LOAN AGREEMENT

 

This Loan Agreement (this “Loan Agreement”), dated as of March 1, 2018, is
entered into between Windtree Therapeutics, Inc., a Delaware corporation with
its principal offices at 2600 Kelly Rd., Suite 100, Warrington, PA 18976
(“Borrower”), and LPH Investments Ltd., a Cayman Islands company organized and
existing under the laws of Cayman Islands with its principal offices at Unit
110-111, Bio-Informatics Centre, No. 2 Science Park West Avenue, Hong Kong
Science Park, Shatin, Hong Kong (“Lender”).

 

RECITALS

 

WHEREAS, effective October 27th, 2017, LPH Investments Limited (“LPH”), a
wholly-owned subsidiary of Lee’s Pharmaceutical Holdings Limited (“Lee’s”),
invested $10,000,000 (the “Investment”) in Borrower and acquired 2,311,604
shares of Borrower’s common stock (the “Shares”), at a price of $4.326 per
share, following which purchase Lee’s beneficially owned 73% of Borrower’s
issued and outstanding shares of common stock (the “Common Stock”);

 

WHEREAS, Lender has agreed to provide Borrower financial support while the
parties pursue potential strategic initiatives intended to provide Borrower
sufficient capital to support its continuing operations, including with respect
to the AEROSURF® clinical development program and that certain License Agreement
dated as of June 12, 2017, by and between Borrower and Lender, pursuant to which
Borrower, as Licensor thereunder, has licensed to certain Lender’s affiliates,
as Licensee thereunder, certain rights with respect to Borrower’s technology
with the aim of advancing the Development, registration and Commercialization of
the Surfaxin Product, Surfaxin LS®, Aerosurf®, and any other pharmaceutical
composition containing synthetic KL4 Surfactant in the Licensed Territory (as
such terms are defined in the License Agreement);

 

WHEREAS, to provide sufficient time for the parties to identify and advance the
potential strategic initiatives, including one or more potential strategic
transactions or equity offerings resulting in minimum proceeds to Borrower of at
least $9 Million Dollars in cash (after taking into account the funds advanced
under this Agreement and the $1.5 million loan under the Loan Agreement dated
January 10, 2018, the “Funding Event”), Lender has agreed to advance funds to
Borrower on the terms provided in this Loan Agreement; and

 

WHEREAS, to secure its obligations to Lender hereunder and under that certain
loan agreement by and between Borrower and Lender, dated as of January 10, 2018
(the “First Loan Agreement”), Borrower wishes to grant Lender a continuing first
priority lien and security interest in all assets of Borrower.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

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ARTICLE I

 

DEFINITIONS

 

“Contractual Obligation” means, as to any entity, any provision of any security
issued by such entity or of any agreement, instrument or other undertaking to
which such entity is a party or by which it or any of its property is bound.

 

“Loan” means the loan made by Lender to Borrower in the amount of One Million
Dollars ($1,000,000), which amount shall be disbursed in cash no later than
March 2, 2018.

 

“Encumbrance” has the meaning set forth in Section 2.5.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect on, the operations, business, properties, liabilities (actual or
contingent), or condition (financial or otherwise) of Borrower; or (b) a
material adverse effect on (i) the ability of Borrower to perform its
obligations under this Loan Agreement, (ii) the legality, validity, binding
effect or enforceability against Borrower of any loan agreement to which it is a
party or (iii) the rights, remedies and benefits available to, or conferred upon
Lender under this Loan Agreement.

 

“Maturity Date” means the earlier of (i) unless otherwise agreed, the closing
date (the “Closing Date”) of the Funding Event, except that, to the extent that
the Funding Event is completed through a series of transactions, then the
Maturity Date shall be the last Closing Date to occur with respect to the
Funding Event, and (ii) December 31, 2018.

 

ARTICLE II

 

TERM LOAN

 

2.1     Agreement to Make Loan. On the terms and subject to the conditions of
this Loan Agreement, Lender agrees to fund the Loan to Borrower in cash no later
than March 2, 2018. The proceeds of the Loan shall be paid by wire transfer to
an account designated in writing by Borrower.

