the aggregate may each require approximately ten hours per year of the Executive’s time. TheExecutive agrees to abide by any rules, regulations, instructions, personnel practices and policiesof the Company that are applicable to him and any changes therein that may be adopted from time totime by the Company.     3. **Compensation and Benefits**.          3.1. Salary. The Company shall pay the Executive a base salary for the year startingOctober 31, 2009, 2009 in accordance with its regular payroll practices at an annualized rate of$275,000, less lawful deductions. Such salary shall be subject to adjustment thereafter asdetermined by the Board.          3.2. Annual Target Cash Bonus. The Executive shall be eligible to receive an annualtarget cash bonus of up to thirty-five (35) percent of his then annual base salary (“TargetCash Bonus”). The Board (or a committee thereof) shall determine the amount of the actualaward, if any, based on overall corporate performance and individual performance. Actual awardsmay be greater than or less than the Executive’s Target Cash Bonus, depending in part upon theextent to which actual performance exceeds or falls below the performance goals. Any bonus shallbe paid in a single lump sum, subject to lawful deductions, at such time as bonuses are regularlypaid to senior executives of the Company, but in any event such bonus shall be paid on or beforeMarch 15 of the year following the year to which the bonus relates. Except as may be expresslyprovided below, the Executive must be employed on the date that the bonus is paid to be eligiblefor any Target Cash Bonus. Each cash bonus award that may become payable shall be paid solely fromthe general assets of the Company. Notwithstanding the foregoing, the Executive shall not beeligible for a Target Cash Bonus for 2009, but the Executive shall be eligible to receive a TargetCash Bonus for 2010 of up to forty and eighty-three hundredths percent (40.83%) of his then annualbase salary.           3.3. Grant of Restricted Stock. The Executive will be granted, effective as of theEffective Date, one hundred ten thousand (110,000) shares of restricted common stock. The grantshall be on such terms and conditions as are described in Appendix A hereto.          3.4.Fringe Benefits. The Executive shall be entitled to participate in all bonus andbenefit programs (excluding the Company’s Cash Bonus Program for Employees (Other than ExecutiveOfficers)) that the Company establishes and makes available to its employees or executives, if any,to the extent that the Executive’s position, tenure, salary, age, health and other qualificationsmake him eligible to participate; provided, however, the Executive’s participationis subject to the applicable terms, conditions and eligibility requirements of these plans as theymay exist from time to time. The Executive shall be entitled to accrue 1.67 vacation days permonth (four (4) weeks per year), and, if requested in writing by the President and Chief ExecutiveOfficer, such vacation time shall be taken at such times as may be approved by the President andChief Executive Officer or his designee. Accrued but unused vacation at the end of each year willnot carry over past January 31 of the next year.
-2-

 
          3.5. Reimbursement of Expenses. The Company shall reimburse the Executive for allreasonable travel, entertainment and other expenses incurred or paid by the Executive in connectionwith, or related to, the performance of his duties, responsibilities or services under thisAgreement, in accordance with the Company’s expense reimbursement policy, including the Executive’spresentation of documentation, expense statements, vouchers and/or such other supportinginformation as the Company may request, provided, however, that the amountavailable for such travel, entertainment and other expenses may be fixed in advance by the Board.Notwithstanding the foregoing, (i) the expenses eligible for reimbursement in any particulartaxable year may not affect the expenses eligible for reimbursement in any other taxable year, (ii)such reimbursement must be made on or before the last day of the year following the year in whichthe expense was incurred, and (iii) the right to reimbursement is not subject to liquidation orexchange for another benefit. During the 90 (ninety) day period from the Effective Date,,or forsuch longer period as may be approved by the President and Chief Executive Officer in his solediscretion (the last day of either such period being referred to as the “ Benefit Date”), theCompany shall reimburse the Executive for reasonable expenses he incurs or pays for business travelto and from New Hope, Pennsylvania and Cary, North Carolina and for temporary board, lodging, andtransportation in or around Cary, North Carolina.          3.6. Car Allowance. Commencing with the Benefit Date, the Executive will receive amonthly car allowance in the amount of $850. Both a valid driver’s license, an acceptable motorvehicle record and personal automobile insurance are required at all times to operate a personalmotor vehicle on Company business. The Company reserves the right to change or discontinue itsvehicle reimbursement program at any time.          3.7. Reimbursement of Moving Expenses. Provided that the Executive remains anemployee in good standing with the Company through the Benefit Date, the Company shall reimbursethe Executive for reasonable moving expenses, including expenses for temporary housing, incurred orpaid by the Executive for establishing a residence in, and relocating his principal residence fromNew Hope, Pennsylvania to, Wake county or any county adjacent thereto, in North Carolina. Theterms and conditions, including the amount thereof, shall be in accordance with the Company’spolicies and practices applicable to the Company’s executive vice presidents. All suchreimbursement amounts shall be paid on or before March 15 of the year following the year in whichthe expense was incurred. Upon the Executive’s request, the Executive may receive payment on orafter the Benefit Date of amounts due under this Section 3.7 in a single lump sum. In the eventthat Executive’s employment with the Company is terminated at the end of the Initial Term underSection 4.1 pursuant to Executive’s notice of non-renewal, at the election of the Company for Cause(as defined in Section 20) during the Initial Term, or at the election of the Executive withoutGood Reason (as defined in Section 20) during the Initial Term, then, within thirty (30) days afterany such termination, the Executive will repay all of the amounts received by him pursuant to thisSection 3.7.     4. **Employment Termination**. The employment of the Executive by the Company pursuant tothis Agreement shall terminate upon the occurrence of any of the following:          4.1. Expiration of the Employment Period in accordance with Section 1;
-3-

