Document:

Exhibit 10.2

 

CERTAIN INFORMATION CONTAINED IN THIS EXHIBIT,
MARKED BY [***], HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE THE REGISTRANT HAS DETERMINED THAT IT IS BOTH NOT MATERIAL AND IS THE
TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

 

Security Purchase Option Agreement

 

This Security Purchase Option Agreement (the “Agreement”)
is entered into as of August 8, 2022 (the “Effective Date”), by and among (i) Enalare Therapeutics
Inc., a Delaware corporation (the “Company”), (ii) the holders of the outstanding capital stock of the
Company set forth on Schedule A hereto (the “Stockholders”), (iii) the holders of certain convertible
promissory notes of the Company (collectively, the “Notes” and each, a “Note”) set
forth on Schedule B hereto (the “Noteholders”), (iv) the holders of options to acquire capital
stock in the Company set forth on Schedule C hereto (the “Optionholders”), (v) the holders of warrants
to acquire capital stock in the Company set forth on Schedule D hereto (the “Warrantholders” and together
with the Stockholders, Noteholders and Optionholders, the “Securityholders”) and (vi) Eagle Pharmaceuticals, Inc.,
a Delaware corporation (the “Purchaser”, and together with the Company, Stockholders and Optionholders, each
a, “Party” and together, the “Parties”).

 

R E C I T A L S

 

WHEREAS, the Company and the Purchaser are parties
to the Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), and it is a condition
to the closing of the sale of the Common Stock of the Company, par value $0.0001 per share (the “Common Stock”),
that the Company, Stockholders and Optionholders execute and deliver this Agreement to the Purchaser;

 

WHEREAS, the Stockholders collectively hold 90,000
shares of Common Stock, and each individual Stockholder holds the number of shares of Common Stock set forth opposite his or her name
on Schedule A hereto and, following the Conversion, the Noteholders collectively hold 30,735 shares of Common Stock, and each
individual Noteholder holds the number of shares of Common Stock set forth opposite his or her name on Schedule B hereto following
the Conversion (the “Outstanding Common Stock”);

 

WHEREAS, the Optionholders collectively hold the
option to acquire 2,480 shares of Common Stock, and each individual Optionholder holds an option to acquire the number of shares of Common
Stock set forth opposite his or her name on Schedule C hereto (the “Outstanding Options”) and the Warrantholders
collectively hold the warrants exercisable for 4,591 shares of Common Stock, and each individual Warrantholder holds warrants to acquire
the number of shares of Common Stock set forth opposite his or her name on Schedule D hereto (the “Outstanding Warrants”
and together with the Outstanding Common Stock and Outstanding Options, the “Outstanding Securities”); and

 

WHEREAS, the Parties desire to set forth the terms
and conditions under which the Company shall have the right, but not the obligation, to purchase all of the Outstanding Securities on
the terms set forth herein.

 

NOW, THEREFORE, in consideration of the promises,
covenants and agreements set forth above and herein contained, the receipt and sufficiency of which the Parties acknowledge, the Parties
agree as follows:

 

     

     

    

 

A G R E E M E N T

 

1.            Conversion
of Indebtedness.

 

(a)            As
of the Effective Date, each Noteholder and the Company hereby agrees and acknowledge that the balance under such Noteholder’s convertible
notes (the “Balance”) has been converted (the “Conversion”) into the number of shares
of Common Stock set forth on Schedule B (the “Conversion Shares”). Notwithstanding the terms of the
Notes, each Noteholder acknowledges and agrees that as of the Effective Date, the aggregate outstanding principal amount of each Note,
together with all accrued and unpaid interest thereon, is as set forth across from such Noteholder’s name on Schedule B.
Each Noteholder further agrees that the principal and accrued interest for each such Noteholder’s Note(s) shall be calculated
as of August 5, 2022. To the extent that additional interest accrues so that the total amount otherwise due to a Noteholder under
a Note is in excess of the amount set forth on Schedule B, each such Noteholder hereby irrevocably waives any such additional
interest. For the avoidance of doubt, no fractional shares of Common Stock will be issued as Conversion Shares and in lieu of any fractional
Conversion Shares to which such Noteholder would otherwise be entitled, the Company shall pay such Noteholder cash equal to such fraction
multiplied by the price at which such Noteholder’s Note converts. Following the Conversion, the undersigned Noteholder agrees and
acknowledges that such Noteholder will be a party to this Agreement as a Stockholder and will be subject to the covenants and obligations
applicable to the Stockholders under this Agreement.

 

(b)            Each
undersigned Noteholder agrees and acknowledges that the issuance of the Conversion Shares pursuant the Notes constitutes full satisfaction
of the Company’s obligations with respect to the Balance, and as of the Effective Date any and all obligations, liabilities, claims,
expenses, liens, actions, rights and interests the Noteholder has or may have in the future arising in respect of the Balance are hereby
extinguished and terminated, or otherwise are hereby forgiven and waived to the full extent of the law, and the Company is hereby released
from the same to the full extent of the law. The Noteholder hereby agrees to promptly take any further action and to execute any and
all additional documents or instruments requested by the Company to release the Company from its obligations under the Balance.

 

(c)            Upon
issuance of the Conversion Shares in accordance with Section 1(a) above, all obligations of the Company (including outstanding
principal, interest or any other amounts) under the Notes will be fully satisfied and discharged, and the Notes will automatically be
terminated and of no further force or effect. Each Noteholder acknowledges and agrees that the Notes and any and all side letters and
similar agreements entered into between such Noteholder and the Company in connection with the Notes and all obligations set forth therein
shall be terminated and of no further force or effect (whether or not actually delivered to the Company). Other than Noteholder’s
right to receive the Conversion Shares, each Noteholder hereby waives, on behalf of itself, any and all demands, claims, suits, actions,
causes of actions, proceedings, assessments and rights with respect to the Notes and any related agreements underlying the Notes, including,
without limitation: (i) any principal or interest payments due as of the date hereof in excess of the amounts to be converted into
Conversion Shares pursuant hereto; (ii) any right to notice of the conversion of the Conversion Shares; and (iii) any rights
arising from any past or present default or event of default under the Notes.

 

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(d)            The
Noteholder agrees and covenants that it will promptly execute and deliver to the Company such further instruments and documents and take
such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Agreement, including,
for the avoidance of doubt, all financing documents executed by the investors in connection with the Qualified Financing (as defined
in the Notes) in accordance with Section 3(d) of the Notes, and to comply with state or federal securities laws or other regulatory
approvals, including causing any Affiliates of the Noteholder to take any actions that are necessary or appropriate to fulfill the terms
and provisions of this Conversion Agreement. For purposes of this Agreement, “Affiliate” of a Party, means
any corporation or other business entity controlled by, controlling or under common control with such Party. For this purpose, “control”
shall mean direct or indirect beneficial ownership of fifty percent (50%) or more of the voting or income interest in such corporation
or other business entity.

 

2.            Right
to Purchase. The Securityholders hereby irrevocably grant to the Purchaser the right to purchase (the “Purchase Option”),
and the Securityholders hereby irrevocably agree to promptly sell to the Purchaser, all of the Outstanding Securities at any time following
the date hereof until the expiration of the Option Term as set forth in Section 7. The Purchaser may exercise the Purchase Option
in its sole and absolute discretion. As more fully set forth in the Definitive Agreement (as defined below), the Outstanding Securities
shall be sold free and clear of any liens.

 

3.            Procedures.

 

(a)            The
Purchase Option may be exercised by the Purchaser by service of a written notice substantially in the form attached hereto as Exhibit B
(the “Call Exercise Notice”) on the Securityholders and Company at any time following date hereof
(and prior to termination of the Purchase Option pursuant to Section 7). The Purchaser’s delivery of the Call Exercise
Notice shall be revokable, in the Purchaser’s reasonable discretion, within [***] Business
Days of the Company delivering to the Purchaser a substantially complete disclosure schedule under the Definitive Agreement. For the
purposes of this Section 3(a), the date of exercise of the Purchase Option is the date on which the Purchaser serves the
Call Exercise Notice on the Securityholders and Company (such date, the “Call Notice Date”).

 

(b)            The
sale of the Outstanding Securities to the Purchaser shall be documented in a definitive agreement (the “Definitive Agreement”)
containing the terms, covenants and conditions set forth in the Term Sheet attached hereto as Exhibit A
(the “Term Sheet”). The Parties shall use commercially reasonable efforts to enter into the Definitive
Agreement within [***] days of the Purchaser delivering the Call Exercise Notice, and the Securityholders
hereby irrevocably agree to vote all shares of capital stock that they hold in the Company in favor of the transactions contemplated
by the Definitive Agreement as long as the Definitive Agreement does not materially deviate from the terms and conditions set forth in
the Term Sheet attached hereto as Exhibit A.

 

(c)            Notwithstanding
the foregoing, the Purchaser, in its sole and absolute discretion, may elect to exercise the Purchase Option and acquire the
Outstanding Securities pursuant to this Agreement rather than pursuant to the terms of the Term Sheet and the Definitive Agreement
(the “Direct Acquisition Option”). Following the determination of the Valuation Amount (as defined below),
the Direct Acquisition Option may be exercised by the Purchaser by service of a written notice substantially in the form attached
hereto as Exhibit C (the “Direct Acquisition
Notice”) on the Securityholders and Company at any time following date hereof (and prior to termination of the
Purchase Option pursuant to Section 7). The Purchaser’s delivery of the Direct Acquisition Notice shall be
revokable in the Purchaser’s reasonable discretion if the Company, the Company’s business or the Company’s
products suffer a material adverse event in between the Direct Notice Date and the Acquisition Closing. For the purposes of this Section 3(c),
the date of exercise of the Direct Acquisition Option is the date on which the Purchaser serves the Direct Acquisition Notice on the
Securityholders and Company (the “Direct Notice Date”). Upon the written request of the Purchaser, the
Company and the Purchaser shall promptly cooperate to determine the Valuation Amount (as defined below), which written
request may be delivered by Purchaser prior to or after the Purchaser delivers the Call Exercise Notice or Direct Acquisition
Notice.

 

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(d)            The
consummation of the transactions contemplated by the Direct Acquisition Option shall take place remotely through the exchange of documents
on a date to be designated by the Purchaser and consented to by the Company, such consent to not be unreasonably withheld, delayed or
conditioned; provided, that if the Parties are unable to agree on a date for the Acquisition Closing, the consummation of the transaction
contemplated by the Direct Acquisition Option shall take place [***] days after the Direct Notice
Date (the “Direct Acquisition Closing Date”). On the Direct Acquisition Closing Date:

 

(i)            Each
Stockholder shall deliver to Purchaser a customary release of claims relating to the transaction contemplated by this Agreement and their
equity ownership in the Company and any other documentation as may be reasonably requested by the Purchaser;

 

(ii)            Each
Stockholder shall deliver to the Purchaser an executed stock power in the form attached hereto as Exhibit D
(the “Stock Power”), representing the assignment of all Outstanding Securities held by such Stockholder
to the Purchaser in exchange for such Stockholder’s portion of the Direct Acquisition Consideration;

 

(iii)            Each
Optionholder shall deliver to the Purchaser an executed option termination agreement in the form attached hereto as Exhibit E
(the “Option Termination Agreement”), terminating the Outstanding Options held by such Optionholder
in exchange for the Optionholder’s portion of the Direct Acquisition Consideration as specified in the Option Termination Agreement;

 

(iv)            Each
Warrantholder shall deliver to the Purchaser an executed warrant termination agreement in the form attached hereto as Exhibit F
(the “Warrant Termination Agreement”), terminating the Outstanding Warrants held by such Warrantholder
in exchange for the Warrantholder’s portion of the Direct Acquisition Consideration as specified in the Warrant Termination Agreement;

 

(v)            The
Purchaser shall pay to each Stockholder, by wire transfer of immediately available funds, each Stockholder’s portion of the Direct
Acquisition Consideration (as defined below);

 

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(vi)            The
Purchaser shall deposit with the Company the aggregate amount of the Direct Acquisition Consideration that is due to the Optionholders
that are employees of the Company for payment through the Company’s standard payroll practices; and

 

(vii)            The
Purchaser shall pay to each Optionholder that is not an employee of the Company (a “Non-Employee Optionholder”),
by wire transfer of immediately available funds, each Non-Employee Optionholder’s portion of the Direct Acquisition Consideration.

 

(e)            As
used in this Agreement, the “Direct Acquisition Consideration” shall mean (i) the greater of (a) $100,000,000.00
or (b) the Valuation Amount calculated as of the Call Notice Date or the Direct Notice Date, as applicable,
which shall not be greater than $175,000,000.00 (ii) plus the product equal to (A) [***],
as applicable (the “Acquisition Closing”), multiplied by a percentage equal to (B) [***].
[***]. For purposes of this Subsection 3(e), the following terms shall have the following meanings:

 

(i)            “Valuation
Amount” shall mean an amount equal to [***].

 

(ii)            “Indebtedness”
shall mean the outstanding principal amount of, and all interest and other amounts accrued in respect of and all amounts payable at retirement
of, (a) any indebtedness for borrowed money of the Company, (b) any obligation of the Company evidenced by bonds, debentures,
notes or other similar instruments, (c) any reimbursement obligation of the Company with respect to letters of credit (including
standby letters of credit to the extent drawn upon), bankers’ acceptances or similar facilities issued for the account of the Company,
(d) any obligation of the type referred to in clauses (a) through (c) of another person or entity the payment of which
the Company has guaranteed or for which the Company is responsible or liable, directly or indirectly, jointly or severally, as obligor
or guarantor, (e) any known tax liabilities and (f) any deferred revenue.

 

(f)            The
Company shall use reasonable best efforts to promptly (and in any event within [***] days following
notice from the Purchaser) prepare and deliver true and complete copies of all audited, unaudited and proforma financial statements that
Purchaser will be required to file with the Securities and Exchange Commission (the “SEC”) in connection with
the consummation of the Purchase Option (including the Direct Acquisition Option) and such financial statements shall be prepared in
accordance with generally accepted accounting principles and Regulation S-X in a manner suitable for filing with the SEC. Notwithstanding
anything to the contrary herein, all time periods with respect to the exercise of the Purchase Option and Direct Acquisition Option,
the execution of a Definitive Agreement and the closing of such acquisition shall be tolled pending the preparation and delivery of such
financial statements. The Company shall cause its independent auditors to deliver an audit report in connection with any audited financial
statements and a consent allowing Purchaser to file such auditor report with the SEC.

