Document:

Exhibit 10.4

 

LIPELLA
PHARMACEUTICALS INC.

 

2008
STOCK INCENTIVE PLAN

 

Effective
March __, 2008

 

Article
I

 

PURPOSE AND ADOPTION OF THE PLAN

 

1.1           Purpose.
The purpose of the Lipella Pharmaceuticals Inc. 2008 Stock Incentive Plan (as amended from time to time, the “Plan”)
is to assist the Company in attracting and retaining highly competent employees, officers, directors, consultants and advisors,
to act as an incentive in motivating selected employees, officers, directors, consultants and advisors of the Company to achieve
long-term corporate objectives, and to allow those employees, officers, directors, consultants and advisors to share the benefits
of future growth in the value of the Company by providing them with the opportunity to acquire Common Stock.

 

1.2           Adoption
and Term. The Plan has been approved by the Board as of March __, 2008 and will be effective as of such date (the “Effective
Date”). This Plan shall remain in effect until the tenth anniversary of the Effective Date, or until terminated by the
Board, whichever occurs sooner.

 

Article
II

 

DEFINITIONS

 

For
the purpose of this Plan, capitalized terms shall have the following meanings:

 

2.1           Affiliate
shall have the meaning given to such term in Section 8.6(a)(ii).

 

2.2           Acquiring
Corporation shall have the meaning given to such term in Section 8.9(b).

 

2.3           Award
means any one or a combination of Non-Qualified Stock Options described in Article VI, Incentive Stock Options described
in Article VI or Restricted Shares described in Article VII.

 

2.4           Award
Agreement means a written agreement between the Company and a Participant or a written acknowledgment from the Company to
a Participant specifically setting forth the terms and conditions of an Award granted under the Plan.

 

2.5           Beneficiary
means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company, or if
no such written designation is filed, by operation of law, succeeds to the rights and obligations of the Participant
under the Plan and the Award Agreement upon the Participant’s death.

 

     

     

    

 

2.6           Board
means the Board of Directors of the Company.

 

2.7           Change
in Control means, and shall be deemed to have occurred upon the occurrence of, any one of the following events:

 

  (a)           The
consummation (i.e., closing) of a reorganization, merger or consolidation involving the Company, unless, following such reorganization,
merger or consolidation, all or substantially all of the individuals and entities who were the respective beneficial owners of
the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation,
following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than fifty percent (50%)
of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors or trustees, as the case may be, of the entity resulting from such reorganization,
merger or consolidation in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation, as the case may be;

 

  (b)           The
consummation (i.e., closing) of a sale or other disposition of all or substantially all the assets of the Company, unless, following
such sale or other disposition, all or substantially all of the individuals and entities who were the respective beneficial owners
of the Outstanding Common Stock and Company Voting Securities immediately prior to such sale or other disposition, following such
sale or other disposition beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the
election of directors or trustees, as the case may be, of the entity purchasing such assets in substantially the same proportion
as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such sale or disposition,
as the case may be; or

 

  (c)           prior
to the occurrence of a public offering of the Company’s securities, the consummation of any transaction in connection with
which 50% or more of the Company’s Common Stock beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) by the Company’s shareholders immediately prior to such transaction is disposed of and no longer held by those
shareholders; or

 

  (d)           a
complete liquidation or dissolution of the Company.

 

2.8           Code
means the Internal Revenue Code of 1986, as amended. References to a section of the Code shall include that section and
any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

 

2.9           Company
means Lipella Pharmaceuticals Inc., a Delaware corporation, and its successors.

 

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2.10         Committee
shall have the meaning given to such term in Section 3.1(a).

 

2.11         Common
Stock means Common Stock of the Company, $.0001 par value per share.

 

2.12         Company
Voting Securities means the combined voting power of all outstanding voting securities of the Company entitled to vote generally
in the election of directors to the Board.

 

2.13         Date
of Grant means the date designated by the Board as the date as of which it grants an Award, which shall not be earlier than
the date on which the Board approves the granting of such Award.

 

2.14         Deferral
Right is defined in Section 8.8.

 

2.15         Deferred
Payments is defined in Section 8.8

 

2.16         Effective
Date is defined in Section 1.2.

 

2.17         Exchange
Act means the Securities Exchange Act of 1934, as amended.

 

2.18         Fair
Market Value means, on any date, the fair market value of the Common Stock as determined under procedures established by the
Board from time to time in good faith, provided that any such determination shall comply with the requirements of Section 409A
of the Code. The Fair Market Value may differ depending on whether it refers to the grant, exercise, vesting, or settlement or
payout of an Award.

 

2.19         Incentive
Stock Option means a stock option within the meaning of Section 422 of the Code.

 

2.20         Merger
means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect
involving the Company.

 

2.21         Non-Qualified
Stock Option means a stock option which is not an Incentive Stock Option.

 

2.22         Options
mean all Non-Qualified Stock Options and Incentive Stock Options granted at any time under the Plan.