 
          4.2. At the election of the Company, for Cause, immediately upon written notice by the Companyto the Executive;          4.3. At the election of the Executive, for Good Reason, upon written notice by the Executiveto the Company;          4.4. At the election of the Company without Cause during a Change of Control Period (asdefined in Section 20) or at the election of the Executive for Good Reason during a Change ofControl Period;          4.5. Upon the death or Disability (as defined in Section 20) of the Executive;          4.6. At the election of the Executive, without Good Reason, by providing written notice to theCompany; and          4.7. At the election of the Company, without Cause, by providing written notice to theExecutive.     5. **Effect of Termination**.          5.1. Termination for Cause. In the event the Executive’s employment is terminated forCause pursuant to Section 4.2, the Company shall pay to the Executive the compensation and benefitsotherwise payable to him under Section 3 through the last day of his actual employment by theCompany.          5.2. Termination at the Election of the Executive Without Good Reason. In the eventthe Executive elects to terminate his employment pursuant to Section 4.6, the Company shall pay theExecutive the compensation and benefits otherwise payable to him under Section 3 through the lastday of his actual employment by the Company.          5.3. Termination for Death or Disability. If the Executive’s employment is terminatedby death or because of Disability pursuant to Section 4.5, in addition to any disability or lifeinsurance benefits for which the Executive or the estate of the Executive may be eligible, theCompany shall pay to the estate of the Executive or to the Executive, as the case may be, thecompensation and benefits otherwise payable to him under Section 3 through the last day of hisactual employment by the Company. In addition, if the Executive’s employment terminates as aresult of his death, the Executive’s estate shall receive an amount equal to a pro rata payment ofthe annual cash bonus for which he would have been eligible, less lawful deductions, within ten(10) calendar days following the effective date of the Release required by Section 5.6, but notlater than ninety (90) days following termination of employment. Notwithstanding the foregoing, ifthe ninetieth (90th) day following the Executive’s termination from employment occurs in thecalendar year following the year of the Executive’s termination, then the payment shall be made noearlier than January 1 of such subsequent calendar year. No other benefits are payable upon theExecutive’s termination pursuant to Section 4.5.
-4-

 
          5.4.Termination Without Cause or for Good Reason and not during a Change of Control Period. Provided that the Executive remains an employee in good standingwith the Company through the Benefit Date, if the Executive’s employment is terminated withoutCause pursuant to Section 4.7, or for Good Reason pursuant to Section 4.3, and such terminationdoes not occur during a Change of Control Period, the Company shall:     (i) pay the Executive a lump sum payment equal to one (1) times his annualizedbase salary, less lawful deductions, payable within ten (10) calendar days followingthe effective date of the Release required by Section 5.6 but not later than ninety(90) days following termination of employment. Notwithstanding the foregoing, ifthe ninetieth (90th) day following the Executive’s termination fromemployment occurs in the calendar year following the year of the Executive’stermination, then the payment shall be made no earlier than January 1 of suchsubsequent calendar year;     (ii) pay on behalf of the Executive, in accordance with the Company’s regularpayroll practices, on a monthly basis an amount equal to (a) one hundred (100)percent of the Executive’s monthly health and dental COBRA premiums for theExecutive and his dependents, if any, if the Executive properly elects to continuehealth and dental insurance under COBRA and (b) pay to the Executive on the firstbusiness day of each applicable month one hundred (100) percent of the cost of themonthly premiums paid by the Company to the insurance companies for life insuranceand disability insurance for the Executive in the month preceding the Executive’stermination of employment, such payments under subsections (a) and (b) to continueuntil the earlier of (x) twelve (12) months after the termination of the Executive’semployment and (y) the last day of the first month that the Executive is eligiblefor other employer-sponsored health coverage. Notwithstanding the foregoing, to theextent such payments are reimbursement to the Executive of medical expenses incurredby the Executive as described in Reg. § 1.409A-1(b)(9)(v)(B), reimbursements may notbe made beyond the period of time during which the Executive would be entitled (orwould, but for such arrangement, be entitled) to COBRA continuation coverage under agroup health plan of the Company;     (iii) pay the Executive a lump sum payment in an amount equal to a pro ratapayment of the Target Cash Bonus for which he was eligible, less lawful deductions;such payment shall be paid within ten (10) calendar days following the effectivedate of the Release required by Section 5.6, but not later than ninety (90) daysfollowing termination of employment. Notwithstanding the foregoing, if theninetieth (90th) day following the Executive’s termination fromemployment occurs in the calendar year following the year of the Executive’stermination, then the payment shall be made no earlier than January 1 of suchsubsequent calendar year; and     (iv) accelerate vesting of all of the Executive’s outstanding unvested stockoptions and restricted stock by one year.
-5-

