Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of July 24, 2017
(the “Effective Date”) between SILICON VALLEY BANK, a California corporation
with a loan production office located at 380 Interlocken Crescent, Suite 600,
Broomfield, Colorado 80021 (“Bank”), and GEMPHIRE THERAPEUTICS INC., a Delaware
corporation with offices located at 17199 N. Laurel Park Drive, Suite 401,
Livonia, Michigan 48152 (“Borrower”), provides the terms on which Bank shall
lend to Borrower and Borrower shall repay Bank.  The parties agree as follows:

1. ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP.  Calculations and determinations must be made following GAAP.  Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13.  All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

2. LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay.  Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

2.1.1 Term Loan.

(a) Availability.  Bank shall make a growth capital loan in the maximum
principal amount not to exceed Fifteen Million Dollars ($15,000,000.00) (the
“Term Loan”) available to Borrower, funded in three (3) tranches, as follows:
(i) subject to the satisfaction of the terms and conditions of this Agreement,
an initial tranche of the Term Loan shall be available on the Effective Date,
and shall be in an original principal amount not less than Five Million Dollars
($5,000,000.00) but not to exceed Ten Million Dollars ($10,000,000.00) (the
“Tranche A Amount”); (ii) subject to the satisfaction of the terms and
conditions of this Agreement, a second tranche of the Term Loan shall be
available during the Tranche B Draw Period, and shall be in an original
principal amount equal to the Tranche B Availability Amount (the “Tranche B
Amount”; the Bank’s obligation to fund the Tranche B Amount terminates on the
expiration of the Tranche B Draw Period); and (iii) upon the occurrence of the
Tranche C Availability Event, and subject to the satisfaction of the terms and
conditions of this Agreement, a third tranche of the Term Loan shall be
available during the Tranche C Draw Period, and shall be in an original
principal amount equal to the Tranche C Availability Amount (the “Tranche C
Amount”; the Bank’s obligation to fund the Tranche C Amount terminates on the
termination of the Tranche C Draw Period).   In no event shall the aggregate
principal amount of the funded Term Loan exceed Fifteen Million Dollars
($15,000,000.00).

(b) Repayment.  Commencing on the first day of the month following the month in
which a Funding Date occurs, and thereafter on the first day of each successive
calendar month until the Term Loan is paid in full, Borrower shall make monthly
payments of interest with respect to the outstanding principal amount of the
Term Loan.  Commencing on the Term Loan Amortization Date, and on the first day
of each month thereafter, Borrower shall repay the outstanding principal balance
of the Term Loan in accordance with the Term Loan Amortization Schedule (each
payment of interest and/or payment of principal on the Tranche A Amount, Tranche
B Amount and/or Tranche C Amount being a “Term Loan Payment”).  Borrower’s final
Term Loan Payment, due on the Term Loan Maturity Date, shall include all
outstanding principal and accrued and unpaid interest under the Tranche A
Amount, Tranche B Amount and/or Tranche C Amount, as applicable.  Once repaid,
the Term Loan, or any portion thereof, may not be reborrowed.

(c) Mandatory Prepayment Upon an Acceleration.  If the Term Loan is accelerated
by Bank following the occurrence and during the continuance of an Event of
Default, Borrower shall immediately pay to Bank an amount equal to the sum of
(i) all outstanding principal plus accrued and unpaid interest with respect to
the Term Loan, (ii) the Final Payment Fee, (iii) the Success Fee, if applicable,
(iv) the Prepayment Fee, if applicable, and (v) all other sums, if any, that
shall have become due and payable with respect to the Term Loan, including
interest at the Default Rate with respect to any past due amounts.

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(d) Optional Prepayment.  Borrower shall have the option to prepay all, but not
less than all, of the Term Loan, provided Borrower (i) delivers written notice
to Bank of its election to prepay the Term Loan at least three (3) days prior to
such prepayment, and (ii) pays, on the date of such prepayment (A) the
outstanding principal plus accrued and unpaid interest with respect to the Term
Loan, (B) the Final Payment Fee, (C) the Success Fee, if applicable, (D) the
Prepayment Fee, if applicable, and (E) all other sums, if any, that shall have
become due and payable with respect to the Term Loan, including interest at the
Default Rate with respect to any past due amounts. 

(e) Term Loan Cash Security Event. 

(i)In the event a Positive Clinical Trial Event does not occur on or prior to
March 31, 2018, Borrower shall have the option, on March 31, 2018, to either (i)
provide cash security and maintain a cash balance at all time in a restricted
account at Bank, in an amount equal to not less than fifty percent (50%) of the
outstanding Obligations of Borrower owed to Bank; or (ii) prepay all, but not
less than all, of the Term Loan, provided Borrower (X) delivers written notice
to Bank of its election to prepay the Term Loan at least three (3) days prior to
such prepayment, and (Y) pays, on the date of such prepayment (I) the
outstanding principal plus accrued and unpaid interest with respect to the Term
Loan, (II) the Final Payment Fee, (III) the Success Fee, if applicable, and (IV)
all other sums, if any, that shall have become due and payable with respect to
the Term Loan, including interest at the Default Rate with respect to any past
due amounts.  For the avoidance of doubt, no Prepayment Fee shall be payable by
Borrower as a result of a prepayment of the Term Loan under this Section
2.1.1(e)(i).

(ii)In the event a Pre-Clinical Event does not occur on or prior to July 31,
2018, Borrower shall have the option, on July 31, 2018, to either (i) provide
cash security and maintain a cash balance at all time in a restricted account at
Bank, in an amount equal to not less than one hundred percent (100%) of the
outstanding Obligations of Borrower owed to Bank; or (ii) prepay all, but not
less than all, of the Term Loan, provided Borrower (X) delivers written notice
to Bank of its election to prepay the Term Loan at least three (3) days prior to
such prepayment, and (Y) pays, on the date of such prepayment (I) the
outstanding principal plus accrued and unpaid interest with respect to the Term
Loan, (II) the Final Payment Fee, (III) the Success Fee, if applicable, and (IV)
all other sums, if any, that shall have become due and payable with respect to
the Term Loan, including interest at the Default Rate with respect to any past
due amounts.  For the avoidance of doubt, no Prepayment Fee shall be payable by
Borrower as a result of a prepayment of the Term Loan under this Section
2.1.1(e)(ii).  The providing of cash security or repayment in full of the Term
Loan under Section 2.1.1(e) (i) and/or (ii) being a “Term Loan Cash Security
Event”.

2.2 Payment of Interest on the Credit Extensions. 

(a) Interest Rate – Term Loan.  Subject to Section 2.2(b), the principal amount
outstanding under the Term Loan shall accrue interest at a floating per annum
rate equal to the Prime Rate, which interest shall be payable monthly.

(b) Default Rate.  Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall bear interest at a rate per annum which
is up to five percentage points (5.00%) above the rate that is otherwise
applicable thereto (the “Default Rate”).  Fees and expenses which are required
to be paid by Borrower pursuant to the Loan Documents (including, without
limitation, Bank Expenses) but are not paid when due (after giving effect to any
applicable grace or cure period) shall bear interest until paid at a rate equal
to the highest rate applicable to the Obligations.  Payment or acceptance of the
increased interest rate provided in this Section 2.2(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.

(c) Adjustment to Interest Rate.  Changes to the interest rate of any Credit
Extension based on changes to the Prime Rate shall be effective on the effective
date of any change to the Prime Rate and to the extent of any such change.

(d) Payment; Interest Computation.  Interest is payable monthly on the first
calendar day of each month and shall be computed on the basis of a 360-day year
for the actual number of days elapsed.  In computing interest, (i) all payments
received after 12:00 noon Pacific time on any day shall be deemed received at
the opening of business on the next Business Day, and (ii) the date of the
making of any Credit Extension shall be included and

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the date of payment shall be excluded; provided,  however, that if any Credit
Extension is repaid on the same day on which it is made, such day shall be
included in computing interest on such Credit Extension.

