exv10w8






Exhibit 10.8




CPEX PHARMACEUTICALS, INC.

2008 EQUITY AND INCENTIVE PLAN




1. Purpose




     The purpose of the Plan is to attract and retain key employees, consultants, and directors of
the Company and its Affiliates, to provide an incentive for them to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the Company. The Plan seeks to
achieve this purpose by providing Awards in the form of Restricted Stock, Restricted Stock Units,
Cash Awards, Options (which may constitute Incentive Stock Options or Nonstatutory Stock Options)
or Stock Appreciation Rights.



2. Definitions




     Capitalized terms are defined in the provisions of the Plan or in Appendix 1 attached hereto,
which is incorporated in the Plan by this reference. Appendix 1 also contains a list of defined
terms and reference to where their definitions appear in the Plan.



3. Administration




     The Plan shall be administered by the Committee. The Committee shall determine which eligible
employees, consultants, and directors will receive Awards. The Committee shall have authority to
adopt, alter and repeal such administrative rules, guidelines and practices governing the operation
of the Plan as it shall from time to time consider advisable, to interpret the provisions of the
Plan and any Award agreement, and to remedy any ambiguities or inconsistencies therein. The
Committee’s decisions shall be final and binding. To the extent permitted by applicable law, the
Committee may delegate to one or more executive officers of the Company the power to make Awards to
Participants who are not subject to Section 16 of the Exchange Act and all determinations under the
Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards
for all such Participants and a maximum for any one Participant, and such other features of the
Awards as required by applicable law.



4. Eligibility




     All employees, directors and consultants of the Company or any Affiliate are eligible to be
Participants in the Plan. Incentive Stock Options may be granted only to eligible employees of the
Company or its Affiliates who are taxpayers for United States federal income tax purposes.



5. Stock Available for Awards





     (a) Amount. Subject to the provisions of Section 5(b), the total number of shares
which may be subject to Awards under the Plan shall not exceed four hundred fifty thousand
(450,000), all of which may be granted as Incentive Stock Options. If any Award under the
Plan expires, is terminated unexercised, or is forfeited or settled in a manner that results
in fewer shares outstanding than were originally awarded, then any shares no longer subject
to such Award and not issued thereunder shall again be available for Awards under the Plan.
Common Stock issued through the assumption or substitution of outstanding grants from
Bentley Pharmaceuticals, Inc. (“Rollover Awards”) or from an acquired company shall not
reduce the shares available for Awards under the Plan. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury shares.




     (b) Adjustment. In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares, or other transaction affects the Common
Stock such that an adjustment is required in order to preserve the benefits intended to be
provided by the Plan, then the Committee (subject in the case of Incentive Stock Options to
any limitation required under the Code) shall equitably adjust any



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or all of (i) the number and kind of shares in respect of which Awards may be made
under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii)
the exercise price with respect to any of the foregoing, and if considered appropriate, the
Committee may make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole number.




     (c) Limit on Individual Grants. The maximum number of shares of Common Stock subject
to all Awards that may be granted under the Plan to any Participant in the aggregate in any
calendar year shall not exceed one hundred thousand (100,000) shares subject to adjustment
under subsection (b). With respect to any Award settled in cash that is intended to satisfy
the requirements for “performance-based compensation” (within the meaning of Section
162(m)(4)(C) of the Code), no more than two million dollars ($2,000,000) may be paid to any
one individual with respect to each year of a Performance Period.



6. Stock Options





     (a) Grant of Options. Subject to the provisions of the Plan, the Committee may grant
options (“ Options ”) to purchase shares of Common Stock (i) complying with the requirements
of Section 422 of the Code or any successor provision and any regulations thereunder (“
Incentive Stock Options ”), and (ii) not intended to comply with such requirements (“
Nonstatutory Stock Options ”). The Committee shall determine the number of shares subject to
each Option and the exercise price therefor, which, except with respect to Rollover Awards,
shall not be less than 100% of the Fair Market Value of the Common Stock on the date of
grant.




