<SEC-DOCUMENT>0001193125-11-156346.txt : 20110901
<SEC-HEADER>0001193125-11-156346.hdr.sgml : 20110901

<ACCEPTANCE-DATETIME>20110601172618

<PRIVATE-TO-PUBLIC>

ACCESSION NUMBER:		0001193125-11-156346

CONFORMED SUBMISSION TYPE:	PRER14A

PUBLIC DOCUMENT COUNT:		2

FILED AS OF DATE:		20110601

DATE AS OF CHANGE:		20110603


FILER:


	COMPANY DATA:	

		COMPANY CONFORMED NAME:			AP PHARMA INC /DE/

		CENTRAL INDEX KEY:			0000818033

		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]

		IRS NUMBER:				942875566

		STATE OF INCORPORATION:			DE

		FISCAL YEAR END:			1231



	FILING VALUES:

		FORM TYPE:		PRER14A

		SEC ACT:		1934 Act

		SEC FILE NUMBER:	001-33221

		FILM NUMBER:		11886124



	BUSINESS ADDRESS:	

		STREET 1:		123 SAGINAW DRIVE

		CITY:			REDWOOD CITY

		STATE:			CA

		ZIP:			94063

		BUSINESS PHONE:		6503662626



	MAIL ADDRESS:	

		STREET 1:		123 SAGINAW DRIVE

		STREET 2:		123 SAGINAW DRIVE

		CITY:			REDWOOD CITY

		STATE:			CA

		ZIP:			94063



	FORMER COMPANY:	

		FORMER CONFORMED NAME:	ADVANCED POLYMER SYSTEMS INC /DE/

		DATE OF NAME CHANGE:	19920703



</SEC-HEADER>

<DOCUMENT>
<TYPE>PRER14A
<SEQUENCE>1
<FILENAME>dprer14a.htm
<DESCRIPTION>REVISED PRELIMINARY PROXY
<TEXT>
<HTML><HEAD>
<TITLE>Revised Preliminary Proxy</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">UNITED STATES </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1">SECURITIES AND EXCHANGE COMMISSION </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">WASHINGTON, D.C. 20549 </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4">SCHEDULE 14A </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">PROXY STATEMENT PURSUANT
TO SECTION&nbsp;14 (a)&nbsp;OF THE </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">SECURITIES EXCHANGE ACT OF 1934 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">(AMENDMENT NO. 1) </FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Filed by the Registrant&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;x&nbsp;] </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">Filed by a Party
other than the Registrant&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;&nbsp;] </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">Check the appropriate box: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;x&nbsp;]</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Preliminary Proxy Statement</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ROWSPAN="4"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-6 (e) (2)</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Definitive Proxy Statement</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Definitive Additional Materials</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Soliciting Material Pursuant to &#167;240.14a-12</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4">A. P. PHARMA, INC. </FONT></P>
<P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">(Name of Registrant as Specified In Its
Charter) </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">(Name of Person(s) Filing Proxy Statement, if other than the Registrant) </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">Payment of Filing Fee (Check the appropriate box): </FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

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<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="94%"></TD></TR>
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<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;x&nbsp;]</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:ARIAL" SIZE="2">No fee required.</FONT></TD></TR>
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<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:ARIAL" SIZE="2">Fee computed on table below per Exchange Act Rules&nbsp;14a-6 (i)(4) and 0-11.</FONT></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">1)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Title of each class of securities to which transaction applies:</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">2)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Aggregate number of securities to which transaction applies:</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">3)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">4)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Proposed maximum aggregate value of transaction:</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD HEIGHT="5" COLSPAN="2"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">5)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Total fee paid:</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD HEIGHT="5" COLSPAN="4"></TD></TR>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:ARIAL" SIZE="2">Fee paid previously with preliminary materials.</FONT></TD></TR>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:ARIAL" SIZE="2">Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its filing.</FONT></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">1)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Amount Previously Paid:</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">2)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Form, Schedule or Registration Statement No.</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">3)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Filing Party:</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR>
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<TD HEIGHT="5" COLSPAN="2"></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">4)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Date Filed:</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>A.P. PHARMA, INC. </B></FONT></P>
<P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.4pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Notice Of Annual Meeting Of Stockholders </FONT></B></FONT></P>
<P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">To Be Held June&nbsp;29, 2011 </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">To our Stockholders: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Annual Meeting of Stockholders of A.P. Pharma, Inc. (&#147;we,&#148; &#147;us&#148; and
&#147;our&#148;) will be held on June&nbsp;29, 2011 at 9:00 a.m. local time at our headquarters located at 123 Saginaw Drive, Redwood City, California 94063, for the following purposes, as more fully described in the accompanying Proxy Statement:
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">1.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To elect four nominees for Director, named herein to serve until the 2012 Annual Meeting of Stockholders and until their successors are duly elected and qualified;
</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To approve an amendment to the Company&#146;s Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of the Company&#146;s common
stock from 100,000,000 to 1,500,000,000; </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">3.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To approve an amendment to our 2007 Equity Incentive Plan (the &#147;2007 Plan&#148;) to: a) increase by 90,000,000 the authorized number of shares of common stock reserved for
issuance under our 2007 Plan, b) increase the maximum number of shares of our common stock, par value $0.01 per share (the &#147;Shares&#148;) that can be granted to an individual as an equity award in any calendar year from 300,000 shares to 50% of
the authorized number of shares reserved for issuance under the 2007 Plan and c) allow for automatic annual increases to the number of shares authorized for issuance under the 2007 Plan for each of the next three years; </FONT></TD></TR></TABLE>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">4.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To approve an amendment to the Company&#146;s 1997 Employee Stock Purchase Plan (&#147;ESPP&#148;) to increase by 500,000 the number of shares of common stock reserved for
issuance under the Company&#146;s ESPP; </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">5.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To ratify the appointment of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP as our independent registered public accounting firm for the fiscal year ending December&nbsp;31,
2011; and </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">6.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Only stockholders of record at the close of business on May&nbsp;24, 2011 will be entitled to notice of, and to vote at, such meeting or any adjournments or
postponements thereof. A list of stockholders entitled to vote at the meeting will be available for inspection at our offices located at 123 Saginaw Drive, Redwood City, California 94063 for at least 10 days prior to the meeting and will also be
available for inspection at the meeting. </FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="25%" BORDER="0">

