Exhibit 10.1

LIQUIDIA TECHNOLOGIES, INC.

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

 

 

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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the “Agreement”) is
entered into as of October 26, 2018 by and between PACIFIC WESTERN BANK, a
California state-chartered bank (“Bank”) and LIQUIDIA TECHNOLOGIES, INC.
(“Borrower”).

RECITALS

A.Bank and Borrower have entered into that certain Loan and Security Agreement
dated as of January 6, 2016 (as amended, the “Prior Loan Agreement”).

B.Borrower has requested, and Bank has agreed, to amend and restate the Prior
Loan Agreement in its entirety.  Bank and Borrower hereby agree that the Prior
Loan Agreement is amended and restated in its entirety as set forth below.

C.Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower.  This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.

AGREEMENT

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions.  As used in this Agreement, all capitalized terms shall have
the definitions set forth on Exhibit A.  Any term used in the Code and not
defined herein shall have the meaning given to the term in the Code.

1.2 Accounting Terms.  Any accounting term not specifically defined on Exhibit A
shall be construed in accordance with GAAP and all calculations shall be made in
accordance with GAAP (except for non-compliance with ASC 718 in monthly
reporting).  The term “financial statements” shall include the accompanying
notes and schedules.

2. LOAN AND TERMS OF PAYMENT.

2.1 Credit Extensions.

(a) Promise to Pay.  Borrower promises to pay to Bank, in lawful money of the
United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower, together with interest on the unpaid
principal amount of such Credit Extensions at rates in accordance with the terms
hereof.

(b)Term Loan.

(i)Subject to and upon the terms and conditions of this Agreement, Bank agrees
to make one (1) or more term loans to Borrower in an aggregate principal amount
not to exceed Sixteen Million Dollars ($16,000,000) (each a “Term Loan” and
collectively the “Term Loans”).   

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Eleven Million Dollars ($11,000,000) of the Term Loans (“Tranche  A”) shall be
advanced to the Borrower on the Closing Date. The proceeds of the Tranche A Term
Loans shall be used first to refinance Borrower’s existing Indebtedness to Bank
and the UNC Debt, with any amounts remaining thereafter used for general working
capital purposes and for capital expenditures.

The remaining Five Million Dollars ($5,000,000) of the Term Loans (“Tranche  B”)
shall be available through the Tranche B Availability End Date, provided that
Borrower achieves the Performance Milestone. Funds will be available under
Tranche B  as soon as Borrower delivers to Bank evidence satisfactory to Bank
that Borrower has achieved the Performance Milestone. Each Tranche B Term Loan,
except the last Tranche B Term Loan, must be in a minimum amount of $500,000.
The proceeds of the Tranche B Term Loans shall be used for general working
capital purposes and for capital expenditures.

(ii)Interest shall accrue from the date of each Term Loan at the rate specified
in Section 2.2(a), and during the Interest-Only Period interest on the
applicable Term Loan shall be payable monthly beginning on the first day of the
month next following such Term Loan, and continuing on the same day of each
month thereafter.  Any Term Loans that are outstanding on the last day of the
Interest-Only Period shall be payable in equal monthly installments of
principal, plus all accrued interest, beginning on the next day after the last
day of the Interest-Only Period (the “Conversion Date”), and continuing on the
same day of each month thereafter in amounts that would fully amortize each
applicable Term Loan, as of the Conversion Date, over the Repayment Period. All
amounts remaining due in connection with the Term Loans and any other amounts
due under this Agreement shall be immediately due and payable on the Term Loan
Maturity Date.  Term Loans, once repaid, may not be reborrowed. Subject to
payment of the Prepayment Fee as set forth in Section 2.4(c) hereof, Borrower
may prepay any Term Loan without any penalty or additional premium.

(iii)When Borrower desires to obtain a Term Loan, Borrower shall notify Bank
(which notice shall be irrevocable) by facsimile transmission or email to be
received no later than 3:30 p.m. Eastern time on the day on which the Term Loan
is to be made.  Such notice shall be given by a Loan Advance/Paydown Request
Form in substantially the form of Exhibit C.  The notice shall be signed by an
Authorized Officer. Bank shall be entitled to rely on any notice given by a
person whom Bank reasonably believes to be an Authorized Officer, and Borrower
shall indemnify and hold Bank harmless for any damages, loss, costs and expenses
suffered by Bank as a result of such reliance.

(c) Usage of Credit Card Services Under the Credit Card Line.

(i) Usage Period.  Subject to and upon the terms and conditions of this
Agreement, at any time from the Closing Date through the Credit Card Maturity
Date, Borrower may use the Credit Card Services (as defined below) in amounts
and upon terms as provided in Section 2.1(c)(ii) below.

(ii) Credit Card Services.  Subject to and upon the terms and conditions of this
Agreement, Borrower may request corporate credit cards and standard and
e-commerce merchant account services from Bank (collectively, the “Credit Card
Services”).

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The aggregate limit of the corporate credit cards and merchant credit card
processing reserves shall not exceed the Credit Card Line.  The terms and
conditions (including repayment and fees) of such Credit Card Services shall be
subject to the terms and conditions of Bank’s standard forms of application and
agreement for the Credit Card Services, which Borrower hereby agrees to execute.

(iii) Collateralization of Obligations Extending Beyond Maturity.  If Borrower
has not cash secured its obligations with respect to any Credit Card Services by
the Credit Card Maturity Date, then, effective as of such date, the balance in
any deposit accounts held by Bank and the certificates of deposit or time
deposit accounts issued by Bank in Borrower’s name (and any interest paid
thereon or proceeds thereof, including any amounts payable upon the maturity or
liquidation of such certificates or accounts), shall automatically secure such
obligations to the extent of the then continuing or outstanding Credit Card
Services.  Borrower authorizes Bank to hold such balances in pledge and to
decline to honor any drafts thereon or any requests by Borrower or any other
Person to pay or otherwise transfer any part of such balances for so long as the
applicable Credit Card Services are outstanding or continue.

2.2 Interest Rates, Payments, and Calculations.

(a) Interest Rates.

(i) Term Loans.  Except as set forth in Section 2.2(b), the Term Loans shall
bear interest, on the outstanding daily balance thereof, at a variable annual
rate equal to the greater of: (A) the Prime Rate then in effect; or (B) five
percent (5.00%).

(b) Late Fee; Default Rate.  If any payment is not made within 15 days after the
date such payment is due, Borrower shall pay Bank a late fee equal to the lesser
of (i) 5% of the amount of such unpaid amount or (ii) the maximum amount
permitted to be charged under applicable law.  All Obligations shall bear
interest, from and after the occurrence and during the continuance of an Event
of Default, at a rate equal to 5 percentage points above the interest rate
applicable immediately prior to the occurrence of the Event of Default.

(c) Payments.  Borrower authorizes Bank to, at its option, charge such interest,
all Bank Expenses, all Periodic Payments, and any other amounts due and owing in
accordance with the terms of this Agreement against any of Borrower’s deposit
accounts, in which case those amounts shall thereafter accrue interest at the
rate then applicable hereunder.  Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.  All payments
shall be free and clear of any taxes, withholdings, duties, impositions or other
charges (other than income, branch profits and franchise taxes), to the end
that Bank will receive the entire amount of any Obligations payable hereunder,
regardless of source of payment.

(d) Computation.  In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased, effective as of the day the Prime Rate is changed, by an amount equal
to such change in the Prime Rate.  All

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interest chargeable under the Loan Documents shall be computed on the basis of a
360-day year for the actual number of days elapsed.

2.3 Crediting Payments.  Other than any time after the occurrence and during the
continuance of an Event of Default, Bank shall credit a wire transfer of funds,
check or other item of payment to such deposit account or Obligation as Borrower
specifies.  After the occurrence and during the continuance of an Event of
Default, Bank shall have the right, in its sole discretion, to immediately apply
any wire transfer of funds, check, or other item of payment Bank may receive to
conditionally reduce Obligations, but such applications of funds shall not be
considered a payment on account unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment.  Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 5:30 p.m. Eastern
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

2.4 Fees.  Borrower shall pay to Bank the following:

(a) Facility Fee.  On or before the Closing Date, a fee equal to Five Thousand
Dollars ($5,000), which shall be nonrefundable;

(b) Bank Expenses.  On the Closing Date, all Bank Expenses incurred through the
Closing Date, and, after the Closing Date, all Bank Expenses, as and when they
become due.