 

(g)            Notwithstanding
the foregoing, the deadline for the closing on the Purchase Option (including the Direct Acquisition Option) may be extended to the extent
necessary for the Purchaser to receive any necessary approvals from regulatory authorities under applicable anti-trust laws or to allow
for the lapse of any waiting period under applicable anti-trust laws; provided, that Purchaser shall use best efforts to obtain such
anti-trust clearances.

 

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4.            Power
of Attorney. As security for the performance by the Securityholders of his, her or its obligations under this Agreement, in the event
the Purchaser exercises its Purchase Option, each Securityholder hereby grants an irrevocable proxy and power of attorney to the Purchaser,
with power to take all necessary actions and execute and deliver all documents and/or written consent of the stockholders to consummate
the sale and purchase of the Outstanding Securities pursuant to the Direct Acquisition Option or the Definitive Agreement, as applicable
(“Power of Attorney”); provided that, the Purchaser shall not exercise the foregoing Power of Attorney
unless the Securityholder has failed to comply with his, her or its obligations pursuant to this Agreement and in any case within [***]
Business Days following the request by Purchaser. This Power of Attorney is coupled with an interest and
shall survive, and shall not be affected by, the subsequent death, disability, incompetency or bankruptcy of the Securityholder. This
Power of Attorney shall not, without the prior written consent of the Purchaser, be superseded or revoked by any proxy or power of attorney
granted by the Securityholder simultaneously herewith or subsequent hereto.

 

5.            Phase
3 Milestone.

 

(a)            Within
[***] Business Days of the Company achieving the Phase 3 Milestone, the Company shall deliver a
notice (the “Phase 3 Notice”) to the Purchaser pursuant to Section 15 of this Agreement confirming the
achievement of the Phase 3 Milestone. As used in this Agreement, the “Phase 3 Milestone” means the Company’s
receipt of a communication from the U.S. Food and Drug Administration (“FDA”) after the completion of the Phase
2 Clinical Trial (as defined in the Purchase Agreement) that can be reasonably interpreted as not precluding the Company to proceed to
a phase 3 clinical trial involving the Company’s Product (as defined in the Purchase Agreement) (the “Company Product”).
The term “Business Day” shall have the meaning ascribed to it in the Purchase Agreement.

 

(b)            Prior
to and following the Phase 3 Milestone, the Company shall, to the extent practicable, provide the Purchaser with at least [***]
days’ advance notice of any meetings, consultations or appointments with FDA representatives relating
to the Company Product (an “FDA Meeting”); provided that, if the FDA or the Company requests a meeting
with the other and [***] days’ advance notice is not practicable, the Company shall provide
the Purchaser with notice of the requested meeting by the FDA or the Company within twenty-four hours (24) of such request. The Company
shall use commercially reasonable efforts to allow representatives of the Purchaser to attend any such FDA Meetings, and the Company
shall provide Purchaser copies of any data, documentation and information prepared in connection with any such FDA Meeting and all communications
with the FDA for the Purchaser to review, discuss and comment or, if not practicable or legally permitted, shall provide Purchaser with
a copy or summary thereof as soon as reasonably practicable thereafter.

 

(c)            Following
the Phase 3 Milestone, the Company hereby agrees and covenants not to initiate phase 3 pivotal studies involving the Company Product
until the termination of the Purchase Option as set forth in Section 7. The Company further agrees and covenants to provide the
Purchaser with reasonable access to the Company’s personnel, data, documentation, systems and information relating to the Company
Product following the Phase 3 Milestone, including any communications received from the FDA.

 

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6.            Royalties.

 

(a)            Royalty
Term. Purchaser’s obligation to pay royalties under this Section 6 shall commence [***] and
shall continue with respect to sales of all Products on a country-by-country basis until [***] years
after the First Commercial Sale of the first Product in such country (“Royalty Term”).

 

(b)            Royalty
Rates. Following the closing of the Acquisition and during the Royalty Term, Purchaser shall pay to the Royalty Recipients a [***]%
royalty on the Net Sales of all Products for the first [***] months
after the First Commercial Sale in such country (the “Initial Royalty Period”); provided that, with respect
to any Net Sales of Products to a United States Governmental Body, the Post-Initial Period Royalty Rates shall apply and such sales shall
be included in the calculation of Annual Net Sales of Product. Following the Initial Royalty Period, Purchaser shall pay to the Royalty
Recipients the following royalties on the Annual Net Sales of Products, equal to the following percentages of such Net Sales (the “Post-Initial
Period Royalty Rates”):

 

	Annual Net Sales of Products	Royalty
    Rate
	Annual
    Net Sales of Products (as defined below) equal to or less than	9%
	Annual
    Net Sales of Products greater than	12%

 

For purposes of this Agreement, “Annual Net Sales of Products”
means [***].

 

For clarity, the Initial Royalty Period is determined on a country-by-country
basis. By way of example, if the First Commercial Sale of a Product occurs in the United States, then the Initial Royalty Period will
end [***] months after such First Commercial Sale in the United States for any and all Products, and thereafter Purchaser will pay royalties
at the applicable Post-Initial Period Royalty Rate on Net Sales of all Products in the United States. Then, if there is a First Commercial
Sale of a Product in Germany, the Initial Royalty Period will end [***] months after such First Commercial Sale in Germany, and thereafter
Purchaser will pay royalties at the applicable Post-Initial Period Royalty Rate on Net Sales for any and all Products in Germany in addition
to the United States.

 

(c)            Royalty
Adjustment.

 

(i)            If
Purchaser, its Affiliate or sublicensee becomes obligated to make payment to a Third Party with respect to intellectual property rights
owned or controlled by such Third Party reasonably necessary for the Development, manufacture, use or sale of the Products (including
with respect to any pharmaceutically active ingredient that is not a Product (excluding Other Product) but is sold in combination with
a Product (whether or not in fixed dosage form)) (such amount, a “Third Party Payment Amount”), the Royalty
Recipients’ portion of such Third Party Payment Amount shall be equal to the then applicable Post-Initial Period Royalty Rate multiplied
by the Third Party Payment Amount (the “Deduction Amount”) and Purchaser may deduct the Deduction Amount from
the amounts payable to the Royalty Recipients under this Section 6; provided that, such deduction shall not reduce the amounts
so payable to the Royalty Recipients to less than [***] percent ([***]%)
of the amount that would otherwise be due hereunder. Purchaser may carry forward to subsequent calendar quarters any deductions that
it was not able to deduct as a result of the foregoing proviso. Notwithstanding the foregoing, in no event shall any royalty adjustment
under this Section 6(c) apply to the TP Royalty (as defined in Section 6(e) below).

 

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(ii)            If
the Product is neither (i) Covered by a Valid Claim of a Patent controlled by Purchaser or any of its Affiliates in the country
for which such Product is sold nor (ii) subject to any Regulatory Exclusivity in such country, the royalty payable by Purchaser
with respect to such Product in such country shall be reduced by [***] percent ([***]%)
of the amount otherwise payable pursuant to Section 6(b). Notwithstanding the foregoing, the reduction in this Section 6(c)(ii) shall
not apply with respect to a Product in a calendar quarter in a particular country if a reduction is made under Section 6(c)(iii) below
for such Product in such quarter in such country.

 

(iii)            If
in any country during the Royalty Term for a Product, Generic Products to such Product are sold by any Third Party that is not a
sublicensee, and the aggregated (all package sizes) sales turnover of the Product in such country (measured in unit sales) is less
than [***]% of the aggregated sales volume of such Product for the calendar quarter immediately
prior to the launch of the Generic Product in such country, then the then-applicable royalty rates (i.e., as set forth in
Section 6(b)) and as such royalties may have been further reduced pursuant to Section 6(c)(i), subject to
Section 6(c)(v) for such calendar quarter for Product sold in such country will be reduced by [***] percent
([***]%) of the royalty rates then applicable. If, in any country during the Royalty Term for a
Product, Generic Products to such Product are sold by any Third Party that is not a sublicensee, and the aggregated (all package
sizes) sales turnover of the Product in such country (measured in unit sales) is less than [***]%
of the aggregated sales volume of such Product for the calendar quarter immediately prior to the launch of the Generic Product in
such country, then the then-applicable royalty rates (i.e., as set forth in Section 6(b) and as such royalties may have
been further reduced pursuant to Section 6(c)(i), subject to Section 6(c)(v)) for such calendar quarter for Product sold
in such country will be reduced by [***] percent ([***]%)
of the royalty rates set forth in Section 6(b). All such determinations of unit sales shall be based upon a mutually
acceptable calculation method using market share data provided by a reputable and mutually agreed upon provider, such as IQVIA.

 

(iv)            No
more than one royalty payment shall be due under this Agreement with respect to a sale of a particular Product (e.g., even if such Product
is Covered by multiple Valid Claims or multiple patents).

 

(v)            Notwithstanding
anything to the contrary, with respect to any Product in any calendar quarter, the operation of Section 6(c)(i), Section 6(c)(ii) and
Section 6(c)(iii) above, individually or in combination, shall not reduce by more than [***] percent
([***]%) the royalties that would otherwise have been due under Section 6(b) with respect
to Net Sales of such Product in the applicable country(ies) during such calendar quarter.

 

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(d)            Payment.
Commencing with the calendar quarter in which the First Commercial Sale of the first Product occurs, Purchaser shall pay the Royalty
Recipients equitably based on a pro rata ratio of the total number of capital stock held by the Royalty Recipients (or, their respective
predecessors-in-interest, as applicable) at the time of the closing of the Acquisition (“Pro Rata Basis”) within
[***] days following the end of each such calendar quarter during the Royalty Term.

 

(e)            TP
Royalty. If Purchaser or its Affiliates Divests one or more Products to a Third Party for commercialization in a territory other
than the United States (i.e., divestiture shall not be based on the location of the Third Party), Purchaser shall pay to the Royalty
Recipients on a Pro Rata Basis a [***] percent ([***]%) royalty
on any sales or non-sales related revenue either Purchaser or its Affiliates receives from such Third Party (“TP Royalty”)
within [***] days following receipt of such revenue; provided that, (a) such TP Royalty
shall not be greater than [***] ($[***]), and (b) such
TP Royalty shall not be subject to any royalty adjustment. For clarity, Purchaser’s obligation to pay the TP Royalty shall survive
any Change of Control of Purchaser or the Company.

 

(f)            PRV.
If Purchaser or any of its Affiliates determines to sell the first Priority Review Voucher granted with respect to the Product (“PRV”),
Purchaser shall pay to the Royalty Recipients on a Pro Rata Basis [***] percent ([***]%)
of all proceeds received from the sale of such PRV within [***] days of the consummation of the
sale of the PRV. If Purchaser or any of its Affiliates determines to use the PRV for an application of Purchaser or any of its Affiliates,
Purchaser shall pay to the Royalty Recipients on a Pro Rata Basis [***] Dollars ($[***])
within [***] days of the submission of such application.

 

(g)            Late
Payments. In the event any royalty payments or other payments due to the Royalty Recipients under this Section 6 are not paid
when due hereunder, Purchaser shall pay to the Royalty Recipients interest charges at the rate of [***] percent
([***]%) per annum on the total royalty payments or other payments due hereunder under paid in full.

 

(h)            Reporting.
At such times as Purchaser shall deliver a royalty payment to the Royalty Recipients under Section 6(b), Section 6(d) or
Section 6(e) hereof, Purchaser shall also deliver to each of Herman Cukier, Daniel Motto, and Dr. Joseph V. Pergolizzi,
Jr (the “Designated Persons”) a written report detailing all sales, if any, made of Products during the calendar
quarter giving rise to the royalty payment (or such other applicable period), and detailing the amount of Net Sales made during such
calendar quarter and showing its calculations the royalty payments due to the Royalty Recipients pursuant to Section 6(c) or
Section 6(d) hereof, as applicable. The Designated Persons shall be responsible for distributing each report to the Royalty
Recipients. Each report shall include at least the following:

 

(i)            The
dollar amount of Net Sales, on a country-by-country basis, of Products sold by and/or for Purchaser or its Affiliates or any Licensees;

 

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(ii)            an
accounting for Net Sales, showing the details of all deductions from the gross amounts invoiced by Purchaser and its Affiliates and any
Licensees; and

 

(iii)            the
royalty amounts due to the Royalty Recipients;

 

Each such report shall be signed by an officer of Purchaser and shall
be certified as true, correct, and complete. Purchaser’s failure to submit a royalty report as provided in this Section 6(h) shall
constitute a breach of this Agreement.

 

(i)            Records.
Purchaser and its Affiliates shall keep (and shall cause each Licensee to keep) complete, true and accurate records and books in
reasonably sufficient detail for the purpose of showing its calculation of Net Sales as well as any amounts payable to the Royalty
Recipients hereunder. Records and books shall be kept at Purchaser’s (or Licensee’s, as applicable) principal
place of business, for at least thirty-six (36) months following the end of the calendar year to which such books and records
pertain.

 

(j)            Audit.
The books and records referred to in Section 6(j) shall be open to inspection by the Designated Persons as well as their respective
accountants, attorneys, agents or advisors (each, a “Designated Persons’ Representative”) reasonably
acceptable to Purchaser, upon at least twenty (20) days’ prior written notice to Purchaser, during normal business hours during
the Royalty Term and for a period of three (3) years thereafter, for the purpose of verifying the Purchaser’s calculations
of Net Sales and Purchaser’s royalty statement. Such audits may not (a) be conducted for any calendar year ending more than
thirty-six (36) months prior to the date of the request, (b) be conducted more than once each calendar year per Designated Person,
or (c) be repeated for any calendar quarter. Purchaser shall ensure that any Licensee will provide the Designated Persons with such
access to any books and records maintained by the Licensee. In the event such audit is conducted by a Designated Persons’ Representative,
such Designated Persons’ Representative shall provide to Purchaser (y) a preliminary copy of its audit report at the same
time it provides such audit report to the Designated Persons and (z) the final audit report containing its conclusions regarding
any audit. Any Designated Person or Designated Persons’ Representative conducting an audit shall enter into a confidentiality agreement
with Purchaser and shall not disclose or use the confidential information except to the extent necessary to conduct the audit.

 

(k)            Assumption
by Acquirer. During the Royalty Term, Purchaser shall not (and shall ensure that none of its Affiliates do not) Divest any rights
with respect to any Product to any Person (an “Acquirer”), unless the Acquirer agrees in writing (a) to
assume and be bound by all of the provisions of this Section 6 (including, but not limited to this Section 6(k)), to the same
extent that such provisions apply to Purchaser, and (b) that each Royalty Recipient is an intended third party beneficiary of the
foregoing. Purchaser shall deliver a copy such agreement signed by an Acquirer to each Royalty Recipient prior to or at the time of the
closing of the transaction pursuant to which rights with respect to a Product are Divested to the Acquirer.

