APLS 2018 Proxy Statement

The Compensation Committee is expected to make most of the significant adjustments to annual compensation, determine bonus and equity awards and establish new performance objectives at one or more meetings held during the first quarter of the year. However, the Compensation Committee may also consider matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year. Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Committee by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the Compensation Committee, which determines any adjustments to his compensation as well as awards to be granted. For all executives and directors as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current Company-wide compensation levels and recommendations of the Compensation Committee’s compensation consultant, including analyses of executive and director compensation paid at other companies identified by the consultant. In 2017, we paid annual base salaries of $400,000 to Dr. Francois, $279,227 to Dr. Deschatelets and $68,939 to Mr. Sullivan. We use base salaries to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. None of our named executive officers is currently party to an employment agreement or other agreement or arrangement that provides for automatic or scheduled increases in base salary. In March 2018, in recognition that in 2017 base salaries were determined on the basis of compensation paid by comparable private companies and after considering base salaries paid by comparable public companies, our board of directors approved annual base salaries for 2018 of $555,000 for Dr. Francois, $400,000 for Dr. Deschatelets and $380,000 for Mr. Sullivan. We do not have a formal performance-based bonus plan. From time to time, our board of directors has approved discretionary annual cash bonuses to our named executive officers with respect to their prior year performance. In addition, under the terms of the offer letter we entered into with Mr. Sullivan, he was eligible for a discretionary annual bonus of up to 20% of his annualized base salary in 2017. In December 2017, Dr. Francois, Dr. Deschatelets and Mr. Sullivan received cash bonuses of $225,000, $120,000 and $40,000, respectively, for services performed during 2017. In March 2018, our board of directors established target bonuses as a percentage of annual base salary for 2018 of 55% for Dr. Francois, 45% for Dr. Deschatelets and 40% for Mr. Sullivan. Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incents our executive officers to remain in our employment during the vesting period. Accordingly, our board of directors periodically reviews the equity incentive compensation of our named executive officers and from time to time may grant equity incentive awards to them in the form of stock options. In August 2017, our board of directors granted options to purchase 421,940 and 187,529 shares of common stock to Dr. Francois and Dr. Deschatelets, respectively, at an exercise price equal to $4.31 per share. Each of these options will vest as to 25% of the shares on August 21, 2018 and with respect to the remaining shares in approximately equal monthly installments through the fourth anniversary of the grant, subject to continued service. In October 2017, in connection with his appointment as the Chief Financial Officer of our company, our board of directors granted to Mr. Sullivan options to purchase 398,499 shares of our common stock at an exercise price - 19 -