     (b) Terms and Conditions. Each Option shall be exercisable at such times and subject
to such terms and conditions as the Committee may specify in the applicable grant or
thereafter; provided that (i) no Option shall be exercisable after the expiration of ten
years from the date the Option is granted, and (ii) no Option may be granted with a reload
feature which provides for an automatic grant of additional or replacement options upon the
exercise of an Option. The Committee may impose such conditions with respect to the exercise
of Options, including conditions relating to applicable securities laws, as it considers
necessary or advisable.




     (c) Payment. No shares shall be delivered pursuant to any exercise of an Option until
payment in full of the exercise price therefor is received by the Company. Such payment may
be made in whole or in part in cash or to the extent permitted by the Committee at or after
the grant of the Option, pursuant to any of the following methods: (i) by actual delivery
and transfer, or attestation of ownership and delivery of a valid instrument of transfer, to
the Company of shares of Common Stock owned by the Participant, including vested Restricted
Stock, (ii) by retaining shares of Common Stock otherwise issuable pursuant to the Option,
(iii) for consideration received by the Company under a broker-assisted cashless exercise
program acceptable to the Company, or (iv) for such other lawful consideration as the
Committee may determine.



7. Stock Appreciation Rights





     (a) Grant of SARs. Subject to the provisions of the Plan, the Committee may grant
rights to receive any excess in value of shares of Common Stock over the exercise price (“
Stock Appreciation Rights ” or “ SARs ”) in tandem with an Option (at or after the award of
the Option), or alone and unrelated to an Option. SARs in tandem with an Option shall
terminate to the extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. The Committee shall determine at
the time of grant or thereafter whether SARs are settled in cash, Common Stock or other
securities of the Company, Awards or other property.




     (b) Exercise Price. The Committee shall fix the exercise price of each SAR or specify
the manner in which the price shall be determined. An SAR granted in tandem with an Option
shall have an exercise price not less than the exercise price of the related Option. An SAR
granted alone and unrelated to an Option may not have an exercise price that, except with
respect to Rollover Awards, is less than 100% of the Fair Market Value of the Common Stock
on the date of the grant.



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8. Restricted Stock and Restricted Stock Units





     (a) Grant of Restricted Stock. Subject to the provisions of the Plan, the Committee
may grant shares of Common Stock subject to forfeiture (“ Restricted Stock ”) and determine
the duration of the period (the “ Restricted Period ”) during which, and the conditions
under which, the shares may be forfeited to the Company and the other terms and conditions
of such Awards. Shares of Restricted Stock may be issued for no cash consideration or such
minimum consideration as may be required by applicable law.




     (b) Restrictions. Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during the Restricted
Period. Shares of Restricted Stock shall be evidenced in such manner as the Committee may
determine. Any certificates issued in respect of shares of Restricted Stock shall be
registered in the name of the Participant and unless otherwise determined by the Committee,
deposited by the Participant, together with a stock power endorsed in blank, with the
Company. At the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or, if the Participant has died, to the Participant’s
Designated Beneficiary.




     (c) Restricted Stock Units. Subject to the provisions of the Plan, the Committee may
grant the right to receive in the future shares of Common Stock subject to forfeiture (“
Restricted Stock Units ”) and determine the duration of the Restricted Period during which,
and the conditions under which, the Award may be forfeited to the Company and the other
terms and conditions of such Awards, which terms and conditions shall comply with the
requirements set forth in Section 409A of the Code. Restricted Stock Unit Awards shall
constitute an unfunded and unsecured obligation of the Company, and shall be settled in shares of Common Stock or cash, as determined by the Committee at the time of grant or
thereafter. Such Awards shall be made in the form of “units” with each unit representing the
equivalent of one share of Common Stock.