 

2.23         Outstanding
Common Stock means, at any time, the issued and outstanding shares of Common Stock.

 

2.24         Participant
means a person designated to receive an Award under the Plan in accordance with Section 5.1.

 

2.25         Participant
Shares are any shares of Common Stock issued or issuable to a Participant pursuant to an Award, including shares of Common
Stock issued pursuant to Article VIII and shares of Common Stock issued upon the exercise of Option or shares of Common Stock
issued in connection with a dividend or pursuant to Section 8.9 of this Plan.

 

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2.26         Plan
shall have the meaning given to such term in Section 1.1.

 

2.27         Purchased
Restricted Shares shall have the meaning given to such term in Section 7.1.

 

2.28         Purchase
Price, with respect to Options, shall have the meaning set forth in Section 6.1(b).

 

2.29         Repurchase
Option shall have the meaning given to such term in Section 8.8.

 

2.30         Repurchase
Price shall have the meaning given to such term in Section 8.8.

 

2.31         Repurchased
Shares shall have the meaning given to such term in Section 8.8.

 

2.32         Restricted
Shares means Common Stock subject to restrictions imposed in connection with Awards granted under Article VII.

 

2.33         Retirement
means early or normal retirement under a pension plan or arrangement of the Company or one of its Subsidiaries in which
the Participant participates or, in the case of a Participant who is a non-employee member of the Board, retirement under the
Board’s retirement policy, if any.

 

2.34         Shareholders
Agreement shall have the meaning given to such term in Section 8.15.

 

2.35         Subsidiary
means a subsidiary of the Company within the meaning of Section 424(f) of the Code.

 

2.36         Termination
of Service means (a) with respect to Participants who are employees of the Company, the termination of a Participant’s
employment with the Company for any reason, including death, disability, retirement, or as the result of the divestiture of the
Participant’s employer or any similar transaction in which the Participant’s employer ceases to be the Company; (b)
with regard to a member of the Board who is not an employee, the date on which the individual ceases to be a member of the Board
for any reason; and (c) with regard to consultants, advisors and any other Participant who is neither an employee nor a member
of the Board, the termination of a business relationship, for any reason, between the Participant and the Company or its Affiliates.
In such case, a Termination of Service shall be deemed to have occurred as of the date written notice to that effect is given.
The Board shall, in its discretion, determine the effect of all matters and questions relating to Termination of Service, including,
without limitation, the question of whether a leave of absence constitutes a Termination of Service.

 

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Article
III

ADMINISTRATION

 

3.1           Board.

 

  (a)             Duties
and Authority. The Plan shall be administered by the Board. The Board shall have exclusive and final authority in each determination,
interpretation or other action affecting the Plan and its Participants. The Board shall have the sole discretionary authority
to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate, and to take such steps in connection with the Plan and Awards granted hereunder as it may
deem necessary or advisable. The Board may, subject to compliance with applicable legal requirements, delegate such of its powers
and authority under the Plan as it deems appropriate to designated officers or employees of the Company. In addition, the Board
may appoint a committee to exercise any of the powers and authority conferred upon the Board under the Plan (“Committee”).
In the event of such delegation of authority or appointment of Committee, references in the Plan to the Board shall be deemed
to refer, as appropriate, to the delegate of the Board or the Committee, as the case may be.

 

  (b)             Indemnification.
Each person who is or shall have been a member of the Board or the Committee, or an officer of the Company to whom authority was
delegated in accordance with the Plan shall be indemnified and held harmless by the Company against and from any loss, cost, liability,
or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure
to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s
approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes
to handle and defend it on his or her own behalf; provided, however, that the foregoing indemnification shall not apply to any
loss, cost, liability, or expense that is a result of his or her own willful misconduct. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s
Certificate of Incorporation or Bylaws, conferred in a separate agreement with the Company, as a matter of law, or otherwise,
or any power that the Company may have to indemnify them or hold them harmless.

 

3.2           Compliance
with Section 409A of the Code. The Company intends that no Awards granted under the Plan shall be considered to provide for
the deferral of compensation under Section 409A of the Code and, accordingly, this Plan shall be so administered and construed.
Further, the Company may modify the Plan and any Award to the extent necessary to fulfill this intent. Consistent with the intent
of this Section 3.2, in the event that any provision that is necessary for the Plan to comply with Section 409A is determined
by the Board, in its sole discretion, to have been omitted, such omitted provision shall be deemed included herein and is hereby
incorporated as part of the Plan.

 

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Article
IV

 

SHARES

 

4.1           Number
of Shares Issuable. The total number of shares initially authorized to be issued under the Plan shall be 1,000,000 shares
of Common Stock. No more than 1,000,000 shares of Common Stock may be issued under the Plan as Incentive Stock Options. The foregoing
share limits shall be subject to adjustment in accordance with Section 8.9. The shares to be offered under the Plan shall be authorized
and unissued Common Stock, or issued Common Stock that shall have been reacquired by the Company.

