Document:

Blueprint

 

 

COMMON STOCK PURCHASE WARRANT

 

BRIDGELINE DIGITAL, INC.

 

 

	
Warrant
Shares:_____________________

	
 Initial Exercise
Date: October __, 2023

Issue
Date: October __, 2018

 

THIS
COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________ or its assigns (the "Holder") is entitled, upon the
terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after _____, 2018 (the
"Initial Exercise
Date") and on or prior to the close of business on the five
(5) year anniversary of the Initial Exercise Date (the
"Termination Date")
but not thereafter, to subscribe for and purchase from Bridgeline
Digital, Inc., a Delaware corporation (the "Company"), up to ______ shares
(as subject to adjustment hereunder, the "Warrant Shares") of Common
Stock. The purchase price of one share of Common Stock under this
Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

 

Section 1. Definitions. In addition to the
terms defined elsewhere in this Warrant, the following terms have
the meanings indicated in this Section 1:

 

"Affiliate" means any Person
that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405
under the Securities Act.

 

“Bid Price” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the bid price of the Common Stock for the time in
question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b)  if the
Common Stock is not then listed or quoted for trading on a Trading
Market and if the Common Stock is then quoted on the OTC Pink
Market (or any successor thereto) the most recent bid price per
share of the Common Stock so reported, or (c) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Holders of a majority in interest of the Warrants then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.

 

"Business Day" means any day
except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.

 

"Change of Control" means any
Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which
holders of the Company's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold
publicly traded securities and, directly or indirectly, are, in all
material respect, the holders of the voting power of the surviving
entity (or entities with the authority or voting power to elect the
members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities) after such
reorganization, recapitalization or reclassification, (ii) pursuant
to a migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company or (iii) a merger
in connection with a bona fide acquisition by the Company of any
Person in which (x) the gross consideration paid, directly or
indirectly, by the Company in such acquisition is not greater than
20% of the Company's market capitalization as calculated on the
date of the consummation of such merger and (y) such merger does
not contemplate a change to the identity of a majority of the board
of directors of the Company. Notwithstanding anything herein to the
contrary, any transaction or series of transaction that, directly
or indirectly, results in the Company or the Successor Entity not
having Common Stock or common stock, as applicable, registered
under the 1934 Act and listed on an Eligible Market shall be deemed
a Change of Control.

 

 

 

 

 

"Commission" means the United
States Securities and Exchange Commission.

 

"Common Stock" means the common
stock of the Company, par value $0.001 per share, and any other
class of securities into which such securities may hereafter be
reclassified or changed.

 

"Common Stock Equivalents" means
any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.

 

"Exchange Act" means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

"Parent Entity" of a Person
means an entity that, directly or indirectly, controls the
applicable Person, including such entity whose common stock or
equivalent equity security is quoted or listed on a Trading Market
(or, if so elected by the Holder, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Holder or
in the absence of such designation, such Person or entity with the
largest public market capitalization as of the date of consummation
of the Change of Control.

 

"Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other
entity of any kind.

 

"Proceeding" means an action,
claim, suit, investigation or proceeding (including, without
limitation, an informal investigation or partial proceeding, such
as a deposition), whether commenced or threatened.

 

"Registration Statement" means
the Company's registration statement on Form S-1 (File No.
333-227430).

 

"Securities Act" means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 

"Successor Entity" means one or
more Person or Persons (or, if so elected by the Holder, the
Company or Parent Entity) formed by, resulting from or surviving
any Change of Control or one or more Person or Persons (or, if so
elected by the Holder, the Company or the Parent Entity) with which
such Change of Control shall have been entered into.

 

"Trading Day" means a day on
which the Common Stock is traded on a Trading Market.

 

"Trading Market" means any of
the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the NYSE American, the New York Stock Exchange, OTCQB or
OTCQX (or any successors to any of the foregoing).

 

"Transfer Agent" means
American Stock Transfer & Trust
Company, LLC, with a mailing address of 6201 15th Avenue, Brooklyn,
NY 11219, and any successor transfer agent of the
Corporation.

 

"Warrants" means this Warrant
and other Common Stock Purchase Warrants issued by the Company
pursuant to the Registration Statement.

 

 

 

 

 

Section 2. Exercise.

 

a)
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before close of business on the
Termination Date by delivery to the Company of a duly executed
facsimile copy (or e-mail attachment) of the Notice of Exercise in
the form annexed hereto (the "Notice of Exercise"). Within
the earlier of (i) two (2) Trading Days and (ii) the number of
Trading Days comprising the Standard Settlement Period (as defined
in Section 2(d)(i) following the date of exercise as aforesaid, the
Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or
cashier's check drawn on a United States bank unless the cashless
exercise procedure specified in Section 2(c) below is specified in
the applicable Notice of Exercise. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or
other type of guarantee or notarization) of any Notice of Exercise
form be required. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within three (3) Trading
Days of the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Trading Day
of receipt of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.

 

b)
Exercise Price. The
exercise price per share of the Common Stock under this Warrant
shall be ________, subject
to adjustment hereunder (the "Exercise Price").

 

c)
Cashless Exercise.
If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to
the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a "cashless exercise" in which the
Holder shall be entitled to receive a number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:

 

(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;

 

(B) = the Exercise Price of
this Warrant, as adjusted hereunder; and

 

(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.

 

 

 

 

 

If Warrant Shares are issued in such a
cashless exercise, the parties acknowledge and agree that in
accordance with Section 3(a)(9) of the Securities Act, the Warrant
Shares shall take on the registered characteristics of the Warrants
being exercised. The Company agrees not to take any position
contrary to this Section 2(c). Notwithstanding anything
herein to the contrary but without limiting the rights of the
Holder to receive Warrant Shares on a "cashless exercise" and
without limiting the liquidated damages provision in section
2(d)(i) and the Buy-In provision in Section 2(d)(iv), in the event there is no effective
registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to
the Holder, under no circumstance will the Company be required
to net cash settle the
warrants.

 

"VWAP" means, for any date, the
price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)
if the Common Stock is not then listed or quoted for trading on a
Trading Market and if the Common Stock is then quoted on the OTC
Pink Market (or any successor thereto), the most recent bid price
per share of the Common Stock so reported, or (c) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the holders of a majority in interest of the Warrants then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.

 

Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).

 

d)
Mechanics of
Exercise.

 

i.
Delivery of Warrant Shares
Upon Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder or (B)
this Warrant is being exercised via cashless exercise, and
otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earliest
of (i) two (2) Trading Days after the delivery to the Company of
the Notice of Exercise, (ii) one (1) Trading Day after delivery of
the aggregate Exercise Price to the Company and (iii) the number of
Trading Days comprising the Standard Settlement Period after the
delivery to the Company of the Notice of Exercise (such date, the
“Warrant Share
Delivery Date”). Upon delivery of the Notice of
Exercise, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date
of delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following delivery of the Notice of Exercise. If
the Company fails for any reason to deliver to the Holder the
Warrant Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise. The Company
agrees to maintain a transfer agent that is a participant in the
FAST program so long as this Warrant remains outstanding and
exercisable. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.