<TR>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="95%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:ARIAL" SIZE="2">BY ORDER OF THE BOARD OF DIRECTORS</FONT></TD></TR>
<TR>
<TD HEIGHT="13" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/<U></U></FONT></P></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="3" NOWRAP><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;, Secretary</FONT></TD></TR></TABLE> <P STYLE="margin-top:10px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">Redwood City, California </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">May &nbsp;&nbsp;&nbsp;&nbsp;, 2011 </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">YOUR VOTE IS IMPORTANT </FONT></B></FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>You are cordially invited to attend
the Annual Meeting. Whether or not you expect to attend the meeting, you are urged to mark, sign, date and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose or follow the instructions on
the enclosed proxy card to vote by telephone or via the Internet.&nbsp;Submitting a proxy or voting instructions will not prevent you from attending the Annual Meeting and voting in person, if you so desire. Please note, however, that if your shares
are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain from the record holder a proxy issued in your name. </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>A.P. PHARMA, INC. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">123 Saginaw Drive </FONT></B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT
STYLE="font-family:ARIAL" SIZE="2">Redwood City, California 94063 </FONT></B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">(650) 366-2626
</FONT></B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.4pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PROXY STATEMENT </FONT></B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.4pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS </FONT></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">FOR THE STOCKHOLDERS MEETING TO BE HELD ON JUNE 29, 2011 </FONT></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">THE PROXY STATEMENT AND THE ANNUAL REPORT ARE AVAILABLE AT: </FONT></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">http://www.edocumentview.com/APPA </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">2011 ANNUAL MEETING OF STOCKHOLDERS </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">The enclosed proxy is being solicited on behalf of our Board of Directors (the &#147;Board&#148;) for use at the Annual Meeting of Stockholders to be held on June&nbsp;29, 2011 at 9:00 a.m. local time at our
headquarters located at 123 Saginaw Drive, Redwood City, California 94063, or at any adjournments or postponements thereof (the &#147;Annual Meeting&#148;). The proxy materials and the Annual Report are being mailed to stockholders on or about May
&nbsp;&nbsp;&nbsp;&nbsp;, 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Only holders of our common stock as of the close of business on May&nbsp;24, 2011 (the &#147;Record Date&#148;) are
entitled to vote at the Annual Meeting. Stockholders who hold our shares in &#147;street name&#148; may vote at the Annual Meeting only if they hold a valid proxy from their broker. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">As of the Record Date, there were &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock outstanding. A majority of the outstanding shares of common stock entitled to vote
at the Annual Meeting must be present in person or by proxy in order for there to be a quorum at the meeting. Stockholders of record who are present at the meeting in person or by proxy and who abstain from voting, including brokers holding
customers&#146; shares of record who cause abstentions to be recorded at the meeting, will be included in the number of stockholders present at the meeting for purposes of determining whether a quorum is present. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Each stockholder of record is entitled to one vote at the Annual Meeting for each share of common stock held by such stockholder on the Record Date. Stockholders
do not have cumulative voting rights. Stockholders may vote their shares by using the proxy card enclosed with this Proxy Statement. All proxy cards received by us which are properly voted, whether by signed proxy card, telephonic or internet
voting, that have not been revoked will be voted in accordance with the instructions contained in the proxy cards. For shares held in &#147;street name&#148; through a broker or other nominee, the broker or nominee may not be permitted to exercise
voting discretion with respect to some of the matters to be acted upon. Thus, if stockholders do not give their broker or nominee specific instructions, their shares may not be voted on those matters and will not be counted in determining the number
of shares necessary for approval. This could result in a &#147;broker non-vote&#148; on such a proposal. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">1 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Directors will be elected by a favorable vote of a plurality of the aggregate votes present, in person or by proxy,
at the Annual Meeting. Abstentions will not affect the outcome of the election of candidates for director. Absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on certain
non-routine items, such as the election of directors. Thus, if the beneficial owner does not give a broker specific instructions, the beneficially owned shares may not be voted on the election of directors and will not be counted in determining the
number of shares necessary for approval, although they will count for purposes of determining whether a quorum exists. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The proposal to increase the
authorized shares of the Company&#146;s common stock to 1,500,000,000 requires the affirmative vote, in person or by proxy, of a majority of the outstanding shares as of the record date. Proxies reflecting abstentions will be treated as votes
against this proposal. Brokers are expected to be able to vote shares held for a beneficial owner on this proposal, but are not required to do so. Thus, if the beneficial owner does not give a broker specific voting instructions on this proposal,
the beneficially owned shares may be voted, or may be left un-voted and present at the meeting merely as a broker non-vote. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The proposals to: 1)
approve the amendment to our 2007 Plan to (a)&nbsp;increase by 90,000,000 the authorized number of shares of common stock reserved for issuance under our 2007 Plan (b)&nbsp;increase the maximum number of shares of our common stock that can be
granted to an individual as an equity award in any calendar year from 300,000 shares to 50% of the authorized shares reserved for issuance under our 2007 Plan and c) allow for automatic annual increases to the number of shares authorized for
issuance under the 2007 Plan for each of the next three years and 2) increase by 500,000 the number of shares reserved for issuance under the Company&#146;s ESPP require the affirmative vote of a majority of the aggregate votes present, in person or
by proxy, at the Annual Meeting. Proxies reflecting abstentions will be treated as votes against these proposals. A broker is not entitled to vote shares held for a beneficial owner on these proposals. Thus, if the beneficial owner does not give a
broker specific instructions, the beneficially owned shares may not be voted on these proposals and will not be counted in determining the number of shares necessary for approval, although they will count for purposes of determining whether a quorum
exists. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The proposal to ratify the appointment of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP as our independent registered public accounting firm
for the fiscal year ending December&nbsp;31, 2011 requires the affirmative vote of a majority of the aggregate votes present, in person or by proxy, and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against
this proposal. However, ratification of the selection of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP is considered a routine matter on which a broker or other nominee is empowered to vote. Accordingly, no broker non-votes are expected on this
proposal. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We are not aware, as of the date hereof, of any matters to be voted upon at the Annual Meeting other than those stated in this Proxy
Statement and the accompanying Notice of Annual Meeting of Stockholders. If any other matters are properly brought before the Annual Meeting, the enclosed proxy card gives discretionary authority to the persons named as proxies to vote the shares
represented by the proxy card in their discretion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">A stockholder of record may revoke a proxy at any time before it is voted at the Annual Meeting by
(a)&nbsp;delivering a proxy revocation or another duly executed proxy bearing a later date to our Secretary at 123 Saginaw Drive, Redwood City, California 94063 or (b)&nbsp;attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not revoke a proxy unless the stockholder actually votes in person at the meeting. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">2 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The proxy card accompanying this Proxy Statement is solicited by our Board. We will pay all of the costs of
soliciting proxies. In addition to solicitation by mail, our officers, directors and employees may solicit proxies personally, or by telephone, without receiving additional compensation. We, if requested, will also pay brokers, banks and other
fiduciaries that hold shares of common stock for beneficial owners for their reasonable out-of-pocket expenses of forwarding these materials to stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">INFORMATION CONCERNING THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">The number of Directors currently authorized to serve on our Board in accordance with our bylaws is four. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Certain
information regarding each of our Directors, including his age, experience, qualifications, attributes and skills that led the Board to conclude that the individual should serve on the Board and his principal occupation and directorships during the
past five years, is set forth below: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="22%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="63%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Age</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Position</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Director</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Since</B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Paul Goddard, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Chairman</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John B. Whelan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer and Chief Financial Officer, Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kevin C. Tang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2009</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gregory Turnbull</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">72</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1986</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Paul Goddard, Ph.D.</I> has served as Chairman of our
Board since November 2000. Dr.&nbsp;Goddard has served as Chief Executive Officer for ARYx Therapeutics, Inc., a biopharmaceutical company, since 2005 and Chairman of its Board of Directors since 2003. He has also been a Director of Adolor
Corporation Inc., a biopharmaceutical company focused on the discovery, development and commercialization of prescription pain management products, since 2000 and of Onyx Pharmaceuticals, Inc., a biopharmaceutical company which develops therapies
that target the molecular mechanisms that cause cancer, since 1997. From 1998 to 2000, Dr.&nbsp;Goddard was President and Chief Executive Officer of Elan Corporation, plc&#146;s pharmaceutical division. From 2000 to 2005, Dr.&nbsp;Goddard served as
a Director of Xenoport, Inc., a biopharmaceutical company focused on developing and commercializing product candidates that improve the therapeutic benefits of existing drugs, and, from 1998 to 2006, Dr.&nbsp;Goddard served as a Director of
Molecular Devices, Inc., a developer of high-performance bioanalytical measurement systems.&nbsp;From 1991 to 1998, Dr.&nbsp;Goddard served as Chairman and Chief Executive Officer of Neurex Corporation, a biopharmaceutical company developing
products for pain management. In 1998, Neurex was acquired by Elan. Prior to Neurex, Dr.&nbsp;Goddard held various senior management positions at SmithKline Beecham. Dr.&nbsp;Goddard&#146;s qualifications to serve on our Board include his experience
as Chief Executive Officer, Director and Chairman of publicly-traded companies, including biopharmaceutical companies, and his oversight of corporate finance functions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>John B. Whelan</I>&nbsp;was appointed President, Chief Executive Officer and Director in April 2011. Mr.&nbsp;Whelan has served as our Acting Chief Executive Officer since May 2010 and Vice President, Finance
and Chief Financial Officer since February 2009. He was Chief Operating Officer and Chief Financial Officer at Raven Biotechnologies, inc., a private company developing antibody-based cancer therapeutics, from April 2002 until the company&#146;s
acquisition in July 2008. From January 2000 to March 2002, he was Vice President and Chief Financial Officer at Eos Biotechnology, Inc., a private therapeutic antibodies company. Prior to that, Mr.&nbsp;Whelan held a number of ascending management
positions at Hewlett Packard Company, culminating in his </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
tenure as Director of Corporate Development. Mr.&nbsp;Whelan&#146;s qualifications to serve on the Board include his management experience with the Company, which gives him valuable insight into
the operations of the Company, and his former executive management positions with other biotechnology companies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Kevin C. Tang</I> has served as a
member of our Board since February 2009. Mr.&nbsp;Tang is the Managing Director of Tang Capital Management, LLC, a life sciences-focused investment company he founded in 2002. Entities managed by Tang Capital Management, LLC hold a significant
ownership position in our common stock. From 1993 to 2001, Mr.&nbsp;Tang held various positions at Deutsche Banc Alex Brown, Inc., an investment banking firm, most recently serving as Managing Director and head of the firm&#146;s Life Sciences
research group. He has been a Director of Ardea Biosciences, Inc., a biotechnology company focused on the development of small-molecule therapeutics, since 2003. From June 2009 to September 2010, he was a Director of Penwest Pharmaceuticals Co. and,
from July 2010 to September 2010, was the Chairman of its Board of Directors until its acquisition by Endo Pharmaceuticals. From 2001 to 2008, he was a Director of Trimeris, Inc. Mr.&nbsp;Tang&#146;s qualifications to serve on our Board include his
experience as a Director of numerous biotechnology companies and his experience as a Managing Director of funds specializing in the area of life sciences. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Gregory Turnbull</I> has served as a member of our Board since February 1986. Mr.&nbsp;Turnbull served as our President and Chief Executive Officer from October 2006 to July 2008 and as our interim Chief
Financial Officer from January 2008 to February 2009. Mr.&nbsp;Turnbull has been a private investor and business consultant for over five years. Previously, he was a general partner of Cable&nbsp;&amp; Howse Ventures, a venture capital firm, and
also served as an investment banker with Morgan Stanley&nbsp;&amp; Co. and White, Weld&nbsp;&amp; Co. Mr.&nbsp;Turnbull has served as Chairman of the Board for Planar Systems, Inc., a company specializing in designing and marketing specialty display
products and systems, since 2005 and as a Director since 1986. Mr.&nbsp;Turnbull was also a Director of a private company from 2001 until 2010. Mr.&nbsp;Turnbull&#146;s qualifications to serve on our Board include his experience as our former
President and Chief Executive Officer and Chief Financial Officer, a current Chairman, Director and member of the governance and compensation committees of a publicly-traded company and a former member of the governance, compensation, audit and
finance committees of two publicly-traded companies, and a former Director of multiple private companies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our other executive officers and their ages
and positions are as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="26%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Age</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Executive Position</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Since</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Michael&nbsp;A.&nbsp;Adam,&nbsp;Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">53</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Senior Vice Present and Chief Operating Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John&nbsp;Barr,&nbsp;Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">51</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Senior&nbsp;Vice&nbsp;President&nbsp;of&nbsp;Research&nbsp;and&nbsp;Development</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1997</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Michael A. Adam, Ph.D.</I>&nbsp;was appointed Senior
Vice President and Chief Operating Officer in April 2011. Dr.&nbsp;Adam has been a consultant with our Company since July 2010. From October 2008 to June 2010, he was Senior Vice President of Pharmaceutical Operations at Spectrum Pharmaceuticals,
Inc., a biotechnology company with fully integrated commercial and drug development operations with a primary focus in oncology. From March 2006 to February 2007, Dr.&nbsp;Adam served as Vice President, Drug Development Operations at Anadys
Pharmaceuticals, Inc., a biopharmaceutical company dedicated to improving patient care by developing novel medicines for the treatment of hepatitis C. Prior to that, Dr.&nbsp;Adam held various senior positions with Pfizer, Inc., Agouron
Pharmaceuticals, Inc. and Bristol-Myers Squibb Company. Dr.&nbsp;Adam received his Ph.D. in organic chemistry at the Massachusetts Institute of Technology. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">4 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>John Barr, Ph.D.</I>&nbsp;has served as our Senior Vice President, Research&nbsp;and Development since September
2007. He was our Vice President, Research&nbsp;and Development from August 2000 to September 2007 and joined us in 1997 as Director of Pharmaceutical Sciences. Dr.&nbsp;Barr has played a key role in evaluating and developing the potential of our
novel delivery systems. Prior to joining us, he served as the Director of Biopharmaceutics for Cortech, Inc., a biotechnology company. Dr.&nbsp;Barr received his Ph.D. in pharmacology from the University of Glasgow in Scotland, after which he
pursued post-doctoral studies at the University of Arizona. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">There are no family relationships among any of our Directors or executive officers.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">There are no current legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business to which we, our
executive officers or our Directors are a party. There are no current, nor in the past ten years have there been any, legal proceedings involving our Directors or executive officers related to, among others, (i)&nbsp;federal bankruptcy,
(ii)&nbsp;criminal proceedings, (iii)&nbsp;federal or state securities laws, (iv)&nbsp;any judgment, decree or order enjoining a Director or officer from acting as an investment advisor, broker or dealer of securities or engaging in any type of
business practice, (v)&nbsp;proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business activity and (vi)&nbsp;any disciplinary sanctions or orders imposed by stock, commodities or derivatives exchange or
other self-regulatory organization. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">5 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">CORPORATE GOVERNANCE </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Board met seven times and took action by unanimous written consent two times during fiscal year 2010. The Audit and Finance Committee met five times, the
Compensation and Stock Option Committee met four times and the Nominating and Governance Committee met once during fiscal year 2010. Each member of the Board attended 75% or more of the aggregate number of Board and applicable committee meetings on
which he served, held during the period for which he was a Director or committee member during 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Board
Independence </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Board has determined that the following Directors are &#147;independent Directors&#148; as defined by the rules of The
NASDAQ Stock Market (&#147;NASDAQ&#148;): Dr.&nbsp;Goddard and Mr.&nbsp;Tang. Although the Company&#146;s common stock is not listed on NASDAQ, the Board uses the definition of independence from the NASDAQ listing standards to assess independence of
our Directors. Under applicable SEC and NASDAQ rules, the existence of certain &#147;related-party&#148; transactions above certain thresholds between a Director and us are required to be disclosed and preclude a finding by the Board that the
Director is independent. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Board Committees </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Due to the number of Directors currently authorized to serve on the Board and the inapplicability of the NASDAQ listing standards following our move to the OTC
market, the Board of Directors determined that as of April 2011, there is no longer a need for a standing audit and finance committee, compensation and stock option committee and nominating and governance committee. The Board of Directors will
assume the responsibilities of the respective committee roles. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Board of Directors oversees the corporate accounting and financial reporting
process. The Board appoints our independent auditor and oversees and evaluates its work, ensures written disclosures and communicates with the independent auditor, meets with management and the independent auditor to discuss our financial
statements, meets with the independent auditor to discuss matters that may affect our financial statements, approves all related-party transactions, provides oversight of risk management and approves professional services provided to us by the
independent public accountants. The Board is also responsible for reviewing our plans for providing appropriate financial resources to sustain our operations, including review of our strategic plan and annual operating budget. The Board of Directors
has determined that Dr.&nbsp;Goddard qualifies as our financial expert under applicable SEC rules. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Board of Directors, acting though our
non-employee directors, administers our benefit and equity incentive plans, reviews and administers all compensation arrangements for executive officers, and establishes and reviews general policies relating to the compensation and benefits of our
officers and employees. The non-employee directors review and approve goals for our executive officers, and evaluate their performance in light of these goals. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Board provides oversight with respect to corporate governance. Procedures for the consideration of director nominees recommended by stockholders are set forth in our amended and restated bylaws and are
described below. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">6 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Board Leadership Structure </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The role of our Chairman of the Board is separate from the Chief Executive Officer. The Board has determined that its structure is appropriate to fulfill its
duties effectively and efficiently, so that our business receives the undivided attention of the Chief Executive Officer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT
STYLE="font-family:ARIAL" SIZE="2">Director Nomination </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Criteria for Board Membership </I></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board is responsible for assessing the appropriate balance of experience, skills and characteristics required of our Board. Nominees for director are selected
based on their experience, knowledge, integrity, understanding of our business environment and the willingness to devote adequate time to Board duties. The Board uses the same selection criteria regardless of whether the candidate has been
recommended by a stockholder or identified by the Board. In selecting candidates for appointment or re-election to the Board, the Board considers the appropriate balance of experience, skills and characteristics required of our Board, as well as
potential independence under the rules of the NASDAQ, and with the objective that at least one director qualifies as &#147;financial expert&#148; under the rules of the SEC. When evaluating a candidate for our Board, the Board does not assign
specific weight to any of these factors nor does it believe that all of the criteria necessarily apply to every candidate. At minimum, a Director&#146;s qualifications, in light of the above-mentioned criteria, are considered each time the Director
is nominated or re-nominated for Board membership. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">While our Board does not have a written policy regarding diversity in identifying Director
candidates, the Board considers diversity in its search for the best candidates to serve on our Board. The Board looks to incorporate diversity into the Board through a number of demographics, skills, experiences, including operational experience,
and viewpoints, all with a view to identify candidates that can assist the Board with its decision making. The Board believes that our current Board reflects a diverse mix of Directors on a number of these factors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Stockholder Nominees </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board will consider written
proposals from stockholders for nominees for Director. Any such nominations should be submitted to the Board c/o the Secretary and should include the following information: (a)&nbsp;all information relating to such nominee that is required to be
disclosed pursuant to Regulation&nbsp;14A under the Securities Exchange Act of 1934 (including such person&#146;s written consent to being named in the Proxy Statement as a nominee and to serving as a Director if elected); (b)&nbsp;the names and
addresses of the stockholders making the nomination and the number of shares of our common stock which are owned beneficially and of record by such stockholders; and (c)&nbsp;appropriate biographical information and a statement as to the
qualification of the nominee. Stockholders seeking to recommend a prospective nominee should follow the instructions under the heading &#147;Communications with Directors&#148; below, and do so within the timeliness requirements described under
&#147;Stockholder Proposals for 2012 Annual Meeting&#148; below. The Board did not receive any stockholder nominations during fiscal 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Process
for Identifying and Evaluating Nominees </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board believes we are well-served by our current Directors. In the ordinary course, absent special
circumstances or a material change in the criteria for Board membership, the Board will re-nominate incumbent directors who continue to be quali-</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">7 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
fied for Board service and are willing to continue as Directors. The Board determined that the four incumbent Directors who are standing for re-election are sufficient to serve our needs, given
the company&#146;s current size and activities. If a vacancy on our Board occurs between annual stockholder meetings, the Board will seek out potential candidates for Board appointment who meet the criteria for selection as a nominee and have the
specific qualities or skills being sought. Director candidates will be identified based on input from members of our Board, our senior management and a third-party executive search firm, if engaged. The Board will consider persons recommended by our
stockholders in the same manner as a nominee recommended by our Board members, management, or a third-party executive search firm. The Board will evaluate each candidate&#146;s qualifications and check relevant references; in addition, such
candidates will be interviewed by at least one member of the Board. Candidates meriting serious consideration will meet with other members of our Board, as deemed appropriate. Based on this input, the Board will evaluate which of the prospective
candidates is qualified to serve as a Director and whether this candidate should be appointed to fill a current vacancy on our Board, or presented for the approval of the stockholders, as appropriate. The Board then will make a recommendation as to
the person(s) who should be nominated to the Board.</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Board Nominees for the 2011 Annual Meeting </I></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Each of the nominees listed in this Proxy Statement is a current director standing for re-election, except for one new Director, John B. Whelan, who was appointed
to our Board in April 2011 in conjunction with his appointment as President and Chief Executive Officer of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT
STYLE="font-family:ARIAL" SIZE="2">Oversight of Risk Management </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Board is responsible for oversight of our risk management policies and
procedures. We are exposed to a number of risks including financial risks, strategic and operational risks and risks relating to regulatory and legal compliance. The Board will regularly discuss with management our major risk exposures and the steps
management has taken to monitor and control such exposures, including the guidelines and policies to govern the process by which risk assessment and risk management are undertaken, and highlighting any new risks that may have arisen since they last
met. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board manages exposure risks within various areas including: 1) risks relating to our employment policies, executive compensation plans and
arrangements, 2) financial risks and taking appropriate actions to help ensure quality financial reporting and 3) risks associated with the independence of the Board and potential conflicts of interest. The Board&#146;s administration of its risk
oversight function has not affected the Board&#146;s leadership structure, which separates the roles of our Chairman of the Board and our Chief Executive Officer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">COMMUNICATIONS WITH DIRECTORS </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Stockholders and other
interested parties who wish to communicate with any Director or committee of our Board may do so using the procedures detailed on our website at www.appharma.com on the Corporate Governance link of the Investor Relations section. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We have a policy of encouraging all Directors to attend the annual stockholder meetings; all of the Directors, except one, attended the 2010 annual stockholder
meeting either telephonically or in person. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">8 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">CODE OF ETHICS </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We have adopted a Code of Ethics that applies to all of our Directors, officers and employees. The Code of Ethics is posted on our website at
http://www.appharma.com under the caption &#147;Investor Relations.&#148; If we make any substantive amendments to the code of ethics or grant any waiver, including implicit waiver, from a provision of the code of ethics to our principal executive
officer, principal financial officer or principal accounting officer, we will disclose the nature of such amendment or waiver on our website. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">9 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">SECURITY OWNERSHIP BY CERTAIN BENEFICIAL HOLDERS </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth information regarding beneficial ownership of our common stock by (a)&nbsp;each person known to us to own more than 5% of the
outstanding shares of our common stock, (b)&nbsp;each of our Directors, (c)&nbsp;our Chief Executive Officer and each other executive officer named in the compensation tables, and (d)&nbsp;all Directors and executive officers as a group. The number
of shares reported is as of February&nbsp;15, 2011, or a later date for information based on filings with the SEC. The information in this table is based solely on statements in filings with the SEC or other reliable information. Unless otherwise
indicated, the address of each of the named individuals is c/o&nbsp;A.P.&nbsp;Pharma, Inc., 123&nbsp;Saginaw Drive, Redwood City, CA 94063. The percentage of ownership is based on 40,143,227 shares of common stock outstanding as of February&nbsp;15,
2011. Beneficial ownership of shares is determined in accordance with the rules of the SEC and includes voting and investment power with respect to the shares. Shares of common stock subject to outstanding options and warrants exercisable within 60
days of February&nbsp;15, 2011 are deemed outstanding for computing the percentage of ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person. Except as otherwise
noted, each person or entity has sole voting and investment power with respect to the shares shown. Unless otherwise noted, none of the shares shown as beneficially owned are subject to pledge. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="18%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="59%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000">&nbsp;<FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number&nbsp;of<BR>Shares<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1) </SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Percent&nbsp;of<BR>Class<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1) </SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kevin C. Tang, Tang Capital Management, LLC&nbsp;and its affiliates</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,224,853</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">4401 Eastgate Mall</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="2">San Diego, California 92121</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Baker Bros. Advisors, LLC and its affiliates</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,861,818</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">667 Madison Avenue</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="2">New York, NY 10065</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top">
<P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kevin&nbsp;C.&nbsp;Tang</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2) </SUP></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,224,853</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="top">
<P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gregory&nbsp;Turnbull</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">441,017</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Paul&nbsp;Goddard</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)
</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Chairman of the Board</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">305,433</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John Barr</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)
</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Senior&nbsp;Vice&nbsp;President, Research and Development</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">400,100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John B. Whelan</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)
</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer and Chief Financial Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">251,043</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ronald
Prentki</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Former President and Chief Executive Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,094,543</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Officers and Directors as a group (6&nbsp;persons)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,716,989</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Less than 1%. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Based on shares of common stock issued and outstanding as of February&nbsp;15, 2011. Assumes the exercise of all outstanding options, warrants and rights to
purchase Common Stock held by such person or group to the extent exercisable within 60 days of February&nbsp;15, 2011, and that no other person has exercised any outstanding stock options. Holders of more than 5% of our outstanding common stock also
hold certain convertible securities, including convertible promissory notes, that have limits on the ability of the holders to convert these securities into our common stock if, after such a conversion, the holder would beneficially own more than a
stated percentage of our outstanding common stock (e.g., 9.99%). Where these limits are applicable as of February&nbsp;15, 2011, the shares underlying these convertible securities that are not currently issuable have been excluded from the
beneficial ownership calculations. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">10 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Based on information set forth in a Schedule 13D/A filed with the SEC on May&nbsp;3, 2011 by Tang Capital Management, LLC and its affiliates reporting beneficial
ownership of Kevin C. Tang of 11,224,853 shares. Includes 47,945 shares of restricted stock, subject to a right of repurchase which lapses on June&nbsp;28, 2011. Mr.&nbsp;Tang retains 1,539,000 shares of common stock in a margin brokerage account.
Beneficial ownership for Tang Capital and Mr. Tang excludes 30,000,000 shares of common stock potentially issuable upon conversion of $1.2 million of principal amount of the Company&#146;s Secured Convertible Notes due 2021 (the &#147;Notes&#148;).
Tang Capital has the right to purchase up to an additional $2,400,000 of principal amount of Notes at any time through May&nbsp;2, 2013. The Notes have a limit on the ability of the holder to convert the principal and accrued interest, to the extent
that the holder would beneficially own greater than 9.99% of the Company&#146;s common stock following the conversion, provided that the holder has the ability to increase or decrease this limitation on conversion upon providing the Company with 61
days of prior written notice. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Based on information set forth in a Schedule 13D/A filed with the SEC on May&nbsp;3, 2011 by Felix J. Baker and Julian C. Baker, reporting beneficial ownership
of 6,861,818 shares. Shares deemed beneficially owned by Messrs. Baker are held of record by Baker/Tisch Investments, L.P., Baker Bros. Investments II, L.P., 667, L.P., Baker Bros. Life Sciences, L.P., and 14159, L.P. (collectively, &#147;Baker
Bros&#148;). Beneficial ownership for Baker Bros and Messers Baker excludes 7,500,000 shares of common stock potentially issuable upon conversion of $300,000 of principal amount of Notes. Baker Bros has the right to purchase up to an additional
$600,000 of principal amount of Notes at any time through May&nbsp;2, 2013. The Notes have a limit on the ability of the holder to convert the principal and accrued interest, to the extent that the holder would beneficially own greater than 9.99% of
the Company&#146;s common stock following the conversion, provided that the holder has the ability to increase or decrease this limitation on conversion upon providing the Company with 61 days of prior written notice. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Includes 175 shares owned by Mr.&nbsp;Turnbull&#146;s spouse, 5,350 shares held in a benefit or retirement plan, 195,750 shares underlying stock options
exercisable on or before April&nbsp;15, 2011 and 47,945 shares of restricted stock, subject to a right of repurchase which lapses on June&nbsp;28, 2011. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Includes 11,250 shares held in a family trust, 79,500 shares underlying stock options exercisable within 60 days of February&nbsp;15, 2011 and 47,945 shares of
restricted stock, subject to a right of repurchase which lapses on June&nbsp;28, 2011. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Includes 332,625 shares underlying stock options exercisable within 60 days of February&nbsp;15, 2011. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Includes 251,043 shares underlying stock options exercisable within 60 days of February&nbsp;15, 2011. Mr.&nbsp;Whelan was appointed our President, Chief
Executive Officer, effective April&nbsp;24, 2011. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Includes 1,047,144 shares underlying stock options exercisable within 60 days of February&nbsp;15, 2011 in accordance with the separation agreement.
Mr.&nbsp;Prentki resigned as President, Chief Executive Officer and Director in June 2010. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Indemnification </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our restated certificate of incorporation and bylaws provide for indemnification of our
Directors, officers and other agents. Each of our current Directors and officers have entered into separate indemnification agreements with us. Such agreements require us, among other things, to indemnify our officers and directors, other than for
liabilities arising from willful misconduct of a culpable nature, and to advance their expenses incurred as a result of any proceedings against them as to which they could be indemnified. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">11 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Related Party Transactions </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">Pursuant to our Code of Ethics, our executive officers, Directors and employees must disclose transactions involving actual or apparent conflicts of interest, such as related-party transactions, to the Chairman of
the Board. As a matter of policy, all related-party transactions between us and any of our officers, Directors or principal stockholders, are approved by a majority of the independent and disinterested members of our Board, are on terms no less
favorable to us than could be obtained from unaffiliated third parties and are in connection with bona fide business purposes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;24, 2011,
we entered into a Securities Purchase Agreement (the &#147;Purchase Agreement&#148;) with Tang Capital Partners, L.P. and Baker Bros. Advisors, LLC and certain affiliated entities (collectively, &#147;Baker Bros&#148;). Mr.&nbsp;Tang, one of our
Directors, is the Managing Director of Tang Capital Management, LLC, the general partner of Tang Capital Partners, L.P. Baker Bros beneficially owns approximately 17% of our outstanding common stock. Pursuant to the Purchase Agreement, the Company
may issue up to $4.5 million aggregate principal amount of convertible notes due 2021 that are convertible into shares of the Company&#146;s common stock, par value $0.01. The Company received $1.5 million, before expenses, at an initial closing,
including $1.2 million from Tang Capital Partners, L.P. and $300,000 from Baker Bros. The purchasers may also purchase their pro rata interest of up to an additional $3.0 million aggregate principal amount of notes from time to time, with such right
expiring upon the second anniversary of the initial closing date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">SECTION&nbsp;16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Under Section&nbsp;16(a) of the Securities Exchange Act of 1934 and SEC rules, our Directors, executive officers and
beneficial owners of more than 10% of any class of equity security (the &#147;Reporting Persons&#148;) are required to file periodic reports of their ownership, and changes in that ownership, with the SEC. Based solely on our review of copies of
these reports and representations of such reporting persons, we believe that during fiscal year&nbsp;2010, all Reporting Persons satisfied such applicable SEC filing requirements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">12 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">EXECUTIVE COMPENSATION </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following tables and descriptive materials set forth information concerning compensation earned for services rendered to us by each person who served as the
Chief Executive Officer (&#147;CEO&#148;) during fiscal year 2010 and our next most highly compensated executive officer, who was serving as an executive officer at the end of fiscal year 2010 and whose compensation for fiscal year&nbsp;2010
exceeded $100,000 (collectively the &#147;Named Executive Officers&#148;). No one served us as an executive officer during 2010 other than our Named Executive Officers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Summary Compensation Table </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth
information concerning compensation earned for services rendered to us by the Named Executive Officers. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" NOWRAP STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name and Principal Position(s)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Year</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Salary</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stock<BR>Awards<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option<BR>Awards<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Non-Equity<BR>Incentive<BR>Plan<BR>Compen-<BR>sation<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>All Other<BR>Compen-<BR>sation<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Total</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John B.
Whelan</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">300,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">363,765</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,350</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">671,115</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer and Chief Financial Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2009</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">259,616</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">211,050</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,923</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">517,589</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John Barr</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">302,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">363,765</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,082</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">682,847</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sr. Vice President, Research</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="2">and Development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2009</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">313,616</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">112,288</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">47,250</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,450</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">488,604</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ronald J.
Prentki</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">191,250</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">462,600</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">880,422</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,534,272</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Former President and Chief</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="2">Executive&nbsp;Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2009</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">441,346</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">56,786</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">72,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,350</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">577,482</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">This column represents the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board (&#147;FASB&#148;) Accounting
Standard Codification (&#147;ASC&#148;) Topic 718, for stock options and awards granted to the Named Executive Officers in 2010 and 2009. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. The assumptions used in calculating the fair value of the stock options and awards can be found under Note&nbsp;7 to the Consolidated Financial Statements in our Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2010. For additional information on stock options awarded to the Named Executive Officers in 2010 and in prior years, see below under Outstanding Equity Awards at 2010 Fiscal Year-End table, respectively. These amounts reflect the
grant date fair value for these stock options and awards, and do not necessarily correspond to the actual value that will be realized by the Named Executive Officers. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">The amounts listed were earned in 2009 and paid in February 2010 and reflect cash awards to the named individuals under the bonus program. No cash incentive or
bonus amounts were paid for 2010 performance. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">The stated amounts include a travel allowance for Dr.&nbsp;Barr of $7,800 and $8,100 in 2010 and 2009, respectively, and matching contributions to our 401(k)
Plan. We made matching cash contributions equal to 50% of each participant&#146;s con-</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">13 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:ARIAL" SIZE="2">
tribution during the plan year up to a maximum amount equal to the lesser of 3% of each participant&#146;s annual compensation or $7,350 in 2010 and 2009. The amount for Mr.&nbsp;Prentki includes
a severance payment of $850,000 and $25,400 for 12 months of continued COBRA coverage, both related to his resignation in June 2010. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Prentki was our President and Chief Executive&nbsp;Officer since July 2008 and resigned in June 2010. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Whelan was appointed President and Chief Executive Officer in April 2011. He had been our Acting Chief Executive Officer since May 2010 and Chief
Financial Officer since February 2009. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Historically, we have maintained a bonus plan under which employees, including Named Executive
Officers, have been eligible for bonus payments. Bonus payments for officers are based on the attainment of corporate goals. Each corporate goal represents a predetermined percentage of the officer&#146;s targeted bonus, which is a pre-determined
percentage of the officer&#146;s base pay. During fiscal year 2010, there were no bonuses earned under the bonus plan. In 2009, Messrs. Prentki and Whelan and Dr.&nbsp;Barr earned bonuses of $72,000, $40,000 and $47,250, respectively, which were
each paid in February 2010. The performance-based cash bonus plan for 2009 for Messrs. Prentki and Whelan and Dr.&nbsp;Barr consisted of payment of a percentage of year-end base salary based on achievement of corporate objectives. The
performance-based cash bonus targets for 2009 for Messrs. Prentki and Whelan and Dr.&nbsp;Barr were 50%, 35% and 35%, respectively, of year-end salary. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with Mr.&nbsp;Prentki&#146;s resignation, we entered into a separation and release agreement with him pursuant to which he was paid cash severance of
$850,000 and is entitled to the reimbursement of continued healthcare coverage under COBRA for up to 12 months. In addition, in accordance with his management retention agreement, we provided him with 12 months of accelerated vesting of his
outstanding stock options and up to 12 months following his termination of employment to exercise such options. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT
STYLE="font-family:ARIAL" SIZE="2">Retirement Plans </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We have established and maintain a retirement savings plan under section 401(k) of the
Internal Revenue Code to cover our eligible employees. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a tax deferred basis through contributions to a 401(k) plan. Our 401(k)
plan is qualified under Section&nbsp;401(a) of the Internal Revenue Code and its associated trust is exempt from federal income taxation under Section&nbsp;501(a) of the Internal Revenue Code. Our 401(k) plan permits us to make matching
contributions on behalf of eligible employees, and we currently make these matching contributions up to a maximum amount equal to the lesser of 3% of each participant&#146;s annual compensation or $7,350 for 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">14 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Outstanding Equity Awards at Fiscal Year-End </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth information regarding outstanding equity awards held by our Named Executive Officers at December&nbsp;31, 2010: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="31%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stock Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Options<BR>Exercisable</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Options Not<BR>Exercisable<FONT
STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option<BR>Exercise<BR>Price ($)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option<BR>Expiration<BR>Date</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number&nbsp;of<BR>Shares or<BR>Units of<BR>Stock&nbsp;That<BR>Have Not<BR>Vested</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Market&nbsp;Value<BR>of Shares<BR>or&nbsp;Units of<BR>Stock&nbsp;That<BR>Have Not<BR>Vested ($)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John B. Whelan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,625</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">134,375</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">07/08/20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">118,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">02/17/20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">160,417</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;
</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">189,583</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.610</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">02/23/19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John Barr</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,625</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">134,375</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">07/08/20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">118,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">02/17/20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">61,333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;
</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">98,667</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">
</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.710</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/16/19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">53,223</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,769</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.370</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/15/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,318</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,690</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.370</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/15/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,568</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">182</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.120</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/16/17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/10/16</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/14/14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.280</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">01/23/13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,125</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.760</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">08/22/12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">08/21/11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">08/21/11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ronald J. Prentki</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;
</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,020,833</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.190</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">06/15/11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;
</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,311</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">
</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">06/15/11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">All unvested options vest ratably monthly over the first four years of the ten-year option term, except where noted. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Option vested on June&nbsp;15, 2010 in accordance with the separation agreement and can be exercised on or until June&nbsp;15, 2011.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Option vests ratably monthly over the first five years over a 10-year option term. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Option vested 25% on February&nbsp;23, 2010 and the remainder ratably over the following 36 months. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Non-qualified Defined Contribution and Other Non-qualified Deferred Compensation Plans </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not maintain a defined benefit pension plan or a nonqualified deferred compensation plan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">15 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Payments Upon Termination or Change In Control </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Payments Upon Termination </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In conjunction with the
resignation of Mr.&nbsp;Prentki as our President and Chief Executive Officer in June 2010, we made a payment of $850,000 in July 2010 in accordance with his employment agreement. In addition, pursuant to his employment agreement, there was continued
vesting of his unvested stock options and lapse of forfeiture and transfer restrictions on restricted stock previously granted to him, both for a 12 month period following his termination. We are also paying health care benefits for up to 12 months
following his termination of service. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Potential Payments Upon Termination </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;23, 2005, we entered into a change of control agreement with Dr.&nbsp;Barr. Dr.&nbsp;Barr&#146;s agreement was amended and restated on November&nbsp;8, 2007 as a management retention agreement. The
agreement was again amended on December&nbsp;23, 2008 without affecting any of its economic provisions to conform with Treasury Regulations under Section&nbsp;409A of the Internal Revenue Code. The agreement, as amended, provides that if
Dr.&nbsp;Barr&#146;s employment is terminated by us without good cause or by him for good reason, as such terms are defined in his agreement, he shall receive his annual base salary in effect on the date of termination, the average of any bonus paid
during each of the three 12-month periods prior to termination, and the continued vesting of his unvested stock options, all for a 12-month period following such termination, and the lapse of all remaining forfeiture and transfer restrictions on
restricted stock previously granted to him. Such salary and bonus payments shall be paid in twelve equal monthly installments. We also agreed to pay health care benefits for up to 12 months. In addition, upon a change of control, if he is
involuntarily terminated, all of his unvested stock options shall immediately vest. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In conjunction with the appointment of John B. Whelan as our Chief
Financial Officer, we entered into a retention and change of control agreement with Mr.&nbsp;Whelan on February&nbsp;9, 2009. The agreement provides that if Mr.&nbsp;Whelan&#146;s employment is terminated by us without good cause or by him for good
reason, as such terms are defined in his agreement, he shall receive his annual base salary in effect on the date of termination, the average of any bonus paid during each of the three 12-month periods prior to termination, and the continued vesting
of his unvested stock options and lapse of forfeiture and transfer restrictions on restricted stock previously granted to him, all for a 12-month period following such termination. Such salary and bonus payments shall be paid in twelve equal monthly
installments. We also agreed to pay health care benefits for up to 12 months. In addition, upon a change of control, if he is involuntarily terminated, all of his unvested stock options shall immediately vest. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with Mr.&nbsp;Whelan&#146;s appointment as President and Chief Executive Officer, we entered into a management retention agreement with
Mr.&nbsp;Whelan on April&nbsp;25, 2011 (the &#147;Whelan Management Agreement&#148;). The Whelan Management Agreement provides that if Mr.&nbsp;Whelan&#146;s employment is terminated by us not in connection with a change of control, without cause,
as such term is defined in the Whelan Management Agreement, or by Mr.&nbsp;Whelan as a result of certain events set forth in the Whelan Management Agreement, then, in such case, during the 12 months after the date of termination (the &#147;Severance
Period&#148;), he shall receive (i)&nbsp;an amount equal to the monthly base salary he was receiving immediately prior to the termination, (ii)&nbsp;the average bonus paid during each of the three 12-month periods (or such shorter period of time
during which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options, restricted stock and other equity awards that otherwise would have vested during the Severance Period. We also agreed to
reimburse him for, or continue to pay for, health care benefits during the Severance Period, or such date when he is no longer eligible for such benefits </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">16 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
under applicable law. In the event Mr.&nbsp;Whelan&#146;s employment is terminated without good cause or he resigns for good reason within 12 months following a change of control of the Company,
then in lieu of the above benefits during the 18-month period after the date of termination (the &#147;Change of Control Severance Period&#148;), he shall receive (i)&nbsp;an amount equal to the greater of (A)&nbsp;the base salary he was receiving
immediately prior to the termination or (B)&nbsp;the base salary he was receiving immediately prior to the change of control, (ii)&nbsp;150% of the average bonus paid during each of the three 12-month periods (or such shorter period of time during
which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options, restricted stock and other equity awards. We also agreed to reimburse him for, or continue to pay for, health care benefits
during the Change of Control Severance Period, or such date when he is no longer eligible for such benefits under applicable law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with
Dr.&nbsp;Adam&#146;s appointment, the Company entered into a management retention agreement with Dr.&nbsp;Adam on April&nbsp;25, 2011 (the &#147;Adam Management Agreement&#148;). The Adam Management Agreement provides that if Dr.&nbsp;Adam&#146;s
employment is terminated by the Company not in connection with a change of control, without cause, as such term is defined in the Adam Management Agreement, or by Dr.&nbsp;Adam as a result of certain events set forth in the Adam Management
Agreement, then, in such case, during the six months after the date of termination (the &#147;Severance Period&#148;), he shall receive (i)&nbsp;an amount equal to the monthly base salary he was receiving immediately prior to the termination,
(ii)&nbsp;one-half the average bonus paid during each of the three 12-month periods (or such shorter period of time during which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options,
restricted stock and other equity awards that otherwise would have vested during the Severance Period. The Company also agreed to reimburse him for, or continue to pay for, health care benefits during the Severance Period, or such date when he is no
longer eligible for such benefits under applicable law. In the event Dr.&nbsp;Adam&#146;s employment is terminated by the Company without good cause or he resigns for good reason within 12 months following a change of control of the Company, then in
lieu of the above benefits, during the twelve months after the date of termination (the &#147;Change of Control Severance Period&#148;), he shall receive (i)&nbsp;an amount equal to the greater of (A)&nbsp;the monthly base salary he was receiving
immediately prior to the termination or (B)&nbsp;the base salary he was receiving immediately prior to the change of control, (ii)&nbsp;the average bonus paid during each of the three 12-month periods (or such shorter period of time during which he
was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options, restricted stock and other equity awards. The Company also agreed to reimburse him for, or continue to pay for, health care benefits
during the Change of Control Severance Period, or such date when he is no longer eligible for such benefits under applicable law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table
sets forth information regarding potential payments to be made to Mr.&nbsp;Whelan or Dr.&nbsp;Barr if a change of control had occurred and their termination payments were triggered on December&nbsp;31, 2010, assuming maximum payouts which would
occur if a change of control had occurred. The same termination payments would be triggered upon a termination of employment by us without good cause or by executive for good reason, other than the value of acceleration of previously unvested
options. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Base&nbsp;Salary<BR>($)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Bonus<BR>($)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Value&nbsp;of&nbsp;Options<BR>Previously&nbsp;Unvested<BR>($)<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Total</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" NOWRAP> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John Barr</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">302,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">$346,260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John B. Whelan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">300,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">340,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">17 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">The dollar value of unvested stock options is calculated based on the excess of the closing market price of our common stock on December&nbsp;31, 2010 over the
exercise price of these options. Options would be exercisable for a 90-day period beyond potential termination date. There is no value reported as the option exercise price was higher than the closing market price as of December&nbsp;31, 2010.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Director Compensation </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Non-Chair, Non-Employee Director Compensation </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
non-chair, non-employee Directors did not receive cash compensation for their service as members of our Board or any of its committees until April 2011, when the Board enacted prospective cash payments to Mr.&nbsp;Turnbull of $30,000 annually. The
following Director compensation information includes compensation paid during 2010 to three Directors who resigned from the Board in early 2011: Stephen R. Davis, Toby Rosenblatt and Robert Zerbe, M.D. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Dr.&nbsp;Zerbe and Messrs. Rosenblatt and Turnbull each received restricted stock awards in 2010 of 109,933 shares of our common stock. The restricted stock awards
vested 14,042 shares on May&nbsp;20, 2010 and 47,946 shares on November&nbsp;20, 2010. Mr.&nbsp;Turnbull&#146;s remaining restricted stock award of 47,945 shares is scheduled to vest on the day prior to the next annual meeting. Mr.&nbsp;Tang
received a restricted stock award of 95,891 shares of our common stock. The restricted stock award vested 47,946 shares on November&nbsp;20, 2010, and 47,945 shares are scheduled to vest on the day prior to the next annual meeting. Dr.&nbsp;Zerbe
and Mr.&nbsp;Rosenblatt resigned effective April&nbsp;18, 2011 and April&nbsp;13, 2011, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Davis became a member of our Board in
February 2010 and received a restricted stock award in 2010 of 31,088 shares of our common stock. The restricted stock vests and all restrictions thereon lapse with respect to&nbsp;one-third of the shares on each anniversary of the date of the
grant, subject to Mr.&nbsp;Davis&#146;s continued service on the Board. Mr.&nbsp;Davis voluntarily cancelled his restricted stock award of 31,088 shares on February&nbsp;16, 2011. Mr.&nbsp;Davis also received a restricted stock award for 95,891
shares of our common stock. The restricted stock award vested 47,946 shares on November&nbsp;20, 2010, and the remaining 47,945 shares were cancelled upon his resignation from the Board effective February&nbsp;23, 2011. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Chairman Compensation </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Dr.&nbsp;Goddard&#146;s annual cash
retainer for his services as Chairman of our Board is $30,000, plus participation in the same equity compensation structure and in the prospective cash compensation as the other non-employee Directors. Dr.&nbsp;Goddard received restricted stock
awards in 2010 of 109,933 shares of our common stock. The restricted stock awards vested 14,042 shares on May&nbsp;20, 2010 and 47,946 shares on November&nbsp;20, 2010, and 47,945 shares are scheduled to vest on the day prior to the next annual
meeting. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">18 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table shows 2010 compensation for all of our non-employee Directors and our Chairman. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

