**EXHIBIT 10.40**

 
| **[Form of Employee Stock Option Agreement –  ISO]** |   |                  |
|-----------------------------------------------------------|--------|-----------------------|
| ISO No. **XX-XX**                                         |   | Option for            |
|                                                      |   | **X,XXX **Shares |

 

**MEDAREX,INC.**

# **INCENTIVESTOCK OPTION AGREEMENT**

#  

**FOR          STOCKOPTION PLAN**

 

**MEDAREX, INC.**a NewJersey corporation (the “Company”), in consideration of the value to it of thecontinuing services of **XXXXXXX**(hereinafter called “Optionee”), which continuing services the grant of thisoption is designed to secure, and in consideration of the various undertakingsmade herein by Optionee, and pursuant to its **XXXX StockOption Plan** (hereinafter called the “Plan”), hereby grants toOptionee an option (the “Option”), intended to be an incentive stock optionwithin the meaning of Section 422 of the Internal Revenue Code of 1986, asnow or hereafter amended (the “Code”), evidenced by this Option Agreement,exercisable for the period and upon the terms hereinafter set out, to purchase **XXXXX**shares (the “Option Amount”) of $.01par value common stock of the Company (“Common Stock”) at a price of **$XXXXXX**per share (the “Option Price”),which price represents at least the fair market value (as such term is definedin the Plan) of the shares as of the Date of Grant (as hereinafter defined).

 

**1.  Termof Option**. This Option is granted and dated on the date set forth next above thesignature shown (sometimes hereinafter called the “Date of Grant”), and willterminate and expire, to the extent not previously exercised, one day prior tothe end of ten (10) years after the Date of Grant (*i.e.*,on the **XXX day of XXXXX, XXX**), except that ifOptionee owns stock on the date the Option is granted (using the attribution ofstock ownership rules of Section 424 (d) of the Code) possessing more than10% of the total combined power of all classes of stock of the Company, then theOption shall terminate and expire one day prior to the end of five years fromthe Date of Grant (*i.e.*, on the **XXX day of XXXXX, XXXXX**), or at such earlier time as may bespecified in Section 4 hereof.

 

**2.  Vesting**.  Except as set forth in the immediatelyfollowing sentence or as otherwise provided in the Plan or this OptionAgreement, this Option is exercisable in whole or in part at any time and fromtime to time prior to the termination of the Option pursuant to Section 4herein.  This Option shall becomeexercisable as to one fourth (1/4th) of the Option Amounton the first anniversary of the Date of Grant, and as to one forty-eighth (1/48th)of the Option Amount on the last day of each full month thereafter; provided,however, that upon the occurrence of an event constituting a Change of Control,as such term is defined in the Plan, the Option Amount shall become immediatelyexercisable in full.

 

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**3.  Non-Transferability.**  This Option is not assignable or transferableotherwise than by will or by the laws of descent and distribution. During thelifetime of the Optionee, this Option shall be exercisable only by theOptionee.

 

**4.  Mannerof Exercise.** The Optionee (or other person entitled to exercise the Option) shallpurchase shares of Common Stock subject hereto by the payment to the Company ofthe Option Price in full.  This Option isto be exercised by written notice to the Company stating the full number ofshares to be purchased and the time of delivery thereof, which shall be atleast 15 days after the giving of notice unless an earlier date shall have beenagreed upon between Optionee (or other person entitled to exercise the Option)and the Company.  At such time, theCompany shall, without transfer or issue tax to the Optionee (or other person entitledto exercise the Option), deliver at the principal office of the Company, or atsuch other place as shall be mutually agreed upon, a certificate orcertificates for such shares against payment of the Option Price therefor infull for the number of shares to be delivered; provided, however, that the timeof delivery may be postponed by the Company for such period as may be requiredfor it to comply with reasonable diligence with any requirements of law.  Payment of the Option Price shall be made incash either by a certified or official bank check; provided, however, thatduring the 60-day period from and after a Change of Control the Optionee(unless the Optionee initiated a Change of Control in a capacity other than asan officer or director of the Company within the meaning of Section 16 ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), and therules and regulations thereunder), shall have the right, in lieu of the paymentof the full Option Price of the shares of the Common Stock being purchasedunder the Option, by forwarding written notice to the Company, to elect (withinsuch 60-day period) to surrender all or part of the Option to the Company andto receive in cash an amount equal to the amount by which the fair market valueper share of Common Stock on the date of exercise shall exceed the Option Priceper share under the Option multiplied by the number of shares of Common Stockgranted under the Option as to which the right granted by this proviso shallhave been exercised. The written notice provided by the Optionee shall specifythe Optionee’s election to purchase shares subject to this Option or to receivethe cash payment herein provided.