 

 

 

 

 

ii.
Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.

 

iii.
Rescission Rights.
If the Company fails to cause the Transfer Agent to transmit to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.

 

iv.
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In
addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder
the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder's brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company
shall (A) pay in cash to the Holder the amount, if any, by which
(x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (1) the number of
Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (2) the price
at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored (in which case such exercise
shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver shares of Common
Stock upon exercise of the Warrant as required pursuant to the
terms hereof.

 

v.
No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.

 

 

 

 

 

vi.
Charges, Taxes and
Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided,
however, that in
the event Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company shall pay all Transfer
Agent fees required for same-day processing of any Notice of
Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant
Shares.

 

vii.
Closing of Books.
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.

 

e)
Holder's Exercise
Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder's Affiliates, and any other Persons
acting as a group together with the Holder or any of the Holder's
Affiliates (such Persons, "Attribution Parties")), would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder
and its Affiliates and Attribution Parties shall include the number
of shares of Common Stock issuable upon exercise of this Warrant
with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, non-exercised portion
of this Warrant beneficially owned by the Holder or any of its
Affiliates or Attribution Parties and (ii) exercise or conversion
of the unexercised or non-converted portion of any other securities
of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company's most recent periodic or annual report filed with the
Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The "Beneficial Ownership
Limitation" shall be 4.99%

 

 

 

 

(or,
upon election by a Holder prior to the issuance of any Warrants,
9.99%) of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon
notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st day
after such notice is delivered to the Company. The provisions of
this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section
2(e) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

 

Section 3. Certain
Adjustments.

 

a)
Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.

 

b)
Subsequent Rights
Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the "Purchase Rights"), then the
Holder will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder's right to participate in any such Purchase Right would
result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).

 

 

 

 

 

c)
Pro Rata
Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
"Distribution"), at
any time after the issuance of this Warrant, then, in each such
case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).

 

d)
Fundamental
Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a "Fundamental Transaction"),
then, upon any subsequent exercise of this Warrant, the Holder
shall have the right to receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the
occurrence of such Fundamental Transaction, at the option of the
Holder (without regard to any limitation in Section 2(e) on the
exercise of this Warrant), the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is
the surviving corporation, and any additional consideration (the
"Alternate
Consideration") receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such
Fundamental Transaction (without regard to any limitation in
Section 2(e) on the exercise of this Warrant). For purposes of any
such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Exercise Price among the Alternate
Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. Notwithstanding anything to
the contrary, in the event of a Fundamental Transaction, the
Company or any Successor Entity (as defined below) shall, at the
Holder’s option, exercisable at any time concurrently with,
or within 30 days after, the consummation of the Fundamental
Transaction (or, if later, the date of the public announcement of
the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to
the Holder an amount of cash equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the
date of the consummation of such Fundamental
Transaction;

 

 

 

 

provided, however, that, if the
Fundamental Transaction is not within the Company's control,
including not approved by the Company’s board of directors,
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value (as
defined below) of the unexercised portion of this Warrant, that is
being offered and paid to the holders of Common Stock of the
Company in connection with the Fundamental Transaction, whether
that consideration be in the form of cash, stock or any combination
thereof, or whether the holders of Common Stock are given the
choice to receive from among alternative forms of consideration in
connection with the Fundamental Transaction. 
“Black Scholes
Value” means the value of this Warrant based on the
Black and Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg, L.P. (“Bloomberg”) determined as
of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period
equal to the time between the date of the public announcement of
the applicable Fundamental Transaction and the Termination Date,
(B) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of
the Trading Day immediately following the public announcement of
the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the
sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in such
Fundamental Transaction and (ii) the greater of (x) the last VWAP
immediately prior to the public announcement of such Fundamental
Transaction and (y) the last VWAP immediately prior to the
consummation of such Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the
Termination Date.  The payment of
the Black Scholes Value will be made by wire transfer of
immediately available funds (or such other consideration) within
five Business Days of the Holder’s election (or, if later, on
the effective date of the Fundamental
Transaction).  The
Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the
"Successor Entity")
to assume in writing all of the obligations of the Company under
this Warrant in accordance with the provisions of this Section 3(d)
pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the "Company" shall refer instead to the
Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company
under this Warrant with the same effect as if such Successor Entity
had been named as the Company herein.

 

e)
Calculations. All
calculations under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.

 

f)
Notice to
Holder.

 

i.
Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the
Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement
of the facts requiring such adjustment.

 

 

 

 

 

ii.
Notice to Allow Exercise
by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company, then, in each case, the Company
shall cause to be delivered by facsimile or email to the Holder at
its last facsimile number or email address as it shall appear upon
the Warrant Register of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.

 

Section 4. Transfer of
Warrant.

 

a)
Transferability.
This Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of
the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees, as applicable,
and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and
this Warrant shall promptly be cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date the Holder delivers an assignment form to the Company
assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.

 

b)
New Warrants. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the original Initial Exercise
Date of this Warrant and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant
thereto.

 

 

 

 

 

c)
Warrant Register.
The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the "Warrant Register"), in the name
of the record Holder hereof from time to time. The Company may deem
and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.

 

Section 5. Miscellaneous.

 

a)
No Rights as Stockholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.

 

b)
Loss, Theft, Destruction
or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.

 

c)
Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken
or such right may be exercised on the next succeeding Business
Day.

 

d)
Authorized
Shares.

 

The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

 

Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.

 

 

 

 

 

Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.

 

e)
Governing Law. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal Proceedings concerning
the interpretation, enforcement and defense of this Warrant shall
be commenced in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the "New York Courts"). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of
the New York Courts for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the
enforcement of any provision hereunder), and hereby irrevocably
waives, and agrees not to assert in any suit, action or Proceeding,
any claim that it is not personally subject to the jurisdiction of
such New York Courts, or such New York Courts are improper or
inconvenient venue for such Proceeding. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal Proceeding
arising out of or relating to this Warrant. If any party shall
commence an action or Proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or Proceeding
shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or Proceeding.

 

f)
Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.

 

g)
Nonwaiver and
Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies. Without limiting any other provision of this
Warrant, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees,
including those of appellate Proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.