2.3 Fees.  Borrower shall pay to Bank:

(a) Final Payment Fee.  A fee (which fee is in addition to and not a
substitution for the regular monthly payments of principal plus accrued
interest, and shall be referred to herein as the “Final Payment Fee”), due on
the earliest to occur of (a) the Term Loan Maturity Date, (b) the acceleration
of the Term Loan, or (c) the prepayment of the Term Loan in full pursuant to
Section 2.1.1(c), 2.1.1(d) and/or Section 2.1.1(e) equal to (i) the original
aggregate principal amount of the Term Loan funded by Bank and drawn by
Borrower; multiplied by (ii) ten percent (10.00%);

(b) Prepayment Fee.  Upon termination of this Agreement for any reason prior to
the Term Loan Maturity Date, in addition to the payment of any other amounts
then-owing, a prepayment fee (the “Prepayment Fee”) in an amount equal to (i)
two percent (2.00%) of the funded amount of the Term Loan if such prepayment
occurs prior to the first anniversary of the Effective Date, or (ii) one percent
(1.00%) of the funded amount of the Term Loan if such termination occurs on or
at any time after the first anniversary of the Effective Date; provided that no
termination fee shall be charged if (i) the credit facility hereunder is
replaced with a new facility from Bank; or (ii) the credit facility is repaid in
full in connection with the occurrence of the Term Loan Cash Security Event;

(c) Success Fee.  In the event that a Liquidity Event occurs on or before 5:00
PM, Eastern time, on July 24, 2024 (seven (7) years after the Effective Date),
then in connection with such Liquidity Event and simultaneously with the closing
thereof, the Borrower shall pay to Bank a success fee (the “Success Fee”) in an
amount equal to three and one-half of one percent (3.50%) of the aggregate
funded principal amount of the Term Loan (notwithstanding any repayment
thereof).  The Success Fee shall be fully earned by the Bank upon and as of the
closing of a Liquidity Event and shall be paid in cash in immediately available
funds to the Bank at such closing.  The failure of Borrower to pay the Success
Fee as and when due shall result in an immediate Event of Default, for which
there shall be no grace or cure period, and the unpaid portion of the Success
Fee shall bear interest, payable on demand by Bank, at the Default Rate, or the
highest rate permitted under applicable law, if less, until paid in full.  The
Borrower’s obligation to pay the Success Fee, and the terms of this Section
2.3(c) shall survive the repayment of the Obligations and any expiration or
termination of this Agreement; and

(d) Bank Expenses.  All Bank Expenses (including reasonable attorneys’ fees and
expenses for documentation and negotiation of this Agreement) incurred through
and after the Effective Date, when due (or, if no stated due date, upon demand
by Bank).

(e) Fees Fully Earned.  Unless otherwise provided in this Agreement or in a
separate writing by Bank, Borrower shall not be entitled to any credit, rebate,
or repayment of any fees earned by Bank pursuant to this Agreement
notwithstanding any termination of this Agreement or the suspension or
termination of Bank’s obligation to make loans and advances hereunder.  Bank may
deduct amounts owing by Borrower under the clauses of this Section 2.3 pursuant
to the terms of Section 2.4(c).  Bank shall provide Borrower written notice of
deductions made from the Designated Deposit Account pursuant to the terms of the
clauses of this Section 2.3.

2.4 Payments; Application of Payments; Debit of Accounts.

(a) All payments to be made by Borrower under any Loan Document shall be made in
immediately available funds in Dollars, without setoff or counterclaim, before
12:00 noon Pacific time on the date when due.  Payments of principal and/or
interest received after 12:00 noon Pacific time are considered received at the
opening of business on the next Business Day.  When a payment is due on a day
that is not a Business Day, the payment shall be due the next Business Day, and
additional fees or interest, as applicable, shall continue to accrue until
paid. 

(b) Bank has the exclusive right to determine the order and manner in which all
payments with respect to the Obligations may be applied.  Borrower shall have no
right to specify the order or the accounts to which Bank shall allocate or apply
any payments required to be made by Borrower to Bank or otherwise received by
Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.

(c) Bank may debit any of Borrower’s deposit accounts, including the Designated
Deposit Account, for principal and interest payments or any other amounts
Borrower owes Bank when due; provided that Bank agrees to (i) first debit the
Designated Deposit Account for any such amounts and (ii) only debit Borrower’s
other

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deposit accounts (excluding any Excluded Accounts) if the Designated Deposit
Account does not contain sufficient funds to satisfy the amounts then owing by
Borrower to Bank.  These debits shall not constitute a set-off.

2.5 Taxes.

(a)Withholding.  Except as provided in the following sentence, payments received
by Bank from Borrower under this Agreement will be made free and clear of and
without deduction for any and all Taxes.  If at any time any Governmental
Authority, applicable law, regulation or international agreement requires
Borrower to make any withholding or deduction of Taxes from any such payment or
other sum payable hereunder to Bank or any assignee thereof and such Taxes are
Indemnified Taxes, Borrower hereby covenants and agrees that the amount due from
Borrower with respect to such payment or other sum payable hereunder will be
increased to the extent necessary to ensure that, after the making of such
required withholding or deduction, Bank or its assignee receives a net sum equal
to the sum which it would have received had no withholding or deduction been
required, and Borrower shall pay the full amount withheld or deducted to the
relevant Governmental Authority.  Borrower will, upon request, furnish Bank with
proof reasonably satisfactory to Bank indicating that Borrower has made such
withholding payment; provided,  however, that Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower. For the avoidance of
doubt, in no event shall Borrower be obligated to make any payment to Bank or
any successor or assign under this Section 2.5(a), or to otherwise indemnify and
hold Bank or any successor or assign harmless, on account of the loans hereunder
failing to qualify for the portfolio interest exemption under the Internal
Revenue Code (notwithstanding, without limitation, the provision of any
certificate with respect to such exemption by Bank or any successor assign in
accordance with Section 2.5(b)).

(b)Status of Lenders. 

(i)If Bank or any assignee hereunder is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Loan
Document, Bank (on or prior to the Effective Date) or such assignee (on or prior
to the date of the assignment pursuant to which it becomes a lender hereunder)
shall deliver to Borrower such properly completed and executed documentation
(including, without limitation, Internal Revenue Service Form W-8BEN-E or a
certificate reasonably satisfactory to Borrower with respect to such person’s
eligibility for the portfolio interest exemption under the Internal Revenue
Code) as will permit such payments to be made without withholding or at a
reduced rate of withholding.  In addition, Bank and any assignee hereunder shall
deliver such other documentation prescribed by applicable law or reasonably
requested by Borrower as will enable Borrower to determine whether or not Bank
or such assignee is subject to backup withholding or information reporting
requirements.

(ii)Without limiting the generality of Section 2.5(b)(i), Bank and any assignee
that is a U.S. person within the meaning of Section 7701(a)(3) of the Internal
Revenue Code shall provide two properly completed and duly executed copies of
IRS Form W-9 (or any successor or other applicable form) to Borrower certifying
that such person is exempt from United States backup withholding Tax or
otherwise prove that it is entitled to such an exemption.

(iii)If a payment made by Borrower under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if the recipient were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) and 1472(b) of the Internal Revenue Code, as
applicable), such recipient shall deliver to Borrower at the time or times
prescribed by law and at such time or times reasonably requested by Borrower
such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i)of the Internal Revenue Code) and such additional
documentation reasonably requested by Borrower as may be necessary for Borrower
to comply with its obligations under FATCA and to determine that such recipient
has complied with such recipient’s obligations under FATCA or to determine the
amount to deduct and withhold from such payment.  Solely for purposes of this
clause (iii), “FATCA” shall include any amendments made to FATCA after the date
of this Agreement.

(iv)To the extent that a form provided pursuant to this Section 2.5(b) is
rendered obsolete or inaccurate in any material respect as result of change in
circumstances with respect to the status of Bank or any assignee.  Bank or such
assignee shall deliver to Borrower revised forms necessary to confirm or
establish the entitlement to such exemption from United States backup
withholding Tax.