 

4.2           Shares
Subject to Terminated Awards. Common Stock covered by any unexercised portions of terminated or forfeited Options (including
canceled Options) granted under Article VI, Common Stock forfeited as provided in Section 7.2(a), or surrendered, forfeited or
repurchased pursuant to this Plan including, without limitation, Sections 8.6 or 8.8, may again be subject to new Awards under
the Plan. Shares of Common Stock surrendered to or withheld by the Company in payment or satisfaction of the Purchase Price of
an Option or tax withholding obligation with respect to an Award shall be available for the grant of new Awards under the Plan.

 

Article
V

 

PARTICIPATION

 

5.1           Eligible
Participants. Participants in the Plan shall be such employees, officers, directors, consultants and advisors of the Company
and its subsidiaries as the Board, in its sole discretion, may designate from time to time. The Board’s designation of a
Participant in any year shall not require the Board to designate such person to receive Awards or grants in any other year. The
designation of a Participant to receive Awards or grants under one portion of the Plan does not require the Board to include such
Participant under other portions of the Plan. The Board shall consider such factors as it deems pertinent in selecting Participants
and in determining the type and amount of their respective Awards.

 

Article
VI

 

STOCK OPTIONS

 

6.1           Option
Awards.

 

  (a)             Grant
of Options. The Board may grant, to such Participants as the Board may select, Options entitling the Participant to purchase
shares of Common Stock from the Company in such number, at such price, and on such terms and subject to such conditions, not inconsistent
with the terms of this Plan, as may be established by the Board. The terms of any Option granted under this Plan shall be set
forth in an Award Agreement.

 

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  (b)             Purchase
Price of Options. The Purchase Price of each share of Common Stock which may be purchased upon exercise of any Option granted
under the Plan shall be determined by the Board; provided, however, that the Purchase Price of the Common Stock purchased pursuant
to Options shall be equal to or greater than the Fair Market Value of such Common Stock on the Date of Grant.

 

  (c)             Designation
of Options. The Board shall designate, at the time of the grant of each Option, the Option as an Incentive Stock Option or
a Non-Qualified Stock Option.

 

  (d)             Incentive
Stock Option Share Limitation. No Participant may be granted Incentive Stock Options under the Plan (or any other plans of
the Company and its Subsidiaries) that would result in shares with an aggregate Fair Market Value (measured on the Date of Grant)
of more than $100,000 first becoming exercisable in any one calendar year.

 

  (e)             Rights
as a Shareholder. A Participant or a transferee of an Option pursuant to Section 8.4 shall have no rights as a shareholder
with respect to Common Stock covered by an Option until the Participant or transferee shall have become the holder of record of
any such shares, and no adjustment shall be made for dividends in cash or other property or distributions or other rights with
respect to any such Common Stock for which the record date is prior to the date on which the Participant or a transferee of the
Option shall have become the holder of record of any such shares covered by the Option; provided, however, that Participants are
entitled to share adjustments to reflect capital changes under Section 8.9.

 

6.2           Terms
of Stock Options.

 

  (a)             Conditions
on Exercise. An Award Agreement with respect to Options may contain such waiting periods, exercise dates and restrictions
on exercise (including, without limitation, periodic installments) as may be determined by the Board at the time of grant.

 

  (b)             Duration
of Options. Options shall terminate upon the first to occur of the following events:

 

      (i)       
    Expiration of the Option as provided in the Award Agreement; or

 

      (ii)           Except
as otherwise provided in the Award Agreement or permitted by the Board pursuant to Section 6.2(c) below, a Participant’s
disability, retirement, death or other Termination of Service; or

 

      (iii)          In
the case of an Incentive Stock Option, ten years from the Date of Grant.

 

  (c)             Acceleration
or Extension of Exercise Time. The Board, in its sole discretion, shall have the right (but shall not be obligated), exercisable
on or at any time after the Date of Grant, to permit the exercise of an Option (i) prior to the time such Option would become
exercisable under the terms of the Award Agreement, (ii) after the termination of the Option under the terms of the Award Agreement,
or (iii) after the expiration of the Option.

 

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6.3           Exercise
Procedures. Each Option granted under the Plan shall be exercised prior to the close of business on the expiration date of
the Option by written notice to the Company or by such other method as provided in the Award Agreement or as the Board may establish
or approve from time to time. The Purchase Price of shares purchased upon exercise of an Option granted under the Plan shall be
paid in full in cash by the Participant pursuant to the Award Agreement; provided, however, that the Board may (but shall not
be required to) permit payment to be made by delivery to the Company of either (a) Common Stock (which may include Restricted
Shares or shares otherwise issuable in connection with the exercise of the Option, subject to such rules as the Board deems appropriate)
or (b) any combination of cash and Common Stock, or (c) such other consideration as the Board deems appropriate and in compliance
with applicable law (including payment in accordance with a cashless exercise program under which, if so instructed by the Participant,
Common Stock may be issued directly to the Participant’s broker or dealer upon receipt of an irrevocable written notice
of exercise from the Participant). In the event that any Common Stock shall be transferred to the Company to satisfy all or any
part of the Purchase Price, the part of the Purchase Price deemed to have been satisfied by such transfer of Common Stock shall
be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of
Common Stock transferred to the Company. The Participant may not transfer to the Company in satisfaction of the Purchase Price
any fractional share of Common Stock. Any part of the Purchase Price paid in cash upon the exercise of any Option shall be added
to the general funds of the Company and may be used for any proper corporate purpose. Unless the Board shall otherwise determine,
any Common Stock transferred to the Company as payment of all or part of the Purchase Price upon the exercise of any Option shall
be held as treasury shares.

