As
filed
with the Securities and Exchange Commission on January 14, 2008 Registration
No.
333-_________
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-8
REGISTRATION
STATEMENT UNDER
THE
SECURITIES ACT OF 1933
A.P.
Pharma, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware 94-2875566
(State
or
Other Jurisdiction of
(I.R.S. Employer
Incorporation
or Organization)
Identification
No.)
123
Saginaw Drive, Redwood City, California 94063
(Address
of Principal Executive Offices)
2007
Equity Incentive Plan
1997
Employee Stock Purchase Plan
(Full
Title of the Plan)
Gregory
Turnbull
President
and Chief Executive Officer
A.P.
Pharma, Inc.
123
Saginaw Drive
Redwood
City, California 94063
(Name
and
Address of Agent for Service)
(650)
366-2626
(Telephone
Number, Including Area Code, of Agent for Service)
Copy
to:
Marina
Remennik, Esq.
Heller
Ehrman LLP
275
Middlefield Road
Menlo
Park, California 94025-3506
(650)
324-7000
CALCULATION
OF REGISTRATION
FEE
|
Title
of
Securities
to
be
Registered
|
Amount
to be
Registered
(1)
|
Proposed
Maximum
Offering
Price per
Share (2)
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount
of
Registration
Fee
|
|
Common
Stock, par value $0.01
|
3,100,000
|
$1.49
|
$4,619,000
|
$181.53
|
|
(1)
|
Represents
3,000,000 shares issuable upon exercise of equity awards to be granted
under Registrant's 2007 Equity Incentive Plan and 100,000 additional
shares issuable upon exercise of purchase rights granted under the
Registrant's 1997 Employee Stock Purchase Plan, including such additional
number of shares as may be required by reason of any
stock
dividend, stock split, recapitalization or any other similar transaction
effected without the receipt of consideration which results in an
increase
in the number of the Registrant’s outstanding shares of common stock, or
any anti-dilution provisions of such
plans.
|
|
(2)
|
Estimated
solely for the purpose of calculating the amount of the registration
fee
pursuant to Rule 457(h) promulgated under the Securities Act 1933,
as
amended (the “Securities Act”). Pursuant to Rule 457(c) under
the Securities Act , the price per share and aggregate offering price
are
based upon the average of the high and low prices of the Registrant’s
common stock as reported on
the Nasdaq
Global Market on January 11,
2008.
|
PART
II
INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
The
shares being registered herein are 3,000,000 shares of common stock authorized
to be issued under Registrant's 2007 Equity Incentive Plan and 100,000
additional shares of common stock authorized to be issued under Registrant's
1997 Employee Stock Purchase Plan.
Item
3. Incorporation of Documents by
Reference
The following documents filed or to be filed with the Securities and Exchange Commission (the “Commission”) by the Registrant are incorporated by reference in this Registration Statement:
(a) The
Registrant’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2006;
(b) The
Registrant’s
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2007,
June 30, 2007 and September 30, 2007;
(c) The
Registrant’s
Current Reports on Form 8-K filed with the Commission on May 15, 2007, May
30,
2007, June 25, 2007, October 2, 2007 and December 17, 2007;
(d) The
description of
the Registrant’s Common Stock contained in the registration statement on Form
8-A filed with the Commission on August 7, 1987 pursuant to Section 12 of the
Exchange Act of 1934, as amended (the “Exchange Act”); and
(e) All
documents
subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and
15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold.
Item
5. Interests
of Named Experts and
Counsel
Heller
Ehrman LLP, counsel to the
Company, has rendered an opinion with respect to the legality of the Common
Stock issuable under the 2007 Equity Incentive Plan and the 1997 Employee Stock
Purchase Plan. Julian N. Stern, the sole shareholder of a
professional corporation that is a partner of Heller Ehrman LLP, is the
Secretary of the Company. Mr. Stern owns 42,583 shares of the
Company’s Common Stock.
Item
6. Indemnification of Directors
and Officers
The
Registrant has the power to
indemnify its officers and directors against liability for certain acts pursuant
to Section 145 of the General Corporation Law of the State of
Delaware. Section B of Article VI of the Registrant’s Certificate of
Incorporation provides:
|
“(1)
|
Right
to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action,
suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a “proceeding”), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a
director
or officer, of the Corporation or is or was serving at the request
of the
Corporation, as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether
the
basis of such proceeding is alleged action in an official capacity
as a
director, officer, employee or agent or in any other capacity while
serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized
by
the General Corporation Law of the State of Delaware, as the same
exists
or may hereafter be amended (but, in the case of any such amendment,
only
to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation
to
provide prior to such amendment), against all expense, liability
and loss
(including attorneys’ fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be
a
director, officer, employee or agent and shall inure to the benefit
of his
or her heirs, executors and administrators; provided, however, that,
the
Corporation shall indemnify any such person seeking indemnification
in
connection with a proceeding (or part thereof) initiated by such
person
only if such proceeding (or part thereof) was authorized by the board
of
directors of the Corporation. The right to indemnification
conferred in this Section B shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in
defending
any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of Delaware
requires, the payment of such expenses incurred by a director or
officer
in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while
a
director or officer, including, without limitation, service to an
employee
benefit plan) in advance of the final disposition of a proceeding,
shall
be made only upon delivery to the Corporation of an undertaking,
by or on
behalf of such director or officer, to repay all amounts so advanced
if it
shall ultimately be determined that such director or officer is not
entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the
same
scope and effect as the foregoing indemnification of directors and
officers.
|
|
(2)
|
Non-Exclusivity
of Rights. The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section B shall not be exclusive of any
other rights which any person may have or hereafter acquire under
any
statute, provisions of this Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise.
|
|
(3)
|
Insurance. The
Corporation may maintain insurance, at its expense, to protect itself
and
any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise
against
any such expense, liability or loss, whether or not the Corporation
would
have the power to indemnify such person against such expense, liability
or
loss under Delaware General Corporation
Law.”
|
Registrant
maintains directors’ and
officers’ liability insurance in the amount of $10,000,000 which covers civil
liabilities. Such insurance helps the Registrant to attract qualified
officers and directors, by providing a means for the Company to pay the costs
and expenses involved in the event civil litigation is brought against of one
of
the Registrant’s officers or directors.
Item
8. Exhibits
|
4.1
|
2007
Equity Incentive Plan
|
|
4.2
|
1997
Employee Stock Purchase Plan (included in the Registrant's S-8, File
Number 333-35151, incorporated herein by
reference)
|
|
4.3
|
Form
of 2007 Equity Incentive Plan Stock Option
Agreement
|
|
4.4
|
Form
of 2007 Equity Incentive Plan Restricted Stock Unit
Agreement
|
5.1
Opinion of Heller Ehrman LLP
23.1 Consent
of Odenberg Ullakko Muranishi & Co. LLP
23.2 Consent
of Ernst & Young LLP
23.3 Consent
of Heller Ehrman LLP
(filed
as part of Exhibit
5.1)
24.1 Power
of Attorney (see page II-2)
Item
9. Undertakings
A. The
undersigned
Registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act
of 1933, as amended (the “Securities
Act”);
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the Registration
Statement;
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration
Statement;
|
provided,
however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Exchange
Act
that are incorporated by reference in the Registration Statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each
such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
B. The
undersigned
Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act, each filing of the Registrant’s annual report pursuant
to Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar
as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-
SIGNATURES
Pursuant
to the requirements of the
Securities Act of 1933, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-8 and
has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redwood City, State
of
California, on this 14th day of January, 2008.
A.P.
PHARMA,
INC.
By:
Gregory
Turnbull
President
and Chief Executive Officer
POWER
OF
ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS, that
each person whose signature appears below does hereby constitute and appoint
Gregory Turnbull and Paul Goddard, or either of them, with full power of
substitution, such person’s true and lawful attorneys-in-fact and agents for
such person in such person’s name, place and stead, in any and all capacities,
to sign any or all amendments (including post-effective amendments) to this
Registration Statement on Form S-8 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done
in
and about the premises in order to effectuate the same as fully, to all intents
and purposes, as he or such person might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents may lawfully do or
cause to be done by virtue hereof.
Pursuant
to the requirements of the
Securities Act of 1933, this Registration Statement on Form S-8 has been signed
by the following persons in the capacities and on the dates
indicated.
|
Gregory
H. Turnbull
|
President
and Chief Executive Officer, Director (Principal Executive
Officer)
|
January
14, 2008
|
|
Michael
O’Connell
|
Chief
Operating Officer and Chief Financial Officer (Principal Accounting
Officer)
|
January
14, 2008
|
|
Paul
Goddard
|
Chairman
of the Board of Directors
|
January
14, 2008
|
|
Peter
Riepenhausen
|
Director
|
January
14, 2008
|
|
Toby
Rosenblatt
|
Director
|
January
14, 2008
|
|
Arthur
Taylor
|
Director
|
January
14, 2008
|
|
Robert
Zerbe
|
Director
|
January
14, 2008
|
II-
INDEX
TO
EXHIBITS
Item
No. Description
of Item
|
4.1
|
2007
Equity Incentive Plan
|
|
4.2
|
1997
Employee Stock Purchase Plan (included in the Registrant's S-8, File
Number 333-35151, incorporated herein by
reference)
|
|
4.3
|
Form
of 2007 Equity Incentive Plan Stock Option
Agreement
|
|
4.4
|
Form
of 2007 Equity Incentive Plan Restricted Stock Unit
Agreement
|
5.1 Opinion
of Heller Ehrman LLP
23.1 Consent
of Odenberg Ullakko Muranishi & Co. LLP
23.2 Consent
of Ernst & Young LLP
23.3 Consent
of Heller Ehrman LLP
(filed
as part of Exhibit
5.1)
24.1 Power
of Attorney (see page II-2)
II-
A.P.
PHARMA, INC.
2007
EQUITY INCENTIVE PLAN
1.
Purposes of the Plan.
The purpose of this Plan is to encourage
ownership in A.P. Pharma, Inc., a Delaware corporation (the
“Company”), by key personnel whose long-term employment or
other service relationship with the Company is considered essential to
the
Company’s continued progress and, thereby, encourage recipients to act in the
stockholders’ interest and share in the Company’s success.
2.
Definitions.
As used herein, the following definitions
shall apply:
(a)
“Administrator” means the Board, any
Committees or such delegates as shall be administering the Plan in accordance
with Section 4 of the Plan.
(b)
“Affiliate” means any entity that is directly
or indirectly controlled by the Company or any entity in which the Company
has a
significant ownership interest as determined by the Administrator.
(c)
“Applicable Laws” means the
requirements relating to the administration of stock option and stock
award
plans under U.S. federal and state laws, any stock exchange or quotation
system
on which the Company has listed or submitted for quotation the Common
Stock to
the extent provided under the terms of the Company's agreement with such
exchange or quotation system and, with respect to Awards subject to the
laws of
any foreign jurisdiction where Awards are, or will be, granted under
the Plan,
the laws of such jurisdiction.
(d)
“Award” means a Stock
Award or Option granted in accordance with the terms of the Plan.
(e)
“Awardee” means an Employee, Consultant
or Director of the Company or any Affiliate who has been granted an Award
under
the Plan.
(f)
“Award Agreement” means a Stock Award
Agreement and/or Option Agreement, which may be in written or electronic
format,
in such form and with such terms and conditions as may be specified by
the
Administrator, evidencing the terms and conditions of an individual Award.
Each Award Agreement is subject to the terms and conditions of the Plan.
(g)
“Board” means the Board of Directors of
the Company.
(h)
“Cause” means, unless such term or an equivalent
term is otherwise defined with respect to an Award by the Participant’s Award
Agreement, any of the following: (i) the Participant’s theft, dishonesty,
willful misconduct, breach of fiduciary duty for personal profit, or
falsification of any Company or Affiliate documents or records; (ii)
the
Participant’s material failure to abide by a Company’s or Affiliate’s code of
conduct or other policies (including without limitation, policies relating
to
confidentiality and reasonable workplace conduct); (iii) the Participant’s
unauthorized use, misappropriation, destruction or diversion of any tangible
or
intangible asset or corporate opportunity of the Company or an Affiliate
(including, without limitation, the Participant’s improper use or disclosure of
confidential or proprietary information); (iv) any intentional act by the
Participant which has a material detrimental effect on the Company or
an
Affiliate’s reputation or business; (v) the Participant’s repeated failure
or inability to perform any reasonable assigned duties after written
notice from
the Company or an Affiliate (including, without limitation, habitual
absence from work for reasons other than illness), and a reasonable opportunity
to cure, such failure or inability; (vi) any material breach by the
Participant of any employment or service agreement between the Participant
and
the Company or an Affiliate, which breach is not cured pursuant to the
terms of
such agreement; or (vii) the Participant’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the Participant’s ability
to perform his or her duties with the Company or an Affiliate.