(c)The agreements and obligations of the parties contained in this Section 2.5
shall survive the termination of this Agreement.

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3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, such documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation: 

(a) duly executed signatures to the Loan Documents;

(b) duly executed signatures to the Control Agreement with JPMorgan Chase Bank,
N.A.;

(c) the Operating Documents and long-form good standing certificates of Borrower
certified by the Secretary of State (or equivalent agency) of Borrower’s
jurisdiction of organization or formation and each jurisdiction in which
Borrower is qualified to conduct business, each dated as of a date no earlier
than thirty (30) days prior to the Effective Date;

(d) duly executed signatures to the completed Borrowing Resolutions for
Borrower;

(e) certified copies, dated as of a recent date, of financing statement
searches, as Bank may request, accompanied by written evidence (including any
UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

(f) the Perfection Certificate of Borrower, together with the duly executed
signature thereto;

(g) [reserved];

(h) [reserved];

(i) a legal opinion of Borrower’s counsel dated as of the Effective Date
together with the duly executed signature thereto;

(j) [reserved]; and

(k) payment of the fees and Bank Expenses then due as specified in Section 2.3
hereof.

3.2 Conditions Precedent to all Credit Extensions.  Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following conditions precedent:

(a) timely receipt of an executed Payment/Advance Form;  and

(b) the representations and warranties in this Agreement shall be true,
accurate, and complete in all material respects on the date of the
Payment/Advance Form and on the Funding Date of each Credit Extension; provided,
 however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the Credit
Extension.  Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties in this Agreement remain true,
accurate, and complete in all material respects; provided,  however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided,  further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date.

3.3 Covenant to Deliver.   Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition precedent to any
Credit Extension.  Borrower expressly agrees that a Credit Extension made prior
to the receipt by Bank of any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.

3.4 Procedures for Borrowing. 

(a) Term Loan.  Subject to the prior satisfaction of all other applicable
conditions to the making of any Term Loan set forth in this Agreement, Borrower
shall deliver to Bank by electronic mail or facsimile a Payment/Advance Form and
the request for such Term Loan.

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4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest.  Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof. 

Borrower acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank.  Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to
Permitted Liens that are permitted pursuant to the terms of this Agreement to
have superior priority to Bank’s Lien in this Agreement).

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations) are repaid in
full in cash.  Upon payment in full in cash of the Obligations (other than
inchoate indemnity obligations) and at such time as Bank’s obligation to make
Credit Extensions has terminated, Bank shall, at the sole cost and expense of
Borrower, release its Liens in the Collateral and all rights therein shall
revert to Borrower.  In the event (x) all Obligations (other than inchoate
indemnity obligations), except for Bank Services, are satisfied in full, and (y)
this Agreement is terminated, Bank shall terminate the security interest granted
herein upon Borrower providing cash collateral acceptable to Bank in its good
faith business judgment for Bank Services, if any.  In the event such Bank
Services consist of outstanding Letters of Credit, Borrower shall provide to
Bank cash collateral in an amount equal to (x) if such Letters of Credit are
denominated in Dollars, then at least one hundred five percent (105.0%); and
(y) if such Letters of Credit are denominated in a Foreign Currency, then at
least one hundred ten percent (110.0%), of the Dollar Equivalent of the face
amount of all such Letters of Credit plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its business
judgment), to secure all of the Obligations relating  to such  Letters of
Credit.

4.2 Priority of Security Interest.  Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral (subject only
to Permitted Liens that are permitted pursuant to the terms of this Agreement to
have superior priority to Bank’s Lien under this Agreement).  If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.

4.3 Authorization to File Financing Statements.  Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Bank under the
Code.  Such financing statements may indicate the Collateral as “all assets of
the Debtor” or words of similar effect, or as being of an equal or lesser scope,
or with greater detail, all in Bank’s discretion.

5. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization, Authorization; Power and Authority.  Borrower is duly
existing and in good standing as a Registered Organization in its jurisdiction
of formation and is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a material adverse effect on
Borrower’s business.  In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower, entitled “Perfection
Certificate”.  Borrower represents and warrants to Bank that (a) Borrower’s
exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof; (b) Borrower is an organization of the type and is
organized in the jurisdiction set forth in the Perfection Certificate; (c) the
Perfection Certificate accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth Borrower’s place of business, or,
if more than one, its chief executive office as well as Borrower’s mailing
address (if different than its chief executive office); (e) except as set forth
in the Perfection Certificate, Borrower (and each of its predecessors) has not,
in the past five (5) years, changed its jurisdiction of formation,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its

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Subsidiaries is accurate and complete (it being understood and agreed that
Borrower may from time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one or more
specific provisions in this Agreement). 

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) conflict with, contravene, constitute a default or
breach under, or result in or permit the termination or acceleration of, any
material agreement by which Borrower is bound.  Borrower is not in default under
any agreement to which it is a party or by which it is bound in which the
default could reasonably be expected to have a material adverse effect on
Borrower’s business.

5.2 Collateral.  Borrower has good title to, rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens.  Borrower
has no Collateral Accounts at or with any bank or financial institution other
than Bank or Bank’s Affiliates except for the Collateral Accounts described in
the Perfection Certificate delivered to Bank in connection herewith and which
Borrower has taken such actions as are necessary to give Bank a perfected
security interest therein, pursuant to the terms, and subject to the exclusions,
of Section 6.6(b).  The Accounts are bona fide, existing obligations of the
Account Debtors.  

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate.  None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2. 

All Inventory is in all material respects of good and marketable quality, free
from material defects. 

Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) non-exclusive licenses granted to its customers
in the ordinary course of business, (b) over-the-counter software that is
commercially available to the public, and (c) material Intellectual Property
licensed to Borrower and noted on the Perfection Certificate.  Each Patent which
it owns or purports to own and which is material to Borrower’s business, that is
granted, is valid and enforceable, and no part of the Intellectual Property
which Borrower owns or purports to own and which is material to Borrower’s
business has been judged invalid or unenforceable, in whole or in part.  To the
best of Borrower’s knowledge, no claim has been made that any part of the
Intellectual Property violates the rights of any third party except to the
extent such claim would not reasonably be expected to have a material adverse
effect on Borrower’s business. 

Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is it bound by, any Restricted License.

5.3 Litigation.  Except as disclosed in the Perfection Certificate and as
otherwise disclosed to Bank in writing from time to time, there are no actions
or proceedings pending or, to the knowledge of any Responsible Officer,
threatened in writing by or against Borrower or any of its Subsidiaries
involving more than, individually or in the aggregate, Two Hundred Thousand
Dollars ($200,000.00).

5.4 Financial Statements; Financial Condition.  All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations.  There has not been any material
deterioration in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Bank (which, solely for
purposes of the Effective Date closing, are the financial statements dated as of
March 31, 2017 delivered by Borrower to Bank).

5.5 Solvency.  The fair salable value of Borrower’s consolidated assets
(including goodwill minus disposition costs) exceeds the fair value of
Borrower’s liabilities; Borrower is not left with unreasonably small capital
after the transactions in this Agreement; and Borrower is able to pay its debts
(including trade debts) as they mature.

5.6 Regulatory Compliance.  Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act of
1940, as amended.  Borrower is not engaged as one

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of its important activities in extending credit for margin stock (under
Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower (a)
has complied in all material respects with all Requirements of Law, and (b) has
not violated any Requirements of Law the violation of which could reasonably be
expected to have a material adverse effect on its business.  None of Borrower’s
or any of its Subsidiaries’ properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally.  Borrower and each of its Subsidiaries 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
to continue their respective businesses as currently conducted.

5.7 Subsidiaries; Investments.  Borrower does not own any stock, partnership, or
other ownership interest or other equity securities except for Permitted
Investments.

5.8 Tax Returns and Payments; Pension Contributions.  Borrower has timely filed
all required income and other Tax returns and reports, and Borrower has timely
paid all foreign, federal, state and local Taxes owed by Borrower except to the
extent (i) such Taxes are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, so long as such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor or (ii) such Taxes do not
exceed an amount of One Hundred Thousand Dollars ($100,000.00).

