CORNERSTONE BIOPHARMA HOLDINGS,
INC.
2005 STOCK OPTION PLAN
(as Amended and Restated Effective October 31,
2008)
1.
Purposes of this Plan . The purposes of this 2005 Stock
Option Plan (as Amended and Restated Effective October 31,
2008) are to attract and retain the best available personnel, to
provide additional incentive to the Employees of Cornerstone
BioPharma Holdings, Inc. (the “Company”) and any of its
Subsidiaries, to promote the success of the Company’s
business and to enable the Employees to share in the growth and
prosperity of the Company by providing them with an opportunity to
purchase stock in the Company.
Options granted
hereunder may be either Incentive Stock Options or Nonstatutory
Stock Options, at the discretion of the Board and as reflected in
the terms of the written stock option agreement.
2.
Definitions . As used herein, the following definitions
shall apply:
(a)
“Board” shall mean the Board of Directors of the
Company.
(b)
“Code” shall mean the Internal Revenue Code of the
1986, as amended.
(c)
“Common Stock” shall mean the Common Stock of the
Company.
(d)
“Company” shall mean Cornerstone BioPharma Holdings,
Inc., a corporation duly organized under the laws of the State of
Delaware.
(e)
“Committee” shall mean the Committee appointed by the
Board in accordance with Section 4 of this Plan, if one is
appointed.
(f)
“Continuous Employment” or “Continuous Status as
an Employee” shall mean the absence of any interruption or
termination of employment or service as an Employee, Director or
Consultant by or to the Company or any Parent or Subsidiary of the
Company which now exists or is hereafter organized or acquired by
or acquires the Company. Continuous Employment shall not be
considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Board or in the event of
transfers between locations of the Company or between the Company,
its Parent, any of its Subsidiaries or its successors.
(g)
“Corporate Change” shall mean one of the following
events: (i) the merger, consolidation or other reorganization
of the Company in which the outstanding Common Stock is converted
into or exchanged for a different class of securities of the
Company, a class of securities of any other issuer (except a Parent
or Subsidiary of the Company), cash or other property (ii) the
sale, lease or exchange of all or substantially all of the assets
of the Company to any other corporation or entity (except a Parent
or Subsidiary of the Company); or (iii) the adoption by
shareholders of the Company of a plan of liquidation or
dissolution. The following events are not defined as a
“Corporate Change”: (i) a merger, consolidation or
reorganization of the Company which would result in the voting
stock of the Company outstanding immediately prior
thereto
continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at least
sixty percent (60%) of the combined voting power of the voting
stock of the Company or such surviving entity outstanding
immediately after such merger, consolidation or reorganization of
the Company, or (ii) merger, consolidation or reorganization
of the Company effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more
than forty-nine percent (49%) of the combined voting power of the
Company’s then outstanding stock;
(h)
“Employee” shall mean any person, including officers
and directors, employed by the Company, its Parent, any of its
Subsidiaries or its successors; or, for purposes of eligibility for
Nonstatutory Stock Options, any person employed by the Company,
including officers and directors, or any consultant to, or director
of, the Company, or any Parent or Subsidiary of the Company,
whether or not such consultant or director is an employee of such
entities.
(i)
“Exchange Act” shall mean the Securities Exchange Act
of 1934, as amended, or any successor legislation.
(j)
“Incentive Stock Option” shall mean an Option intended
to qualify as an incentive stock option within the meaning of
Section 422 of the Code.
(k)
“Non-Employee Director” shall mean a director who is a
“Non-Employee Director,” as such term is defined under
Rule 16b-3(b)(3)(i) promulgated pursuant to the Exchange Act
and any applicable releases and opinions or the Securities and
Exchange Commission.
(1)
“Nonstatutory Stock Option” shall mean an Option which
is not an Incentive Stock Option.
(m)
“Option” shall mean a stock option granted pursuant to
this Plan.
(n)
“Option Agreement” shall mean a written agreement in
such form or forms as the Board (subject to the terms and
conditions of this Plan) may from time to time approve, evidencing
an Option.
(o)
“Optioned Stock” shall mean the Common Stock subject to
an Option.
(p)
“Optionee” shall mean an Employee who is granted an
Option.
(q)
“Parent” shall mean a “parent corporation,”
whether now or hereafter existing, as defined in Sections 424(e)
and (g) of the Code.
(r)
“Plan” shall mean this 2005 Stock Option Plan (as
Amended and Restated Effective October 31, 2008).
(s)
“Registration Date” shall mean the effective date of
the first registration statement which is filed by the Company and
declared effective pursuant to Section 12(g) of the Exchange Act,
with respect to any class of the Company’s
securities.
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(t)
“Securities Act” shall mean the Securities Act of 1933,
as amended, or any successor legislation.