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<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fees&nbsp;Earned&nbsp;or<BR>Paid in&nbsp;Cash</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option<BR>Awards<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stock<BR>Awards<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>All Other<BR>Compensation</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Total</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stephen R.
Davis</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">130,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">130,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Paul Goddard,
Ph.D.</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)(6)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">127,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Toby
Rosenblatt</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)(7)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kevin
Tang</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gregory
Turnbull</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)(8)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Robert Zerbe,
M.D.</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)(9)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">97,101</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Prentki is not included in this table as he received no compensation for his service as a Director. The compensation received by Mr.&nbsp;Prentki as an
employee is shown in the Summary Compensation Table. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Amount represents the aggregate grant date fair value of options and awards computed in accordance with &#147;FASB&#148; &#147;ASC&#148; Topic 718. The
assumptions used in calculating the fair value of the stock options and awards can be found under Note&nbsp;7 to the Consolidated Financial Statements in our Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2010.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Davis joined our Board in February 2010. He resigned effective February&nbsp;23, 2011. The restricted stock award granted in February 2010 vested
one-third of the shares on each anniversary date of the grant. Mr.&nbsp;Davis voluntarily cancelled his restricted stock award granted in February 2010 on February&nbsp;16, 2011. The restricted stock award granted in May 2010 vested 50% on
November&nbsp;20, 2010. At December&nbsp;31, 2010, Mr.&nbsp;Davis had restricted stock awards covering 79,033 shares of our common stock outstanding. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">The restricted stock award granted in February 2010, vested 100% on May&nbsp;20, 2010 and the restricted stock award granted in May 2010, vested 50% on
November&nbsp;20, 2010. Mr.&nbsp;Rosenblatt and Dr.&nbsp;Zerbe resigned effective April&nbsp;13, 2011 and April&nbsp;18, 2011, respectively. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">The restricted stock award granted in May 2010, vested 50% on May&nbsp;20, 2010 and 50% on November&nbsp;20, 2010. At December&nbsp;31, 2010, Mr.&nbsp;Tang had
restricted stock awards covering 47,945 shares of our common stock outstanding. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">At December&nbsp;31, 2010, Dr.&nbsp;Goddard had restricted stock awards covering 47,945 shares of our common stock and options to purchase 79,500 shares of our
common stock outstanding. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">At December&nbsp;31, 2010, Mr.&nbsp;Rosenblatt had restricted stock awards covering 47,945 shares of our common stock and stock options to purchase 29,500 shares
of our common stock outstanding. Mr.&nbsp;Rosenblatt resigned effective April&nbsp;13, 2011. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">At December&nbsp;31, 2010, Mr.&nbsp;Turnbull had restricted stock awards covering 47,945 shares of our common stock and options to purchase 195,750 shares of our
common stock outstanding. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(9)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">At December&nbsp;31, 2010, Dr.&nbsp;Zerbe had restricted stock awards covering 47,945 shares of our common stock and options to purchase 28,250 shares of our
common stock outstanding. Dr.&nbsp;Zerbe resigned effective April&nbsp;18, 2011. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">19 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Equity Compensation Plan Information </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The table below discloses information as of December&nbsp;31, 2010 with respect to our equity compensation plans that have been approved by stockholders and plans
that have not been approved by stockholders. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="54%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Plan Category</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number of<BR>Securities to<BR>be Issued<BR>upon Exercise<BR>of&nbsp;Outstanding<BR>Options</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Weighted-<BR>Average<BR>Exercise<BR>Price of<BR>Outstanding<BR>Options</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number of Securities</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Remaining&nbsp;Available&nbsp;for</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Future&nbsp;Issuance&nbsp;under</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Equity&nbsp;Compensation</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Plans
(Excluding</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Securities&nbsp;Reflected</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>in&nbsp;Column&nbsp;(a))</B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Equity compensation plans approved by security holders:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock option and award plans</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,188,282</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.62</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,039,549</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Employee Stock Purchase Plan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">109,158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Equity compensation plans not approved by security holders</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,028,958</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD COLSPAN="9" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,217,240</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,148,707</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">In October 2000, we adopted the Non-Qualified Stock Plan covering 62,500 shares. In September 2007, the Board, subject to approval by the Compensation and Stock
Option Committee, authorized the reservation for issuance of an additional 1,000,000 shares under the plan and authorized amendments to the plan to limit participation awards to new hires, to provide for stock appreciation rights and to require the
exercise price of any non-qualified stock option to be at 100% or more of fair market value. In July 2008, the Board authorized the reservation of another 1,000,000 shares for issuance under the Non-Qualified Stock Plan. The availability of the
recently added shares for awards will expire in 2017. Under the Non-Qualified Stock Plan, awards may be granted only as a material inducement to any new hire accepting employment or consultancy with us. The plan provides for the discretionary award
of options, restricted stock and stock appreciation rights or any combination of these awards to an eligible person, provided however, that only non-qualified stock options may be granted under the plan. Under the plan, the term of any non-qualified
stock option granted may not exceed 10 years, and the exercise price of any such non-qualified stock option must be at least 100% of the fair market value of the Common Stock at the date of grant. Options generally vest over a period of four years.
The remaining shares available in the Non-Qualified Stock Plan expired in October 2010. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">20 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">REPORT OF THE AUDIT AND FINANCE COMMITTEE</FONT><FONT
STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">While we do not currently have a standing Audit Committee, the Board of Directors did have an Audit Committee prior to the filing of the Company&#146;s Annual Report on Form 10-K for the year ended
December&nbsp;31, 2010 (the &#147;Form 10-K&#148;). Prior to the dissolution of the Audit Committee and the filing of the Form 10-K, and under the guidance of a written charter adopted by the Board, the Audit Committee reviewed and discussed with
management the Company&#146;s audited financial statements for the year ended December&nbsp;31, 2010, as required by Item&nbsp;307(d)(3) of Regulation S-K. The Board has assumed the responsibilities of the former Audit Committee, including
overseeing our accounting and financial reporting processes and the audit of our financial statements. The Board is further currently responsible for appointing and providing for the compensation of our independent registered public accounting firm.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Management has primary responsibility for the system of internal controls and the financial reporting process. The independent registered public
accounting firm has the responsibility to express an opinion on the financial statements based on an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In this context and in connection with the audited financial statements contained in our Form&nbsp;10-K, the Board attests that the audit committee, prior to its
dissolution: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;&nbsp;&nbsp;received and reviewed and discussed the audited financial statements as of and for the fiscal year ended
December&nbsp;31, 2010 with our management and Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP, our independent registered public accounting firm; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;&nbsp;&nbsp;discussed with Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP, the matters required to be discussed under auditing standards generally accepted
in the United States, including those matters set forth in Statement on Auditing Standards No.&nbsp;61, as amended (AICPA, <I>Professional Standards,</I> Vol.1, AU Section&nbsp;380), as adopted by the Public Company Accounting Oversight Board in
Rule 3200T regarding <I>&#147;Communications with Audit Committees&#148;</I> ; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;&nbsp;&nbsp;reviewed the written disclosures and the letter from
Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP required by the Securities Acts administered by the Securities and Exchange Commission and in compliance with Rule 3520 of the Public Accounting Oversight Board, discussed with Odenberg, Ullakko,
Muranishi&nbsp;&amp; Co. LLP their independence, and concluded that the non-audit services performed by Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP are compatible with maintaining their independence; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;&nbsp;&nbsp;based on the foregoing reviews and discussions, recommended to the Board of Directors that the audited financial statements be included in our
Form&nbsp;10-K as filed with the SEC; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;&nbsp;&nbsp;instructed Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP that the audit committee, as
then constituted, expects to be advised if there are any subjects that require special attention. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Board of Directors
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Paul Goddard, Chairman </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT
STYLE="font-family:ARIAL" SIZE="2">John B. Whelan </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Kevin C. Tang </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Gregory Turnbull </FONT></P>
<P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.4pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#147;The material in this report is not &#147;soliciting material,&#148; is not deemed &#147;filed&#148; with the Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.&#148; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">21 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">Principal Accountant Fees and Services </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table shows the fees paid or accrued by us for the audit and other services provided by Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP for fiscal
2010 and 2009. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="17%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="21%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000">&nbsp;<FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2010</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2009</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Audit
Fees</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">149,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">183,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Audit-Related
Fees</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Tax
Fees</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,275</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32,413</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">All other
Fees</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD COLSPAN="5" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">178,775</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">215,913</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Audit fees represent fees for professional services provided in connection with the audit of our financial statements, review of our quarterly financial
statements and routine regulatory filings. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Audit-related fees consist primarily of accounting consultations, employee benefit plan audits and services related to business acquisitions and divestitures.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Tax fees principally include fees for tax compliance and for Section&nbsp;382 consulting services. Tax compliance fees totaled $23,525 and $22,404 for 2010 and
2009, respectively. Section&nbsp;382 fees and FIN 48 fees totaled $5,750 and $10,009, respectively for 2010 and 2009. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP>&nbsp;</FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">All other fees are fees for any services not included in the first three categories. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">22 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PROPOSAL 1&#151;ELECTION OF DIRECTORS </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">At the Annual Meeting, the stockholders will vote on the election of four Directors to serve for a one-year term or until the next annual meeting of stockholders
and until their successors are elected and qualified. Our Board has unanimously nominated Messrs. Tang, Turnbull and Whelan and Dr.&nbsp;Goddard for election to our Board. The nominees have indicated that they are willing and able to serve as
Directors. If any of these individuals becomes unable or unwilling to serve, the accompanying proxy may be voted for the election of such other person as shall be designated by our Board. The proxies being solicited will be voted for no more than
four nominees at the Annual Meeting. The Directors will be elected by a plurality of the votes cast, in person or by proxy at the Annual Meeting, assuming a quorum is present. Stockholders do not have cumulative voting rights in the election of
Directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The Board of Directors recommends a vote &#147;FOR&#148; all Nominees. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">Unless otherwise instructed, it is the intention of the persons named in the accompanying proxy card to vote shares represented by properly executed proxy cards for the election of Messrs. Tang, Turnbull and Whelan
and Dr.&nbsp;Goddard. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PROPOSAL 2&#151;APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
</FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Proposed Amendment</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board of
Directors is requesting stockholder approval of an amendment to the Company&#146;s Amended and Restated Certificate of Incorporation to increase the Company&#146;s authorized number of shares of Common Stock from one hundred million
(100,000,000)&nbsp;shares to one billion five hundred million (1,500,000,000)&nbsp;shares. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>General Effect of the Amendment</I> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The additional Common Stock to be authorized by adoption of the amendment would have rights identical to the currently outstanding Common Stock of the Company.
Adoption of the proposed amendment and issuance of the Common Stock would not affect the rights of the holders of currently outstanding Common Stock of the Company, except for effects incidental to increasing the number of shares of the
Company&#146;s Common Stock outstanding, such as dilution of the earnings per share and voting rights of current holders of Common Stock. If the amendment is adopted, it will become effective upon filing of a Certificate of Amendment of the
Company&#146;s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Reasons for the Amendment</I>
</FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to the 40,064,194 shares of Common Stock outstanding on March&nbsp;31, 2011, the Board of Directors has reserved 813,664,830 shares for
issuance for the Conversion Shares related to the Purchase Agreement, 3,977,270 shares for the exercise of the warrant related to the October 2009 Private Placement and 49,349,524 shares for issuance upon the exercise of options granted or to be
granted or issuance of stock in conjunction with stock awards or the Employee Stock Purchase Plan. The Company currently has an insufficient number of authorized shares to allow for the issuance of the Conversion Shares upon conversion of the Notes.
If the proposed amendment is approved, the Company would have a sufficient number of authorized shares to issue the Conversion Shares. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to the
Purchase Agreement, the Company is required to take all action necessary to ensure it has a sufficient number of authorized shares for the purpose of issuance upon conversion of the Notes within the earlier of (a)&nbsp;six months from the initial
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">23 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
closing date of May&nbsp;2, 2011and (b)&nbsp;one business day after the Annual Meeting (the &#147;Increase Deadline&#148;). If the proposed amendment is not approved by stockholders before the
Increase Deadline, the Company will be in breach of a covenant under the Purchase Agreement, which, following a ten day cure period, will result in an event of default under the Notes. Pursuant to the terms of the Notes, upon an event of default
Note holders will have a right to redeem all or any portion of their Notes. </FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board of Directors has evaluated the Company&#146;s financial
needs and has determined that to have the flexibility necessary to use the Company&#146;s capital stock for future business and financial purposes, the number of authorized shares of Common Stock should be increased to 1,500,000,000 shares. Upon
stockholder approval of this proposed amendment, the additional shares might be used, without any further stockholder approval, for various purposes, including, without limitation, raising capital, establishing strategic relationships with other
companies and expanding the Company&#146;s business through the acquisition of other businesses or products, and/or providing equity incentives to employees, officers or Directors, and stock dividends. In May 2011, the Company announced that we plan
to seek additional financing or strategic collaborative arrangements to fund our operations through the expected FDA approval decision for our lead product, APF530. The Company currently has no other specific plans with respect to the issuance of
the additional authorized shares of common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>No Appraisal or Dissenters Rights</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">If this proposal is approved and the increase in authorized shares is effected, our stockholders will not have any rights of dissent or appraisal under the General Corporation Law of the State of Delaware.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Potential Anti-Takeover Effect</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The additional
shares of Common Stock that would become available for issuance if the proposal were adopted could also be used by the Company to oppose a hostile takeover attempt or delay or prevent changes in control or management of the Company. For example,
without further stockholder approval, the Board could strategically sell shares of Common Stock in a private transaction to purchasers who would oppose a takeover or favor the current Board. Although this proposal to increase the authorized Common
Stock has been prompted by business and financial considerations and not by the threat of any hostile takeover attempt (nor is the Board currently aware of any such attempt directed at the Company), nevertheless, stockholders should be aware that
approval of this Proposal 2 could facilitate future efforts by the Company to deter or prevent changes in control of the Company, including transactions in which the stockholders might otherwise receive a premium for their shares over the then
current market prices. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Vote Required and Board Recommendation</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">The affirmative vote of the holders of a majority of the shares of Common Stock outstanding on the Record Date will be required to approve this amendment to the Company&#146;s Amended and Restated Certificate of
Incorporation. As a result, abstentions and broker non-votes will have the same effect as negative votes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The Board of Directors recommends a vote
&#147;FOR&#148; the amendment to the Company&#146;s Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of the Company&#146;s common stock from 100,000,000 to 1,500,000,000. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PROPOSAL 3&#151;AMENDMENT OF OUR 2007 EQUITY INCENTIVE PLAN </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">At the Annual Meeting, stockholders will be asked to approve an amendment to our 2007 Plan to: a) increase the maximum number of shares of our common stock, par
value $0.01 per share (the &#147;Shares&#148;) available for grant under the 2007 Plan by </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">24 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
90,000,000 shares of common stock, b) increase the maximum number of Shares that can be granted to an individual as an equity award in any calendar year from 300,000 shares to 50% of the
authorized number of shares reserved for issuance under the 2007 Plan and c) allow for automatic annual increases to the number of shares authorized for issuance under the 2007 Plan for each of the next three years. Such amendment will require the
affirmative vote of a majority of the aggregate votes present, in person or by proxy, at the Annual Meeting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Our 2007 Plan provides equity ownership
incentives to our current and prospective management and employees in order to incent and reward superior performance in achieving our long-term objectives. Subject to stockholder approval, our Board has approved the amendment to the 2007 Plan to:
a) increase the maximum number of shares of our common stock, par value $0.01 per share available for grant under the 2007 Plan to 95,000,000 shares of common stock reserved for issuance, b) increase the maximum number of shares of our common stock
that can be granted to an individual as an equity award from 300,000 to 50% of the authorized number of shares reserved for issuance and c) allow for automatic annual increases to the number of shares authorized for issuance under the 2007 Plan for
each of the next three years. The following description of the 2007 Plan is a summary and is qualified by reference to the complete text of the 2007 Plan, which is attached hereto as Exhibit A. You can also request a copy of the 2007 Plan by writing
to the attention of our Investor Relations, A.P. Pharma, Inc., 123 Saginaw Drive, Redwood City, California 94063. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to the proposed amendment,
the total number of shares authorized for issuance under the 2007 Plan would be automatically increased to 14% of the aggregate number of shares of Common Stock a) issued and outstanding and b) issuable upon conversion of the then outstanding senior
secured convertible notes due 2021, including any interest amounts added to the outstanding principal due under the notes (the &#147;Notes&#148;). The automatic increase would occur on December&nbsp;31 for each of 2011, 2012 and 2013. While the
number of authorized shares would increase annually for three years, the grant of awards under the 2007 Plan will remain within the discretion of our Board. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">DESCRIPTION OF THE 2007 EQUITY INCENTIVE PLAN </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">On
September&nbsp;26, 2007, our Board approved the A.P. Pharma, Inc. 2007 Plan, which was amended in May 2010, under which 5,000,000 shares of common stock are currently reserved for issuance. Our Board adopted the 2007 Plan because our 2002 Equity
Incentive Plan had only approximately 84,000 shares available for grant, and our Non-Qualified Stock Plan was limited to new hires. As a consequence, without approval of the 2007 Plan, we anticipated we would not have sufficient shares available for
periodic grants principally to our management and key employees. Our Board believed that we should continue to have a stockholder-approved compensation plan to make compensation awards to attract and retain employees, executive officers, directors
and other service providers. The 2007 Plan was approved by our stockholders on December&nbsp;14, 2007. The stockholder approval of the 2007 Plan was intended to satisfy the stockholder approval requirements under Section&nbsp;162(m) of the Internal
Revenue Code, as amended (the &#147;Code&#148;), so as to permit us to deduct under federal income tax law certain amounts paid under the 2007 Plan to executive officers that might otherwise not be deductible, and to permit us to grant
&#147;incentive stock options&#148; eligible for special tax treatment under Code Section&nbsp;422. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Summary of the 2007 Plan</I> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>General.</I> A copy of the 2007 Plan, as amended and restated, is attached to this Proxy Statement as Exhibit A. The following description of the 2007 Plan is a
summary and so is qualified by reference to the complete text of the 2007 Plan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">25 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The purpose of the 2007 Plan is to provide equity ownership incentives to current and prospective management and
employees in order to incent and reward superior performance in achieving our long-term objectives, with the attendant rewards aligning with increased shareholder value as expressed in higher share prices. Stock options and stock awards, including
restricted stock, restricted stock units, stock appreciation rights and similar types of equity awards, may be granted under the 2007 Plan. Options granted under the 2007 Plan may be either &#147;incentive stock options,&#148; as defined in
Section&nbsp;422 of the Code, or nonstatutory stock options. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Administration.</I> The 2007 Plan may be administered by our Board, a committee of our
Board, or an employee or director delegated by our Board or our Board committee in accordance with the terms of the 2007 Plan (as applicable, the &#147;Administrator&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Eligibility.</I> Awards may be granted under the 2007 Plan to employees, including our officers, Directors and consultants and our affiliates. Incentive stock options may be granted only to our employees or
employees of our subsidiaries, if any. As of December&nbsp;31, 2010, 24 individuals were eligible to receive awards under the 2007 Plan, including 16 employees, 2 officers and 6 directors. Our Board or committee, in its discretion, selects the
employees, directors and consultants to whom awards may be granted, the time or times at which such awards are granted, and the terms of such awards. However, no individual may be granted equity awards under the 2007 Plan covering more than 300,000
shares or 50% of the number of shares authorized for issuance under the 2007 Plan if shareholders approve the amendment and restatement of the 2007 Plan in any calendar year, except that in connection with an individual&#146;s commencement of
service with us, he or she may be granted awards covering up to an additional 200,000 shares in the year in which such service commences. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Securities
Subject to the 2007 Plan.</I> An aggregate of 5,000,000 shares of common stock is currently reserved for issuance under the 2007 Plan. As of December&nbsp;31, 2010, the closing price of our common stock was $0.45 per share. Unissued shares subject
to awards that are canceled, expire or are forfeited will be available for re-grant or sale under the 2007 Plan. In addition, if an awardee pays the exercise or purchase price of an award through the tendering of shares or if award shares are
withheld or tendered to satisfy applicable withholding obligations, the number of shares tendered or withheld shall become available for re-issuance under the 2007 Plan. However, shares that have been issued under the 2007 Plan, whether upon
exercise of a stock option or under a stock award, will not be available for future distribution under the 2007 Plan unless the shares are repurchased by or forfeited to the Company upon the awardee&#146;s failure to vest in or otherwise earn the
shares. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Terms and Conditions of Options.</I> Each option is evidenced by a stock option agreement between us and the optionee and is subject to the
following additional terms and conditions: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Exercise Price.</I> The Administrator determines the exercise price of options at the time the options
are granted. The exercise price of an incentive stock option or a nonstatutory stock option may not be less than 100% of the fair market value of the common stock on the date the option is granted and the exercise price of an incentive stock option
granted to an employee who holds more than 10% of our voting stock may not be less than 110% of the fair market value of the common stock on the date the option is granted. The fair market value of the common stock is the closing price for the
shares as quoted on the principal exchange or quotation service for our common stock as of the applicable date. No option may be repriced to reduce the exercise price of such option without stockholder approval (except in connection with a change in
our capitalization&#151;see <I>&#147;Adjustments upon Changes in Capitalization, Dissolution, Merger or Asset Sale&#148; </I>below). </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">26 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Exercise of Option; Form of Consideration.</I> The Administrator determines when options vest and become
exercisable and in its discretion may accelerate the vesting of any outstanding option. Our standard vesting schedule applicable to options granted to employees has been a four-year period from the date of grant or the date of hire, assuming
continued employment with us. The means of payment for shares issued upon exercise of an option are specified in each option agreement. The 2007 Plan permits payment to be made by cash, check, wire transfer, other shares of our common stock (with
some restrictions), broker assisted same-day sales, a reduction in the amount of any of our liability owed to the awardee (including any liability attributable to the awardee&#146;s participation in any of our deferred compensation programs or
arrangements), any other form of consideration permitted by applicable law (which may include a &#147;net exercise&#148; program) and the Administrator, or any combination thereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Term of Option.</I> The term of an option may be no more than ten years from the date of grant, although the term of an incentive stock option granted to an employee who holds more than 10% of our voting stock
may be no more than five years from the date of grant. No option may be exercised after the expiration of its term. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Terms and Conditions of Stock
Awards.</I> Stock awards may be restricted stock grants, restricted stock units, stock appreciation rights or other similar stock awards (including awards that do not require the awardee to pay any amount in connection with receiving the shares or
that have a purchase price that is less than the grant date fair market value of our stock). Each stock award agreement contains provisions regarding (i)&nbsp;the number of shares subject to the stock award, (ii)&nbsp;the purchase price of the
shares, if any, and the means of payment for the shares, (iii)&nbsp;the performance criteria (including qualifying performance criteria), if any, and level of achievement versus these criteria that will determine the number of shares granted,
issued, retainable and vested, as applicable, (iv)&nbsp;such terms and conditions on the grant, issuance, vesting and forfeiture of the shares, as applicable, as may be determined from time to time by the Administrator, (v)&nbsp;restrictions on the
transferability of the stock award or the shares, and (vi)&nbsp;such further terms and conditions, in each case not inconsistent with the 2007 Plan, as may be determined from time to time by the Administrator. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Section&nbsp;162(m) Limitations.</I> Section&nbsp;162(m) of the Code generally disallows a tax deduction to a public company for compensation in excess of $1
million paid in a year to each of our Chief Executive Officer or certain of our other most highly compensated officers. Stock options and other stock awards may qualify as performance-based compensation if we satisfy certain requirements in
connection with the plan under which the awards are granted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Under Section&nbsp;162(m), options and stock appreciation rights will satisfy the
&#147;performance-based compensation&#148; exception if the award of the options or stock appreciation rights is made by a committee of the Board consisting solely of two or more &#147;outside directors,&#148; the plan sets forth the maximum number
of shares that can be granted to any person within a specified period and the compensation is based solely on an increase in the stock price after the grant date (i.e., the option or stock appreciation right exercise price is equal to or greater
than the fair market value of the stock subject to the award on the grant date). Other types of awards may only qualify as &#147;performance-based compensation&#148; if such awards are only granted or payable to the recipients based upon the
attainment of objectively determinable and pre-established performance goals which are established by a qualifying committee and which relate to performance targets which are approved by the Company&#146;s stockholders. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The 2007 Plan has been designed to permit the Administrator to grant stock options and stock appreciation rights which will qualify as &#147;performance-based
compensation.&#148; In addition, to permit awards other than stock options and stock appreciation </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">27 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
rights to qualify as &#147;performance-based compensation,&#148; the 2007 Plan provides that the Administrator may grant such awards that vest or become exercisable upon the attainment of
performance targets which are related to one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, affiliate or business segment
(which may be measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years&#146; results or to a designated comparison group): (i)&nbsp;cash flow; (ii)&nbsp;earnings
(including gross margin; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings before taxes; and net earnings); (iii)&nbsp;earnings per share; (iv)&nbsp;growth in earnings or earnings per share;
(v)&nbsp;stock price; (vi)&nbsp;return on equity or average stockholders&#146; equity; (vii)&nbsp;total stockholder return; (viii)&nbsp;return on capital; (ix)&nbsp;return on assets or net assets; (x)&nbsp;return on investment; (xi)&nbsp;revenue or
growth in revenue; (xii)&nbsp;income or net income; (xiii)&nbsp;operating income or net operating income, in aggregate or per share; (xiv)&nbsp;operating profit or net operating profit; (xv)&nbsp;operating margin; (xvi)&nbsp;return on operating
revenue; (xvii)&nbsp;market share; (xviii)&nbsp;contract awards or backlog; (xix)&nbsp;overhead or other expense reduction; (xx)&nbsp;growth in stockholder value relative to the moving average of the S&amp;P 500 Index or a peer group index;
(xxi)&nbsp;credit rating; (xxii)&nbsp;strategic plan development and implementation (including individual performance objectives that relate to achievement of the Company&#146;s or any business unit&#146;s strategic plan); (xxiii)&nbsp;improvement
in workforce diversity; (xxiv)&nbsp;growth of revenue, operating income or net income; (xxv)&nbsp;efficiency ratio; (xxvi)&nbsp;ratio of nonperforming assets to total assets; and (xxvii)&nbsp;any other similar criteria. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Adjustments upon Changes in Capitalization, Dissolution, Merger or Asset Sale.</I> In the event of any stock split, reverse stock split, stock dividend,
combination, reclassification of our common stock or any other change to our capital structure (effected without receipt of our consideration), the Administrator shall make proportionate adjustments to (1)&nbsp;the number of shares of Common Stock
covered by each outstanding award under the 2007 Plan, (2)&nbsp;the number of shares of Common Stock which have been authorized for issuance under the 2007 Plan but as to which no awards have yet been granted or which have been returned to the 2007
Plan upon cancellation, forfeiture or expiration of an award, (3)&nbsp;each of the share limitations set forth in Section&nbsp;3 of the 2007 Plan (reserves shares and per person limits) and (4)&nbsp;the price per share of Common Stock covered by
each such outstanding award under the 2007 Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In the event of a merger of us with or into another corporation, or the sale of substantially all of
our assets, as determined by our Board or the Administrator, our Board or the Administrator, may, in its discretion, (i)&nbsp;provide for the assumption or substitution of, or adjustment (including to the number and type of shares and exercise or
purchase price applicable) to, each outstanding award; (ii)&nbsp;accelerate the vesting of options and terminate any restrictions on stock awards; and/or (iii)&nbsp;provide for termination of awards as a result of the transaction on such terms and
conditions as it deems appropriate, including providing for the cancellation of awards for a cash or other payment to the awardee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Term of the 2007
Plan and Amendment and Termination of the 2007 Plan</I>. The 2007 Plan shall continue in effect until May&nbsp;20, 2020 or, if stockholders approve the amendment and restatement of the 2007 Plan, ten years following such approval, unless terminated
earlier. The Administrator may amend, alter or discontinue the 2007 Plan or any award agreement at any time. However, we will obtain stockholder approval for any amendment to the 2007 Plan if stockholder approval is necessary or desirable to comply
with any applicable law or exchange listing requirements. In addition, we will obtain stockholder approval of any of the following: (i)&nbsp;an increase in the number of shares available for issuance under the 2007 Plan (other than an adjustment on
a stock split or other corporate transaction or pursuant to the automatic annual increase, if stockholders approve the amendment and restatement of the 2007 Plan), (ii)&nbsp;a change of the class of persons eligible to receive awards under the 2007
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">28 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
Plan; (iii)&nbsp;a reduction in the minimum exercise prices at which options may be granted; or (iv)&nbsp;any amendment of outstanding options or stock appreciation rights that effects a
repricing of such awards. Generally, no amendment of the 2007 Plan shall impair the rights of an outstanding award without the consent of the awardee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Awards under the 2007 Plan</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth
the options and restricted stock awards issued under the 2007 Plan that have been received by or allocated as of December&nbsp;31, 2010 to the following persons or groups: (i)&nbsp;our CEO, (ii)&nbsp;each of our other Named Executive Officers,
(iii)&nbsp;our current executive officers as a group and (iv)&nbsp;all current directors who are not executive officers as a group. We do not have any associates of any of such Directors, executive officers or nominees nor do we have any other
person who received or is to receive five percent of such options, warrants or rights that have received any awards under the 2007 Plan. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="17%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="53%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Position</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number of<BR>Securities<BR>Underlying</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Options<BR>Granted</B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number
of<BR>Securities<BR>Underlying<BR>Restricted</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stock<BR>Awards<BR>Granted</B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Total</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John B.
Whelan</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer and Chief Financial Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">650,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">650,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John Barr</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Sr. Vice President, Research and Development</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">677,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">677,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ronald J. Prentki</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Former President and Chief Executive Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">250,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">63,095</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">313,095</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Paul Goddard, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Chairman</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">207,183</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">219.183</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kevin C. Tang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">95,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">95,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gregory Turnbull</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">200,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">188,933</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">388,933</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">All current executive officers as a group</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,327,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,327,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">All employees, other than current executive officers, as a group</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,061,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,061,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">All current directors who are not executive officers as a group</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">212,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">492,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">704,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2">
</FONT></I><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Whelan was appointed President, Chief Executive Officer and Director in April 2011.
</FONT></FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>New Plan Benefits</I>. The amount, if any, of equity compensation to be awarded to officers, Directors, employees and
consultants is determined from time to time by our Board, as applicable, and is not presently determinable. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Federal Income Tax Consequences</I>. The
following is a general summary of the federal income tax consequences of the issuance and exercise of options or other awards under the 2007 Plan. This summary includes general tax principles that apply only to employees who are citizens or
residents of the United States and is provided only for general information purposes. The following discussion does not address the tax consequences of Awards that may be subject to and do not comply with the rules and guidance issued pursuant to
Section&nbsp;409A of the Code. Section&nbsp;409A has implications that affect traditional deferred compensation plans, as well as certain equity awards. Accordingly, additional adverse tax consequences could apply to certain equity awards as a
result of Section&nbsp;409A based on the terms of the equity awards or modifications that have been made to the provisions of the equity awards. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">29 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following discussion does not purport to be complete, and does not cover, among other things, state and local tax
treatment of participants in the 2007 Plan. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of income taxation that may be relevant
in light of personal investment circumstances. This summarized tax information is not tax advice. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Options</I>. The grant of an incentive stock
option has no federal income tax effect on the optionee. Upon exercise the optionee does not recognize income for &#147;regular&#148; tax purposes. However, the excess of the fair market value of the stock subject to an option over the exercise
price of such option (the &#147;option spread&#148;) is includible in the optionee&#146;s &#147;alternative minimum taxable income&#148; for purposes of the alternative minimum tax. If the optionee does not dispose of the stock acquired upon
exercise of an incentive stock option until more than two years after the option grant date and more than one year after exercise of the option, any gain (or loss) upon sale of the shares will be a long-term capital gain (or loss). If shares are
sold or otherwise disposed of before these periods have expired (a &#147;disqualifying disposition&#148;), the option spread at the time of exercise of the option (but not more than the amount of the gain on the sale or other disposition) is
ordinary income in the year of such sale or other disposition. If gain on a disqualifying disposition exceeds the amount treated as ordinary income, the excess is taxable as capital gain (which will be long-term capital gain if the shares have been
held more than one year after the date of exercise of the option). We are not entitled to a federal income tax deduction in connection with incentive stock options, except to the extent that the optionee has taxable ordinary income on a
disqualifying disposition (unless limited by Section&nbsp;162(m)). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The grant of a nonstatutory option having an exercise price equal to the grant date
fair market value of our common stock has no federal income tax effect on the optionee. Upon the exercise of a nonstatutory option, the optionee has taxable ordinary income (and unless limited by Section&nbsp;162(m) we are entitled to a
corresponding deduction) equal to the option spread on the date of exercise. Upon the disposition of stock acquired upon exercise of a nonstatutory stock option, the optionee recognizes either long-term or short-term capital gain or loss, depending
on how long the stock was held, on any difference between the sale price and the exercise price, to the extent not recognized as taxable income on the date of exercise. We may allow nonstatutory stock options to be transferred subject to conditions
and restrictions imposed by the Administrator; special tax rules may apply on such a transfer. In the case of both incentive stock options and nonstatutory stock options, special federal income tax rules apply if our common stock is used to pay all
or part of the option price, and different rules than those described above will apply if unvested shares are purchased on exercise of the option. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Stock Appreciation Rights</I>. No taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant will
recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss. We are
entitled to a deduction in the same amount as and at the time the employee recognizes ordinary income. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Restricted Stock Awards</I>. Stock awards
will generally be taxed in the same manner as nonstatutory stock options. Shares issued under a restricted stock award are subject to a &#147;substantial risk of forfeiture&#148; within the meaning of Section&nbsp;83 of the Code to the extent the
shares will be forfeited in the event that the participant ceases to provide services to us and are not transferable. As a result of this substantial risk of forfeiture, the participant will not recognize ordinary income at the time the award shares
are issued. Instead, the participant will recognize ordinary income on the dates when the stock is no longer subject to a substantial risk of forfeiture, or when the stock becomes transferable, if earlier. The participant&#146;s ordinary income is
measured as the difference between the amount paid for the stock, if any, and the fair market value of the stock on the date the stock is no longer subject to forfeiture. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">30 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The participant may accelerate his or her recognition of ordinary income, if any, and begin his or her capital gains
holding period by timely filing (i.e., within thirty days of the share issuance date) an election pursuant to Section&nbsp;83(b) of the Code. In such event, the ordinary income recognized, if any, is measured as the difference between the amount
paid for the stock, if any, and the fair market value of the stock on the date of such issuance, and the capital gain holding period commences on such date. The ordinary income recognized by an employee will be subject to tax withholding by us. We
are entitled to a deduction in the same amount as and at the time the employee recognizes ordinary income. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Restricted Stock Unit Awards</I>. A
participant will generally not recognize taxable income at the time of the grant of a restricted stock unit award. When an award is paid (assuming the award is settled at the time that the award vests), the participant will recognize ordinary
income. In the event of an award that is settled in shares of our Common Stock at a time following the vesting date, income tax may be deferred beyond vesting and until shares are actually delivered to the participant if deferred in compliance with
the timing of distributions and other requirements under Section&nbsp;409A of the Code. We are entitled to a deduction in the same amount as and at the time the employee recognizes ordinary income. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;409A covers most programs that defer the receipt of compensation to a succeeding year. It provides rules for elections to defer, if any, and for
timing of payouts. There are significant penalties placed on the individual participant for failure to comply with Section&nbsp;409A. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;409A
does not apply to incentive stock options, nonstatutory stock options that have an exercise price that is at least equal to the grant date fair market value and meet certain other requirements and restricted stock or restricted stock unit type
awards provided there is no deferral of income beyond the vesting date. Section&nbsp;409A also does not cover stock appreciation rights if the exercise price is not less than the fair market value of the underlying stock on the date of grant, the
rights are settled in such stock and no features defer the recognition of income beyond the exercise date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Tax Effect for the
Company</I>.&nbsp;Generally we will be entitled to a tax deduction in connection with an award under the 2007 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for
example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid to our Chief Executive Officer and to certain of our other most highly compensated executive officers. Under
Section&nbsp;162(m)&nbsp;of the Internal Revenue Code, the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain
compensation in excess of $1,000,000 if the conditions of Section&nbsp;162(m) are met. These conditions include stockholder approval of the 2007 Plan, setting limits on the number of awards that any individual may receive and for awards other than
certain stock options, establishing performance criteria that must be met before the award actually will vest or be paid. The 2007 Plan has been designed to permit our Board to grant awards which may qualify as performance-based for purposes of
satisfying the conditions of Section&nbsp;162(m) which may permit the Company to receive a federal income tax deduction in connection with such awards. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Vote Required and Board Recommendation</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The affirmative
vote of the holders of a majority of the shares of Common Stock present in person or by proxy at the meeting and entitled to vote on this proposal will be required to approve this amendment to the 2007 Plan. As a result, abstentions will have the
same effect as a negative votes, while broker non-votes will be disregarded. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The Board of Directors recommends a vote &#147;FOR&#148; the amendment
to our 2007 Plan. </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">31 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PROPOSAL 4&#151;AMENDMENT OF THE COMPANY&#146;S 1997 EMPLOYEE STOCK
PURCHASE PLAN (&#147;ESPP&#148;) </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board of Directors has approved an amendment, subject to stockholder approval, to the 1997 Employee
Stock Purchase Plan (&#147;ESPP&#148;). The following description of the ESPP is a summary and so qualified by reference to the complete text of the ESPP, attached to this proxy statement as Exhibit B. The ESPP permits the Company&#146;s employees
to purchase the Company&#146;s Common Stock at a discounted price. This plan is designed to encourage and assist employees of the Company to acquire an equity interest in the Company through the purchase of shares of Company Common Stock.
Approximately 17 employees of the Company are eligible to participate in the Purchase Plan. You can request a copy of the 1997 Employee Stock Purchase Plan by writing to the Company to the attention of the Stock Administrator. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Subject to stockholder approval, the Board of Directors has approved an increase of 500,000 shares from 500,000 to 1,000,000 shares, under the ESPP. As of
March&nbsp;31, 2011, 390,842 shares have been issued under the Purchase Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Description of the ESPP</I> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">All employees, including executive officers, customarily employed more than 20 hours per week and more than five months per year by the Company are eligible to
participate in the ESPP as of the first semi-annual enrollment date following employment. Participants may elect to make contributions up to a maximum of 10% of base earnings. On the last trading date of April and October, the Company applies the
funds then in each participant&#146;s account to the purchase of shares. The cost of each share purchased is 85% of the lower of the closing prices for Common Stock on: (i)&nbsp;the first trading day in the enrollment period in which the purchase is
made; and (ii)&nbsp;the purchase date. The length of the enrollment period per plan may not exceed a maximum of 24 months. Enrollment dates are the first business day of May and November. The Board may limit the maximum number of shares that may be
purchased by a participant during any enrollment period, may limit the length of the enrollment periods and no participant&#146;s right to acquire shares may accrue at a rate exceeding $25,000 of fair market value of Common Stock (determined as the
lower of the fair market value on the first trading day in an enrollment period or the fair market value on the purchase date) in any calendar year. Currently, the Board has set the enrollment periods at six months. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board of Directors may administer the ESPP or the Board may delegate its authority to a committee of the Board. The Board of Directors may amend or terminate
the Purchase Plan at any time and may provide for an adjustment in the purchase price and the number and kind of securities available under the plan in the event of a reorganization, recapitalization, stock split, or other similar event. However,
amendments that would increase the number of shares reserved for purchase, or would otherwise require stockholder approval in order to comply with certain federal tax laws, require stockholder approval. Shares available under the plan may be either
outstanding shares repurchased by the Company or newly issued shares. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table shows the &#147;Dollar Value&#148; and number of shares
applicable to the named individuals and groups under the ESPP during the year ended December&nbsp;31, 2010, purchased on the April and October 2010 purchase dates under the ESPP at a purchase price of $0.5355 and $0.68, respectively, which represent
85% of the closing price on the purchase date. The &#147;Dollar Value&#148; is the difference between the fair market value of the Common Stock on the purchase date of April&nbsp;30, 2010 or October&nbsp;31, 2010 and the participant&#146;s purchase
price of $0.5355 or $0.68 per share. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Because purchase rights are subject to discretion, including an employee&#146;s decision not to participate in the
Purchase Plan, awards under the Purchase Plan for the current fiscal year are not determinable. No purchase rights have been granted with respect to the additional 500,000 shares for which approval is requested. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">32 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PLAN BENEFITS&#151;1997 EMPLOYEE STOCK PURCHASE PLAN
</FONT></B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name and Position</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Dollar<BR>Value&nbsp;($)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="right" STYLE="BORDER-BOTTOM:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>of&nbsp;Shares</B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">John Barr, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,121</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Senior Vice President, Research and Development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:0.50em; text-indent:-0.50em"><FONT STYLE="font-family:ARIAL" SIZE="2">Non-Executive Officer Employee Group</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,621</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">33,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Federal Income Tax Consequences</I> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The following general description of federal income tax consequences is based upon current statutes, regulations and interpretations thereof. Because the
applicable rules are complex and because income tax consequences may vary depending upon the individual circumstances of each participant, participants should consult their personal tax advisors concerning federal, state, local and foreign income
tax consequences associated with their participation in the Purchase Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In general, participants will not have taxable income or loss under the ESPP
until they sell or otherwise dispose of shares acquired under the plan (or die holding such shares). If the shares are held, as of the date of sale or disposition, for longer than both: (i)&nbsp;two years after the beginning of the enrollment period
during which the shares were purchased; and (ii)&nbsp;one year following purchase, a participant will have taxable ordinary income equal to 15% of the fair market value of the shares on the first day of the enrollment period (but not in excess of