 

6.4           Change
in Control. The Award Agreement may, in the Board’s discretion, provide that in the event of a Change in Control, all
or some portion of the Options outstanding on the date of such Change in Control shall become immediately and fully exercisable;
absent such provision in the Award Agreement, Options shall not immediately vest upon a Change in Control. The provisions of this
Section 6.4 shall not be applicable to any Options granted to a Participant if any Change in Control results from such Participant’s
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of Common Stock or Company Voting Securities.

 

6.5           Early
Exercise. An Award Agreement may, but need not, provide that the Participant may elect to exercise the Option in whole or
in part prior to the date the Option is fully vested. Absent such a provision in the Award Agreement, Options are not exercisable
prior to the vesting thereof. The provision may be included in the Award Agreement at the time of grant of the Option or may be
added to the Award Agreement by amendment at a later time. In the event of an early exercise of an Option, any shares of Common
Stock received shall be subject to a special repurchase right in favor of the Company with terms established by the Board. The
Board shall determine the time(s) and/or the event(s) that causes the repurchase right to terminate and fully vest the Common
Stock in the Participant. Alternatively, in the sole discretion of the Board, one or more Participants may be granted stock purchase
rights allowing them to purchase shares of Common Stock which are not subject to such repurchase right, subject to conditions
and restrictions as the Board may determine.

 

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Article
VII

 

RESTRICTED SHARES

 

7.1           Restricted
Share Awards. The Board may grant to any Participant an Award of Common Stock in such number of shares, and on such terms,
conditions and restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership
of purchased or designated shares of Common Stock or other criteria, as the Board shall establish. Without limitation of the foregoing,
the Board may require that one or more Participants pay for Restricted Shares such amount as shall be determined by the Board
(such payment method to be determined by the Board) (such Restricted Shares are referred to herein as “Purchased Restricted
Shares”). The terms of any Restricted Share Award granted under this Plan shall be set forth in an Award Agreement which
shall contain provisions determined by the Board and not inconsistent with this Plan.

 

  (a)             Issuance
of Restricted Shares. As soon as practicable after the Date of Grant of a Restricted Share Award by the Board, the Company
shall cause to be transferred on the books of the Company, or its agent, Common Stock, registered on behalf of the Participant,
evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company as of the Date of Grant if an
Award Agreement with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely
returned to the Company. All Common Stock covered by Awards under this Article VII shall be subject to the restrictions, terms
and conditions contained in the Plan and the Award Agreement entered into by the Participant. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares may be held
in custody by the Company, its designee, or, if the certificates bear a restrictive legend, by the Participant. Upon the lapse
or release of all restrictions with respect to an Award as described in Section 7.1(d), one or more share certificates, registered
in the name of the Participant, for an appropriate number of shares as provided in Section 7.1(d), free of any restrictions set
forth in the Plan and the Award Agreement shall be delivered to the Participant.

 

  (b)             Shareholder
Rights. Beginning on the Date of Grant of the Restricted Share Award and subject to execution of the Award Agreement as provided
in Section 7.1(a), the Participant shall become a shareholder of the Company with respect to all shares subject to the Award Agreement
and shall have all of the rights of a shareholder, including, without limitation, the right to vote such shares and the right
to receive dividends; provided, however, that any Common Stock distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed, shall be subject to the same restrictions as such Restricted Shares and
held or restricted as provided in Section 7.1(a).

 

  (c)             Restriction
on Transferability. Except as otherwise permitted by the Company, none of the Restricted Shares may be assigned or transferred
(other than by will or the laws of descent and distribution, or to an inter vivos trust with respect to which the Participant
is treated as the owner under Sections 671 through 677 of the Code, except to the extent that Section 16 of the Exchange Act limits
a Participant’s right to make such transfers), pledged or sold prior to lapse of the restrictions applicable thereto.

 

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  (d)           Delivery
of Shares Upon Vesting. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction
of or release from any other conditions prescribed by the Board, or at such earlier time as provided under the provisions of Section
7.3, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, as
determined by the Board in its sole and absolute discretion, subject to the requirements of Section 8.5, the Company shall deliver
to the Participant or, in case of the Participant’s death, to the Participant’s Beneficiary, one or more share certificates
for the appropriate number of shares of Common Stock, free of all such restrictions, except for any restrictions that may be imposed
by law and other restrictions imposed hereunder.

 

7.2           Terms
of Restricted Shares.

 

  (a)             Forfeiture
of Restricted Shares. Subject to Sections 7.2(b) and 7.3, all Restricted Shares shall be forfeited and returned to the Company
and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the
service of the Company or a subsidiary until the expiration of the forfeiture period for such Restricted Shares and satisfies
any and all other conditions set forth in the Award Agreement. The Board shall determine the forfeiture period (which may, but
need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award.