(c) Prepayment Fee. A fee (the “Prepayment Fee”) in connection with any
prepayment of the Term Loan under Section 2.1(b) in an amount equal to (i) two
percent (2%) of the principal amount of Term Loan so prepaid if the Term Loan is
prepaid within one (1) year of the Closing Date, (ii) one percent (1.00%) of the
principal amount of the Term Loan so prepaid if the Term Loan is prepaid between
one (1) year and two (2) years after the Closing Date, or (iii) Zero Dollars
($0) if repaid more than two (2) years after the Closing Date.

(d) Near-Term Success Fee.  If a Liquidity Event occurs prior to October 31,
2019, Borrower shall pay to Bank a fee (the “Near-Term Success Fee”) of: (i)
 $187,000 if Borrower has not received a Tranche B Term Loan, or (ii) $225,000
if Borrower has received a Tranche B Term Loan.  This Section 2.4(d) shall
survive any termination of this Agreement.

(e)  Long-Term Success Fee.  If a Liquidity Event occurs on or after October 31,
2019, Borrower shall pay to Bank a fee (the “Long-Term Success Fee”) of: (i)
$275,000 if Borrower has not received a Tranche B Term Loan, or (ii) $375,000 if
Borrower has received a Tranche B Term Loan.  This Section 2.4(e) shall survive
any termination of this Agreement.

 

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For the avoidance of doubt, under no circumstances shall Borrower be required to
pay both the Near-Term Success Fee described in Section 2.4(d)  and the
Long-Term Success Fee described in Section 2.4(e).

 

2.5 Term.  This Agreement shall become effective on the Closing Date and,
subject to Section 12.7, shall continue in full force and effect for so long as
any Obligations (other than inchoate indemnity obligations) remain outstanding
or Bank has any obligation to make Credit Extensions under this
Agreement.  Notwithstanding the foregoing, Bank shall have the right to
terminate its obligation to make Credit Extensions under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default.

3. CONDITIONS OF LOANS.

3.1 Conditions Precedent to Closing.  The agreement of Bank to enter into this
Agreement on the Closing Date is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, each of the
following items and completed each of the following requirements:

(a) this Agreement;

(b) an officer’s certificate of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;

(c) payment of the fees and Bank Expenses then due specified in Section 2.4,
which may be debited from any of Borrower’s accounts with Bank;

(d) current SOS Reports indicating that except for Permitted Liens, there are no
other security interests or Liens of record in the Collateral;

(e) current financial statements, including audited statements (or such other
level required by the Investment Agreement) for Borrower’s most recently ended
fiscal year, together with an unqualified opinion (or an opinion qualified only
for going concern so long as Borrower’s investors provide additional equity as
needed), company prepared consolidated and consolidating balance sheets,  income
statements, and statements of cash flows for the most recently ended month in
accordance with Section 6.2, and such other updated financial information as
Bank may reasonably request;

(f) current Compliance Certificate in accordance with Section 6.2;

(g) evidence satisfactory to Bank that the insurance policies required by
Section 6.5 hereof are in full force and effect, together with appropriate
evidence showing loss payable and additional insured clauses or endorsements in
favor of Bank,

(h) an updated Borrower Information Certificate;

(i) a payoff letter from the University of North Carolina at Chapel Hill
covering the UNC Debt;  and

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(j) such other documents or certificates, and completion of such other matters,
as Bank may reasonably request.

3.2 Conditions Precedent to all Credit Extensions.  The obligation of Bank to
make each Credit Extension, including the initial Credit Extension, is
contingent upon the Borrower’s compliance with Section 3.1 above, and is further
subject to the following conditions:

(a) timely receipt by Bank of the Loan Advance/Paydown Request Form as provided
in Section 2.1;  

(b) Borrower shall have transferred substantially all of its Cash assets into
operating accounts held with Bank and otherwise be in compliance with Section
6.6 hereof;

(c) in Bank’s sole discretion, there has not been a Material Adverse Effect; and

(d) the representations and warranties contained in Section 5 shall be true and
correct in all material respects on and as of the date of such Loan
Advance/Paydown Request Form and on the effective date of each Credit Extension
as though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true and correct in all material
respects as of such date, and provided further that any representation or
warranty that contains a materiality qualification therein shall be true and
correct in all respects).  The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2.

4. CREATION OF SECURITY INTEREST.

4.1 Grant of Security Interest.  Borrower grants and pledges to Bank a
continuing security interest in the Collateral to secure prompt repayment of any
and all Obligations and to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents.  Except for Permitted Liens or as
disclosed in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in later-acquired
Collateral.  Borrower also hereby agrees not to sell, transfer, assign,
mortgage, pledge, lease, grant a security interest in, or encumber any of its
Intellectual Property except for Permitted Transfers.    Notwithstanding any
termination of this Agreement or of any filings undertaken related to Bank’s
rights under the Code, Bank’s Lien on the Collateral shall remain in effect for
so long as any Obligations (other than inchoate indemnity obligations) are
outstanding.

4.2 Perfection of Security Interest.  Borrower authorizes Bank to file at any
time financing statements, continuation statements, and amendments thereto that
(i) either specifically describe the Collateral or describe the Collateral as
all assets of Borrower of the kind pledged hereunder, and (ii) contain any other
information required by the Code for the sufficiency of filing office acceptance
of any financing statement, continuation statement, or amendment, including
whether Borrower is an organization, the type of organization and any
organizational identification number issued to Borrower, if applicable. 
Borrower shall have possession of the

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Collateral, except where expressly otherwise provided in this Agreement or where
Bank chooses to perfect its security interest by possession in addition to the
filing of a financing statement.  Where Collateral is in possession of a third
party bailee, Borrower shall take such steps as Bank reasonably requests for
Bank to (i) subject to Section 7.11 below, obtain an acknowledgment, in form and
substance satisfactory to Bank, of the bailee that the bailee holds such
Collateral for the benefit of Bank, and (ii) obtain “control” of any Collateral
consisting of investment property, deposit accounts, letter-of-credit rights or
electronic chattel paper (as such items and the term “control” are defined in
Revised Article 9 of the Code) by causing the securities intermediary or
depositary institution or issuing bank to execute a control agreement in form
and substance satisfactory to Bank.  Borrower will not create any chattel paper
without placing a legend on the chattel paper acceptable to Bank indicating that
Bank has a security interest in the chattel paper.  Borrower from time to time
may deposit with Bank specific cash collateral to secure specific Obligations;
Borrower authorizes Bank to hold such specific balances in pledge and to decline
to honor any drafts thereon or any request by Borrower or any other Person to
pay or otherwise transfer any part of such balances for so long as the specific
Obligations are outstanding.  Borrower shall take such other actions as Bank
requests to perfect its security interests granted under this Agreement.

5. REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants as follows:

5.1 Due Organization and Qualification.  Borrower and each Subsidiary is duly
existing under the laws of the state in which it is organized and qualified and
licensed to do business in any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except where the failure
to do so would not reasonably be expected to cause a Material Adverse Effect. 

5.2 Due Authorization; No Conflict.  The execution, delivery, and performance of
the Loan Documents are within Borrower’s powers, have been duly authorized, and
are not in conflict with nor constitute a breach of any provision contained in
Borrower’s Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under any agreement by which it is bound,
including that certain Amended and Restated License Agreement dated December 15,
2008 by and between the University of North Carolina at Chapel Hill and
Borrower, except to the extent such default would not reasonably be expected to
cause a Material Adverse Effect.

5.3 Collateral.  Borrower has rights in or the power to transfer the Collateral,
and its title to the Collateral is free and clear of Liens, adverse claims, and
restrictions on transfer or pledge except for Permitted Liens.    Other than
movable items of personal property such as laptop computers, all Collateral
having an aggregate book value in excess of $100,000, is located solely in the
Collateral States.  All Inventory is in all material respects of good and
merchantable quality, free from all material defects, except for Inventory for
which adequate reserves have been made.  Except as set forth in the Schedule,
none of the Borrower’s Cash is maintained or invested with a Person other than
Bank or Bank’s affiliates.

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5.4 Intellectual Property.  Borrower is the sole owner (except for Intellectual
Property jointly owned with the University of North Carolina (“UNC”) or
GlaxoSmithKline (“GSK”)) or licensee of the Intellectual Property, and owns or
control the Intellectual Property created (whether solely or jointly with UNC or
GSK) or purchased by Borrower, except for licenses granted by Borrower in the
ordinary course of business.  To Borrower’s knowledge, each of the Copyrights,
Trademarks and Patents created or purchased by Borrower is valid and
enforceable, and no part of the Intellectual Property created or purchased by
Borrower has been judged invalid or unenforceable, in whole or in part, and no
claim has been made to Borrower that any part of the Intellectual Property
created or purchased by Borrower violates the rights of any third party except
to the extent such claim would not reasonably be expected to cause a Material
Adverse Effect.