 

h)
Notices. Any and
all notices or other communications or deliveries to be provided by
the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by e-mail,
or sent by a nationally recognized overnight courier service,
addressed to the Company, at 80 Blanchard Road, Burlington, MA
01803, Attention: Chief Executive Officer, email address:
akahn@bridgeline.com, or such other email address or address as the
Company may specify for such purposes by notice to the Holders. Any
and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the
Company. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the time
of transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section prior to 5:30 p.m. (New York City time)
on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii)
the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be
given.

 

i)
Reserved.

 

 

 

 

 

 

 

 

j)
Limitation of
Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.

 

k)
Remedies. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.

 

l)
Successors and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.

 

m)
Amendment. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company, on the one hand, and the
Holder or the beneficial owner of this Warrant, on the other
hand.

 

n)
Severability.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.

 

o)
Headings. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.

 

********************

 

(Signature Page Follows)

 

 

 

 

IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.

 

BRIDGELINE
DIGITAL, INC.

 

By:
__________________________

Name:              
Roger Kahn

Title:              
Chief Executive Officer

 

 

 

 

 

 

 

NOTICE OF EXERCISE

 

TO:
BRIDGELINE DIGITAL, INC.

 

(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.

 

(2)
Payment shall take the form of (check applicable box):

 

[  
]  in lawful money of the United States; or

 

[ 
 ]  if permitted the cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with respect to
the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).

 

(3)
Please issue said Warrant Shares in the name of the undersigned or
in such other name as is specified below:

 

___________________________________

 

The
Warrant Shares shall be delivered to the following DWAC Account
Number:

 

___________________________________                                                                           

 

____________________________________

 

____________________________________

 

 

[SIGNATURE
OF HOLDER]

 

Name of
Investing Entity:
________________________________________________________  

 

Signature of Authorized Signatory of Investing
Entity:__________________________________  

 

Name of
Authorized
Signatory:____________________________________________________ 

 

Title
of Authorized Signatory:
______________________________________________________

 

Date:__________________________________________________________________________

 

 

 

 

 

 

ASSIGNMENT
FORM

 

(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)

 

FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

 

Name:

(Please
Print)

 

 

Address:

(Please
Print)

 

 

Phone
Number:

 

Email
Address:

 

Dated:
_____________________ __, ______

 

Holder's
Signature:

 

Holder's
Address:Exhibit

Valeritas Holdings, Inc.
2018 Inducement Plan
Adopted by the Board of Directors:  [                      ], 2018
ARTICLE ONE: GENERAL PROVISIONS

I.PURPOSE OF THE PLAN
The Plan, through the granting of Awards, is intended to (i) help the Company secure and retain the services of eligible award recipients, (ii) provide an inducement material for such persons to enter into employment with the Company or an affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules, (iii)provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and (iv) provide a means by which the eligible recipients may benefit from increases in value of the Common Stock.
Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.
		
	II.
	ADMINISTRATION OF THE PLAN

A.The Board will administer the Plan.  The Board may delegate administration of the Plan to a Committee.  However, notwithstanding the foregoing or anything in the Plan to the contrary, the grant of Awards will be approved by the Company’s independent compensation committee or a majority of the Company’s independent directors (as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules) in order to comply with the exemption from the stockholder approval requirement for “inducement grants” provided under Rule 5635(c)(4) of the NASDAQ Listing Rules.  To the extent the Board, the Committee or a subcommittee administers the Plan, references in the Plan to the “Plan Administrator” shall be deemed to refer to the Board, the Committee or subcommittee.  Members of the Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time.

B.The Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the provisions of those programs and any outstanding Awards thereunder as it may deem necessary or advisable.  All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and shall be final, binding and conclusive on all parties who have an interest in the Plan under its jurisdiction or any Award thereunder.

C.Service on the Committee shall constitute service as a Board member, and the members of the Committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on the Committee.  No member of the Committee shall be liable for any act or omission made in good faith with respect to the Plan or any Award made thereunder.  The Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the provisions of those programs and any outstanding Awards thereunder as it may deem necessary or advisable.  Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Plan under its jurisdiction or any Award thereunder.

III.ELIGIBILITY

A.Awards may only be granted to persons who are Employees, where the Award is an inducement material to the individual’s entering into employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules.  For clarity, Awards may not be granted to (1) consultants or Directors, for service in such capacities, or (2) any individual who was previously an Employee or Director, other than following a bona fide 

period of non-employment.  Notwithstanding the foregoing, Awards may not be granted to Employees who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, unless (i) the stock underlying such Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Awards are granted pursuant to a corporate transaction such as a spin off transaction) or (ii) the Company, in consultation with its legal counsel, has determined that such Awards are otherwise exempt from or alternatively comply with the distribution requirements of Section 409A of the Code.

All Awards must be granted either by a majority of the Company’s independent directors or by the Company’s compensation committee comprised of independent directors within the meaning of Rule 5605(a)(2) of the NASDAQ Listing Rules.
B.The Plan Administrator shall have full authority to determine, (i) which eligible persons are to receive such Awards, the time or times when those Awards are to be made, the number of shares to be covered by each such Award, the time or times when the Award is to become exercisable, the vesting schedule (if any) applicable to an Award, the maximum term for which such Award is to remain outstanding and the status of a granted option as  a Non-Statutory Option, (ii) the time or times when the Awards are to be made, the number of shares subject to each such Award, the vesting and issuance schedule (if any) applicable to the shares which are the subject of such Award and the cash consideration (if any) payable for those shares, and (iii) the time or times when the Awards are to be made, the performance objectives for each such Award, the amounts payable at designated levels of attained performance, any applicable service vesting requirements, the payout schedule for each such Award and the form (cash or shares of Common Stock) in which the Award is to be settled.

IV.STOCK SUBJECT TO THE PLAN

A.The stock issuable under the Plan shall be shares of authorized but unissued Common Stock, including treasury shares and shares repurchased by the Corporation on the open market.  Subject to adjustment as provided in Section V.G, the number of shares of Common Stock available for issuance under the Plan shall equal 1,000,000 shares (the “Share Reserve”). For clarity, the Share Reserve in this Section IV.A is a limitation on the number of shares of Common Stock that may be issued pursuant to the Plan. Shares of Common Stock may be issued in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c)(3) or other applicable Stock Exchange rule, and such issuance will not reduce the number of shares available for issuance under the Plan. 

B.If any Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan.  If any shares of Common Stock issued pursuant to an Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan.  Any shares reacquired by the Company in satisfaction of tax withholding obligations on an Award or as consideration for the exercise or purchase price of an Award will again become available for issuance under the Plan.

C.Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction, merger, reorganization, consolidation, reclassification or change in par value, or any other unusual or infrequently occurring event affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, or if the value of outstanding shares of Common Stock is substantially reduced as a result of a spin-off transaction or the Corporation’s payment of an extraordinary dividend or distribution, then equitable adjustments shall be made by the Plan Administrator to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and the exercise or base price per share in effect under each outstanding Award (iii) the number and/or class of securities subject to each outstanding Award and the cash consideration (if any) payable per share, and (iv) the number and/or class of securities subject to the Corporation’s outstanding repurchase rights under the Plan and the repurchase price payable per share.  In the event of a Change in Control, the applicable Change in Control provisions of the Plan shall apply.  