 

  (b)             Waiver
of Forfeiture Period. Notwithstanding anything contained in this Article VII to the contrary, the Board may at any time and
from time to time, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement
(including, without limitation, the death, disability or retirement of the Participant or a material change in circumstances arising
after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted
Shares) as the Board shall determine.

 

  (c)             Purchased
Restricted Shares. If the forfeited Restricted Shares are Purchased Restricted Shares, the Company shall pay to the Participant
the amount paid by the Participant for such forfeited Restricted Shares which purchase price may be in the form of immediately
available funds and/or the release of debt if and to the extent that the Participant paid all or a portion of the purchase price
through debt, as determined by the Board.

 

7.3           Change
in Control. The Restricted Shares Award Agreement may, in the Board’s discretion, provide that in the event of a Change
in Control, all or any part of the restrictions applicable to the Restricted Shares Award shall terminate and the Participant
shall immediately have the right to the delivery of share certificate or certificates for the relevant shares in accordance with
Section 7.1(d); absent such provision in the Restricted Shares Award Agreement, the restrictions applicable to the Restricted
Shares Award shall not terminate upon a change in control.

 

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Article
VIII

 

TERMS APPLICABLE GENERALLY TO AWARDS

 

GRANTED UNDER THE PLAN

 

8.1           Plan
Provisions Control Award Terms. Except as provided in Section 8.19, the terms of the Plan shall govern all Awards granted
under the Plan, and in no event shall the Board have the power to grant any Award under the Plan which is contrary to any of the
provisions of the Plan. In the event any provision of any Award granted under the Plan shall conflict with any term in the Plan
as constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of Grant of such Award shall
control. Except as provided in Section 8.3 and Section 8.9, the terms of any Award granted under the Plan may not be changed after
the Date of Grant of such Award so as to materially decrease the value of the Award without the express written approval of the
holder.

 

8.2           Award
Agreement. No person shall have any rights under any Award granted under the Plan unless and until the Company and the Participant
to whom such Award shall have been granted shall have executed and delivered an Award Agreement or received any other Award acknowledgment
authorized by the Board expressly granting the Award to such person and containing provisions setting forth the terms of the Award.

 

8.3           Modification
of Award After Grant. No Award granted under the Plan to a Participant may be modified (unless such modification does not
materially decrease the value of the Award) after the Date of Grant except by express written agreement between the Company and
the Participant, provided that any such change (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved
by the Board.

 

8.4           Limitation
on Transfer. Except as provided in Section 7.1(c) in the case of Restricted Shares, a Participant’s rights and interest
under the Plan may not be assigned or transferred other than by will or the laws of descent and distribution, and during the lifetime
of a Participant, only the Participant personally (or the Participant’s personal representative) may exercise rights under
the Plan. The Participant’s Beneficiary may exercise the Participant’s rights to the extent they are exercisable under
the Plan following the death of the Participant. Notwithstanding the foregoing, to the extent permitted under Section 16(b) of
the Exchange Act with respect to Participants subject to such Section, the Board may grant Non-Qualified Stock Options that are
transferable, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for
such family members, and the Board may also amend outstanding Non-Qualified Stock Options to provide for such transferability.

 

8.5           Taxes.
The Company shall be entitled, if the Board deems it necessary or desirable, to withhold (or secure payment from the Participant
in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with
respect to any amount payable and/or shares issuable under such Participant’s Award, or with respect to any income recognized
upon a disqualifying disposition of shares received pursuant to the exercise of an Incentive Stock Option, and the Company may
defer payment or issuance of the cash or shares upon exercise or vesting of an Award unless indemnified to its satisfaction against
any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Board and shall be payable
by the Participant at such time as the Board determines in accordance with the following rules:

 

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  (a)             The
Participant shall have the right to elect to meet his or her withholding requirement (i) by having withheld from such Award at
the appropriate time that number of shares of Common Stock, rounded up to the next whole share, whose Fair Market Value is equal
to the amount of withholding taxes due, (ii) by direct payment to the Company in cash of the amount of any taxes required to be
withheld with respect to such Award or (iii) by a combination of shares and cash.

 

  (b)             The
Board shall have the discretion as to any Award, to cause the Company to pay to tax authorities for the benefit of any Participant,
or to reimburse such Participant for the individual taxes which are due on the grant, exercise or vesting of any share Award,
or the lapse of any restriction on any share Award (whether by reason of a Participant’s filing of an election under Section
83(b) of the Code or otherwise), including, but not limited to, Federal income tax, state income tax, local income tax and excise
tax under Section 4999 of the Code, as well as for any such taxes as may be imposed upon such tax payment or reimbursement.

 

  (c)             In
the case of Participants who are subject to Section 16 of the Exchange Act, the Board may impose such limitations and restrictions
as it deems necessary or appropriate with respect to the delivery or withholding of shares of Common Stock to meet tax withholding
obligations.

