Exhibit
10.5


 


LIPELLA
PHARMACEUTICALS INC.


2008 INCENTIVE PLAN


 


STOCK
OPTION AGREEMENT


 


NOTICE OF STOCK OPTION GRANT


 


Optionee:
_______


 


The
Optionee has been granted an Option to purchase a number of shares of Lipella Pharmaceuticals Inc. Common Stock, $.0001 par value
per share, as designated below (the “Shares”), subject to the terms and conditions of the Lipella Pharmaceuticals
Inc. 2008 Stock Incentive Plan, as amended from time to time (the “Plan”), and this Option Agreement, as follows:


 


	Date
    of Grant: [   ]	Type
    of Option: [   ]
	Purchase
    Price per Share: $[   ] per share	Expiration
    Date: [   ]
	Total
Number of

Shares with Respect  

        to
which the 

        Option
is Granted: [   ]
	Total
    Purchase Price: $[   ]
	Vesting
Schedule: [   ]

	Exercise
                                         After Termination of Services

         

        Termination
        of Services for any reason: any non-vested portion of the Option expires immediately;

         

        Termination
        of Services due to death or disability (within the meaning of Section 22(e)(3) of the Code): vested portion of the Option
        is exercisable by the Optionee (or, in the event of the Optionee’s death, the Optionee’s Beneficiary) for
        a period of three years following the Optionee’s Termination; 

         

        Termination
        of Services for any reason other than death or Disability: vested portion of the Option is exercisable for a period of
        three years following the Optionee’s Termination.

         

        In
no event may this Option be exercised after the Expiration Date set forth in this Notice of Stock Option Grant (the “Notice
of Grant”). The Option, whether exercised or unexercised, is further subject to cancellation and rescission under
Section 8.6(b) of the Plan upon the violation of any covenant contained in Section 8.6(a) of the Plan.



 






     


     


    

 


1.            Grant
of Option. The Option granted to the Optionee and described in the Notice of Grant is subject to the terms and conditions
of the Plan, which is incorporated by reference in its entirety into this Option Agreement. In the event of a conflict between
the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail. Capitalized
terms not otherwise defined in this Agreement shall have the meaning given to the terms in the Plan.


 


If
designated in this Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that the Option fails to meet
the requirements of an ISO under Section 422 of the Code, this Option shall be treated as a Non-Qualified Stock Option (“NSO”).


 


		2.	Exercise
of Option.



 


(a)          Right
to Exercise. This Option shall be exercisable, in whole or in part, during its term in accordance with the applicable provisions
of the Plan and this Option Agreement. No Shares shall be issued pursuant to the exercise of an Option unless the issuance and
exercise comply with applicable laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to such Shares.


 


(b)          Method
of Exercise. The Optionee may exercise the Option by delivering an exercise notice in the form attached as Exhibit A
to this Option Agreement (the “Exercise Notice”) which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be
required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Purchase Price as to all Shares
exercised. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied
by the aggregate Purchase Price.


 


3.            Method
of Payment. If the Optionee elects to exercise the Option by submitting an Exercise Notice under Section 2(b) of this Agreement,
the aggregate Purchase Price (as well as any applicable withholding or other taxes) shall be paid by cash or check; provided,
however, that the Board may consent, in its discretion, to payment in any of the following forms, or a combination of them:


 


(a)          cash
or check;


 


(b)          consideration
received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan;


 


(c)          surrender
of other Shares which (i) have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have
a Fair Market Value on the date of surrender equal to the aggregate Purchase Price of the Exercised Shares; or


 


(d)          any
other consideration that the Board deems appropriate and in compliance with applicable law.


 


4.            Restrictions on Exercise. This Option may not be exercised if the issuance
of the Shares upon exercise or the method of payment of consideration for those Shares would constitute a violation of any
applicable law or regulation.


 






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5.            Non-Transferability
of Option. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall
be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.


 


6.            Term
of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Option Agreement.


 


7.            Transfer
Restrictions. The Optionee shall not sell, assign, transfer, pledge, hypothecate, give away, or in any manner dispose of or
encumber, whether voluntarily or by operation of law, whether for consideration or for no consideration (a “Transfer”),
any shares of the Company Common Stock or any interest in any shares of the Company Common Stock acquired under this Agreement
unless such Transfer is permitted by and is in accordance with the terms and subject to the conditions of this Agreement or unless
such Transfer is approved in advance in writing by the Board, which approval the Board shall have no obligation to give. Any attempted
Transfer of any Common Stock that is not permitted under the terms of this Section shall be null and void, and the Company shall
not give effect to any such attempted Transfer on its books and records. No person holding Common Stock that is Transferred in
violation of this Agreement shall be entitled to receive distributions on that stock (including, without limitation, any right
to distributions upon a merger, dissolution, liquidation or winding up of the affairs of the Company) or shall be entitled to
the rights under this Agreement, which benefits and rights shall continue to accrue to the exclusive benefit of the person who
made such impermissible Transfer. The provisions of this Section shall expire upon, and so long as, the Common Stock (or a successor
security) is publicly traded on an established securities market; provided, however, that the Optionee shall continue to be subject
to any limitations, restrictions or other conditions that may be imposed or otherwise arise under Section 8.14 of the Plan with
respect to any public offering of the Company’s securities.


