Liquidity Event Bonus Plan: Proposed Terms and Fiduciary Considerations

1. DRAFT 6/25/2018 Liquidity Bonus PlanBoard of Directors Meeting___, 2018 CONFIDENTIAL & PRIVILEGED ATTORNEY-CLIENT COMMUNICATION

2. PROPOSED TERMS OF LIQUIDITY EVENT BONUS PLAN • Participant: Service providers designated by the Board • Bonus Pool: ___% up to $___ of Net Consideration ___% up to $___ of Net Consideration • Allocation: Percentage interests (“Bonus Percentage”) awarded by Board. Can be awarded at any time. • Termination: If cease to be a service provider before the Closing, unless terminated without cause 60 days prior. • Forfeiture: Upon such a termination Bonus Percentage may be reallocated to others by the Board. • Net Consideration: Amount to be distributed to Stockholders, including escrow and earn out, but without regard to the amounts payable under the Bonus Plan. • Form of Payment: Same as received by Stockholders. • Time of Payment: Same timing as Stockholders. • Reductions: Bonus Amount reduced by amounts received for common or options. • Conditions: Participant needs to be employed, not breached his/her obligations to the Company and must sign a release. • Termination: Two years or [TBD]

3. BONUS PLANPREFERRED AND COMMON FIDUCIARYCONSIDERATIONS • TRADOS CASE - FACTS • In 2013 the Delaware Court of Chancery refused to dismiss a claim of breach of fiduciary duty (duty of loyalty) by Common Stockholders against a private Company Board of Directors in the context of a sale transaction with a Management Incentive Plan (“MIP”). • In the sale for $60 million, proceeds were just enough to pay most of the Preferred preferences and a MIP. Nothing went to the Common Stockholders. If there had not been a MIP payment, the Common Stockholders would have received some proceeds. • The Board consisted of four representatives of venture investors, two management personnel and one other director. Court held the Board was not disinterested.

4. PREFERRED AND COMMONFIDUCIARY CONSIDERATIONS • HOLDINGS • The Court did not accept the defendants argument that there was an alignment of interests between the Common and Preferred because it was in the interest of all to get the highest price. • “Directors owe fiduciary duties to preferred stockholders as well as common stockholders where the right claimed by the preferred is not to a preference as against the common stock but rather a right shared equally with the common.” • “[T]he standard of conduct for directors requires that they strive in good faith and on an informed basis to maximize the value of the corporation for the benefit of its residual claimants, the ultimate beneficiaries of the firm’s value, not for the benefit of its contractual claimants. In light of this obligation, ‘it is the duty of directors to pursue the best interests of the corporation and its common stockholders, if that can be done faithfully with the contractual promised owed to the preferred.’” • Preferred holders with contractual rights, on the other hand, are not owed fiduciary duties on the basis of such rights.

5. PREFERRED AND COMMONFIDUCIARY CONSIDERATIONS (Cont.) • Key Findings • “Once the deal price exceeded the liquidation preference….the MIP took value away from the common.” • “Until the Merger proceeds cleared the preference, each dollar was allocated between management and the preferred stockholders…But once the consideration topped the preference, thereby implicating the rights of the common, the additional dollars were not fairly allocated.” • Fair Allocation? • In a footnote the Court stated: “This case does not present the question of what is a fair allocation of the cost of the MIP. The boundaries are clear: 100% could come from proceeds that otherwise go to the preferred stock (a scenario raising no fairness issues), or 100% could come from proceeds that otherwise go to the common stock (a scenario raising serious fairness issues). A range of intermediate allocations are possible and could be justified depending on the facts.”

6. PREFERRED AND COMMONFIDUCIARY CONSIDERATIONS (Cont.) • Fair Process? • The Court noted there was not a vote of a majority of the disinterested common stockholders. The Court said: • “The failure to condition the deal on a vote of the disinterested common stockholders is likewise not evidence of unfairness; it simply deprives the defendants of the otherwise helpful affirmative evidence of fairness.” • Alternatives • Reduction in payment to Stockholders • Reduce Preferred’s liquidation preference by amount of Bonus Pool, with approval of Preferred Stockholders. • Reduce pro rata the amounts payable to Preferred and Common by the amount of the Bonus Pool, with approval of each of Preferred and Common Stockholders. • Implement such reductions with an amendment to Articles now or consider implementing in the Merger Agreement (but consider obtaining stockholder approval to such an approach now). • Obtain disinterested Common stockholder approval now to the Bonus Plan, without any contemplated reductions of payments to Preferred or Common. Consider if a Common stockholder who is also a Preferred stockholder is interested.

7. BONUS PLAN – GOLDEN PARACHUTE • 280G Rules • Payments under the Bonus Plan in connection with a change of control can trigger Golden Parachute tax rules under 280G. • The Company (or acquirer) will have a withholding obligation with respect to the golden parachute tax. • No Taxation Under 280G • The Bonus Plan provides “claw back” of excess parachute payments to avoid 280G taxation. • Disinterested Stockholders approval is obtained at the time of change of control with respect to the specific allocations to “disqualifying individuals”. All Stockholders are to be solicited and provided with full disclosure.