 

8.6           Certain
Conditions on Awards

 

  (a)             Covenants.
Except as may be provided in the applicable Award Agreement, as a condition for participation in this Plan, the Participant shall
agree and covenant as follows:

 

      (i)           Noncompetition.
From the Date of Grant and continuing for a period of twelve (12) months immediately following the Participant’s
Termination of Service, the Participant shall not directly or indirectly engage in or become associated as an employee,
consultant, partner, owner, agent, stockholder, officer or director of, or otherwise have a business relationship with, any
person or organization engaged in, or about to become engaged in, a business that competes, directly or indirectly, with the
business of the Company or its Affiliates within the United States of America and any of its possessions and any other
location in which the Company has an office.

 

      (ii)           Nonsolicitation
of Clients. For a period of twenty-four (24) months immediately following the Participant’s Termination of Service,
the Participant shall not (A) induce or attempt to induce, directly or indirectly, any Client (as defined below) to cease doing
business with the Company, (B) induce or attempt to induce, directly or indirectly, any Client or Prospective Client (as defined
below) to not commence doing business with the Company, or (C) solicit the business of any Client or Prospective Client. “Client”
means a client of the Company or a client with which the Company has done business in the one year period ending on the Participant’s
Termination of Service, and all Affiliates thereof. “Prospective Client” means any potential client of the Company,
which the Company has either contacted within the one-year period ending on the Participant’s Termination of Service or
has been identified by the Company as a potential client during such one-year period, and all Affiliates thereof. “Affiliate”
means a person or entity that controls, is controlled by, or is under common control with, any Client or Prospective Client.

 

    12 

     

    

 

      (iii)          Nonsolicitation
of Company Employees. From the Date of Grant and continuing for a period of twenty-four (24) months immediately following
the Participant’s Termination of Service, the Participant shall not either directly or indirectly solicit, induce, recruit
or encourage any of the employees or prospective employees of the Company or any Affiliate thereof to leave their employment;
or take away such employees, or attempt to solicit, induce, recruit, encourage or take away employees of the Company or any Affiliate
thereof, either for the Participant’s own benefit or for any other person or entity.

 

  (b)             Violation
of Covenants. In the event that the Board determines that the Participant has violated any of the covenants contained in Section
8.6(a), then at the sole discretion of the Board:

 

      (i)           all
of the Participant’s unexercised Options (whether vested or not) shall terminate immediately;

 

      (ii)          all
of the Participant’s Restricted Shares shall be forfeited to the Company and, if and to the extent that such Restricted
Shares are Purchased Restricted Shares, the Company shall pay to the Participant the amount paid by the Participant for such forfeited
Restricted Shares which purchase price may be in the form of immediately available funds and/or the release of debt if and to
the extent that the Participant paid all or a portion of the purchase price through debt, as determined by the Board;

 

      (iii)
        to the extent that the Participant has previously exercised an Option (including any
exercise of the unvested portion of the Option under Section 6.5 above) in respect of Common Stock still held by the Participant,
then at the option of the Company, the Participant, upon notice from the Company of the Participant’s obligations under
this Section 8.6(b)(iii), shall either (A) immediately deliver to the Company an amount in cash equal to the then-Fair Market
Value of such Common Stock less the aggregate Purchase Price and taxes paid by or on behalf of the Participant with respect to
such Option exercise, or (B) sell such Common Stock to the Company for an amount equal to the aggregate Purchase Price and taxes
paid by the Participant with respect to such Option exercise;

 

      (iv)          to
the extent that the Participant has previously exercised an Option (including any exercise of the unvested portion of the Option
under Section 6.5 above) in respect of Common Stock of which the Participant has disposed, the Participant, upon notice from the
Company of the Participant’s obligations under this Section 8.6(b)(iii), shall immediately pay the Company an amount equal
to the amount realized by the Participant upon the disposition of such Common Stock less the aggregate Purchase Price and taxes
paid by the Participant with respect to such Option exercise;

 

    13 

     

    

 

      (v)
         to the extent that the Participant has previously been granted Restricted
Shares that are no longer restricted (the “Vested Restricted Shares”), then at the option of the Company,
the Participant, upon notice from the Company of the Participant’s obligations under this Section 8.6(b)(v), shall
either (A) immediately deliver to the Company an amount in cash equal to the then-Fair Market Value of such Vested Restricted
Shares less the taxes paid by the Participant upon receipt of the Vested Restricted Shares, or (B) sell such Vested
Restricted Shares to the Company for an amount equal to the taxes paid by the Participant upon receipt of the Vested
Restricted Shares or, if the Vested Restricted Shares are Purchased Restricted Shares, the amount paid by the Participant for
such forfeited Restricted Shares which purchase price may be in the form of immediately available funds and/or the release of
debt if and to the extent that the Participant paid all or a portion of the purchase price through debt, as determined by the
Board;

 

      (vi)          to
the extent that the Participant has previously been granted Restricted Shares in respect of Common Stock of which the Participant
has disposed (regardless of whether the Restricted Shares are or were Vested Restricted Shares), the Participant, upon notice
from the Company of the Participant’s obligations under this Section 8.6(b)(vi), shall immediately pay the Company an amount
equal to the amount realized by the Participant upon the disposition of such Common Stock less the aggregate taxes paid by the
Participant upon receipt of the Restricted Shares;

  

      (vii)         the
notice described in subsections (ii) – (vi) of this Section 8.6(b) may be given at any time within twelve months after the
expiration of the applicable covenant period under Section 8.6(a). In addition, the Company shall have the right to require appropriate
documentation regarding the amount of any taxes paid by or on behalf of the Participant with respect to any Option exercise or
receipt of Restricted Shares.