(i)
“Change in Control” means, unless such
term or an equivalent term is otherwise defined with respect to an Award
by the
Participant’s Award Agreement, the occurrence of any of the
following:
i. an
Ownership Change Event or a series of related Ownership Change Events
(collectively, a “Transaction”) in which the stockholders of the Company
immediately before the transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership
of shares
of the Company’s voting stock immediately before the Transaction, direct or
indirect beneficial ownership of more than fifty percent (50%) of the
total
combined voting power of the outstanding voting securities of the Company
or
such surviving entity immediately outstanding after the Transaction,
or, in the
case of an Ownership Change Event described in Section 2(bb)(iii), the
entity to
which the assets of the Company were transferred (the “Transferee”), as the case
may be; or
ii. the
liquidation or dissolution of the Company.For purposes of the preceding
sentence, indirect beneficial ownership shall include, without limitation,
an
interest resulting from ownership of the voting securities of one or
more
corporations or other business entities which own the Company or the
Transferee,
as the case may be, either directly or through one or more subsidiary
corporations or other business entities. The Board shall have the right to
determine whether multiple sales or exchanges of the voting securities
in the
Company or multiple Ownership Change Events are related, and its determination
shall be final, binding and conclusive. The Board may also, but need not,
specify that other transactions or events constitute a Change in Control.
(j)
“Code” means the United States Internal
Revenue Code of 1986, as amended.
(k)
“Committee” means the compensation
committee of the Board or a committee of Directors appointed by the Board
in
accordance with Section 4 of the Plan.
(l) “Common
Stock” means the common stock of the
Company.
(m)
“Company” means A.P. Pharma, Inc., a
<?xml:namespace prefix = st1 ns =
"urn:schemas-microsoft-com:office:smarttags" />Delaware corporation, or its
successor.
(n)
“Consultant” means any person (including an
advisor or an employee of an entity) that is engaged by the Company or
any
Parent, Subsidiary or Affiliate, to render services and is compensated
for such
services.
(o)
"Continuous Service" means that the
Participant's service with the Company or an Affiliate, whether as an
Employee,
Director or Consultant, is not interrupted or terminated. A change in
the
capacity in which the Participant renders service to the Company or an
Affiliate
as an Employee, Consultant or Director or a change in the entity for
which the
Participant renders such service, provided that there is no interruption
or
termination of the Participant's service with the Company or an Affiliate,
shall
not terminate a Participant's Continuous Service; provided, however, if
the Company for which a Participant is rendering services ceases to qualify
as
an "Affiliate," as determined by the Board in its sole discretion, such
Participant's Continuous Service shall be considered to have terminated
on the
date such Company ceases to qualify as an Affiliate. To the extent permitted
by
law, the Board or the chief executive officer of the Company, in that
party's
sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board
or the chief executive officer of the Company, including sick leave,
military
leave or any other personal leave; or (ii) transfers between the Company,
an Affiliate, or their successors. Notwithstanding the foregoing, a leave
of
absence shall be treated as Continuous Service for purposes of vesting
in a
Stock Award only to such extent as may be provided in the Company's leave
of
absence policy, in the written terms of any leave of absence agreement
or policy
applicable to the Participant, or as otherwise required by law.
(p)
“Conversion Award” has the meaning set
forth in Section 4(b)(xii) of the Plan.
(q)
“Director” means a member of the
Board.
(r)
“Effective Date” means the date of approval of the
Plan by the stockholders of the Company in the manner and to the extent
required
by Applicable Laws.
(s)
“Employee” means a regular,
active employee of the Company or any Affiliate, including an Officer
and/or
Inside Director. Within the limitations of Applicable Law, the
Administrator shall have the discretion to determine the effect upon
an Award
and upon an individual's status as an Employee in the case of (i) any
individual who is classified by the Company or its Affiliate as leased
from or
otherwise employed by a third party or as intermittent or temporary,
even if any
such classification is changed retroactively as a result of an audit,
litigation
or otherwise, (ii) any leave of absence approved by the Company or an
Affiliate, (iii) any transfer between locations of employment with the
Company or an Affiliate or between the Company and any Affiliate or between
any
Affiliates, (iv) any change in the Awardee's status from an Employee to a
Consultant or Director, and (v) at the request of the Company or an
Affiliate an Employee becomes employed by any partnership, joint venture
or
corporation not meeting the requirements of an Affiliate in which the
Company or
an Affiliate is a party.
(t)
“Exchange Act” means the Securities
Exchange Act of 1934, as amended.
(u)
“Fair Market Value” means, as of any
date, the value of a share of Common Stock or other property as determined
by
the Administrator, in its discretion, or by the Company, in its discretion,
if
such determination is expressly allocated to the Company herein, subject
to the
following:
i. If,
on such date, the Common Stock is listed on a national or regional securities
exchange or market system, including without limitation the Nasdaq Global
Market, the Fair Market Value of a share of Common Stock shall be the
closing
price on such date of a share of Common Stock (or the mean of the closing
bid
and asked prices of a share of Common Stock if the stock is so quoted
instead)
as quoted on such exchange or market system constituting the primary
market for
the Common Stock, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable. If the relevant date does not
fall on a day on which the Common Stock has traded on such securities
exchange
or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Common Stock was so traded prior to
the
relevant date, or such other appropriate day as shall be determined by
the
Administrator, in its discretion.
ii. If,
on such date, the Common Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share
of Common
Stock shall be as determined by the Administrator in good faith using
a
reasonable application of a reasonable valuation method without regard
to any
restriction other than a restriction which, by its terms, will never
lapse.
(v)
“Grant Date” means, for all purposes,
the date on which the Administrator approves the determination of grant
of an
Award, or such other date as is determined by the Administrator, provided
that
in the case of any Incentive Stock Option, the grant date shall be the
later of
the date on which the Administrator makes the determination granting
such
Incentive Stock Option or the date of commencement of the Awardee's employment
relationship with the Company.
(w)
“Incentive Stock Option” means an
Option intended to qualify as an incentive stock option within the meaning
of
Section 422 of the Code and the regulations promulgated thereunder.
(x)
“Inside Director” means a Director who is an
Employee.
(y)
“Nasdaq” means the Nasdaq
Global Market or its successor.
(z)
“Nonstatutory
Stock Option” means an Option not
intended to qualify as an Incentive Stock Option.
(aa)
“Officer” means a person who is an
officer of the Company within the meaning of Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder.
(bb)
“Option” means a
right granted under Section 8 to purchase a number of Shares at such
exercise price, at such times, and on such other terms and conditions
as are
specified in the agreement or other documents evidencing the Option (the
“Option
Agreement”). Both Options intended to qualify as Incentive Stock Options
and Nonstatutory Stock Options may be granted under the Plan.
(cc)
“Outside Director” means a Director who is
not an Employee.
(dd)
“Ownership Change Event” means the occurrence of
any of the following with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions
by the
stockholders of the Company of more than fifty percent (50%) of the voting
stock
of the Company; (ii) a merger or consolidation in which the Company is
a party;
or (iii) the sale, exchange, or transfer of all or substantially all of the
assets of the Company.
(ee)
“Parent” means a “parent corporation,” whether now
or hereafter existing, as defined in Section 424(e) of the Code, or any
successor provision.
(ff)
“Participant” means the Awardee
or any person (including any estate) to whom an Award has been assigned
or
transferred as permitted hereunder.
(gg)
“Plan” means this A.P. Pharma, Inc.
2007 Equity Incentive Plan.
(hh)
“Qualifying Performance Criteria” shall
have the meaning set forth in Section 13(b) of the Plan.
(ii)
“Restricted Stock Unit” means a
bookkeeping entry representing an amount equivalent to the Fair Market
Value of
one Share (or a fraction or multiple of such value), payable in cash,
property
or Shares. Restricted Stock Units represent an unfunded and unsecured
obligation of the Company, except as otherwise provided for by the
Administrator.
(jj)
“Share” means a share of the Common
Stock, as adjusted in accordance with Section 14 of the Plan.
(kk)
“Stock Appreciation Right” means a right
to receive cash and/or shares of Common Stock
based on a change in the Fair Market Value of a specific number of shares
of
Common Stock between the grant date and the exercise date granted under
Section
12.
(ll)
“Stock Award” means
an award or issuance of Shares, Restricted Stock Units, Stock Appreciation
Rights or other similar awards made under Section 12 of the Plan, the
grant, issuance, retention, vesting, settlement, and/or transferability
of which
is subject during specified periods of time to such conditions (including
continued employment or performance conditions) and terms as are expressed
in
the agreement or other documents evidencing the Award (the “Stock Award
Agreement”).
(mm)
“Subsidiary” means any company (other
than the Company) in an unbroken chain of companies beginning with the
Company,
provided each company in the unbroken chain (other than the Company)
owns, at
the time of determination, stock possessing 50% or more of the total
combined
voting power of all classes of stock in one of the other companies in
such
chain.
(nn)
“Termination of Continuous
Service” shall mean ceasing to be in Continuous Service as
an Employee, Consultant or Director, as determined in the sole discretion
of the
Administrator. However, for Incentive Stock Option purposes, Termination
of Continuous Service will occur when the Awardee ceases to be an employee
(as
determined in accordance with Section 3401(c) of the Code and the
regulations promulgated thereunder) of the Company or one of its
Subsidiaries. The Administrator shall determine whether any corporate
transaction, such as a sale or spin-off of a division or business unit,
or a
joint venture, shall be deemed to result in a Termination of Continuous
Service.
(oo)
“Total and Permanent Disability” shall have the
meaning set forth in Section 22(e)(3) of
the Code.
3.
Stock Subject to
the Plan.
(a)
Aggregate Limits. Subject to the provisions
of Section 14 of the Plan, the maximum aggregate number of Shares that may
be sold or issued under the Plan is 3,000,000 shares of Common Stock.
Shares subject to Awards granted under the Plan that are cancelled, expire
or
are forfeited shall be available for re-grant under the Plan. If an
Awardee pays the exercise or purchase price of an Award granted under
the Plan
through the tender or withholding of Shares, or if Shares are tendered
or
withheld to satisfy any Company withholding obligations, the number of
Shares so
tendered or withheld shall become available for re-issuance thereafter
under the
Plan. The Shares subject to the Plan may be either Shares reacquired by
the Company, including Shares purchased in the open market, or authorized
but
unissued Shares.
(b)
Code Section 162(m) Share
Limits. Subject to the provisions of Section 14 of the
Plan, the aggregate number of Shares subject to Awards granted under
this Plan
during any calendar year to any one Awardee shall not exceed 300,000,
except
that in connection with his or her first commencing service with the
Company or
an Affiliate, an Awardee may be granted Awards covering up to an additional
200,000 Shares during the year in which such service commences.
Notwithstanding anything to the contrary in the Plan, the limitations
set forth
in this Section 3(b) shall be subject to adjustment under
Section 14(a) of the Plan only to the extent that such adjustment will not
affect the status of any Award intended to qualify as “performance based
compensation” under Code Section 162(m).
4.
Administration of
the Plan.
(a)
Procedure.
i.
Multiple Administrative Bodies. The Plan shall be
administered by the Board, a Committee and/or their delegates.
ii.
Section 162. To the extent that the
Administrator determines it to be desirable to qualify Awards granted
hereunder
as “performance-based compensation” within the meaning of Section 162(m) of
the Code, Awards to “covered employees” within the meaning of
Section 162(m) of the Code or Employees that the Committee determines may
be “covered employees” in the future shall be made by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code.
iii.
Rule 16b-3. To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3 promulgated under
the Exchange Act (“Rule 16b-3”), Awards to Officers and Directors shall be
made by the entire Board or a Committee of two or more “non-employee directors”
within the meaning of Rule 16b-3.
iv.
Other Administration. The Board or a Committee may
delegate to an authorized officer or officers of the Company the power
to
approve Awards to persons eligible to receive Awards under the Plan who
are not
(A) subject to Section 16 of the Exchange Act or (B) at the time
of such approval, “covered employees” under Section 162(m) of the Code or
(C) any other executive officer.
v.
Delegation of Authority for the Day-to-Day Administration of the
Plan. Except to the extent prohibited by Applicable
Law, the Administrator may delegate to one or more individuals the day-to-day
administration of the Plan and any of the functions assigned to it in
this
Plan. Such delegation may be revoked at any time.
vi.
Nasdaq. The Plan will be administered in a
manner that complies with any applicable Nasdaq or stock exchange listing
requirements.