 
          5.5. Termination Without Cause or for Good Reason during a Change of Control Period.Provided that the Executive remains an employee in good standing with the Company through theBenefit Date, if the Executive’s employment is terminated without Cause pursuant to Section 4.4, orfor Good Reason pursuant to Section 4.4, and such termination occurs during a Change of ControlPeriod, the Company shall:     (i) pay the Executive a lump sum payment equal to one (1) times his annualizedbase salary, less lawful deductions, payable within ten (10) calendar days followingthe effective date of the Release required by Section 5.6, but not later than ninety(90) days following termination of employment. Notwithstanding the foregoing, ifthe ninetieth (90th) day following the Executive’s termination fromemployment occurs in the calendar year following the year of the Executive’stermination, then the payment shall be made no earlier than January 1 of suchsubsequent calendar year;     (ii) pay on behalf of the Executive, in accordance with the Company’s regularpayroll practices, on a monthly basis an amount equal to (a) one hundred (100)percent of the Executive’s monthly health and dental COBRA premiums for theExecutive and his dependents, if any, if the Executive properly elects to continuehealth and dental insurance under COBRA and (b) pay to the Executive on the firstbusiness day of each applicable month one hundred (100) percent of the cost of themonthly premiums paid by the Company to the insurance companies for life insuranceand disability insurance for the Executive in the month preceding the Executive’stermination of employment, such payments under subsections (a) and (b) to continueuntil the earlier of (x) twelve (12) months after the termination of the Executive’semployment and (y) the last day of the first month that the Executive is eligiblefor other employer-sponsored health coverage. Notwithstanding the foregoing, to theextent such payments are reimbursement to the Executive of medical expenses incurredby the Executive as described in Reg. § 1.409A-1(b)(9)(v)(B), reimbursements may notbe made beyond the period of time during which the Executive would be entitled (orwould, but for such arrangement, be entitled) to COBRA continuation coverage under agroup health plan of the Company;     (iii) pay the Executive a lump sum payment in an amount equal to a pro ratapayment of the Target Cash Bonus for which he was eligible, less lawful deductions;such payment shall be paid ten (10) calendar days following the effective date ofthe Release required by Section 5.6, but not later than ninety (90) days followingtermination of employment. Notwithstanding the foregoing, if the ninetieth (90th)day following the Executive’s termination from employment occurs in the calendaryear following the year of the Executive’s termination, then the payment shall bemade no earlier than January 1 of such subsequent calendar year; and     (iv) accelerate vesting of one hundred (100) percent of all of the Executive’s outstandingunvested stock options and restricted stock.
-6-

 
5.6 Conditions to Payment.     (i) Notwithstanding any provision of this Agreement to the contrary, theCompany’s obligation to provide the payments and benefits under Sections 5.2, 5.3,5.4, and 5.5 is conditioned upon the Executive’s, or the Executive’s estate’s,execution of a severance agreement and full release of all claims against theCompany and all affiliated persons and entities, drafted by and satisfactory tocounsel for the Company (the “Release”), and the Executive’s compliance withSections 7 and 8 of this Agreement. The Release shall include clauses coveringconfidentiality, non-disparagement, cooperation, and non-admissions, among otherterms, all in a form acceptable to the Company. If the Executive chooses not toexecute such a release or fails to comply with those Sections, then the Company’sobligation to compensate the Executive ceases on the effective termination dateexcept as to base salary up through the termination date. The Release shall beprovided to the Executive within thirty (30) days of the Executive’s separation fromservice and the Executive must execute it within the time period specified in theRelease (which shall not be longer than forty-five (45) days from the date ofreceipt). Such Release shall not be effective until any applicable revocationperiod specified therein has expired.     (ii) Notwithstanding any provision of this Agreement to the contrary, theCompany’s obligation to provide the payments and benefits under Sections 5.4 and 5.5shall not arise until the Benefit Date and is expressly conditioned upon theExecutive remaining an employee in good standing with the Company through theBenefit Date.     6. **Vesting of Stock Upon a Change of Control**. One hundred (100) percent of theExecutive’s outstanding unvested stock options and restricted stock will vest on a Change ofControl (as defined in Section 20).     7. **Non-Compete**.          (a) During the Executive’s employment with the Company and for a period of one year followingthe cessation thereof, the Executive will not engage in any of the following on his own behalf orin any capacity on another’s behalf:               (i) engage in any business activity (or assist others to engage in any business activity) thatdirectly competes with the Company; or               (ii) have any interest in any business that directly competes with the Company; or               (iii) be employed (or otherwise engaged) in (A) a management capacity, (B) other capacityproviding the same or similar services which the Executive provided to the Company, or (C) anycapacity connected with competitive business activities, by any person or
-7-