5.5 Name; Location of Chief Executive Office.  Except as disclosed in the
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement.  The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.

5.6 Litigation.  Except as set forth in the Schedule, there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court or
administrative agency in which a likely adverse decision would reasonably be
expected to have a Material Adverse Effect.

5.7 No Material Adverse Change in Financial Statements.  All consolidated and
consolidating financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower’s consolidated and consolidating financial condition as of the date
thereof and Borrower’s consolidated and consolidating results of operations for
the period then ended.  There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.

5.8 Solvency, Payment of Debts.  Borrower is able to pay its debts (including
trade debts) as they mature; the fair saleable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; and Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement.

5.9 Compliance with Laws and Regulations.  Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA.  No event has occurred resulting from Borrower’s failure
to comply with ERISA that is reasonably likely to result in Borrower’s incurring
any liability that could have a Material Adverse Effect.  Borrower is not an
“investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940.  Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal Reserve
System).  Borrower has not violated any statutes, laws, ordinances or rules
applicable to it, the violation of which would reasonably be expected to have a
Material Adverse Effect.  Borrower and each Subsidiary have filed or caused to
be filed all

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tax returns required to be filed, and have paid, or have made adequate provision
for the payment of, all taxes reflected therein except those being contested in
good faith with adequate reserves under GAAP or where the failure to file such
returns or pay such taxes would not reasonably be expected to have a Material
Adverse Effect.

5.10 Subsidiaries.  Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.

5.11 Government Consents.  Borrower and each Subsidiary have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower’s business as currently conducted,
except where the failure to do so would not reasonably be expected to cause a
Material Adverse Effect.

5.12 Inbound Licenses.  Except as disclosed on the Schedule, Borrower is not a
party to, nor is bound by, any material license or other agreement important for
the conduct of Borrower’s business that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement important for the conduct of Borrower’s business, other
than this Agreement or the other Loan Documents.

5.13 Full Disclosure.  No representation, warranty or other statement made by
Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading in light of the circumstances in which they were made,
it being recognized by Bank that the projections and forecasts provided by
Borrower in good faith and based upon reasonable assumptions are not to be
viewed as facts and that actual results during the period or periods covered by
any such projections and forecasts may differ from the projected or forecasted
results.

6. AFFIRMATIVE COVENANTS.

Borrower covenants that, until payment in full of all outstanding Obligations
(other than inchoate indemnity obligations), and for so long as Bank may have
any commitment to make a Credit Extension hereunder, Borrower shall do all of
the following:

6.1 Good Standing and Government Compliance.  Borrower shall maintain its and
each of its Subsidiaries’ corporate existence and good standing in the
respective states of formation, shall maintain qualification and good standing
in each other jurisdiction in which the failure to so qualify would reasonably
be expected to have a Material Adverse Effect, and shall furnish to Bank the
organizational identification number issued to Borrower by the authorities of
the state in which Borrower is organized, if applicable.  Borrower shall meet,
and shall cause each Subsidiary to meet, the minimum funding requirements of
ERISA with respect to any employee benefit plans subject to ERISA.  Borrower
shall comply, and shall cause each Subsidiary to comply, with all statutes,
laws, ordinances and government rules and regulations to which it is subject,
and shall maintain, and shall cause each of its Subsidiaries to maintain, in
force all licenses,

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approvals and agreements, the loss of which or failure to comply with which
would reasonably be expected to have a Material Adverse Effect.

6.2 Financial Statements, Reports, Certificates, Collateral Audits. 

(a) Borrower shall deliver to Bank:  (i) as soon as available, but in any event
within 30 days after the end of each calendar month, a company prepared
consolidated and consolidating balance sheet,  income statement, and statement
of cash flows covering Borrower’s operations during such period, along with
accounts payable agings, all in a form reasonably acceptable to Bank and
certified by a Responsible Officer; (ii) as soon as available, but in any event
within 180 days after the end of Borrower’s fiscal year, audited (or such other
level as is required by the Investment Agreement) consolidated and consolidating
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an opinion which is either unqualified (provided that the
opinion may contain a qualification as to going concern typical for venture
backed companies similar to Borrower) or otherwise consented to in writing by
Bank on such financial statements of an independent certified public accounting
firm reasonably acceptable to Bank; (iii) annual budget approved by Borrower’s
Board of Directors as soon as available but not later than sixty (60) days after
the end of each fiscal year during the term hereof; (iv) if applicable, copies
of all statements, reports and notices sent or made available generally by
Borrower to its security holders or to any holders of Subordinated Debt and all
reports on Forms 10-K and 10-Q filed (including, but not limited to, quarterly
clinical program updates) with the Securities and Exchange Commission; (v)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could reasonably be
expected to result in damages or costs to Borrower or any Subsidiary of $500,000
or more; (vi) promptly upon receipt, each management letter prepared by
Borrower’s independent certified public accounting firm regarding Borrower’s
management control systems; and (vii) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.    

(b) Within 30 days after the last day of each month, Borrower shall deliver to
Bank with the monthly financial statements a Compliance Certificate certified as
of the last day of the applicable month and signed by a Responsible Officer in
substantially the form of Exhibit D hereto.

(c) As soon as possible and in any event within three (3) calendar days after
becoming aware of the occurrence or existence of an Event of Default hereunder,
a written statement of a Responsible Officer setting forth details of the Event
of Default, and the action which Borrower has taken or proposes to take with
respect thereto.

(d) Borrower shall deliver to Bank the notices required in Section 7.2.

(e) Bank (through any of its officers, employees, or agents) shall have the
right, upon reasonable prior notice, from time to time during Borrower’s usual
business hours but no more than twice a year (unless an Event of Default has
occurred and is continuing), to inspect Borrower’s Books and to make copies
thereof and to check, test, inspect, audit and appraise the Collateral at
Borrower’s expense in order to verify Borrower’s financial condition or the
amount, condition of, or any other matter relating to, the Collateral.

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Borrower may deliver to Bank on an electronic basis any certificates, reports or
information required pursuant to this Section 6.2, and Bank shall be entitled to
rely on the information contained in the electronic files, provided that Bank in
good faith believes that the files were delivered by a Responsible
Officer.  Borrower shall include a submission date on any certificates and
reports to be delivered electronically.

6.3 Inventory and Equipment; Returns.  Borrower shall keep all Inventory and
Equipment in good and merchantable condition, free from all material defects
except for Inventory and Equipment (i) sold in the ordinary course of business,
and (ii) for which adequate reserves have been made, in all cases in the United
States and such other locations as to which Borrower gives prior written
notice.  Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist on the Closing Date.  Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims involving inventory having a book value of more than $200,000.

6.4 Taxes.  Borrower shall make, and cause each Subsidiary to make, due and
timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, including, but not limited
to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability,
and will execute and deliver to Bank, on demand, proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits and
any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by Borrower
or such Subsidiary.

6.5 Insurance.  Borrower, at its expense, shall (i) keep the Collateral insured
against loss or damage, and (ii) maintain liability and other insurance, in each
case as ordinarily insured against by other owners in businesses similar to
Borrower’s.  All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank.  All policies
of property insurance shall contain a lender’s loss payable endorsement, in a
form satisfactory to Bank, showing Bank as lender's loss payee.  All liability
insurance policies shall show, or have endorsements showing, Bank as an
additional insured.  Any such insurance policies shall specify that the insurer
must give at least twenty (20) days’ notice to Bank before canceling its policy
for any reason.  Within thirty (30) days of the Closing Date, Borrower shall
cause to be furnished to Bank a copy of its policies including any endorsements
covering Bank or showing Bank as an additional insured.  Upon Bank’s request,
Borrower shall deliver to Bank certified copies of the policies of insurance and
evidence of all premium payments.  Proceeds payable under any casualty policy
will, at Borrower’s option, be payable to Borrower to replace the property
subject to the claim, provided that any such replacement property shall be
deemed Collateral in which Bank has been granted a first priority security
interest, provided that if an Event of Default has occurred and is continuing,
all proceeds payable under any such policy shall, at Bank’s option, be payable
to Bank to be applied on account of the Obligations.

6.6 Primary Depository.  Subject to the provisions of Section 3.2(b), as of the
Closing Date, Borrower shall maintain, and shall cause all of its Subsidiaries
to maintain, all  depository and operating accounts with Bank and all investment
accounts with Bank or Bank’s

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affiliates; provided that prior to Borrower maintaining any investment accounts
with Bank’s affiliates, Borrower, Bank, and any such affiliate shall have
entered into a securities account control agreement with respect to any such
investment accounts, in form and substance satisfactory to
Bank.  Notwithstanding the above, Borrower shall be permitted to maintain an
aggregate amount not to exceed $100,000 in one or more accounts outside of Bank.