8.7           Surrender
of Awards. Any Award granted under the Plan may be surrendered to the Company for cancellation on such terms as the Board
and the holder approve. With the consent of the Participant, the Board may substitute a new Award under this Plan in connection
with the surrender by the Participant of an equity compensation award previously granted under this Plan or any other plan sponsored
by the Company; provided, however, that if the Company’s stock is publicly traded and such approval is required by the rules
of any applicable stock exchange, no such substitution shall be permitted without the approval of the Company’s shareholders.

 

    14 

     

    

 

8.8           Repurchase
Option. Unless otherwise provided in the Award Agreement, each Award (together with any Common Stock issued or isssuable upon
the exercise of an Option) shall be subject to the right and option of the Company to purchase Participant Shares upon such Participant’s
Termination of Service for whatever reason (the “Repurchase Option”) (the Participant Shares as to which the
Repurchase Option has been exercised are referred to herein as the “Repurchased Shares”). The Company may exercise
the Repurchase Option, in whole or in part, within one hundred and eighty (180) days following the Termination of Service, by
giving a written notice to the Participant. Such a notice shall set forth the date of sale, the price per Repurchased Share, the
terms of payment, and the other terms and conditions of the sale. If an execution of any Option shall occur after the Termination
of Service, then the Company may exercise its Repurchase Option, with regard to the newly issued Shares, within one hundred eighty
(180) days following the issuance of such Shares to the Optionee. The purchase price at which the Repurchased Shares will be acquired
shall be the Fair Market Value per share of the Common Stock of the Company multiplied by the number of such Repurchased Shares
(“Repurchase Price”). The Repurchase Price may, in the Company’s discretion, be paid in one lump-sum
payment at the settlement or paid in five (5) equal annual installments over five (5) years (or such lesser number of equal installments
and/or over such shorter periods) as calculated from the date of the settlement (such election to defer the payment of the Repurchase
Price is referred to herein as the “Deferral Right” and the deferred payments are referred to herein as the
“Deferred Payments”). The Deferred Payments shall accrue interest at five percent (5%), per annum, and
all accrued interest for the relevant period shall be payable on the date the installment payment for that period is due. Deferred
Payments shall be payable upon a Change in Control and shall be prepayable by the Company in whole or in part at any time and
from time to time without penalty or premium. Settlement for the purchase of the Repurchased Shares pursuant to the provisions
of this Section shall be made within thirty (30) days following the date of exercise of the Repurchased Option. All settlements
for the repurchase and sale of the Repurchased Shares shall, unless otherwise agreed to by the Company and the Participant, be
held at the principal executive offices of the Company during regular business hours. At settlement, the stock certificate or
certificates representing the Repurchased Shares shall be delivered by the Participant to the Company, duly endorsed for transfer
or with executed stock power attached, with any necessary documentary and transfer tax stamped affixed by the Participant free
and clear of all liens, claims and encumbrances except for the terms of this Agreement. The Company may determine whether or not
to exercise the Repurchase Option in its sole and absolute discretion, and the failure to exercise the Repurchase Option with
respect to one or more Participants shall not constitute a waiver to exercise the Repurchase Option with respect to other Participants.

 

8.9           Adjustments
to Reflect Capital Changes.

 

  (a)             Recapitalization.
The number and kind of shares subject to outstanding Awards, the Purchase Price for such shares, the number and kind of shares
available for Awards subsequently granted under the Plan and the maximum number of shares in respect of which Awards can be made
to any Participant in any calendar year shall be appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization with a similar substantive effect upon the Plan
or the Awards granted under the Plan. The maximum number of shares in respect of which Awards can be made to any Participant in
any calendar year shall be proportionately adjusted to reflect any other event that results in an increase in the number of issued
and outstanding shares of Common Stock. The Board shall have the power and sole discretion to determine the amount of the adjustment
to be made in each case.

 

    15 

     

    

 

  (b)             Merger.
After any Merger in which the Company is the surviving corporation, each Participant shall, at no additional cost, be entitled
upon any exercise of all Options or receipt of other Award to receive (subject to any required action by shareholders), in lieu
of the number of shares of Common Stock receivable or exercisable pursuant to such Award, the number and class of shares or other
securities to which such Participant would have been entitled pursuant to the terms of the Merger if, at the time of the Merger,
such Participant had been the holder of record of a number of shares equal to the number of shares receivable or exercisable pursuant
to such Award. Comparable rights shall accrue to each Participant in the event of successive Mergers of the character described
above. In the event of a Merger in which the Company is not the surviving corporation, the surviving, continuing, successor, or
purchasing corporation, as the case may be (the “Acquiring Corporation”), shall either assume the Company’s
rights and obligations under outstanding Award Agreements or substitute awards in respect of the Acquiring Corporation’s
stock for such outstanding Awards. In the event the Acquiring Corporation fails to assume or substitute for such outstanding Awards,
the Board may, at its election, provide that any unexercisable and/or unvested portion of the outstanding Awards shall be immediately
exercisable and/or vested as of a date prior to such Merger, as the Board so determines. The exercise and/or vesting of any Award
that was permissible solely by reason of this Section 8.9(b) shall be conditioned upon the consummation of the Merger. Any Options
which are neither assumed by the Acquiring Corporation nor exercised as of the date of the Merger shall terminate effective as
of the effective date of the Merger.