 
entity that engages in the same, similar or otherwise competitive business as the Company.The restrictions set forth in subparagraphs 7(a)(i)—(iii) shall apply in the following severablegeographic areas: (i) the Raleigh-Cary-Durham-Chapel Hill, NC metropolitan areas; (ii) any city,metropolitan area, county, state (or similar political subdivisions in foreign countries) in whichthe Company is located or does or, during the last twelve (12) months of the Executive’s employmentwith the Company, did business; (iii) any city, metropolitan area, county, or state (or similarpolitical subdivisions in foreign countries) in which the Executive’s services were provided, orfor which the Executive had responsibility, or in which the Executive worked on Company projects,during the last twelve (12) months of the Executive’s employment with the Company; or (iv) theentire United States of America and its territories.          (b) During the Executive’s employment with the Company and for a period of one (1) yearfollowing the cessation thereof (whether voluntary or involuntary and regardless of the reason for,or party initiating, the termination), the Executive will not engage in any of the following on hisown behalf or in any capacity on another’s behalf, directly or indirectly:               (i) solicit, persuade, induce, encourage or attempt to solicit, persuade, induce or encourageany person to leave his or her employment with the Company or to refrain from providing services tothe Company; or               (ii) induce or attempt to induce (including, without limitation, by soliciting business from),or otherwise encourage or assist, any customer, client, or business relation of the Company withwhich the Executive had contact on behalf of the Company (A) to cease doing business with theCompany or reduce the level of business it conducts with the Company, or (B) to purchase or promoteany prescription pharmaceutical product that competes directly with the Company’s products for thetreatment of any indication for which the Company has received United States Food and DrugAdministration (“FDA”) approval or for an indication which the Company’s products are beingdeveloped or may be developed.Upon cessation of the Executive’s employment with the Company, the Executive will sever allmarketing and sales relationships with customers of the Company and the Executive agrees that anyattempt to retain these customers for his own or another’s benefit will be a material breach ofthis Agreement.          (c) The Executive agrees that, if requested by the Company in writing, he will give notice tothe Company of each new business activity he plans to undertake during the non-competition period,at least ten (10) business days prior to beginning any such activity. The notice shall state thename and address of the individual, corporation, association or other entity or organization(“Entity”) for whom such activity is undertaken and the name of the Executive’s businessrelationship or position with the entity. The Executive further agrees to provide the Company withother pertinent information concerning such business activity as the Company may reasonably requestin order to determine the Executive’s continued compliance with his obligations under thisAgreement. The Executive agrees that, if requested by the Company in writing, he will provide acopy of Sections 7 and 8 of this Agreement to all persons and Entities with whom he seeks to behired or do business before accepting employment or engagement with
-8-

 
any of them.          (d) If any restriction set forth in this Section 7 is found by any court of competentjurisdiction to be unenforceable because it extends for too long a period of time or over too greata range of activities or in too broad a geographic area, it shall be interpreted to extend onlyover the maximum period of time, range of activities or geographic area as to which it may beenforceable.          (e) The Executive acknowledges that the restrictions contained in this Section are necessaryfor the protection of the business and goodwill of the Company and in light of, among other things,the highly competitive market in which the Company operates. The Executive agrees that any breachof this Section will cause the Company substantial and irreparable damage and therefore, in theevent of any such breach, in addition to such other remedies which may be available, the Companyshall have the right to seek specific performance and injunctive relief without posting a bond.          (f) If the Executive violates the provisions of this Section 7, he shall continue to be heldby the restrictions set forth in this Section, until a period equal to the period of restrictionhas expired without any violation.     8. **Proprietary Information and Developments****.**          8.1. Proprietary Information.          (a) The Executive agrees that all information and know-how, whether or not in writing, of aprivate, secret or confidential nature concerning the Company’s business or financial affairs(collectively, “Proprietary Information”) is and shall be the exclusive property of theCompany. By way of illustration, but not limitation, Proprietary Information may includeinventions, products, processes, methods, techniques, formulas, compositions, compounds, projects,developments, plans, research data, clinical data, financial data, personnel data, computerprograms, and customer and supplier lists. The Executive will disclose Proprietary Informationsolely to employees, officers, and directors of the Company and only on a need-to-know basis andwill use the same solely for purposes of performing the Executive’s duties and responsibilities onbehalf of Company as described in Section 2 hereof, unless otherwise permitted by prior writtenapproval of an officer of the Company. Developments (defined in Section 8.2(a) below) shallconstitute Proprietary Information of Company for all purposes hereunder.          (b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches,drawings, laboratory notebooks, program listings, or other written, photographic, or other tangiblematerial containing Proprietary Information, whether created by the Executive or others, whichshall come into his custody or possession, shall be and are the exclusive property of the Companyto be used by the Executive only in the performance of his duties for the Company.          (c) The Executive agrees that his obligations set forth in paragraphs (a) and
-9-