(b)
Powers of the Administrator. Subject
to the provisions of the Plan and, in the case of a Committee or delegates
acting as the Administrator, subject to the specific duties delegated
to such
Committee or delegates, the Administrator shall have the authority, in
its
discretion:
i. to
select the Employees, Consultants and Directors of the Company or its
Affiliates
to whom Awards are to be granted hereunder;
ii. to
determine the number of shares of Common Stock to be covered by each
Award
granted hereunder;
iii. to
determine the type of Award to be granted to the selected Employees,
Consultants
and Directors;
iv. to
approve forms of Award Agreements for use under the Plan;
v. to
determine the terms and conditions, not inconsistent with the terms of
the Plan,
of any Award granted hereunder. Such terms and conditions include, but are
not limited to, the exercise and/or purchase price (if applicable), the
time or
times when an Award may be exercised (which may or may not be based on
performance criteria), the vesting schedule, any vesting and/or exercisability
acceleration or waiver of forfeiture restrictions, the acceptable forms
of
consideration, the term, and any restriction or limitation regarding
any Award
or the Shares relating thereto, based in each case on such factors as
the
Administrator, in its sole discretion, shall determine and may be established
at
the time an Award is granted or thereafter;
vi. to
correct administrative errors;
vii. to
construe and interpret the terms of the Plan (including sub-plans and
Plan
addenda) and Awards granted pursuant to the Plan;
viii.
to adopt rules and procedures relating to the operation and administration
of
the Plan to accommodate the specific requirements of local laws and
procedures. Without limiting the generality of the foregoing, the
Administrator is specifically authorized (A) to adopt the rules and
procedures regarding the conversion of local currency, withholding procedures
and handling of stock certificates which vary with local requirements
and
(B) to adopt sub-plans and Plan addenda as the Administrator deems
desirable, to accommodate foreign laws, regulations and practice;
ix. to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans and Plan addenda;
x. to
modify or amend each Award, including, but not limited to, the acceleration
of
vesting and/or exercisability, provided, however, that any such amendment
is
subject to Section 15 of the Plan and except as set forth in that Section,
may not impair any outstanding Award unless agreed to in writing by the
Participant;
xi. to
allow Participants to satisfy withholding tax amounts by electing to
have the
Company withhold from the Shares to be issued upon exercise of an Option
or
vesting of a Stock Award that number of Shares having a Fair Market Value
equal
to the amount required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined in such manner and on such date that
the
Administrator shall determine or, in the absence of provision otherwise,
on the
date that the amount of tax to be withheld is to be determined. All
elections by a Participant to have Shares withheld for this purpose shall
be
made in such form and under such conditions as the Administrator may
provide;
xii.
to authorize conversion or substitution under the Plan of any or all
stock
options, stock appreciation rights or other stock awards held by service
providers of an entity acquired by the Company (the “Conversion Awards”).
Any conversion or substitution shall be effective as of the close of
the merger,
acquisition or other transaction. The Conversion Awards may be
Nonstatutory Stock Options or Incentive Stock Options, as determined
by the
Administrator, with respect to options granted by the acquired entity;
provided,
however, that with respect to the conversion of stock appreciation rights
in the
acquired entity, the Conversion Awards shall be Nonstatutory Stock
Options. Unless otherwise determined by the Administrator at the time of
conversion or substitution, all Conversion Awards shall have the same
terms and
conditions as Awards generally granted by the Company under the Plan;
xiii.
to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator;
xiv.
to impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant
or other
subsequent transfers by the Participant of any Shares issued as a result
of or
under an Award, including without limitation, (A) restrictions under
an insider trading policy or under any other Company policy relating
to Company
stock and stock ownership and (B) restrictions as to the use of a specified
brokerage firm for such resales or other transfers;
xv.
to provide, either at the time an Award is granted or by subsequent action,
that
an Award shall contain as a term thereof, a right, either in tandem with
the
other rights under the Award or as an alternative thereto, of the Participant
to
receive, without payment to the Company, a number of Shares, cash or
a
combination thereof, the amount of which is determined by reference to
the value
of the Award;
xvi.
to cause all outstanding Awards held by an Awardee to terminate
immediately in their entirety (including as to vested Options) upon first
notification to the Awardee of the Awardee’s Termination of Continuous Service
for Cause. If an Awardee’s Continuous Service with the Company is
suspended pending an investigation of whether the Awardee shall be terminated
for Cause, the Administrator has the authority to cause all the Awardee’s rights
under all outstanding Awards to be suspended during the investigation
period in
which event the Awardee shall have no right to exercise any outstanding
Awards.
xvii.
to determine whether and to what extent the vesting of Awards shall be
tolled
during any unpaid leave of absence. In the event of military leave,
vesting shall toll during any unpaid portion of such leave, provided
that, upon
an Awardee’s returning from military leave (under conditions that would entitle
him or her to protection upon such return under the Uniform Services
Employment
and Reemployment Rights Act), he or she shall be given vesting credit
with
respect to Options to the same extent as would have applied had the Awardee
continued to provide services to the Company throughout the leave on
the same
terms as he or she was providing services immediately prior to such leave.
xviii.
to make all other determinations deemed necessary or advisable for administering
the Plan and any Award granted hereunder.
(c)
Effect of Administrator's
Decision. All decisions, determinations and
interpretations by the Administrator regarding the Plan, any rules and
regulations under the Plan and the terms and conditions of any Award
granted
hereunder, shall be final and binding on all Participants and on all
other
persons. The Administrator shall consider such factors as it deems
relevant, in its sole and absolute discretion, to making such decisions,
determinations and interpretations including, without limitation, the
recommendations or advice of any officer or other employee of the Company
and
such attorneys, consultants and accountants as it may select.
5.
Eligibility.
Awards may be granted to Employees,
Consultantsand Directors of the Company or any of its Affiliates; provided
that
Incentive Stock Options may be granted only to Employees of the Company
or of a
Subsidiary of the Company.
6.
Term of Plan.
The Plan shall become effective on the
Effective Date. It shall continue in effect for a term of ten
(10) years from the later of the Effective Date or the date any amendment
to add shares to the Plan is approved by stockholders of the Company
unless
terminated earlier under Section 15 of the Plan.
7.
Term of Award.
The term of each Award shall be determined
by
the Administrator and stated in the Award Agreement. In the case of an
Option, the term shall be ten (10) years from the Grant Date or such
shorter term as may be provided in the Award Agreement; provided that
an
Incentive Stock Option granted to an Employee who on the Grant Date owns
stock
representing more than ten percent (10%) of the voting power of all classes
of
stock of the Company or any Subsidiary shall have a term of no more than
five
(5) years from the Grant Date.
8.
Options.
The Administrator may grant an Option
or
provide for the grant of an Option, either from time to time in the discretion
of the Administrator or automatically upon the occurrence of specified
events,
including, without limitation, the achievement of performance goals,
the
satisfaction of an event or condition within the control of the Awardee
or
within the control of others.
(a) Option
Agreement. Each Option Agreement
shall contain provisions regarding (i) the number of Shares that may be
issued upon exercise of the Option, (ii) the type of Option, (iii) the
exercise price of the Shares and the means of payment for the Shares,
(iv) the term of the Option, (v) such terms and conditions on the
vesting and/or exercisability of an Option as may be determined from
time to
time by the Administrator, (vi) restrictions on the transfer of the Option
or the Shares issued upon exercise of the Option and forfeiture provisions,
and
(vii) such further terms and conditions, in each case not inconsistent with
this Plan as may be determined from time to time by the Administrator.
(b) Exercise
Price. The per share exercise
price for the Shares to be issued pursuant to exercise of an Option shall
be
determined by the Administrator, subject to the following:
i. In
the case of an Incentive Stock Option, the per Share exercise price shall
be no
less than one hundred percent (100%) of the Fair Market Value per Share
on the
Grant Date; provided however, that in the case of an Incentive Stock
Option
granted to an Employee who on the Grant Date owns stock representing
more than
ten percent (10%) of the total combined voting power of all classes of
stock of
the Company or any Parent or Subsidiary, the per Share exercise price
shall be
no less than one hundred ten percent (110%) of the Fair Market Value
per Share
on the Grant Date.
ii. In
the case of a Nonstatutory Stock Option, the per Share exercise price
shall be
no less than one hundred percent (100%) of the Fair Market Value per
Share on
the Grant Date.
iii. Notwithstanding
the foregoing, at the Administrator's discretion, Conversion Awards may
be
granted in substitution and/or conversion of options of an acquired entity,
with
a per Share exercise price of less than 100% of the Fair Market Value
per Share
on the date of such substitution and/or conversion.
(c) Vesting
Period and Exercise Dates. Options
granted under this Plan shall vest and/or be exercisable at such time
and in
such installments during the period prior to the expiration of the Option's
term
as determined by the Administrator. The Administrator shall have the right
to make the timing of the ability to exercise any Option granted under
this Plan
subject to continued employment, the passage of time and/or such performance
requirements as deemed appropriate by the Administrator, or to grant
fully
vested Options. At any time after the grant of an Option, the
Administrator may reduce or eliminate any restrictions surrounding any
Participant's right to exercise all or part of the Option.
(d) Form
of Consideration. The Administrator
shall determine the acceptable form of consideration for exercising an
Option,
including the method of payment, either through the terms of the Option
Agreement or at the time of exercise of an Option. Acceptable forms of
consideration may include:
i. cash;
ii. check
or wire transfer (denominated in U.S. Dollars);
iii. subject
to the Company's discretion to refuse for any reason and at any time
to accept
such consideration and subject to any conditions or limitations established
by
the Administrator, other Shares held by the Participant 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;
iv. consideration
received by the Company under a broker-assisted sale and remittance program
acceptable to the Administrator;
v. cashless
“net exercise” arrangement pursuant to which the Company will reduce the number
of Shares issued upon exercise by the largest whole number of Shares
having an
aggregate Fair Market Value that does not exceed the aggregate exercise
price;
provided that the Company shall accept a cash or other payment from the
Participant to the extent of any remaining balance of the exercise price
not
satisfied by such reduction in the number of whole Shares to be issued;
vi. such
other consideration and method of payment for the issuance of Shares
to the
extent permitted by Applicable Laws; or
vii. any
combination of the foregoing methods of payment.
(e) No
Option (or Stock Appreciation Right) Repricings. Other than in connection
with a change in the Company’s capitalization (as described in
Section 14(a) of the Plan), a Repricing (as defined below) is prohibited
without approval by the stockholder s of the Company.
“Repricing”
means any of the following or any other action that has the same purpose
and
effect: (a) lowering the exercise price of an outstanding Option or Stock
Appreciation Right granted under this Plan after it is granted;
(b) any other action affecting an outstanding Option or Stock Appreciation
Right granted under this Plan that is treated as a repricing under United
States
generally accepted accounting principles; (c) canceling an outstanding
Option or Stock Appreciation Right granted under this Plan at a time
when its
exercise or purchase price exceeds the then fair market value of the
stock
underlying such outstanding Option or Stock Appreciation Right, in exchange
for
another Option or Stock Appreciation Right or a cash payment, unless
the
cancellation and exchange occurs in connection with a merger, consolidation,
sale of substantially all the Company’s assets, acquisition, spin-off, spin-out,
or other similar corporate transaction.
9.
Effect of Termination
of Continuous Service on
Awards
(a) Generally. Unless
otherwise provided for by
the Administrator, upon an Awardee's Termination of Continuous Service
other
than as a result of circumstances described in Sections 9(b), (c), (d)
and (e)
below, all outstanding Awards granted to such Awardee that were vested
and
exercisable as of the date of the Awardee’s Termination of Continuous Service
may be exercised by the Awardee until the earlier of (A) three (3) months
following Awardee’s Termination of Continuous Service or (B) the expiration
of the term of such Award; provided, however, that the Administrator
may in the
Award Agreement specify a period of time (but not beyond the expiration
date of
the Award) following Termination of Continuous Service during which the
Awardee
may exercise the Award as to Shares that were vested and exercisable
as of the
date of Termination of Continuous Service. To the extent such a period
following Termination of Continuous Service is specified, the Award shall
automatically terminate at the end of such period to the extent the Awardee
has
not exercised it within such period.
(b) Disability
of Awardee. Unless otherwise
provided for by the Administrator, upon an Awardee's Termination of Continuous
Service as a result of the Awardee's disability, including Total and
Permanent
Disability, all outstanding Awards granted to such Awardee that were
vested and
exercisable as of the date of the Awardee’s Termination of Continuous Service
may be exercised by the Awardee until the earlier of (A) twelve (12)
months
following Awardee’s Termination of Continuous Service as a result of Awardee’s
disability, including Total and Permanent Disability or (B) the expiration
of the term of such Award. If the Participant does not exercise such Award
within the time specified, the Award (to the extent not exercised) shall
automatically terminate.
(c) Death
of Awardee. Unless otherwise provided
for by the Administrator, upon an Awardee's Termination of Continuous
Service as
a result of the Awardee's death, all outstanding Awards granted to such
Awardee
that were vested and exercisable as of the date of the Awardee’s death may be
exercised until the earlier of (A) twelve (12) months following the
Awardee's death or (B) the expiration of the term of such Award. If
an Award is held by the Awardee when he or she dies, such Award may be
exercised, to the extent the Award is vested and exercisable, by the
beneficiary
designated by the Awardee (as provided in Section 16 of the Plan), the
executor or administrator of the Awardee's estate or, if none, by the
person(s)
entitled to exercise the Award under the Awardee's will or the laws of
descent
or distribution; provided that the Company need not accept exercise of
an Award
by such beneficiary, executor or administrator unless the Company has
satisfactory evidence of such person's authority to act as such. If the
Award is not so exercised within the time specified, such Award (to the
extent
not exercised) shall automatically terminate. The Awardee’s service shall
be deemed to have terminated on account of death if the Awardee dies
within
three (3) months (or such longer period as determined by the Administrator,
in
its discretion) after the Awardee’s Termination of Continuous Service.
