exv10w40






Exhibit 10.40




CORNERSTONE BIOPHARMA HOLDINGS, INC., a Delaware Corporation




NONSTATUTORY
EMPLOYEE STOCK OPTION AGREEMENT




	 	 	 
	Optionee:                                                                  

	 	Option Grant Date:                                              
	 
	 	 
	 

	 	Shares Subject to Option:                                    
	 
	 	 
	 

	 	Exercise Price:                                                        






     Cornerstone BioPharma Holdings, Inc., a Delaware corporation (the “Company”) hereby grants to
the optionee named above (the “Optionee”) an option to purchase the amount of shares of Common
Stock set forth above (the “Shares”) of the Company, at the Exercise Price set forth above and on
the terms set forth herein, and in all respects subject to the terms and provisions of the
Company’s 2005 Stock Option Plan (the “Plan”) applicable to nonstatutory stock options, which
terms and provisions hereby are incorporated by reference herein. Unless the context herein
otherwise requires, the terms defined in the Plan shall have the same meanings herein.



     1. Nature of the Option. This Option is intended to be an nonstatutory stock option
and is not intended to be an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”), or otherwise to qualify for any special
tax benefits to Optionee.



     2. Date of Grant; Term of Option. This Option is granted as of the Option Grant Date
set forth above, and it may not be exercised later than ten (10) years from such date.



     3. Option Exercise Price. The exercise price for this Option is the Exercise Price
per Share set forth above, which price is not less than the fair market value thereof on the date
this Option was granted (or not less than one hundred ten percent (110%) of the fair market value
thereof on the date this Option was granted, if the Optionee owns stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the Company or its
parents or subsidiaries).



     4. Right to Exercise. This Option shall vest and be exercisable, cumulatively, during
its term as follows:



	 	 	 
	 


	 

	 


	 


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          (a) Method of Exercise. This Option shall be exercisable by executing the Common
Stock Purchase Agreement which shall serve as written notice and state the election to exercise
this Option, the number of Shares in respect to which this Option is being exercised and






 




			
	1	 	Insert appropriate time based
vesting schedule.




 









 









such other representations and agreements as to Optionee’s investment intent with respect to
such Shares as may be required by the Company hereunder or pursuant to the provisions of the Plan.
Such written notice shall be signed by Optionee and shall be delivered in person or by certified
mail to the Secretary of the Company or such other person as may be designated by the Company.
The written notice shall be accompanied by payment of the purchase price. Payment of the purchase
price shall be made by check or such other consideration and method of payment authorized by the
Board pursuant to the Plan. The certificate or certificates for the Shares as to which this
Option shall be exercised shall be registered in the name of Optionee and shall carry the legends
set forth in the Plan, the Stock Purchase Agreement or the Investment Representation Statement, as
applicable, and/or as required under applicable law.




          (b) Restrictions on Exercise. This Option may not be exercised if the issuance of
the Shares upon such exercise would constitute a violation of any applicable federal or state
securities laws or other laws or regulations. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.




     5. Investment Representations. In connection with the acquisition of this Option,
Optionee represents and warrants as follows:



          (a) Investment Intent. Optionee is acquiring this Option, and upon exercise of this
Option, Optionee will be acquiring the Shares for investment for Optionee’s own account, not as a
nominee or agent, and not with a view to, or for resale in connection with, any distribution
thereof.




          (b) Protection of Interests. Optionee, by reason of Optionee’s business or financial
experience, has the capacity to evaluate the merits and risks of purchasing Common Stock of the
Company and to make an informed investment decision with respect thereto and to protect Optionee’s
interests in connection with the acquisition of this Option and the Shares.




     6. Termination of Status as an Employee. If Optionee ceases to serve as an Employee
for any reason other than death or disability and thereby terminates Optionee’s Continuous Status
as an Employee, Optionee shall have the right to exercise this Option at any time within thirty
(30) days after the date of such termination to the extent that Optionee was entitled to exercise
this Option at the date of such termination. If Optionee ceases to serve as an Employee, due to
death or disability, this Option may be exercised at any time within six (6) months after the date
of death or termination of such status as an Employee due to disability, in the case of death, by
Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or
inheritance, or, in the case of disability, by Optionee, but in any case only to the extent
Optionee was entitled to exercise this Option at the date of such termination. To the extent that
Optionee was not entitled to exercise this Option at the date of termination, or to the extent this
Option is not exercised within the time specified herein, this Option shall terminate.