 
(b) above also extend to such types of information, know-how, records and tangible property ofcustomers of the Company or suppliers to the Company or other third parties who may have disclosedor entrusted the same to the Company or to the Executive in the course of the Company’s business.          8.2. Developments.          (a) The Executive will make full and prompt disclosure to the Company of all inventions,discoveries, processes, methods, developments, software, and works of authorship, whether or notpatentable or copyrightable, which are created, made, conceived or reduced to practice by theExecutive or under his direction or jointly with others during his employment by the Company,whether or not during normal working hours or on the premises of the Company (all of which, alongwith all improvements, modifications, and derivative works thereof and thereto and all proprietaryknow-how and other information associated therewith, are collectively referred to in this Agreementas “Developments”).          (b) The Executive agrees to irrevocably and unconditionally assign, and does herebyirrevocably and unconditionally assign, to the Company (or any person or entity designated by theCompany) and to forever waive and never assert any and all of his right, title and interest in andto all Developments and all related patents, patent applications, copyrights, copyrightregistration applications, and other intellectual property rights and moral rights associatedtherewith. The rights assigned to Company herein shall include, without limitation, the rights (i)to bring claims and causes of action for damages and other relief by reason of all past and futureinfringements, misappropriations, or other violations of any and all rights under suchDevelopments; (ii) to collect and enjoy damages, benefits, and other remedies resulting therefrom;and (iii) to charge and collect royalties or other payments arising out of or relating to the grantof licenses or similar rights under any such Developments.          (c) The Executive agrees to cooperate fully with the Company, both during and after hisemployment with the Company, with respect to the prosecution, procurement, maintenance, enforcementand/or defense of patents, trademarks, copyrights, trade secrets and other means for protection ofthe Developments (both in the United States and foreign countries). The Executive shall sign allpapers, including, without limitation, copyright registration applications, patent applications,declarations, oaths, formal assignments, assignment of priority rights, and powers of attorney,which the Company may deem necessary or desirable in order to protect its rights and interests inany Development. The Executive shall further execute and deliver all such instruments and take allother actions as in the opinion of the Company and its counsel shall be appropriate to vest in theCompany (or in such person as the Company may specify) all right, title and interest in saidDevelopments and any patents, trademarks, copyrights, trade secrets and other intellectual propertyrights associated therewith.          (d) Whenever requested to do so by the Company, both during and after his employment with theCompany, and at the expense of the Company, the Executive shall cooperate fully and assist theCompany in the defense or prosecution of any claims or actions now in existence or which may bebrought in the future in connection with (i) any litigation commenced by the Company against thirdparties, (ii) any litigation commenced by a third party
-10-

 
against the Company and (iii) any administrative hearing or administrative proceedinginvolving the Company. The Executive’s full cooperation in connection with any claims, actions oradministrative proceedings shall include, but not be limited to, his being available to meet withthe Company’s counsel to prepare for trial, discovery or an administrative hearing and to act as awitness when requested by the Company at reasonable times designated by the Company.          (e) The Executive hereby irrevocably appoints the Company to be his attorney in fact and, inhis name and on his behalf, to execute all such instruments and take all other actions andgenerally to use his name for the purpose of providing to the Company the full benefit of theprovisions of this Section 8.          (f) The Executive hereby waives and quitclaims to the Company any and all claims, of anynature, which the Executive now or may hereafter have for infringement, misappropriation, or otherviolation of any Development assigned hereunder to the Company.          (g) The Executive acknowledges and agrees that all original works of authorship which arecreated by the Executive (solely or jointly with others) within the scope of the Executive’semployment and which are protectable by copyright are “works made for hire,” as that term isdefined in the United States Copyright Act (17 U.S.C. Section 101).          (h) The Executive represents and warrants that to the extent applicable, the Executive hasprovided to the Company a list entitled “List of Inventions,” that a true and complete list of allinventions, discoveries, methods, processes, developments, software, and works of authorship,whether or not patentable or copyrightable, which were created, made, conceived or reduced topractice by the Executive, whether solely or jointly with others, prior to his employment by theCompany (collectively, “Inventions”). Any improvements to or derivative works of any suchInventions, whether or not patentable or copyrightable and whether or not reduced to practice,conceived or created after commencement of the Executive’s employment by the Company shallconstitute Developments for all purposes hereunder to the extent arising out of or relating to anyuse of or other reliance on any Proprietary Information by or on behalf of the Executive.          8.3. Other Agreements. Other than as previously disclosed to the Company by theExecutive in writing, the Executive hereby represents that he is not bound by the terms of anyagreement with any previous employer or other party to refrain from using or disclosing any tradesecret or confidential or proprietary information in the course of his employment with the Companyor to refrain from competing, directly or indirectly, with the business of such previous employeror any other party. The Executive further represents that his performance of all the terms of thisAgreement and as an executive officer of the Company does not and will not breach any agreement tokeep in confidence proprietary information, knowledge or data acquired by him in confidence or intrust prior to his employment with the Company.     9. **Other Severance Arrangements**. The benefits under this Agreement will be providedin lieu of benefits under any severance plan of the Company or under the Executive’s offer letter.The Executive acknowledges and agrees that the acceleration of vesting of stock options andrestricted stock under this Agreement is in lieu of any acceleration of vesting of
-11-