 

2.2     Repayment Terms. The entire unpaid principal balance of the Loan,
together with accrued interest thereon, shall be due and payable on the Maturity
Date. For the avoidance of doubt, upon the occurrence of the Funding Event,
Borrower is obligated to repay the entire outstanding principal amount of the
Loan plus accrued and unpaid interest thereon, if the same has not been repaid
in full earlier.

 

2.3     Interest Rate. The Loan shall bear interest on the outstanding principal
amount of the Loan at a rate per annum equal to six percent (6%) (“the
Contracted Interest Rate”). If Borrower fails to repay the principal amount of
the Loan on the due date, Lender shall charge Borrower interest at a rate equal
to the lower of 30% above the Contracted Interest Rate (referred to as the
“Defaulted Interest Rate”) or the maximum interest rate permitted by law on
overdue sums from and including the due date to the actual payment date. If
Borrower fails to repay the accrued interest and default interest on the due
date, the Defaulted Interest Rate shall be calculated monthly on the interest
payment date.

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2.4     Prepayment. Borrower may, at its option, prepay the Loan, in whole or in
part, prior to the Maturity Date. Each prepayment shall include interest on the
amount prepaid to the date of prepayment.

 

2.5     Negative Pledge. Borrower shall not, without the prior written consent
of the Lender, which consent shall not be unreasonably withheld or delayed,
create, suffer to exist, or permit to subsist, any mortgage, pledge, lien,
charge, privilege, priority, encumbrance or other security interest of any kind
or nature whatsoever and howsoever arising (referred to as the “Encumbrance”)
upon all or any part of its present or future undertakings, assets, or revenues,
except for the following (“Permitted Encumbrances”):

 

(a) any such Encumbrance created in the ordinary course of the Borrower’s
development activities and business transactions, including without limitation,

 

(i) with respect to accounts maintained in the ordinary course and held at
financial institutions to secure standard fees for services charged by such
institutions, including liens of a collection bank arising in the ordinary
course;

 

(ii) obligations in respect of purchase money financing, capital lease
obligations and equipment financing facilities covering existing and newly-
acquired equipment, including for the acquisition, installation, qualification
and validation of such equipment;

 

(iii) liens in favor of landlords under real property leases granted by
Borrower, and letter of credit deposits related thereto;

 

(iv) liens related to workers’ compensation, unemployment insurance and other
social security legislation;

 

(v) liens arising under leases, licenses or subleases granted to others not
interfering in any material respect with the business of Borrower; and

 

(vi) and liens on advances in favor of a vendor providing goods or services;

 

(b) any Encumbrance in favor of Lender;

 

(c) statutory liens created by operation of law and Encumbrances arising in
connection with outstanding contractual obligations; and

 

(d) liens for taxes, assessments or governmental charges or levies.

 

2.6     Representations and Warranties. Borrower represents and warrants to
Lender that:

 

(a) No Encumbrance. All of the Borrower’s assets are free and clear of any
Encumbrance as of the date hereof except for Permitted Encumbrances;

 

(b) Ownership of Properties. Borrower has good record and marketable title in
fee simple to, or valid leasehold interests in, all real property necessary or
used in the ordinary conduct of its business, except for such defects in title
that, either individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect; and

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(c) Litigation. There are no actions, suits, proceedings, claims, disputes or
investigations pending or, to the knowledge of Borrower, threatened, at law, in
equity, in arbitration or before any governmental authority, by or against
Borrower or against any of its properties or revenues that (a) either
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect or (b) purport to affect or pertain to this Loan Agreement or any
other loan agreement or any of the transactions contemplated hereby.

 

2.7     Security Interest. Borrower hereby agrees to grant to Lender a
continuing first priority lien and security interest in all of Borrower’s assets
to secure its obligations hereunder and under the First Loan Agreement. The
grant of such continuing first priority lien and security interest shall be
memorialized in and evidenced by a security agreement to be entered into by
Borrower and Lender (the “Security Agreement”).