Notwithstanding the foregoing, this Option shall not be exercisable after the expiration of
the term set forth in paragraph 2 hereof.




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     7. Withholding Tax Liability. The Company reserves the right to withhold, in
accordance with any applicable laws, from any compensation or other consideration payable to the
Optionee any taxes required to be withheld by federal, state or local law as a result of the grant
or exercise of this Option or the sale or other disposition of the Shares issued upon exercise of
this Option, and if such compensation or consideration is insufficient, the Company may require
Optionee to pay to the Company an amount sufficient to cover such withholding tax liability.



     8. Nontransferability of Option. This Option may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily
by operation of law or otherwise, other than by will or by the laws of descent or distribution, and
may be exercised during the lifetime of Optionee only by such Optionee. Subject to the foregoing
and the terms of the Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.



     9. Continuation of Status as an Employee. Neither this Option or the Plan nor any
Option granted thereunder shall confer upon any Optionee any right to continue in the status of an
Employee of the Company, its Parent, Subsidiary or a successor corporation or limit in any respect
the right of the Company or any such corporations to discharge the Optionee at any time, with or
without cause and with or without notice.



     10. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Optionee will not sell, transfer, assign, encumber or otherwise
dispose of (including, without limitation by operation of law) any of Optionee’s right, title or
interest in and to all or any portion of the Shares except as provided in this Section:



          (a) Right of First Refusal. In the event Optionee desires (or is required) to sell or
transfer in any manner all or a portion of the Shares, the Optionee shall first offer such Shares
for sale to the Company (or its assignee) at the same price, and upon the same terms (or reasonably
similar terms) as those on which the Optionee is disposing of said Shares (“Right of First
Refusal”). Optionee shall offer such Shares to the Company by delivering a written notice (the
“Notice”) to the Company stating (i) Optionee’s bona fide intention to sell or otherwise transfer
such Shares, (ii) the number of such Shares to be sold or otherwise transferred, (iii) the price
for which Optionee proposes to sell such Shares and all additional terms and conditions, if any, of
the sale or transfer, and (iv) the name of the proposed buyer or transferee. Optionee shall attach
to the Notice a copy of the written offer, if any, of the sale or transfer. In the event of a
transfer not involving a sale of such Shares for a specific sum of money, or if, in the sole
judgment of the Company’s Board of Directors, the proposed transfer does not involve a price for
the Shares negotiated by the Optionee and Optionee’s proposed transferee in a bona fide “arm’s
length transaction,” the price of the Shares shall be determined by the Company’s Board of
Directors in the manner specified in Section 10(c) below.




     Within thirty (30) days after the Company’s receipt of the Notice (the “Acceptance Period”),
the Company (or its assignee) may elect to purchase all of the Shares (or, with the consent of the
Optionee, a portion thereof) to which the Notice refers, at the price per share (or at the fair
market value of such Shares determined pursuant to paragraph 10(c) hereof in the case of a
transfer other than a bona fide arms-length transaction) and on the same terms and conditions



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(or terms and conditions as similar as reasonably possible) as set forth in the Notice. If
the Company (or its assignee) elects to purchase such Shares hereunder, it shall notify Optionee
either orally or in writing during the Acceptance Period of its intention to purchase all of such
Shares (or, with the consent of Optionee, a portion thereof) and either (i) set a date and
location for the closing of the transaction on or prior to the last day of the Acceptance Period,
or at such later date as the parties may otherwise agree, at which time the Company (or its
assignee) shall tender payment for the Shares or (ii) include payment for the Shares with the
Company’s notice to Optionee, if in writing, or deliver it to Optionee under separate cover. At
such closing, the certificates representing the Shares so purchased shall be delivered to the
Company and canceled or, in the case of payment by the Company by mail, such certificates shall be
deemed to be canceled upon the date of such mailing of the Company’s payment and, thereafter,
shall be promptly returned by Optionee to the Company by certified or registered mail. Optionee
hereby authorizes and directs the Secretary or Transfer Agent of the Company to transfer the
Shares as to which the Right of First Refusal has been exercised from Optionee to the Company (or
its assignee). Optionee further authorizes the Company to refuse, or to cause its Transfer Agent
to refuse, to transfer or record any Shares to be transferred in violation of this Agreement. If
the Company (or its assignee) does not elect to purchase the Shares to which the Notice refers,
Optionee may sell or otherwise transfer the Shares to the third party named in the Notice at the
price and on the terms and conditions specified in the Notice or at a higher price, provided that
such sale or transfer is consummated within sixty (60) days from either (i) the lapse of the
Acceptance Period or (ii) the date of the Company’s notice, whether written or oral, advising
Optionee that it does not intend to purchase the Shares hereunder, whichever occurs first in time
and provided, further, that any such sale or transfer is in accordance with all of the terms and
conditions set forth in this Agreement. In the event the Shares are not disposed of by the
Optionee within said 60-day period, such Shares shall once again be subject to the Right of First
Refusal herein provided.