The adjustments shall be made by the Plan Administrator in such manner as the Plan Administrator deems appropriate in order to prevent the dilution or enlargement of benefits under the Plan and outstanding Awards.  The adjustments shall be final, binding and conclusive Plan Administrator deems appropriate in order to prevent the dilution or enlargement of benefits under the Plan and outstanding Awards.  The adjustments shall be final, binding and conclusive.

D.Outstanding Awards under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

V.REPRICING 

The Plan Administrator may not (i) effect a cancellation of any or all outstanding options under the Plan and grant in substitution therefore new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new option grant date or (ii) reduce the exercise, purchase or strike price of any outstanding Non-Statutory Option or Stock Appreciation Right under the Plan, unless the stockholders of the Company have approved such an action within 12 months prior to such an event.
ARTICLE TWO: OPTION GRANTS

VI.OPTION TERMS

Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below.  Each option shall be designated in the document as a Non-Statutory Option.
A.Exercise Price.

(i)The exercise price per share shall be fixed by the Plan Administrator; but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

(ii)The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of the documents evidencing the option, be payable in cash or check made payable to the Corporation.  Should the Common Stock be publicly traded at the time the option is exercised, then the exercise price may also be paid as follows:

(a)in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date;

(b)in shares of Common Stock otherwise issuable under the option but withheld by the Corporation in satisfaction of the exercise price, with such withheld shares to be valued at Fair Market Value on the Exercise Date; or
(c)to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (A) a brokerage firm (reasonably satisfactory to the Corporation for purposes of administering such procedure in compliance with the Corporation’s pre-clearance/pre-notification policies) to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such exercise and (B) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

B.Exercise and Term of Options.  Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option.  However, no option shall have a term in excess of ten (10) years measured from the option grant date.

C.Effect of Termination of Service.  The following provisions shall govern the exercise of any options granted pursuant to the Plan that are outstanding at the time of the Optionee’s cessation of Service or death:

(i)Any option outstanding at the time of the Optionee’s cessation of Service for any reason other than death, Retirement, Permanent Disability and Misconduct shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term, and provided that if such documents do not include such a period of time, any such option shall remain so exercisable until the earlier of (i) the expiration of the three (3)-month period following the date of Optionee’s cessation of Service, and (ii) the expiration of the option term set forth in the documents evidencing the option.

(ii)Any option held by the Optionee at the time of the Optionee’s cessation of Service due to Retirement or Permanent Disability shall remain exercisable until the earlier of (i) the expiration of the twelve (12)-month period following the date of Optionee’s cessation of Service and (ii) the expiration of the option term set forth in the documents evidencing the option.

(iii)Any option held by the Optionee at the time of the Optionee’s death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option.  Any such option shall remain so exercisable until the earlier of (i) the expiration of the twelve (12)-month period following the date of Optionee’s death, and (ii) the expiration of the option term set forth in the documents evidencing the option.

(iv)Should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage in Misconduct while holding one or more outstanding options granted under this Article Two, then all of those options shall terminate immediately and cease to be outstanding.

(v)During the applicable post-Service exercise period, the option may not be exercised for more than the number of vested shares for which the option is at the time exercisable.  No additional shares shall vest under the option following the Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to an express written agreement with the Optionee.  Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding.

The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:
(a)extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term;

(b)include an automatic extension provision whereby the specified post-Service exercise period in effect for any option granted under this Article Two shall automatically be extended by an additional period of time equal in duration to any interval within the specified post-Service exercise period during which the exercise of that option or the immediate sale of the shares acquired under such option could not be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of such option beyond the expiration date of the term of that option; and/or

(c)permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optionee continued in Service.

D.Stockholder Rights.  The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares.

E.Repurchase Rights.  The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock.  Should the Optionee cease Service while such shares are unvested, the Corporation shall have the right to repurchase any or all of those unvested shares at a price per share equal to the lower of (i) the exercise price paid per share or (ii) the Fair Market Value per share of Common Stock at the time of repurchase.  The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.

F.Transferability of Options.  The transferability of options granted under the Plan shall be governed by the following provisions:

(i)The Plan Administrator may structure one or more Non-Statutory Options so that the option may be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for the Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order.  The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment.  The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate.

(ii)Beneficiary Designations.  Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options.  Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

(iii)Hedging.  Prior to the date the Corporation first becomes subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act, outstanding options under the Plan, together with the shares of Common Stock subject to those options during the period prior to exercise, shall not be the subject of any short position, put equivalent position (as such term is defined in Rule 16a-1(h) under the 1934 Act) or call equivalent position (as such term is defined Rule 16a-1(b) of the 1934 Act).

(iv)Pledges, Gifts and other Transfers.  Except as otherwise provided in subparagraph (i), (ii) or (iii) above, until the date the Corporation first becomes subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act, outstanding options under the Plan, together with the shares of Common Stock subject to those options during the period prior to exercise, shall not be the subject of any pledges, gifts, hypothecations or other transfers, other than pursuant to the Corporation’s repurchase rights or in connection with a Change in Control in which such options shall terminate and cease to be outstanding.

VII.STOCK APPRECIATION RIGHTS

A.Authority.  The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant stock appreciation rights in accordance with this Section III to selected Optionees or other individuals eligible to receive option grants under the Discretionary Grant Program.

B.Types.  Two types of stock appreciation rights shall be authorized for issuance under this Section III:  (i) tandem stock appreciation rights (“Tandem Rights”) and (ii) stand-alone stock appreciation rights (“Stand-alone Rights”).

C.Tandem Rights.  The following terms and conditions shall govern the grant and exercise of Tandem Rights.

(i)One or more Optionees may be granted a Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock or the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.

(ii)No such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option surrender or at any earlier time.  If the surrender is so approved, then the distribution to which the Optionee shall accordingly become entitled under this Section III may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

(iii)If the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years after the date of the option grant.

D.Stand-Alone Rights.  The following terms and conditions shall govern the grant and exercise of Stand-alone Rights:

(i)One or more individuals may be granted a Stand-alone Right not tied to any underlying option.  The Stand-alone Right shall relate to a specified number of shares of Common Stock and shall be exercisable upon such terms and conditions as the Plan Administrator may establish.  In no event, however, may the Stand-alone Right have a maximum term in excess of ten (10) years measured from the grant date.  Upon exercise of the Stand-alone Right, the holder shall be entitled to receive a distribution from the Corporation in an amount equal to the excess of (i) the aggregate Fair Market Value (on the exercise date) of the shares of Common Stock underlying the exercised right over (ii) the aggregate base price in effect for those shares.