6.7 Financial Covenants. Borrower shall at all times maintain the following
financial ratios and covenants:

(a) Minimum Cash at Bank.  Monitored on a daily basis, a balance of Cash at
Bank of not less Eight Million Five Hundred Thousand Dollars ($8,500,000) (the
“Minimum Cash Threshold”); provided however, that the Minimum Cash Threshold
shall be decreased to Six Million Dollars ($6,000,000) if Borrower provides
evidence reasonably acceptable to Bank that Borrower has achieved the Funding
Milestone.  Notwithstanding the foregoing, up to two (2) times per calendar
year, Borrower may allow its balance of Cash at Bank to be below the applicable
Minimum Cash Threshold, so long as (i) Borrower’s balance of Cash at Bank shall
not at any time be less than Two Hundred Fifty Thousand Dollars ($250,000) below
the applicable Minimum Cash Threshold, and (ii) Borrower’s balance of Cash at
Bank shall not remain below the applicable Minimum Cash Threshold for more than
three (3) consecutive Business Days per occurrence.  

6.8 Protection of Intellectual Property.

(a) Borrower shall promptly give Bank written notice on a quarterly basis of any
applications or registrations of intellectual property rights filed with the
United States Patent and Trademark Office during such fiscal year, including the
date of such filing and the registration or application numbers, if any.

(b) Except for Permitted Transfers, Borrower shall (i) protect, defend and
maintain the validity and enforceability of the trade secrets, Trademarks,
Patents and Copyrights material to the business of Borrower, (ii) use
commercially reasonable efforts to detect infringements of such Trademarks,
Patents and Copyrights and promptly advise Bank in writing of material
infringements detected and (iii) not allow any material Trademarks, Patents or
Copyrights to be abandoned, forfeited or dedicated to the public without the
written consent of Bank, which shall not be unreasonably withheld.

(c) Bank shall have the right, but not the obligation, to take, at Borrower’s
sole expense, any actions that Borrower is required under this Section 6.8 to
take but which Borrower fails to take, after 15 days’ notice to
Borrower.  Borrower shall reimburse and indemnify Bank for all reasonable costs
and reasonable out-of-pocket expenses incurred in the reasonable exercise of its
rights under this Section 6.8.

6.9 Consent of Inbound Licensors.  Prior to entering into or becoming bound by
any material inbound license or similar agreement, Borrower shall:  (i) provide
written notice to Bank of the material terms of such license or agreement with a
description of its likely impact on Borrower’s business or financial condition;
and (ii) in good faith use commercially reasonable efforts to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for

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Borrower’s interest in such licenses or contract rights to be deemed Collateral
and for Bank to have a security interest in it that might otherwise be
restricted by the terms of the applicable license or agreement, whether now
existing or entered into in the future, provided, however, that the failure to
obtain any such consent or waiver shall not constitute a default under this
Agreement.

6.10 Creation/Acquisition of Subsidiaries. In the event any Borrower or any
Subsidiary of any Borrower creates or acquires any Subsidiary, Borrower or such
Subsidiary shall promptly notify Bank of such creation or acquisition, and
Borrower or such Subsidiary shall take all actions reasonably requested by Bank
to achieve any of the following with respect to such “New Subsidiary” (defined
as a Subsidiary formed after the date hereof during the term of this
Agreement):  (i) to cause New Subsidiary to become either a co-Borrower
hereunder, if such New Subsidiary is organized under the laws of the United
States, or a secured guarantor with respect to the Obligations; and (ii) to
grant and pledge to Bank a perfected security interest in 100% of the stock,
units or other evidence of ownership held by Borrower or its Subsidiaries of any
such New Subsidiary which is organized under the laws of the United States, and
65% of the stock, units or other evidence of ownership held by Borrower or its
Subsidiaries of any such New Subsidiary which is not organized under the laws of
the United States.

6.11 Further Assurances.  At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

7. NEGATIVE COVENANTS.

Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until the outstanding Obligations (other than inchoate indemnity
obligations) are paid in full or for so long as Bank may have any commitment to
make any Credit Extensions, Borrower will not do any of the following without
Bank’s prior written consent, which shall not be unreasonably withheld:

7.1 Dispositions.  Convey, sell, lease, license, transfer or otherwise dispose
of (collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, or move cash balances on deposit
with Bank to accounts opened at another financial institution, other than
Permitted Transfers.

7.2 Change in Name, Location, Executive Office, or Executive Management; Change
in Business; Change in Fiscal Year; Change in Control.  Change its name or the
state of Borrower’s formation or relocate its chief executive office without 30
days prior written notification to Bank; replace or suffer the departure of its
chief executive officer or chief financial officer without delivering written
notification to Bank within 10 days; fail to appoint an interim replacement or
fill a vacancy in the position of chief executive officer or chief financial
officer for more than 30 consecutive days; suffer a change on its board of
directors which results in the failure of at least one partner of either New
Enterprise Associates or Canaan Partners or their Affiliates to serve as a
voting member, in such case without having used best efforts to deliver at least
fifteen  (15) days prior written notification to Bank; take action to liquidate,
wind up, or otherwise cease to conduct business in the ordinary course; engage
in any business, or permit any of its Subsidiaries to engage in any business,
other than or reasonably related or incidental to

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the businesses currently engaged in by Borrower; change its fiscal year end;
have a Change in Control.

7.3 Mergers or Acquisitions.  Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (a) each of the following conditions is applicable:  (i) the
consideration paid in connection with such transactions (including assumption of
liabilities) does not in the aggregate exceed $250,000 during any fiscal year,
(ii) no Event of Default has occurred, is continuing or would exist after giving
effect to such transactions, (iii) such transactions do not result in a Change
in Control, and (iv) Borrower is the surviving entity; or (b) the Obligations
are repaid in full concurrently with the closing of any merger or consolidation
of Borrower in which Borrower is not the surviving entity; provided, however,
that Borrower shall not, without Bank’s prior written consent, enter into any
binding contractual arrangement with any Person to attempt to facilitate a
merger or acquisition of Borrower, unless (i) no Event of Default exists when
such agreement is entered into by Borrower, (ii) such agreement does not give
such Person the right to claim any fee, payment or damages from any parties,
other than from Borrower or Borrower’s investors, in connection with a sale of
Borrower’s stock or assets pursuant to or resulting from an assignment for the
benefit of creditors, an asset turnover to Borrower’s creditors (including,
without limitation, Bank), foreclosure, bankruptcy or similar liquidation, and
(iii) Borrower notifies Bank in advance of entering into such an agreement
(provided, the failure to give such notification shall not be deemed a material
breach of this Agreement).

7.4 Indebtedness.  Create, incur, assume, guarantee or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness, or prepay any Indebtedness or take any actions which
impose on Borrower an obligation to prepay any Indebtedness, except Indebtedness
to Bank.

7.5 Encumbrances.  Create, incur, assume or allow any Lien with respect to its
property, or assign or otherwise convey any right to receive income, including
the sale of any Accounts, or permit any of its Subsidiaries so to do, except for
Permitted Liens, or covenant to any other Person (other than (i) the licensors
of in-licensed property with respect to such property or (ii) the lessors of
specific equipment or lenders financing specific equipment with respect to such
leased or financed equipment) that Borrower in the future will refrain from
creating, incurring, assuming or allowing any Lien with respect to any of
Borrower’s property.

7.6 Distributions.  Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any capital stock,
except that Borrower may (i) repurchase the stock of former employees or
directors pursuant to stock repurchase agreements in an aggregate amount not to
exceed $250,000 in any fiscal year, as long as an Event of Default does not
exist prior to such repurchase or would not exist after giving effect to such
repurchase, and (ii) repurchase the stock of former employees or directors
pursuant to stock repurchase agreements by the cancellation of indebtedness owed
by such former employees or directors to Borrower regardless of whether an Event
of Default exists.

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7.7 Investments.  Directly or indirectly acquire or own an Investment in, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments, or maintain or invest any of
its investment property with a Person other than Bank or permit any Subsidiary
to do so unless such Person has entered into a control agreement with Bank, in
form and substance satisfactory to Bank, or suffer or permit any Subsidiary to
be a party to, or be bound by, an agreement that restricts such Subsidiary from
paying dividends or otherwise distributing property to Borrower.