(d) Termination
for Cause. The Administrator
has the authority to cause all outstanding Awards held by an Awardee
to
terminate immediately in their entirety (including as to vested Awards)
upon
first notification to the Awardee of the Awardee’s Termination of Continuous
Service for Cause in accordance with Section 4(b)(xvi) above.
(e) Other
Terminations of Continuous
Service. The Administrator may provide in the
applicable Award Agreement for different treatment of Awards upon Termination
of
Continuous Service of the Awardee than that specified above.
(f) Extension
of Exercise Period. The
Administrator shall have full power and authority to extend the period
of time
for which an Award is to remain exercisable following an Awardee’s Termination
of Continuous Service from the periods set forth in Sections 9(a), (b),
(c), (d)
and (e) above or in the Award Agreement to such greater time as the
Administrator shall deem appropriate, provided that in no event shall
such Award
be exercisable later than the date of expiration of the term of such
Award as
set forth in the Award Agreement.
(g) Extension
if Exercise Prevented by
Law. Notwithstanding the foregoing, other than a
termination for Cause, if a sale within the applicable time periods set
forth in
Section 9(a), (b), (c) and (e) above or in the Award Agreement is prevented
by
Section 18 below, the Award shall remain exercisable until thirty (30)
days
after the date the Awardee is notified by the Company that the Award
is
exercisable, but in any event no later than the Award expiration
date.
(h) Extension
if Subject to Section
16(b). Notwithstanding the foregoing, other than a
termination for Cause, if a sale within the applicable time periods set
forth in
Section 9(a), (b), (c) and (e) above or in the Award Agreement would
subject the
Awardee to a suit under Section 16(b) of the Exchange Act, the Award
shall
remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of shares by the
Awardee would no longer be subject to suit, (ii) the one hundred ninetieth
(190th) day after Awardee’s Termination of Continuous Service, or
(iii) the Award expiration date.
10.
Incentive Stock Option
Limitations/Terms.
(a) Eligibility. Only
employees (as determined
in accordance with Section 3401(c) of the Code and the regulations
promulgated thereunder) of the Company or any of its Subsidiaries may
be granted
Incentive Stock Options.
(b) $100,000
Limitation. Notwithstanding the
designation “Incentive Stock Option” in an Option Agreement, if and to the
extent that the aggregate Fair Market Value of the Shares with respect
to which
Incentive Stock Options are exercisable for the first time by the Awardee
during
any calendar year (under all plans of the Company and any of its Subsidiaries)
exceeds U.S. $100,000, such Options shall be treated as Nonstatutory
Stock
Options. For purposes of this Section 10(b), Incentive Stock Options
shall be taken into account in the order in which they were granted. The
Fair Market Value of the Shares shall be determined as of the Grant Date.
(c) Transferability. An
Incentive Stock Option
may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in
any manner by the Awardee otherwise than by will or the laws of descent
and
distribution, and, during the lifetime of such Awardee, may only be exercised
by
the Awardee. If the terms of an Incentive Stock Option are amended to
permit transferability, the Option will be treated for tax purposes as
a
Nonstatutory Stock Option. The designation of a beneficiary by an Awardee
will not constitute a transfer.
(d) Exercise
Price. The per Share exercise
price of an Incentive Stock Option shall be determined by the Administrator
in
accordance with Section 8(b)(i) of the Plan.
(e) Other
Terms. Option Agreements evidencing
Incentive Stock Options shall contain such other terms and conditions
as may be
necessary to qualify, to the extent determined desirable by the Administrator,
with the applicable provisions of Section 422 of the Code.
11.
Exercise of Award.
(a) Procedure
for Exercise.
i. Any
Award granted hereunder shall be exercisable according to the terms of
the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the respective Award Agreement.
ii. An
Award shall be deemed exercised when the Company receives (A) written or
electronic notice of exercise (in accordance with the Award Agreement)
from the
person entitled to exercise the Award; (B) full payment for the Shares with
respect to which the related Award is exercised; and (C) payment of all
applicable withholding taxes (if any).
iii. An
Award may not be exercised for a fraction of a Share.
(b) Rights
as a Stockholder. The Company shall issue (or cause
to be issued) such Shares as administratively practicable after the Award
is
exercised. Shares issued upon exercise of an Award shall be issued in the
name of the Participant or, if requested by the Participant, in the name
of the
Participant and his or her spouse. Unless provided otherwise by the
Administrator or pursuant to this Plan, until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of
a duly
authorized transfer agent of the Company), no right to vote or receive
dividends
or any other rights as a stockholder shall exist with respect to the
Shares
subject to an Award, notwithstanding the exercise of the Award.
12.
Stock Awards.
(a) Stock
Award Agreement. Each Stock Award
Agreement shall contain provisions regarding
(i) the
number of Shares
subject to such Stock Award or a formula for determining such number,
(ii) the
purchase price of the
Shares, if any, and the means of payment for the Shares,
(iii) the
performance criteria
(including Qualifying Performance Criteria), if any, and level of achievement
versus these criteria that shall determine the number of Shares granted,
issued,
retainable and/or vested,
(iv) such
terms and conditions
on the grant, issuance, vesting, settlement and/or forfeiture of the
Shares as
may be determined from time to time by the Administrator,
(v) restrictions
on the
transferability of the Stock Award and (vi) such further terms and
conditions in each case not inconsistent with this Plan as may be determined
from time to time by the Administrator.
(b) Restrictions
and Performance Criteria. The
grant, issuance, retention, settlement and/or vesting of each Stock Award
or the
Shares subject thereto may be subject to such performance criteria (including
Qualifying Performance Criteria) and level of achievement versus these
criteria
as the Administrator shall determine, which criteria may be based on
financial
performance, personal performance evaluations and/or completion of service
by
the Awardee. Unless otherwise permitted in compliance with the
requirements of Code Section 162(m) with respect to an Award intended
to comply
as “performance-based compensation” thereunder, the Committee shall establish
the Qualifying Performance Criteria applicable to, and the formula for
calculating the amount payable under, the Award no later than the earlier
of (a)
the date ninety (90) days after the commencement of the applicable performance
period, or (b) the date on which 25% of the performance period has elapsed,
and
in any event at a time when the achievement of the applicable Qualifying
Performance Criteria remains substantially uncertain.
(c) Forfeiture. Unless
otherwise provided for
by the Administrator, upon the Awardee's Termination of Continuous Service,
the
Stock Award and the Shares subject thereto shall be forfeited, provided
that to
the extent that the Participant purchased or earned any Shares, the Company
shall have a right to repurchase the unvested Shares at such price and
on such
terms and conditions as the Administrator determines.
(d) Rights
as a Stockholder. Unless otherwise
provided by the Administrator in the Award Agreement, the Participant
shall have
the rights equivalent to those of a stockholder and shall be a stockholder
only
after Shares are issued (as evidenced by the appropriate entry on the
books of
the Company or of a duly authorized transfer agent of the Company) to
the
Participant. Unless otherwise provided by the Administrator, a Participant
holding Stock Units shall not be entitled to receive dividend payments
or any
credit therefor as if he or she was an actual stockholder.
(e) Stock
Appreciation Rights.
i. General. Stock
Appreciation Rights may be granted either alone, in addition to, or in
tandem
with other Awards granted under the Plan. The Administrator
may grant Stock Appreciation Rights to eligible
Participants subject to terms and conditions not inconsistent with this
Plan and
determined by the Administrator. The specific terms and conditions
applicable to the Participant shall be provided for in the Stock Award
Agreement. Stock Appreciation Rights shall be exercisable, in whole or in
part, at such times as the Administrator shall specify in the Stock Award
Agreement.
ii. Exercise
of Stock Appreciation Right. Upon the exercise of a
Stock Appreciation Right, in whole or in part, the Participant shall
be entitled
to a payment in an amount equal to the excess of the Fair Market Value
on the
date of exercise of a fixed number of Shares covered by the exercised
portion of
the Stock Appreciation Right, over the Fair Market Value on the Grant
Date of
the Shares covered by the exercised portion of the Stock Appreciation
Right (or
such other amount calculated with respect to Shares subject to the Award
as the
Administrator may determine). The amount due to the Participant upon the
exercise of a Stock Appreciation Right shall be paid in such form of
consideration as determined by the Administrator and may be in cash,
Shares or a
combination thereof, over the period or periods specified in the Stock
Award
Agreement. A Stock Award Agreement may place limits on the amount that may
be paid over any specified period or periods upon the exercise of a Stock
Appreciation Right, on an aggregate basis or as to any Participant. A
Stock Appreciation Right shall be considered exercised when the Company
receives
written notice of exercise in accordance with the terms of the Stock
Award
Agreement from the person entitled to exercise the Stock Appreciation
Right.
iii. Nonassignability
of Stock Appreciation Rights. Except as
determined by the Administrator, no Stock Appreciation Right shall be
assignable
or otherwise transferable by the Participant except by will or by the
laws of
descent and distribution.
13.
Other Provisions
Applicable to
Awards.
(a) Non-Transferability
of Awards. Unless
determined otherwise by the Administrator, an Award may not be sold,
pledged,
assigned, hypothecated, transferred, or disposed of in any manner for
value
other than by beneficiary designation, will or by the laws of descent
or
distribution. Subject to Section 10(c), the Administrator may in its
discretion make an Award transferable to an Awardee's family member or
any other
person or entity as it deems appropriate. If the Administrator makes an
Award transferable, either at the time of grant or thereafter, such Award
shall
contain such additional terms and conditions as the Administrator deems
appropriate, and any transferee shall be deemed to be bound by such terms
upon
acceptance of such transfer.
(b) Qualifying
Performance Criteria. For
purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any
one or more of the following performance criteria, either individually,
alternatively or in any combination, applied to either the Company as
a whole or
to a business unit, Affiliate or business segment, either individually,
alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative
to a
pre-established target, to previous years' results or to a designated
comparison
group, in each case as specified by the Administrator in the
Award: (i) cash flow; (ii) earnings (including gross
margin; earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization;
earnings
before taxes; and net earnings); (iii) earnings
per share; (iv) growth in earnings or earnings per share; (v) stock
price; (vi) return on equity or average stockholders' equity;
(vii) total stockholder return; (viii) return on capital;
(ix) return on assets or net assets; (x) return on investment;
(xi) revenue or growth in revenue; (xii) income or net income;
(xiii) operating income or net operating income, in aggregate or per share;
(xiv) operating profit or net operating profit; (xv) operating margin;
(xvi) return on operating revenue; (xvii) market share;
(xviii) contract awards or backlog; (xix) overhead or other expense
reduction; (xx) growth in stockholder value relative to the moving average
of the S&P 500 Index or a peer group index; (xxi) credit rating;
(xxii) strategic plan development and implementation (including individual
performance objectives that relate to achievement of the Company’s or any
business unit’s strategic plan); (xxiii) improvement in workforce
diversity; (xxiv) growth of revenue, operating income or net income;
(xxv)
efficiency ratio; (xxvi) ratio of nonperforming assets to total assets;
and
(xxvii) any other similar criteria. The Committee may appropriately adjust
any evaluation of performance under a Qualifying Performance Criteria
to exclude
any of the following events that occurs during a performance period:
(A) asset write-downs; (B) litigation or claim judgments or
settlements; (C) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results; (D) accruals for
reorganization and restructuring programs; (E) any gains or losses
classified as extraordinary or as discontinued operations in the Company’s
financial statements; and (F) mergers, acquisitions or
divestitures.
(c) Certification. Prior
to the payment of any
compensation under an Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Committee shall certify
the extent to which any Qualifying Performance Criteria and any other
material
terms under such Award have been satisfied (other than in cases where
such
relate solely to the increase in the value of the Common Stock).
(d) Discretionary
Adjustments Pursuant to
Section 162(m). Notwithstanding satisfaction of
any completion of any Qualifying Performance Criteria, to the extent
specified
at the time of grant of an Award to “covered employees” within the meaning of
Section 162(m) of the Code, the number of Shares, Options or other benefits
granted, issued, retainable and/or vested under an Award on account of
satisfaction of such Qualifying Performance Criteria may be reduced by
the
Committee on the basis of such further considerations as the Committee
in its
sole discretion shall determine.
(e) Tax
Withholding Obligation. As a condition
of the grant, issuance, vesting, exercise or settlement of an Award granted
under the Plan, the Participant shall make such arrangements as the
Administrator may require for the satisfaction of any applicable federal,
state,
local or foreign withholding tax obligations that may arise in connection
with
such grant, issuance, vesting, exercise or settlement of the Award. The
Company shall not be required to issue any Shares under the Plan until
such
obligations are satisfied.