          (b) Involuntary Transfer. In the event of any transfer by operation of law or other
involuntary transfer (the “Involuntary Transfer”), of all, or a portion, of the Shares, the Company
shall have an option to purchase all of the Shares transferred (the “Involuntary Transfer Option”).
Upon such transfer, the Optionee and person acquiring the Shares shall promptly notify in writing
the Secretary of the Company of such transfer. The Company (or its assignee) shall notify Optionee
and the person acquiring the Shares as to whether the Company (or its assignee) wishes to purchase
the Shares pursuant to the Involuntary Transfer Option within thirty (30) days after receipt by the
Company of the written notice of the involuntary transfer of the Shares. If the Company (or its
assignee) elects to purchase said Shares hereunder, it shall set a date for the closing of the
transaction at a place specified by the Company (or its assignee) not later than thirty (30) days
after receipt by the Company of the written notice of the involuntary transfer of the Shares, or at
such later date as the parties may otherwise agree. At such closing, the Company (or its assignee)
shall tender payment for the Shares and the certificates representing the Shares so purchased shall
be canceled. Optionee hereby authorizes and directs the Secretary or Transfer Agent of the Company
to transfer the Shares as to which the Involuntary Transfer Option has been exercised from the
Optionee to the Company (or its assignee). Optionee further authorizes the Company to refuse, or
to cause its Transfer Agent to refuse, to transfer or record any Shares to be transferred in
violation of this Agreement.




          (c) Determination of Price. With respect to Shares to be transferred pursuant





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to the Right of First Refusal where the price is not determined as a result of a bona fide
arms-length transaction by the Optionee under Section 10(a) or the Involuntary Transfer Option,
the price per share shall be a price set by the Board of Directors of the Company that will
reflect the then current fair market value of the Shares, as determined by the Board of Directors
in good faith after giving consideration to the factors set forth in Section 260.140.50 of Title
10 of the California Code of Regulations or, upon the request of the Optionee, by an independent
appraiser acceptable to both the Company and the Optionee; provided, that the Optionee shall be
required to bear one-half of the cost of such independent appraisal.




          (d) Intra-family Transfers. Notwithstanding anything to the contrary contained
herein, Optionee shall have the right, at any time and from time to time during Optionee’s
lifetime or upon Optionee’s death, to transfer all or any portion of Optionee’s Shares (the
“Transferred Family Shares”) to Optionee’s spouse, any of Optionee’s issue, ancestors or
descendants, or a trust for the sole benefit of Optionee, Optionee’s spouse, any of Optionee’s
issue, ancestors or descendants (any such individual or trust is hereinafter referred to as an
“Intra-family Transferee”), provided that the Intra-family Transferee receiving the Transferred
Family Shares executes a consent to be bound by the terms of this Agreement with respect to the
Transferred Family Shares. The Transferred Family Shares shall be and remain subject to all of
the terms and conditions of this Agreement as were applicable to such Shares immediately prior to
their transfer pursuant to this Section 10(d); without limiting the foregoing, the obligations
hereunder arising out of the possession or ownership of such Transferred Family Shares shall be
binding upon the respective Intra-family Transferees. For purposes of exercising any rights under
this Agreement, the Company’s right to purchase the Shares of Optionee shall extend to any Shares
owned by an Intra-family Transferee.