7.8 Capitalized Expenditures.  Make Capitalized Expenditures in excess of (a)
$500,000 in the aggregate during Borrower’s fiscal year ending December 31,
2018, (b) $1,250,000 in the aggregate during Borrower’s fiscal year ending
December 31, 2019, or (c) $500,000 in any fiscal year of Borrower thereafter;
provided that any unused amount of Capital Expenditures in any fiscal year up to
$500,000 may be added to the limitations under this Section 7.8 and used by
Borrower in the subsequent fiscal year.

7.9 Transactions with Affiliates.  Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower except for (i)
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person, and (ii)
the sale of Borrower’s equity securities in bona fide transactions with
Borrower’s existing investors that do not result in a Change in Control.      

7.10 Subordinated Debt.  Make any payment in respect of any Subordinated Debt,
or permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision affecting
Bank’s rights contained in any documentation relating to the Subordinated Debt
without Bank’s prior written consent.

7.11 Inventory and Equipment.  Store the Inventory or the Equipment of an
aggregate book value in excess of $250,000 with a bailee, warehouseman,
collocation facility or similar third party unless the third party has been
notified of Bank’s security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank’s benefit or (b) is in possession of the warehouse receipt, where
negotiable, covering such Inventory or Equipment.  Except for Inventory sold in
the ordinary course of business and for movable items of personal property
having an aggregate book value not in excess of $250,000, and except for such
other locations as Bank may approve in writing, Borrower shall keep the
Inventory and Equipment only at the location set forth in Section 10 and such
other locations of which Borrower gives Bank prior written notice and as to
which Bank is able to take such actions as may be necessary or advisable to
perfect its security interest or to obtain a bailee’s acknowledgment of Bank’s
rights in the Collateral.

7.12 No Investment Company; Margin Regulation.  Become or be controlled by an
“investment company,” within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.

8. EVENTS OF DEFAULT.

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Any one or more of the following events shall constitute an Event of Default by
Borrower under this Agreement:

8.1 Payment Default.  If Borrower fails to pay any of the Obligations when due;

8.2 Covenant Default. 

(a) If Borrower fails to perform any obligation under Sections 6.2 (financial
reporting), 6.4 (taxes), 6.5 (insurance), 6.6 (primary accounts), or 6.7
(financial covenants), or violates any of the covenants contained in Article ‎7
of this Agreement; or

(b) If Borrower fails or neglects to perform or observe any other material term,
provision, condition, covenant contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition or covenant
that can be cured, has failed to cure such default within 10 days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
10 day period or cannot after diligent attempts by Borrower be cured within such
10 day period, and such default is likely to be cured within a reasonable time,
then Borrower shall have an additional reasonable period (which shall not in any
case exceed 30 days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default but no Credit Extensions will be made;

8.3 Material Adverse Effect.  If there occurs any circumstance or any
circumstances which would reasonably be expected to have a Material Adverse
Effect;

8.4 Attachment.  If any material portion of Borrower’s assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any material portion of Borrower’s assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after Borrower receives notice thereof, provided that none
of the foregoing shall constitute an Event of Default where such action or event
is stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Credit Extensions will be made during such cure
period);

8.5 Insolvency.  If Borrower becomes insolvent, or if an Insolvency Proceeding
is commenced by Borrower, or if an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within forty-five  (45) days (provided
that no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);

8.6 Other Agreements.  If (a) there is a default or other failure to perform in
any  agreement to which Borrower is a party with a third party or parties  (i)
resulting in a right by

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such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of $500,000, (ii) in
connection with any material lease of real property that gives the landlord the
right to terminate such lease,  or  (iii) that would reasonably be expected to
have a Material Adverse Effect, or (b) any default or event of default (however
designated) shall occur with respect to any Subordinated Debt which is not cured
within any applicable cure period;

8.7 Judgments.  If a final, uninsured judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least $500,000 shall
be rendered against Borrower and shall remain unsatisfied and unstayed for a
period of 10 days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of the judgment); or

8.8 Misrepresentations.  If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.

9. BANK’S RIGHTS AND REMEDIES.

9.1 Rights and Remedies.  Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section 8.5
(insolvency), all Obligations shall become immediately due and payable without
any action by Bank);

(b) Demand that Borrower  (i) deposit cash with Bank in an amount equal to the
amount of any Letters of Credit remaining undrawn, as collateral security for
the repayment of any future drawings under such Letters of Credit, and (ii) pay
in advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit, and Borrower shall promptly deposit and
pay such amounts;

(c) Cease advancing money or extending credit to or for the benefit of Borrower
under this Agreement or under any other agreement between Borrower and Bank;

(d) Settle or adjust disputes and claims directly with account debtors for
amounts, upon terms and in whatever order that Bank reasonably considers
advisable;

(e) Make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral.  Borrower agrees
to assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate.  Borrower authorizes Bank to enter the
premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank’s determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith.  With respect to any of Borrower’s owned premises,
Borrower hereby grants Bank a license to enter into

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possession of such premises and to occupy the same, without charge, in order to
exercise any of Bank’s rights or remedies provided herein, at law, in equity, or
otherwise;

(f) place a “hold” on any account maintained with Bank and/or deliver a notice
of exclusive control, any entitlement order, or other directions or instructions
pursuant to any control agreement or similar agreements providing control of any
Collateral;

(g) Set off and apply to the Obligations any and all (i) balances and deposits
of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by Bank;

(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the
Collateral.  Bank is hereby granted a license or other right, solely pursuant to
the provisions of this Section 9.1, to use, without charge, Borrower’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section 9.1, Borrower’s rights under all
licenses and all franchise agreements shall inure to Bank’s benefit;

(i) Sell the Collateral at either a public or private sale, or both, by way of
one or more contracts or transactions, for cash or on terms, in such manner and
at such places (including Borrower’s premises) as Bank determines is
commercially reasonable, and apply any proceeds to the Obligations in whatever
manner or order Bank deems appropriate.  Bank may sell the Collateral without
giving any warranties as to the Collateral.  Bank may specifically disclaim any
warranties of title or the like.  This procedure will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.  If Bank sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Bank,
and applied to the indebtedness of the purchaser.  If the purchaser fails to pay
for the Collateral, Bank may resell the Collateral and Borrower shall be
credited with the proceeds of the sale;

(j) Bank may credit bid and purchase at any public sale;

(k) Apply for the appointment of a receiver, trustee, liquidator or conservator
of the Collateral, without notice and without regard to the adequacy of the
security for the Obligations and without regard to the solvency of Borrower, any
guarantor or any other Person liable for any of the Obligations; and

(l) Any deficiency that exists after disposition of the Collateral as provided
above will be paid immediately by Borrower.

Bank may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.

9.2 Power of Attorney.  Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of

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Bank’s designated officers, or employees) as Borrower’s true and lawful attorney
to:  (a) send requests for verification of Accounts or notify account debtors of
Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any
checks or other forms of payment or security that may come into Bank’s
possession; (c) sign Borrower’s name on any invoice or bill of lading relating
to any Account, drafts against account debtors, schedules and assignments of
Accounts, verifications of Accounts, and notices to account debtors; (d) dispose
of any Collateral; (e) make, settle, and adjust all claims under and decisions
with respect to Borrower’s policies of insurance; (f) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; and (g) file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral; provided Bank may exercise such
power of attorney to sign the name of Borrower on any of the documents described
in clause (g) above, regardless of whether an Event of Default has
occurred.  The appointment of Bank as Borrower’s attorney in fact, and each and
every one of Bank’s rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations (other than inchoate indemnity
obligations) have been fully repaid and performed and Bank’s obligation to
provide advances hereunder is terminated.

9.3 Accounts Collection.  At any time after the occurrence and during the
continuation of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank’s security interest in such funds and verify the amount of such
Account.  Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank’s trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.

9.4 Bank Expenses.  If Borrower fails to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms
of this Agreement, then Bank may do any or all of the following after reasonable
notice to Borrower:  (a) make payment of the same or any part thereof; and/or
(b) obtain and maintain insurance policies of the type discussed in Section 6.5
of this Agreement, and take any action with respect to such policies as Bank
deems prudent.  Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral.  Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

9.5 Bank’s Liability for Collateral.  Bank has no obligation to clean up or
otherwise prepare the Collateral for sale.  All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.

9.6 No Obligation to Pursue Others.  Bank has no obligation to attempt to
satisfy the Obligations by collecting them from any other person liable for them
and Bank may release, modify or waive any collateral provided by any other
Person to secure any of the Obligations, all without affecting Bank’s rights
against Borrower.  Borrower waives any right it may have to require Bank to
pursue any other Person for any of the Obligations.