(ii)The number of shares of Common Stock underlying each Stand-alone Right and the base price in effect for those shares shall be determined by the Plan Administrator in its sole discretion at the time the Stand-alone Right is granted.  In no event, however, may the base price per share be less than the Fair Market Value per underlying share of Common Stock on the grant date.  In the event outstanding Stand-alone Rights are to be assumed in connection with a Change in Control transaction or otherwise continued in effect, the shares of Common Stock underlying each such Stand‐alone Right shall be adjusted immediately after such Change in Control so as to apply to the number and class of securities into which those shares of Common Stock would have been converted in consummation of such Change in Control had those shares actually been outstanding at that time.  Appropriate adjustments to reflect such Change in Control shall also be made to the base price per share in effect under each outstanding Stand-alone Right, provided the aggregate base price shall remain the same.  To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in 

consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of the outstanding Stand-alone Rights under the Discretionary Grant Program, substitute, for the securities underlying those assumed rights, one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in Control transaction.

(iii)Stand-alone Rights shall be subject to the same transferability restrictions applicable to Non-Statutory Options and may not be transferred during the holder’s lifetime, except if such assignment is in connection with the holder’s estate plan and is to one or more Family Members of the holder or to a trust established for the holder and/or one or more such Family Members or pursuant to a domestic relations order covering the Stand-alone Right as marital property.  In addition, one or more beneficiaries may be designated for an outstanding Stand-alone Right in accordance with substantially the same terms and provisions as set forth in Section I.F of this Article Two.

(iv)The distribution with respect to an exercised Stand-alone Right may be made in shares of Common Stock valued at Fair Market Value on the exercise date, in cash or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

(v)The holder of a Stand-alone Right shall have no stockholder rights with respect to the shares subject to the Stand-alone Right unless and until such person shall have exercised the Stand-alone Right and become a holder of record of the shares of Common Stock issued upon the exercise of such Stand-alone Right.
E.Post-Service Exercise.  The provisions governing the exercise of Tandem, and Stand-alone Stock Appreciation Rights following the cessation of the recipient’s Service shall be substantially the same as those set forth in Section I.C of this Article Two.

F.Net Counting.  Upon the exercise of any Tandem or Stand-alone Right under this Section III, the share reserve under Section V of Article One shall be reduced by the net number of shares actually issued by the Corporation upon such exercise and not by the gross number of shares as to which such right is exercised.

VIII.CHANGE IN CONTROL

A.Except as otherwise set forth in the applicable Award agreement, the following provisions shall be in effect in the event of a Change in Control transaction:

(i)In the event of a Change in Control, each option or stock appreciation right outstanding on the effective date of the Change in Control may, as determined by the Plan Administrator in its sole discretion, be (i) assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction, or (ii) replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control (the excess of the Fair Market Value of those shares over the aggregate exercise price payable for such shares) on any shares as to which the option or stock appreciation right is not otherwise at that time exercisable and provides for subsequent payout of that spread in accordance with the same exercise/vesting schedule applicable to those shares, but only if such replacement cash program would not result in the treatment of the option or stock appreciation right as an item of deferred compensation subject to Code Section 409A.  However, to the extent that the Plan Administrator determines in its sole discretion that any option or stock appreciation right outstanding under the Plan on the effective date of such Change in Control transaction is not to be so assumed, continued or replaced, that option or stock appreciation right shall automatically accelerate so that each such option or stock appreciation right shall, immediately prior to the effective date of that Change in Control, become exercisable as to all the shares of Common Stock at the time subject to such option or stock appreciation right and may be exercised as to any or all of those shares as fully vested shares of Common Stock.

(ii)To the extent the Plan Administrator determines, in its sole discretion, that any option or stock appreciation right outstanding under the Plan on the date of a Change in Control is not to be assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect or replaced with a cash incentive program in accordance with Section III.A.i. of this Article Two, the holder of any such option or stock appreciation right shall be entitled to receive, upon consummation of the Change in Control, a lump sum cash payment in an amount equal to 

the spread, if any, existing on the shares of Common Stock subject to the option or stock appreciation right at the time of the Change in Control over the aggregate exercise or base price in effect for such option or stock appreciation right.  The Plan Administrator shall have the authority to determine, in its sole discretion, that any option or stock appreciation right outstanding under the Plan on the date of such Change in Control that is not to be assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect or replaced with a cash incentive program in accordance with Section III.A.i. of this Article Two shall be subject to cancellation and termination, without cash payment or other consideration due the award holder, if the Fair Market Value per share of Common Stock on the date of such Change in Control is less than the per share exercise or base price in effect for such option or stock appreciation right.

(iii)All outstanding repurchase rights under the Plan shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of a Change in Control, except to the extent:  (i) the Plan Administrator determines in its sole discretion that those repurchase rights are to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

(iv)Each option or stock appreciation right which is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had those shares actually been outstanding at the time.  Appropriate adjustments to reflect such Change in Control shall also be made to (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan and (iii)  the number and/or class of securities subject to the Corporation’s outstanding repurchase rights under the Plan and the repurchase price payable per share.  To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the Plan Administrator may, in its sole discretion, provide in the document evidencing the Change in Control transaction that the successor corporation, in connection with the assumption or continuation of the outstanding options or stock appreciation rights under the Discretionary Grant Program, shall substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction.

B.Immediately following the consummation of the Change in Control, all outstanding options or stock appreciation rights under the Plan shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction.

C.The Plan Administrator shall have the discretionary authority to structure one or more outstanding options or stock appreciation rights so that those options or stock appreciation rights shall, immediately prior to the effective date of a Change in Control, become exercisable as to all the shares of Common Stock at the time subject to those options or stock appreciation rights and may be exercised as to any or all of those shares as fully vested shares of Common Stock, whether or not those options or stock appreciation rights are to be assumed in the Change in Control transaction or otherwise continued in effect.  In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Grant Program so that those rights shall immediately terminate upon the consummation of the Change in Control transaction, and the shares subject to those terminated rights shall thereupon vest in full.

D.The Plan Administrator shall have full power and authority to structure one or more outstanding options or stock appreciation rights under the Plan so that those options or stock appreciation rights shall become exercisable as to all the shares of Common Stock at the time subject to those options or stock appreciation rights in the event the Optionee’s Service is subsequently terminated by reason of an Involuntary Termination within a designated period following the effective date of any Change in Control transaction in which those options or stock appreciation rights do not otherwise fully accelerate.  In addition, the Plan Administrator may structure one or more of the Corporation’s 

repurchase rights so that those rights shall immediately terminate with respect to any shares held by the Optionee at the time of such Involuntary Termination, and the shares subject to those terminated repurchase rights shall accordingly vest in full at that time.