 

(l)            Definitions.
As used in this Section 6, the following terms shall have the following respective meanings:

 

(i)            “Acquisition” means
Purchaser’s acquisition of all the outstanding securities of the Company pursuant to the terms of this Agreement.

 

    10

     

    

 

(ii)            “Change
of Control” means, with respect to a Party: (i) a merger, reorganization or consolidation involving such Party in
which the holders of the voting securities of such Party outstanding immediately prior thereto cease to beneficially own at least fifty
percent (50%) of the combined voting power of the surviving entity, directly or indirectly, immediately after such merger, reorganization
or consolidation; or (ii) a transaction in which an entity or individual, or group of entities and/or individuals acting in concert,
acquires more than fifty percent (50%) of the voting equity securities of such Party.

 

(iii)            “Combination
Product” means: [***]. [***] are each referred
to as the “Other Product(s)”.

 

(iv)            “Cover”
shall mean, with respect to a claim of a Patent and a Product, that such claim would be infringed, absent a license, by the manufacture,
use, offer for sale, sale or importation of such Product (considering claims of patent applications to be issued as then pending).

 

(v)            “Development”
or “Develop” means all activities that relate to the development of Products, including, but not limited to,
all interactions with Regulatory Authorities, management of the clinical development program, and oversight of the manufacturing of clinical
supplies and registration batches.

 

(vi)            “Divest”
means the sale, license, sublicense, assignment, or transfer (in any manner) of all or any of the right, title, or interest in and to
a Product to a Third Party.

 

(vii)            “First
Commercial Sale” means, on a country-by-country basis, the first commercial sale, transfer or disposition for monetary
value of any Product for use or consumption by a Third Party end user, in each case, after all approvals, licenses, registrations or
authorizations of any Governmental Body that are necessary for the manufacturing, use, storage, import, transport and sale of such first
Product in a regulatory jurisdiction, including in each case, pricing and reimbursement approval, have been obtained for such country
and where such sale, disposition or transfer results in a recordable Net Sale in accordance with Purchaser’s or its Affiliate’s,
applicable accounting practices (consistently applied).

 

(viii)            “Generic
Product” means, with respect to a particular pharmaceutically active ingredient (including the Product) (“Original
Product”) and a particular country, any pharmaceutical product that: (a) contains the same active pharmaceutical ingredient(s) as
such Original Product, (b) is approved by the regulatory authority in such country as a substitutable generic for such Original
Product or otherwise is approved as a therapeutic equivalent to such Product in a manner that relied on or incorporated data submitted
by a Person (the “Filing Entity”), in connection with the regulatory filings for such Product, including through
an ANDA or an application under §505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act, or any enabling legislation thereof,
or any similar procedure outside the United States, in each case now or in the future, and (c) is sold in such country by a Person
other than by or on behalf of such Filing Entity.

 

    11

     

    

 

(ix)            “Governmental
Body” shall mean any national, federal, regional, state, provincial, local, or foreign or other governmental authority
or instrumentality, legislative body, court, administrative agency, regulatory body, commission or instrumentality, including any multinational
authority having governmental or quasi-governmental powers, or any other industry self-regulatory authority or arbitral body.

 

(x)            “Licensee”
means a Third Party to whom Purchaser or any of its Affiliates grants a license to offer for sale, sell, have sold, or otherwise commercialize
any Product, and any sublicensees (through multiple tiers) of any of the foregoing. “Licensee” shall not be deemed to include
any distributor, wholesaler or reseller of a Product who is not responsible for marketing or promotion of such Product.

 

(xi)            “Phase
2 Clinical Trial” means a human clinical trial of any Product, the principal purpose of which is to evaluate the effectiveness
and/or safety of such Product in the target patient population, as described in 21 C.F.R. § 312.21(b), as amended from time to time,
or the corresponding foreign regulations, and which trial is intended to be the final clinical trial before the initiation of a pivotal
clinical trial and to establish the dosing for such pivotal clinical trial.

 

(xii)            “Regulatory
Authorities” means the FDA and comparable regulatory agencies outside of the United States.

 

(xiii)            “Regulatory
Exclusivity” means, with respect to a Product, any exclusive marketing rights or data exclusivity rights conferred by the
applicable Regulatory Authority with respect to the Product, other than a Patent, including, but not limited to, orphan drug exclusivity,
new chemical entity exclusivity, data exclusivity, or pediatric exclusivity.

 

(xiv)            “Patent(s)”
means all patents and patent applications (including provisional applications), including all divisionals, continuations, substitutions,
continuations-in-part, re-examinations, re-issues, additions, renewals, extensions, confirmations, registrations, any other pre- or post-grant
forms of any of the foregoing, any confirmation patent or registration patent or patent of addition, utility models, patent term extensions,
and supplemental protection certificates or requests for continued examinations, foreign counterparts, foreign equivalents and the like
of any of the foregoing.

 

(xv)            “Product”
means [***]; “Products” means, collectively, [***].

 

(xvi)            “Royalty
Recipient” means the Persons that were Company stockholders at the time of the closing of the Acquisition (other than Purchaser
or its Affiliates), and any of their respective successors, assigns and estates, as applicable.

 

    12

     

    

 

(xvii)            “Net
Sales” means, [***]:

 

(A)            [***];

 

(B)            [***];

 

(C)            [***];

 

(D)            [***];

 

(E)            [***];

 

(F)            [***];
and

 

(G)            [***].

 

Notwithstanding the foregoing, amounts received
or invoiced by Purchaser or its Affiliates for the sale of Products among Purchaser and its Affiliates shall not be included in the computation
of Net Sales hereunder. Net Sales shall be accounted for in accordance with U.S. GAAP in all instances.

 

Transfers, use or sales of Products for research,
Development (including for clinical studies), promotional or advertising purposes or as donations or the like or as “treatment
IND sales,” “named patient sales,” “compassionate use sales” or pursuant to any expanded access programs,
in each case, shall not be included in Net Sales.

 

For purposes of calculating Net Sales on sales of
Combination Products, the gross amount received for any Product included in a Combination Product shall be calculated by multiplying
the gross amount received for such Combination Product by the fraction A/(A+B), where “A” is the gross amount received for
such Product sold separately without the Other Product and “B” is the gross amount received for the Other Product sold separately,
in each case in the same country and calendar quarter. In the event that such Product and any Other Product are not sold separately in
material amounts in the same country and calendar quarter, the gross amount received for such Product shall be reasonably determined
by Purchaser based upon the relative value of the Product and the Other Product included in the Combination Product. In the event of
a dispute with respect to such allocation, either Party may submit the matter to dispute resolution pursuant to Section 11.14 of
the Purchase Agreement.

 

(xviii)            “Third
Party” means any Person other than other than a Party or an Affiliate of a Party.

 

(xix)            “Valid
Claim” means (a) a claim of an issued, unexpired patent controlled by Purchaser that has not been revoked, disclaimed,
abandoned or held invalid or unenforceable by court or other body of competent jurisdiction in an unappealed or unappealable decision,
or (b) a claim of a pending patent application that has not been cancelled, withdrawn, abandoned, or finally rejected by an administrative
agency action from which no appeal can be taken and that has not been pending for more than seven (7) years from the date of filing
of the earliest priority patent application to which such pending patent application is entitled to claim benefit.

 

7.            Term
of the Option. The Purchase Option shall be effective as of the execution of this Agreement and shall terminate if the Purchaser
does not exercise the Purchase Option upon the earlier of (a) within ninety (90) days of receiving the Phase 3 Notice from the Company,
or (b) by June 30, 2027 (the “Option Term”).

 

    13

     

    

 

8.            Representations
and Warranties of the Securityholders. Each Securityholder hereby represents and warrants to the Purchaser that the following representations
and warranties are true and complete as of the date of this Agreement:

 

(a)            Ownership
of Securities. Securityholder is the sole record, legal and beneficial owner of that number and class of shares of Common Stock set
forth opposite the Securityholder’s name on Schedule A or is the sole and beneficial owner of an option to acquire that
number and class of shares of Common Stock set forth opposite the Securityholder’s name on Schedule B. The Outstanding Securities
constitute Securityholder’s only equity or security interest in the Company and Securityholder has no rights to directly or indirectly
acquire additional shares of Common Stock. The Outstanding Securities (a) are not, and as of the closing of the Definitive Agreement
will not be, subject to any liens, claims, options, charges, rights of first refusal or other encumbrances (any of the foregoing, a “Lien”)
(other than Liens created pursuant to this Agreement), and (b) have not been transferred, assigned or otherwise disposed of by Securityholder
and Securityholder has not entered into any agreement to transfer, assign or otherwise dispose of the Outstanding Securities (other than
pursuant to this Agreement).

 

(b)            Power,
Authorization and Validity. Securityholder has all requisite power and legal capacity to enter into this Agreement and to perform
his, her or its obligations under this Agreement. The execution and delivery of this Agreement by Securityholder and the consummation
by Securityholder of the transactions contemplated hereby have been duly authorized by all necessary action, if any, on the part of Securityholder.
This Agreement has been duly executed and delivered by Securityholder and constitutes, or when executed by Securityholder shall constitute,
a valid and binding obligation of Securityholder, enforceable against Securityholder in accordance with its terms, subject only to the
effect, if any, of (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement
of the rights of creditors generally and (ii) rules of law governing specific performance, injunctive relief and other equitable
remedies.

 

(c)            No
Consents. No consent, approval, order, authorization, release or waiver of, or registration, declaration or filing with, any governmental
authority is necessary or required to be made or obtained by Securityholder to enable Securityholder to lawfully execute and deliver,
enter into, and perform its, his or her obligations under this Agreement.

 

(d)            No
Conflict. Neither the execution and delivery by Securityholder of this Agreement or any other transaction contemplated by this Agreement:
(a) conflicts with, or, with or without notice or lapse of time (or both), results in a termination, breach, impairment or violation
of, or constitutes a default under, or requires the consent, release, waiver or approval of, or notice to, any third party under, (i) if
Securityholder is an entity, any provision of the organizational or governing documents of Securityholder, each as currently in effect,
(ii) any applicable law, or (iii) any contract to which Securityholder is a party or by which Securityholder or its, his or
her assets are bound or otherwise affected; or (b) results in the creation of any Lien on any of the Outstanding Securities.

 

    14

     

    

 

(e)            Legal
Proceedings. There is no private or governmental action, inquiry, claim, mediation, arbitration, counterclaim, proceeding, suit,
hearing, litigation, audit or investigation, in each case whether civil, criminal, administrative, judicial or investigative, or any
appeal therefrom (each of the foregoing, a “Legal Proceeding”) to which Securityholder is a party (either directly
or indirectly) and that relates in any way to the Outstanding Securities or any of the transactions contemplated hereby or thereby. To
the knowledge of Securityholder, no such Legal Proceeding has been threatened.

 

(f)            Review.
Securityholder has carefully read this Agreement and Securityholder has had reasonable time and opportunity to discuss this Agreement
with Securityholder’s financial, legal and other advisors, to the extent Securityholder has determined necessary, prior to executing
this Agreement. Securityholder has such knowledge and experience in business and financial matters to enable Securityholder to understand
and form an investment decision with respect thereto. Securityholder understands and acknowledges that the Purchaser is entering into
this Agreement in reliance upon Securityholder’s execution and delivery of this Agreement and agreement to be bound hereby and
by the terms of the Definitive Agreement (including with respect to Securityholder’s indemnification obligations hereunder and
thereunder).

 

9.            Covenants
of the Company. The Company hereby acknowledges and agrees that, during the Option Term, the Company:

 

(a)            Shall
use commercially reasonable best efforts to maintain and preserve intact the business of the Company as currently conducted and to maintain
reasonably satisfactory relationships with suppliers, customers, distributors, Company employees and other persons or entities having
material business relationships with the Company.

 

(b)            Shall
not take any of the following actions without the prior written consent of the Purchaser, such consent to not be unreasonably withheld,
delayed or conditioned:

 

(i)            authorize
the creation or reclassification of, or issue or obligate itself to issue shares of, any shares of any additional class or series of
capital stock or debt securities that rank senior to the Common Stock with respect to the distribution of assets on the liquidation,
sale, change of control, dissolution or winding up of the Company or other similar events, the payment of dividends, rights of redemption,
and any other rights, preferences or privileges; provided that, for the avoidance of doubt, nothing herein shall be construed
as restricting an optionholder or recipient of an award under the Stock Plan (as defined in the Purchase Agreement) from exercising its
option or award pursuant to the terms thereof and the terms of the Stock Plan (as defined in the Purchase Agreement);

 

(ii)            enter
into a Corporate Transaction (as such term is defined in the Purchase Agreement);

 

(iii)            purchase
or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of
capital stock of the Company other than (A) repurchases of stock from former employees, officers, directors, consultants or other
persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at the
lower of the original purchase price or the then-current fair market value thereof, and (B) the Company’s exercise of its
right of first refusal under Section 3.1 of the Amended and Restated Stockholders’ Agreement of the Company, dated as of the
Effective Date, as may be amended from time to time in accordance with its terms;

 

    15

     

    

 

(iv)            sell
or dispose of any assets having an aggregate value exceeding $500,000, other than the sale of inventory in the ordinary course of business
consistent with past practice;

 

(v)            acquire
any assets outside of the ordinary course of business having an aggregate value exceeding $500,000;

 

(vi)            make
any capital expenditures or expenditures in respect of capital additions having an aggregate value exceeding $500,000;

 

(vii)            settle
or agree to settle any Legal Proceeding in an amount greater than $1,000,000 in the aggregate;

 

(viii)            make
any material change in any method of financial accounting or accounting practice;

 

(ix)            to
the extent it may affect the Company, (i) make, revoke or modify any material tax election, (ii) except as required by changes
in applicable law, change any annual accounting period for taxes, (iii) adopt or change any tax accounting method, except as required
by changes in applicable law, (iv) enter into any closing or other agreement with a taxing authority with respect to taxes, (v) settle
or compromise any tax claim or assessment, consent to the extension or waiver of the limitation period applicable to any tax claim or
assessment, (vi) surrender any right to claim a refund of taxes, or (vii) file any tax return other than on a basis consistent
with past practice;

 

(x)            enter
into any commercialization license, option, joint development or other contract relating or pertaining to the Company Product outside
the ordinary course of business;

 

(xi)            waive
any claims or rights with a value in excess of $500,000;

 

(xii)            (A) incur
any indebtedness for borrowed money in an aggregate amount exceeding $500,000 except for unsecured indebtedness, obligations and/or liabilities
or (B) impose any Lien upon any of the assets of the Company, other than in the ordinary course of business and consistent with
past practice;

 

(xii)            hire
a new President or Chief Executive Officer or other officer having similar duties and responsibilities customarily delegated to the President
or Chief Executive Officer; or

 

(xiii)            agree
or commit to do any of the foregoing.