 


8.           Shareholders
Agreement. As a condition to the exercise of the Option hereunder, the Optionee shall execute a joinder to the Shareholders
Agreement between the Company and its stockholders in effect at the time of exercise, including but not limited to the Shareholders
Agreement, dated as of May 26, 2005 between the Company and the shareholders party thereto (as amended from time to time, the
“Shareholders Agreement”). If a Shareholders Agreement is not in effect at the time of exercise, as a condition
to the exercise of the Option hereunder, the Optionee will agree in writing that, upon request of the Company, the Optionee will
execute and deliver a Shareholders Agreement containing such restrictions on the transfer of the Company’s securities, including
without limitation, the Shares, and such other provisions as shall, in the sole judgment of the Board of Directors of the Company,
reflect commercially reasonable terms. The Company shall have no obligation to issue shares to the Optionee pursuant to the exercise
of the Option unless and until the Optionee has complied with this Section.


 


9.           Rescission
of Option or Option Exercise. The Optionee acknowledges that the Option (including any exercise of the Option) and this Option
Agreement are subject to the provisions of Section 8.6 of the Plan, including the cancellation of the Option and the rescission
of any exercise of the Option. Further, the Optionee expressly agrees to and adopts the covenants contained in subsections (i),
(ii) and (iii) of Section 8.6(a) of the Plan relating to noncompetition, nonsolicitation of clients, and nonsolicitation of Company
employees, respectively.


 






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10.           Entire
Agreement, Amendment, Governing Law and Venue. The Plan and this Option 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 the Optionee with respect to the subject matter hereof (but not agreements, if any, relating to other matters), and may not
be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and the Optionee. This
Option Agreement is governed by, and shall be construed and enforced in accordance with, the internal laws of the State of Delaware.
Each party consents and agrees that jurisdiction and venue of any actions instituted under this Option Agreement, or any agreement
executed in connection herewith, or the transactions contemplated herein or therein, shall be proper solely in the state and federal
courts in Allegheny County, Pennsylvania and waive any objections to jurisdiction and venue. Each party waives any right to a
jury trial. No rule of strict construction shall be implied against the Company, the Board or any other person in the interpretation
of any of the terms of the Plan, this Agreement or any rule or procedure established by the Board.


 


11.           Further
Assurances. The Optionee agrees, upon demand of the Company or the Board, to do all acts and execute, deliver and perform
all additional documents, instruments and agreements (including, without limitation, stock powers with respect to shares of Common
Stock issued upon exercise of the Option) which may be reasonably required by the Company or the Board.


 


12.           Optionee’s
Acknowledgment. The Optionee acknowledges receipt of a copy of the Plan, represents that Optionee is familiar with the terms
and provisions of the Plan, and accepts this Option subject to all of those terms and provisions. The Optionee has reviewed the
Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this
Option Agreement, and fully understands all provisions of the Option. Optionee acknowledges that the shares purchased pursuant
to the exercise of the Option and subject to the Repurchase Option (as defined in the Plan). The Optionee agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan or this
Option Agreement. The Optionee further agrees to notify the Company upon any change in the residence address indicated below.


 






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13.           No
Guarantee of Continued Service. THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULES
IS EARNED ONLY BY CONTINUING IN THE SERVICE OF THE COMPANY AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, OR
ENGAGED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT,
THE TRANSACTIONS CONTEMPLATED UNDER IT AND THE VESTING SCHEDULE DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF THE CONTINUED
EMPLOYMENT OR ENGAGEMENT OR OTHERWISE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH
OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT OR ENGAGEMENT OR OTHERWISE AT ANY
TIME, WITH OR WITHOUT CAUSE.


 


[SIGNATURE
PAGE FOLLOWS]


 






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IN
WITNESS WHEREOF, intending to be legally bound, the parties have signed this Option Agreement as of the Date of Grant set forth
in the Notice of Grant.


	 	 	 	 	 	 	 	 	 
	Optionee:	 	Lipella Pharmaceuticals Inc.
	 	 	 
	By:	                          	 	By:	                          
	Name:	             	 	Name:	           
	 	 	Title:	            
	 	 	 
	Residence Address:	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	Social Security Number:	    	 	 



 






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EXHIBIT
A


 


2008
STOCK INCENTIVE PLAN


 


OPTION
EXERCISE NOTICE


 


Lipella
Pharmaceuticals Inc. 