To the extent Borrower defers payment of any contested Taxes, Borrower shall (i)
notify Bank in writing of the commencement of, and any material development in,
the proceedings, and (ii) post bonds or take any other steps required to prevent
the Governmental Authority levying such contested Taxes from obtaining a Lien
upon any of the Collateral that is other than a “Permitted Lien.”  Borrower is
unaware of any written claims or adjustments proposed by a Governmental
Authority for any of Borrower’s prior Tax years which would result in additional
Taxes becoming due and payable by Borrower.  Borrower has paid all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete termination of, or
permitted the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any liability of Borrower, including
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

5.9 Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions
solely as working capital and to fund its general business requirements and not
for personal, family, household or agricultural purposes.

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

5.11 Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with a similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of any
Responsible Officer.

6. AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance. 

(a) Maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower’s business or operations.  Borrower
shall comply, and have each Subsidiary comply, in all material respects, with
all laws, ordinances and regulations to which it is subject.

(b) Obtain all of the Governmental Approvals necessary for the performance by
Borrower of its obligations under the Loan Documents to which it is a party and
the grant of a security interest to Bank in all of the Collateral.  Borrower
shall promptly provide copies of any such obtained Governmental Approvals to
Bank.

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6.2 Financial Statements, Reports, Certificates.  Provide Bank with the
following:

(a) Monthly Cash Reconciliation Reports.  Within thirty (30) days after the end
of each month, a monthly cash reconciliation report, in form and substance
reasonably acceptable to Bank, and in any event detailing Borrower’s average
daily account balances during such month maintained at financial institutions
other than Bank;

(b) Quarterly Financial Statements.  As soon as available, but no later than
forty-five (45) days after the last day of each fiscal quarter, a company
prepared consolidated balance sheet and income statement covering Borrower’s
consolidated operations for such fiscal quarter certified by a Responsible
Officer and in a form acceptable to Bank (the “Quarterly Financial
Statements”); 

(c) Quarterly Compliance Certificate.  Within forty-five (45) days after the
last day of each fiscal quarter and together with the Quarterly Financial
Statements, a duly completed Compliance Certificate signed by a Responsible
Officer, certifying that as of the end of such fiscal quarter, Borrower was in
full compliance with all of the terms and conditions of this Agreement, and
setting forth such other information as Bank may reasonably request;

(d) Annual Operating Budget and Financial Projections.  Within thirty (30) days
after the end of each fiscal year of Borrower, (i) annual operating budgets
(including income statements, balance sheets and cash flow statements, by month)
for the upcoming fiscal year of Borrower, and (ii) annual financial projections
for the following fiscal year (on a quarterly basis) as approved by Borrower’s
board of directors, together with any related business forecasts used in the
preparation of such annual financial projections;

(e) Annual Audited Financial Statements.  As soon as available, but no later
than one hundred twenty (120) days after the last day of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion (other than with respect to a
going concern qualification) on the financial statements from an independent
certified public accounting firm reasonably acceptable to Bank (it being agreed
that Ernst & Young LLP is acceptable to Bank);

(f) Other Statements.  Within five (5) days of delivery, copies of all material
statements, reports and notices made available to Borrower’s security holders or
to any holders of Subordinated Debt;

(g) SEC Filings.  Within five (5) days of filing, copies of all periodic and
other reports, proxy statements and other materials filed by Borrower with the
SEC, any Governmental Authority succeeding to any or all of the functions of the
SEC or with any national securities exchange, or distributed to its
shareholders, as the case may be.  Documents required to be delivered pursuant
to the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
Internet at Borrower’s website address;

(h) Legal Action Notice.  A prompt report of any legal actions pending or
threatened in writing against Borrower or any of its Subsidiaries that could
result in damages or costs to Borrower or any of its Subsidiaries of,
individually or in the aggregate, Two Hundred Thousand Dollars ($200,000.00) or
more; and

(i) Other Financial Information.  Other financial information reasonably
requested by Bank.

6.3 Inventory; Returns.  Keep all Inventory in good and marketable condition,
free from material defects.  Returns and allowances between Borrower and its
Account Debtors shall follow Borrower’s customary practices as they exist at the
Effective Date.  Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims that involve more than Two Hundred Thousand Dollars
($200,000.00).

6.4 Taxes; Pensions.  Timely file, and require each of its Subsidiaries to
timely file, all required income and other material Tax returns and reports and
timely pay, and require each of its Subsidiaries to timely pay, all foreign,
federal, state and local Taxes owed by Borrower and each of its Subsidiaries,
except for (i) deferred payment of any Taxes contested pursuant to the terms of
clause (i) of Section 5.8 hereof or (ii) Taxes described in clause (ii) of
Section 5.8 hereof, and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.

6.5 Insurance. 

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(a) Keep its business and the Collateral insured for risks and in amounts
standard for companies in Borrower’s industry and location and as Bank may
reasonably request.  Insurance policies shall be in a form, with financially
sound and reputable insurance companies that are not Affiliates of Borrower, and
in amounts that are satisfactory to Bank.  All property policies shall have a
lender’s loss payable endorsement showing Bank as the sole lender loss
payee.  All liability policies shall show, or have endorsements showing, Bank as
an additional insured.  Bank shall be named as lender loss payee and/or
additional insured with respect to any such insurance providing coverage in
respect of any Collateral.

(b) Ensure that proceeds payable under any property policy are, at Bank’s
option, payable to Bank on account of the Obligations.   

(c) At Bank’s request, Borrower shall deliver certified copies of insurance
policies and evidence of all premium payments.  Each provider of any such
insurance required under this Section 6.5 shall agree, by endorsement upon the
policy or policies issued by it or by independent instruments furnished to Bank,
that it will give Bank thirty (30) days prior written notice before any such
policy or policies shall be materially altered or canceled.  If Borrower fails
to obtain insurance as required under this Section 6.5 or to pay any amount or
furnish any required proof of payment to third persons and Bank, Bank may make
all or part of such payment or obtain such insurance policies required in this
Section 6.5, and take any action under the policies Bank deems prudent.

6.6 Operating Accounts.

(a) Maintain all of its and all of its Subsidiaries’ operating and other deposit
accounts and securities accounts with Bank and Bank’s Affiliates; provided,
 that Borrower shall be permitted to maintain its existing accounts with
financial institutions other than Bank and Bank’s Affiliates, (the “Existing
Accounts”), so long as (X) such Existing Accounts are subject to Control
Agreements in favor of Bank and in form and substance reasonably acceptable to
Bank, subject to Section 6.12(c); and (Y) the maximum aggregate daily balance in
such Existing Accounts does not at any time exceed the lesser of (i) Five
Million Dollars ($5,000,000.00); and (ii) twenty percent (20%) of Borrower total
cash; provided,  further, that Borrower shall be permitted to maintain, and the
foregoing requirement shall not apply to, (i) the Excluded Accounts (as
hereinafter defined), and/or (ii) one or more petty cash accounts (the “Petty
Cash Accounts”), so long as the maximum aggregate daily balance in all such
Petty Cash Accounts does not at any time exceed Fifty Thousand Dollars
($50,000.00).

(b) Provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or Bank’s Affiliates.  Subject to Section 6.12(c), for each Collateral Account
that Borrower at any time maintains (including, without limitation, the Existing
Accounts), Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder which Control Agreement may not
be terminated without the prior written consent of Bank.  The provisions of the
previous sentence shall not apply to (i) the Petty Cash Accounts; (ii) deposit
accounts exclusively used for Borrower’s credit cards; and (iii) deposit
accounts exclusively used for payroll, payroll Taxes and other employee wage and
benefit payments to or for the benefit of Borrower’s employees and identified to
Bank by Borrower as such (such accounts being the “Excluded Accounts”).

6.7 Protection of Intellectual Property Rights. 

(a) (i) Protect, defend and maintain the validity and enforceability of its
Intellectual Property; (ii) promptly advise Bank in writing of material
infringements or any other event that could reasonably be expected to materially
and adversely affect the value of its Intellectual Property; and (iii) not allow
any Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent. 