(f) Compliance
with Section
409A. Notwithstanding anything to the contrary
contained herein, to the extent that the Administrator determines that
any Award
granted under the Plan is subject to Code Section 409A and unless otherwise
specified in the applicable Award Agreement, the Award Agreement evidencing
such
Award shall incorporate the terms and conditions necessary for such Award
to
avoid the consequences described in Code Section 409A(a)(1), and to the
maximum
extent permitted under Applicable Law (and unless otherwise stated in
the
applicable Award Agreement), the Plan and the Award Agreements shall
be
interpreted in a manner that results in their conforming to the requirements
of
Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or
Internal
Revenue Service regulations or other interpretive guidance issued under
Section
409A (whenever issued, the “Guidance”). Notwithstanding anything to the
contrary in this Plan (and unless the Award Agreement provides otherwise,
with
specific reference to this sentence), to the extent that a Participant
holding
an Award that constitutes “deferred compensation” under Section 409A and the
Guidance is a “specified employee” (also as defined thereunder), no distribution
or payment of any amount shall be made before a date that is six (6)
months
following the date of such Participant's “separation from service” (as defined
in Section 409A and the Guidance) or, if earlier, the date of the Participant's
death.
(g) Deferral
of Award Benefits. The
Administrator may in its discretion and upon such terms and conditions
as it
determines appropriate permit one or more Participants whom it selects
to (a)
defer compensation payable pursuant to the terms of an Award, or (b)
defer
compensation arising outside the terms of this Plan pursuant to a program
that
provides for deferred payment in satisfaction of such other compensation
amounts
through the issuance of one or more Awards. Any such deferral arrangement
shall be evidenced by an Award Agreement in such form as the Administrator
shall
from time to time establish, and no such deferral arrangement shall be
a valid
and binding obligation unless evidenced by a fully executed Award Agreement,
the
form of which the Administrator has approved, including through the
Administrator's establishing a written program (the “Program”) under this Plan
to govern the form of Award Agreements participating in such Program. Any
such Award Agreement or Program shall specify the treatment of dividends
or
dividend equivalent rights (if any) that apply to Awards governed thereby,
and
shall further provide that any elections governing payment of amounts
pursuant
to such Program shall be in writing, shall be delivered to the Company
or its
agent in a form and manner that complies with Code Section 409A and the
Guidance, and shall specify the amount to be distributed in settlement
of the
deferral arrangement, as well as the time and form of such distribution
in a
manner that complies with Code Section 409A and the Guidance.
14.
Adjustments upon
Changes in Capitalization, Dissolution, or Change
In Control
(a) Changes
in Capitalization. Subject to any
required action by the stockholders of the Company, the number of shares
of
Common Stock covered by each outstanding Award, the number of shares
of Common
Stock which have been authorized for issuance under the Plan, but as
to which no
Awards have yet been granted or which have been returned to the Plan
upon
cancellation, forfeiture or expiration of an Award, the price per Share
subject
to each such outstanding Award and each of the share limits set forth
in Section
3(a) and 3(b), shall be proportionately adjusted for any increase or
decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification
of the
Common Stock, payment of a dividend or distribution in a form other than
stock
(excepting normal cash dividends) that has a material effect on the Fair
Market
Value of the shares of Common Stock, or any other increase or decrease
in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
“effected
without receipt of consideration.” Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding
and
conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares
of stock of any class, shall affect, and no adjustment by reason thereof
shall
be made with respect to, the number or price of shares of Common Stock
subject
to an Award.
(b) Dissolution
or Liquidation. In the event of
the proposed dissolution or liquidation of the Company, the Administrator
shall
notify each Participant as soon as practicable prior to the effective
date of
such proposed transaction. To the extent it has not been previously
exercised or the Shares subject thereto issued to the Awardee and unless
otherwise determined by the Administrator, an Award will terminate immediately
prior to the consummation of such proposed transaction.
(c) Change
in Control. In the event there is a
Change in Control of the Company, as determined by the Board or a Committee,
the
Board or Committee may, in its discretion, (i) provide for the assumption
or
substitution of, or adjustment (including to the number and type of Shares
and
exercise or purchase price applicable) to, each outstanding Award; (ii)
accelerate the vesting of Options and terminate any restrictions on Stock
Awards; and/or (iii) provide for termination of Awards as a result of
the Change
in Control on such terms and conditions as it deems appropriate, including
providing for the cancellation of Awards for a cash or other payment
to the
Participant.
For purposes
of this
Section 14(c), an Award shall be considered assumed, without limitation,
if, at
the time of issuance of the stock or other consideration upon a Change
in
Control, as the case may be, each holder of an Award would be entitled
to
receive upon exercise of the Award the same number and kind of shares
of stock
or the same amount of property, cash or securities as such holder would
have
been entitled to receive upon the occurrence of the transaction if the
holder
had been, immediately prior to such transaction, the holder of the number
of
Shares covered by the Award at such time (after giving effect to any
adjustments
in the number of Shares covered by the Award as provided for in Section
14(a);
provided that if such consideration received in the transaction is not
solely
common stock of the successor corporation, the Administrator may, with
the
consent of the successor corporation, provide for the consideration to
be
received upon exercise of the Award to be solely common stock of the
successor
corporation equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
15.
Amendment and Termination
of the
Plan.
(a) Amendment
and Termination. The
Administrator may amend, alter or discontinue the Plan or any Award Agreement,
but any such amendment shall be subject to approval of the stockholders
of the
Company in the manner and to the extent required by Applicable Laws. To
the extent required to comply with Section 162(m), the Company shall
seek
re-approval of the Plan from time to time by the stockholders. In
addition, without limiting the foregoing, unless approved by the stockholders
of
the Company, no such amendment shall be made that would:
i.
materially increase the maximum number of Shares for which Awards may
be granted
under the Plan, other than an increase pursuant to Section 14 of the Plan;
or
ii.
reduce the minimum exercise prices at which Options may be granted under
the
Plan (as set forth in Section 8(b)); or
iii.
result in a Repricing (as defined in Section 8(e)) of Options or Stock
Appreciation Rights; or
iv.
change the class of persons eligible to receive Awards under the Plan.
(b) Effect
of Amendment or Termination. No
amendment, suspension or termination of the Plan shall impair the rights
of any
Award, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
and the Company; provided further that the Administrator may amend an
outstanding Award in order to conform it to the Administrator’s intent (in its
sole discretion) that such Award not be subject to Code Section
409A(a)(1)(B). Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder
with
respect to Awards granted under the Plan prior to the date of such termination.
(c) Effect
of the Plan on Other
Arrangements. Neither the adoption of the Plan by the
Board or a Committee nor the submission of the Plan to the stockholders
of the
Company for approval shall be construed as creating any limitations on
the power
of the Board or any Committee to adopt such other incentive arrangements
as it
or they may deem desirable, including without limitation, the granting
of
restricted stock, stock options or cash bonuses otherwise than under the
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases. The value of Awards granted pursuant to the Plan
will not be included as compensation, earnings, salaries or other similar
terms
used when calculating an Awardee’s benefits under any employee benefit plan
sponsored by the Company or any Subsidiary except as such plan otherwise
expressly provides.
16.
Designation of
Beneficiary.
(a) An
Awardee may file a written designation of a beneficiary who is to
receive the Awardee's rights pursuant to Awardee's Award or the Awardee
may
include his or her Awards in an omnibus beneficiary designation for all
benefits
under the Plan. To the extent that Awardee has completed a designation of
beneficiary while employed with the Company, such beneficiary designation
shall
remain in effect with respect to any Award hereunder until changed by
the
Awardee to the extent enforceable under Applicable Law.
(b) Such
designation of beneficiary may be changed by the Awardee at any time
by written notice. In the event of the death of an Awardee and in the
absence of a beneficiary validly designated under the Plan who is living
at the
time of such Awardee's death, the Company shall allow the executor or
administrator of the estate of the Awardee to exercise the Award, or
if no such
executor or administrator has been appointed (to the knowledge of the
Company),
the Company, in its discretion, may allow the spouse or one or more dependents
or relatives of the Awardee to exercise the Award to the extent permissible
under Applicable Law or if no spouse, dependent or relative is known
to the
Company, then to such other person as the Company may designate.
17.
No Right to Awards
or to
Employment.
No person shall have any claim or right
to be
granted an Award and the grant of any Award shall not be construed as
giving an
Awardee the right to continue in the employ or service of the Company
or its
Affiliates. Further, the Company and its Affiliates expressly reserve the
right, at any time, to dismiss any Employee, Consultant or Awardee at
any time
without liability or any claim under the Plan, except as provided herein
or in
any Award Agreement entered into hereunder.
18.
Legal Compliance.
Subject to Section 22, Shares shall
not be
issued pursuant to the exercise of an Option or Stock Award unless the
exercise
of such Option or Stock Award and the issuance and delivery of such Shares
shall
comply with Applicable Laws and shall be further subject to the approval
of
counsel for the Company with respect to such compliance.
19.
Reservation of
Shares.
The Company, during the term of this
Plan,
will at all times reserve and keep available such number of Shares as
shall be
sufficient to satisfy the requirements of the Plan.
20.
Notice.
Any written notice to the Company required
by
any provisions of this Plan shall be addressed to the Secretary of the
Company
and shall be effective when received.
21.
Governing Law; Interpretation
of Plan and
Awards.
(a) This
Plan and all determinations made and actions taken pursuant hereto
shall be governed by the substantive laws, but not the choice of law
rules, of
the state of Delaware.
(b) In
the event that any provision of the Plan or any Award granted under
the Plan is declared to be illegal, invalid or otherwise unenforceable
by a
court of competent jurisdiction, such provision shall be reformed, if
possible,
to the extent necessary to render it legal, valid and enforceable, or
otherwise
deleted, and the remainder of the terms of the Plan and/or Award shall
not be
affected except to the extent necessary to reform or delete such illegal,
invalid or unenforceable provision.
(c) The
headings preceding the text of the sections hereof are inserted
solely for convenience of reference, and shall not constitute a part
of the
Plan, nor shall they affect its meaning, construction or effect.
(d) The
terms of the Plan and any Award shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted heirs,
beneficiaries, successors and assigns.
(e) All
questions arising under the Plan or under any Award shall be decided
by the Administrator in its total and absolute discretion. In the event
the Participant believes that a decision by the Administrator with respect
to
such person was arbitrary or capricious, the Participant may request
arbitration
with respect to such decision. The review by the arbitrator shall be
limited to determining whether the Administrator's decision was arbitrary
or
capricious. This arbitration shall be the sole and exclusive review
permitted of the Administrator's decision, and the Awardee shall as a
condition
to the receipt of an Award be deemed to explicitly waive any right to
judicial
review.
(f) Notice
of demand for arbitration shall be made in writing to the
Administrator within thirty (30) days after the applicable decision by the
Administrator. The arbitrator shall be appointed in accordance with the
Commercial Rules of Dispute Resolution of the American Arbitration Association;
provided, however, that the arbitration shall not be administered by
the
American Arbitration Association. The arbitration shall be administered
and conducted by the arbitrator pursuant to the Commercial Rules of Dispute
Resolution of the American Arbitration Association. The decision of the
arbitrator on the issue(s) presented for arbitration shall be final and
conclusive and may be enforced in any court of competent jurisdiction.
22.
Limitation on
Liability.
The Company and any Affiliate which
is in
existence or hereafter comes into existence shall not be liable to a
Participant, an Employee, an Awardee or any other persons as to:
(a) The
Non-Issuance of Shares. The
non-issuance or sale of Shares (including under Section 18 above) as
to which
the Company has been unable, or the Arbitration deems it infeasible,
to obtain
from any regulatory body having jurisdiction the authority deemed by
the
Company's counsel to be necessary to the lawful issuance and sale of
any shares
hereunder; and
(b) Tax
Consequences. Any tax consequence
realized by any Participant, Employee, Awardee or other person due to
the
receipt, vesting, exercise or settlement of any Option or other Award
granted
hereunder or due to the transfer of any Shares issued hereunder. The
Participant is responsible for, and by accepting an Award under the Plan
agrees
to bear, all taxes of any nature that are legally imposed upon the Participant
in connection with an Award, and the Company does not assume, and will
not be
liable to any party for, any cost or liability arising in connection
with such
tax liability legally imposed on the Participant. In particular, Awards
issued under the Plan may be characterized by the Internal Revenue Service
(the
“IRS”) as “deferred compensation” under the Code resulting in additional taxes,
including in some cases interest and penalties. In the event the IRS
determines that an Award constitutes deferred compensation under the
Code or
challenges any good faith characterization made by the Company or any
other
party of the tax treatment applicable to an Award, the Participant will
be
responsible for the additional taxes, and interest and penalties, if
any, that
are determined to apply if such challenge succeeds, and the Company will
not
reimburse the Participant for the amount of any additional taxes, penalties
or
interest that result.
(c) Forfeiture.
The
requirement that Participant
forfeit an Award, or the benefits received or to be received under an
Award,
pursuant to any Applicable Law.
23.
Indemnification.