          (e) Restriction on Alienation. Any sale, transfer, encumbrance, or other disposition
or purported sale, transfer, encumbrance or disposition of any of the Shares by Optionee, whether
voluntarily, by operation of law or otherwise, shall be null and void unless the terms, conditions
and provisions of this Agreement are strictly complied with. Optionee further authorizes the
Company to refuse, or cause its Transfer Agent to refuse, to transfer or record any Shares to be
transferred in violation of this Agreement.




          (f) Assignment by Company. The Company’s Right of First Refusal and Involuntary
Transfer Option, at the sole discretion of the Company, may be assigned in whole or in part to any
shareholder or shareholders of the Company.




          (g) Obligations Binding Upon Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interests subject to the provisions of this Agreement,
including the Company’s Right of First Refusal and Involuntary Transfer Option. Any sale or
transfer of the Shares shall be void unless the provisions of this Agreement are met.




          (h) Termination of Rights. The Right of First Refusal and Involuntary Transfer
Option granted the Company by this Section 10 shall terminate at such time as a public market
exists for the Company’s Common Stock (or any other stock issued to purchasers in exchange for the
Shares purchased under this Agreement). For the purpose of this Agreement, a “public market”
shall be deemed to exist if the Common Stock is listed on a national securities exchange (as that
term is used in the Securities Exchange Act of 1934, as amended), or the



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Common Stock is traded on the over-the-counter market and prices are published on business
days in a recognized financial journal.




          (i) Indebtedness. Any payment by the Company for purchase of Shares from Optionee,
may be made by cancellation of any indebtedness to Company from Optionee.




          (j) Legends. All certificates representing any Shares of the Company purchased upon
exercise of the Options shall have endorsed thereon the following legends, or substantially
similar legends, in addition to any legends required by Delaware law or other applicable state or
federal securities laws, unless in the opinion of counsel such legends are no longer necessary:





	 	(1)	 	THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING
THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
	 
	 	(2)	 	THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS, INCLUDING A RIGHT OF
FIRST REFUSAL OF THE COMPANY, AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY.





          (k) Market Standoff Agreement. The Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company held by Optionee
during the period not to exceed one hundred and eighty (180) days as requested by the managing
underwriter following the effective date of a registration statement of the Company filed under the
Securities Act (as hereafter defined), provided that all officers and directors of the Company are
required to enter into similar agreements. Such agreement shall be in writing in a form
satisfactory to the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the shares (or other securities) subject to the foregoing restriction
until the end of such period.




     11. The Plan. This Option is subject to, and the Company and Optionee agree to be
bound by, all of the terms and conditions of the Plan as such Plan may be amended from time to time
in accordance with the terms thereof, provided that no such amendment shall deprive Optionee,
without Optionee’s consent, of this Option or any rights hereunder. Pursuant to the Plan, the
Board of Directors of the Company is authorized to adopt rules and regulations not inconsistent
with the Plan as it shall deem appropriate and proper. A copy of the Plan in its present form is
available for inspection during business hours by Optionee or the persons entitled to exercise this
Option at the Company’s principal office.



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     12. Entire Agreement; Amendment. This Agreement and the Common Stock Purchase
Agreement contains the entire understanding between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous written or oral negotiations and agreements
between them regarding the subject matter hereof. This Agreement may be amended only in writing
signed by each of the parties hereto.



	 	 	 	 	 	 	 
	 	 	CORNERSTONE BIOPHARMA	 	 
	 	 	HOLDINGS, INC., a Delaware Corporation	 	 
	 
	 	 	 	 	 	 
	Dated: [Date]

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 






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OPTIONEE’S ACCEPTANCE




     Optionee acknowledges receipt of a copy of the Plan which is attached hereto, and represents
that Optionee has read and is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of Directors or the
Committee upon any questions arising under the Plan.



	 	 	 	 	 	 	 
	 	 	OPTIONEE:	 	 
	 
	 	 	 	 	 	 
	Dated: [Date]	 	By:                                                             	 	 
	 
	 	 	 	 	 	 
	 	 	Printed Name:                                         	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Mailing Address	 	 
	 	 	(if different from above):	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 






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