(u)
“Share” or “Shares” shall mean the Common
Stock, as adjusted in accordance with Section 11 of this
Plan.
(v)
“Stock Purchase Agreement” shall mean an agreement in
such form or forms as the Board (subject to the terms and
conditions of this Plan) may from time to time approve, which is to
be executed as a condition of purchasing Optioned Stock upon
exercise of an Option.
(w)
“Subsidiary” or “Subsidiaries” shall mean
one or more subsidiary corporations, whether now or hereafter
existing, as defined in Sections 424(f) and (g) of the
Code.
3. Stock
Subject to this Plan . Subject to the provisions of
Section 11 of this Plan, the maximum number of Shares which
may be optioned and sold under this Plan is 373,650 Shares. The
Shares may be authorized, but unissued Shares or reacquired Shares
other than reacquired Shares delivered pursuant to
Section 7(c)(iv) hereof as payment of consideration or
associated taxes in connection with the exercise of an option. If
an Option should expire or become unexercisable or otherwise
terminate for any reason without having been exercised in full
after October 31, 2008, the unpurchased Shares which were
subject thereto shall not return to this Plan and shall not become
available for other Options under this Plan and shall instead be
immediately canceled.
The Company
intends that as long as it is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, and is not
an investment company registered or required to be registered under
the Investment Company Act of 1940, as amended, all offers and
sales of Options and Common Stock issuable upon exercise of any
Option shall be exempt from registration under the provisions of
Section 5 of the Securities Act, and this Plan shall be
administered in such a manner so as to preserve such
exemption.
The Company
intends for this Plan to constitute a written compensatory benefit
plan within the meaning of Rule 701(b) of 17 CFR
Section 230.701 (“Rule 701”) promulgated by
the Securities and Exchange Commission pursuant to the Securities
Act. Unless otherwise designated by the Committee at the time an
Option is granted, all options granted under this Plan by the
Company, and the issuance of any Shares upon exercise thereof, are
intended to be granted in reliance on Rule 701.
4.
Administration of this Plan .
(a)
Procedure . This Plan shall be administered by the Board.
The Board may appoint a Committee consisting of two (2) or
more members of the Board (or such greater number as is required to
qualify for the exemption from the provisions of Section 16(b) of
the Exchange Act provided by Rule 16b-3 promulgated pursuant
to the Exchange Act) to administer this Plan on behalf of the
Board, subject to such terms and conditions as the Board may
prescribe. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board. From time to time, the Board
may increase the size of the Committee and appoint additional
members of the Board thereto, remove members (with or without
cause) and appoint new members of the Board in
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substitution
therefor, fill vacancies, however caused, and remove all members of
the Committee and, thereafter, directly administer this Plan.
Members of the Board or Committee who are either eligible for
Options or have been granted Options may vote on any matters
affecting the administration of this Plan or the grant of Options
pursuant to this Plan, except that no such member shall act upon
the granting of an Option to such person nor shall any such
member’s presence at a meeting of the Board of Directors
establish the existence of a quorum at any meeting of the Board or
the Committee during which action is taken with respect to the
granting of an Option to him.
(b)
Procedure After Registration Date . Notwithstanding the
provisions of Section 4(a) above, after the Registration Date this
Plan shall be administered either by: (i) the full Board,
provided that at all times each member of the Board is a
Non-Employee Director; or (ii) a Committee which at all times
consists solely of Board members who are Non-Employee Directors.
After the Registration Date, the Board shall take all action
necessary to administer this Plan in accordance with the
then-effective provisions of Rule 16b-3 promulgated under the
Exchange Act, provided that any amendment to this Plan required for
compliance with such provisions shall be made in accordance with
Section 13 of this Plan.
(c)
Powers of the Board and/or Committee . Subject to the
provisions of this Plan, the Committee or the Board, as
appropriate, shall have the authority, in its discretion:
(i) to grant Incentive Stock Options and Nonstatutory Stock
Options; (ii) to determine, upon review of relevant
information and in accordance with Section 7 of this Plan, the
fair market value per Share; (iii) to determine the exercise price
of the Options, which exercise price and type of consideration
shall be determined in accordance with Section 7 of this Plan;
(iv) to determine the Employees to whom, and the time or times
at which, Options shall be granted, and the number of Shares to be
subject to each Option; (v) to prescribe, amend and rescind
rules and regulations relating to this Plan; (vi) to determine
the terms and provisions of each Option Agreement and each Stock
Purchase Agreement (each of which need not be identical with the
terms of other Option Agreements and Stock Purchase Agreements)
and, with the consent of the holder thereof, to modify or amend
each Option Agreement and Stock Purchase Agreement; (vii) to
determine whether a stock repurchase agreement or other agreement
will be required to be executed by any Employee as a condition to
the exercise of an Option, and to determine the terms and
provisions of any such agreement (which need not be identical with
the terms of any other such agreement) and, with the consent of the
Optionee, to amend any such agreement; (viii) to interpret
this Plan, the Option Agreements, the Stock Purchase Agreements or
any agreement entered into with respect to the grant or exercise of
Options; (ix) to authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant of an
Option previously granted by the Board or to take such other
actions as may be necessary or appropriate with respect to the
Company’s rights pursuant to Options or agreements relating
to the grant or exercise thereof; and (x) to make such other
determinations and establish such other procedures as it deems
necessary or advisable for the administration of this
Plan.