9.7 Remedies Cumulative.  Bank’s rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative.  Bank shall have
all other rights

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and remedies not inconsistent herewith as provided under the Code, by law, or in
equity.  No exercise by Bank of one right or remedy shall be deemed an election,
and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed
a continuing waiver.  No delay by Bank shall constitute a waiver, election, or
acquiescence by it.  No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only in
the specific instance and for the specific purpose for which it was
given.  Borrower expressly agrees that this Section 9.7 may not be waived or
modified by Bank by course of performance, conduct, estoppel or otherwise.

9.8 Demand; Protest.  Except as otherwise provided in this Agreement, Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment and any other notices relating to the Obligations.

10. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
reporting required pursuant to Section 6.2 of this Agreement, which shall be
sent as directed in the monthly reporting forms provided by Bank) shall be
personally delivered or sent by a recognized overnight delivery service,
certified mail, postage prepaid, return receipt requested, or by telefacsimile
or electronic mail to Borrower or to Bank, as the case may be, at its addresses
set forth below:

If to Borrower:LIQUIDIA TECHNOLOGIES, INC.
419 Davis Drive, Suite 100
Morrisville, North Carolina 27560-6837
Attn: In-house Counsel
FAX: (919)  328-4402

If to Bank:Pacific Western Bank

406 Blackwell Street, Suite 240

Durham, North Carolina 27701

Attn: Loan Operations Manager

FAX: (919) 314-3080
E-Mail: loannotices@square1bank.com

with a copy to:Pacific Western Bank
406 Blackwell Street, Suite 240
Durham, North Carolina 27701
Attn: Mara Huntington

FAX: (919) 314-3090

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

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This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of North Carolina, without regard to principles of
conflicts of law.  Jurisdiction shall lie in the State of North Carolina.  All
disputes, controversies, claims, actions and similar proceedings arising with
respect to Borrower’s account or any related agreement or transaction shall be
brought in the General Court of Justice of North Carolina sitting in Durham
County, North Carolina or the United States District Court for the Middle
District of North Carolina, except as provided below with respect to arbitration
of such matters.  BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.  EACH OF THEM, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM.  THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR
BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.    If the
jury waiver set forth in this Section 11 is not enforceable, then any dispute,
controversy, claim, action or similar proceeding arising out of or relating to
this Agreement, the Loan Documents or any of the transactions contemplated
therein shall be settled by final and binding arbitration held in Durham County,
North Carolina  in accordance with the then current Commercial Arbitration Rules
of the American Arbitration Association by one arbitrator appointed in
accordance with those rules.  The arbitrator shall apply North Carolina law to
the resolution of any dispute, without reference to rules of conflicts of law or
rules of statutory arbitration. Judgment upon any award resulting from
arbitration may be entered into and enforced by any state or federal court
having jurisdiction thereof.  Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this Section.  The
costs and expenses of the arbitration, including without limitation, the
arbitrator’s fees and expert witness fees, and reasonable attorneys’ fees,
incurred by the parties to the arbitration may be awarded to the prevailing
party, in the discretion of the arbitrator, or may be apportioned between the
parties in any manner deemed appropriate by the arbitrator.  Unless and until
the arbitrator decides that one party is to pay for all (or a share) of such
costs and expenses, both parties shall share equally in the payment of the
arbitrator’s fees as and when billed by the arbitrator.

12. GENERAL PROVISIONS.

12.1 Successors and Assigns.  This Agreement shall bind and inure to the benefit
of the respective successors and permitted assigns of each of the parties and
shall bind all persons who become bound as a debtor to this Agreement; provided,
however, that neither this Agreement nor any rights hereunder may be assigned by
Borrower without Bank’s prior written consent, which consent may be granted or
withheld in Bank’s sole discretion.  Bank shall have the right without the
consent of or notice to Borrower to sell, assign, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank’s obligations,
rights and benefits hereunder.

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12.2 Indemnification.  Borrower shall defend, indemnify and hold harmless Bank
and its officers, directors, employees, affiliates, advisors and agents (each,
an “Indemnified Party”) against:  (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Agreement; and (b) all losses or Bank Expenses
in any way suffered, incurred, or paid by Bank, its officers, employees and
agents as a result of or in any way arising out of, following, or consequential
to transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys’ fees and
expenses), except for losses, claims and Bank Expenses caused by an Indemnified
Party’s gross negligence or willful misconduct as determined by a court of
competent jurisdiction by final and non-appealable order.

12.3 Time of Essence.  Time is of the essence for the performance of all
obligations set forth in this Agreement.

12.4 Severability of Provisions.  Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

12.5 Amendments in Writing, Integration.  All amendments to or terminations of
this Agreement or the other Loan Documents must be in writing.  All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement
and the other Loan Documents, if any, are merged into this Agreement and the
Loan Documents.

12.6 Counterparts.  This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.  Executed copies of
the signature pages of this Agreement sent by facsimile or transmitted
electronically in Portable Document Format (“PDF”), or any similar format, shall
be treated as originals, fully binding and with full legal force and effect, and
the parties waive any rights they may have to object to such treatment.

12.7 Survival.  All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Bank has any obligation to make any Credit Extension to
Borrower.  The obligations of Borrower to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.

12.8 Confidentiality and Publicity. 

(a) Borrower shall not, and shall not permit any of its Affiliates to:  (i)
publish or disclose any materials containing Bank’s name, including in any press
release or otherwise in connection with any advertising or marketing, without
first obtaining Bank’s prior written consent, or (ii)  use Bank’s name (or the
name of any of its Affiliates) in connection with its operations or business. 

22.

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(b) In handling any confidential information, Bank shall exercise commercially
reasonable efforts to maintain in confidence, in accordance with its customary
procedures for handling confidential information, all written non-public
information furnished to Bank on a confidential basis clearly identified at the
time of delivery as such (“Confidential Information”) other than any such
Confidential Information that becomes generally available to the public or
becomes available to the Bank from a source other than Borrower and that is not
known to Bank to be subject to confidentiality obligations; provided, that Bank
and its Affiliates shall have the right to disclose Confidential Information to:
(i) such Person’s Affiliates; (ii) such Person or such Person’s Affiliates’
lenders, funding sources, or financing sources; (iii) such Person’s or such
Person’s Affiliates’ directors, officers, trustees, partners, members, managers,
employees, agents, advisors, representatives, attorneys, equity owners,
professional consultants, portfolio management services and rating agencies;
(iv) any successor or assign of Bank; (v) any Person to whom Bank offers to
sell, assign or transfer any Credit Extension or any part thereof or any
interest or participation therein; (vi) any Person that provides statistical
analysis and/or information services to Bank or its Affiliates; and (vii) any
Person (A) to the extent required by it by law, (B)  as may be required in
connection with the examination, audit, or similar investigation of Bank, (C)
 in response to any subpoena or other legal process or informal investigative
demand, (D) in connection with any litigation, or (E) in connection with the
actual or potential exercise or enforcement of any right or remedy under any
Loan Document.  The obligations of Bank and its Affiliates under this Section
12.8 shall supersede and replace any other confidentiality obligations agreed to
by Bank or its Affiliates. 

12.9No Novation.  Nothing contained herein shall in any way impair the Prior
Loan Agreement and the other Loan Documents now held for the Obligations, nor
affect or impair any rights, powers, or remedies under the Prior Loan Agreement
or any Loan Document, it being the intent of the parties hereto that this
Agreement shall not constitute a novation of the Prior Loan Agreement or an
accord and satisfaction of the Obligations.  Except as expressly provided for in
this Agreement, the Loan Documents are hereby ratified and reaffirmed and shall
remain in full force and effect.  Borrower hereby ratifies and reaffirms the
validity and enforceability of all of the liens and security interests
heretofore granted pursuant to the Loan Documents, as collateral security for
the Obligations, and acknowledges that all of such liens and security interests,
and all Collateral heretofore pledged as security for the Obligations, continues
to be and remains in full force and effect as Collateral for the Obligations
from and after the date of this Agreement.  Borrower and Bank acknowledge and
agree that there are no known Events of Default that have occurred and are
continuing as of the Closing Date; provided that the foregoing acknowledgement
shall not be deemed to be a consent or waiver with respect to any Event of
Default that may have occurred prior to the date hereof of which Bank is not
currently aware, or which may hereafter occur, under the Prior Loan Agreement,
this Agreement or any other Loan Document; nor shall the foregoing
acknowledgement limit or impair in any way Bank’s rights and remedies with
respect to any such Event of Default.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.

 

LIQUIDIA TECHNOLOGIES, INC.