9. General Provisions Applicable to Awards





     (a) Transferability. Except as otherwise provided in this Section 9(a), an Award (i)
shall not be transferable other than as designated by the Participant by will or by the laws
of descent and distribution, and (ii) may be exercised during the Participant’s lifetime
only by the Participant or by the Participant’s guardian or legal representative. In the
discretion of the Committee, any Award may be transferable upon such terms and conditions
and to such extent as the Committee determines at or after grant, provided that Incentive
Stock Options may be transferable only to the extent permitted by the Code.




     (b) Documentation. Each Award under the Plan shall be evidenced by a writing delivered
to the Participant specifying the terms and conditions thereof and containing such other
terms and conditions not inconsistent with the provisions of the Plan as the Committee
considers necessary or advisable to achieve the purposes of the Plan or to comply with
applicable tax and regulatory laws and accounting principles.




     (c) Committee Discretion. Each type of Award may be made alone, in addition to or in
relation to any other Award. The terms of each type of Award need not be identical, and the
Committee need not treat Participants uniformly. In addition to the authority granted to the
Committee in Section 9(l) to make Awards to Covered Employees which qualify as
“performance-based compensation” for purposes of Section 162(m) of the Code, the Company may
grant Awards subject to such performance conditions (including performance-based vesting) as
it shall determine in its discretion. Except as otherwise provided by the Plan or a
particular Award, any determination with respect to an Award may be made by the Committee at
the time of grant or at any time thereafter.




     (d) Dividends and Cash Awards. In the discretion of the Committee, any Award under the
Plan may provide the Participant with (i) dividends or dividend equivalents payable
currently or deferred with or without interest, and (ii) cash payments in lieu of or in
addition to an Award; provided, however that if such payment or dividend equivalents would
be subject to Section 409A of the Code, no such



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payment may be made if it would fail to comply with the requirements set forth in
Section 409A of the Code.




     (e) Termination of Employment or Service. The Committee shall determine and set forth
in the grant agreement evidencing the Award the effect on an Award of the disability, death,
retirement or other termination of employment or service of a Participant and the extent to
which, and the period during which, the Participant’s legal representative, guardian or
Designated Beneficiary may receive payment of an Award or exercise rights thereunder, which
shall comply with the requirements set forth in Section 409A of the Code. Unless the
Committee provides otherwise in any case, a Participant’s employment or service shall have
terminated for purposes of the Plan at the time the entity by which the Participant is
employed or to which the Participant renders service ceases to be an Affiliate of the
Company.




     (f) Change in Control. In order to preserve a Participant’s rights under an Award in
the event of a change in control of the Company as defined by the Committee (a “Change in
Control”), the Committee in its discretion may, at the time an Award is made or at any time
thereafter, take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or payment of the Award, (ii) provide for payment
to the Participant of cash or other property with a Fair Market Value equal to the amount
that would have been received upon the exercise or payment of the Award had the Award been
exercised or paid upon the Change in Control, (iii) adjust the terms of the Award in a
manner determined by the Committee to reflect the Change in Control, (iv) cause the Award to
be assumed, or new rights substituted therefor, by another entity, or (v) make such other
provision as the Committee may consider equitable to Participants and in the best interests
of the Company. Except to the extent the Committee provides otherwise, with respect to an
Award that is subject to Section 409A of the Code, a Change in Control shall be deemed to
have occurred under this Plan with respect to such Award only if the Change in Control
qualifies as a “change in control event” (within the meaning of Treasury Regulation Section
1.409A-3(i)(5)).




     (g) Loans. Except for loans to reporting Persons, which are not authorized hereunder,
the Committee may authorize the making of loans to Participants in connection with the grant
or exercise of any Award under the Plan.




     (h) Withholding Taxes. The Participant shall pay to the Company, or make provision
satisfactory to the Committee for payment of, any taxes required by law to be withheld in
respect of Awards under the Plan no later than the date of the event creating the tax
liability. In the Committee’s discretion, such tax obligations may be paid in whole or in
part in shares of Common Stock, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value on the date of delivery. The Company and its
Affiliates may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Participant.