ARTICLE THREE: STOCK ISSUANCE PROGRAM

IX.STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Plan, either as vested or unvested shares, through direct and immediate issuances without any intervening option grants.  Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below.  Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to share right awards, restricted stock units or performance shares which entitle the recipients to receive the shares underlying those Awards upon the attainment of designated performance goals or the satisfaction of specified Service requirements or upon the expiration of a designated time period following the vesting of those awards or units.
A.Consideration.  Shares of Common Stock may be issued under the Plan for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:

(i)cash or check made payable to the Corporation,

(ii)past services rendered to the Corporation (or any Affiliate); or

(iii)any other valid consideration under the Delaware General Corporation Law.

B.Transferability.  Shares of Common Stock issued under this Article Three shall be transferable by will and by the laws of descent and distribution, and during the lifetime of the recipient, such Awards shall be transferable, by gift or pursuant to a domestic relations order, to a Family Member to the extent and in the manner determined by the Plan Administrator and set forth in the applicable agreement evidencing the Award.  Notwithstanding the foregoing, the recipient of an Award under this Article Three may designate a beneficiary of the recipient’s Award in the event of the recipient’s death on a beneficiary designation form provided by the Plan Administrator.

C.Vesting Provisions.

(i)Shares of Common Stock issued under this Article Three may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon the attainment of specified performance objectives.  The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under this Article Three shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement.  Shares of Common Stock may also be issued under this Article Three pursuant to restricted stock units or performance shares which entitle the recipients to receive the shares underlying those Awards upon the attainment of designated performance goals or the satisfaction of specified Service requirements or upon the expiration of a designated time period following the vesting of those Awards, including (without limitation) a deferred distribution date following the termination of the Participant’s Service.

(ii)Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any transaction described in Section IV.C of Article One shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

(iii)The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under this Article Three, whether or not the Participant’s interest in those shares is vested.  Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on 

such shares, subject to any applicable vesting requirements, including (without limitation) the requirement that any dividends paid on shares subject to performance-vesting conditions shall be held in escrow by the Corporation and shall not vest or actually be paid to the Award holder prior to the time those shares vest.  The Participant shall not have any stockholder rights with respect to the shares of Common Stock subject to a restricted stock unit or share right award until that award vests and the shares of Common Stock are actually issued thereunder.  However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom shares of Common Stock, on outstanding restricted stock unit or share right awards, subject to such terms and conditions as the Plan Administrator may deem appropriate; provided, however, that no such dividend-equivalent units relating to restricted stock unit or share right awards subject to performance-vesting conditions shall vest or otherwise become payable prior to the time the underlying award (or portion thereof to which such dividend-equivalents units relate) vests upon the attainment of the applicable performance goals and shall accordingly be subject to cancellation and forfeiture to the same extent as the underlying award.

(iv)Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares.  To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent, the Corporation shall repay to the Participant the lower of (i) the cash consideration paid for the surrendered shares or (ii) the Fair Market Value of those shares at the time of cancellation.

(v)The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares.  Any such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies.  Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives.

(vi)Outstanding Awards of restricted stock units or performance shares under the Stock Issuance Program shall automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those Awards, if the performance goals or Service requirements established for such Awards are not attained or satisfied.  The Plan Administrator, however, shall have the discretionary authority to issue vested shares of Common Stock under one or more outstanding Awards of restricted stock units or performance shares as to which the designated performance goals or Service requirements have not been attained or satisfied.

(vii)The following additional requirements shall be in effect for any performance shares awarded under this Article Three:

(a)At the end of the performance period, the Plan Administrator shall determine the actual level of attainment for each performance objective and the extent to which the performance shares awarded for that period are to vest and become payable based on the attained performance levels.

(b)The performance shares which so vest shall be paid as soon as practicable following the end of the performance period, unless such payment is to be deferred for the period specified by the Plan Administrator at the time the performance shares are awarded or the period selected by the Participant in accordance with the applicable requirements of Code Section 409A.

(c)Performance shares may be paid in (i) cash, (ii) shares of Common Stock or (iii) any combination of cash and shares of Common Stock, as set forth in the applicable Award agreement.

(d)Performance shares may also be structured so that the shares are convertible into shares of Common Stock, but the rate at which each performance share is to so convert shall be based on the attained level of performance for each applicable performance objective.

X.CHANGE IN CONTROL

A.Except as otherwise set forth in the applicable Award agreement, the following provisions shall be in effect in the event of a Change in Control transaction:

(i)Each Award outstanding under Article Three on the effective date of an actual Change in Control transaction may, as determined by the Plan Administrator in its sole discretion, be (i) assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction, or (ii) replaced with a cash incentive program of the successor corporation which preserves the Fair Market Value of the underlying shares of Common Stock at the time of the Change in Control and provides for the subsequent vesting and payment of that value in accordance with the same vesting schedule in effect for those shares at the time of such Change in Control.  However, to the extent that the Plan Administrator determines in its sole discretion that any Award outstanding under the Stock Issuance Program on the effective date of such Change in Control Transaction is not to be so assumed, continued or replaced, that Award shall vest in full immediately prior to the effective date of the actual Change in Control transaction and the shares of Common Stock underlying the portion of the Award that vests on such accelerated basis shall be issued in accordance with the applicable Award agreement, unless such accelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement.

(ii)Each outstanding Award under Article Three which is assumed in connection with a Change in Control or otherwise continued in effect shall be adjusted immediately after the consummation of that Change in Control so as to apply to the number and class of securities into which the shares of Common Stock subject to that Award immediately prior to the Change in Control would have been converted in consummation of such Change in Control had those shares actually been outstanding at that time, and appropriate adjustments shall also be made to the cash consideration (if any) payable per share thereunder, provided the aggregate amount of such cash consideration shall remain the same.  To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the Plan Administrator may, in its sole discretion, provide in the document evidencing the Change in Control transaction that the successor corporation, in connection with the assumption or continuation of the outstanding Awards, shall substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction.

B.The Plan Administrator shall have the discretionary authority to structure one or more unvested Awards under Article Three so that the shares of Common Stock subject to those Awards shall automatically vest (or vest and become issuable) in whole or in part immediately upon the occurrence of a Change in Control or upon the subsequent termination of the Participant’s Service by reason of an Involuntary Termination within a designated period following the effective date of that Change in Control transaction. 

XI.SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.
		
	XII.
	TAX WITHHOLDING

A.The Corporation’s obligation to deliver shares of Common Stock upon the issuance, exercise or vesting of an Award under the Plan shall be subject to the satisfaction of all applicable income and employment tax withholding requirements.