 

    16

     

    

 

(c)            Shall
cause any new recipient of securities of the Company, including any securities convertible into capital stock of the Company, to become
a party to this Agreement as a Securityholder as a condition to the issuance of such capital and become subject to the Purchase Option
obligations set forth herein. For the avoidance of doubt, the Company shall be permitted to continue to grant awards under the Stock
Plan (as defined in the Purchase Agreement) subject to such grantees becoming a party to this Agreement in accordance with this Section 9(c).

 

10.            Restrictions
on Transfer.

 

(a)            Other
than as a function of law (e.g., death or divorce), no Securityholder, at any time, shall be permitted to, directly or indirectly, Transfer
any of its Common Stock without the prior written consent of the Purchaser, such consent to not be unreasonably withheld, delayed or
conditioned; provided, however, that the undersigned Securityholder agrees that it will be a condition to the transfer of any Common
Stock by function of law that such transferred Common Stock continue to be subject to the Purchase Option obligations set forth herein
and the undersigned Securityholder shall further undertake to take any actions necessary to ensure such obligations will continue, be
recognized and enforced.

 

(b)            As
used in this Section 10, “Transfer” shall mean any sale, assignment, disposition, exchange, pledge, encumbrance,
hypothecation, foreclosure or other transfer of such Common Stock or capital stock of the Company or any participation or interest therein,
in each case whether directly or indirectly (including pursuant to a derivative transaction) in any direct or indirect company holding
any Common Stock or capital stock of the Company (including, for the avoidance of doubt, if the Securityholder is an entity, the transfer
of any equity interests or other securities in any direct or indirect parent entity holding equity interests or other securities in the
Securityholder).

 

11.            Representations
and Warranties of the Company. The Company hereby represents and warrants to the Purchaser that the following representations and
warranties are true and complete as of the date of this Agreement:

 

(a)            Authorization;
Binding Obligations. The Company has the requisite power and authority to execute, deliver and perform this Agreement and all
other agreements contemplated hereby, and the Company’s execution, delivery and performance of this Agreement and all other
agreements contemplated hereby has been duly authorized by all required action. This Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’ rights generally and by laws relating to
the availability of specific performance, injunctive relief or other equitable remedies.

 

(b)            No
Conflict. The execution, delivery and performance of and compliance with this Agreement by the Company will not result in any violation
or breach by the Company of any of its formation or governance documents, or any term of any indenture, mortgage, deed of trust or other
agreement, instrument, court order, judgment, decree, statute, rule or regulation to which the Company is a party or by which the
Company is bound and will not be in conflict with or constitute a default under any such term or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the Company. There is no action, suit or proceeding pending
or, to the knowledge of the Company, currently threatened against the Company that questions the legality, validity or enforceability
of this Agreement or the right of the Company to enter into this Agreement.

 

    17

     

    

 

12.            Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

 

13.            Amendments
and Waivers.

 

(a)            Prior
to the Purchaser’s purchase of all the Outstanding Securities, whether consummated by a closing under the Definitive Agreement
or by the Purchaser electing to exercise the Direct Acquisition Option (the closing of such purchase and sale, an “M&A
Closing”), this Agreement may only be amended and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with the written consent of the Company (on its behalf and
on behalf of the Securityholders pursuant to the Company PoA) and the Purchaser. For purposes of amending or waiving any right under
this Agreement as provided in the foregoing sentence, each Securityholder hereby grants an irrevocable proxy and power of attorney to
the Company, with power to take all necessary actions and execute and deliver all documents necessary to amend this agreement or waive
any rights on behalf of such Securityholder (the “Company PoA”); provided that, the consent of the Securityholder
shall be required for any amendment that is targeted as such individual Securityholder. This Company PoA is coupled with an interest
and shall survive, and shall not be affected by, the subsequent death, disability, incompetency or bankruptcy of the Securityholder.
This Company PoA shall not, without the prior written consent of the Purchaser and the Company, be superseded or revoked by any proxy
or power of attorney granted by the Securityholder simultaneously herewith or subsequent hereto. Notwithstanding the foregoing, the Company
PoA shall be automatically terminated without the further action of any Person at the time of an M&A Closing, in which case the provisions
of Section 13(b) shall apply.

 

(b)            Notwithstanding
the provisions of Section 13(a) above, following an M&A Closing, if any, this Agreement may only be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively)
only with the written consent of a Majority of the Royalty Recipients (as defined below) and the Purchaser; provided that, the
consent of a Royalty Recipient shall be required for any amendment that is targeted as such individual Royalty Recipient. For purposes
hereof, a “Majority of the Royalty Recipients” means, measured immediately prior to the M&A Closing, Royalty
Recipients collectively holding at least [***]% of the shares of Common Stock measured solely amongst
the Royalty Recipients (for the avoidance of doubt, excluding any shares of Common Stock owned by Purchaser or its Affiliates immediately
prior to such M&A Closing).

 

14.            Interpretation
and Construction; Termination. This Agreement and the Transaction Documents (as defined in the Purchase Agreement) constitute
the entire Agreement and understanding among the Parties pertaining to the subject matter contained herein and supersedes all prior
and contemporaneous agreements, representations, and understandings of the Parties. No covenant, representation, or condition not
expressed in this Agreement shall affect or be deemed to interpret, change, or restrict the express provisions hereof. The headings
in this Agreement are for the convenience of reference only and shall not affect the interpretation of this Agreement. This
Agreement may be terminated as set forth in Section 11.20 of the Purchase Agreement; provided that, (a) this
Agreement may not be terminated by the Purchaser following an M&A Closing, (b) Sections 1, 14, 16, 17, 18, 19, 20, and 22
shall survive any such termination, and (c) if this Agreement is terminated as set forth in Section 11.20 of the Purchase
Agreement, the Purchase Agreement shall also be deemed terminated as of such date without further action on the part of any Person
(as defined in the Purchase Agreement).

 

    18

     

    

 

 

15.            Notices.
All notices and other communications required or permitted hereunder shall be in writing in English and given by delivery in person,
by electronic mail with confirmation of delivery, by overnight delivery by a nationally recognized private courier, or by U.S. mail
postage prepaid, certified mail. Any such notice or communication shall be deemed to have been received for
the purposes of this Agreement (a) in the case of personal delivery, on the date of such delivery if a Business Day or, if not
a Business Day, the next succeeding Business Day, (b) in the case of nationally-recognized private courier (including overnight
delivery by such courier), on the next Business Day after the date when sent, (c) in the case of email, on the date of such
delivery when receipt is confirmed, and (d) in the case of mailing by U.S. mail, on the fifth Business Day following that on
which the piece of mail containing such communication is deposited with the U.S. Postal Service. All notices shall be addressed as
set out below or to such other address as the Party to whom notice is to be given may have furnished to the other Parties in writing
in accordance with this Section 15:

 

(i)           if
to the Purchaser:

 

Eagle Pharmaceuticals, Inc. 

50 Tice Boulevard, Suite 315 

Woodcliff Lake, NJ 07677 

Attention: [***]

 

With a copy to (which copy shall not constitute notice):

 

Cooley LLP 

500 Boylston Street 

Boston, MA 02116 

Attention: Marc Recht and Miguel J. Vega 

Email: mrecht@cooley.com; mvega@cooley.com 

Fax No.: 617.937.2400

 

(ii)           if
to the Company:

 

Enalare Therapeutics Inc. 

161 Hodge Road 

Princeton, New Jersey 08540 

Attention: [***] 

Email: [***]

 

With a copy to (which copy shall not constitute notice):

 

Coviello Weber & Dahill LLP 

707 Westchester Avenue, Suite 300 

White Plains, NY 10604 

Attention: Paul R. Weber, Esq. 

Email: pweber@cwdlaw.com

 

(iii)            if
to the Securityholders, to the address, facsimile or email address set forth opposite his, her or its name on Schedule A and Schedule
B, as applicable.

 

    19 

     

    

 

16.            Successors
and Assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred or assigned,
in whole or in part, by operation of law or otherwise by any Party without the prior written consent of the other Parties.
Notwithstanding the foregoing, the Purchaser may assign this Agreement and its rights and obligations hereunder (a) to any
Affiliate of Purchaser (provided the Company receives reasonably satisfactory evidence that such Affiliate is able to meet its
obligations hereunder), or (B) to a successor to all or substantially all of the assets of the Purchaser (irrespective of the
nature of the transaction, whether by way of stock sale, asset sale or otherwise). In the event of any assignment in accordance with
the terms of this Agreement, the assignee shall specifically assume and be bound by the provisions of the Agreement by executing and
agreeing to an assumption agreement reasonably acceptable to the Purchaser and the Company. Any purported transfer or assignment
without such consent shall be void. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by, the Parties and their respective successors, transferees and
assigns.

 

17.            Further
Assurances. Each Party agrees to execute such further documents and instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intents of this Agreement.

 

18.            Expenses.
Except as expressly provided in this Agreement, each of the Purchaser and the Company will bear their own costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and accountants, in connection with this Agreement and the transactions
contemplated hereby. Each Securityholder may engage its own counsel, financial advisors and accountants, in connection with this Agreement
and the transactions contemplated hereby and if it does, it shall bear all such costs and expenses individually.

 

19.            No
Third-Party Beneficiaries. Except as otherwise provided in this Agreement, nothing in this Agreement is intended to, or will, create
any rights to any party other than the Parties.

 

20.            Governing
Law. This Agreement shall be governed in all respects by the internal laws of the State of Delaware, without regard to conflict of
law principles that would result in the application of any law other than the law of the State of Delaware.

 

21.          Jurisdiction;
Venue. With respect to any disputes arising out of or related to this Agreement, each Party irrevocably consents to the exclusive
jurisdiction of, and venue in, the Court of Chancery in the State of Delaware, agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such persons and waives, and covenants not to assert or plead, any objection which
such party might otherwise have to such jurisdiction, venue and process.

 

    20 

     

    

 

22.            Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

23.            Remedies;
Prevailing Party. Any Party having any rights under any provision of this Agreement will be entitled to enforce its rights under this
Agreement to recover damages and costs (including attorneys’ fees) caused by any breach of any provision of this Agreement and to
exercise all other rights existing in its favor. Each Party hereby acknowledges and agrees that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any Party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) to seek specific performance and/or other injunctive relief in order to enforce
or prevent any violations of the provisions of this Agreement.

 

[Signature page follows]

 

    21 

     

    

 

In Witness
Whereof, each of the parties has executed this Security Purchase Option Agreement as of the day and year first above written.

 

	 	SECURITYHOLDERS:

 

	 	[***]

 

[Signature
Page to Security Purchase Option Agreement]

 

     

     

    

 

In Witness
Whereof, each of the parties has executed this Security Purchase Option Agreement as of the day and year first above written.

 

	 	PURCHASER:

 

	 	Eagle Pharmaceuticals, Inc.

 

		By:	/s/ Scott Tarriff

	 	Name: Scott Tarriff
	 	Title: President & Chief Executive Officer

 

[Signature
Page to Security Purchase Option Agreement]

 

     

     

    

 

In Witness
Whereof, each of the parties has executed this Security Purchase Option Agreement as of the day and year first above written.

 

	 	COMPANY:

 

	 	Enalare Therapeutics Inc.

 

		By:	/s/ Herman Cukier

		Name:	Herman Cukier
		Title:	President & CEO

 

[Signature
Page to Security Purchase Option Agreement]

 

     

     

    

 

CERTAIN
INFORMATION CONTAINED IN THIS EXHIBIT, MARKED BY [***], HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE THE REGISTRANT HAS DETERMINED
THAT IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

 

Schedule A

 

Stockholders

 

	Name	Number of Shares of Common Stock Held	Contact Information
	[***]	[***]	[***]

 

     

     

    

 

Schedule B

 

Noteholders

 

	Name	Note Agreement	Balance	Number of Shares of Common Stock Held Following Conversion	Contact Information
	[***]	[***]	[***]	[***]	[***]

 

    2 

     

    

 

Schedule C

 

Optionholders

 

	Name	Number of Shares of Common Stock Underlying Options	Contact Information
	[***]	[***]	[***]

 

    3 

     

    

 

Schedule D

 

Warrantholders

 

	Name	Number of Shares of Common Stock Underlying Warrants	Contact Information
	[***]	[***]	[***]

 

    4 

     

    

 

Exhibit A

 

TERM SHEET

 

SUMMARY OF PRINCIPAL TERMS OF PROPOSED DEFINITIVE
TRANSACTION

 

The following is a summary
of the principal terms for the proposed acquisition of Enalare Therapeutics, Inc. (the “Transaction”). This
summary is not intended to, and does not, bind any party or create any legal rights or obligations among any parties. No party will be
obligated to consummate the Transaction unless and until all definitive agreements with respect thereto are negotiated, executed and delivered.

 

	Topic	Terms
	Parties	
    (1)     Eagle
    Pharmaceuticals, Inc., a Delaware corporation (“Parent”)

     

    (2)     A
    newly formed Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”) (in the event of a merger
    structure)

     

    (3)     At
    Parent’ option, Enalare Therapeutics Inc., a Delaware corporation (the “Company”)

     

    (4)   A
    representative, agent and attorney-in-fact (the “Securityholder Representative”) of the Company’s stockholders,
    optionholders and warrantholders (the “Company Securityholders”)

     

    (5)    In
    the event of a stock purchase, the holders of capital stock, options, warrants and other securities of the Company (the “Company
    Securityholders”)

     

	Transaction Structure	
    Parent would acquire the Company by
    means of either (at Parent’s election) (1) a statutory merger (the “Merger”), pursuant to which Merger
    Sub would merge with and into the Company and the Company would be the surviving corporation of such merger (the “Surviving
    Corporation”) or (2) a stock purchase transaction. To the extent possible, the Transaction will be structured as a
    simultaneous sign and close.