 
stock options and restricted stock upon a change of control under the Company’s current andany future stock option plans, including, but not limited to, the Company’s 2000 Equity IncentivePlan, 2003 Stock Incentive Plan, 2004 Stock Incentive Plan, the Cornerstone BioPharma Holdings,Inc. 2005 Stock Option Plan, and the Cornerstone BioPharma Holdings, Inc. 2005 Stock IncentivePlan, each as amended from time to time.     10. **Mitigation**. The Executive has no obligation to mitigate amounts payable underthis Agreement by seeking other employment.     11. **Notices**. All notices required or permitted under this Agreement shall be inwriting and shall be deemed effective upon personal delivery or upon deposit in the United StatesPost Office, by registered or certified mail, postage prepaid, addressed to the other party at theaddress shown above, or at such other address or addresses as either party shall designate to theother in accordance with this Section 11.     12. **Pronouns**. Whenever the context may require, any pronouns used in this Agreementshall include the corresponding masculine, feminine or neuter forms, and the singular forms ofnouns and pronouns shall include the plural, and vice versa.     13. **Entire Agreement**. This Agreement constitutes the entire understanding between theparties hereto with respect to the subject matter hereof, and this Agreement supersedes and rendersnull and void any and all prior oral or written agreements, understandings or commitmentspertaining to the subject matter hereof. To the extent this Agreement is inconsistent or conflictswith any other agreement entered into between the Executive and the Company, including any optionor restricted stock award agreements, this Agreement shall control.     14. **Amendment**. This Agreement may be amended or modified only by a written instrumentexecuted by both the Company and the Executive.     15. **Governing Law**. This Agreement shall be interpreted and enforced in accordancewith the laws of the State of North Carolina without regard to conflict of laws provisions. Anyaction, suit, or other legal proceeding which is commenced to resolve any matter arising under orrelating to any provision of this Agreement shall be commenced only in a court of the State ofNorth Carolina (or, if appropriate, a federal court located within the State of North Carolina),and the Company and the Executive each consents to the jurisdiction of such a court.     16. **Successors and Assigns**. This Agreement shall be binding upon and inure to thebenefit of both parties and their respective successors and assigns, including any corporation withwhich or into which the Company may be merged or which may succeed to its assets or business,provided, however, that the obligations of the Executive are personal and shall not be assigned bythe Executive.     17. **Dispute Resolution**. Any claim or controversy arising out of or relating to thisAgreement, or any breach thereof, or otherwise arising out of or relating to the Executive’s
-12-

 
employment, compensation and benefits with the Company or the termination thereof, includingany claim for discrimination under any local, state or federal employment discrimination law,except as specifically excluded herein, shall be brought in any court having jurisdiction thereof.**Both the Company and the Executive expressly waive any right that any party either has or may haveto a jury trial of any dispute arising out of or in any way related to the Executive’s employmentwith or termination from the Company. The Executive expressly acknowledges and agrees that hehereby waives any right to claim or recover punitive damages.**     18. **Acknowledgment**. **THE EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A REASONABLE PERIODSUFFICIENT TO STUDY, UNDERSTAND AND CONSIDER THIS AGREEMENT, THAT HE HAS HAD AN OPPORTUNITY TOCONSULT WITH LEGAL COUNSEL OF HIS CHOICE, THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ALL OFITS TERMS, THAT HE IS ENTERING INTO AND SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY, AND THATIN DOING SO HE IS NOT RELYING UPON ANY STATEMENTS OR REPRESENTATIONS BY THE COMPANY OR ITS AGENTS.**     19. **Miscellaneous**.          19.1. No delay or omission by the Company in exercising any right under this Agreement shalloperate as a waiver of that or any other right. A waiver or consent given by the Company on anyone occasion shall be effective only in that instance and shall not be construed as a bar or waiverof any right on any other occasion.          19.2. The captions of the sections of this Agreement are for convenience of reference only andin no way define, limit or affect the scope or substance of any section of this Agreement.          19.3. In case any provision of this Agreement shall be invalid, illegal or otherwiseunenforceable, the validity, legality and enforceability of the remaining provisions shall in noway be affected or impaired thereby.          19.4. Nothing in this Agreement should be construed to create a trust or to establish orevidence the Executive’s claim of any right to payment other than as an unsecured general creditorwith respect to any payment to which the Executive may be entitled.          19.5. The provisions of Sections 7 and 8 shall survive the termination of this Agreement.          19.6. Upon termination of the Executive’s employment by the Company for any reason whatsoeverwhether voluntarily or involuntarily, or at any other time upon the Company’s request, theExecutive agrees to promptly return to the possession of the Company any materials or copiesthereof, in hard copy or electronically, containing and/or pertaining to Proprietary Informationrelating to the Company or any of its subsidiaries or affiliates and shall not take any material orcopies thereof from the possession of the Company, or destroy any such materials. In
-13-