the fair market value of the shares at the time of sale over the purchase price). Any additional gain (or loss) from the sale will be long-term capital gain (or loss). The Company is not entitled to an income tax deduction if the holding periods are
satisfied. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">If the shares are sold or disposed of before the expiration of either of the foregoing holding periods (a &#147;disqualifying
disposition&#148;), a participant will have taxable ordinary income equal to the excess of the fair market value of the shares on the purchase date over the purchase price. In addition, the participant will have a taxable capital gain (or loss)
measured by the difference between the sale price and the participant&#146;s purchase price which gain (or loss) will be long-term if the shares have been held as of the date of sale for more than one year. The Company is entitled to an income tax
deduction equal to the amount of ordinary income recognized by a participant in a disqualifying disposition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Vote Required and Board
Recommendation</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy at the meeting and
entitled to vote on this proposal will be required to approve this amendment to the ESPP. As a result, abstentions will have the same effect as a negative votes, while broker non-votes will be disregarded. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The Board of Directors recommends a vote &#147;FOR&#148; the amendment to the Company&#146;s 1997 Employee Stock Purchase Plan. </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">33 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">PROPOSAL 5&#151;RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Subject to stockholder ratification, our Board has selected Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP as independent registered
public accountants to audit our financial statements for the fiscal year ending December&nbsp;31, 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">At the Annual Meeting, the stockholders will be
asked to ratify the appointment of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP as our independent registered public accountants for the fiscal year ending December&nbsp;31, 2011. Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. has audited our
financial statements since 2006. Representatives of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP are expected to be present at the Annual Meeting and will have the opportunity to make statements if they desire to do so. Such representatives are
also expected to be available to respond to appropriate questions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Stockholder ratification of the selection of Odenberg, Ullakko, Muranishi&nbsp;&amp;
Co. as our independent registered public accounting firm is not required by law or our bylaws or otherwise. However, our Board is submitting the selection of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. to the stockholders for ratification as a
matter of good corporate practice. In the event our stockholders fail to ratify the appointment, our Board will reconsider its selection. Even if the selection is ratified, our Board in their discretion may direct the appointment of a different
independent registered public accounting firm at any time during the year if they determine that such a change would be in our best interest and that of our stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Vote Required and Board Recommendation</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or by proxy at the meeting and entitled to vote on this proposal will be required to ratify the appointment of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP as our independent registered public accounting firm for
the fiscal year ending December&nbsp;31, 2011. As a result, abstentions will have the same effect as a negative votes, while broker non-votes, if any, will be disregarded. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>The Board of Directors recommends a vote &#147;FOR&#148; the ratification of the appointment of Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP as our independent registered public accounting firm for the fiscal
year ending December&nbsp;31, 2011. </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">34 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">OTHER MATTERS </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">As of the time of preparation of this Proxy Statement, neither our Board of Directors nor management intends to bring before the meeting any business other than
the matters referred to in the Notice of Annual Meeting and this Proxy Statement. If any other business should properly come before the meeting, or any adjournment thereof, the persons named in the proxy will vote on such matters according to their
best judgment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">STOCKHOLDERS SHARING THE SAME ADDRESS </FONT></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In accordance with notices previously sent to many stockholders who hold their shares through a bank, broker or other holder of record (a &#147;street-name
stockholder&#148;) and share a single address, only one annual report and Proxy Statement is being delivered to that address unless contrary instructions from any stockholder at that address were received. This practice, known as
&#147;householding,&#148; is intended to reduce our printing and postage costs. However, any such street-name stockholder residing at the same address who wishes to receive a separate copy of this Proxy Statement and accompanying Annual Report to
Stockholders may request a copy by contacting the bank, broker or other holder of record, or us by telephone at (650)&nbsp;366-2626. The voting instruction sent to a street-name stockholder should provide information on how to request
(1)&nbsp;householding our future materials or (2)&nbsp;separate materials if only one set of documents is being sent to a household. If it does not, a stockholder who would like to make one of these requests should contact us as indicated above.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">FORM 10-K </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our annual report to stockholders on Form 10-K for the year ended December&nbsp;31, 2010, containing audited balance sheets as of December&nbsp;31, 2010 and 2009 and audited statements of operations,
stockholders&#146; equity and cash flows for each of the last three years in the period ended December&nbsp;31, 2010, is being mailed with this Proxy Statement to Stockholders entitled to notice of the annual meeting. The Form 10-K is not
incorporated into this Proxy Statement and is not considered proxy-soliciting material. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">STOCKHOLDER
PROPOSALS FOR 2012 ANNUAL MEETING </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Under the rules of the SEC, stockholders who wish to submit proposals for inclusion in the Proxy Statement
for the 2012 Annual Meeting of Stockholders must submit such proposals so as to be received by us at 123 Saginaw Drive, Redwood City, California 94063, on or before December&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011. In addition, if we are not notified by
February&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012 of a proposal to be brought before the 2012 Annual Meeting by a stockholder, then proxies held by management may provide the discretion to vote against such proposal even though it is not discussed in the
Proxy Statement for such meeting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">BY ORDER OF THE BOARD OF DIRECTORS </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2"><U>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, Secretary </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">Redwood City, California </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT STYLE="font-family:ARIAL" SIZE="2">May &nbsp;&nbsp;&nbsp;&nbsp;, 2011 </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">35 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">EXHIBIT A </FONT></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">A.P. PHARMA, INC. </FONT></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">FORM OF AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>1.
Purposes of the Plan. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The purpose of this Plan is to encourage ownership in A.P. Pharma, Inc., a Delaware corporation (the
&#147;<B>Company</B>&#148;), by key personnel whose long-term employment or other service relationship with the Company is considered essential to the Company&#146;s continued progress and, thereby, encourage recipients to act in the
stockholders&#146; interest and share in the Company&#146;s success. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2. Definitions. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">As used herein, the following definitions shall apply: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)
<B>&#147;Administrator&#148;</B>&nbsp;means the Board, any Committees or such delegates as shall be administering the Plan in accordance with Section&nbsp;4 of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(b) <B>&#147;Affiliate&#148;</B>&nbsp;means any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant ownership interest as determined by the
Administrator. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) <B>&#147;Applicable Laws&#148;</B>&nbsp;means the requirements relating to the administration of stock option and
stock award plans under U.S. federal and state laws, any stock exchange or quotation system on which the Company has listed or submitted for quotation the Common Stock to the extent provided under the terms of the Company&#146;s agreement with such
exchange or quotation system and, with respect to Awards subject to the laws of any foreign jurisdiction where Awards are, or will be, granted under the Plan, the laws of such jurisdiction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) <B>&#147;Award&#148;</B>&nbsp;means a Stock Award or Option granted in accordance with the terms of the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) <B>&#147;Awardee&#148;</B>&nbsp;means an Employee, Consultant or Director of the Company or any Affiliate who has been granted an Award under
the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(f) <B>&#147;Award Agreement&#148;</B>&nbsp;means a Stock Award Agreement and/or Option Agreement, which may be in written or
electronic format, in such form and with such terms and conditions as may be specified by the Administrator, evidencing the terms and conditions of an individual Award. Each Award Agreement is subject to the terms and conditions of the Plan.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(g) <B>&#147;Board&#148;</B>&nbsp;means the Board of Directors of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(h) <B>&#147;Cause&#148;</B> means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant&#146;s
Award Agreement, any of the following: (i)&nbsp;the Participant&#146;s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Company or Affiliate documents or records; (ii)&nbsp;the
Participant&#146;s </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-1 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">
material failure to abide by a Company&#146;s or Affiliate&#146;s code of conduct or other policies (including without limitation, policies relating to confidentiality and reasonable workplace
conduct); (iii)&nbsp;the Participant&#146;s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company or an Affiliate (including, without limitation, the
Participant&#146;s improper use or disclosure of confidential or proprietary information); (iv)&nbsp;any intentional act by the Participant which has a material detrimental effect on the Company or an Affiliate&#146;s reputation or business;
(v)&nbsp;the Participant&#146;s repeated failure or inability to perform any reasonable assigned duties after written notice from the Company or an Affiliate (including, without limitation, habitual absence from work for reasons other than illness),
and a reasonable opportunity to cure, such failure or inability; (vi)&nbsp;any material breach by the Participant of any employment or service agreement between the Participant and the Company or an Affiliate, which breach is not cured pursuant to
the terms of such agreement; or (vii)&nbsp;the Participant&#146;s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the
Participant&#146;s ability to perform his or her duties with the Company or an Affiliate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(i) <B>&#147;Change in
Control&#148;</B>&nbsp;means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant&#146;s Award Agreement, the occurrence of any of the following: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">i. an Ownership Change Event or a series of related Ownership Change Events (collectively, a &#147;<B>Transaction</B>&#148;) in which the
stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company&#146;s voting stock immediately before the Transaction,
direct or indirect beneficial ownership of more than fifty percent (50%)&nbsp;of the total combined voting power of the outstanding voting securities of the Company or such surviving entity immediately outstanding after the Transaction, or, in the
case of an Ownership Change Event described in Section&nbsp;2(bb)(iii), the entity to which the assets of the Company were transferred (the &#147;Transferee&#148; ), as the case may be; or </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. the liquidation or dissolution of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business
entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Board shall have the right to determine whether multiple sales or exchanges of the
voting securities in the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. The Board may also, but need not, specify that other transactions or events constitute a Change in
Control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(j) <B>&#147;Code&#148;</B>&nbsp;means the United States Internal Revenue Code of 1986, as amended. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(k) <B>&#147;Committee&#148;</B>&nbsp;means the compensation committee of the Board or a committee of Directors appointed by the Board in
accordance with Section&nbsp;4 of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(l) <B>&#147;Common Stock&#148;</B>&nbsp;means the common stock of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(m) <B>&#147;Company&#148;</B>&nbsp;means A.P. Pharma, Inc., a Delaware corporation, or its successor. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-2 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(n) <B>&#147;Consultant&#148;</B> means any person (including an advisor or an employee of an entity)
that is engaged by the Company or any Parent, Subsidiary or Affiliate, to render services and is compensated for such services. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(o)
<B>&#147;Continuous Service&#148;</B> means that the Participant&#146;s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant&#146;s service
with the Company or an Affiliate, shall not terminate a Participant&#146;s Continuous Service; <I>provided, however</I> , if the Company for which a Participant is rendering services ceases to qualify as an &#147;Affiliate,&#148; as determined by
the Board in its sole discretion, such Participant&#146;s Continuous Service shall be considered to have terminated on the date such Company ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer
of the Company, in that party&#146;s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of: (i)&nbsp;any leave of absence approved by the Board or the chief executive officer of the Company,
including sick leave, military leave or any other personal leave; or (ii)&nbsp;transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of
vesting in a Stock Award only to such extent as may be provided in the Company&#146;s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(p) <B>&#147;Conversion Award&#148;</B>&nbsp;has the meaning set forth in Section&nbsp;4(b)(xii)&nbsp;of the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(q) <B>&#147;Director&#148;</B>&nbsp;means a member of the Board. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(r) <B>&#147;Effective Date&#148;</B> means the date of approval of the Plan by the stockholders of the Company in the manner and to the extent required by Applicable Laws. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(s) <B>&#147;Employee&#148;</B>&nbsp;means a regular, active employee of the Company or any Affiliate, including an Officer and/or Inside Director.
Within the limitations of Applicable Law, the Administrator shall have the discretion to determine the effect upon an Award and upon an individual&#146;s status as an Employee in the case of (i)&nbsp;any individual who is classified by the Company
or its Affiliate as leased from or otherwise employed by a third party or as intermittent or temporary, even if any such classification is changed retroactively as a result of an audit, litigation or otherwise, (ii)&nbsp;any leave of absence
approved by the Company or an Affiliate, (iii)&nbsp;any transfer between locations of employment with the Company or an Affiliate or between the Company and any Affiliate or between any Affiliates, (iv)&nbsp;any change in the Awardee&#146;s status
from an Employee to a Consultant or Director, and (v)&nbsp;at the request of the Company or an Affiliate an Employee becomes employed by any partnership, joint venture or corporation not meeting the requirements of an Affiliate in which the Company
or an Affiliate is a party. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(t) <B>&#147;Exchange Act&#148;</B>&nbsp;means the Securities Exchange Act of 1934, as amended. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(u) <B>&#147;Fair Market Value&#148;</B>&nbsp;means, as of any date, the value of a share of Common Stock or other property as determined by the
Administrator, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">i. If, on such date, the Common Stock is listed on a national or regional securities exchange or market system, including without limitation the Nasdaq Global Market, the Fair Market Value of a share of Common
Stock shall be the </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">
closing price on such date of a share of Common Stock (or the mean of the closing bid and asked prices of a share of Common Stock if the stock is so quoted instead) as quoted on such exchange or
market system constituting the primary market for the Common Stock, as reported in <U>The Wall Street Journal</U> or such other source as the Administrator deems reliable. If the relevant date does not fall on a day on which the Common Stock has
traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Common Stock was so traded prior to the relevant date, or such other appropriate day as shall be
determined by the Administrator, in its discretion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. If, on such date, the Common Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Common Stock shall be as determined by the Administrator in good faith using a reasonable application of a reasonable valuation method without regard to any restriction other
than a restriction which, by its terms, will never lapse. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(v) <B>&#147;Grant Date&#148;</B>&nbsp;means, for all purposes, the date on
which the Administrator approves the determination of grant of an Award, or such other date as is determined by the Administrator, provided that in the case of any Incentive Stock Option, the grant date shall be the later of the date on which the
Administrator makes the determination granting such Incentive Stock Option or the date of commencement of the Awardee&#146;s employment relationship with the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(w) <B>&#147;Incentive Stock Option&#148;</B>&nbsp;means an Option intended to qualify as an incentive stock option within the meaning of Section&nbsp;422 of the Code and the regulations promulgated thereunder.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(x) <B>&#147;Inside Director&#148;</B> means a Director who is an Employee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(y) <B>&#147;Nasdaq&#148;</B> means the Nasdaq Global Market or its successor. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(z) <B>&#147;Nonstatutory Stock Option&#148;</B>&nbsp;means an Option not intended to qualify as an Incentive Stock Option. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(aa) <B>&#147;Officer&#148;</B>&nbsp;means a person who is an officer of the Company within the meaning of Section&nbsp;16 of the Exchange Act and
the rules and regulations promulgated thereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(bb) <B>&#147;Option&#148;</B>&nbsp;means a right granted under Section&nbsp;8 to
purchase a number of Shares at such exercise price, at such times, and on such other terms and conditions as are specified in the agreement or other documents evidencing the Option (the &#147;Option Agreement&#148; ). Both Options intended to
qualify as Incentive Stock Options and Nonstatutory Stock Options may be granted under the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(cc) <B>&#147;Outside
Director&#148;</B> means a Director who is not an Employee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(dd) <B>&#147;Ownership Change Event&#148;</B> means the occurrence of any
of the following with respect to the Company: (i)&nbsp;the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%)&nbsp;of the voting stock of the Company;
(ii)&nbsp;a merger or consolidation in which the Company is a party; or (iii)&nbsp;the sale, exchange, or transfer of all or substantially all of the assets of the Company. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-4 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ee) <B>&#147;Parent&#148;</B> means a &#147;parent corporation,&#148; whether now or hereafter
existing, as defined in Section&nbsp;424(e) of the Code, or any successor provision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ff) <B>&#147;Participant&#148;</B>&nbsp;means the
Awardee or any person (including any estate) to whom an Award has been assigned or transferred as permitted hereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(gg)
<B>&#147;Plan&#148;</B>&nbsp;means this A.P. Pharma, Inc. 2007 Equity Incentive Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(hh) <B>&#147;Qualifying Performance
Criteria&#148;</B>&nbsp;shall have the meaning set forth in Section&nbsp;13(b) of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ii) <B>&#147;Restricted Stock
Unit&#148;</B>&nbsp;means a bookkeeping entry representing an amount equivalent to the Fair Market Value of one Share (or a fraction or multiple of such value), payable in cash, property or Shares. Restricted Stock Units represent an unfunded and
unsecured obligation of the Company, except as otherwise provided for by the Administrator. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(jj) <B>&#147;Share&#148;</B>&nbsp;means a
share of the Common Stock, as adjusted in accordance with Section&nbsp;14 of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(kk) <B>&#147;Stock Appreciation
Right&#148;</B>&nbsp;means a right to receive cash and/or shares of Common Stock based on a change in the Fair Market Value of a specific number of shares of Common Stock between the grant date and the exercise date granted under Section&nbsp;12.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ll) <B>&#147;Stock Award&#148;</B>&nbsp;means an award or issuance of Shares, Restricted Stock Units, Stock Appreciation Rights or
other similar awards made under Section&nbsp;12 of the Plan, the grant, issuance, retention, vesting, settlement, and/or transferability of which is subject during specified periods of time to such conditions (including continued employment or
performance conditions) and terms as are expressed in the agreement or other documents evidencing the Award (the &#147;Stock Award Agreement&#148; ). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(mm) <B>&#147;Subsidiary&#148;</B>&nbsp;means any company (other than the Company) in an unbroken chain of companies beginning with the Company, provided each company in the unbroken chain (other than the Company)
owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(nn) <B>&#147;Termination of Continuous Service&#148;</B>&nbsp;shall mean ceasing to be in Continuous Service as an Employee, Consultant or Director, as determined in the sole discretion of the Administrator.
However, for Incentive Stock Option purposes, Termination of Continuous Service will occur when the Awardee ceases to be an employee (as determined in accordance with Section&nbsp;3401(c) of the Code and the regulations promulgated thereunder) of
the Company or one of its Subsidiaries. The Administrator shall determine whether any corporate transaction, such as a sale or spin-off of a division or business unit, or a joint venture, shall be deemed to result in a Termination of Continuous
Service. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(oo) <B>&#147;Total and Permanent Disability&#148;</B>&nbsp;shall have the meaning set forth in Section&nbsp;22(e)(3) of the
Code. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-5 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>3. Stock Subject to the Plan. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(a) <I>Aggregate Limits.</I>&nbsp;Subject to the provisions of Section&nbsp;14 of the Plan, the maximum aggregate number of Shares that may be sold or issued under the Plan is 95,000,000 shares of Common Stock,
provided that the total number of shares authorized for issuance hereunder shall be automatically increased by a positive number on each of December&nbsp;31 2011,&nbsp;December&nbsp;31, 2012 and December&nbsp;31, 2013 to equal 14% of the aggregate
number of shares of Common Stock a) issued and outstanding and b) issuable upon conversion of the then outstanding senior secured convertible notes due 2021, including any interest amounts added to the outstanding principal at the election of the
holders. Shares subject to Awards granted under the Plan that are cancelled, expire or are forfeited shall be available for re-grant under the Plan. If an Awardee pays the exercise or purchase price of an Award granted under the Plan through the
tender or withholding of Shares, or if Shares are tendered or withheld to satisfy any Company withholding obligations, the number of Shares so tendered or withheld shall become available for re-issuance thereafter under the Plan. The Shares subject
to the Plan may be either Shares reacquired by the Company, including Shares purchased in the open market, or authorized but unissued Shares. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(b) <I>Code Section&nbsp;162(m) Share Limits.</I>&nbsp;Subject to the provisions of Section&nbsp;14 of the Plan, the aggregate number of Shares subject to Awards granted under this Plan during any calendar year to
any one Awardee shall not exceed 50% of the maximum aggregate number of shares that are authorized for issuance at the end of such calendar year, after giving effect to the automatic increase, if any, of shares authorized for issuance pursuant to
Section&nbsp;3(a) of the Plan , except that in connection with his or her first commencing service with the Company or an Affiliate, an Awardee may be granted Awards covering up to an additional 200,000 Shares during the year in which such service
commences. Notwithstanding anything to the contrary in the Plan, the limitations set forth in this Section&nbsp;3(b) shall be subject to adjustment under Section&nbsp;14(a) of the Plan only to the extent that such adjustment will not affect the
status of any Award intended to qualify as &#147;performance based compensation&#148; under Code Section&nbsp;162(m). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>4. Administration of the Plan.
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Procedure.</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">i. <I>Multiple Administrative Bodies</I>.&nbsp;The Plan shall be administered by the Board, a Committee and/or their delegates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">ii. <I>Section&nbsp;162</I>.&nbsp;To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as &#147;performance-based compensation&#148; within the meaning of
Section&nbsp;162(m) of the Code, Awards to &#147;covered employees&#148; within the meaning of Section&nbsp;162(m) of the Code or Employees that the Committee determines may be &#147;covered employees&#148; in the future shall be made by a Committee
of two or more &#147;outside directors&#148; within the meaning of Section&nbsp;162(m) of the Code. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iii.
<I>Rule&nbsp;16b-3</I>.&nbsp;To the extent desirable to qualify transactions hereunder as exempt under Rule&nbsp;16b-3 promulgated under the Exchange Act (&#147;Rule&nbsp;16b-3&#148;), Awards to Officers and Directors shall be made by the entire
Board or a Committee of two or more &#147;non-employee directors&#148; within the meaning of Rule&nbsp;16b-3. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iv. <I>Other
Administration</I>.&nbsp;The Board or a Committee may delegate to an authorized officer or officers of the Company the power to approve Awards to persons eligible to receive Awards under the Plan who are not (A)&nbsp;subject to Section&nbsp;16 of
the Exchange Act or (B)&nbsp;at the time of such approval, &#147;covered employees&#148; under Section&nbsp;162(m) of the Code or (C)&nbsp;any other executive officer. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-6 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">v. <I>Delegation of Authority for the Day-to-Day Administration of the Plan</I>.&nbsp;Except to the
extent prohibited by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">vi. <I>Nasdaq</I>.&nbsp;To the extent that the Common Stock is then listed on Nasdaq, the Plan will be administered in a manner that complies with
any applicable Nasdaq or stock exchange listing requirements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Powers of the Administrator</I>.&nbsp;Subject to the provisions of
the Plan and, in the case of a Committee or delegates acting as the Administrator, subject to the specific duties delegated to such Committee or delegates, the Administrator shall have the authority, in its discretion: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">i. to select the Employees, Consultants and Directors of the Company or its Affiliates to whom Awards are to be granted hereunder; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. to determine the number of shares of Common Stock to be covered by each Award granted hereunder; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iii. to determine the type of Award to be granted to the selected Employees, Consultants and Directors; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iv. to approve forms of Award Agreements for use under the Plan; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">v. to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise and/or purchase price
(if applicable), the time or times when an Award may be exercised (which may or may not be based on performance criteria), the vesting schedule, any vesting and/or exercisability acceleration or waiver of forfeiture restrictions, the acceptable
forms of consideration, the term, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine and may be established at the
time an Award is granted or thereafter; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">vi. to correct administrative errors; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">vii. to construe and interpret the terms of the Plan (including sub-plans and Plan addenda) and Awards granted pursuant to the Plan; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">viii. to adopt rules and procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws
and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized (A)&nbsp;to adopt the rules and procedures regarding the conversion of local currency, withholding procedures and handling of stock
certificates which vary with local requirements and (B)&nbsp;to adopt sub-plans and Plan addenda as the Administrator deems desirable, to accommodate foreign laws, regulations and practice; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ix. to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans and Plan
addenda; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-7 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">x. to modify or amend each Award, including, but not limited to, the acceleration of vesting and/or
exercisability, provided, however, that any such amendment is subject to Section&nbsp;15 of the Plan and except as set forth in that Section, may not impair any outstanding Award unless agreed to in writing by the Participant; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xi. to allow Participants to satisfy withholding tax amounts by electing to have the Company withhold from the Shares to be issued upon exercise of
an Option or vesting of a Stock Award that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined in such manner and on such date that the
Administrator shall determine or, in the absence of provision otherwise, on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may provide; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xii. to authorize conversion or substitution under the Plan of any or all stock
options, stock appreciation rights or other stock awards held by service providers of an entity acquired by the Company (the &#147;<B>Conversion Awards</B>&#148; ). Any conversion or substitution shall be effective as of the close of the merger,
acquisition or other transaction. The Conversion Awards may be Nonstatutory Stock Options or Incentive Stock Options, as determined by the Administrator, with respect to options granted by the acquired entity; provided, however, that with respect to
the conversion of stock appreciation rights in the acquired entity, the Conversion Awards shall be Nonstatutory Stock Options. Unless otherwise determined by the Administrator at the time of conversion or substitution, all Conversion Awards shall
have the same terms and conditions as Awards generally granted by the Company under the Plan; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xiii. to authorize any person to execute
on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xiv. to
impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Award,
including without limitation, (A)&nbsp;restrictions under an insider trading policy or under any other Company policy relating to Company stock and stock ownership and (B)&nbsp;restrictions as to the use of a specified brokerage firm for such
resales or other transfers; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xv. to provide, either at the time an Award is granted or by subsequent action, that an Award shall contain
as a term thereof, a right, either in tandem with the other rights under the Award or as an alternative thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash or a combination thereof, the amount of which is
determined by reference to the value of the Award; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xvi. to cause all outstanding Awards held by an Awardee to terminate immediately in
their entirety (including as to vested Options) upon first notification to the Awardee of the Awardee&#146;s Termination of Continuous Service for Cause. If an Awardee&#146;s Continuous Service with the Company is suspended pending an investigation
of whether the Awardee shall be terminated for Cause, the Administrator has the authority to cause all the Awardee&#146;s rights under all outstanding Awards to be suspended during the investigation period in which event the Awardee shall have no
right to exercise any outstanding Awards. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-8 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xvii. to determine whether and to what extent the vesting of Awards shall be tolled during any unpaid
leave of absence. In the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Awardee&#146;s returning from military leave (under conditions that would entitle him or her to protection upon such
return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Options to the same extent as would have applied had the Awardee continued to provide services to the Company
throughout the leave on the same terms as he or she was providing services immediately prior to such leave. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">xviii. to make all other
determinations deemed necessary or advisable for administering the Plan and any Award granted hereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) <I>Effect of
Administrator&#146;s Decision</I>.&nbsp;All decisions, determinations and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and conditions of any Award granted hereunder, shall be final
and binding on all Participants and on all other persons. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, without
limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>5. Eligibility. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Awards may be granted to Employees, Consultants and Directors of the Company or any of its
Affiliates; provided that Incentive Stock Options may be granted only to Employees of the Company or of a Subsidiary of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>6. Term of
Plan. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Plan shall become effective on the Effective Date. It shall continue in effect for a term of ten (10)&nbsp;years from the later of the
Effective Date or the date any amendment to add shares to the Plan is approved by stockholders of the Company unless terminated earlier under Section&nbsp;15 of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>7. Term of Award. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The term of each Award shall be determined by the Administrator and stated in the Award
Agreement. In the case of an Option, the term shall be ten (10)&nbsp;years from the Grant Date or such shorter term as may be provided in the Award Agreement; provided that an Incentive Stock Option granted to an Employee who on the Grant Date owns
stock representing more than ten percent (10%)&nbsp;of the voting power of all classes of stock of the Company or any Subsidiary shall have a term of no more than five (5)&nbsp;years from the Grant Date. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>8. Options. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Administrator may grant an Option or
provide for the grant of an Option, either from time to time in the discretion of the Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of performance goals, the satisfaction of an
event or condition within the control of the Awardee or within the control of others. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-9 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Option Agreement</I>.&nbsp;Each Option Agreement shall contain provisions regarding
(i)&nbsp;the number of Shares that may be issued upon exercise of the Option, (ii)&nbsp;the type of Option, (iii)&nbsp;the exercise price of the Shares and the means of payment for the Shares, (iv)&nbsp;the term of the Option, (v)&nbsp;such terms
and conditions on the vesting and/or exercisability of an Option as may be determined from time to time by the Administrator, (vi)&nbsp;restrictions on the transfer of the Option or the Shares issued upon exercise of the Option and forfeiture
provisions, and (vii)&nbsp;such further terms and conditions, in each case not inconsistent with this Plan as may be determined from time to time by the Administrator. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(b) <I>Exercise Price</I>.&nbsp;The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">i. In the case of an Incentive Stock Option, the per Share exercise price shall be no less than one hundred percent (100%)&nbsp;of the Fair Market
Value per Share on the Grant Date; provided however, that in the case of an Incentive Stock Option granted to an Employee who on the Grant Date owns stock representing more than ten percent (10%)&nbsp;of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%)&nbsp;of the Fair Market Value per Share on the Grant Date. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. In the case of a Nonstatutory Stock Option, the per Share exercise price shall be no less than one hundred percent (100%)&nbsp;of the Fair
Market Value per Share on the Grant Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iii. Notwithstanding the foregoing, at the Administrator&#146;s discretion, Conversion Awards
may be granted in substitution and/or conversion of options of an acquired entity, with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of such substitution and/or conversion. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) <I>Vesting Period and Exercise Dates</I>.&nbsp;Options granted under this Plan shall vest and/or be exercisable at such time and in such
installments during the period prior to the expiration of the Option&#146;s term as determined by the Administrator. The Administrator shall have the right to make the timing of the ability to exercise any Option granted under this Plan subject to
continued employment, the passage of time and/or such performance requirements as deemed appropriate by the Administrator, or to grant fully vested Options. At any time after the grant of an Option, the Administrator may reduce or eliminate any
restrictions surrounding any Participant&#146;s right to exercise all or part of the Option. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) <I>Form of Consideration</I>.&nbsp;The
Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment, either through the terms of the Option Agreement or at the time of exercise of an Option. Acceptable forms of consideration
may include: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">i. cash; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. check or wire transfer (denominated in U.S. Dollars); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">iii. subject to the Company&#146;s discretion to refuse for any reason and at any time to accept such consideration and subject to any conditions or limitations established by the Administrator, other Shares held
by the Participant which&nbsp;have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-10 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iv. consideration received by the Company under a broker-assisted sale and remittance program
acceptable to the Administrator; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">v. cashless &#147;net exercise&#148; arrangement pursuant to which the Company will reduce the number
of Shares issued upon exercise by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate exercise price; provided that the Company shall accept a cash or other payment from the Participant to the
extent of any remaining balance of the exercise price not satisfied by such reduction in the number of whole Shares to be issued; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">vi.
such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">vii. any
combination of the foregoing methods of payment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) <I>No Option (or Stock Appreciation Right) Repricings</I>. Other than in
connection with a change in the Company&#146;s capitalization (as described in Section&nbsp;14(a) of the Plan), a Repricing (as defined below) is prohibited without approval by the stockholders of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">&#147;<B>Repricing</B>&#148; means any of the following or any other action that has the same purpose and effect: (a)&nbsp;lowering the exercise
price of an outstanding Option or Stock Appreciation Right granted under this Plan after it is granted; (b)&nbsp;any other action affecting an outstanding Option or Stock Appreciation Right granted under this Plan that is treated as a repricing
under United States generally accepted accounting principles; (c)&nbsp;canceling an outstanding Option or Stock Appreciation Right granted under this Plan at a time when its exercise or purchase price exceeds the then fair market value of the stock
underlying such outstanding Option or Stock Appreciation Right, in exchange for another Option or Stock Appreciation Right or a cash payment, unless the cancellation and exchange occurs in connection with a merger, consolidation, sale of
substantially all the Company&#146;s assets, acquisition, spin-off, spin-out, or other similar corporate transaction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>9. Effect of Termination of
Continuous Service on Awards </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Generally</I>.&nbsp;Unless otherwise provided for by the Administrator, upon an Awardee&#146;s
Termination of Continuous Service other than as a result of circumstances described in Sections 9(b), (c), (d)&nbsp;and (e)&nbsp;below, all outstanding Awards granted to such Awardee that were vested and exercisable as of the date of the
Awardee&#146;s Termination of Continuous Service may be exercised by the Awardee until the earlier of (A)&nbsp;three (3)&nbsp;months following Awardee&#146;s Termination of Continuous Service or (B)&nbsp;the expiration of the term of such Award;
provided, however, that the Administrator may in the Award Agreement specify a period of time (but not beyond the expiration date of the Award) following Termination of Continuous Service during which the Awardee may exercise the Award as to Shares
that were vested and exercisable as of the date of Termination of Continuous Service. To the extent such a period following Termination of Continuous Service is specified, the Award shall automatically terminate at the end of such period to the
extent the Awardee has not exercised it within such period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Disability of Awardee</I>.&nbsp;Unless otherwise provided for by the
Administrator, upon an Awardee&#146;s Termination of Continuous Service as a result of the Awardee&#146;s disability, including Total and Permanent Disability, all outstanding </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-11 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">
Awards granted to such Awardee that were vested and exercisable as of the date of the Awardee&#146;s Termination of Continuous Service may be exercised by the Awardee until the earlier of
(A)&nbsp;twelve (12)&nbsp;months following Awardee&#146;s Termination of Continuous Service as a result of Awardee&#146;s disability, including Total and Permanent Disability or (B)&nbsp;the expiration of the term of such Award. If the Participant
does not exercise such Award within the time specified, the Award (to the extent not exercised) shall automatically terminate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c)
<I>Death of Awardee</I>.&nbsp;Unless otherwise provided for by the Administrator, upon an Awardee&#146;s Termination of Continuous Service as a result of the Awardee&#146;s death, all outstanding Awards granted to such Awardee that were vested and
exercisable as of the date of the Awardee&#146;s death may be exercised until the earlier of (A)&nbsp;twelve (12)&nbsp;months following the Awardee&#146;s death or (B)&nbsp;the expiration of the term of such Award. If an Award is held by the Awardee
when he or she dies, such Award may be exercised, to the extent the Award is vested and exercisable, by the beneficiary designated by the Awardee (as provided in Section&nbsp;16 of the Plan), the executor or administrator of the Awardee&#146;s
estate or, if none, by the person(s) entitled to exercise the Award under the Awardee&#146;s will or the laws of descent or distribution; provided that the Company need not accept exercise of an Award by such beneficiary, executor or administrator
unless the Company has satisfactory evidence of such person&#146;s authority to act as such. If the Award is not so exercised within the time specified, such Award (to the extent not exercised) shall automatically terminate. The Awardee&#146;s
service shall be deemed to have terminated on account of death if the Awardee dies within three (3)&nbsp;months (or such longer period as determined by the Administrator, in its discretion) after the Awardee&#146;s Termination of Continuous Service.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) <I>Termination for Cause.</I>&nbsp;The Administrator has the authority to cause all outstanding Awards held by an Awardee to
terminate immediately in their entirety (including as to vested Awards) upon first notification to the Awardee of the Awardee&#146;s Termination of Continuous Service for Cause in accordance with Section&nbsp;4(b)(xvi) above. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) <I>Other Terminations of Continuous Service.</I>&nbsp;The Administrator may provide in the applicable Award Agreement for different treatment
of Awards upon Termination of Continuous Service of the Awardee than that specified above. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(f) <I>Extension of Exercise
Period.</I>&nbsp;The Administrator shall have full power and authority to extend the period of time for which an Award is to remain exercisable following an Awardee&#146;s Termination of Continuous Service from the periods set forth in Sections
9(a), (b), (c), (d)&nbsp;and (e)&nbsp;above or in the Award Agreement to such greater time as the Administrator shall deem appropriate, provided that in no event shall such Award be exercisable later than the date of expiration of the term of such
Award as set forth in the Award Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(g) <I>Extension if Exercise Prevented by Law.</I>&nbsp;Notwithstanding the foregoing, other
than a termination for Cause, if a sale within the applicable time periods set forth in Section&nbsp;9(a), (b), (c)&nbsp;and (e)&nbsp;above or in the Award Agreement is prevented by Section&nbsp;18 below, the Award shall remain exercisable until
thirty (30)&nbsp;days after the date the Awardee is notified by the Company that the Award is exercisable, but in any event no later than the Award expiration date. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">(h) <I>Extension if Subject to Section 16(b).</I>&nbsp;Notwithstanding the foregoing, other than a termination for Cause, if a
sale within the applicable time periods set forth in Section&nbsp;9(a), (b), (c)&nbsp;and (e)&nbsp;above or in the Award Agreement would subject the Awardee to a suit under Section&nbsp;16(b) of the Exchange Act, the Award shall remain exercisable
until the earliest to occur of (i)&nbsp;the tenth (10</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"> th</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> )&nbsp;day following
the date on which a sale of shares by the Awardee would no longer be subject to suit, (ii)&nbsp;the one hundred ninetieth (190</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">
th</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> )&nbsp;day after Awardee&#146;s Termination of Continuous Service, or (iii)&nbsp;the Award expiration date. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-12 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>10. Incentive Stock Option Limitations/Terms. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Eligibility.</I>&nbsp;Only employees (as determined in accordance with Section&nbsp;3401(c) of the Code and the regulations promulgated
thereunder) of the Company or any of its Subsidiaries may be granted Incentive Stock Options. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>$100,000
Limitation.</I>&nbsp;Notwithstanding the designation &#147;Incentive Stock Option&#148; in an Option Agreement, if and to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for
the first time by the Awardee during any calendar year (under all plans of the Company and any of its Subsidiaries) exceeds U.S. $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section&nbsp;10(b),
Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the Grant Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(c) <I>Transferability.</I>&nbsp;An Incentive Stock Option may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner by the Awardee otherwise than by will or the laws of descent and
distribution, and, during the lifetime of such Awardee, may only be exercised by the Awardee. If the terms of an Incentive Stock Option are amended to permit transferability, the Option will be treated for tax purposes as a Nonstatutory Stock
Option. The designation of a beneficiary by an Awardee will not constitute a transfer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) <I>Exercise Price.</I>&nbsp;The per Share
exercise price of an Incentive Stock Option shall be determined by the Administrator in accordance with Section&nbsp;8(b)(i)&nbsp;of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(e) <I>Other Terms.</I>&nbsp;Option Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be necessary to qualify, to the extent determined desirable by the
Administrator, with the applicable provisions of Section&nbsp;422 of the Code. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>11. Exercise of Award. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Procedure for Exercise.</I> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">i. Any Award granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by
the Administrator and set forth in the respective Award Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. An Award shall be deemed exercised when the Company receives
(A)&nbsp;written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Award; (B)&nbsp;full payment for the Shares with respect to which the related Award is exercised; and
(C)&nbsp;payment of all applicable withholding taxes (if any). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iii. An Award may not be exercised for a fraction of a Share.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Rights as a Stockholder.</I> The Company shall issue (or cause to be issued) such Shares as administratively practicable after
the Award is exercised. Shares issued upon exercise of an Award shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Unless provided otherwise by the
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-13 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">
Administrator or pursuant to this Plan, until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to an Award, notwithstanding the exercise of the Award. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>12. Stock Awards. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Stock Award Agreement.</I>&nbsp;Each Stock Award Agreement shall
contain provisions regarding (i)&nbsp;the number of Shares subject to such Stock Award or a formula for determining such number, (ii)&nbsp;the purchase price of the Shares, if any, and the means of payment for the Shares, (iii)&nbsp;the performance
criteria (including Qualifying Performance Criteria), if any, and level of achievement versus these criteria that shall determine the number of Shares granted, issued, retainable and/or vested, (iv)&nbsp;such terms and conditions on the grant,
issuance, vesting, settlement and/or forfeiture of the Shares as may be determined from time to time by the Administrator, (v)&nbsp;restrictions on the transferability of the Stock Award and (vi)&nbsp;such further terms and conditions in each case
not inconsistent with this Plan as may be determined from time to time by the Administrator. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Restrictions and Performance
Criteria.</I>&nbsp;The grant, issuance, retention, settlement and/or vesting of each Stock Award or the Shares subject thereto may be subject to such performance criteria (including Qualifying Performance Criteria) and level of achievement versus
these criteria as the Administrator shall determine, which criteria may be based on financial performance, personal performance evaluations and/or completion of service by the Awardee. Unless otherwise permitted in compliance with the requirements
of Code Section&nbsp;162(m) with respect to an Award intended to comply as &#147;performance-based compensation&#148; thereunder, the Committee shall establish the Qualifying Performance Criteria applicable to, and the formula for calculating the
amount payable under, the Award no later than the earlier of (a)&nbsp;the date ninety (90)&nbsp;days after the commencement of the applicable performance period, or (b)&nbsp;the date on which 25% of the performance period has elapsed, and in any
event at a time when the achievement of the applicable Qualifying Performance Criteria remains substantially uncertain. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c)
<I>Forfeiture.</I>&nbsp;Unless otherwise provided for by the Administrator, upon the Awardee&#146;s Termination of Continuous Service, the Stock Award and the Shares subject thereto shall be forfeited, provided that to the extent that the
Participant purchased or earned any Shares, the Company shall have a right to repurchase the unvested Shares at such price and on such terms and conditions as the Administrator determines. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) <I>Rights as a Stockholder.</I>&nbsp;Unless otherwise provided by the Administrator in the Award Agreement, the Participant shall have the
rights equivalent to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) to the Participant. Unless
otherwise provided by the Administrator, a Participant holding Stock Units shall not be entitled to receive dividend payments or any credit therefor as if he or she was an actual stockholder. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) Stock Appreciation Rights. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">i.
<I>General.</I>&nbsp;Stock Appreciation Rights may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. The Administrator may grant Stock Appreciation Rights to eligible Participants subject to
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-14 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">
terms and conditions not inconsistent with this Plan and determined by the Administrator. The specific terms and conditions applicable to the Participant shall be provided for in the Stock Award
Agreement. Stock Appreciation Rights shall be exercisable, in whole or in part, at such times as the Administrator shall specify in the Stock Award Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">ii. <I>Exercise of Stock Appreciation Right.</I>&nbsp;Upon the exercise of a Stock Appreciation Right, in whole or in part, the Participant shall be entitled to a payment in an amount equal to the excess of the
Fair Market Value on the date of exercise of a fixed number of Shares covered by the exercised portion of the Stock Appreciation Right, over the Fair Market Value on the Grant Date of the Shares covered by the exercised portion of the Stock
Appreciation Right (or such other amount calculated with respect to Shares subject to the Award as the Administrator may determine). The amount due to the Participant upon the exercise of a Stock Appreciation Right shall be paid in such form of
consideration as determined by the Administrator and may be in cash, Shares or a combination thereof, over the period or periods specified in the Stock Award Agreement. A Stock Award Agreement may place limits on the amount that may be paid over any
specified period or periods upon the exercise of a Stock Appreciation Right, on an aggregate basis or as to any Participant. A Stock Appreciation Right shall be considered exercised when the Company receives written notice of exercise in accordance
with the terms of the Stock Award Agreement from the person entitled to exercise the Stock Appreciation Right. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iii. <I>Nonassignability
of Stock Appreciation Rights.</I>&nbsp;Except as determined by the Administrator, no Stock Appreciation Right shall be assignable or otherwise transferable by the Participant except by will or by the laws of descent and distribution. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>13. Other Provisions Applicable to Awards. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Non-Transferability of Awards.</I>&nbsp;Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner for value other than by beneficiary designation, will or by the laws of descent or distribution. Subject to Section&nbsp;10(c), the Administrator may in its discretion make an Award
transferable to an Awardee&#146;s family member or any other person or entity as it deems appropriate. If the Administrator makes an Award transferable, either at the time of grant or thereafter, such Award shall contain such additional terms and
conditions as the Administrator deems appropriate, and any transferee shall be deemed to be bound by such terms upon acceptance of such transfer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(b)<I> Qualifying Performance Criteria.</I>&nbsp;For purposes of this Plan, the term &#147;Qualifying Performance Criteria&#148; shall mean any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, Affiliate or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively
over a period of years, on an absolute basis or relative to a pre-established target, to previous years&#146; results or to a designated comparison group, in each case as specified by the Administrator in the Award: (i)&nbsp;cash flow;
(ii)&nbsp;earnings (including gross margin; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings before taxes; and net earnings); (iii)&nbsp;earnings per share; (iv)&nbsp;growth in earnings or
earnings per share; (v)&nbsp;stock price; (vi)&nbsp;return on equity or average stockholders&#146; equity; (vii)&nbsp;total stockholder return; (viii)&nbsp;return on capital; (ix)&nbsp;return on assets or net assets; (x)&nbsp;return on investment;
(xi)&nbsp;revenue or growth in revenue; (xii)&nbsp;income or net income; (xiii)&nbsp;operating income or net operating income, in aggregate or per share; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-15 </FONT></P>