     

	Principal Definitive Agreement	The principal definitive agreement providing for the Transaction would be an Agreement and Plan of Merger (the “Definitive Agreement”) to be prepared by Parent. For the avoidance of doubt, this summary does not purport, and is not intended, to include an exhaustive list of all the terms that Parent may ultimately propose in the Definitive Agreement.

                                                                                 

	Other Transaction Agreements	
    Concurrently with the execution of the
    Definitive Agreement, certain other definitive agreements would be executed and delivered in connection with the Transaction, including:

     

    (1)    a
    restrictive covenant agreement, in form and substance reasonably acceptable to Parent, pursuant to which certain C-level executives or
    members of senior management that are also Company Securityholders to be identified by Parent would agree not to compete with the Company
    (Enalare Therapeutics Inc.) as the business is conducted at the time of the execution of the Definitive Agreement and not solicit or hire
    employees for the longer of (a) three years following the Closing (as defined below) and (b) one year after the termination
    of his/her employment, or disclose confidential information regarding, the Company (the “Restrictive Covenant Agreement”),
    with such agreement to be effective as of the Closing;

     

    (2)     Agreements
    terminating the outstanding options of the Company in the form agreed to by the Company, Parent and the Company Securityholders in the
    Security Purchase Option Agreement, dated August [●], 2022 (the “Call Option Agreement”);

     

    (3)     Agreements
    terminating the outstanding warrants of the Company in the form agreed to in the Call Option Agreement; and

     

    (4)     A
    customary joinder agreement to the Merger Agreement, executed by Company’s securityholders.

     

 

    5 

     

    

 

	Execution of Definitive Agreement	The parties shall use commercially reasonable efforts to enter into the Definitive Agreement to effect the Transaction within [***] days of Parent delivering the Call Exercise Notice (as defined in the Call Option Agreement) or such other date as Parent and the Company mutually agree. The closing of the Definitive Agreement (the “Closing”) shall be as set forth in the Definitive Agreement and the Definitive Agreement shall contain customary closing conditions, including the receipt of any clearances necessary with applicable anti-trust laws or other regulatory bodies.

                                                                                 

	Consideration Payable at Closing	
    At the Closing, Parent shall acquire
    all of the outstanding shares and terminate all other securities of the Company other than those owned by Parent for an amount equal to
    the greater of (the “Purchase Price”):

     

    (i) $100 million; or

     

    (ii) an amount equal to [***] (such
    final valuation amount, the “Valuation Amount”); provided further that, in no event shall the purchase price
    be greater than $175 million (the “Cap”).

     

    For avoidance of doubt, the Purchase
    Price would be paid for the Company shares owned by persons other than Parent and not prorated based on Parent’s existing ownership.

     

    At Closing, the Purchase Price shall
    (i) be increased the product of (A) [***] to (B) [***], (ii) be reduced by [***], (iii) be reduced by [***],
    and (iv) be subject to [***] (the “Closing Payment”). [***].

     

    The calculation of the Closing Payment
    shall be subject to a customary post-closing adjustment whereby Parent shall deliver to the Securityholder Representative Parent’s
    calculation of the Closing Payment and be allowed to recover from the Securityholders if it is determined that the Purchase Price at Closing
    was higher than the final Purchase Price (the “Purchase Price Offset”).

     

    Additionally, a portion of the Closing
    Payment in an amount equal to [***] shall be placed into a separate escrow account to serve as Parent’s remedy for certain indemnification
    obligations of the Company set forth in the Definitive Agreement (the “Indemnity Escrow”). A portion of the
    Closing Payment in an amount to be determined by Parent shall also be placed into a separate escrow account to serve as the first line
    of recovery for Parent in the event of a Purchase Price Offset (the “Purchase Price Escrow”) which amount shall
    be released from the Purchase Price Escrow within [***] days of the parties agreement (or as determined by the independent accounting
    firm) as to the final working capital.

     

    Finally, the Company Securityholders
    may place a portion of the Purchase Price in a separate account to be administered by the Company Securityholder Representative to cover
    the Company Securitholder Representative’s costs and expenses incurred in connection with its representation of the Company Securityholders
    (the “Expenses Fund”).

     

 

    6 

     

    

 

	Effects of the Transaction	
    If structured as a Merger, at the time
    the Merger becomes effective (the “Effective Time”), as a result of the Merger and without any action on the
    part of any of Parent, Merger Sub, the Company or any Company Securityholder:

     

    (1)    Outstanding
Shares of Merger Sub Common Stock. Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective
Time would be converted into and become one share of common stock of the Surviving Corporation;

     

    (2)    Treasury
Shares of the Company. Any shares of capital stock of the Company that are treasury shares as of immediately prior to the Effective
Time would be cancelled and cease to exist (“Cancelled Shares”);

     

    (3)    Outstanding
Shares of Company Common Stock. Each share of common stock of the Company issued and outstanding immediately prior to the Effective
Time (other than Cancelled Shares or dissenting shares) would be cancelled and converted into the right to receive, in cash, without
interest, the per share portion (determined on a fully diluted basis) of:

     

    (a)       the
    Closing Payment;

     

    (b)       any
    amount released from the Indemnity Escrow for payment to Company Securityholders;

     

    (c)      any
    amount released from the Purchase Price Escrow for payment to Company Securityholders; and

     

    (d)       any
    amount released from the Expense Fund for payment to Company Securityholders;

     

    in each case, subject to any required
    withholding taxes; and

     

    (4)    Company
Options and Warrants. Each vested option and warrant to purchase shares of common stock of the Company that is unexpired and unexercised
as of immediately prior to the Effective Time would automatically be converted into the right to receive for each share that is subject
to such option or warrant, in cash, without interest, the per share portion (determined on a fully diluted basis) of:

     

    (a)       the
    Closing Payment, less the per share exercise price of such option or warrant;

     

    (b)       any
    amount released from the Indemnity Escrow for payment to Company Securityholders;

     

    (c)       any
    amount released from the Purchase Price Escrow for payment to Company Securityholders; and

     

    (d)       any
    amount released from the Expense Fund for payment to Company Securityholders;

     

    in each case, subject to any required
    withholding taxes and subject to such holder delivering an executed option cancellation agreement or warrant cancellation agreement, as
    applicable. Any unvested options shall be cancelled for no consideration.

     

    In structured as a stock purchase, the
    payments in clauses (3) and (4) above will apply.

     

    Parent would have no obligation
to make any payment pursuant to the Definitive Agreement unless and until it first received from the Company or the Securityholder Representative
a schedule setting forth the portion thereof payable to each Company Securityholder and instructions for disbursement thereto (each,
a “Payment Schedule”). Parent would be entitled to rely on each Payment Schedule in making such payment without
investigation and would have no liability for any errors that may be contained in any Payment Schedule. 

     

 

    7 

     

    

 

	Release of Indemnity Escrow, Purchase Price Escrow and Expense Fund	
    Promptly following the date that is
    [***] months after the date of the Closing, any remaining balance of the Indemnity Escrow would be released for disbursement to the Company
    Securityholders; provided, however, that, if there are any indemnifications claims pending, the applicable portion of the
    Indemnity Escrow would not be so released until such claims are finally resolved and satisfied.

     

    If, pursuant to the post-Closing adjustment
    procedures with respect to the Closing Payment, it is determined that (1) the final Closing Payment equals or exceeds the estimated
    Closing Payment or (2) the estimated Closing Payment exceeds the final Closing Payment by an amount that is less than the Purchase
    Price Escrow, then either the full amount of the Purchase Price Escrow or the portion of the Purchase Price Escrow in excess of the amount
    by which the estimated Closing Payment exceeds the final Closing Payment, as applicable, would be released for disbursement to the Company
    Securityholders. If, pursuant to the post-Closing adjustment procedures with respect to the Closing Payment, it is determined that the
    estimated Closing Payment exceeds the final Closing Payment by an amount that is greater than the Purchase Price Escrow, Parent may recover
    from the Company Securityholders an amount equal to such shortfall.

     

    As soon as reasonably determined by
    the Securityholder Representative that the Expense Fund is no longer required to be held by the Securityholder Representative, the remaining
    portion of the Expense Fund would be released for disbursement to the Company Securityholders.

     

	Representations and Warranties of the Company	
    The Definitive Agreement will contain
    customary representations and warranties. The following representations and warranties will be considered “Fundamental Representations”
    for puposes of the Definitive Agreement: [***].[***]. The representations and warranties in the Definitive Agreement that are not [***]
    or [***] are referred to herein as the “Standard R&Ws.”

     

    [***]

     

 

    8 

     

    

 

	Indemnification	
    Survival: The representations,
    warranties, covenants and agreements contained in the Definitive Agreement would survive the Closing as follows:

     

    (1)     [***];

     

    (2)     [***];

     

    (3)     [***];
    and

     

    (4)     [***].

     

    Indemnification Provisions:

     

    (1) Each Company
    Securityholder would, severally but not jointly, indemnify Parent, Merger Sub, the Surviving Corporation (if applicable) and each of
    their respective affiliates and representatives (the “Parent Indemnitees”) from and against such Company
    Securityholder’s pro rata share of any losses that such Parent Indemnitee directly or indirectly incurs related to:

     

    (a)       [***];

     

    (b)       [***];

     

    (c)       [***];

     

    (d)       [***];

     

    (e)       [***];
    or

     

    (f)       [***].

     

    For the avoidance of doubt, each party
    subject to a Restrictive Covenant Agreement shall be liable for its own breaches thereof and in no event shall any Company Securityholder
    (other than the Company Securityholder that is party ot the Restictive Covenant Agreement) be liable for such party’s breaches.

     

    (2) Parent would indemnify Parent
    the Company Securityholders and their respective affiliates and representatives (each, a “CS Indemnitee” the
    “CS Indemnitees”) from and against any losses that a CS Indemnitee directly or indirectly incurs related to:

     

    (a)       [***];
    or

     

    (b)       [***].

     

    Order of Recovery:

     

    (1)       Parent
    Indemnities would seek recovery for indemnification claims as follows:

     

    (a)       [***];

     

    (b)       [***];
    and

     

    (c)       [***].

     

    (2)     [***].

     

    (3)     [***].

     

    (4)     [***].

     

 

    9 

     

    

 

	 	Other Indemnification Matters:

                                                                                 

                                                                                For purposes of indemnification, all materiality qualifiers contained in the Company’s representations and warranties would be disregarded, both for purposes of determining whether true and correct and for purposes of calculating losses.

                                                                                 

                                                                                [***];

                                                                                 

                                                                                [***].

                                                                                 

                                                                                An indemnified party shall take all
    reasonable steps to mitigate any loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does,
    give rise thereto; provided that no indemnified party shall be obligated to make a claim, commence litigation or initiate a dispute against
    a third party that is a customer or vendor of such indemnified party.

                                                                                 

                                                                                NO PARTY WILL BE LIABLE TO ANY OTHER
    PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES SUFFERED BY THE OTHER PARTY (INCLUDING WITHOUT LIMITATION DAMAGES
    FOR HARM TO BUSINESS, LOST REVENUES, LOST SAVINGS, OR LOST PROFITS SUFFERED BY THE OTHER PARTY), REGARDLESS OF THE FORM OF ACTION,
    WHETHER IN CONTRACT, WARRANTY, STRICT LIABILITY, OR TORT, INCLUDING WITHOUT LIMITATION NEGLIGENCE OF ANY KIND WHETHER ACTIVE OR PASSIVE,
    AND REGARDLESS OF WHETHER A PARTY KNEW OF THE POSSIBILITY THAT SUCH DAMAGES COULD RESULT. THE PARTIES SHALL RELEASE THE OTHER PARTIES
    (AND EACH INDEMNIFIED PARTY) FROM ANY SUCH CLAIM.

                                                                                 

                                                                                All indemnification payments made under
    this Agreement shall be treated by the parties as an adjustment to the Purchase Price for tax purposes, unless otherwise required by law.

                                                                                 

                                                                                The parties agree that their sole and
    exclusive remedy with respect to any and all claims for any breach of any representation, warranty, covenant, agreement or obligation
    set in the Definitive Agreement or otherwise relating to the subject matter of the Definitive Agreement, shall be pursuant to the indemnification
    provisions set forth in the Definitive Agreement.

                                                                                 

                                                                                For the avoidance of doubt, the foregoing
    does not purport, and is not intended, to be an exhaustive list of all the changes that Parent may ultimately propose to the indemnification
    provisions in the Definitive Agreement.

                                                                                 

 

    10 

     

    

 

	Expenses	
    All costs and expenses incurred in connection
    with the Definitive Agreement and the transactions contemplated thereby (including fees and disbursements of counsel, financial advisors
    and accountants) that are not otherwise paid prior to the closing date shall be borne by the party which incurs such cost or expense;
    provided that, all fees incurred in connection with any (a) filings under the HSR Act, (b) any other regualtory filing
    and (c) the premium for the R&W Policy shall be borne equally by Parent, on the one hand, and by the Company, on the other hand.
    Any tail insurance premiums shall be borne by the Company.

     

	Specific Performance	
    Each party would be entitled to specific
    performance of the terms of the Definitive Agreement and immediate injunctive relief, without the necessity of proving the inadequacy
    of money damages as a remedy, in addition to any other remedy at law or in equity.

     

	Governing Law; Exclusive Forum	
    The Definitive Agreement would be interpreted,
    construed and governed in accordance with the laws of the State of Delaware without regard to the conflicts of law principles thereof,
    and the parties would irrevocably submit to the jurisdiction of state and federal courts in the State of Delaware in respect of the interpretation
    and enforcement of the Definitive Agreement.