By: /s/ Timothy Albury

Name: Timothy Albury

Title: SVP and Chief Accounting Officer

PACIFIC WESTERN BANK

By: /s/ Lan Zhu

Name: Lan Zhu

 

Title: Vice President

 

 

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EXHIBIT A

DEFINITIONS

 “Accounts” means all presently existing and hereafter arising accounts,
contract rights, payment intangibles and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower and any and all credit insurance, guaranties, and other
security therefore, as well as all merchandise returned to or reclaimed by
Borrower and Borrower’s Books relating to any of the foregoing.

“Affiliate” means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person’s senior
executive officers, directors, and general partners.

“Authorized Officer” means someone designated as such in the corporate
resolution provided by Borrower to Bank in which this Agreement and the
transactions contemplated hereunder are authorized by Borrower’s board of
directors.  If Borrower provides subsequent corporate resolutions to Bank after
the Closing Date, the individual(s) designated as “Authorized Officer(s)” in the
most recently provided resolution shall be the only “Authorized Officers” for
purposes of this Agreement.

“Bank Expenses” means all reasonable costs or expenses (including reasonable
attorneys’ fees and expenses, whether generated by in-house or by outside
counsel) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents;  reasonable Collateral
audit fees; and Bank’s reasonable attorneys’ fees and expenses (whether
generated in-house or by outside counsel) incurred in amending, enforcing or
defending the Loan Documents (including fees and expenses of appeal), incurred
before, during and after an Insolvency Proceeding, whether or not suit is
brought.

“Borrower’s Books” means all of Borrower’s books and records
including:  ledgers; records concerning Borrower’s assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks in the State of North Carolina are authorized or required to close.

“Capitalized Expenditures” means current period unfinanced cash expenditures
that are capitalized and amortized over a period of time in accordance with
GAAP, including but not limited to unfinanced capitalized cash expenditures for
capital equipment, unfinanced capitalized manufacturing and labor costs as they
relate to inventory, and unfinanced capitalized cash expenditures for software
development.

“Cash” means unrestricted cash and cash equivalents.

1.

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“Change in Control” shall mean a transaction other than a bona fide equity
financing or series of financings on terms and from investors reasonably
acceptable to Bank in which any “person” or “group” (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of a sufficient number of shares of all
classes of stock then outstanding of Borrower ordinarily entitled to vote in the
election of directors, empowering such “person” or “group” to elect a majority
of the Board of Directors of Borrower, who did not have such power before such
transaction. 

“Closing Date” means the date of this Agreement.

“Code” means the North Carolina Uniform Commercial Code as amended or
supplemented from time to time.

“Collateral” means the property described on Exhibit B attached hereto and all
Negotiable Collateral to the extent not described on Exhibit B, except to the
extent any such property (i) is non-assignable by its terms without the consent
of the licensor thereof or another party (but only to the extent such
prohibition on transfer is enforceable under applicable law, including, without
limitation, Sections §25-9-406 and §25-9-408 of the Code), (ii) the granting of
a security interest therein is contrary to applicable law, provided that upon
the cessation of any such restriction or prohibition, such property shall
automatically become part of the Collateral, (iii) constitutes the capital stock
of a controlled foreign corporation (as defined in the IRC), in excess of 65% of
the voting power of all classes of capital stock of such controlled foreign
corporations entitled to vote, or (iv) property (including any attachments,
accessions or replacements) that is subject to a Lien that is permitted pursuant
to clause (c) of the definition of Permitted Liens, if the grant of a security
interest with respect to such property pursuant to this Agreement would be
prohibited by the agreement creating such Permitted Lien or would otherwise
constitute a default thereunder, provided, that such property will be deemed
"Collateral" hereunder upon the termination and release of such Permitted Lien.

 

“Collateral State” means the state or states where the Collateral is located,
which is North Carolina. 

“Compliance Certificate” means a compliance certificate, in substantially the
form of Exhibit D attached hereto, executed by a Responsible Officer of the
Borrower.

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable; (ii) any obligations with respect to undrawn letters of credit,
corporate credit cards or merchant services issued for the account of that
Person; and (iii) all obligations arising under any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term “Contingent Obligation” shall not
include endorsements for collection or deposit in the ordinary course of
business.  The amount of any Contingent Obligation shall be deemed to be an
amount equal to the

2.

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stated or determined amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith; provided, however, that such amount shall not in any event exceed
the maximum amount of the obligations under the guarantee or other support
arrangement.

“Conversion Date” is defined in Section 2.1(b)(ii).

“Copyrights” means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.

“Credit Card Line” means a Credit Extension of up to $50,000, to be used
exclusively for the provision of Credit Card Services.

“Credit Card Maturity Date” means September 30, 2020.

“Credit Card Services” is defined in Section 2.1(c)(ii).

“Credit Extension” means each Term Loan, the Credit Card Services provided under
the Credit Card Line, or any other extension of credit by Bank to or for the
benefit of Borrower hereunder.

“Equipment” means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.

“Event of Default” has the meaning assigned in Article ‎8.

“Funding Milestone” means Borrower has, after the Closing Date and on or prior
to October 31, 2019: (i) received at least Forty Million Dollars ($40,000,000)
of aggregate gross Cash proceeds from the sale of New Equity or licensing of
Borrower’s Intellectual Property, and (ii) completed public disclosure of the
safety data analysis for LIQ-861 without any materially adverse data.

“GAAP” means generally accepted accounting principles, consistently applied, as
in effect from time to time in the United States.

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations, including but not limited to any sublimit contained herein.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or

3.

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informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.

“Intellectual Property” means all of Borrower’s right, title, and interest in
and to the following:

(a) Copyrights, Trademarks and Patents;

(b) Any and all trade secrets, and any and all intellectual property rights in
computer software and computer software products now or hereafter existing,
created, acquired or held;

(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;

(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

(e) All licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;

(f) All amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents; and

(g) All proceeds and products of the foregoing, including without limitation all
payments under insurance or any indemnity or warranty payable in respect of any
of the foregoing.

“Interest-Only Extension Milestone” means Borrower has received, after the
Closing Date and on or prior to October 31, 2019, at least Forty Million Dollars
($40,000,000) of aggregate gross Cash proceeds from the sale of New Equity or
licensing of Borrower’s Intellectual Property.

“Interest-Only Period” means the period commencing on the Closing Date and
continuing through December 31, 2019; provided however, that if Borrower
provides evidence reasonably satisfactory to Bank that Borrower has achieved the
Interest-Only Extension Milestone, the Interest-Only Period shall be extended to
June 30, 2020.

“Inventory” means all present and future inventory in which Borrower has any
interest.

“Investment” means any beneficial ownership of (including stock, partnership or
limited liability company interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.

“Investment Agreement” means, collectively, Borrower’s stock purchase and other
agreement(s) pursuant to which Borrower most recently issued its preferred
stock.

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

“Letter of Credit” means a commercial or standby letter of credit or similar
undertaking issued by Bank  (or any of its correspondent banks) at Borrower’s
request.

4.

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“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

“Liquidity Event” means Borrower has provided evidence reasonably acceptable to
Bank that Borrower has received at least Forty Million Dollars ($40,000,000) of
gross Cash proceeds from the sale of New Equity.

“Loan Documents” means, collectively, this Agreement, any note or notes executed
by Borrower, and any other document, instrument or agreement entered into in
connection with this Agreement, all as amended or extended from time to time.

“Long-Term Success Fee” is defined in Section 2.4(e).

“Material Adverse Effect” means a material adverse effect on (i) the operations,
business or financial condition of Borrower and its Subsidiaries taken as a
whole, (ii) the ability of Borrower to repay the Obligations or otherwise
perform its obligations under the Loan Documents, or (iii) Borrower’s interest
in, or the value, perfection or priority of Bank’s security interest in the
Collateral.

“Minimum Cash Threshold” is defined in Section 6.7(a).

“Near-Term Success Fee” is defined in Section 2.4(d).

“Negotiable Collateral” means all of Borrower’s present and future letters of
credit of which it is a beneficiary, drafts, instruments (including promissory
notes), securities, documents of title, and chattel paper, and Borrower’s Books
relating to any of the foregoing.

“New Equity” means cash proceeds received after the Closing Date from the sale
or issuance of Borrower’s equity securities to investors.

“Obligations” means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Performance Milestone” means, prior to June 30, 2019, Borrower has both (i)
completed full enrollment of the LIQ-861 Phase 3 trial (LTI-301), and (ii) not
observed any materially adverse data related to the safety of LIQ-861 through
the two-week endpoint.

“Periodic Payments” means all installments or similar recurring payments that
Borrower may now or hereafter become obligated to pay to Bank pursuant to the
terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.

5.