B.The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options, stock appreciation rights, restricted stock units or any other share right awards pursuant to which vested shares of Common Stock are to be issued under the Plan and any or all Participants to whom vested or unvested shares of Common Stock are issued in a direct issuance under the Stock Issuance Program with the right to use shares of Common 

Stock in satisfaction of all or part of the Withholding Taxes to which such holders may become subject in connection with the exercise of their options or stock appreciation rights, the issuance to them of vested shares or the subsequent vesting of unvested shares issued to them.  Such right may be provided to any such holder in either or both of the following formats:

(i)Stock Withholding:  The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or stock appreciation right or upon the issuance of fully-vested shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (equal to the statutory minimum amount required, (or such greater amount permitted under FASB Accounting Standards Codification Topic 718, Compensation-Stock Compensation, for equity-classified awards) or such other amount required to avoid adverse accounting consequences to the Corporation, as determined by the Plan Administrator in its discretion).  The shares of Common Stock so withheld shall reduce the number of shares of Common Stock authorized for issuance under the Plan.

(ii)Stock Delivery:  The election to deliver to the Corporation, at the time the Non-Statutory Option or stock appreciation right is exercised, the vested shares are issued or the unvested shares subsequently vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the exercise, share issuance or share vesting triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder.  The shares of Common Stock so delivered shall neither reduce the number of shares of Common Stock authorized for issuance under the Plan nor be added to the shares of Common Stock authorized for issuance under the Plan.

XIII.SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.
		
	XIV.
	EFFECTIVE DATE AND TERM OF THE PLAN

A.The Plan became effective on the Plan Effective Date, and was approved by the Corporation’s Board of Directors on [                    ], 2018.

B.The Plan shall terminate upon the earliest to occur of (i) [                              ], 2028, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully vested shares or (iii) the termination of all outstanding Awards in connection with a Change in Control.  Should the Plan terminate on [                            ], 2028, then all Awards outstanding at that time shall continue to have force and effect in accordance with the provisions of the documents evidencing those Awards.

XV.AMENDMENT OF THE PLAN

A.The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects.  However, no such amendment or modification shall adversely affect the rights and obligations with respect to Awards at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification.  In addition, amendments to the Plan will be subject to stockholder approval to the extent required under applicable law or regulation or pursuant to the listing standards of the Stock Exchange on which the Common Stock is at the time primarily traded.

B.The Committee shall have the discretionary authority to adopt and implement from time to time such addenda or subplans to the Plan as it may deem necessary in order to bring the Plan into compliance with applicable laws and regulations of any foreign jurisdictions in which grants or awards are to be made under the Plan and/or to obtain favorable tax treatment in those foreign jurisdictions for the individuals to whom the grants or awards are made.

C.The provisions of the Plan and the outstanding Awards under the Plan shall, in the event of any ambiguity, be construed, applied and interpreted in a manner so as to ensure that all Awards and Award agreements provided to Optionees or Participants who are subject to U.S. income taxation either qualify for an exemption from the requirements of Section 409A of the Code or comply with those requirements; provided, however, that the Corporation shall not make any representations that any Awards made under the Plan will in fact be exempt from the requirements of Section 409A of the Code or otherwise comply with those requirements, and each Optionee and Participant shall accordingly be solely responsible for any taxes, penalties or other amounts which may become payable with respect to his or her Awards by reason of Section 409A of the Code.

XVI.USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.
		
	XVII.
	REGULATORY APPROVALS

A.The implementation of the Plan, the grant of any Award and the issuance of shares of Common Stock in connection with the issuance, exercise or vesting of any Award made under the Plan shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Awards made under the Plan and the shares of Common Stock issuable pursuant to those Awards.

B.No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of applicable securities laws.

XVIII.NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Affiliate employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause.
		
	XIX.
	RECOUPMENT

Optionees and Participants shall be subject to any clawback, recoupment or other similar policy adopted by the Board as in effect from time to time, and Awards and any cash, shares of Common Stock or other property or amounts due, paid or issued to the holder of an Award shall be subject to the terms of such policy, as in effect from time to time.

         

APPENDIX
The following definitions shall be in effect under the Plan:
		
	A.
	“Affiliate” shall mean, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition. 

B.“Award” shall mean any of the following awards authorized for issuance or grant under the Plan:  stock options, stock appreciation rights, direct stock issuances, restricted stock or restricted stock unit awards, performance shares, performance units, dividend-equivalent rights and cash incentive awards.

C.“Board” shall mean the Corporation’s Board of Directors.

D.“Change in Control” shall have the meaning assigned to such term in the Award agreement for the particular Award or in any other agreement incorporated by reference into the Award agreement for purposes of defining such term, and in the absence of such a Change in Control definition shall mean a change in ownership or control of the Corporation effected through any of the following transactions:

(i)the closing of a merger, consolidation or other reorganization approved by the Corporation’s stockholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction; 

(ii)the closing of a stockholder-approved sale, transfer or other disposition (including in whole or in part through one or more licensing arrangements) of all or substantially all of the Corporation’s assets; or

(iii)a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.

Unless otherwise determined by the Board, in no event shall (i) any public offering of the Corporation’s securities (whether directly or via a reverse merger with a public shell company) be deemed to constitute a Change in Control, (ii) a Change in Control be deemed to have occurred for purposes of the Plan as a result of a majority of the Board being designated by Capital Royalty Partners II, L.P. and/or its affiliates or Capital Royalty Partners II, L.P. and/or its affiliates acquiring, directly or indirectly, beneficial ownership of securities (or interests convertible into or exercisable for securities) of the Corporation as a result of one or more equity financing transactions, (iii) a change in the Stock Exchange in which the Common Stock is listed or (iv) the merger of Valeritas, Inc. with and into a subsidiary of the Corporation, in each case, be deemed to constitute a Change in Control.
		
	E.
	“Code” shall mean the Internal Revenue Code of 1986, as amended.

F.“Common Stock” shall mean the Corporation’s common stock.

G.“Corporation” shall mean Valeritas Holdings, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of Valeritas Holdings, Inc. which has by appropriate action assumed the Plan.

H.“Employee” shall mean an individual who is in the employ of the Corporation or Affiliate, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

I.“Exercise Date” shall mean the date on which the Corporation shall have received written notice of the option exercise.

J.“Fair Market Value” per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

(iv)If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value per share of Common Stock on any relevant date shall be the closing selling price per share of Common Stock at the close of regular trading hours (i.e., before after-hours trading begins) on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is reported by the National Association of Securities Dealers (if primarily traded on the Nasdaq Global or Global Select Market) or as officially quoted in the composite tape of transactions on any other Stock Exchange on which the Corporation’s common stock is then primarily traded.  If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(v)If the Common Stock is not at the time listed on any Stock Exchange, then the Fair Market Value shall be determined by the Plan Administrator through the reasonable application of a reasonable valuation method that takes into account the applicable valuation factors set forth in the Treasury Regulations issued under Section 409A of the Code.