     

 

    11 

     

    

 

Exhibit B

 

CALL EXERCISE NOTICE

 

    12 

     

    

 

Exhibit C

 

Direct Acquisition Notice

 

    13 

     

    

 

Exhibit D

 

Stock Power

 

    14 

     

    

 

Exhibit E

 

Option Termination Agreement

 

    15 

     

    

 

Exhibit F

 

Warrant Termination Agreement

 

    16Document

Exhibit 10.1

SLEEP NUMBER CORPORATION
EXECUTIVE SEVERANCE PAY PLAN

Amended and Restated Effective May 11, 2022

SLEEP NUMBER CORPORATION
EXECUTIVE SEVERANCE PAY PLAN
TABLE OF CONTENTS
						
	ARTICLE 1 Name and Purpose
	1

	ARTICLE 2 Definitions
	2

	2.1    Administrator
	2

	2.2    Affiliate..
	2

	2.3    Base Pay
	2

	2.4    Cause
	2

	2.5    Change in Control.
	3

	2.6    Change in Control Base Amount.
	3

	2.7    Change in Control Protection Period
	3

	2.8    COBRA Reimbursement
	3

	2.9    Code
	3

	2.10    Committee
	3

	2.11    Company
	3

	2.12    Employee
	3

	2.13    Excluded Employee
	4

	2.14    Good Reason.
	4

	2.15    Incentive Plan Target
	4

	2.16    Involuntary Termination of Employment
	5

	2.17    Outplacement Services
	5

	2.18    Participant.
	5

	2.19    Participating Employer
	5

	2.20    Plan
	5

	2.21    Premium Reimbursement Period
	5

	2.22    Pro-Rata Incentive Bonus
	5

	2.23    Qualified Employee
	5

	2.24    Qualified Employee Category..
	6

	2.25    Regular Base Amount
	6

	2.26    Release
	6

	2.27    Restricted Activities
	6

	2.28    Severance Pay
	6

	2.29    Termination of Employment.
	7

	ARTICLE 3 Entitlement to Severance Pay
	8

	3.1    Eligible Terminations.
	8

	3.2    Terminations Not Covered.
	8

	3.3    Release Required
	8

	3.4    Restricted Activities
	8

i

						
	3.5    Return of Property
	9

	ARTICLE 4 Severance Pay Benefits	10

	4.1    Regular Base Amount
	10

	4.2    Change in Control Base Amount
	11

	4.3    COBRA Reimbursement
	11

	4.4    Reductions
	12

	4.5    Period of Payment
	12

	4.6    Outplacement Services
	13

	4.7    Termination or Repayment of Severance Pay Benefits
	14

	4.8    Death of Participant
	14

	4.9    Limitation on Change in Control Payments.
	14

	ARTICLE 5 Administration
	16

	5.1    Administrator
	16

	5.2    Administrator’s Discretion
	16

	ARTICLE 6 Amendment and Termination of Plan
	17

	6.1    Right to Amend or Terminate the Plan
	17

	6.2    Change in Control
	17

	ARTICLE 7 Miscellaneous Provisions
	18

	7.1    Participation by Affiliate
	18

	7.2    No Benefit Accrues
	18

	7.3    Indemnification
	18

	7.4    Specialist’s Assistance
	18

	7.5    Benefits Claim Procedure
	18

	7.6    Disputes
	19

	7.7    Company Action.
	19

	7.8    Status of Plan
	19

	7.9    No Assignment of Benefits
	20

	7.10    Withholding, Clawback, and Offsets
	20

	7.11    Other Benefits
	20

	7.12    No Employment Rights Created
	20

	7.13    Successors
	20

ii

SLEEP NUMBER CORPORATION
EXECUTIVE SEVERANCE PAY PLAN
Pursuant to the retained power of amendment contained in Section 6.1 of the Select Comfort Corporation Executive Severance Pay Plan (now titled the “Sleep Number Corporation Executive Severance Plan,” as previously amended and restated as of December 12, 2008 and as subsequently amended, effective June 12, 2017) (the “Plan”), the Plan is amended and restated pursuant to this instrument, effective May 11, 2022.  The provisions of this instrument will apply to any Qualified Employee who terminates employment on or after May 11, 2022.
ARTICLE 1
Name and Purpose
The name of this Plan is the “Sleep Number Corporation Executive Severance Pay Plan.”  Its purpose is to provide severance benefits to certain Qualified Employees whose employment is involuntarily terminated without Cause. Severance Pay is in addition to regular earned pay and benefits for accrued paid time off, if any, payable to Qualified Employees upon separation from service.

ARTICLE 2
1

Definitions
The terms listed in this Article 2 shall have the meanings given below.
2.1    Administrator. The “Administrator” is the person designated under the Plan to perform administrative duties on behalf of the Company or, as the context may require, the individual to whom specific administrative duties have been delegated.
2.2    Affiliate. An “Affiliate” is the Company or another member of a controlled group of corporations, within the meaning of Code Section 414(b) or any trade or business that is under common control with the Company, within the meaning of Code Section 414(c).
2.3    Base Pay. “Base Pay” means the Qualified Employee’s annualized base salary (and excludes any commissions, incentive pay, bonus, allowances, or other addition to pay) in effect immediately prior to: 
(A)    his or her Termination of Employment;
(B)    the first day of a Change in Control Protection Period; or 
(C)    the Change in Control
whichever of the above is the highest rate of Base Pay.
Base Pay includes any amounts by which base salary is voluntarily reduced under a Code Section 125 cafeteria plan, Code Section 401(k) cash or deferred arrangement or the Sleep Number Executive Deferral Plan.
2.4    Cause. “Cause” means any reason for which a Qualified Employee may be subject to discipline under the Company’s or other Affiliate’s policies, practices and procedures including, but not limited to, the following: 
(A)    dishonesty, fraud, misrepresentation, embezzlement, misconduct, or deliberate injury or attempted injury, in each case related to the Company or any other Affiliate, 
(B)    commission of a felony crime, or commission of any criminal or unlawful activity of any nature or degree in the course of or in relation to Employee's employment, 
(C)    failure to perform the duties of the Employee’s employment (other than failure resulting from the Employee’s incapacity due to physical or mental illness), 
(D)    any material breach of the Employee Inventions, Confidentiality, Non-Compete and Mutual Arbitration Agreement or any other employment, non-compete, non-solicitation or confidentiality agreement entered into with the Company or any other Affiliate, or 
(E)    the Participant's engagement in conduct that brings or is reasonably likely to bring the Company negative publicity or into public disgrace, embarrassment, or disrepute,
(F)    violation of any Company written policy or the Code of Business Conduct. 

2

2.5    Change in Control. 
(A)    A "Change in Control" of the Company under this Plan means a “Change in Control” as defined under the Sleep Number Corporation 2020 Equity Incentive Plan. 
(B)    Notwithstanding the foregoing, to the extent there is a change in the amount or time of payment under this Plan upon a Change in Control, then to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event considered a “Change in Control” under the Sleep Number Corporation 2020 Equity Incentive Plan with respect to such amount (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such amount under this Plan if such transaction also constitutes a “change in control event” (within the meaning of Section 409A of the Code).  Consistent with the terms of this Section 2.5 and solely for purposes of this Plan, the Administrator shall have full and final authority to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto.
2.6    Change in Control Base Amount. The “Change in Control Base Amount” is the Severance Pay benefit described in Section 4.2.
2.7    Change in Control Protection Period. A “Change in Control Protection Period” means the period:
(A)    that begins on the later of (i) six months prior to the Change in Control event and (ii) the date on which the Company or any of its Affiliates began discussions with a third party about the transaction that resulted in the Change in Control and
(B)    that ends on the date that is twenty-four (24) months after the Change in Control event.
2.8    COBRA Reimbursement. The “COBRA Reimbursement” is the Severance Pay benefit described in Section 4.3.
2.9    Code. The “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes any amendment of or successor to that provision.
2.10    Committee. The “Committee” means the “Committee” as defined under the Sleep Number Corporation 2020 Equity Incentive Plan.
2.11    Company. The “Company” is Sleep Number Corporation or its successor.
2.12    Employee. An “Employee” is any individual who performs services for a Participating Employer and is classified by the Participating Employer as a common-law employee. No reclassification of an individual as a common-law employee of a Participating Employer will be given retroactive effect for any purpose under this Plan.
2.13    Excluded Employee. An “Excluded Employee” is an Employee who:
(A)    resides in the United States but is not a United States citizen, unless he or she is classified as a permanent resident of the United States; 
(B)    is classified by the Participating Employer as a part-time Employee;
(C)    is classified by the Participating Employer as a temporary Employee; or
(D)    is covered by a collective bargaining agreement that does not specifically provide for participation in this Plan.
2.14    Good Reason. 
(A)    “Good Reason” under this Plan any refusal to accept: 
3

(1)    a material diminution in the Participant’s base compensation, which for purposes of this Plan will mean a reduction of 10% or more in the Participant’s salary plus target bonus;
(2)    discontinuation of eligibility to participate in a material long-term cash or equity award or equity-based grant program (or in a comparable substitute program) in which other Participants at a comparable level are generally eligible to participate;
(3)    any material diminution of authority, duties or responsibilities, including any change in the authority, duties or responsibilities of the Participant that is inconsistent in any material and adverse respect with the Participant’s then-current position(s), authority, duties and responsibilities with the Company or any Subsidiary; provided, however, that “Good Reason” will not be deemed to exist pursuant to this clause (c) solely on account of the Company no longer being a publicly traded entity or solely on account of a change in the reporting relationship of the Participant; or
(4)    a material change in the geographic location at which the Company requires the Participant to be based as compared to the location where the Participant was based immediately prior to the change, which for purposes of this Plan will mean:
(a)    a relocation that results in an increase in the commuting distance from the Participant’s principal residence to his or her new job location of more than 50 miles, or 
(b)    a relocation that requires the Participant to relocate his or her principal residence;
provided, the event or change constituting Good Reason under this Plan must constitute “good reason” as determined under Section 409A of the Code and consistent with the terms of this Section 2.14, and solely for purposes of this Plan, the Administrator shall have full and final authority to determine conclusively whether Good Reason has occurred under this Plan. 
(B)    Notwithstanding the foregoing, the Qualified Employee will not be deemed to have resigned for Good Reason unless the Qualified Employee:
(1)    gives written notice to the Company of an event or change constituting Good Reason, and his or her intent to terminate employment with the Company on account of such Good Reason, within ninety (90) days after the date of the occurrence of any event or change that the Qualified Employee knows or should reasonably have known to constitute Good Reason and
(2)    actually has a Termination of Employment no later than six (6) months after the end of the thirty (30) day cure period referenced in paragraph (C) below. 
(C)    If the Company remedies any event or change that constitutes Good Reason, within thirty (30) days of the notice from the Qualified Employee (pursuant to paragraph (B)(1) above), such event or change will not constitute Good Reason under this Plan. 
(D)    Good Reason will not be deemed to exist as a result of any of the actions stated in clause 2.14(A) above to the extent that such actions are in connection with an across-the-board change or termination that equally affects at least ninety-five percent (95%) of all Participants.  
(E)    The Qualified Employee’s continued employment (prior to the deadline stated in paragraph (B)(2) above) does not constitute consent to, or waiver of any rights arising in connection with, any circumstances constituting Good Reason. 
(F)    The Qualified Employee’s Termination of Employment for Good Reason as defined above will constitute Good Reason for all purposes of this Plan notwithstanding that the Qualified 
4

Employee may also thereby be deemed to have retired under any applicable benefit plan, policy, or practice of the Company.
2.15    Incentive Plan Target. The Qualified Employee’s annual incentive target under the Sleep Number Corporation Annual Incentive Plan (“AIP”) expressed as a percent of eligible earnings, multiplied by the Qualified Employee’s annualized Base Pay, as that is determined immediately prior to: 
(A)    his or her Termination of Employment;
(B)    the first day of a Change in Control Protection Period; or 
(C)    the Change in Control
whichever of the above that is the highest is the Incentive Plan Target.
2.16    Involuntary Termination of Employment. An “Involuntary Termination of Employment” means a Qualified Employee’s Termination of Employment by (A) a Participating Employer for any reason other than “Cause” or (B) resignation by a Qualified Employee for “Good Reason.” Qualified Employee’s Termination of Employment due to death, disability, or resignation other than for “Good Reason” is not considered “Involuntary Termination of Employment.”
2.17    Outplacement Services. “Outplacement Services” are the Severance Pay benefits described in Section 4.6
2.18    Participant. A “Participant” is a former Qualified Employee who is entitled to Severance Pay benefits under this Plan.
2.19    Participating Employer. A “Participating Employer” is the Company and any other U.S. Affiliate that has adopted the Plan, or all of them collectively, as the context requires, and their respective successors. An Affiliate will cease to be a Participating Employer upon a termination of the Plan as to its Employees or upon its ceasing to be an Affiliate. The Participating Employer with respect to any individual is the Affiliate that is responsible for paying the individual’s wages or salary.
2.20    Plan. The “Plan” is the Sleep Number Corporation Executive Severance Pay Plan set forth in this instrument as it may be amended from time to time.
2.21    Premium Reimbursement Period. The “Premium Reimbursement Period” is the period of time during which the Participant is entitled to receive cash reimbursement payments for COBRA continuation coverage, as described in Section 4.3.
2.22    Pro-Rata Incentive Bonus. A Participant’s “Pro-Rata Incentive Bonus” is an amount equal to the product of (i) the average of the annual performance bonuses that the Participant actually earned under the Sleep Number Corporation Annual Incentive Plan (“AIP”) for the three (3) most recent fiscal years preceding the fiscal year in which the Participant’s Termination of Employment occurs and (ii) a fraction, the numerator of which is the number of calendar days the Participant was employed by the Participating Employer during the fiscal year in which the Termination of Employment occurs and the denominator of which is the number of calendar days in such fiscal year.  
2.23    Qualified Employee. A “Qualified Employee” is an Employee who -
(A)    is paid under a U.S. domestic payroll of the Participating Employer;
(B)    is classified by the Participating Employer in Qualified Employee Category as defined in Section 4; and
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(C)    is not an Excluded Employee.
2.24    Qualified Employee Category. A “Qualified Employee Category” is the employment classification of a Qualified Employee as determined by the Participating Employer in its sole discretion.
2.25    Regular Base Amount. The “Regular Base Amount” is the Severance Pay benefit described in Section 4.1.
2.26    Release. A “Release” is a written instrument signed by the Qualified Employee, under which the Qualified Employee releases all Affiliates, and the directors, officers, and employees of each of them, all employee benefit plans and all employee benefit plan fiduciaries from any and all claims the Qualified Employee may have against any of them.  The Release will waive all claims the Qualified Employee may have under the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974 (other than benefits payable following Termination of Employment), and such other statutes and rules of law as the Company may deem advisable.
2.27    Restricted Activities. In addition to compliance with all the other terms of this Plan, in order to be eligible to receive (and not required to repay) the Change in Control Base Amount Severance Pay benefit, the Qualified Employee or Participant may not engage in any of the following “Restricted Activities” for a period of two (2) years after the Qualified Employee’s Termination of Employment.  The term “Restricted Activities” means the Qualified Employee will not, directly, or indirectly, alone or in any capacity with another person or entity:
(A)    engage in any commercial activity as described above that competes with the Company’s or any other Affiliate’s business as the Company or Affiliate has conducted it during the five years before the Qualified Employee's employment with the Participating Employer ends, within any state in the United States or within any country in which the Company or Affiliate directly or indirectly markets or services products or provides services;
(B)    interfere or attempt to interfere with the Company’s or any other Affiliate’s relationships with any of its current or prospective customers or vendors, by soliciting competing business from or having any competitive business-related contact with the customer or vendor or otherwise; or
(C)    employ, attempt to employ or otherwise contract for services with any person or entity who is then employed or engaged by the Company or any other Affiliate (whether as an employee or an independent contractor) on behalf of the Qualified Employee or any other person or entity, or take any action to induce any person or entity then employed or engaged by the Company or any other Affiliate (whether as an employee or independent contractor) to terminate their employment or engagement with the Company or any other Affiliate.
2.28    Severance Pay. “Severance Pay” means the benefits provided under the terms of this Plan. As described in Section 4, and subject to all the terms of this Plan, Severance Pay benefits may include the (a) Regular Base Amount, (b) Change in Control Base Amount, (c) COBRA Reimbursement and (d) Outplacement Services.
2.29    Termination of Employment. “Termination of Employment” means a termination of the Qualified Employee’s employment relationship (both as an employee and independent contractor) with the Company and all Affiliates or such other change in the Qualified Employee’s employment relationship with the Company and all Affiliates that would be considered a “separation from service” under Section 409A of the Code. The Qualified Employee’s employment relationship will be treated as remaining intact while the Qualified Employee is on a military leave, a sick leave or other bona fide leave of absence (pursuant to 
6