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“Permitted Indebtedness” means:

(a) Indebtedness of Borrower in favor of Bank arising under this Agreement or
any other Loan Document;

(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;

(c) Indebtedness to not to exceed $3,500,000 in the aggregate at any time
(including any amounts existing on the Closing Date and disclosed in the
Schedule pursuant to clause (b) above) secured by a lien described in clause (c)
of the defined term “Permitted Liens,” provided such Indebtedness does not
exceed at the time it is incurred the lesser of the cost or fair market value of
the property financed with such Indebtedness; 

(d) Subordinated Debt;

(e) Indebtedness to trade creditors incurred in the ordinary course of business;
 

(f) Indebtedness incurred in connection with the financing solely of director’s
and officer’s insurance premiums in an aggregate amount at any time outstanding
not to exceed the lesser of premiums owed under such policies or $650,000;  and

(g) Extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon Borrower or its Subsidiary, as the
case may be.

“Permitted Investment” means:

(a) Investments existing on the Closing Date disclosed in the Schedule;

(b) (i) Marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency or any State thereof maturing within
one year from the date of acquisition thereof, (ii) commercial paper maturing no
more than one year from the date of creation thereof and currently having rating
of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s
Investors Service, (iii) Bank’s certificates of deposit maturing no more than
one year from the date of investment therein, and (iv) Bank’s money market
accounts; (v) Investments in regular deposit or checking accounts held with Bank
or as otherwise permitted by, and subject to the terms and conditions of,
Section 6.6 of this Agreement; and (vi) Investments consistent with any
investment policy adopted by the Borrower’s board of directors;

(c) Investments accepted in connection with Permitted Transfers;

(d) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries not to exceed $250,000 in the aggregate
in any fiscal year;

(e) Investments not to exceed $250,000 outstanding in the aggregate at any time
consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase

6.

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plan agreements approved by Borrower’s Board of Directors;

(f) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of Borrower’s business;

(g) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business, provided that this subparagraph (g) shall not
apply to Investments of Borrower in any Subsidiary;

(h) Joint ventures or strategic alliances in the ordinary course of Borrower’s
business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash Investments by Borrower do not exceed $500,000 in the aggregate in any
fiscal year; and

(i) Investments permitted under Section 7.3.

“Permitted Liens” means the following:

(a) Any Liens existing on the Closing Date and disclosed in the Schedule
(excluding Liens to be satisfied with the proceeds of the Credit Extensions) or
arising under this Agreement,  the other Loan Documents, or any other agreement
in favor of Bank;

(b) Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings and for which Borrower maintains adequate reserves;

(c) Liens not to exceed $3,500,000 in the aggregate (including any Liens
existing on the Closing Date and disclosed in the Schedule pursuant to clause
(a) above) at any time (i) upon or in any Equipment (other than Equipment
financed by a Credit Extension) acquired or held by Borrower or any of its
Subsidiaries to secure the purchase price of such Equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
Equipment, or (ii) existing on such Equipment at the time of its acquisition, in
each case provided that the Lien is confined solely to the property so acquired
and improvements thereon, and the proceeds of such Equipment;

(d) Liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by Liens of the type described in clauses (a)
through (c) above, provided that any extension, renewal or replacement Lien
shall be limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; and

(e) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Sections 8.4 (attachment) or 8.8
(judgments);

(f) Liens securing Subordinated Debt, provided that such Liens do not encumber
assets beyond those assets comprising the Collateral;  

7.

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(g) Liens to secure the payment of worker's compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA), provided that
the aggregate of all such Liens shall not exceed $250,000 at any time; and

(h)Leases or subleases of real property granted in the ordinary course of
business (or, if referring to another Person, in the ordinary course of such
Person's business), and leases, subleases, non-exclusive licenses of personal
property (other than Intellectual Property) granted in the ordinary course of
business which (i) do not interfere in any material respect with the business of
Borrower and its Subsidiaries, (ii) do not secure any Indebtedness, and (iii)
are not otherwise prohibited by this Agreement.

“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition
by Borrower or any Subsidiary of: 

(a) Inventory in the ordinary course of business;

(b) licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business;

(c) worn-out, surplus or obsolete Equipment;  

(d) grants of security interests and other Liens that constitute Permitted
Liens; and

(e) other assets of Borrower or its Subsidiaries that do not in the aggregate
exceed $250,000 during any fiscal year.

“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

“Prepayment Fee” is defined in Section 2.4(c).

“Prime Rate” means the variable rate of interest, per annum, most recently
announced by Bank, as its “prime rate,” whether or not such announced rate is
the lowest rate available from Bank; provided that, in the event such rate of
interest is less than zero percent (0.00%), such rate shall be deemed to be zero
percent (0.00%) for purposes of this Agreement.

“Prior Loan Agreement” is defined in the recitals to this Agreement.

“Repayment Period” is the period commencing on the Conversion Date and
continuing through the Term Loan Maturity Date.

“Responsible Officer” means each of the Chief Executive Officer, the Chief
Operating Officer  (if any), the Chief Financial Officer, Vice President of
Finance and the Controller of Borrower, as well as any other officer or employee
identified as an Authorized Officer in the corporate resolution delivered by
Borrower to Bank in connection with this Agreement.

8.

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“Schedule” means the schedule of exceptions attached hereto and approved by
Bank, if any.

“SOS Reports” means the official reports from the Secretaries of State of each
Collateral State, the state where Borrower’s chief executive office is located,
the state of Borrower’s formation and other applicable federal, state or local
government offices identifying all current security interests filed in the
Collateral and Liens of record as of the date of such report.

“Subordinated Debt” means any debt incurred by Borrower that is subordinated in
writing to the debt owing by Borrower to Bank on terms reasonably acceptable to
Bank (and identified as being such by Borrower and Bank).

“Subsidiary” means any corporation, partnership or limited liability company or
joint venture in which (i) any general partnership interest or (ii) more than
50% of the stock, limited liability company interest or joint venture of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity, at the time as of which any determination is
being made, is owned by Borrower, either directly or through an Affiliate.

“Term Loan Maturity Date” means the date occurring four (4) years after the
Closing Date.

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

“Tranche” means any of Tranche A or Tranche B.

“Tranche A” has the meaning assigned in Section 2.1(b)(i).

“Tranche B” has the meaning assigned in Section 2.1(b)(i).

“Tranche A Term Loan” means the Term Loan made under Tranche A.

“Tranche B Term Loan” or “Tranche B Term Loans” means any Term Loan(s) made
under Tranche B.

“Tranche B Availability End Date” means June 30, 2019.

“UNC Debt” means Indebtedness of the Borrower to the University of North
Carolina at Chapel Hill, such Indebtedness being unsecured and not evidenced by
a promissory note.

 

 

9.

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DEBTORLIQUIDIA TECHNOLOGIES, INC.

SECURED PARTY:PACIFIC WESTERN BANK

EXHIBIT B

COLLATERAL DESCRIPTION ATTACHMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:

(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), financial assets, general intangibles (including patents,
trademarks, copyrights, goodwill, payment intangibles, domain names and
software), goods (including fixtures), instruments (including promissory notes),
inventory (including all goods held for sale or lease or to be furnished under a
contract of service, and including returns and repossessions), investment
property (including securities and securities entitlements), letter of credit
rights, money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;

(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment.  All terms
above have the meanings given to them in the North Carolina Uniform Commercial
Code, as amended or supplemented from time to time, including revised Division 9
of the Uniform Commercial Code-Secured Transactions.

Notwithstanding the foregoing, the Collateral shall not include any of the
intellectual property, in any medium, of any kind or nature whatsoever, now or
hereafter owned or acquired or received by Borrower, or in which Borrower now
holds or hereafter acquires or receives any right or interest (collectively, the
“Intellectual Property”); provided, however, that the Collateral shall include
all accounts and general intangibles that consist of rights to payment and
proceeds from the sale, licensing or disposition of all or any part, or rights
in, the foregoing (the “Rights to Payment”). 

Notwithstanding the foregoing, if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in the Rights to Payment, then
the Collateral shall automatically, and effective as of January 6, 2016 include
the Intellectual Property to the extent and only to the extent necessary to
permit perfection of Bank’s security interest in the Rights to Payment, and
further provided, however, that Bank’s enforcement rights with respect to any
security interest in the Intellectual Property shall be absolutely limited to
the Rights to Payment only, and Bank shall have no recourse whatsoever with
respect to the underlying Intellectual Property.

1.

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EXHIBIT C

LOAN ADVANCE/PAYDOWN REQUEST FORM

[Please refer to New Borrower Kit]

 

EXHIBIT D

COMPLIANCE CERTIFICATE

[Please refer to New Borrower Kit]

 

2.

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