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(xiv)&nbsp;operating profit or net operating profit; (xv)&nbsp;operating margin; (xvi)&nbsp;return on operating revenue; (xvii)&nbsp;market share; (xviii)&nbsp;contract awards or backlog;
(xix)&nbsp;overhead or other expense reduction; (xx)&nbsp;growth in stockholder value relative to the moving average of the S&amp;P 500 Index or a peer group index; (xxi)&nbsp;credit rating; (xxii)&nbsp;strategic plan development and implementation
(including individual performance objectives that relate to achievement of the Company&#146;s or any business unit&#146;s strategic plan); (xxiii)&nbsp;improvement in workforce diversity; (xxiv)&nbsp;growth of revenue, operating income or net
income; (xxv)&nbsp;efficiency ratio; (xxvi)&nbsp;ratio of nonperforming assets to total assets; and (xxvii)&nbsp;any other similar criteria. The Committee may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria
to exclude any of the following events that occurs during a performance period: (A)&nbsp;asset write-downs; (B)&nbsp;litigation or claim judgments or settlements; (C)&nbsp;the effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results; (D)&nbsp;accruals for reorganization and restructuring programs; (E)&nbsp;any gains or losses classified as extraordinary or as discontinued operations in the Company&#146;s financial statements; and
(F)&nbsp;mergers, acquisitions or divestitures. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c)<I> Certification.</I>&nbsp;Prior to the payment of any compensation under an Award
intended to qualify as &#147;performance-based compensation&#148; under Section&nbsp;162(m) of the Code, the Committee shall certify the extent to which any Qualifying Performance Criteria and any other material terms under such Award have been
satisfied (other than in cases where such relate solely to the increase in the value of the Common Stock). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) <I>Discretionary
Adjustments Pursuant to Section&nbsp;162(m).</I>&nbsp;Notwithstanding satisfaction of any completion of any Qualifying Performance Criteria, to the extent specified at the time of grant of an Award to &#147;covered employees&#148; within the meaning
of Section&nbsp;162(m) of the Code, the number of Shares, Options or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Qualifying Performance Criteria may be reduced by the Committee on the
basis of such further considerations as the Committee in its sole discretion shall determine. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) <I>Tax Withholding
Obligation.</I>&nbsp;As a condition of the grant, issuance, vesting, exercise or settlement of an Award granted under the Plan, the Participant shall make such arrangements as the Administrator may require for the satisfaction of any applicable
federal, state, local or foreign withholding tax obligations that may arise in connection with such grant, issuance, vesting, exercise or settlement of the Award. The Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(f) <I>Compliance with Section&nbsp;409A.</I>&nbsp;Notwithstanding anything to the contrary contained
herein, to the extent that the Administrator determines that any Award granted under the Plan is subject to Code Section&nbsp;409A and unless otherwise specified in the applicable Award Agreement, the Award Agreement evidencing such Award shall
incorporate the terms and conditions necessary for such Award to avoid the consequences described in Code Section&nbsp;409A(a)(1), and to the maximum extent permitted under Applicable Law (and unless otherwise stated in the applicable Award
Agreement), the Plan and the Award Agreements shall be interpreted in a manner that results in their conforming to the requirements of Code Section&nbsp;409A(a)(2), (3)&nbsp;and (4)&nbsp;and any Department of Treasury or Internal Revenue Service
regulations or other interpretive guidance issued under Section&nbsp;409A (whenever issued, the &#147;<B>Guidance</B>&#148; ). Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement provides otherwise, with specific
reference to this sentence), to the extent that a Participant holding an Award that constitutes &#147;deferred compensation&#148; under Section&nbsp;409A and the Guidance is a &#147;specified employee&#148; (also as defined thereunder), no
distribution or payment of any amount shall be made before a date that is six (6)&nbsp;months following the date of such Participant&#146;s &#147;separation from service&#148; (as defined in Section&nbsp;409A and the Guidance) or, if earlier, the
date of the Participant&#146;s death. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-16 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(g) <I>Deferral of Award Benefits.&nbsp;</I>The Administrator may in its discretion and upon such
terms and conditions as it determines appropriate permit one or more Participants whom it selects to (a)&nbsp;defer compensation payable pursuant to the terms of an Award, or (b)&nbsp;defer compensation arising outside the terms of this Plan
pursuant to a program that provides for deferred payment in satisfaction of such other compensation amounts through the issuance of one or more Awards. Any such deferral arrangement shall be evidenced by an Award Agreement in such form as the
Administrator shall from time to time establish, and no such deferral arrangement shall be a valid and binding obligation unless evidenced by a fully executed Award Agreement, the form of which the Administrator has approved, including through the
Administrator&#146;s establishing a written program (the &#147;<B>Program</B>&#148; ) under this Plan to govern the form of Award Agreements participating in such Program. Any such Award Agreement or Program shall specify the treatment of dividends
or dividend equivalent rights (if any) that apply to Awards governed thereby, and shall further provide that any elections governing payment of amounts pursuant to such Program shall be in writing, shall be delivered to the Company or its agent in a
form and manner that complies with Code Section&nbsp;409A and the Guidance, and shall specify the amount to be distributed in settlement of the deferral arrangement, as well as the time and form of such distribution in a manner that complies with
Code Section&nbsp;409A and the Guidance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>14. Adjustments upon Changes in Capitalization, Dissolution, or Change In Control </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Changes in Capitalization.</I>&nbsp;Subject to any required action by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Award, the number of shares of Common Stock which have been authorized for issuance under the Plan, but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation, forfeiture or
expiration of an Award, the price per Share subject to each such outstanding Award and each of the share limits set forth in Section&nbsp;3(a) and 3(b), shall be proportionately adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, payment of a dividend or distribution in a form other than stock (excepting normal cash dividends) that has a
material effect on the Fair Market Value of the shares of Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been &#147;effected without receipt of consideration.&#148; Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Award. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Dissolution or Liquidation.&nbsp;</I>In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised or the Shares
subject thereto issued to the Awardee and unless otherwise determined by the Administrator, an Award will terminate immediately prior to the consummation of such proposed transaction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) <I>Change in Control.</I>&nbsp;In the event there is a Change in Control of the Company, as determined by the Board or a Committee, the Board
or Committee may, in its discretion, (i)&nbsp;provide for the assumption or substitution of, or adjustment (including to the number and type of Shares and exercise or purchase price applicable) to, each outstanding Award;
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-17 </FONT></P>