 

Notwithstanding the foregoing, payment inwhole or in part of the Option Price may be made in unrestricted shares ofCommon Stock which are already owned by the Optionee free and clear of anyliens, claims, encumbrances or security interests, based upon the fair marketvalue (as defined in the Plan) of the Common Stock on the date the Option isexercised.  No shares of Common Stockshall be issued until full payment therefor has been made.  If the Optionee (or other persons entitled toexercise the Option) fails to accept a delivery of, or to pay for all or anypart of the number of shares specified in such notice upon tender or deliverythereof, the right to exercise the Option with respect to such undeliveredshares shall be thereupon terminated.

 

**5.  Terminationof Employment.**

 

(a)  Death.  If any Optionee’s relationship with or employmentby the Company and/or any of its subsidiaries terminates by reason of death,this Option may thereafter be exercised immediately in full by the legalrepresentative of the estate or by the legatee of the Optionee under the willof the Optionee until the expiration of the stated term of the Option.

 

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(b)  PermanentDisability.  If the Optionee’srelationship with or employment by the Company and/or any of its subsidiariesterminates by reason of “Permanent and Total Disability” (as defined in Section 22(e)(3) of the Code), this Option may, to the extent suchOption has vested, thereafter be exercised by the Optionee for a period ofthree years from the date of such termination or expiration of the stated termof the Option, whichever period is the shorter. Notwithstanding the foregoing, if the Option is not exercised within 12months of the date Optionee’s employment by the Company and/or any of itssubsidiaries is terminated by reason of Permanent and Total Disability withinthe meaning of Section 22(e)(3) of the Code, theOption shall be treated as a nonqualified option and not an incentive stockoption under the Code.  If the Optioneedies during the 12-month period commencing on the date his/her employment bythe Company terminates by reason of such Permanent and Total Disability,however, then the Option will continue to be an incentive stock option underthe Code until such time as the Option shall no longer be exercisable under theterms hereof.

 

(c)    Terminationfor Cause.  If the Optionee’s relationshipwith or employment by the Company is terminated by the Company for reason ofwillful violation of the Company’s policies, the Option shall thereuponterminate.  Notwithstanding theforegoing, nothing herein shall be deemed to alter the at-will employmentstatus of an employee of the Company in any way.

 

(d)   Other Termination.  If the Optionee’s relationship with oremployment by the Company terminates for any reason other than death orpermanent disability or for reason of willful violation of the Company’spolicies, this Option may, to the extent such Option has vested, thereafter beexercised by the Optionee for a period of three months from the date of suchtermination or expiration of the stated term of the Option, whichever period isthe shorter; provided, however, that if such termination is by action of theCompany within 18 months following a Change of Control (other than dischargefor reason of willful violation of the Company’s policies), any unexercisedportion of this Option may be exercised by the Optionee until the earlier ofsix months and one day after such termination or the expiration of such Optionin accordance with the terms hereof. Notwithstanding the foregoing, if the Option is not exercised withinthree months of the date Optionee’s relationship with or employment by theCompany and/or any of its subsidiaries is terminated, the Option shall betreated as a nonqualified option and not an incentive stock option under theCode.

 

**6.  Adjustmentson Recapitalization.**  The number of shares of Common Stock subjecthereto and the Option Price per share shall be proportionately adjusted for anyincrease or decrease in the number of issued shares of the Common Stockresulting from the subdivision or consolidation of the shares, or the paymentof a stock dividend after the Date of Grant, or other decrease or increase inthe shares of Common Stock outstanding effected without receipt ofconsideration by the Company; provided, however, that any Options to purchasefractional shares resulting from such adjustments shall be eliminated.

 

If the Company shall at any time merge orconsolidate with or into another corporation, the holder of this Option willthereafter receive, upon the exercise thereof, the securities or property towhich a holder of the number of shares of Common Stock then deliverable uponthe exercise of such Option would have been entitled upon such merger orconsolidation, and the

 

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Company shall take such steps in connection with such merger orconsolidation as may be necessary to assure that the provisions of the Planshall thereafter be applicable, as nearly as reasonably may be, in relation toany securities or property thereafter deliverable upon the exercise of suchOption.  A sale of consideration (apartfrom the assumption of obligations) consisting primarily of securities shall bedeemed a merger or consolidation for the foregoing purposes.  In the event of the proposed dissolution,liquidation or reorganization of the Company, other than pursuant to a mergeror consolidation as referred to above, the Option granted hereunder shallterminate as of a date to be fixed by the Committee (as that term is defined inthe Plan); provided that not less than 30 day’s prior written notice of thedate so fixed shall be given to the Optionee, and the Optionee shall have theright, during the period of thirty (30) days preceding such termination, toexercise his or her Option as to all or any part of the shares covered thereby,including shares as to which such Option would not otherwise be exercisable.