 

ARTICLE III

 

DEFAULTS AND REMEDIES

 

3.1      Events of Default. Any one or more of the following events shall
constitute an event of default hereunder (an “Event of Default”):

 

a)     Borrower fails to make any required payment required on the Loan within
five (5) days after Borrower’s receipt of written notice of default from Lender;

 

b)     Borrower breaches any representation, warranty, covenant or pledge made
by Borrower in this Loan Agreement or otherwise in connection with the Loan;

 

c)     if, pursuant to the United States Bankruptcy Code or any other federal or
state law relating to insolvency or relief of debtors (a “Bankruptcy Law”),
Borrower shall (i) commence a voluntary case or proceeding; (ii) consent to the
entry of an order for relief against it in an involuntary case; (iii) consent to
the appointment of a trustee, receiver, assignee, liquidator or similar
official; (iv) make an assignment for the benefit of its creditors; or (v) admit
in writing its inability to pay its debts as they become due; or

 

d)     if a court enters an order or decree under any Bankruptcy Law that (i) is
for relief against Borrower in an involuntary case, (ii) appoints a trustee,
receiver, assignee, liquidator or similar official for Borrower or substantially
all of Borrower’s properties, or (iii) orders the liquidation of the Borrower.

 

3.2      Remedies. Upon the occurrence of an Event of Default, Lender, at its
option, may take one or more of the following remedial steps:

 

a)     Upon notice to Borrower, the entire principal amount of the Loan shall
become immediately due and payable, without presentment, demand for payment,
protest, notice of nonpayment or protest, notice of dishonor or any other notice
or demand, all of which are hereby expressly waived;

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b)     Take any action at law or in equity to collect from Borrower the payments
then due and thereafter to become due under the Loan or to enforce performance
and observance of any obligation or agreement of Borrower under the Loan; and

 

c)     Resort to any remedy available to Lender under the Security Agreement.

 

3.3     No Remedy Exclusive. No remedy of Lender is intended to be exclusive of
any other available remedy, but each such remedy shall be cumulative and shall
be in addition to every other remedy given under this Loan Agreement or by
applicable law. No delay or omission to exercise any right or power accruing
upon any Event of Default shall impair any such right or power or shall be
construed to be a waiver thereof.

 

ARTICLE IV

 

MISCELLANEOUS

 

4.1     Notice. Any notice to a party to this Agreement shall be in writing and
sent to the respective addresses set forth in the introductory paragraph of this
Agreement (or such other address as a party shall designate in writing) by
certified mail, return receipt requested, or by nationally recognized overnight
courier. All notices shall be effective upon the earlier of (a) three days after
being sent or (b) receipt.

 

4.2     Successors and Assigns. This Loan Agreement contains the entire
agreement of the parties with respect to its subject matter and may not be
amended except by a written instrument signed by the party to be charged with
such amendment. This Loan Agreement shall be binding on and inure to the benefit
of the successors and assigns of the parties, except that the Borrower shall not
have the right to assign its rights or obligations hereunder.

 

4.3     Judicial Proceedings. This Loan Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws principles. All claims or actions arising from this Loan
Agreement shall be litigated in the federal courts for the Southern District of
New York or the state courts located in the county of New York. Borrower and
Lender hereby irrevocably submit to the jurisdiction of such courts and waive
any claim that any action brought in such a court has been brought in an
inconvenient forum

 

4.4     Captions. The section headings of this Loan Agreement are for reference
purposes only and shall not affect the interpretation of this Agreement.

 

4.5     Severability. If any provision of this Loan Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision.

 

4.6     Waiver of Jury Trial. BORROWER AND LENDER HEREBY WAIVE ALL RIGHTS
TO DEMAND A JURY TRIAL FOR ANY ACTIONS ARISING FROM THIS LOAN AGREEMENT.

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4.7     Amendment of the First Loan Agreement. Borrower and Lender hereby amend
the First Loan Agreement in all relevant respects such that, after giving
effects to such amendments, the First Loan Agreement will be conformed to the
terms of this Loan Agreement in all material respects except for the principal
amount of the loan thereunder.

 

 

 

[Signature page follows]

 

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In Witness Whereof, the parties hereto have caused this Loan Agreement to be
executed by their duly authorized officers as of the date first written above.

 

 

WINDTREE THERAPEUTICS, INC.                                                     
             LPH INVESTMENTS LTD.

 

 

              By:     /s/ Craig Fraser                                          
                                                       By:     /s/ Benjamin Li,
Ph.D.          

              Name:     Craig Fraser                                           
                                                      Name:     Benjamin Li,
Ph.D.

              Title:     President and Chief Executive Officer                 
                                         Title:     Chief Executive Officer