In addition to such other rights of
indemnification as they may have as members of the Board or officers
or
employees of the Company or an Affiliate, members of the Board and any
officers
or employees of the Company or an Affiliate to whom authority to act
for the
Board or the Company is delegated shall be indemnified by the Company
against
all reasonable expenses, including attorneys’ fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding,
or in
connection with any appeal therein, to which they or any of them may
be a party
by reason of any action taken or failure to act under or in connection
with the
Plan, or any right granted hereunder, and against all amounts paid by
them in
settlement thereof (provided such settlement is approved by independent
legal
counsel selected by the Company) or paid by them in satisfaction of a
judgment
in any such action, suit or proceeding, except in relation to matters
as to
which it shall be adjudged in any such action, suit or proceeding that
such
person is liable for gross negligence, bad faith or intentional misconduct
in
duties; provided, however, that within sixty (60) days after the institution
of
such action, suit or proceeding, such person shall offer to the Company,
in
writing, the opportunity at its own expense to handle and defend the
same.
24.
Unfunded Plan.
Insofar as it provides for Awards, the
Plan
shall be unfunded. Although bookkeeping accounts may be established with
respect to Awardees who are granted Stock Awards under this Plan, any
such
accounts will be used merely as a bookkeeping convenience. The Company
shall not be required to segregate any assets which may at any time be
represented by Awards, nor shall this Plan be construed as providing
for such
segregation, nor shall the Company nor the Administrator be deemed to
be a
trustee of stock or cash to be awarded under the Plan. Any liability of
the Company to any Participant with respect to an Award shall be based
solely
upon any contractual obligations which may be created by the Plan; no
such
obligation of the Company shall be deemed to be secured by any pledge
or other
encumbrance on any property of the Company. Neither the Company nor the
Administrator shall be required to give any security or bond for the
performance
of any obligation which may be created by this Plan.
A.P.
PHARMA, INC.
2007
EQUITY INCENTIVE PLAN
NOTICE
OF GRANT OF STOCK OPTION
You
have
been granted an option to purchase Common Stock of A.P. Pharma, Inc. (the
“Company”) as follows:
Committee
Approval
Date:
___________________
Date
of
Grant: ___________________
Exercise
Price per
Share: $__________________
Total
Number of Shares
Granted: ___________________
Total
Exercise
Price: $__________________
Type
of
Option: ______
Nonstatutory Stock Option
______
Incentive Stock Option
Expiration
Date:
___________________
Vesting
Commencement
Date:
___________________
|
Vesting/Exercise
Schedule:
|
So
long as you are in Continuous Service with the Company, the Shares
underlying this Option shall vest and become exercisable in accordance
with the following schedule:[___________ of the total number of
Shares subject to the Option shall vest and become exercisable on
the
______month anniversary of the Vesting Commencement Date and _______
of
the total number of Shares subject to the Option shall vest and become
exercisable on each monthly anniversary
thereafter.]
|
Termination
Period: This Option may be
exercised for ninety (90) days aftertermination of Optionee’s Continuous
Service. Optionee isresponsible for keeping track of these exercise
periods following termination for any reason of his or her service relationship
with the Company. The Company will not provide further notice of such
periods.
Transferability: This
Option may not be transferred except as set forth inthe attached A.P. Pharma,
Inc. Stock Option Agreement.
By
your signature and the signature of
the Company’ representative below, you and the Company agree that this option is
granted under and governed by the terms and conditions of the A.P. Pharma,
Inc.
2007 Equity Incentive Plan and the A.P. Pharma, Inc. Stock Option Agreement,
both of which are attached and made a part of this document.
In
addition, you agree and acknowledge
that your rights to any Shares underlying the Option will be earned only as
you
provide services to the Company over time, that the grant of the Option is
not
as consideration for service you rendered to the Company prior to your Vesting
Commencement Date, and that nothing in the Notice or the attached documents
confers upon you any right to continue your employment or consulting
relationship with the Company for any period of time, nor does it interfere
in
any way with your right or the Company’s right to terminate that relationship at
any time, for any reason, with or without cause.
OPTIONEE A.P.
PHARMA, INC.
________________________________ __________________________________
Name:
Title:
A.P.
PHARMA, INC.
2007
EQUITY INCENTIVE PLAN
STOCK
OPTION AGREEMENT
THIS
STOCK OPTION AGREEMENT (the
"Agreement") dated on the grant date ("Grant Date") as stated in the Notice
of
Stock Option Grant (“Notice of Grant”) between A.P. Pharma, Inc., a Delaware
corporation (the "Company"), and ________________ ("Optionee"), is entered
into
as follows:
WITNESSETH:
WHEREAS,
the Company has established
the A.P. Pharma, Inc. 2007 Equity Incentive Plan (the "Plan"); and
WHEREAS,
the Compensation Committee of
the Board of Directors of the Company or its delegates (the "Committee") has
determined that Optionee shall be granted an option under the Plan as
hereinafter set forth;
The
parties hereby agree that the
Company grants, effective as of the Grant Date, Optionee [an
Incentive][a Nonstatutory] Stock Option (this
"Option") to purchase the number of Shares, as stated in the Notice of Grant,
of
its $0.001 par value Common Stock (the "Shares") upon the terms and conditions
set forth in the Notice of Grant and this Agreement.
1. Plan
Award. This Option is granted under and
pursuant to the Plan and is subject to each and all of the provisions
thereof. If this Option is designated as an Incentive Stock Option,
it is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Internal Revenue Code of 1986, as amended, and to the
extent this Option does not qualify as an Incentive Stock Option under
Applicable Laws, then it is intended to be and will be treated as a Nonstatutory
Stock Option. Notwithstanding the above, in the event that the Shares
subject to this Option (and all other Incentive Stock Options granted to
Optionee by the Company or any Subsidiary, including under other plans of the
Company or any Subsidiary) that first become exercisable in any calendar year
have an aggregate fair market value (determined for each Share as of the date
of
grant of the option covering such Share) in excess of $100,000, this Option
shall be treated as a Nonstatutory Stock Option, in accordance with Section
10(b) of the Plan.
2. Exercise
Price. The exercise price applicable to
this Option (meaning, the price Optionee must pay in order to purchase any
Shares hereunder) shall be the price per Share as stated
in the Notice of Grant.
3. Vesting
and Exercise of Option. Subject to
Optionee's not experiencing a Termination of Continuous Service during the
stated vesting period, Optionee shall vest in and earn the right to exercise
this Option on the vesting schedule as set forth in the Notice of
Grant.
4. Expiration. This
Option will expire ten (10) years from the Grant Date, unless sooner
terminated or canceled in accordance with the provisions of the
Plan. This means that (subject to the continuing service requirement
set forth in Section 3 above and subject to earlier termination upon certain
other events as set forth in the Plan) this Option must be exercised, if at
all,
on or before the expiration date as stated in the Notice of Grant (the
"Expiration Date"). If this Option expires on a stock exchange
holiday or weekend day, this Option will expire on the last trading day
prior to the holiday or weekend. Optionee
shall be solely responsible for exercising this Option, if at all, prior to
its
Expiration Date. The Company shall have no obligation to notify
Optionee of this Option's expiration.
5. Exercise
Mechanics. This Option may be exercised
by delivering to the Stock Plan Administrator at the Company's head office
a
[completed Exercise of Stock Option form] stating the number of
Shares as to which the Option is exercised or by any other method the Committee
has approved. The notice must be accompanied by the payment of the
full Option exercise price of such Shares. Exercise shall not be
deemed to have occurred unless and until Optionee has delivered to the Company
(or its authorized representative) an approved notice of exercise, full payment
of the exercise price for the Shares being exercised and payment of any
applicable withholding taxes in accordance with Section 8
below. Payment of the Option exercise price may be in cash; check or
wire transfer; through an approved cashless-brokered exercise program, with
other shares of the Company's Common Stock which have a Fair Market Value on
the
date of surrender equal to the aggregate exercise price of the Shares as to
which the Option is being exercised (subject to the Company's discretion to
withhold approval for such payment method at any time), cashless “net exercise”
arrangement pursuant to which the Company will reduce the number of Shares
having an aggregate Fair Market Value that does not exceed the aggregate
exercise price; provided that the Company shall accept a cash or other payment
from the Optionee to the extent of any remaining balance of the exercise price
not satisfied by such reduction in the number of whole Shares to be issued;
such
other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws; or a combination thereof to the extent
permissible under Applicable Law.
6. Termination
of Continuous Service. All rights of
Optionee in this Option, to the extent that it has not previously become vested
and been exercised, shall terminate upon Optionee's Termination of Continuous
Service except as set forth in this Section 6. The portion of the
Option that relates to any Shares that were unvested and unexercisable as of
the
date of Optionee's Termination of Continuous Service shall terminate and expire
effective immediately upon such date. With respect to the vested and
exercisable portion of the Option, and subject to the final sentence of this
Section 6:
(i) In
the event of Termination of Continuous Service other than as a result of
Optionee's death or disability or for Cause, any outstanding Options that were
vested and exercisable as of the date of Termination of Continuous Service
may
be exercised by the Optionee until the earlier of [ninety (90) days] following
the Optionee’s Termination of Continuous Service.
(ii) In
the event of Termination of Continuous Service as a result of Optionee's
disability (including a Total and Permanent Disability), Optionee shall have
twelve (12) months to exercise the Option as to the Shares subject to the Option
that were vested and exercisable as of the date of Termination of
Employment;
(iii) In
the event of Termination of Continuous Service as a result of Optionee’s death,
Optionee shall have twelve (12) months following the Optionee’s death to
exercise the Option as to the Shares subject to the Option that were vested
and
exercisable as of the date of death; and
(iv) In
the event of Termination of Continuous Service for Cause, all rights of the
Optionee in this Option, whether vested or unvested, shall terminate and expire
effective immediately upon the first notification to Optionee of the Optionee’s
Termination of Continuous Service.
Notwithstanding
the above, in no event may an Option be exercised, even as to vested and
otherwise exercisable Shares, after the Expiration Date set forth in
Section 4 above.
7. Transferability. This
Option generally is not transferable by Optionee otherwise than by will or
the
laws of descent and distribution, and is exercisable only by Optionee during
Optionee’s lifetime; provided however that if this Option is a Nonstatutory
Stock Option, it may be transferred by instrument to an inter vivos or
testamentary trust in which the Option is to be passed to beneficiaries upon
the
death of the trustor (settlor) or by gift or pursuant to domestic relations
orders to "Immediate Family Members" (as defined below) of the
Optionee. "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or
sister-in-law (including adoptive relationships), a trust in which these persons
have more than fifty percent of the beneficial interest, a foundation in which
these persons (or the Optionee) control the management of assets, and any other
entity in which these persons (or the Optionee) own more than fifty percent
of
the voting interests.
8. Tax
Matters.
(i) Optionee
is responsible for, and by accepting this Option agrees to bear, all taxes
of
any nature, including withholding taxes, interest or penalties arising out
of
the grant of this Option, the vesting or exercise of this Option or the
subsequent sale of the Shares acquired pursuant to the exercise of this Option,
or any violation of Code Section 409A that impacts this Option, that are legally
imposed upon Optionee in connection with this Option, and the Company does
not
assume, and will not be liable to any party for, any cost or liability arising
in connection with such tax liability legally imposed on
Optionee. The Company has not provided any tax advice with respect to
this Option or the disposition of the Shares. Optionee should obtain
advice from an appropriate independent professional adviser with respect to
the
taxation implications of any aspect of this Option, including the grant, vesting
or exercise of this Option or the subsequent sale of any Shares.
(ii) In
the event that the Company or the Optionee’s employer, including any affiliate
or subsidiary qualified to deduct tax at source (the “Employer”), is required to
withhold any amount (including in connection with income tax, employment or
payroll taxes, social security contributions or other similar amounts, with
such
obligation in aggregate referred to herein as the “Withholding Obligation”) as a
result of any event occurring in connection with this Option, the Optionee
shall
make a cash payment to the Company as necessary to cover all applicable
Withholding Obligations at or prior to the time the event giving rise to the
Withholding Obligation occurs; provided that (a) the Company has the right
to
withhold a portion of the Shares otherwise to be delivered upon exercise of
this
Option having a Fair Market Value equal to the amount of the Withholding
Obligation in accordance with such rules as the Company may from time to time
establish, (b) the Company or the Employer has the right, and the Optionee
in
accepting this grant explicitly authorizes the Company, to deduct an amount
equal to the Withholding Obligation from the Optionee’s compensation or (c) the
Company may establish alternative procedures to ensure satisfaction of all
applicable Withholding Obligations arising in connection with this
Option. The Optionee will receive a cash refund for any payment of
cash or fraction of a surrendered share not necessary to satisfy the Withholding
Obligations.
(iii) Optionee
acknowledges and agrees that the ultimate liability for any tax-related item
legally due by Optionee is and remains Optionee’s responsibility and that the
Company and or the Employer (a) make no representations or undertakings
regarding the treatment of any such tax items in connection with any aspect
of
this Option, including the grant, vesting or exercise of this Option or the
subsequent sale of the Shares acquired upon exercise of this Option; and
(b) do not commit to structure the terms or any aspect of this Option to
reduce or eliminate the Optionee’s liability for such tax items. The
Company may refuse to honor the exercise of this Option and refuse to deliver
the Shares if Optionee fails to comply with Optionee’s obligations in connection
with the satisfaction of the Withholding Obligations.