 
addition, the Executive shall also return to the Company all Company property and equipment inthe Executive’s possession or control, including but not limited to, all documents, productsamples, tapes, notes, computer files, equipment, phone, facsimile, printer, computer, physicianlists, employee lists, lab notebooks, files, computer equipment, security badges, telephone callingcards, credit cards, and other information or materials (and all copies) which containconfidential, proprietary or non-public information of the Company. The Executive further agreesto leave intact all electronic Company documents on the Company’s servers or computers, includingthose which the Executive developed or helped develop during the Executive’s employment. TheExecutive further agrees to promptly return or make available to the Company or its agents anymotor vehicle provided to the Executive by the Company.     20. **Definitions**.          20.1. For purposes of this Agreement, “beneficially ownership” shall have the meaningset forth in Rule 13d-3 promulgated under the Exchange Act, and “beneficially own(s)” and“beneficially owned” shall have a correlative meanings.          20.2. For the purposes of this Agreement, “Cause” for termination shall be deemed toexist upon (a) the Executive’s use of alcohol or narcotics which proximately results in the willfulmaterial breach or habitual willful neglect of the Executive’s duties under this Agreement; (b) theExecutive’s criminal conviction of fraud, embezzlement, misappropriation of assets, or theExecutive’s conviction of any felony or other crime that brings embarrassment to the Company, butin no event traffic or similar violations; (c) any act of the Executive constituting willfulmisconduct which is materially detrimental to the Company’s best interests, including but notlimited to misappropriation of, or intentional damage to, the funds, property or business of theCompany; (d) the Executive’s material violation of the Company’s policies, including but notlimited to violations of the Company’s policies prohibiting harassment or discrimination; or (e)the Executive’s willful Material Breach (as defined below) of this Agreement, if such willfulMaterial Breach is not cured by the Executive within thirty (30) days after the Company’s writtennotice thereof specifying the nature of such willful Material Breach. “Material Breach”shall mean (x) the substantial and continual willful nonperformance of the Executive’s materialduties under this Agreement resulting from the Executive’s gross negligence or willful misconductwhich the Board reasonably determines has resulted in material injury to the Company or (y) thebreach of Section 7 or Section 8 of this Agreement.          20.3. For purposes of this Agreement, a “Change of Control” shall mean:               (a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3)or 14(d)(2) of the Exchange Act (as defined below)) (a “Person”) of beneficial ownership ofany capital stock of the Company if prior to such acquisition such Person did not, and after suchacquisition such Person does, beneficially own fifty percent (50%) or more of the combined votingpower of the then-outstanding securities of the Company entitled to vote generally in the electionof directors (the “Outstanding Company Voting Securities”); or               (b) such time as the Continuing Directors (as defined below) do not constitute a majority ofthe Board (or, if applicable, the Board of Directors of a successor
-14-

 
corporation to the Company), where the term “Continuing Director” means at any date amember of the Board (x) who was a member of the Board on the date of the initial adoption of theEmployment Agreement by the Board or (y) who was nominated or elected subsequent to such date by atleast a majority of the directors who were Continuing Directors at the time of such nomination orelection or whose election to the Board was recommended or endorsed by at least a majority of thedirectors who were Continuing Directors at the time of such nomination or election; provided,however, that there shall be excluded from this clause (y) any individual whose initial assumptionof office occurred as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents,by or on behalf of a person other than the Board; or               (c) the consummation of a merger, consolidation, reorganization, recapitalization or shareexchange involving the Company or a sale or other disposition of all or substantially all of theassets of the Company (a “Business Combination”), unless, immediately following suchBusiness Combination, each of the following two conditions is satisfied: (x) all or substantiallyall of the individuals and entities who were the beneficial owners of the Outstanding CompanyVoting Securities immediately prior to such Business Combination beneficially own, directly orindirectly, more than fifty percent (50%) of the combined voting power of the then-outstandingsecurities entitled to vote generally in the election of directors, respectively, of the resultingor acquiring corporation in such Business Combination (which shall include, without limitation, acorporation which as a result of such transaction owns the Company or substantially all of theCompany’s assets either directly or through one or more subsidiaries) (such resulting or acquiringcorporation is referred to herein as the “Acquiring Corporation”) in substantially the sameproportions as their ownership of the Outstanding Company Voting Securities immediately prior tosuch Business Combination and (y) no Person (excluding any executive benefit plan (or relatedtrust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns,directly or indirectly, 50% or more of the combined voting power of the then-outstanding securitiesof such corporation entitled to vote generally in the election of directors (except to the extentthat such ownership existed prior to the Business Combination); or               (d) the liquidation or dissolution of the Company.          20.4. For purposes of this Agreement, a “Change of Control Period” shall consist ofthe period from three (3) months before until three (3) months after the date on which a Change ofControl occurs.          20.5. As used in this Agreement, the term “Disability” means, with respect to theExecutive, that the Executive is unable to perform the essential functions of his position with areasonable accommodation if necessary by reason of any medically determinable physical or mentalimpairment. A determination of Disability shall be agreed upon by a physician satisfactory to theExecutive and a physician selected by the Company, providedthat if thesephysicians do not agree, the Executive and the Company shall each select a physician and these twotogether shall select a third physician, whose determination as to Disability shall be binding onall parties.
-15-