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(ii)&nbsp;accelerate the vesting of Options and terminate any restrictions on Stock Awards; and/or (iii)&nbsp;provide for termination of Awards as a result of the Change in Control on such terms
and conditions as it deems appropriate, including providing for the cancellation of Awards for a cash or other payment to the Participant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">For purposes of this Section&nbsp;14(c), an Award shall be considered assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a Change in Control, as the case may be, each
holder of an Award would be entitled to receive upon exercise of the Award the same number and kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to such transaction, the holder of the number of Shares covered by the Award at such time (after giving effect to any adjustments in the number of Shares covered by the Award as provided for in
Section&nbsp;14(a); provided that if such consideration received in the transaction is not solely common stock of the successor corporation, the Administrator may, with the consent of the successor corporation, provide for the consideration to be
received upon exercise of the Award to be solely common stock of the successor corporation equal to the Fair Market Value of the per Share consideration received by holders of Common Stock in the transaction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>15. Amendment and Termination of the Plan. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) <I>Amendment and Termination.</I>&nbsp;The Administrator may amend, alter or discontinue the Plan or any Award Agreement, but any such
amendment shall be subject to approval of the stockholders of the Company in the manner and to the extent required by Applicable Laws. To the extent required to comply with Section&nbsp;162(m), the Company shall seek re-approval of the Plan from
time to time by the stockholders. In addition, without limiting the foregoing, unless approved by the stockholders of the Company, no such amendment shall be made that would: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">i. materially increase the maximum number of Shares for which Awards may be granted under the Plan, other than an increase pursuant to Section&nbsp;3 or Section&nbsp;14 of the Plan; or </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">ii. reduce the minimum exercise prices at which Options may be granted under the Plan (as set forth in Section&nbsp;8(b)); or </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iii. result in a Repricing (as defined in Section&nbsp;8(e)) of Options or Stock Appreciation Rights; or </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">iv. change the class of persons eligible to receive Awards under the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Effect of Amendment or Termination.</I>&nbsp;No amendment, suspension or termination of the Plan shall impair the rights of any Award,
unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company; provided further that the Administrator may amend an outstanding Award in order to
conform it to the Administrator&#146;s intent (in its sole discretion) that such Award not be subject to Code Section&nbsp;409A(a)(1)(B). Termination of the Plan shall not affect the Administrator&#146;s ability to exercise the powers granted to it
hereunder with respect to Awards granted under the Plan prior to the date of such termination. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) <I>Effect of the Plan on Other
Arrangements.</I>&nbsp;Neither the adoption of the Plan by the Board or a Committee nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-18 </FONT></P>