(b) Provide written notice to Bank within ten (10) days of entering or becoming
bound by any Restricted License (other than over-the-counter software that is
commercially available to the public).  Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (i) any Restricted License to be deemed “Collateral” and
for Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such Restricted License, whether now
existing or entered into in the future, and (ii) Bank to have the ability in the
event of a liquidation of any Collateral to dispose of such Collateral in
accordance with Bank’s rights and remedies under this Agreement and the other
Loan Documents.

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6.8 Litigation Cooperation.  From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

6.9 Access to Collateral; Books and Records.  Allow Bank, or its agents, at
reasonable times, on one (1) Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), to inspect the
Collateral and audit and copy Borrower’s Books.  Such inspections or audits
shall be conducted no more often than once every twelve (12) months unless an
Event of Default has occurred and is continuing in which case such inspections
and audits shall occur as often as Bank shall determine is necessary.  The
foregoing inspections and audits shall be at Borrower’s expense, and the charge
therefor shall be $1,000.00 per person per day (or such higher amount as shall
represent Bank’s then-current standard charge for the same), plus reasonable
out-of-pocket expenses.  In the event Borrower and Bank schedule an audit more
than ten (10) days in advance, and Borrower cancels or seeks to reschedule the
audit with less than ten (10) days written notice to Bank, then (without
limiting any of Bank’s rights or remedies), Borrower shall pay Bank a fee of
$1,000.00 plus any out-of-pocket expenses incurred by Bank to compensate Bank
for the anticipated costs and expenses of the cancellation or rescheduling.

6.10 Formation or Acquisition of Subsidiaries.  Notwithstanding and without
limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the
time that Borrower forms any direct or indirect Subsidiary or acquires any
direct or indirect Subsidiary after the Effective Date, Borrower shall (a) cause
such new Subsidiary to provide to Bank a joinder to this Agreement to cause such
Subsidiary to become a co-borrower hereunder, together with such appropriate
financing statements and/or Control Agreements, all in form and substance
satisfactory to Bank (including being sufficient to grant Bank a first priority
Lien (subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary), (b) provide to Bank appropriate certificates and powers
and financing statements, pledging all of the direct or beneficial ownership
interest in such new Subsidiary, in form and substance satisfactory to Bank, and
(c) provide to Bank all other documentation in form and substance satisfactory
to Bank, including one or more opinions of counsel satisfactory to Bank, which
in its opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above.  Any document, agreement, or
instrument executed or issued pursuant to this Section 6.10 shall be a Loan
Document.

6.11 Further Assurances.  Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement.  Deliver to Bank, within
five (5) days after the same are sent or received, copies of all material
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.

6.12 Post-closing Matters.

(a) On or before the date that is ten (10) days after the Effective Date,
Borrower shall deliver to Bank duly executed original signature pages (other
than the original signature pages executed by Bank), to the Loan Documents and
other agreements/documents listed in Section 3.1;

(b) On or before the date that is thirty (30) days after the Effective Date,
unless waived by Bank in Bank’s sole discretion, Borrower shall deliver to Bank
a landlord’s consent in favor of Bank for 17199 N. Laurel Park Drive, Suite 401,
Livonia, Michigan 48152;

(c) On or before the date that is thirty (30) days after the Effective Date,
Borrower shall deliver to Bank evidence satisfactory to Bank that the
endorsements required by Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing lender loss payable, notice of
cancellation and additional insured clauses or endorsements in favor of Bank;
and

(d) On or before the date that is sixty (60) days after the Effective Date,
Borrower shall have either (i) delivered duly executed signatures to the Control
Agreement with Bank of Ann Arbor, or (ii) closed all of Borrower’s deposit
accounts located at Bank of Ann Arbor

7. NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

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7.1 Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose
of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, except for Transfers (a) of
Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment that is, in the reasonable judgment of Borrower, no longer
economically practicable to maintain or useful in the ordinary course of
business of Borrower; (c) consisting of Permitted Liens and Permitted
Investments; (d) consisting of Borrower’s use or transfer of money or Cash
Equivalents in a manner that is not prohibited by the terms of this Agreement or
the other Loan Documents; and (e) of non-exclusive licenses for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business.

7.2 Changes in Business, Control, or Business Locations. (a) Engage in or permit
any of its Subsidiaries to engage in any business other than the businesses
currently engaged in by Borrower and such Subsidiary, as applicable, or
reasonably related thereto; (b) liquidate or dissolve; or (c) permit or suffer
any Change in Control.

Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than One Hundred
Thousand Dollars ($100,000.00) in Borrower’s assets or property) or deliver any
portion of the Collateral valued, individually or in the aggregate, in excess of
One Hundred Thousand Dollars ($100,000.00) to a bailee at a location other than
to a bailee and at a location already disclosed in the Perfection Certificate,
(2) change its jurisdiction of organization, (3) change its organizational
structure or type, (4) change its legal name, or (5) change any organizational
number (if any) assigned by its jurisdiction of organization.  If Borrower
intends to deliver any portion of the Collateral valued, individually or in the
aggregate, in excess of One Hundred Thousand Dollars ($100,000.00) to a bailee,
and Bank and such bailee are not already parties to a bailee agreement governing
both the Collateral and the location to which Borrower intends to deliver the
Collateral, then Borrower will first receive the written consent of Bank, and
such bailee shall, unless waived by Bank in Bank’s sole discretion, execute and
deliver a bailee agreement in form and substance satisfactory to Bank.

7.3 Mergers or Acquisitions.  Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person (including, without limitation, by
the formation of any Subsidiary).  A Subsidiary may merge or consolidate into
another Subsidiary or into Borrower.

7.4 Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance.  Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, permit any Collateral not to be subject to the first priority security
interest granted herein (except for Permitted Liens), or enter into any
agreement, document, instrument or other arrangement (except with or in favor of
Bank) with any Person which directly or indirectly prohibits or has the effect
of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s Intellectual Property, except as is otherwise permitted in Section
7.1 hereof and the definition of “Permitted Liens” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.6(b) hereof.

7.7 Distributions; Investments.  (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock; or (b) directly or
indirectly make any Investment (including, without limitation, by the formation
of any Subsidiary) other than Permitted Investments, or permit any of its
Subsidiaries to do so.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
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, or as set
forth on Schedule 7.8 hereto.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof in contravention of the subordination agreement applicable
thereto, provide for earlier or greater principal, interest, or

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other payments thereon in contravention of the subordination agreement
applicable thereto, or adversely affect the subordination thereof to Obligations
owed to Bank.

7.10 Compliance.  Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940, as amended, or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent
a Reportable Event or Prohibited Transaction, as defined in ERISA, from
occurring, or (c) comply with the Federal Fair Labor Standards Act, the failure
of any of the conditions described in clauses (a) through (c) which could
reasonably be expected to have a material adverse effect on Borrower’s business;
or violate any other law or regulation, if the violation could reasonably be
expected to have a material adverse effect on Borrower’s business, or permit any
of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.

8. EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

8.1 Payment Default.  Borrower fails to (a) make any payment of principal or
interest on any Credit Extension when due, or (b) pay any other Obligations
within three (3) Business Days after such Obligations are due and payable (which
three (3) Business Day cure period shall not apply to payments due on the Term
Loan Maturity Date).  During the cure period, the failure to make or pay any
payment specified under clause (b) hereunder is not an Event of Default (but no
Credit Extension will be made during the cure period);

8.2 Covenant Default. 

(a) Borrower fails or neglects to perform any obligation in Sections 2.1.1(e),
6.2, 6.4, 6.5, 6.6, 6.7(b), 6.10, 6.11 or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided,  however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period).  Cure periods provided under this section shall not
apply, among other things, to any covenants set forth in clause (a) above;

8.3 Material Adverse Change.  A Material Adverse Change occurs:

8.4 Attachment; Levy; Restraint on Business. 

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under the control of Borrower (including
a Subsidiary), or (ii) a notice of lien or levy is filed against any of
Borrower’s assets by any Governmental Authority, and the same under subclauses
(i) and (ii) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided,  however, no Credit Extensions shall be made during any ten (10) day
cure period; or

(b) (i) any material portion of Borrower’s assets is attached, seized, levied
on, or comes into possession of a trustee or receiver, or (ii) any court order
enjoins, restrains, or prevents Borrower from conducting all or any material
part of its business;

8.5 Insolvency.  (a) Borrower or any of its Subsidiaries is unable to pay its
debts (including trade debts) as they become due or otherwise becomes insolvent;
(b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or
(c) an Insolvency Proceeding is begun against Borrower or any of its
Subsidiaries and is not dismissed or stayed within thirty (30) days (but no
Credit Extensions shall be made while any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);

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8.6 Other Agreements.  There is, under any agreement to which Borrower is a
party with a third party or parties, (a) any default resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount individually or in the aggregate in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any breach or
default by Borrower, the result of which could have a material adverse effect on
Borrower’s business; 

8.7 Judgments; Penalties.  One or more fines, penalties or final judgments,
orders or decrees for the payment of money in an amount, individually or in the
aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000.00) (not
covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower by any
Governmental Authority, and the same are not, within ten (10) days after the
entry, assessment or issuance thereof, discharged, satisfied, or paid, or after
execution thereof, stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the satisfaction, payment, discharge, stay, or
bonding of such fine, penalty, judgment, order or decree);

8.8 Misrepresentations.  Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;

8.9 Subordinated Debt.  Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or otherwise
cease to be in full force and effect, any Person shall be in breach thereof or
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this
Agreement or any applicable subordination or intercreditor agreement; or

8.10 Governmental Approvals.  Except with respect to any clinical trials or the
FDA approval process, any Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed in the
ordinary course for a full term or (b) subject to any decision by a Governmental
Authority that designates a hearing with respect to any applications for renewal
of any of such Governmental Approval or that could result in the Governmental
Authority taking any of the actions described in clause (a) above, and such
decision or such revocation, rescission, suspension, modification or non-renewal
(i) cause, or could reasonably be expected to cause, a Material Adverse Change,
or (ii) adversely affects the legal qualifications of Borrower or any of its
Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal could
reasonably be expected to affect the status of or legal qualifications of
Borrower or any of its Subsidiaries to hold any Governmental Approval in any
other jurisdiction.

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, without notice or demand, do any or all of the
following:

(a) declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

(b) stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

(c) demand that Borrower (i) deposit cash with Bank in an amount equal to at
least 105% (110% for Letters of Credit denominated in a Currency other than
Dollars), of the Dollar Equivalent of the aggregate face amount of all Letters
of Credit remaining undrawn (plus all interest, fees, and costs due or to become
due in connection therewith (as estimated by Bank in its good faith business
judgment)), to secure all of the Obligations relating to such Letters of Credit,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit;

(d) terminate any FX Contracts;

(e) verify the amount of, demand payment of and performance under, and collect
any Accounts and General Intangibles, settle or adjust disputes and claims
directly with Account Debtors for amounts on terms and

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in any order that Bank considers advisable, and notify any Person owing Borrower
money of Bank’s security interest in such funds;

(f) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral.  Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates.  Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

(g) apply to the Obligations any (i) balances and deposits of Borrower it holds
(other than balances in the Excluded Accounts), or (ii) any amount held by Bank
owing to or for the credit or the account of Borrower;

(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property 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, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;

(i) 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;

(j) demand and receive possession of Borrower’s Books; and

(k) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).

9.2 Power of Attorney.  Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of
an Event of Default, to: (a) endorse Borrower’s name on any checks or other
forms of payment or security; (b) sign Borrower’s name on any invoice or bill of
lading for any Account or drafts against Account Debtors; (c) settle and adjust
disputes and claims about the Accounts directly with Account Debtors, for
amounts and on terms Bank determines reasonable; (d) make, settle, and adjust
all claims under Borrower’s insurance policies; (e) pay, contest or settle any
Lien, charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as
its lawful attorney-in-fact to sign Borrower’s name on any documents necessary
to perfect or continue the perfection of Bank’s security interest in the
Collateral regardless of whether an Event of Default has occurred until all
Obligations (other than inchoate indemnity obligations), have been satisfied in
full and Bank is under no further obligation to make Credit Extensions
hereunder.  Bank’s foregoing appointment as Borrower’s attorney in fact, and all
of Bank’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations), have been fully repaid
and performed and Bank’s obligation to provide Credit Extensions terminates.

9.3 Protective Payments.  If Borrower fails to obtain the insurance called for
by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document or which may be required to preserve the Collateral, Bank may obtain
such insurance or make such payment, and all amounts so paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then highest
rate applicable to the Obligations, and secured by the Collateral.  Bank will
make reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time thereafter.  No
payments by Bank are deemed an agreement to make similar payments in the future
or Bank’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds Upon Default.  If an Event of Default
has occurred and is continuing, Bank shall have the right to apply in any order
any funds in its possession, whether from Borrower account balances, payments,
proceeds realized as the result of any collection of Accounts or other
disposition of the Collateral, or otherwise, to the Obligations.  Bank shall pay
any surplus to Borrower by credit to the Designated Deposit Account

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or to other Persons legally entitled thereto; Borrower shall remain liable to
Bank for any deficiency.  If Bank, directly or indirectly, enters into a
deferred payment or other credit transaction with any purchaser at any sale of
Collateral, Bank shall have the option, exercisable at any time, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.

9.5 Bank’s Liability for Collateral.  So long as Bank complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Bank, Bank shall not be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c)
any diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of
loss, damage or destruction of the Collateral; provided that Bank is in
compliance with the immediately preceding sentence.

9.6 No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or
therewith.  No waiver hereunder shall be effective unless signed by the party
granting the waiver and then is only effective for the specific instance and
purpose for which it is given.  Bank’s rights and remedies under this Agreement
and the other Loan Documents are cumulative.  Bank has all rights and remedies
provided under the Code, by law, or in equity.  Bank’s exercise of one right or
remedy is not an election and shall not preclude Bank from exercising any other
remedy under this Agreement or other remedy available at law or in equity, and
Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay
in exercising any remedy is not a waiver, election, or acquiescence. 

9.7 Demand Waiver.  Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

10. NOTICES

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below.  Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

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If to Borrower:

 

Gemphire Therapeutics Inc.

 

 

17199 N. Laurel Park Drive, Suite 401

 

 

Livonia, Michigan 48152

 

 

Attn: Jeffrey S. Mathiesen

 

 

Email:    jmathiesen@gemphire.com

 

 

Website URL: www.gemphire.com

 

 

 

with a copy to:

 

Honigman Miller Schwartz and Cohn LLP

 

 

350 East Michigan Avenue, Suite 300

 

 

Kalamazoo, Michigan 49007

 

 

Attn: Phillip D. Torrence, Esquire

 

 

Fax:  (269) 337-7703

 

 

Email:    ptorrence@honigman.com

 

 

 

If to Bank:

 

Silicon Valley Bank

 

 

380 Interlocken Crescent, Suite 600

 

 

Broomfield, Colorado 80021

 

 

Attn: Mr. Tom Hertzberg

 

 

Fax:  (303) 469-9088

 

 

Email:  thertzberg@svb.com

 

 

 

with a copy to:

 

Riemer & Braunstein LLP

 

 

Three Center Plaza

 

 

Boston, Massachusetts  02108

 

 

Attn:    Charles W. Stavros, Esquire

 

 

Fax:    (617) 880-3456

 

 

Email:    cstavros@riemerlaw.com

11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

Except as otherwise expressly provided in any of the Loan Documents, New York
law governs the Loan Documents without regard to principles of conflicts of
law.  Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in New York, New York; provided,  however, that nothing in
this Agreement shall be deemed to operate to preclude Bank from bringing suit or
taking other legal action in any other jurisdiction to realize on the Collateral
or any other security for the Obligations, or to enforce a judgment or other
court order in favor of Bank.  Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court,
and Borrower hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.  Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in,
or subsequently provided by Borrower in accordance with, Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

This Section 11 shall survive the termination of this Agreement.