 
          20.6. As used in this Agreement, the term “Exchange Act” shall mean the SecuritiesExchange Act of 1934, as amended.          20.7. For purposes of this Agreement, “Good Reason” shall be deemed to exist upon (a)any material reduction in the annual base compensation payable to the Executive (but exclusive ofany Target Cash Bonus, annual equity award or other similar cash bonus or equity plans for thispurpose); (b) the relocation of the place of business at which the Executive is principally locatedto a location that is greater than thirty (30) miles from its current location; (c) the failure ofthe Company to comply with a material term of this Agreement; or (d) a material reduction in theExecutive’s level of responsibility to that which is not consistent with the position held by theExecutive, as defined in Section 2 herein, so long as notice of the Good Reason condition is givenwithin thirty (30) days of the condition’s initial existence, the Company is given thirty (30) daysto remedy the condition, and the termination from employment occurs within ninety (90) daysfollowing the initial existence of one or more Good Reason conditions. By way of clarification,any change in ownership of the outstanding capital stock of the Company, including but not limitedto, the fact that the Company is no longer registered pursuant to Section 12 of the Securities Actof 1933, as amended, shall not constitute a “Good Reason” within the context of this Agreement.          20.8. For purposes of this Agreement, “pro rata payment” shall be deemed to mean thecalculation of a payment by the Company based on the proportion of the calendar year completed,based on the nearest whole number of months of the Executive’s employment (for illustrativepurposes only, if the Executive was terminated without Cause by the Company on April13th of a given year, the Executive would be entitled to 1/4 of his Target Cash Bonusfor such year under Section 5.4(iii)).     21. **Non-Disparagement**. The Executive understands and agrees that as a condition tohim of the monetary consideration provided in connection with this Agreement, during the term ofthe Agreement and after the termination of his employment with the Company for any reason, he shallnot make any false, disparaging or derogatory statements in public or private to any person ormedia outlet regarding the Company or any of its directors, officers, employees, agents, orrepresentatives or the Company’s business affairs and financial condition. Nothing in this Sectionshall prohibit the Executive from communicating or testifying truthfully (i) to the extent requiredor protected by law, (ii) to any federal, state, or local governmental agency, or (iii) in responseto a subpoena to testify issued by a court of competent jurisdiction.     22. **Section 409A.**          22.1. Parties’ Intent. The parties intend that the provisions of this Agreementcomply with the provisions of Section 409A and all provisions of this Agreement shall be construedin a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.If any provision of this Agreement (or of any award of compensation, including equity compensationor benefits) would cause the Executive to incur any additional tax or interest under Section 409A,the Company shall, upon the specific request of the Executive, use its reasonable business effortsto in good faith reform such provision to comply with Section 409A; provided, that to the maximumextent practicable, the original intent and economic benefit
-16-

 
to the Executive and the Company of the applicable provision shall be maintained, and theCompany shall have no obligation to make any changes that could create any additional economic costor loss of benefit to the Company. The Company shall timely use its reasonable business efforts toamend any plan or program in which the Executive participates to bring it in compliance withSection 409A. Notwithstanding the foregoing, the Company shall have no liability with regard toany failure to comply with Section 409A so long as it has acted in good faith with regard tocompliance therewith.          22.2. Separation from Service. A termination of employment shall not be deemed tohave occurred for purposes of any provision of this Agreement providing for the payment of anyamounts or benefits upon or following a termination of employment unless such termination alsoconstitutes a “Separation from Service” within the meaning of Section 409A and, for purposes of anysuch provision of this Agreement, references to a “termination,” “termination of employment,”“separation from service” or like terms shall mean Separation from Service.          22.3. Separate Payments. Each installment payment required under this Agreement shallbe considered a separate payment for purposes of Section 409A.          22.4. Delayed Distribution to Key Employees. If the Company determines in accordancewith Sections 409A and 416(i) of the Code and the regulations promulgated thereunder, in theCompany’s sole discretion, that the Executive is a Key Employee of the Company on the date theExecutive’s employment with the Company terminates and that a delay in benefits provided under thisAgreement is necessary to comply with Code Section 409A(A)(2)(B)(i), then any severance paymentsand any continuation of benefits or reimbursement of benefit costs provided by this Agreement, andnot otherwise exempt from Section 409A, shall be delayed for a period of six (6) months followingthe date of termination of the Executive’s employment (the “409A Delay Period”). In suchevent, any severance payments and the cost of any continuation of benefits provided under thisAgreement that would otherwise be due and payable to the Executive during the 409A Delay Periodshall be paid to the Executive in a lump sum cash amount in the month following the end of the 409ADelay Period. For purposes of this Agreement, “Key Employee” shall mean an employee who,on an Identification Date (“Identification Date” shall mean each December 31) is a keyemployee as defined in Section 416(i) of the Code without regard to paragraph (5) thereof. If theExecutive is identified as a Key Employee on an Identification Date, then the Executive shall beconsidered a Key Employee for purposes of this Agreement during the period beginning on the firstApril 1 following the Identification Date and ending on the following March 31.     23. Parachutes. If all, or any portion, of the payments provided under thisAgreement, either alone or together with other payments and benefits which the Executive receivesor is entitled to receive from the Company or an affiliate, would constitute an excess “parachutepayment” within the meaning of Section 280G of the Code, the payments and benefits provided underthis Agreement shall be reduced to the extent necessary so that no portion thereof shall fail to betax-deductible under Section 280G of the Code.[Remainder of this page is intentionally left blank]
-17-

 
**SIGNATURE PAGE TO EXECUTIVE EMPLOYMENT AGREEMENT**IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year setforth above.      **CORNERSTONE THERAPEUTICS INC.**