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the power of the Board or any Committee to adopt such other incentive arrangements as it or they may deem desirable, including without limitation, the granting of restricted stock, stock options
or cash bonuses otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. The value of Awards granted pursuant to the Plan will not be included as compensation, earnings, salaries
or other similar terms used when calculating an Awardee&#146;s benefits under any employee benefit plan sponsored by the Company or any Subsidiary except as such plan otherwise expressly provides. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>16. Designation of Beneficiary. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) An
Awardee may file&nbsp;a written designation of a beneficiary who is to receive the Awardee&#146;s rights pursuant to Awardee&#146;s Award or the Awardee may include his or her Awards in an omnibus beneficiary designation for all benefits under the
Plan. To the extent that Awardee has completed a designation of beneficiary while employed with the Company, such beneficiary designation shall remain in effect with respect to any Award hereunder until changed by the Awardee to the extent
enforceable under Applicable Law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) Such designation of beneficiary may be changed by the Awardee at any time by written notice. In
the event of the death of an Awardee and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Awardee&#146;s death, the Company shall allow the executor or administrator of the estate of the Awardee to
exercise the Award, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may allow the spouse or one or more dependents or relatives of the Awardee to exercise the Award to the
extent permissible under Applicable Law or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>17. No Right to Awards or to Employment. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">No person shall have any claim or right to be granted an Award and
the grant of any Award shall not be construed as giving an Awardee the right to continue in the employ or service of the Company or its Affiliates. Further, the Company and its Affiliates expressly reserve the right, at any time, to dismiss any
Employee, Consultant or Awardee at any time without liability or any claim under the Plan, except as provided herein or in any Award Agreement entered into hereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>18. Legal Compliance. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Subject to Section&nbsp;22, Shares shall not be issued pursuant to the exercise of an
Option or Stock Award unless the exercise of such Option or Stock Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such
compliance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>19. Reservation of Shares. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The
Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-19 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>20. Notice. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Any written notice to the Company required by any provisions of this Plan shall be addressed to the Secretary of the Company and shall be effective when received.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>21. Governing Law; Interpretation of Plan and Awards. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(a) This Plan and all determinations made and actions taken pursuant hereto shall be governed by the substantive laws, but not the choice of law rules, of the state of Delaware. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) In the event that any provision of the Plan or any Award granted under the Plan is declared to be illegal, invalid or otherwise unenforceable
by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of the terms of the Plan and/or Award shall not be
affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) The headings
preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of the Plan, nor shall they affect its meaning, construction or effect. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) The terms of the Plan and any Award shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs,
beneficiaries, successors and assigns. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) All questions arising under the Plan or under any Award shall be decided by the
Administrator in its total and absolute discretion. In the event the Participant believes that a decision by the Administrator with respect to such person was arbitrary or capricious, the Participant may request arbitration with respect to such
decision. The review by the arbitrator shall be limited to determining whether the Administrator&#146;s decision was arbitrary or capricious. This arbitration shall be the sole and exclusive review permitted of the Administrator&#146;s decision, and
the Awardee shall as a condition to the receipt of an Award be deemed to explicitly waive any right to judicial review. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(f) Notice of
demand for arbitration shall be made in writing to the Administrator within thirty (30)&nbsp;days after the applicable decision by the Administrator. The arbitrator shall be appointed in accordance with the Commercial Rules of Dispute Resolution of
the American Arbitration Association; provided, however, that the arbitration shall not be administered by the American Arbitration Association. The arbitration shall be administered and conducted by the arbitrator pursuant to the Commercial Rules
of Dispute Resolution of the American Arbitration Association. The decision of the arbitrator on the issue(s) presented for arbitration shall be final and conclusive and may be enforced in any court of competent jurisdiction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>22. Limitation on Liability. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company and any Affiliate
which is in existence or hereafter comes into existence shall not be liable to a Participant, an Employee, an Awardee or any other persons as to: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(a) <I>The Non-Issuance of Shares.</I>&nbsp;The non-issuance or sale of Shares (including under Section&nbsp;18 above) as to which the Company has been unable, or the Arbitration deems it infeasible, to obtain from
any regulatory body having jurisdiction the authority deemed by the Company&#146;s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-20 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) <I>Tax Consequences.</I>&nbsp;Any tax consequence realized by any Participant, Employee, Awardee
or other person due to the receipt, vesting, exercise or settlement of any Option or other Award granted hereunder or due to the transfer of any Shares issued hereunder. The Participant is responsible for, and by accepting an Award under the Plan
agrees to bear, all taxes of any nature that are legally imposed upon the Participant in connection with an Award, and the Company does not assume, and will not be liable to any party for, any cost or liability arising in connection with such tax
liability legally imposed on the Participant. In particular, Awards issued under the Plan may be characterized by the Internal Revenue Service (the &#147;IRS&#148;) as &#147;deferred compensation&#148; under the Code resulting in additional taxes,
including in some cases interest and penalties. In the event the IRS determines that an Award constitutes deferred compensation under the Code or challenges any good faith characterization made by the Company or any other party of the tax treatment
applicable to an Award, the Participant will be responsible for the additional taxes, and interest and penalties, if any, that are determined to apply if such challenge succeeds, and the Company will not reimburse the Participant for the amount of
any additional taxes, penalties or interest that result. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) <I>Forfeiture.</I> The requirement that Participant forfeit an Award, or
the benefits received or to be received under an Award, pursuant to any Applicable Law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>23. Indemnification. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Company or an Affiliate, members of
the Board and any officers or employees of the Company or an Affiliate to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys&#146; fees, actually
and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection
with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in any such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60)&nbsp;days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>24. Unfunded Plan. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Insofar as it provides for Awards, the
Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Awardees who are granted Stock Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company nor the Administrator be deemed to be a trustee of stock or cash to be awarded under the
Plan. Any liability of the Company to any Participant with respect to an Award shall be based solely upon any contractual obligations which may be created by the Plan; no such obligation of the Company shall be deemed to be secured by any pledge or
other encumbrance on any property of the Company. Neither the Company nor the Administrator shall be required to give any security or bond for the performance of any obligation which may be created by this Plan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">A-21 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">EXHIBIT B </FONT></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>A.P. PHARMA, INC. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>1997
EMPLOYEE STOCK PURCHASE PLAN </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(as amended through May 17, 2011) </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">1. PURPOSE. This A.P. Pharma, Inc. 1997 Employee Stock Purchase Plan is designed to encourage and assist employees of A.P. Pharma, Inc. and participating subsidiaries to acquire an equity interest in the Company
through the purchase of shares of Company common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">2. DEFINITIONS. As used herein, the following definitions shall apply: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) &#147;Administrator&#148; shall mean the entity, either the Board or the committee of the Board, responsible for administering this Plan, as
provided in Section&nbsp;3. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) &#147;Board&#148; shall mean the Board of Directors of the Company, as constituted from time to time.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) &#147;Code&#148; shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) &#147;Company&#148; shall mean A.P. Pharma, Inc., a Delaware corporation, and Participating Subsidiaries. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(e) &#147;Common Stock&#148; shall mean the Common Stock, $.01 par value, of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(f) &#147;Employee&#148; shall mean any individual who is an employee of the Company or a Participating Subsidiary within the meaning of
Section&nbsp;3401(c) of the Code and the Treasury Regulations thereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(g) &#147;Enrollment Date&#148; shall have the meaning set
forth in Section&nbsp;6. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(h) &#147;Fair market value&#148; means as of any given date: (i)&nbsp;the closing price of the Common Stock
on the NASDAQ Global Market as reported in the Wall Street Journal; or (ii)&nbsp;if the Common Stock is no longer quoted on the NASDAQ Global Market, but is listed on an established stock exchange or quoted on any other established interdealer
quotation system, the closing price for the Common Stock on such exchange or system, as reported in the Wall Street Journal; or (iii)&nbsp;in the absence of an established market for the Common Stock, the fair market value of the Common Stock as
determined by the Administrator in good faith. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(i) &#147;Lower Price Enrollment Date&#148; shall have the meaning set forth in
Section&nbsp;6. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(j) &#147;Option Period&#148; shall have the meaning set forth in Section&nbsp;7(b). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(k) &#147;Participating Subsidiary&#148; shall mean a Subsidiary which has been designated by the Administrator as covered by the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(l) &#147;Plan&#148; shall mean this A.P. Pharma, Inc. 1997 Employee Stock Purchase Plan, as it may be amended from time to time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(m) &#147;Purchase Date&#148; shall have the meaning set forth in Section&nbsp;9(a). </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-1 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(n) &#147;Section&#148; unless the context clearly indicates otherwise, shall refer to a Section of
this Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(o) &#147;Subsidiary&#148; shall mean a &#147;subsidiary corporation&#148; of the Company, whether now or hereafter
existing, within the meaning of Section&nbsp;424(f) of the Code, but only for so long as it is a &#147;subsidiary corporation.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(p) &#147;Trading Day&#148; means any day on which regular trading occurs on any established stock exchange or market system on which the Common
Stock is traded. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">3. ADMINISTRATION. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) Administrator. The Plan shall be administered by the Board or, upon delegation by the Board, by a committee of the Board (in either case, the
&#147;Administrator&#148;). In connection with the administration of the Plan, the Administrator shall have the powers possessed by the Board. The Administrator may act only by a majority of its members. The Administrator may delegate administrative
duties to such employees of the Company as it deems proper, so long as such delegation is not otherwise prohibited by Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or other applicable law. The Board at any time may terminate the
authority delegated to any committee of the Board pursuant to this Section&nbsp;3(a) and revest in the Board the administration of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(b) Administrator Determinations Binding. The Administrator may adopt, alter and repeal administrative rules, guidelines and practices governing the Plan and the options granted under it as it shall deem advisable
from time to time, may interpret the terms and provisions of the Plan and the Options granted under it, may correct any defect, omission or inconsistency in the Plan or in any Option; and may otherwise supervise the administration of the Plan and
the Options granted under it. The Administrator may establish, under guidelines from the Board, limits on the number of shares which may be purchased by each participant on an annual or other periodic basis or on the number of shares which may be
purchased on any Purchase Date. All decisions made by the Administrator under the Plan shall be binding on all persons, including the Company and all participants in the Plan. No member of the Administrator shall be liable for any action that he or
she has in good faith taken or failed to take with respect to this Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="1">4. NUMBER OF SHARES. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) The Company has reserved for sale under the Plan 1,000,000 shares of Common Stock. Shares sold under the Plan may be newly issued shares or
shares reacquired in private transactions or open market purchases, but all shares sold under the Plan, regardless of source, shall be counted against the 1,000,000 share limitation. If at any Purchase Date, the shares available under the Plan are
less than the number all participants would otherwise be entitled to purchase on such date, purchases shall be reduced proportionately to eliminate the deficit. If, at any Purchase Date, the shares which may be purchased by a participant are
restricted on account of a limit on the aggregate shares which may be purchased per employee, purchases under each option shall be reduced proportionately. Any funds that cannot be applied to the purchase of shares due to such reductions shall be
refunded to participants as soon as administratively feasible. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) In the event of any reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, merger, consolidation, offering of rights, or other similar change in the capital structure of the Company, the Board may make such adjustment, if any, as it deems appropriate in the
number, kind, and purchase price of the shares available for purchase under the Plan and in the maximum number of shares subject to any option under the Plan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-2 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">5. ELIGIBILITY REQUIREMENTS. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(a) Each Employee of the Company, except those described in the next paragraph, shall become eligible to participate in the Plan in accordance with Section&nbsp;6 on the first Enrollment Date on or following
commencement of his or her employment by the Company or following such period of employment as is designated by the Administrator from time to time. Participation in the Plan is entirely voluntary. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) The following Employees are not eligible to participate in the Plan: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(i) Employees who would, immediately upon enrollment in the Plan, own directly or indirectly, or hold options or rights to acquire stock possessing, five percent (5%)&nbsp;or more of the total combined voting power
or value of all classes of stock of the Company or any subsidiary of the Company; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ii) Employees who are customarily employed by
the Company fewer than twenty (20)&nbsp;hours per week or fewer than five (5)&nbsp;months in any calendar year. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">6. ENROLLMENT. Any eligible employee
may enroll or re-enroll in the Plan each year as of the close of the first trading day of: (a)&nbsp;May and November of each such year; or (b)&nbsp;such other days as may be established by the Board from time to time (the &#147;Enrollment
Dates&#148;); provided, that the first Enrollment Date shall be April&nbsp;30, 1997. In order to enroll, an eligible employee must complete, sign, and submit to the Company an enrollment form. Any enrollment form received by the Company by the 20th
day of the month preceding an Enrollment Date (or by the Enrollment Date in the case of employees hired after such 20th day or in the case of the first Enrollment Date), or such other date established by the Administrator from time to time, will be
effective on that Enrollment Date. In addition, the Administrator may re-enroll existing participants in the Plan on any Enrollment Date (the &#147;Lower Price Enrollment Date&#148;) on which the fair market value of the Common Stock is lower than
the fair market value on such participant&#146;s existing Enrollment Date. A participant may elect not to re-enroll on a Lower Price Enrollment Date by filing a written statement with the Company declaring such election prior to the Lower Price
Enrollment Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">7. GRANT OF OPTION ENROLLMENT. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(a) Enrollment or re-enrollment by a participant in the Plan on an Enrollment Date will constitute the grant by the Company to the participant of an option to purchase shares of Common Stock from the Company under
the Plan. Any participant whose option expires and who has not withdrawn from the Plan will automatically be re-enrolled in the Plan and granted a new option on the Enrollment Date immediately following the date on which the option expires.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) Except as provided in Section&nbsp;10, each option granted under the Plan shall have the following terms: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(i) the option will have a term of not more than twenty-four (24)&nbsp;months or such shorter option period as may be established by the Board from
time to time (the &#147;Option Period&#148;). Notwithstanding the foregoing, however, whether or not all shares have been purchased thereunder, the option will expire on the earlier to occur of: (A)&nbsp;the completion of the purchase of shares on
the last Purchase Date occurring within twenty-four (24)&nbsp;months after the Enrollment Date for such option, or such shorter option period as may be established by the Board before an Enrollment Date for all options to be granted on such date; or
(B)&nbsp;the date on which the employee&#146;s participation in the Plan terminates for any reason; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-3 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ii) payment for shares purchased under the option will be made only through payroll withholding in
accordance with Section&nbsp;8; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(iii) purchase of shares upon exercise of the option will be effected only on the Purchase Dates
established in accordance with Section&nbsp;9; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(iv) the option, if not altered, amended or revoked by the Company prior to the relevant
Purchase Date, may be accepted only by (x)&nbsp;there having been withheld from the compensation of the employee in accordance with the terms of the Plan amounts sufficient to purchase the Common Stock intended to be purchased under the option, and
(y)&nbsp;the employee being employed by the Company and not having withdrawn from the Plan on the relevant Purchase Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(v) the price
per share under the option will be determined as provided in Section&nbsp;9; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(vi) the maximum number of shares available for purchase
under an option for each one percent (1%)&nbsp;of compensation designated by an employee in accordance with Section&nbsp;8 will, unless otherwise established by the Board before an Enrollment Date for all options to be granted on such date, be
determined by dividing $25,000 by the fair market value of a share of Common Stock on the Enrollment Date, dividing the result by the maximum number of percentage points that an employee may designate under Section&nbsp;8 at the time such option is
granted, and multiplying the result by the number of calendar years included in whole or in part in the period from grant to expiration of the option; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(vii) the option (taken together with all other options then outstanding under this and all other similar stock purchase plans of the Company and any subsidiary of the Company, collectively &#147;Options&#148;)
will in no event give the participant the right to purchase shares at a rate per calendar year which accrues in excess of $25,000 of fair market value of such shares, less the fair market value of any shares accrued and already purchased during such
year under Options which have expired or terminated, determined at the applicable Enrollment Dates; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(viii) the option will in all
respects be subject to the terms and conditions of the Plan, as interpreted by the Administrator from time to time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">8. PAYROLL AND TAX WITHHOLDING; USE
BY COMPANY. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) Each participant shall elect to have amounts withheld from his or her compensation paid by the Company during the
Option Period, at a rate equal to any whole percentage up to a maximum of ten percent (10%), or such lesser percentage as the Board may establish from time to time before an Enrollment Date. Compensation includes regular salary payments, annual and
quarterly bonuses, hire-on bonuses, cash recognition awards, commissions, overtime pay, shift premiums, and elective contributions by the participant to qualified employee benefit plans, but excludes all other payments including, without limitation,
long-term disability or workers compensation payments, car allowances, employee referral bonuses, relocation payments, expense reimbursements (including but not limited to travel, entertainment, and moving expenses), salary gross-up payments, and
non-cash recognition awards. The participant shall designate a rate of withholding in his or her enrollment form and may elect to increase or decrease the rate of contribution effective as of any Enrollment Date, by delivery to the Company, not
later than ten (10)&nbsp;days before such Enrollment Date, of a written notice indicating the revised withholding rate. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-4 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) Payroll withholdings shall be credited to an account maintained for purposes of the Plan on
behalf of each participant, as soon as administratively feasible after the withholding occurs. The Company shall be entitled to use the withholdings for any corporate purpose, shall have no obligation to pay interest on withholdings to any
participant, and shall not be obligated to segregate withholdings. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) Upon disposition of shares acquired by exercise of an option,
the participant shall pay, or make provision adequate to the Company for payment of, all federal, state, and other tax (and similar) withholdings that the Company determines, in its discretion, are required due to the disposition, including any such
withholding that the Company determines in its discretion is necessary to allow the Company to claim tax deductions or other benefits in connection with the disposition. A participant shall make such similar provisions for payment that the Company
determines, in its discretion, are required due to the exercise of an option, including such provisions as are necessary to allow the Company to claim tax deductions or other benefits in connection with the exercise of the option. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">9. PURCHASE OF SHARES. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) On the last Trading
Day immediately preceding an Enrollment Date (other than the first Enrollment Date), or on such other days as may be established by the Board from time to time prior to an Enrollment Date for all options to be granted on such Enrollment Date (each a
&#147;Purchase Date&#148;), the Company shall apply the funds then credited to each participant&#146;s payroll withholdings account to the purchase of whole shares of Common Stock. The cost to the participant for the shares purchased under any
option shall be not less than eighty-five percent (85%)&nbsp;of the lower of: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(i) the fair market value of the Common Stock on the
Enrollment Date for such option; or </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ii) the fair market value of the Common Stock on the date such option is exercised. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) Any funds in an amount less than the cost of one share of Common Stock left in a participant&#146;s payroll withholdings account on a Purchase
Date shall be carried forward in such account for application on the next Purchase Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(c) Notwithstanding the terms of
Section&nbsp;9(a), no funds credited to any employee&#146;s payroll withholdings account shall be used to purchase Common Stock on any date prior to the date that the Plan has been approved by the stockholders of the Company, as noted in
Section&nbsp;21. If such approval is not forthcoming within one year from the date that the Plan was approved by the Board of Directors, all amounts withheld shall be distributed to the participants as soon as administratively feasible. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">10. WITHDRAWAL FROM THE PLAN. A participant may withdraw from the Plan in full (but not in part) at any time, effective after written notice thereof is received by
the Company. Unless the Administrator elects to permit a withdrawing participant to invest funds credited to his or her withholding account on the Purchase Date immediately following notice of withdrawal, all funds credited to a participant&#146;s
payroll withholdings account shall be distributed to him or her without interest within sixty (60)&nbsp;days after notice of withdrawal is received by the Company. Any eligible employee who has withdrawn from the Plan may enroll in the Plan again on
any subsequent Enrollment Date in accordance with the provisions of Section&nbsp;6. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">11. TERMINATION OF EMPLOYMENT. Participation in the Plan terminates
immediately when a participant ceases to be employed by the Company for any reason whatsoever (including death or disability) or otherwise becomes ineligible to partic-</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-5 </FONT></P>