 

  (c)             Options
to Purchase Shares or Stock of Acquired Companies. After any Merger in which the Company or a Subsidiary shall be a surviving
corporation, the Board may grant substituted options under the provisions of the Plan, pursuant to Section 424 of the Code, replacing
old options granted under a plan of another party to the Merger whose shares or stock subject to the old options may no longer
be issued following the Merger. The foregoing adjustments and manner of application of the foregoing provisions shall be determined
by the Board in its sole discretion. Any such adjustments may provide for the elimination of any fractional shares which might
otherwise become subject to any Options.

 

8.10         No
Right to Continued Service. No person shall have any claim of right to be granted an Award under this Plan. Neither the
Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the service of
the Company or any of its Subsidiaries.

 

8.11         Awards
Not Includable for Benefit Purposes. Payments received by a Participant pursuant to the provisions of the Plan shall not be
included in the determination of benefits under any pension, group insurance or other benefit plan applicable to the Participant
which is maintained by the Company or any of its Affiliates, except as may be provided under the terms of such plans or determined
by the Board.

 

8.12         Governing
Law. All determinations made and actions taken pursuant to the Plan shall be governed by the internal laws of the State of
Delaware and construed in accordance therewith.

 

8.13         No
Strict Construction. 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, any Award granted under the Plan or any rule or procedure established by the
Board.

 

    16 

     

    

 

8.14         Initial
Public Offering. As a condition of participation in this Plan, each Participant shall be obligated to cooperate with the Company
and the underwriters in connection with any public offering of the Company’s securities and any transactions relating to
a public offering, and shall execute and deliver any agreements and documents, including without limitation, a lock-up agreement,
that may be requested by the Company or the underwriters. The Participants’ obligations under this Section shall apply to
any Common Stock issued under the Plan as well as to any and all other securities of the Company or its successor for which Common
Stock may be exchanged or into which Common Stock may be converted.

 

8.15         Shareholders
Agreement. As a condition to the exercise of any Option hereunder or the receipt of Restricted Stock the Participant shall
execute a joinder to the Shareholders Agreement between the Company and its stockholders in effect at the time of exercise, including,
without limitation, 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 or the receipt of Restricted Shares, the Participant will
agree in writing that, upon request of the Company, the Participant will execute and deliver a Shareholders Agreement containing
such restrictions on the transfer of the Company’s securities, and such other provisions as shall, in the sole judgment
of the Board reflect commercially reasonable terms. The Company shall have no obligation to issue shares to the Participant unless
and until the Participant has complied with this Section.

 

8.16         Captions.
The captions (i.e., all Section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, and
shall not be deemed to limit, characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall
be construed as if no captions have been used in the Plan.

 

8.17         Severability.
Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under
the Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions
of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect.

 

8.18         Amendment
and Termination.

 

  (a)             Amendment.
The Board shall have complete power and authority to amend the Plan at any time; provided, however, that the Board shall not,
without the requisite affirmative approval of shareholders of the Company, make any amendment which requires shareholder approval
under the Code or under any other applicable law or rule of any stock exchange which lists Common Stock or Company Voting Securities.
No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been
granted under the Plan, adversely affect the right of such individual under such Award.

 

    17 

     

    

 

  (b)             Termination.
The Board shall have the right and the power to terminate the Plan at any time. No Award shall be granted under the Plan after
the termination of the Plan, but the termination of the Plan shall not have any other effect and any Award outstanding at the
time of the termination of the Plan may be exercised after termination of the Plan at any time prior to the expiration date of
such Award to the same extent such Award would have been exercisable had the Plan not terminated.

 

8.19         Foreign
Qualified Awards. Awards under the Plan may be granted to such employees of the Company and its Subsidiaries who are residing
in foreign jurisdictions as the Board in its sole discretion may determine from time to time. The Board may adopt such supplements
to the Plan as may be necessary or appropriate to comply with the applicable laws of such foreign jurisdictions and to afford
Participants favorable treatment under such laws; provided, however, that no Award shall be granted under any such supplement
with terms or conditions inconsistent with the provision set forth in the Plan.

 

    18Exhibit
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.

 

    2 

     

    

 

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.

 

    3 

     

    

 

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.

 

    4 

     

    

 

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]

 

    5 

     

    

 

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:	    	 	 

 

    6 

     

    

 

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.

 

    2 

     

    

 

(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]

 

    3 

     

    

 

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

 

    4

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