which there is a reasonable expectation that the Qualified Employee will return to perform services for the Company or an Affiliate) but only if the period of such leave does not exceed six (6) months, or if longer, so long as the Qualified Employee retains a right to reemployment by the Company or an Affiliate under applicable statute or by contract, provided, however, where the Qualified Employee’s leave is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months and such impairment causes the Qualified Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a twenty-nine (29) month period of absence may be substituted for such six (6) month period of absence.  In all cases, the Qualified Employee’s Termination of Employment must constitute a “separation from service” under Section 409A of the Code and any “separation from service” under Section 409A of the Code will be treated as a Termination of Employment.
ARTICLE 3
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Entitlement to Severance Pay
3.1    Eligible Terminations. Severance Pay will be paid, subject to the other provisions of this Plan, only to a Qualified Employee subject to an Involuntary Termination of Employment by a Participating Employer.
3.2    Terminations Not Covered. No Severance Pay will be paid to any person upon commencement of a leave of absence, including military service leave, or to any person whose employment is terminated by:
(A)    his or her resignation (other than Involuntary Termination of Employment for Good Reason), retirement or death;
(B)    discharge for Cause;
(C)    failure to be reinstated following a leave of absence; or
(D)    refusal to accept a new job position with a Participating Employer, a transfer to a new work location or a reduction in wages or salary, other than such events that would constitute Good Reason under this Plan.
3.3    Release Required. 
(A)    Notwithstanding any other provision in this Plan, as a condition to becoming a Participant in this Plan who is entitled to receive Severance Pay, the Qualified Employee must timely execute and deliver to the Administrator, and not subsequently revoke, a Release of claims in the form provided by the Company within fifty (50) days of the date of the Qualified Employee’s Termination of Employment. The Qualified Employee will forfeit any right to Severance Pay if the Qualified Employee fails to comply with the requirements of the preceding sentence or is in violation of the Employee Inventions, Confidentiality, Non-Compete and Mutual Arbitration Agreement or any other employment, non-compete, non-solicitation or confidentiality agreement with the Company or any Affiliate. If the aggregate period during which the Qualified Employee is entitled to consider and/or revoke the Release spans two (2) calendar years, no Severance Pay will be paid prior to the beginning of the second such calendar year, and any payments otherwise payable prior thereto (if any) will instead be paid on the first regularly scheduled Company payroll date occurring in such second calendar year.
(B)    The requirement that the Qualified Employee not engage in any Restricted Activities in order to receive (and not be required to repay) the Change in Control Base Amount Severance Pay benefit (if any) does not prevent the Qualified Employee from seeking employment during such two-year period so long as such employment commences after the expiration of such two-year period and does not require, induce or result in the disclosure of any trade secrets or other confidential or proprietary information of the Company or any other Affiliate.  In order to receive the Change in Control Base Amount Severance Pay benefit (if any is owed), in the Release the Qualified Employee must acknowledge and agree that complying with the Restricted Activities restrictions will not prevent the Qualified Employee from earning a living after his or her Termination of Employment.
3.4    Restricted Activities. As a condition to being a Participant entitled to receive Change in Control Base Amount Severance Pay benefits under this Plan, a Qualified Employee must not engage in any Restricted Activities or otherwise fail to comply with the provisions of this Plan including, but not limited to, Section 4.7.  Pursuant to Section 4.7, a Participant who has received Change in Control Base Amount Severance Pay benefits under this Plan may be required to repay the Company or other Affiliate for such amounts if the Administrator determines that the Participant has engaged in Restricted Activities or the Participant otherwise fails to comply with the provisions of Section 4.7.
3.5    Return of Property. No Severance Pay will be paid to a Participant prior to the date on which the Participant returns to his or her employer all property of the Company and any Affiliate he or she has in 
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his or her possession or control including, but not limited to, employee identification cards, credit cards, phone cards, vehicles, equipment, documents and electronic storage media.

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ARTICLE 4
Severance Pay Benefits
4.1    Regular Base Amount. Subject to the other provisions of this Plan, a Participant in the respective Qualified Employee Category will receive a cash Regular Base Amount Severance Pay benefit in the amount determined from the following table.
						
	Qualified Employee Category	Regular Base Amount - Severance Pay
	Tier I -- CEO	An amount equal to: 
(a)  two times - 
(i)    annual Base Pay and
(ii)    annual Incentive Plan Target (in effect as of the date of Termination of Employment) 
plus 
(b)  Pro-Rata Incentive Bonus  

	Tier II – Executive Vice Presidents (EVPs) or Senior Vice Presidents (SVP’s) who are executive officers of the Company	An amount equal to: 
(a)  one times - 
(i)  annual Base Pay and
(ii)    annual incentive plan target (in effect as of the date of Termination of Employment) 
plus 
(b) Pro-Rata Incentive Bonus 

	Tier III – Senior Vice Presidents (SVPs) or Vice Presidents (VPs)	An amount equal to: 
(a)  fifty percent of - 
(i)    annual Base Pay and
(ii)    annual incentive plan target (in effect as of the date of Termination of Employment)
plus 
(b) Pro-Rata Incentive Bonus  

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4.2    Change in Control Base Amount. In addition to receiving the Regular Base Amount described in Section 4.1, if the Participant’s Termination of Employment occurs during a Change in Control Protection Period and only if such Change in Control is consummated, then, subject to the other provisions of this Plan, the Participant in the respective Qualified Employee Category (Tiers 1 and II) will receive a cash Change in Control Base Amount Severance Pay benefit determined from the following table.
						
	Qualified Employee Category	Change in Control Base Amount - Severance Pay
	Tier I -- CEO	An amount equal to: 
 one times - 
(i)    annual Base Pay and
(ii)    annual incentive plan target (in effect as of the date of Termination of Employment)

	Tier II – Executive Vice Presidents (EVPs) or Senior Vice Presidents (SVP’s) who are executive officers of the Company	An amount equal to: 
one times - 
(i)    annual Base Pay and
(ii)    annual incentive plan target (in effect as of the date of Termination of Employment)

	Tier III – Senior Vice Presidents (SVPs) or Vice Presidents (VPs)	[None - Change in Control Base Amount Severance Pay benefits do not apply to Tier III]

4.3    COBRA Reimbursement. Subject to the other provisions of this Plan, if the Participant timely elects continued coverage (which may include coverage for the Participant, Participant’s spouse and/or Participant’s other eligible dependents) under the Participating Employer’s group medical plan and/or group dental plan pursuant to Section 4980B of the Code (“COBRA”), in accordance with ordinary plan practices and provides appropriate documentation of such payment as requested by the Administrator, the Participating Employer will reimburse the Participant each month during the Premium Reimbursement Period an amount equal to the difference between the amount the Participant pays for such COBRA continuation coverage each such month and the amount paid by a full-time active employee of the Participating Employer each such month for the same level of coverage elected by the Participant.  Any such reimbursement or payment will be made on or before the tenth (10th) day of the calendar month following the calendar month in which any COBRA continuation coverage payment was incurred. For purposes of this Section 4.3, the Premium Reimbursement Period is the period that begins on the date of Termination of Employment and ends on the earlier of: 
(A)    the last date of the Premium Reimbursement Period that applies to the Participant based on his or her Qualified Employee Category in the table below;
(B)    the date on which the Participant’s eligibility for COBRA continuation coverage under the Company’s group medical or group dental plan ends or the Participant chooses to stop their COBRA continuation coverage; or 
(C)    the date on which the Participant becomes eligible to participate in another group medical plan (that provides “major medical” coverage) or group dental plan, as the case may be, because of reemployment or otherwise, whether or not the Participant elects to participate in such plan. 
Other than the Premium Reimbursement Period payments described in this Section 4.3, the Participant’s coverage under any Participating Employer employee benefit plan is subject to the terms of such employee benefit plan and applicable law. 
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	Qualified Employee Category	Premium Reimbursement Period
	Tier I	Two Years after the date of Termination of Employment
	Tier II	One Year after the date of Termination of Employment
	Tier III	Six months after the date of Termination of Employment

4.4    Reductions. Notwithstanding the foregoing provisions, the total amount of Severance Pay (Regular Base Amount, Change in Control Base Amount, COBRA Reimbursement and Outplacement Services) to which a Participant would otherwise be entitled under this Plan will be reduced by each of the following:
(A)    the full amount of any severance, separation or similar types of payments the Company or any other Affiliate is required to make to the Participant on account of the termination of his or her employment under any individual severance, separation or employment agreement, any other severance plan or pursuant to the Worker Adjustment and Retraining Notification Act, 21 U.S.C. §2101 et seq. (or a similar law of any state);
(B)    the full amount of any indebtedness of the Participant to the Company or any other Affiliate including, but not limited to, unearned advances, credit card balances and paid time off in excess of time accrued; and 
(C)    with respect to any Participant who terminated employment with the Company or an Affiliate and is rehired by the Company or any other Affiliate, the full amount of Severance Pay paid to the Participant under this Plan or any individual severance, separation or employment agreement or pursuant to the Worker Adjustment and Retraining Notification Act, 21 U.S.C. §2101 et seq. (or a similar law of any state) within the two year period following such previous Termination of Employment.  
4.5    Period of Payment. 
(A)        
(1)    With respect to a Qualified Employee who is classified by the Participating Employer as Tier I or II, the Regular Base Amount Severance Pay benefit pursuant to Section 4.1 and, if applicable, the Change in Control Base Amount Severance Pay benefit pursuant to Section 4.2, will be paid in a single lump sum within a reasonable time following the Participant’s Termination of Employment (subject to the provisions of Section 3.3 relating to execution and delivery of a Release within the required time period) and in no event later than March 1st of the calendar year following the calendar year during which such Termination of Employment occurs; provided,  if the Participant’s Termination of Employment is within a Change in Control Protection Period but before the Closing of the Change in  Control, payment of the Change in Control Base Amount Severance Pay benefit pursuant to Section 4.2 will be paid within thirty (30) days after the Closing of the Change in Control.   
(2)    With respect to a Qualified Employee who is classified by the Participating Employer as a Tier III, the Regular Base Amount Severance Pay benefit pursuant to Section 4.1 will be paid in substantially equal installments at regular payroll intervals beginning no later than forty-five (45) days after the Participant’s Termination of Employment (subject to the provisions of Section 3.3 relating to execution and delivery of a Release within the required time period); provided, that any portion of the Severance Pay benefit pursuant to Section 4.1 would exceed the limitations of the separation pay exception to Code Section 409A (as described in Treasury Regulation Section 1.409A-1(b)(9)) will be paid in a single lump sum within a reasonable time following the Participant’s Termination of Employment (subject to the provisions of Section 3.3 relating to execution and delivery of a Release within the required time period) and in no event 
12

later than March 1st of the calendar year following the calendar year during which such Termination of Employment occurs.
(B)    Payments of amounts under this Plan are intended to comply with one or more exemptions or exclusions under Section 409A of the Code and any final regulations and guidance promulgated thereunder (“Section 409A”), and to the extent Section 409A is applicable to any payments or benefits under this Plan, this Plan is intended to comply with Section 409A. This Plan shall be construed and administered in a manner consistent with such intentions. 
(C)    It is intended that the Severance Pay amounts under this Plan are excluded from Section 409A of the Code either as short-term deferrals under Treasury Regulation Section 1.409A-1(b)(4) or as payments under a separation pay plan as described in Treasury Regulation Section 1.409A-1(b)(9). 
(D)    Notwithstanding any other provision of this Plan if, at the time of the Qualified Employee’s Termination of Employment, the Qualified Employee is a Specified Employee (within the meaning of Section 409A of the Code) and the Company determines that paying any Severance Pay at the time or times indicated in this Plan would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code then, in addition to the conditions specified herein, no payment under this Plan will be made until the first day after the end of the six (6) month period following the date of the Qualified Employee’s Termination of Employment or, if earlier, upon the Qualified Employee’s death. If any such suspended payment is not made within ten (10) days of the end of such six (6) month period, the Company will pay the Qualified Employee interest, equal to the Applicable Federal Rate (“AFR”) determined under Section 1274(d) of the Code in effect for each month, from the date of Termination of Employment through the date of payment.
4.6    Outplacement Services. A Participant will be eligible to receive outplacement services through a provider selected by the Company and at the expense of the Company, subject to the limits set forth below and subject to all of the other terms and conditions of this Plan.  A Participant in Tier III will be eligible to receive up to nine (9) months of outplacement services at a cost to the Company of up to ten thousand dollars ($10,000); a Participant in Tier II will be eligible to receive up to twelve (12) months of outplacement services at a cost to the Company of up to twelve thousand and five hundred dollars ($12,500); and a Participant in Tier I will be eligible to receive outplacement services until obtaining a new role at a cost to the Company of up to eighteen thousand dollars ($18,000).  Eligibility for outplacement services under this Section 4.6 will terminate immediately upon the acceptance by the Participant of employment with another employer at a level of compensation and benefits reasonably comparable to the compensation and benefits that the Participant was entitled to immediately prior to the Participant’s Termination of Employment with the Company or any other Affiliate.
4.7    Termination or Repayment of Severance Pay Benefits. A Participant’s right to receive Severance Pay benefits terminates upon the occurrence of any of the following events.
(A)    The Participant becomes re-employed by the Company or any other Affiliate. Upon the date of reemployment no further payments of Severance Pay (Regular Base Amount, Change in Control Base Amount, COBRA Reimbursement and/or Outplacement Services) will be owed to the Participant.
(B)    The Participant’s Release is declared invalid or the Participant revokes (or attempts to revoke) the Release or commences or is part of a legal or administrative action against the Company, any of its Affiliates, or the directors, officers, or employees of any of them that is based on any claim waived under the Release. Upon the occurrence of any such event, the Participant shall, upon demand of the Administrator, repay to the Participating Employer the full amount of all Severance Pay benefits (Regular Base Amount, Change in Control Base Amount, COBRA Reimbursement and/or Outplacement Services) he or she received, to the extent such amount would not have been payable under this Plan if the Participant had not executed the Release.
(C)    The Chief Legal Risk Officer (or the office of the Company’s general counsel) informs the Administrator that the Participant is in violation of the Employee Inventions, Confidentiality, Non-Compete and Mutual Arbitration Agreement or any other employment, non-compete, non-solicitation, confidentiality, compensation, stock option or equity agreement with the Company or any other 
13