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ipate in the Plan. As soon as administratively feasible after termination, the Company shall pay to the participant or his or her beneficiary or legal representative, all amounts credited to the
participant&#146;s payroll withholdings account; provided, however, that if a participant ceases to be employed by the Company because of the commencement of employment with a Subsidiary of the Company that is not a Participating Subsidiary, funds
then credited to such participant&#146;s payroll withholdings account shall be applied to the purchase of whole shares of Common Stock at the next Purchase Date and any funds remaining after such purchase shall be paid to the participant.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">12. DESIGNATION OF BENEFICIARY. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)
Each participant may designate one or more beneficiaries in the event of death and may, in his or her sole discretion, change such designation at any time. Any such designation shall be effective upon receipt in written form by the Company and shall
control over any disposition by will or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) As soon as administratively feasible after the death of a participant, amounts
credited to his or her account shall be paid in cash to the designated beneficiaries or, in the absence of a designation, to the executor, administrator, or other legal representative of the participant&#146;s estate. Such payment shall relieve the
Company of further liability with respect to the Plan on account of the deceased participant. If more than one beneficiary is designated, each beneficiary shall receive an equal portion of the account unless the participant has given express
contrary written instructions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">13. ASSIGNMENT. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(a) The rights of a participant under the Plan shall not be assignable by such participant, by operation of law or otherwise. No participant may create a lien on any funds, securities, rights, or other property
held by the Company for the account of the participant under the Plan, except to the extent that there has been a designation of beneficiaries in accordance with the Plan, and except to the extent permitted by the laws of descent and distribution if
beneficiaries have not been designated. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) A participant&#146;s right to purchase shares under the Plan shall be exercisable only
during the participant&#146;s lifetime and only by him or her, except that a participant may direct the Company in the enrollment form to issue share certificates to the participant and his or her spouse in community property, to the participant
jointly with one or more other persons with right of survivorship, or to certain forms of trusts approved by the Administrator. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">14. ADMINISTRATIVE
ASSISTANCE. If the Administrator in its discretion so elects, it may retain a brokerage firm, bank, or other financial institution to assist in the purchase of shares, delivery of reports, or other administrative aspects of the Plan. If the
Administrator so elects, each participant shall (unless prohibited by the laws of the nation of his or her employment or residence) be deemed upon enrollment in the Plan to have authorized the establishment of an account on his or her behalf at such
institution. Shares purchased by a participant under the Plan shall be held in the account in the name in which the share certificate would otherwise be issued pursuant to Section&nbsp;13(b). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">15. COSTS. All costs and expenses incurred in administering the Plan shall be paid by the Company, except that any stamp duties or transfer taxes applicable to participation in the Plan may be charged to the
account of such participant by the Company. Any brokerage fees for the purchase of shares by a participant shall be paid by the Company, but brokerage fees for the resale of shares by a participant shall be borne by the participant. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-6 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">16. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal rights and privileges with respect to the
Plan so that the Plan qualifies as an &#147;employee stock purchase plan&#148; within the meaning of Section&nbsp;423 of the Code and the related Treasury Regulations. Any provision of the Plan which is inconsistent with Section&nbsp;423 of the Code
shall without further act or amendment by the Company or the Board be reformed to comply with the requirements of Section&nbsp;423. This Section&nbsp;16 shall take precedence over all other provisions of the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">17. APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of California. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">18. MODIFICATION AND TERMINATION. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) The Board
may amend, alter, or terminate the Plan at any time, including amendments to outstanding options. No amendment shall require stockholder approval, except: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(i) for an increase in the number of shares reserved for purchase under the Plan; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(ii) to the extent
required for the Plan to comply with Section&nbsp;423 of the Code; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(iii) to the extent required by other applicable laws, regulations
or rules; or </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:7%"><FONT STYLE="font-family:ARIAL" SIZE="2">(iv) to the extent the Board otherwise concludes that stockholder approval is advisable. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) In the event the Plan is terminated, the Board may elect to terminate all outstanding options either immediately or upon completion of the
purchase of shares on the next Purchase Date, or may elect to permit options to expire in accordance with their terms (and participation to continue through such expiration dates). If the options are terminated prior to expiration, all funds
contributed to the Plan that have not been used to purchase shares shall be returned to the participants as soon as administratively feasible. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:3%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(c) In the event of the sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, or the dissolution or liquidation of the Company, each option
outstanding under the Plan shall be assumed by any purchaser of all or substantially all of the assets of the Company or by a successor by merger to the Company (or the parent company of such purchaser or successor) in compliance with
Section&nbsp;424 of the Code, unless otherwise provided by the Board in its sole discretion, in which event, a Purchase Date shall occur immediately before the effective date of such event. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">19. RIGHTS AS AN EMPLOYEE. Nothing in the Plan shall be construed to give any person the right to remain in the employ of the Company or to affect the Company&#146;s right to terminate the employment of any person
at any time with or without cause. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">20. RIGHTS AS A SHAREHOLDER; DELIVERY OF CERTIFICATES. Unless otherwise determined by the Board, certificates
evidencing shares purchased on any Purchase Date shall be delivered to a participant only if he or she makes a written request to the Administrator. Participants shall be treated as the owners of their shares effective as of the Purchase Date.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">21. BOARD AND SHAREHOLDER APPROVAL. The Plan was approved by the Board of Directors on March&nbsp;5, 1997, and by the holders of a majority of the
votes cast at a duly held shareholders&#146; meeting on June&nbsp;18, 1997, at which a quorum of the voting power of the Company was represented in person or by proxy. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1">B-7 </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC. </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">123 Saginaw Drive </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Redwood City, CA 94063 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">June 1,
2011 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VIA EDGAR </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Securities and
Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Division of Corporation Finance </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">100 F Street, N.E. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Washington, D.C. 20549-4628 </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Attention:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jeffrey Riedler</FONT></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Johnny Gharib</FONT></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Daniel Greenspan</FONT></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Re:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P. Pharma, Inc.</FONT></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Schedule 14A</FONT></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Filed May 17, 2011</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">File No.
001-33221</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dear Mr. Riedler, Mr. Gharib and Mr. Greenspan: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-right:2%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Set forth below is the response of A.P. Pharma, Inc., a Delaware corporation (the &#147;Company&#148;), to the comment
letter, dated May 31, 2011 (the &#147;Comment Letter&#148;), of the staff of the Division of Corporation Finance (the &#147;Staff&#148;) of the Securities and Exchange Commission (the &#147;Commission&#148;) to the Company&#146;s proxy statement on
Schedule 14A (the &#147;Proxy Statement&#148;). The Proxy Statement was filed with the Commission on May 17, 2011. Concurrently herewith, the Company has filed Amendment No. 1 to the Proxy Statement (&#147;Amendment No. 1&#148;) incorporating the
revisions described in this letter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For reference purposes, the Staff&#146;s comments as reflected in the Comment Letter are
reproduced in bold and the corresponding responses of the Company are shown below the comments. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>1.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We note that under &#147;Proposal 2 &#151; Approval in Increase in Number of Authorized Shares of Common Stock,&#148; the last sentence of the section entitled
&#147;Reasons for the Amendment,&#148; currently reads</B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&#133;the Board of Directors has reserved
813,664,830 shares for issuance for the Conversion Shares related to the Securities Purchase Agreement...</B> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We also note
that page 6 of your registration statement on Form S-1, filed May&nbsp;18, 2011, provides:</B> </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We are currently seeking stockholder approval at our 2011 Annual Meeting of
Stockholders, to be held on June 29, 2011, to increase our authorized number of shares of common stock to a total of 1,500,000,000; until we increase our total authorized common stock, we do not have enough authorized common stock to allow the Notes
to be fully converted. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>However, your proxy statement makes no mention of the fact that you do not have enough
authorized common stock available to allow the Notes to be fully converted. Accordingly, please revise your disclosure in your proxy statement to make clear the lack of sufficient shares available to accommodate the conversion of the Conversion
Shares as a reason for increasing the number of authorized shares of your common stock. </B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>RESPONSE TO COMMENT 1 </U></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s comment, the Company has revised its disclosure in Proposal 2 on page 23 of Amendment No. 1. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>2.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Please also revise your disclosure to include a discussion of the effects and consequences if shareholders do not elect to authorize additional shares of common
stock. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>RESPONSE TO COMMENT 2 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s comment, the Company has revised its disclosure in Proposal 2 on page 23 of Amendment No. 1. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; * &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;* &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;* &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*
</FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company hereby acknowledges that (i) the Company is responsible for the adequacy and
accuracy of the disclosure in its filing, (ii) Staff comments or changes to disclosure based on Staff comments does not foreclose the Commission from taking any actions with respect to the Company&#146;s filing, and (iii) it is the Staff&#146;s
position that the Company may not assert Staff comments as defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We hope that the foregoing has been responsive to the Staff&#146;s comments. If you should have any questions about this letter or
require any further information, please call the undersigned at (650) 366-2626 or Ryan Murr at (415) 315-6395. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sincerely,</FONT></TD></TR>
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<TD HEIGHT="16"></TD></TR>
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<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John B. Whelan</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">John B. Whelan</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Executive Officer</FONT></TD></TR></TABLE></DIV> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">cc:</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ryan Murr, Esq. (Ropes &amp; Gray LLP) </FONT></TD></TR></TABLE>
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