     (i) Foreign National Awards. Notwithstanding anything to the contrary contained in the
Plan, Awards may be made to Participants who are foreign nationals or employed or performing
services outside the United States on such terms and conditions different from those
specified in the Plan as the Committee considers necessary or advisable to achieve the
purposes of the Plan or to comply with applicable laws.




     (j) Amendment of Award. Except as provided in Section 9(k), the Committee may amend,
modify or terminate any outstanding Award, including substituting therefor another Award of
the same or a different type, changing the date of exercise or realization, and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s
consent to such action shall be required unless (i) the Committee determines that the
action, taking into account any related action, would not materially and adversely affect
the Participant, or (ii) the action is permitted by the terms of the Plan.




     (k) No Repricing of Options. Notwithstanding anything to the contrary in the Plan, the
Company shall not engage in any repricing of Options granted under the Plan without further
stockholder approval. For this purpose, the term “repricing” shall mean any of the following
or other action that has the same effect: (i) lowering the exercise price of an Option after
it is granted, (ii) any other action that is



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treated as a repricing under generally accepted accounting principles, or (iii)
canceling an Option at a time when its exercise price exceeds the fair market value of the
underlying stock in exchange for another Option, Restricted Stock, or other equity of the
Company, unless the cancellation and exchange occurs in connection with a merger,
acquisition, spin-off, or similar corporate transaction.




     (l) Code Section 162(m) Provisions. If the Committee determines at the time an Award
is granted to a Participant that such Participant is, or may be as of the end of the tax
year for which the Company would claim a tax deduction in connection with such Award, a
Covered Employee, then the Committee may provide that the Participant’s right to receive
cash, Stock, or other property pursuant to such Award shall be subject to the satisfaction
of Performance Goals during a Performance Period. Prior to the payment of any Award subject
to this Section 9(l), the Committee shall certify in writing that the Performance Goals and
other material terms applicable to such Award were satisfied. Notwithstanding the attainment
of Performance Goals by a Covered Employee, the Committee shall have the right to reduce
(but not to increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant. The Committee shall have
the power to impose such other restrictions on Awards subject to this Section 9(l) as it may
deem necessary or appropriate to ensure that such Awards satisfy all requirements for
“performance-based compensation” within the meaning of Section 162(m) of the Code.



10. Miscellaneous





     (a) No Right To Employment. No person shall have any claim or right to be granted an
Award. Neither the Plan nor any Award hereunder shall be deemed to give any employee the
right to continued employment or service or to limit the right of the Company to discharge
any Participant at any time.




     (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no
Participant or Designated Beneficiary shall have any rights as a stockholder with respect to
any shares of Common Stock to be distributed under the Plan until he or she becomes the
holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder
of the Stock at the time of the Award except as otherwise provided in the applicable Award.




     (c) Effective Date. The Plan shall become effective on the Effective Date.




     (d) Amendment and Term of Plan. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, subject to such stockholder approval as the Board
determines to be necessary or advisable to comply with any tax or regulatory requirement.
Unless terminated earlier by the Board or extended by subsequent approval of the Company’s
stockholders, the term of the Plan shall expire at the close of business on the date
immediately preceding the tenth anniversary of the date on which the Plan was originally
approved by stockholders, and no further Awards shall be made thereafter.




     (e) Governing Law. The provisions of the Plan shall be governed by and interpreted in
accordance with the laws of Delaware.




     (f) Code Section 409A Compliance. Notwithstanding any provision of the Plan, to the
extent that any Award would be subject to Section 409A of the Code, no such Award may be
granted if it would fail to comply with the requirements of Section 409A of the Code. To
the extent that the Committee determines that the Plan or any Award is subject to Section
409A of the Code and fails to comply with the requirements of Section 409A of the Code,
notwithstanding anything to the contrary contained in the Plan or in any Award agreement,
the Committee reserves the right to amend or terminate the Plan and/or amend, restructure,
terminate or replace the Award in order to cause the Award to either not be subject to
Section 409A of the Code or to comply with the applicable provisions of such section.



