless
otherwise determined by the Board or provided in the Stock Purchase Award Agreement. 

        (v)    Transferability.    Rights to purchase or receive shares of
Common Stock granted under a Stock Purchase Award shall be transferable by the Participant only upon such terms and conditions 

12

 

as
are set forth in the Stock Purchase Award Agreement, as the Board shall determine in its sole discretion, and so long as Common Stock awarded under the Stock Purchase Award remains subject to the
terms of the Stock Purchase Award Agreement. 

        (b)    Stock Bonus Awards.    Each Stock Bonus Award Agreement shall
be in such form and shall contain such terms and conditions as the Board shall deem appropriate. At the Board's election, shares of Common Stock may be (i) held in book entry form subject to
the Company's instructions until any restrictions relating to the Stock Bonus Award lapse; or (ii) evidenced by a certificate, which certificate shall be held in such form and manner as
determined by the Board. The terms and conditions of Stock Bonus Award Agreements may change from time to time, and the terms and conditions of separate Stock Bonus Award Agreements need not be
identical, but each Stock Bonus Award Agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 

        (i)    Consideration.    A Stock Bonus Award may be awarded in
consideration for services actually rendered to the Company or an Affiliate. 

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

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

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

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

        (i)    Consideration.    At the time of grant of a Stock Unit Award,
the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Stock Unit Award. To the extent required by applicable law,
the consideration to be paid by the Participant for each share of Common Stock subject to a Stock Unit Award will not be less than the par value of a share of Common Stock. The consideration may be
paid in any form permitted under applicable law. 

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

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

        (iv)    Additional Restrictions.    At the time of the grant of a
Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the 

13

 

shares
of Common Stock (or their cash equivalent) subject to a Stock Unit Award after the vesting of such Stock Unit Award. 

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

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

        (d)    Stock Appreciation Rights.    Each Stock Appreciation Right
Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Stock Appreciation Right Agreements may change from time to
time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical, provided, however, that each Stock
Appreciation Right Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 

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

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

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

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

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

14

   
        (e)    Other Stock Awards.    Other forms of Stock Awards valued in whole or in part by reference to, or otherwise
based on, Common Stock may be granted either alone or in addition to Stock Awards provided for under Section 7 and the preceding provisions of this Section 8. Subject to the provisions
of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common
Stock (or the cash equivalent thereof) to be granted pursuant to such Awards and all other terms and conditions of such Awards. 

9.    COVENANTS OF THE COMPANY.    

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

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

10.    USE OF PROCEEDS FROM STOCK.    

        Proceeds
from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company. 

11.    MISCELLANEOUS.    

        (a)    Acceleration of Exercisability and Vesting.    The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. 

        (b)    Stockholder Rights.    No Participant shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms. 

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

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

15

 

treated
as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement. 

        (e)    Investment Assurances.    The Company may require a Participant, as a condition of exercising or acquiring
Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is
acquiring Common Stock subject to the Stock Award for the Participant's own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 

        (f)    Withholding Obligations.    To the extent provided by the terms of a Stock Award Agreement, the Company may, in
its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company's right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from
the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; or (iii) via such other method as may be set forth in the Stock Award Agreement. 

12.    ADJUSTMENTS UPON CHANGES IN STOCK.    

        (a)    Capitalization Adjustments.    If any change is made in, or other event occurs with respect to, the Common
Stock subject to the Plan or subject to any Stock Award without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company (each a "Capitalization Adjustment"), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to
Sections 4(a) and 4(b) and the maximum number of securities subject to award to any person pursuant to Section 5(c), and the outstanding Stock Awards will be appropriately adjusted in
the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction "without receipt of consideration" by the
Company.) 

        (b)    Dissolution or Liquidation.    In the event of a dissolution or liquidation of the Company, then all
outstanding Stock Awards shall terminate immediately prior to the completion of such dissolution or liquidation. 

        (c)    Corporate Transaction.    In the event of a Corporate Transaction, any surviving corporation or acquiring
corporation may (but need not) assume or continue any or all Stock Awards outstanding under the Plan or may (but need not) substitute similar stock awards for Stock Awards outstanding under the Plan
(including awards to acquire the same consideration paid to the stockholders of the 

16

 

Company,
as the case may be, pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be
assigned by the Company to the successor of the Company (or the successor's parent company), if any, in connection with such Corporate Transaction. In the event that any surviving corporation or
acquiring corporation does not assume or continue all such outstanding Stock Awards or substitute similar stock awards for all such outstanding Stock Awards, then with respect to Stock Awards that
have been not assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction, the vesting of
such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date
prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the
effective time of the Corporate Transaction), and such Stock Awards shall terminate if not exercised (if applicable) at or prior to such effective time, and any reacquisition or repurchase rights held
by the Company with respect to such Stock Awards shall (contingent upon the effectiveness of the Corporate Transaction) lapse. With respect to any other Stock Awards outstanding under the Plan that
have not been assumed, continued or substituted, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated, unless otherwise
provided in a written agreement between the Company or any Affiliate and the holder of such Stock Award, and such Stock Awards shall terminate if not exercised (if applicable) prior to the effective
time of the Corporate Transaction. 

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

13.    AMENDMENT OF THE PLAN AND STOCK AWARDS.    

        (a)    Amendment of Plan.    Subject to the limitations, if any of applicable law, the Board at any time, and from
time to time, may amend the Plan. However, except as provided in Section 12(a) relating to Capitalization Adjustments, no amendment shall be effective unless approved by the stockholders of the
Company to the extent stockholder approval is necessary to satisfy applicable law or any securities exchange listing requirements. 

        (b)    Stockholder Approval.    The Board, in its sole discretion, may submit any other amendment to the Plan for
stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the
exclusion
of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees. 

        (c)    Contemplated Amendments.    It is expressly contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith. 

        (d)    No Impairment of Rights.    Rights under any Stock Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. 

        (e)    Amendment of Stock Awards.    The Board at any time, and from time to time, may amend the terms of any one or
more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the agreement evidencing the Stock Award, subject to any specified limits in
the Plan that are not subject to Board discretion; provided, however, that the 

17

 

rights
under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
Previously granted Stock Awards may be repriced, replaced or regranted through cancellation, or by lowering the exercise price of a previously granted Stock Award without the prior approval of the
Company's stockholders. 

14.    TERMINATION OR SUSPENSION OF THE PLAN.    

        (a)    Plan Term.    The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall
terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated. 

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

15.    EFFECTIVE DATE OF PLAN.    

        The
Plan shall became effective upon its approval by the stockholders of the Company. The Board may grant Stock Awards prior to the Plan being approved by stockholders, but in such
circumstance no such Stock Award shall itself be effective unless and until stockholder approval is obtained. Any amendment to the Plan shall become effective upon the later of (i) the date
such amendment is adopted by the Board, or (ii) if stockholder approval of such amendment is required by Section 13(a) hereof, the date such amendment is approved by the stockholders of
the Company. 

16.    CHOICE OF LAW.    

        The
law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state's conflict of laws rules. 

        The
Company has executed this Plan to evidence its adoption by the Board on January 26, 2006. 

	 	 	TAPESTRY PHARMACEUTICALS, INC.
	

 	
 	

 	

 
	 	 	BY:	/s/  KAI LARSON      

18

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