Exhibit 10.6


 


TAPESTRY PHARMACEUTICALS, INC.


2006 EQUITY
INCENTIVE PLAN


 


STOCK OPTION AGREEMENT


(INCENTIVE STOCK OPTION OR
NONSTATUTORY STOCK OPTION)


 


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


 


The
details of your option are as follows:


 


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


 


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


 


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


 


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


 


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


 


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


 


(d)                                  if
your option is an Incentive Stock Option, then, to the extent that the
aggregate Fair Market Value (determined at the time of grant) of the shares of
Common Stock with respect to which your option plus all other Incentive Stock
Options you hold are exercisable for the first time by you during any calendar
year (under all plans of the Company and its Affiliates) exceeds one hundred
thousand dollars ($100,000), your option(s) or portions thereof


 


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that
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.


 


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


 


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


 


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


 


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


 


(d)                                  In
the Company’s sole discretion at the time your option is granted (or
subsequently in the case of a Nonstatutory Stock Option), pursuant to the
following deferred payment alternative:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(a)                                  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


 


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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;


 


(b)                                  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;


 


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


 


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


 


If
your option is an Incentive Stock Option, note that to obtain the federal
income tax advantages associated with an Incentive Stock Option, the Code
requires that at all times beginning on the date of grant of your option and
ending on the day three (3) months before the date of your option’s
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or your permanent and total disability, as defined in Section 22(e) of
the Code. (The definition of disability in Section 22(e) of the Code
is different from the definition of the Disability under the Plan). The Company
has provided for extended exercisability of your option under certain
circumstances for your benefit but cannot guarantee that your option will
necessarily be treated as an Incentive Stock Option if you continue to provide
services to the Company or an Affiliate as a Consultant or Director after your
employment terminates or if you otherwise exercise your option more than three (3) months
after the date your employment with the Company or an Affiliate terminates.


 


8.                                      EXERCISE.


 


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


 


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


 


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(c)                                  If
your option is an Incentive Stock Option, by exercising your option you agree
that you will notify the Company in writing within fifteen (15) days after the
date of any disposition of any of the shares of the Common Stock issued upon
exercise of your option that occurs within two (2) years after the date of
your option grant or within one (1) year after such shares of Common Stock
are transferred upon exercise of your option.


 


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


 


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


 


11.                               WITHHOLDING
OBLIGATIONS.


 


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


 


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


 


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


 


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


 


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


 


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