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12. GENERAL PROVISIONS

12.1 Successors and Assigns.  This Agreement binds and is for the benefit of the
successors and permitted assigns of each party.  Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion).  Bank has the
right, without the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents.  Notwithstanding the foregoing, so long as an Event of Default has
not occurred and is continuing, Bank shall not assign any interest in the Loan
Documents to any Person which is a direct competitor of Borrower.

12.2 Indemnification.  Borrower agrees to indemnify, defend and hold Bank and
its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against:  (i) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (ii) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.

This Section 12.2 shall survive until all statutes of limitation with respect to
the Claims, losses, and expenses for which indemnity is given shall have run.

12.3 Time of Essence.  Time is of the essence for the performance of all
Obligations in this Agreement.

12.4 Severability of Provisions.  Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

12.5 Correction of Loan Documents.  Bank may correct patent errors and fill in
any blanks in the Loan Documents consistent with the agreement of the parties.

12.6 Amendments in Writing; Waiver; Integration.  No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought.  Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document.  Any waiver granted shall be limited to the
specific circumstance expressly described in it, and shall not apply to any
subsequent or other circumstance, whether similar or dissimilar, or give rise
to, or evidence, any obligation or commitment to grant any further waiver.  The
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into the Loan
Documents.

12.7 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, is an original, and all taken together, constitute one Agreement.

12.8 Confidentiality.  In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with
Bank, collectively, “Bank Entities”); (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided,  however, Bank
shall use commercially reasonable efforts to obtain any prospective transferee’s
or purchaser’s agreement to the terms of this provision); (c) as required by
law, regulation, subpoena, or other order; (d) to Bank’s regulators or as
otherwise required in connection with Bank’s examination or audit; (e) as Bank
considers appropriate in exercising remedies under the Loan Documents; and (f)
to third-party service providers of Bank so long as such service providers have
executed a confidentiality agreement with Bank with terms no less restrictive
than those contained herein.  Confidential information does not include
information that is either: (i) in the public domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain (other than as a
result of its disclosure by Bank in violation of this Agreement) after
disclosure to Bank; or (ii) disclosed to Bank by a third party, if Bank does not
know that the third party is prohibited from disclosing the information.

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Bank Entities may use anonymous forms of confidential information for aggregate
datasets, for analyses or reporting, and for any other uses not expressly
prohibited in writing by Borrower.  The provisions of the immediately preceding
sentence shall survive termination of this Agreement.

12.9 Right of Set Off.  Borrower hereby grants to Bank, a lien, security
interest and right of set off as security for all Obligations to Bank, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Bank
(including a Bank subsidiary) or in transit to any of them.  At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations.  ANY AND ALL
RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

12.10 Electronic Execution of Documents.  The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

12.11 Captions.  The headings used in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.

12.12 Construction of Agreement.  The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement.  In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.

12.13 Relationship.  The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement.  The parties do not
intend to create any agency, partnership, joint venture, trust, fiduciary or
other relationship with duties or incidents different from those of parties to
an arm’s-length contract.

12.14 Third Parties.  Nothing in this Agreement, whether express or implied, is
intended to: (a) confer any benefits, rights or remedies under or by reason of
this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

13. DEFINITIONS

13.1 Definitions.  As used in the Loan Documents, the word “shall” is mandatory,
the word “may” is permissive, the word “or” is not exclusive, the words
“includes” and “including” are not limiting, the singular includes the plural,
and numbers denoting amounts that are set off in brackets are negative.  As used
in this Agreement, the following capitalized terms have the following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

“Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

“Agreement” is defined in the preamble hereof.

“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution
who is authorized to execute the Loan Documents, including any Credit Extension
request, on behalf of Borrower.

“Bank” is defined in the preamble hereof.

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“Bank Entities” is defined in Section 12.9.

“Bank Expenses” are all reasonable and out-of-pocket audit fees and expenses,
costs, and expenses (including reasonable attorneys’ fees and expenses) for
preparing, amending, negotiating, administering, defending and enforcing the
Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred with respect to
Borrower.

“Bank Services”  are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

“Borrower” is defined in the preamble hereof.

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state Tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s board of directors (and, if required under the terms of
such Person’s Operating Documents, stockholders) and delivered by such Person to
Bank approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying (a) such Person has the authority
to execute, deliver, and perform its obligations under each of the Loan
Documents to which it is a party, (b) that set forth as a part of or attached as
an exhibit to such certificate is a true, correct, and complete copy of the
resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents, including any Credit Extension request, on behalf of such
Person, together with a sample of the true signature(s) of such Person(s), and
(d) that Bank may conclusively rely on such certificate unless and until such
Person shall have delivered to Bank a further certificate canceling or amending
such prior certificate.

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank
is closed.

“Cash Equivalents”  means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.

“Change in Control” means (a) at any time, any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act shall become, or
obtain rights (whether by means or warrants, options or otherwise) to become,
the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of forty-nine percent (49%) or more of
the ordinary voting power for the election of directors of Borrower (determined
on a fully diluted basis) other than by the sale of Borrower’s equity securities
in a public offering or to venture capital or private equity investors so long
as Borrower identifies to Bank the venture capital or private equity investors
at least seven (7) Business Days prior to the closing of the transaction and
provides to Bank a description of the material terms of the transaction; (b)
during any period of 12 consecutive months, a majority of the members of the
board of directors or other equivalent governing body of Borrower cease to be
composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body; or (c) at any time,
Borrower shall cease to own and control, of record and beneficially, directly or
indirectly, 100% of each class of outstanding capital stock of each Subsidiary
of Borrower free and clear of all Liens (except Liens created by this Agreement
and Permitted Liens).

“Claims” is defined in Section 12.3.

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“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of New York; provided,  that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of New York, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit B.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation, in each
case, directly or indirectly guaranteed, endorsed, co‑made, discounted or sold
with recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of
business.  The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or,
if not determinable, the maximum reasonably anticipated liability for it
determined by the Person in good faith; but the amount may not exceed the
maximum of the obligations under any guarantee or other support arrangement.

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

“Credit Extension” is any Term Loan or any other extension of credit hereunder
by Bank for Borrower’s benefit.

“Currency” is coined money and such other banknotes or other paper money as are
authorized by law and circulate as a medium of exchange.

“Default Rate” is defined in Section 2.2(b).

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is account number 3302195934, maintained by
Borrower with Bank.

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

“Effective Date” is defined in the preamble hereof.

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“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.

“Event of Default” is defined in Section 8.

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

“Excluded Accounts” is defined in Section 6.6(b).

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
Bank or its assignee, as applicable, or required to be withheld or deducted from
a payment to Bank or its assignee, as applicable, (a) Taxes imposed on or
measured by net income (however denominated), franchise Taxes, and branch
profits Taxes, in each case, (i) imposed as a result of Bank or its assignee, as
applicable, being organized under the laws of, or having its principal office or
its applicable lending office located in, the jurisdiction imposing such Tax (or
any political subdivision thereof) or (ii) that are Taxes imposed as a result of
a present or former connection between Bank or its assignee, as applicable, and
the jurisdiction imposing such Tax (other than connections arising from Bank
having executed, delivered, become a party to, performed its obligations under,
received payments under, received or perfected a security interest under,
engaged in any other transaction pursuant to or enforced any Loan Document, (b)
U.S. federal withholding Taxes imposed on amounts payable to or for the account
of Bank or its assignee, as applicable, with respect to an applicable interest
in a loan pursuant to a law in effect on the date on which (i) Bank or its
assignee, as applicable, acquires such interest in the loan or (ii) Bank or its
assignee, as applicable, changes its lending office, except in each case to the
extent that, pursuant to Section 2.5, amounts with respect to such Taxes were
payable either to such lender’s assignor immediately before such assignee became
a party hereto or to such lender immediately before it changed its lending
office, (c) Taxes attributable to Bank’s or its assignee’s, as applicable,
failure to comply with Section 2.5(b), and (d) any U.S. federal withholding
Taxes imposed under FATCA.