		
	K.
	“Family Member” means, with respect to a particular Optionee or Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

L.“Involuntary Termination” shall have the meaning assigned to such term in the Award agreement for the particular Award or in any other agreement incorporated by reference into the Award agreement for purposes of defining such term.  In the absence of such an Involuntary Termination definition, such term shall mean the termination of the Service of any individual which occurs by reason of:

(vi)such individual’s involuntary dismissal or discharge by the Corporation (or any  Affiliate) for reasons other than Misconduct, or

(vii)such individual’s voluntary resignation following (A) a change in his or her position with the Corporation (or any Affiliate) which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation (or any Affiliate) without the individual’s consent.

		
	M.
	“Misconduct” shall have the meaning assigned to such term in the Award agreement for the particular Award or in any other agreement incorporated by reference into the Award agreement for purposes of defining such term, and in the absence of such, Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Affiliate), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Affiliate) in a material manner.  The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Affiliate) to discharge or dismiss any Optionee, Participant or other person in the Service of the Corporation (or any 

Affiliate) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct.

N.“1933 Act” shall mean the Securities Act of 1933, as amended.

O.“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

P.“Non-Statutory Option” shall mean an option not intended to satisfy the requirements of Code Section 422.
Q.“Optionee” shall mean any person to whom an option is granted under the Plan.

R. “Participant” shall mean any person who is issued shares of Common Stock, restricted stock units, performance shares, performance units or other stock-based awards under the Plan.

S.“Performance Goals” shall mean any of the following performance criteria upon which the vesting of one or more Awards under the Plan may be based:  (i) revenue, organic revenue, net sales, or new-product revenue or net sales, (ii) achievement of specified milestones in the discovery and development of the Corporation’s technology or of one or more of the Corporation’s products, (iii) achievement of specified milestones in the commercialization of one or more of the Corporation’s products, (iv) achievement of specified milestones in the manufacturing of one or more of the Corporation’s products, (v) expense targets, (vi) share price, (vii) total shareholder return, (viii) earnings per share, (ix) operating margin, (x) gross margin, (xi) return measures (including, but not limited to, return on assets, capital, equity, or sales), (xii) productivity ratios, (xiii) operating income, (xiv) net operating profit, (xv) net earnings or net income (before or after taxes), (xvi) cash flow (including, but not limited to, operating cash flow, free cash flow and cash flow return on capital), (xvii) earnings before or after interest, taxes, depreciation, amortization and/or stock-based compensation expense, (xviii) economic value added, (xix) market share, (xx) working capital targets, (xxi) achievement of specified milestones relating to corporate partnerships, collaborations, license transactions, distribution arrangements, mergers, acquisitions, dispositions or similar business transactions, (xxii) employee retention and recruiting and human resources management and (xxiii) any other performance condition.  In addition, such performance goals may be based upon the attainment of specified levels of the Corporation’s performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of the Corporation’s business units or divisions or any Affiliate.  Performance goals may include a minimum threshold level of performance below which no award will be earned, levels of performance at which specified portions of an award will be earned and a maximum level of performance at which an award will be fully earned.  Each applicable performance goal may be structured at the time of the Award to provide for appropriate adjustments or exclusions for one or more of the following items:  (A) asset impairments or write-downs; (B) litigation or governmental investigation expenses and any judgments, verdicts and settlements in connection therewith; (C) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (D) accruals for reorganization and restructuring programs; (E) any unusual or infrequently occurring item or event; (F) items of income, gain, loss or expense attributable to the operations of any business acquired by the Corporation or costs and expenses incurred in connection with mergers and acquisitions; (G) items of income, gain, loss or expense attributable to one or more business operations divested by the Corporation or the gain or loss realized upon the sale of any such business the assets thereof, (H) accruals for bonus or incentive compensation costs and expenses associated with cash-based awards made under the Plan or other bonus or incentive compensation plans of the Corporation, (I) the impact of foreign currency fluctuations or changes in exchange rates and (J) any other item.

T.“Permanent Disability or Permanently Disabled” have the meaning assigned to such term in the Award agreement for the particular Award or in any other agreement incorporated by reference into the Award agreement for purposes of defining such term, and in the absence of such a definition shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more.

U.“Plan” shall mean the Corporation’s 2018 Inducement Plan as set forth in this document and as subsequently amended or restated from time to time.

V.“Plan Administrator” shall mean the particular entity, whether the Committee, the Board or a subcommittee, which is authorized to administer the Plan with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction.

W.“Plan Effective Date” shall mean [                                   ], 2018, the date that the Plan was adopted by the Board.

X.“Retirement” shall have the meaning assigned to such term in the Award agreement for the particular Award or in any other agreement incorporated by reference into the Award agreement for purposes of defining such term.  In the absence of such a Retirement definition, such term shall mean the Award holder’s cessation of Service after attaining age sixty (60) with at least five (5) completed years of Service to the Corporation.

Y.“Service” shall mean the performance of services for the Corporation (or any Affiliate, whether now existing or subsequently established) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance.  For purposes of the Plan, an Optionee or Participant shall be deemed to cease Service immediately upon the occurrence of the either of the following events:  (i) the Optionee or Participant no longer performs services in any of the foregoing capacities for the Corporation or any Affiliate or (ii) the entity for which the Optionee or Participant is performing such services ceases to remain an Affiliate of the Corporation, even though the Optionee or Participant may subsequently continue to perform services for that entity.  Service shall not be deemed to cease during a period of military leave, sick leave or other personal leave approved by the Corporation; provided, however , that should such leave of absence exceed three (3) months, then for purposes of determining the period within which an Incentive Option may be exercised as such under the federal tax laws, the Optionee’s Service shall be deemed to cease on the first day immediately following the expiration of such three (3)-month period, unless Optionee is provided with the right to return to Service following such leave either by statute or by written contract.  Except to the extent otherwise required by law or expressly authorized by the Plan Administrator or by the Corporation’s written policy on leaves of absence, no Service credit shall be given for vesting purposes for any period the Optionee or Participant is on a leave of absence.

Z.“Stock Exchange” shall mean the Nasdaq Stock Market or such other established securities market that the Common Stock is traded on from time to time.

AA.“Stock Issuance Agreement“ shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under Article Three of the Plan.

BB.     “Withholding Taxes” shall mean the applicable federal and state income and employment withholding taxes to which the holder of an Award under the Plan may become subject in connection with the issuance, exercise, vesting or settlement of that Award.

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