(d)
Effect of the Board’s or Committee’s Decision .
All decisions, determinations and interpretations of the Board or
the Committee shall be final and binding on all Optionees and any
other holders of Options.
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5.
Eligibility . Options may be granted only to Employees,
which, as defined herein, includes consultants. An Employee who has
been granted an Option may, if such Employee is otherwise eligible,
be granted additional Options.
6. Term
of Plan . This Plan originally became effective upon the
earlier to occur of its adoption by the Board or its approval by
vote of a majority of the outstanding shares of the Company’s
capital stock entitled to vote on the adoption of this Plan. The
Plan was amended and restated as set forth herein effective
October 31, 2008. This Plan shall continue in effect for a
term of (10) years from its original effective date unless
sooner terminated in accordance with the terms and provisions of
this Plan.
7. Option
Price and Consideration .
(a)
Exercise Price . The exercise price per Share for the Shares
to be issued pursuant to the exercise of an Option shall be such
price as is determined by the Board; provided ,
however , that such price shall in no event be less than
eighty-five percent (85%) with respect to Nonstatutory Stock
Options, and one hundred percent (100%) with respect to Incentive
Stock Options, of the fair market value per Share on the date of
grant. In the case of an Option granted to an Employee who, at the
time the Option is granted, owns stock (as determined under Section
424(d) of the Code) constituting more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company
or its Parent or Subsidiaries, the exercise price per Share shall
be no less than one hundred ten percent (110%) of the fair market
value per Share on the date of grant.
(b)
Fair Market Value . The fair market value per Share on the
date of grant shall be determined by the Board in its sole
discretion, exercised in good faith and consistent with the laws of
The State of Delaware; provided , however, that where
there is a public market for the Common Stock, the fair market
value per Share shall be the average of the closing bid and asked
prices of the Common Stock on the date of grant, as reported in
The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities
Dealers Automated Quotations (“NASDAQ”) System), or, in
the event the Common Stock is listed on a stock exchange or on the
NASDAQ System, the fair market value per Share shall be the closing
price on the exchange or on the NASDAQ System as of the date of
grant of the Option, as reported in The Wall Street
Journal.
(c)
Payment of Consideration . The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Board and may consist
entirely of cash, check, promissory notes, Shares held by the
Optionee for the requisite period necessary to avoid a charge to
the Company’s earnings for financial reporting purposes which
have a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option
shall be exercised, or any combination of such methods of payment.
Subject to subparagraphs (i) through (iv) hereto,
utilization of Shares as the method of payment may be completed by
either (a) the tender of Shares then held by the Optionee, or
(b) the withholding of Shares which would otherwise be issued
pursuant to an Option pursuant to a broker-dealer sale and
remittance procedure described in subparagraph (iii) hereto.
In making its determination as to the type of consideration to
accept, the Board shall consider if acceptance of such
consideration is deemed to be such as may be reasonably expected to
benefit the Company.
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(i) If
the consideration for the exercise of an Option is a promissory
note, it shall be a full recourse promissory note executed by the
Optionee, bearing interest at a rate which shall be sufficient to
preclude the imputation of interest under the applicable provisions
of the Code. Until such time as the promissory note has been paid
in full, the Company may retain the Shares purchased upon exercise
of the Option in escrow as security for payment of the promissory
note.
(ii) If
the consideration for the exercise of an Option is the surrender of
previously acquired and owned Shares, the Optionee will be required
to make representations and warranties satisfactory to the Company
regarding his or her title to the Shares used to effect the
purchase, including, without limitation, representations and
warranties that the Optionee has good and marketable title to such
Shares free and clear of any and all liens, encumbrances, charges,
equities, claims, security interests, options or restrictions and
has full power to deliver such Shares without obtaining the consent
or approval of any person or governmental authority other than
those which have already given consent or approval in a form
satisfactory to the Company. The value of the Shares used to effect
the purchase shall be the fair market value of those Shares as
determined by the Board in its sole discretion, exercised in good
faith.
(iii) If
the consideration for the exercise of an Option is to be paid
through a broker-dealer sale and remittance procedure, the Optionee
shall provide (1) irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the
purchased shares and to remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to
cover the aggregate option price payable for the purchased Shares
plus all applicable Federal and State incom
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