 

**7.  Subjectto Plan.** This Option is subject to all the terms andconditions of the Plan, and specifically to the power of the Committee to makeinterpretations of the Plan and of the options granted thereunder, and of theBoard of Directors of the Company (“Board of Directors”) to alter, amend,suspend or discontinue the Plan subject to the limitations expressed in thePlan.  By acceptance hereof, Optioneeacknowledges receipt of a copy of a Summary Plan Description which describesthe basic terms and conditions of the Plan and is attached hereto as ExhibitA, and recognizes and agrees that determinations, interpretations or otheractions respecting the Plan may be made by a majority of the Board of Directorsor of the Committee, and that such determinations, interpretations or otheractions are final, conclusive and binding upon all parties, including Optionee.

 

**8.  Rightsas Shareholder.** This Option shall not entitle Optionee or anypermitted transferee hereof to any rights of a shareholder of the Company or toany notice of proceedings of the Company or to any notice of proceedings of theCompany in respect of any shares issuable upon exercise of this Option unlessand until the Optionee has given to the Company a written notice of exercise,has paid in full the Option Price for such shares and, if applicable, has givena representation to the Company that he or she is purchasing such shares forinvestment only and not with a view towards any distribution.  The Company shall not be required to issue ordeliver any certificate for shares of its Common Stock purchased hereunderprior to compliance with applicable federal and state laws and regulations withrespect to the issuance, registration or listing of such shares.

 

**9.****Securities Laws**.    Optionee acknowledges that he or she hasbeen informed of, or is otherwise familiar with, the nature and the limitationsimposed by the Securities Act of 1933, as amended (the “Act”), the ExchangeAct, and the rules and regulations thereunder (in particular, Rule 144,promulgated under the Act and Section 16 of the Exchange Act, and Rule16b-3 promulgated thereunder), concerning the shares issuable upon exercise ofthis Option and agrees to be bound by the restrictions embodied in such Act,the Exchange Act, and all the rules and regulations promulgated thereunder.

 

**10. Reporting of Premature Disposition**.    If Shares acquired through the exercise ofan Option are disposed of either within two years of the Date of Grant orwithin one year of the date

 

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the Option wasexercised, the Optionee shall promptly provide written notice to the Company ofthe date of disposition and the amount realized from the disposition.

 

**11.  Miscellaneous;Governing Law.**

 

(a) In the event the Option shall beexercised in whole, this Option Agreement shall be surrendered to the Companyfor cancellation.  In the event theOption shall be exercised in part, or a change in the number or designation ofthe Common Stock shall be made, this Option Agreement shall be delivered byOptionee to the Company for the purpose of making appropriate notation thereon,or of otherwise reflecting, in such manner as the Company shall determine, thepartial exercise or the change in the number of designation of the CommonStock.

 

(b) The Option shall be exercised in accordance with such administrativeregulations as the Committee shall from time to time adoptto the extent not inconsistent with Section 422 of the Code andregulations issued thereunder.

 

(c) The Option and this Option Agreement shall be construed, administeredand governed in all respects under and by the laws of the State of New Jerseyto the extent not inconsistent with Section 422 of the Code andregulations issued thereunder.

 

(d) Optionee hereby agrees that he or she will make such arrangements as theCompany deems necessary to discharge any federal, state, or local income orpayroll tax withholding obligations imposed upon the Company with respect tothis Option.  Upon Optionee’s request andsubject to the Company’s approval, in its sole discretion, and in compliancewith any applicable conditions or restrictions of law, the Company may withholdfrom fully vested shares of Common Stock otherwise issuable to Optionee uponexercise of the Option a number of whole shares of Common Stock having a fairmarket value, determined as of the date of exercise, not in excess of theminimum amount of tax required to be withheld by law.

 

(e) Nothing contained in this Agreement shall confer upon Optionee the rightto employment by the Company or any of its subsidiaries.

 

IN WITNESS WHEREOF, this Option Agreement isexecuted as of the **XXX day of XXXXXX, XXXXX.**

 

 
|   | MEDAREX, INC. |
|--------|---------------|
|   |          |
|   |          |
|   | By:           |   |

 

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