9. Optionee
Acknowledgements. By accepting the
grant of this Option, Optionee acknowledges and agrees that the Plan is
established voluntarily by the Company, it is discretionary in nature and may
be
modified, amended, suspended or terminated by the Company at any time unless
otherwise provided in the Plan or this Agreement. Optionee
acknowledges that all decisions with respect to future grants, if any, will
be
at the sole discretion of the Company. Optionee's participation in
the Plan shall not create a right to further employment with the Company and
shall not interfere with the ability of the Company to terminate Optionee's
service relationship at any time with or without cause and it is expressly
agreed and understood that the service relationship is terminable at the will
of
either party, insofar as permitted by law. Optionee agrees that this
Option is an extraordinary item that does not constitute compensation of any
kind for services of any kind rendered to the Company or the Employer, and
is
outside the scope of Optionee's service contract, if any. This Option
is not part of normal or expected compensation or salary for any purposes,
including, but not limited to calculating any severance, resignation,
termination, redundancy, end-of-service payments, bonuses, long-service awards,
pension or retirement benefits or similar payments insofar as permitted by
law. In the event that Optionee does not have a service relationship
with the Company, this Option grant will not be interpreted to form a service
contract or relationship with the Company, the Employer or any Subsidiary or
Affiliate of the Company. Optionee acknowledges that the future value
of the underlying Shares is unknown, may increase or decrease in the future,
and
cannot be predicted with certainty. In consideration of the grant of
this Option, no claim or entitlement to compensation or damages shall arise
from
termination of this Option or diminution in value of this Option or Shares
purchased through exercise of this Option resulting from Optionee's Termination
of Continuous Service by the Company or the Employer (for any reason whatsoever
and whether or not in breach of Applicable Laws).
10. Data
Transfer. Optionee explicitly and
unambiguously consents to the collection, use and transfer, in electronic or
other form, of Optionee's personal data as described in this document by and
among, as applicable, the Employer, and the Company and its Subsidiaries and
Affiliates for the exclusive purpose of implementing, administering and managing
Optionee's participation in the Plan. Optionee understands that the
Company, its Affiliates, its Subsidiaries and the Employer hold certain personal
information about Optionee, including, but not limited to, name, home address
and telephone number, date of birth, social security number (or other
identification number), salary, nationality, job title, any shares of stock
or
directorships held in the Company, details of all options or any other
entitlement to shares of stock awarded, canceled, purchased, exercised, vested,
unvested or outstanding in Optionee's favor for the purpose of implementing,
managing and administering the Plan ("Data"). Optionee understands
that the Data may be transferred to any third parties assisting in the
implementation, administration and management of the Plan, that these recipients
may be located in Optionee's country or elsewhere and that the recipient country
may have different data privacy laws and protections than Optionee's
country. Optionee may request a list with the names and addresses of
any potential recipients of the Data by contacting the Company’s [Stock
Plan Administrator]. Optionee authorizes the recipients to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Optionee's
participation in the Plan, including any requisite transfer of such Data, as
may
be required to a broker or other third party with whom Optionee may elect to
deposit any Shares acquired upon the exercise of this
Option. Optionee understands that Data will be held only as long as
is necessary to implement, administer and manage participation in the
Plan. Optionee may, at any time, view Data, request additional
information about the storage and processing of the Data, require any necessary
amendments to the Data or refuse or withdraw the consents herein, in any case
without cost, by contacting the Company’s [Stock Plan
Administrator] in writing. Optionee understands that refusing or
withdrawing consent may affect Optionee's ability to participate in the
Plan. For more information on the consequences of refusing to consent
or withdrawing consent, Optionee may contact the Company’s [Stock Plan
Administrator] at the Company.
11. Copies
of Plan Materials. Optionee
acknowledges that Optionee has received a copy of the Plan from the Company
and
agrees to receive stockholder information, including copies of any annual
report, proxy statement and periodic report, from [the Company's website
at http://www.appharma.com/_______]. Optionee acknowledges
that copies of the Plan and stockholder information are also available upon
written or telephonic request to the Company’s [Stock Plan
Administrator].
12. Entire
Agreement; Plan Controls. The Plan is
incorporated herein by reference. The Plan and this Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to Optionee's interest except by
means
of a writing signed by the Company and Optionee. This Agreement is
governed by the laws of the state of Delaware. In the event of any
conflict between the terms and provisions of the Plan and this Agreement, the
Plan terms and provisions shall govern. Capitalized terms used but
not defined in this Agreement or the Notice of Grant have the meanings assigned
to them in the Plan. Certain other important terms governing this
Agreement are contained in the Plan.
|
Accepted
by Optionee:
_________________________________
[Optionee
Name]
|
A.P.
PHARMA, INC.
By:
__________________________________
Name:________________________________
Title:
_________________________________
|
|
I,
__________________, spouse of __________________ (the “Optionee’), have
read and hereby approve the foregoing Agreement. In
consideration of the Company’s granting my spouse the right to purchase
Shares of the Company’s common stock as set forth in the Agreement, I
hereby agree to be irrevocably bound by the Agreement and further
agree
that any community property or other such interest shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as
my attorney-in-fact with respect to any amendment or exercise of
any
rights under the Agreement.
________________________________
Spouse
of Optionee
|
|
RETAIN
THIS AGREEMENT FOR YOUR RECORDS
SV
2327078 v1
A.P.
PHARMA, INC.
2007
EQUITY INCENTIVE PLAN
RESTRICTED
STOCK UNIT GRANT NOTICE
A.P.
Pharma, Inc. (the “Company”), pursuant to its 2007 Equity Incentive Plan (the
“Plan”), hereby grants to the participant under the Plan (the “Participant”)
restricted stock units covering the number of shares of the Company’s common
stock (the “Common Stock”) set forth below (the “Stock Units”). Each
Stock Unit represents one share of Common Stock. The Stock Units are
subject to all of the terms and conditions as set forth in this Restricted
Stock
Unit Grant Notice (the “Grant Notice”), the Restricted Stock Unit Agreement, and
the Plan, all of which are attached hereto and incorporated herein in their
entirety.
|
Participant:
|
|
|
Date
of Grant:
|
|
|
Vesting
Commencement Date:
|
|
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Number
of Shares Subject to Stock Units:
|
|
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Vesting
Schedule:
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Subject
to Participant’s not experiencing a Termination of Continuous Service,
[twenty five percent (25%) of the Stock Units per year on
the
anniversary of the Vesting Commencement
Date.]
|
Additional
Terms/Acknowledgements: The undersigned Participant acknowledges receipt of,
and understands and agrees to the terms and conditions of this Grant Notice,
the
Restricted Stock Unit Agreement, and the Plan. Participant further
acknowledges that as of the Date of Grant, this Grant Notice, the Restricted
Stock Unit Agreement and the Plan set forth the entire understanding between
Participant and the Company regarding the acquisition of restricted stock units
and the stock in the Company covered by the restricted stock units and supersede
all prior oral and written agreements relating thereto, with the exception
of
other awards previously granted and delivered to Participant under the
Plan.
A.P.
Pharma,
Inc. Participant:
By:
_____________________________ By:
_____________________________
Signature Signature
Title: Date:
_________________________________ _________________________________
Date:
____________________________________
A.P.
PHARMA, INC.
2007
EQUITY INCENTIVE PLAN
RESTRICTED
STOCK UNIT AGREEMENT
THIS
RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), dated ____________, 200_, is
entered into by and between _______________ (“Participant”) and A.P. Pharma,
Inc., a Delaware corporation (the “Company”).
RECITALS
WHEREAS,
the Company has adopted the A.P. Pharma, Inc. 2007 Equity Incentive Plan (the
“Plan”), which provides for awards of restricted stock units to the Company’s
Employees, Consultants and Directors; and
WHEREAS,
Participant is currently serving as an Employee or Director of, or a Consultant
to, the Company; and
WHEREAS,
in order to provide Participant incentive to continue in the employ of the
Company and his or her commitment to the success of the Company, the
Compensation Committee of the Board of Directors of the Company (the
“Committee”) has determined that Participant shall be granted restricted stock
units (“Stock Units”) representing hypothetical shares of the Company’s common
stock, par value $0.0001 per share (the “Common Stock”), with each Stock Unit
equal in value to one share of the Company’s Common Stock, subject to the terms
and restrictions set forth in the Restricted Stock Unit Grant Notice (the “Grant
Notice”) and this Agreement and in accordance with the terms and conditions of
the Plan.
NOW
THEREFORE, in consideration of the foregoing, and the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
1. Definitions.
Capitalized
terms not explicitly defined in this Agreement or the Grant Notice but defined
in the Plan shall have the same meanings ascribed to them in the
Plan.
2. Grant
of Stock
Units.
The
Company hereby grants to Participant, pursuant to the terms of the Grant Notice
and this Agreement (collectively, the “Award Agreement”) Stock Units covering
the number of shares of Common Stock indicated in the Grant Notice (the
“Shares”).
|
3.
|
Agreement
to Accept
Stock Units.
|
Participant
hereby agrees to accept from the Company, and the Company hereby agrees to
issue
to Participant, the Stock Units.
|
4.
|
Vesting.
|
Subject
to the limitations contained herein, the Stock Units issued to Participant
shall
vest as provided in the Grant Notice, provided, however, that vesting shall
cease upon the Participant’s Termination of Continuous Service.
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5.
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Benefit
Upon Vesting.
|
Upon
the vesting of the Stock Units,
Participant shall be entitled to receive, as soon as administratively
practicable, a number of Shares equal to:
(a) the
number of Stock Units that have vested multiplied by the fair market value
(as
defined in the Plan) of a share of Common Stock on the date on which such Stock
Units vest, and
(b) a
dividend equivalent payment determined by
(1) multiplying
the number of vested Stock Units by the dividend per share of Common Stock
on
each dividend payment date between the date hereof and the vesting date to
determine the dividend equivalent amount for each dividend payment
date;
(2) dividing
the amount determined in (1) above by the fair market value of a share of
Common Stock on the date of such dividend payment to determine the number of
additional Stock Units to be credited to the Participant; and
(3) multiplying
the number of additional Stock Units determined in (2) above by the fair
market value of a share of Common Stock on the vesting date to determine the
aggregate amount of dividend equivalent payments for such vested Stock
Units;
provided,
however, that if any aggregated dividend equivalent payments in
paragraph (b)(3) above or otherwise results in a payment of a fractional
Share, such fractional share shall be rounded down to the nearest whole
Share.
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6.
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Securities
Law Compliance.
|
Notwithstanding
anything to the contrary contained herein, the Company shall not deliver, and
shall have no liability for failing to deliver, any Shares under the Award
Agreement unless the Shares are then registered under the Securities Act or,
if
such Shares are not then so registered, the Company has determined that such
issuance and transfer would be exempt from the registration requirements of
the
Securities Act. The issuance and transfer of the Shares also must
comply with other applicable laws and regulations governing such Stock Units
and
Shares, and the Company shall not issue, and shall have no liability for failing
to issue, the Shares if the Company determines that such issuance and transfer
would not be in material compliance with such laws and regulations.
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7.
|
Forfeiture.
|
In
the
event of the Termination of Continuous Service of the Participant, at any time
for any reason (including as a result of the Participant’s death or disability)
prior to the vesting of the Stock Units, except as otherwise provided for in
the
Award Agreement, all Stock Units granted hereunder that have not vested by
such
termination date and that are held by the Participant as of such date shall
be
forfeited by, and no further rights shall accrue to, the
Participant. In addition, in the event of Participant’s Termination
of Continuous Service for Cause (as defined in the Plan), any Stock Units
(including any vested portion thereof) held by Participant shall immediately
be
forfeited in their entirety upon first notification to Participant of such
Termination for Cause. If Participant’s Continuous Service with the
Company is suspended pending an investigation of whether Participant shall
be
terminated for Cause, all of Participant’s rights under the Award Agreement
likewise shall be suspended during the investigation period. This
Section 7 shall apply with equal effect to vested Shares issued upon vesting
of
the Stock Units in that the Company shall have the right to recover from
Participant any such Shares, and/or to recover any profits Participant might
have received upon Participant’s sale or other transfer of such Shares, provided
the Company commences action to recover such Shares or profits within six months
following the date of Participant’s Termination of Continuous Service for
Cause.
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8.
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Corporate
Transactions.
|
In
the
event of a Change in Control pursuant to Section 14(c) of the Plan, the Company
may provide for the assumption or substitution of, or adjustment to, the Stock
Units; accelerate the vesting of Stock Units and terminate any restrictions
on
the Stock Units and/or provide for termination of the Stock Units. To
the extent the Stock Units remain in effect following such Change in Control,
such Stock Units shall apply to the new capital stock or other property received
in exchange for the Common Stock in consummation of the corporate
transaction.
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9.
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Rights
as
Shareholder.
|
Stock
Units represent hypothetical shares of Common Stock. Until the Stock
Units become vested, the Participant shall not be entitled to any of the rights
or benefits generally accorded to shareholders.