Affiliate. Upon the occurrence of any such violation, the Participant shall, upon demand of the Administrator, repay to the Participating Employer the full amount of all Severance Pay benefits (Regular Base Amount, Change in Control Base Amount, COBRA Reimbursement and/or Outplacement Services) he or she received pursuant to this Plan.
(D)    With respect only to the Change in Control Base Amount Severance Pay benefit, the Chief Legal Risk Officer (or the office of the Company’s general counsel) informs the Administrator that the Participant has engaged in any Restricted Activities. Upon the occurrence of any such violation, the Participant shall, upon demand of the Administrator, repay to the Participating Employer the full amount of Change in Control Base Amount Severance Pay benefits he or she received (if any) pursuant to this Plan.
4.8    Death of Participant. If a Participant dies prior to receiving all of the Severance Pay benefits to which he or she is entitled, any remaining payments will be made to the Participant’s estate.   If the Participant dies during the COBRA reimbursement period pursuant to Section 4.3, COBRA premium reimbursement payments still owed (if any) will continue to be paid to the Participant’s estate.
4.9    Limitation on Change in Control Payments.
(A)    If all or any portion of the Severance Pay benefits described herein are determined to be “payments” contingent upon a Change of Control within the meaning of Section 280G(b)(2) of the Code, together with any other “payments” that the Participant has the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member, then the “payments” to such Participant from all such sources will be reduced to the largest amount as will result in no portion of such “payments” being subject to the excise tax imposed by Section 4999 of the Code; provided, that such reduction will be made only if the aggregate amount of the payments after such reduction exceeds the difference between (1) the amount of such payments absent such reduction minus (ii) the aggregate amount of the excise tax imposed under Section 4999 of the Code attributable to any such excess parachute payments.   It is presumed that the payments will first be reduced in the order described in Section 17.5 of the Sleep Number Corporation 2020 Equity Incentive Plan and that Severance Pay benefits under this Plan will only be reduced as described herein to the extent that all “incentive payments” under the Sleep Number Corporation 2020 Equity Incentive Plan have first been reduced; provided, that any Participant for whom any excess payment reduction is required shall have the right to elect to first waive all or part of the Severance Pay benefits otherwise owed to the Participant under this Plan before application of the ordering rules set forth under the Sleep Number Corporation 2020 Equity Incentive Plan.
(B)    This paragraph applies only with respect to a Participant who is classified by the Participating Employer as a Tier I Qualified Employee (“Tier I Participant”). The determination of whether and the extent to which any payments must be reduced pursuant to paragraph (A) above, will be made by a national accounting firm selected (and paid for) by the Company. If the Tier I Participant disagrees with the Section 280G calculation performed by such national accounting firm, the Tier I Participant may submit a written request to the Company’s Board of Directors that a second calculation be completed by another national accounting firm selected by such Tier I Participant and the Company will pay for such second Section 280G calculation.  The determination of such second national accounting firm shall be binding, final and conclusive upon the Tier I Participant and the Company. 
(C)    This paragraph applies with respect to any Participant who is classified by the Participating Employer as a Tier III or Tier II Qualified Employee. The determination of whether and the extent to which any payments must be reduced pursuant to paragraph (A) above, will be made by a national accounting firm selected (and paid for) by the Company. If any such Participant disagrees with the Section 280G calculation performed by such national accounting firm, the Participant may submit a written request to the Company’s Board of Directors that a second calculation be completed by another national accounting firm mutually agreed upon by such Participant and the Company and the Company will pay for such second Section 280G calculation; provided, the Board of Directors in its sole discretion may grant or deny the Participant’s request for a second Section 280G calculation.  The determination of 
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such second national accounting firm (if any) shall be binding, final and conclusive upon the Participants and the Company.
ARTICLE 5
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Administration
5.1    Administrator. The Committee will be the Administrator of the Plan and will have overall responsibility for administration of the Plan. The Committee may delegate to the Chief Human Resources Officer of the Company or any other person to perform administrative duties on behalf of the Company and may revoke any such delegation at any time. Any delegation to a person who is not an Employee of an Affiliate will be in writing, and any delegation to an Employee of an Affiliate will terminate upon the termination of his or her employment. If the name of position of Chief Human Resources Officer of the Company changes or the duties of such position are transferred to another position, such other position will be substituted for the Chief Human Resources Officer of the Company in this provision. 
5.2    Administrator’s Discretion. The Administrator will have the discretionary power and authority to establish, modify or terminate Plan policies, rules, or procedures, to interpret, construe, apply and enforce the terms of the Plan or any such Plan rules, polices or procedures whenever he or she deems necessary in its administration. Such discretion will include, without limitation, the discretionary power and authority to (A) determine whether an individual is a Qualified Employee and their Qualified Employee Category, the amount of a Qualified Employee’s benefit and whether a Qualified Employee has satisfied applicable conditions or is subject to limitations and (B) remedy ambiguities, inconsistencies, omissions, and erroneous benefit calculations. All acts and decisions of the Administrator made in good faith are binding on all interested persons.

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ARTICLE 6
Amendment and Termination of Plan
6.1    Right to Amend or Terminate the Plan. Subject to Section 6.2, the Company reserves the right to amend or terminate this Plan at any time by a written instrument approved in advance by the Committee and signed by the Chief Legal Risk Officer and Chief Human Resources Officer of the Company. If the name of position of Chief Legal Risk Officer and/or Chief Human Resources Officer of the Company changes or the duties of such position are transferred to another position, such other position will be substituted for the Chief Legal Risk Officer or Chief Human Resources Officer of the Company in this provision. Subject to Section 6.2, the amendment or termination of the Plan shall be effective as of the date specified in such instrument and may apply to any Qualified Employee or Participant, except that no amendment will be effective to reduce the total amount of Severance Pay payable to a Participant whose employment with all Affiliates terminated before the date the amendment is adopted.  Any Employee whose employment terminates on or after the effective date of the termination of the Plan will be ineligible for Severance Pay.
6.2    Change in Control. Notwithstanding Section 6.1:
(A)    the Company (or on or following a Change in Control, the Company, or any successor) may not amend or terminate this Plan during a Change in Control Protection Period in any way that would adversely affect the rights of any Qualified Employee under the Plan without the written consent of such affected Qualified Employee and
(B)    any Severance Pay payable to any individual who is a Qualified Employee in this Plan as of the day immediately prior to the first day of the Change in Control Protection Period and whose employment with all Affiliates terminates at any time during the Change in Control Protection Period, will be no less than the Severance Pay such Qualified Employee would have been entitled to receive under this Plan if he or she had become entitled to Severance Pay upon an Involuntary Termination of Employment with the Company on the date of the Change in Control.
ARTICLE 7
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Miscellaneous Provisions
7.1    Participation by Affiliate. An Affiliate may, when authorized by its board of directors, adopt this Plan for the benefit of its Employees, subject to the approval of the Administrator. Upon adoption of this Plan, the Participating Employer is subject to the terms of this Plan, as amended by the Company. Subject to Section 6.2, any Participating Employer may terminate this Plan with respect to its Employees at any time when authorized by its board of directors.
7.2    No Benefit Accrues. No Employee of any Affiliate will accrue any right to benefits under this Plan before satisfying all of the requirements for Plan benefits in effect at the termination of his or her employment.  No Participant will accrue any right to continued benefits under this Plan unless he or she satisfies the conditions for eligibility as of the date each benefit installment becomes payable.
7.3    Indemnification. Each Affiliate will indemnify and hold harmless, to the extent permitted by law, each of its directors, officers and employees against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by or asserted against such person at any time by reason of such individual’s services at the request of the Affiliate in connection with the Plan, but only if such individual did not act dishonestly or in bad faith or in willful violation of the law, regulation or Company by-law under which such liability, loss, cost or expense arises.  An Affiliate has the right, but not the obligation, to select counsel and control the defense and settlement of any action for which an individual may be entitled to indemnification under this provision.
7.4    Specialist’s Assistance. The Administrator may retain such actuarial, accounting, legal, clerical, and other services as may reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services.  All costs of administering the Plan will be paid by the Company.
7.5    Benefits Claim Procedure. The claim and appeal review procedures set forth below will apply to this Plan.
(A)    The Participant (“Claimant”), or the Participating Employer on the Participant’s behalf, must make a claim for benefits under the Plan with the Administrator. A claim for benefits must be made no later than 60 days following the Termination of Employment.
(1)    Within 30 days after receipt of a claim for benefits, the Administrator will render a written decision on the claim to the Claimant.
(2)    If the claim is denied, in whole or in part, the Administrator will send notification of the denial to the Claimant. Such notification will comply with the requirements set forth in Department of Labor regulation 2560.503-1(g).
(B)    Appeals of denied claims will be subject to the following procedures.
(1)    To appeal the denial, the Claimant or his or her representative must file a written request for review with the Administrator not later than 60 days after the Claimant receives the Administrator’s written decision on the claim.
(2)    The Claimant or his or her representative may submit written comments, documents, records, and other information relating to the claim for benefits to the Administrator for consideration by the Administrator without regard to whether such information was submitted or considered in the initial review determination. 
(3)    The Claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. 
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(4)    The Administrator will make a decision on review within 60 days of the receipt of the request for review and will provide the decision on review in writing to the Claimant.
(5)    If the denial is upheld in whole or part, the Administrator will notify the Claimant. The notification will include the reasons for the denial, the reference to the Plan provisions on which the denial is based and the Plan’s response to any additional information provided by the Claimant following the initial review determination.
(C)    The 30- and 60-day periods during which the Administrator must respond to the Claimant, may be extended by up to an additional 30- or 60- days, respectively, if circumstances beyond the Administrator’s control so require and if notice of such extension is given to the Claimant. If the time for rendering a written decision on a claim is extended due to the Claimant’s failure to provide information necessary to decide the claim, the time period for making the determination will be tolled from the date on which the notification of the extension is sent to the Claimant until the date on which the Claimant responds to the request for additional information.
(D)    Any individual who fails to follow the claim and appeal procedure will be barred from asserting his or her claim in any judicial or administrative proceeding.
7.6    Disputes. The United States District Court for the District of Minnesota is the exclusive proper venue for any action involving a dispute between any individual and any Affiliate, the Administrator or any other person relating to or arising from the Plan, and such court will have personal jurisdiction over any Qualified Employee named in the action.  The law as stated and applied by the United States Court of Appeals for the Eighth Circuit or the United States District Court for the District of Minnesota will apply to and control all actions relating to the Plan brought against the Plan. No action relating to or arising from the Plan may be commenced against the Plan, the Plan Administrator or the Company more than six months following termination of the involved individual’s employment with an Affiliate or, if later, 90 days after the issuance of the Administrator’s final decision on the request for review of a denied claim under the Plan’s benefit claim procedure.
7.7    Company Action. The Company’s decisions and actions pursuant to the Plan (other than those decisions which the Plan requires to be made by the Administrator when the Company is acting in that capacity) will be made or taken in the Company’s own interest, and the Company is not required to consider the interest of any Qualified Employee or other individual, it being intended that any such decision or action will be made or taken by the Company in its settlor capacity rather than in a fiduciary capacity.
7.8    Status of Plan. Nothing contained in the Plan is to be construed as providing for assets to be held for the benefit of any Qualified Employee or any other person to whom benefits are to be paid pursuant to the terms of this Plan, the Qualified Employee’s or other person’s only interest under the Plan being the right to receive the benefits specified in this instrument. To the extent the Qualified Employee or any other person acquires a right to receive benefits under this Plan, such right is no greater than the right of any unsecured general creditor of the Company.
7.9    No Assignment of Benefits. The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process.
7.10    Withholding, Clawback, and Offsets. The Company retains the right to withhold from any benefit payment pursuant to the Plan any and all income, employment, excise and other taxes as the Company deems necessary, and the Company may offset against amounts otherwise then distributable to any person under the Plan any amounts such person then owes the Company but only if and to the extent allowed under Section 409A of the Code. Any amounts payable or paid under this Plan are subject to any policy (whether in existence as of the Effective Date or later adopted), including, but not limited to, the Sleep Number Clawback and Forfeiture Policy, established by the Company providing for clawback or recovery of amounts that were paid to the Qualified Employee. The Company will make any determination for clawback or recovery in its sole discretion and in accordance with any applicable law or regulation.
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7.11    Other Benefits. No amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy, or procedure of the Company that does not expressly provide otherwise.
7.12    No Employment Rights Created. Neither the maintenance of nor participation in the Plan gives any employee a right to continued employment or limits the right of the Company to discharge, transfer, demote or modify the terms and conditions of employment or otherwise deal with any employee without regard to the effect such action might have on him or her with respect to the Plan. The Plan does not alter the status of each Participant as an at-will employee of the Company.
7.13    Successors. Except as otherwise expressly provided in the Plan, all obligations of the Company under the Plan are binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other transfer of all or substantially all of the business or assets of the Company.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its authorized officers on the date written below.

									
			Sleep Number Corporation
	Dated:  June 1, 2022
	By:	/s/ Sam Hellfeld
			Sam Hellfeld
			Executive Vice President,

			Chief Legal Risk Officer
			
	Dated:  August 1, 2022
	By:	/s/ Christopher Krusmark

			Christopher Krusmark
			Executive Vice President,
			Chief Human Resources Officer

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