___________________ 


___________________ 


___________________ 


Attn:
President


 


1.            Exercise
of Option. Effective as of today, ______________, 20___ , I, ___________ (the “Optionee”), elect to exercise
my Option to purchase ___________ shares of the Common Stock (the “Shares”) of Lipella Pharmaceuticals Inc.
(the “Company”) under and pursuant to the Lipella Pharmaceuticals Inc. 2008 Stock Incentive Plan (the “Plan”)
and the Stock Option Agreement dated [   ] (the “Option Agreement”).


 


2.            Method
of Payment. Included with this Exercise Notice is payment in full of the aggregate Purchase Price of the Shares being exercised,
as set forth in the Option Agreement. I further acknowledge and agree that I am responsible for the payment of any applicable
withholding taxes or other amounts that arise as a result of the exercise of the Option.


 


3.            Representations
of Optionee. The Optionee represents that:


 


(a)          the
Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to exercise the Option and acquire the Company’s Common Stock.
The Optionee’s exercise of the Option is for investment for the Optionee’s own account only and not with a view to,
or for resale in connection with, any “distribution” of the Company’s Common Stock within the meaning of the
Securities Act of 1933 (the “Securities Act”).


 


(b)          the
Optionee acknowledges and understands that any Shares of the Company’s Common Stock acquired upon exercise of the Option
constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act
in reliance upon a specific exemption from the Securities Act, which exemption depends upon, among other things, the bona fide
nature of the Optionee’s investment intent as expressed above. The Optionee further understands that the exercised Option
Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration
is available. The Optionee further acknowledges and understands that the Company is under no obligation to register the Company’s
Common Stock acquired upon exercise of the Option. The Optionee understands that the certificate evidencing the exercised Option
Shares will be imprinted with a legend which prohibits the transfer of those Shares unless they are registered or such registration
is not required in the opinion of counsel satisfactory to the Company, and any other legend required under applicable state securities
laws.


 






     


     


    

 


(c)          the
Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms
and conditions.


 


4.            Rights
as Stockholder. Until the issuance of the Shares (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, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon
as practicable after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date
is prior to the date of issuance except as provided in Section 8.7 of the Plan.


 


5.            Tax
Consultation. Optionee understands that Optionee may be subject to certain tax liabilities and consequences as a result of
Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.


 


		6.	Restrictive
Legends and Stop-Transfer Orders.



 


(a)          Legend.
Optionee understands and agrees that the Company shall cause the legend set forth below, or a substantially equivalent legend,
to be placed upon any certificates evidencing ownership of the Shares together with any other legends that may be required by
the Company or by state or federal securities laws, the Shareholders Agreement dated as of May 26, 2005 among the Company and
the Shareholders party thereto, as amended from time to time (the “Shareholders Agreement”), or any other stockholders
agreement between the Company and its Shareholders in effect at the time of exercise:


 


THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION
OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF
FIRST REFUSAL HELD BY THE ISSUER (OR ITS ASSIGNEES) AS SET FORTH IN A WRITTEN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES. THE SECRETARY OF THE COMPANY WILL UPON REQUEST FURNISH A COPY OF SUCH AGREEMENT, AND ANY OTHER AGREEMENT TO WHICH
THESE SHARES ARE SUBJECT, TO THE HOLDER HEREOF WITHOUT CHARGE. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.


 






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(b)          Stop-Transfer
Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue
appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own
securities, it may make appropriate notations to the same effect in its own records.


 


(c)          Refusal
to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.


 


7.            Joinder
to Shareholders Agreement. As a condition to the exercise of the Option hereunder, the Optionee shall execute a joinder to
any shareholders agreement between the Company and its shareholders in effect at the time of exercise, including but not limited
to, the Shareholders Agreement.


 


8.            Successors
and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this
Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer
herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors
and assigns.


 


9.            Entire
Agreement. The Plan, the Shareholders Agreement, and the Option Agreement are incorporated herein by reference. This Exercise
Notice, the Plan, the Shareholders Agreement, and the Option 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 the Optionee’s interest except by means
of a writing signed by the Company and Optionee.


 


[SIGNATURE
PAGE FOLLOWS]


 






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	Submitted by:	 	Accepted by:
	 	 	 
	Optionee:	 	Lipella Pharmaceuticals Inc.
	 	 	 
	 	 	By:	                             
	Signature	 	 
	 	 	Name:	              
	 	 	 
	Name	 	Title:	                 
	 	 	 
	 	 	 
	Residence Address:	 	 
	 	 	 
	 	 	 
	 	 	Date Received
	 	 	 




 


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