The Plan was adopted by the Board of Directors on May 13, 2008.




The Plan was approved by the stockholders on May 13, 2008.







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APPENDIX 1




     “ Affiliate ” means any business entity in which the Company owns directly or indirectly 50%
or more of the total voting power or has a significant financial interest as determined by the
Committee.



     “ Award ” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Cash Award, or Foreign National Award granted under the Plan.



     “ Board ” means the Board of Directors of the Company.



     “ Cash Award ” — See Section 9(d).



     “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, or any
successor law.



     “ Committee ” means one or more committees each comprised of not less than three members of
the Board appointed by the Board to administer the Plan or a specified portion thereof. If a
Committee is authorized to grant Awards to a Reporting Person or a Covered Employee, each member
shall be a “disinterested person” or the equivalent within the meaning of applicable Rule 16b-3
under the Exchange Act or an “outside director” or the equivalent within the meaning of Section
162(m) of the Code, respectively.



     “ Common Stock ” or “ Stock ” means the Common Stock, $.01 par value, of the Company.



     “ Company ” means CPEX Pharmaceuticals, Inc.



     “ Covered Employee ” means a “ covered employee ” within the meaning of Section 162(m) of the
Code.



     “ Designated Beneficiary ” means the beneficiary designated by a Participant, in a manner
determined by the Committee, to receive amounts due or exercise rights of the Participant in the
event of the Participant’s death. In the absence of an effective designation by a Participant, “
Designated Beneficiary ” means the Participant’s estate.



     “ Effective Date ” — See Section 1.



     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, or
any successor law.



     “ Fair Market Value ” means, unless otherwise determined by the Committee, the closing price
of a share of Common Stock on the Nasdaq Capital Market Exchange as of the relevant date.



     “ Foreign National Award ” — See Section 9(i).



     “ Incentive Stock Option ” — See Section 6(a).



     “ Nonstatutory Stock Option ” — See Section 6(a).



     “ Option ” — See Section 6(a).



     “ Participant ” means a person selected by the Committee to receive an Award under the Plan.



     “ Performance Goals ” means with respect to any Performance Period, one or more objective
performance goals based on one or more of the following objective criteria established by the
Committee prior to the beginning of such Performance Period or within such period after the
beginning of the Performance Period as shall meet the requirements to be considered
“pre-established performance goals” for purposes of Code Section 162(m): (i) increases in the price
of the Common stock, (ii) market share, (iii) sales, (iv) revenue, (v) return on equity, assets, or
capital, (vi) economic profit (economic value added), (vii) total shareholder return, (viii) costs,
(ix) expenses, (x) margins, (xi) earnings or earnings per share, (xii) cash flow, (xiii) customer
satisfaction, (xiv) operating profit, (xv)



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research and development, (xvi) product development, (xvii) manufacturing, or (xviii) any
combination of the foregoing, including without limitation, goals based on any of such measures
relative to appropriate peer groups or market indices. Such Performance Goals may be particular to
a Participant or may be based, in whole or in part, on the performance of the Company generally or
on the performance of the division, department, line of business, subsidiary, or other business
unit, whether or not legally constituted, in which the Participant works.



     “ Performance Period ” means the period of service designated by the Committee applicable to
an Award subject to Section 9(l) for which the Performance Goals will be measured.



     “ Plan ” means the CPEX Pharmaceuticals, Inc. 2008 Equity and Incentive Plan.



     “ Reporting Person ” means a person subject to reporting under Section 16 of the Exchange Act.



     “ Restricted Period ” — See Section 8(a).



     “ Restricted Stock ” — See Section 8(a).



     “ Restricted Stock Unit ” — See Section 8(c).



     “ Stock Appreciation Right ” or “ SAR ” — See Section 7(a).



     “ Treasury Regulations ” means the federal tax regulations promulgated by the U.S. Department
of Treasury.




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