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10.
|
Limitations
on
Transfer.
|
Except
as
otherwise provided for in the Award Agreement, the Stock Units or rights granted
hereunder may not be sold, pledged or otherwise transferred until the Stock
Units become vested in accordance with Section 4 and the Shares are issued
under Section 5.
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11.
|
Award
not a Service
Contract.
|
The
Award
Agreement is not an employment or service contract, and nothing in the Award
Agreement shall be deemed to create in any way whatsoever any obligation on
the
Company or an Affiliate to continue Participant’s employment or
service. In addition, nothing in the Award Agreement shall obligate
the Company or an Affiliate, their respective shareholders, Boards of Directors,
officers or Employees to continue any relationship that Participant may have
as
an Employee or Director of, or a Consultant to, the Company or an
Affiliate.
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12.
|
Tax
and Withholding
Obligations.
|
12.1 Participant
understands and agrees that Participant is solely responsible for any and all
federal, state, local and foreign tax withholding obligations in connection
with
the Stock Units. Participant further agrees to make adequate
provision for any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Company or an Affiliate, if any, which arise
in connection with the grant or vesting of the Stock Units, or the issuance
of
Shares subject to the Stock Units or the subsequent sale of Common Stock
acquired pursuant to such Stock Units, or due upon receipt of dividend
equivalent payments.
12.2 If
Participant does not deliver to the Company’s [Stock Plan
Administrator] at least five (5) days prior to any date on which Stock
Units vest (each, a “Vesting Date”) a written notice of Participant’s election
to satisfy by cash, check or other manner agreeable to the Company, all federal,
state, local or foreign tax withholding obligations related to such Shares,
Participant and the Company agree that the Company shall retain that number
of
the Shares, based on the fair market value of the Company’s common stock on such
Vesting Date, with an aggregate value equal to the amount of all federal, state,
local or foreign tax withholding obligations that Participant, the Company,
or
an Affiliate would incur as a result of the vesting relating to such
Shares.
12.3 Unless
and until the tax withholding obligations of the Company or any Affiliate are
satisfied, the Company shall have no obligation to issue a certificate for,
or
permit the transfer, alienation, etc. of, any of the Shares.
|
13.
|
Representations.
|
Participant has
reviewed with his or her own tax advisors the federal, state, local and
foreign tax consequences relating to the Stock Units and the transactions
contemplated by the Award Agreement. Participant is relying solely on
such advisors and not on any statements or representations of the Company or
any
of its agents. Participant understands that he or she (and not the
Company) shall be responsible for any tax liability that may arise as a result
of the Stock Units or the transactions contemplated by the Award
Agreement.
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14.
|
Data
Privacy
Consent.
|
Optionee
explicitly and unambiguously consents to the collection, use and transfer,
in
electronic or other form, of Optionee's personal data as described in this
document by and among, as applicable, the Employer, and the Company and its
Subsidiaries and Affiliates for the exclusive purpose of implementing,
administering and managing Optionee's participation in the
Plan. Optionee understands that the Company, its Affiliates, its
Subsidiaries and the Employer hold certain personal information about Optionee,
including, but not limited to, name, home address and telephone number, date
of
birth, social security number (or other identification number), salary,
nationality, job title, any shares of stock or directorships held in the
Company, details of all options or any other entitlement to shares of stock
awarded, canceled, purchased, exercised, vested, unvested or outstanding in
Optionee's favor for the purpose of implementing, managing and administering
the
Plan ("Data"). Optionee understands that the Data may be transferred
to any third parties assisting in the implementation, administration and
management of the Plan, that these recipients may be located in Optionee's
country or elsewhere and that the recipient country may have different data
privacy laws and protections than Optionee's country. Optionee may
request a list with the names and addresses of any potential recipients of
the
Data by contacting the Company’s [Stock Plan
Administrator]. Optionee authorizes the recipients to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Optionee's
participation in the Plan, including any requisite transfer of such Data, as
may
be required to a broker or other third party with whom Optionee may elect to
deposit any Shares acquired upon the exercise of this
Option. Optionee understands that Data will be held only as long as
is necessary to implement, administer and manage participation in the
Plan. Optionee may, at any time, view Data, request additional
information about the storage and processing of the Data, require any necessary
amendments to the Data or refuse or withdraw the consents herein, in any case
without cost, by contacting the Company’s [Stock Plan
Administrator] in writing. Optionee understands that refusing or
withdrawing consent may affect Optionee's ability to participate in the
Plan. For more information on the consequences of refusing to consent
or withdrawing consent, Optionee may contact the Company’s [Stock Plan
Administrator] at the Company.
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15.
|
Acknowledgment.
|
Participant
acknowledges and agrees that notwithstanding any terms or conditions of the
Plan
to the contrary, in the event of involuntary Termination of Continuous Service
(whether or not in breach of local labor laws), Participant’s right to receive
benefits under the Award Agreement, if any, will terminate effective as of
the
date that Participant no longer has a service relationship with the Company
and
will not be extended by any notice period mandated under local law (e.g., active
employment would not include a period of “garden leave” or similar period
pursuant to local law); furthermore, in the event of involuntary Termination
of
Continuous Service (whether or not in breach of local labor laws), Participant’s
right to receive benefits under the Award Agreement after Termination of
Continuous Service, if any, will be measured by the date of termination of
Participant’s service relationship and will not be extended by any notice period
mandated under local law.
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16.
|
Notices.
|
Any
notices provided for in the Award Agreement or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case
of
notices delivered by mail by the Company to Participant, five (5) days after
deposit in the United States mail, postage prepaid, addressed to Participant
at
the last address provided by Participant to the Company.
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17.
|
Survival
of
Terms.
|
The
Award
Agreement shall apply to and bind Participant and the Company and their
respective permitted assignees and transferees, heirs, legatees, executors,
administrators and legal successors.
|
18.
|
Failure
to Enforce not a
Waiver.
|
The
failure of the Company to enforce at any time any provision of the Award
Agreement shall in no way be construed to be a waiver of such provision or
of
any other provision hereof.
|
19.
|
Amendments.
|
The
Award
Agreement may be amended or modified at any time only by an instrument in
writing signed by each of the parties hereto, provided that the Administrator
may amend an outstanding Stock Award in order to conform it to the
Administrator’s intent (in its sole discretion) that such Stock Award not be
subject to Code Section 409A(a)(1)(B).
|
20.
|
Authority
of the
Committee.
|
The
Committee shall have full authority to interpret and construe the terms of
the
Award Agreement. The determination of the Committee as to any such
matter of interpretation or construction shall be final, binding and
conclusive.
|
21.
|
Miscellaneous.
|
21.1 The
rights and obligations of the Company under the Award Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company’s successors and assigns.
21.2 Participant
agrees upon request to execute any further documents or instruments necessary
or
desirable in the sole determination of the Company to carry out the purposes
or
intent of the Award Agreement.
21.3 Participant
acknowledges and agrees that he or she has reviewed the Award Agreement in
its
entirety, has had an opportunity to obtain the advice of counsel prior to
executing and accepting the Award Agreement and fully understands all provisions
of the Award Agreement.
21.4 If
Participant has received this or any other document related to the Plan
translated into a language other than English and if the translated version
is
different than the English version, the English version will
control.
21.5 The
Award
Agreement may be signed in counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument.
21.6 The
Award
Agreement is governed by the laws of the state of Delaware.
|
22.
|
Governing
Plan
Document.
|
The
Stock
Units are subject to all the provisions of the Plan, the provisions of which
are
hereby made a part of the Award Agreement, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any
conflict between the provisions of the Award Agreement and those of the Plan,
the provisions of the Plan shall control. Participant represents
that he or she has read this Agreement, the Grant Notice and the Plan, and
is familiar with their terms and provisions. Participant hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of
the
Committee upon any questions arising under the Award Agreement.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
A.P.
Pharma,
Inc. Participant:
By:
_____________________________ By:
_____________________________
Signature Signature
Name:
__________________________
Title:
___________________________
I,
__________________, spouse of __________________ (the “Participant’), have read
and hereby approve the foregoing Agreement. In consideration of the
Company’s granting my spouse restricted stock units covering the number of
Shares of the Company’s common stock as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall hereby be similarly bound by
the
Agreement. I hereby appoint my spouse as my attorney-in-fact with
respect to any amendment or exercise of any rights under the
Agreement.
________________________________
Spouse
of Participant
[SIGNATURE
PAGE TO RESTRICTED STOCK UNIT AGREEMENT]
SV
2327070 v1 (10008.0000-P007)
EXHIBIT
5.1
January
14, 2008
A.P.
Pharma, Inc.
123
Saginaw Drive
Redwood
City, California 94063
|
|
Re:
|
Registration
Statement on Form S-8
|
Ladies
and Gentlemen:
This
opinion is furnished to A.P. Pharma, Inc. (the "Company") in connection with
the
filing of a Registration Statement on Form S-8 (the "Registration Statement")
with the Securities and Exchange Commission for purpose of registering under
the
Securities Act of 1933, as amended, relating to the proposed sale by the
Company
of up to an aggregate of 3,100,000 shares of common stock, par value $0.01
(the
“Shares”). Of the Shares, 3,000,000 are issuable under the Company's
2007 Equity Incentive Plan (the "2007 Plan") and 100,000 shares (the "Shares")
of common stock, par value $0.001 (the “Common Stock”), are issuable by the
Company under the Company's 1997 Employee Stock Purchase Plan (together with
the
2007 Plan, the "Plans").
We
have
based our opinion upon our review of the following records, documents,
instruments and certificates:
|
·
|
The
Amended and Restated Certificate of Incorporation of the Company,
as
amended to date (the "Certificate"), certified to us by an officer
of the
Company as being complete and in full force and effect as of the
date of
this opinion;
|
|
·
|
The
Bylaws of the Company (the "Bylaws") certified to us by an officer
of the
Company as being complete and in full force and effect as of the
date of
this opinion;
|
|
·
|
Records
certified to us by an officer of the Company as constituting all
records
of proceedings and of actions of the Board of Directors and stockholders
relating to the adoption of the Plans and the reservation of the
Shares
for issuance pursuant to the Plans;
|
|
·
|
The
Plans; and
|
|
·
|
Information
provided by the Company's transfer agent as to the number of outstanding
shares of Common Stock of the
Company.
|
In
connection with this opinion, we have, with your consent, assumed the
authenticity of all records, documents and instruments submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the authenticity and conformity to the originals of all records,
documents and instruments submitted to us as copies.
This
opinion is limited to the federal laws of the United States of America and
the
Delaware General Corporation Law, and we disclaim any opinion as to the laws
of
any other jurisdiction. We further disclaim any opinion as to any statute,
rule,
regulation, ordinance, order or other promulgation of any regional or local
governmental body or as to any related judicial or administrative
opinion.
Our
opinion is qualified to the extent that in the event of a stock split, share
dividend or other reclassification of the Common Stock effected subsequent
to
the date hereof, the number of shares of Common Stock issuable under
the Plans may be adjusted automatically, as set forth in the terms of the
Plans,
such that the number of such shares, as so adjusted, may exceed the number
of
Company's remaining authorized, but unissued shares of Common Stock following
such adjustment.
Based
upon the foregoing and our examination of such questions of law as we have
deemed necessary or appropriate for the purpose of this opinion, and subject
to
the assumptions and qualifications expressed herein, it is our opinion that
upon
payment of the purchase price for the Shares and issuance and delivery of
the
Shares pursuant to the terms of the Plans, the Shares will be validly issued,
fully paid and non-assessable.
We
hereby
consent to the filing of this opinion as an exhibit to, and to the use of
this
opinion in connection with, the Registration Statement.
This
opinion is rendered to you and is solely for your benefit. This opinion may
not
be relied upon by any other person, firm, corporation or other entity without
our prior written consent. We disclaim any obligation to advise you of any
change of law that occurs, or any facts of which we become aware, after the
date
of this opinion.
Very
truly yours,
/s/
Heller Ehrman LLP
Heller
Ehrman LLP
EXHIBIT
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in the Registration
Statement on Form S-8 of A.P. Pharma, Inc. pertaining to the
Company’s 2007 Equity Incentive Plan and 1997 Employee Stock Purchase Plan of
our report dated March 26, 2007, relating to the financial statements of A.P.
Pharma, Inc. included in the Annual Report on Form 10-K for the year ended
December 31, 2006, filed with the Securities and Exchange
Commission. We also consent to the incorporation by reference of our
report dated March 26, 2007, relating to the financial statement schedule which
appears in such Annual Report on Form 10-K.
/s/
ODENBERG, ULLAKKO, MURANISHI & CO. LLP
San
Francisco, California
January
11, 2008
EXHIBIT
23.2
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the 2007 Equity Incentive Plan and 1997 Employee Stock
Purchase Plan of AP Pharma, Inc. of our report dated February 24, 2006, with
respect to the financial statements and schedule of A.P. Pharma, Inc. included
in its Annual Report (Form 10-K) for the year ended December 31, 2006, filed
with the Securities and Exchange Commission.
/s/
Ernst
& Young LLP
Palo
Alto, California
January
9, 2008