“Existing Accounts” is defined in Section 6.6(a).

“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code
(including, for the avoidance of doubt, any agreements entered into pursuant to
Section 1471(b)(1) of the Internal Revenue Code), as of the closing date (and
any amended or successor version thereof that is substantively comparable and
not materially more onerous to comply with), any current or future Treasury
Regulations promulgated under the Internal Revenue Code or other official
administrative guidance promulgated thereunder, any intergovernmental agreements
entered into in connection with the implementation thereof, and any fiscal or
regulatory legislation, rules or practices adopted pursuant to such
intergovernmental agreement.

“FDA” is the U.S. Food and Drug Administration.

“Foreign Currency” means lawful money of a country other than the United States.

“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower which shall be a Business Day.

“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other Tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

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“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.

“Indemnified Person” is defined in Section 12.3.

“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of the Borrower
under any Loan Document.

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Intellectual Property” means, with respect to any Person, means all of such
Person’s right, title, and interest in and to the following:

(a) its Copyrights, Trademarks and Patents;

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, and operating
manuals;

(c) any and all source code;

(d) any and all design rights which may be available to such Person;

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, 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; and

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and
any successor thereto.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

“JPMorgan Accounts” is defined in Section 6.6(a).

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

“Liquidity Event” means any of the following: (i) any new drug application (NDA)
approval of gemcabene for Borrower by the FDA; (ii) a sale or other transfer by
the Borrower of all or substantially all of its assets; (iii) a merger or
consolidation of Borrower into or with another person or entity, where the
holders of the Borrower’s outstanding voting equity securities as of immediately
prior to such merger or consolidation hold less than a majority of the issued
and outstanding voting equity securities of the successor or surviving person or
entity as of immediately following the consummation of such merger or
consolidation; or (iv) any sale, in a single transaction or series of

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related transactions, by the holders of the Borrower’s outstanding voting equity
securities, to one or more buyers, of such securities, where such holders do
not, as of immediately following the consummation of such transaction(s),
continue to hold at least a majority of the Borrower’s issued and outstanding
voting equity securities.

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits,
certificates, notices, and any other documents related to this Agreement, the
Perfection Certificate, any subordination agreement, any note, or notes or
guaranties executed by Borrower, and any other present or future agreement by
Borrower with or for the benefit of Bank in connection with this Agreement, all
as amended, restated, or otherwise modified.

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations

“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or
later, whether under this Agreement, the other Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under
the Loan Documents.

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

“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.

“Payment/Advance Form” is that certain form attached hereto as Exhibit C.

“Perfection Certificate” is defined in Section 5.1.

“Permitted Indebtedness” is:

(a) Borrower’s Indebtedness to Bank under this Agreement, the other Loan
Documents and with respect to Bank Services;

(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

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

(d) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

(e) Indebtedness secured by Liens permitted under clauses (a) and (c) of the
definition of “Permitted Liens” hereunder;

(f) Subordinated Debt;

(g) Indebtedness consisting of credit card obligations owed to financial
institutions other than Bank, in a maximum aggregate unsecured amount not to
exceed One Hundred Thousand Dollars ($100,000.00) at any time; and

(h) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (g) above; provided that the
principal amount thereof is not increased (except as may be permitted by any
applicable subordination, intercreditor or similar agreement) or the terms
thereof are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.

“Permitted Investments” are:

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(a) Investments (including, without limitation, Subsidiaries) existing on the
Effective Date and shown on the Perfection Certificate;

(b) Investments consisting of Cash Equivalents;

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

(d) Investments consisting of deposit accounts in which Bank has a perfected
security interest or which are otherwise permitted hereunder; and

(e) Investments accepted in connection with Transfers permitted by Section 7.1.

“Permitted Liens” are:

(a) Liens existing on the Effective Date and shown on the Perfection Certificate
or arising under this Agreement and the other Loan Documents;

(b) Liens for Taxes either (i) not due and payable or (ii) being contested in
good faith and for which Borrower maintains adequate reserves on its Books,
provided that no notice of any such Lien has been filed or recorded under the
Internal Revenue Code and the Treasury Regulations adopted thereunder;

(c) purchase money Liens or capital leases securing no more than Two Hundred
Fifty Thousand Dollars ($250,000.00) in the aggregate amount outstanding (i) on
Equipment acquired or held by Borrower incurred for financing the acquisition of
the Equipment, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

(e) Liens to secure payment of workers’ 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);

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase (except as may be
permitted by any applicable subordination, intercreditor or similar agreement);

(g) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Bank a security interest
therein;

(h) non-exclusive licenses of Intellectual Property granted to third parties in
the ordinary course of business;

(i) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
and

(j) Liens in favor of other financial institutions arising in connection with
Borrower’s deposit and/or securities accounts held at such institutions;
provided that Bank has a perfected security interest in the amounts held in such
deposit and/or securities accounts.

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

“Petty Cash Accounts” is defined in Section 6.6(a).

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“Positive Clinical Trial Event” means the receipt by Bank of a written
electronic communication from a member of Borrower’s Board of Directors (i)
stating that the Board of Directors has determined that the results from either
(a) the ROYAL-1 clinical trial (GEM-301) or (b) the INDIGO-1 clinical trial
(GEM-401) are sufficient to support the development plan for submission of a new
drug application with the FDA and continued development of gemcabene and (ii)
attaching a copy of the press release issued by the Borrower announcing the
foregoing.

“Pre-Clinical Event” means the receipt by Bank of a written electronic
communication from the chief executive officer or chief financial officer of
Borrower, together with supporting documentation from the FDA, that the FDA has
lifted the partial clinical hold with respect to clinical trials of longer than
six months in duration for gemcabene.

“Prime Rate” is the rate of interest per annum from time to time published in
the money rates section of The Wall Street Journal or any successor publication
thereto as the “prime rate” then in effect; provided that, in the event such
rate of interest is less than zero, such rate shall be deemed to be zero for
purposes of this Agreement; and provided further that if such rate of interest,
as set forth from time to time in the money rates section of The Wall Street
Journal, becomes unavailable for any reason as determined by Bank, the “Prime
Rate” shall mean the rate of interest per annum announced by Bank as its prime
rate in effect at its principal office in the State of California (such Bank
announced Prime Rate not being intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to debtors).

“Quarterly Financial Statements” is defined in Section 6.2(b).

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer and Controller of Borrower. 

“Restricted License” is any material license or other agreement with respect to
which Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default under or
termination of could interfere with the Bank’s right to sell any Collateral.

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person.  Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.

“Taxes” means present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority (including any interest, additions to tax or penalties applicable
thereto).

“Term Loan” is defined in Section 2.1.1(a).

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“Term Loan Amortization Date” is August 1, 2018; provided,  that if the Term
Loan I/O Extension Event has occurred, the “Term Loan Amortization Date” will be
February 1, 2019.

“Term Loan Amortization Schedule” is thirty (30) equal monthly payments of
principal, based on a thirty (30) month amortization schedule; provided,  that
if the Term Loan I/O Extension Event has occurred, the “Term Loan Amortization
Schedule” shall be twenty-four (24) equal monthly payments of principal, based
on a twenty-four (24) month amortization schedule.

“Term Loan Cash Security Event” is defined in Section 2.1(e).

“Term Loan I/O Extension Event” means the occurrence of the Tranche C
Availability Event.

“Term Loan Maturity Date” is February 1, 2021 (the first day of the month that
is forty two (42) months after the Effective Date).

“Term Loan Payment” is defined in Section 2.1.1(b)

“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 A Amount” is defined in Section 2.1.1(a).

“Tranche B Amount” is defined in Section 2.1.1(a).

“Tranche B Availability Amount” is the lesser of (a) Five Million Dollars
($5,000,000.00); or (b) (i) Ten Million Dollars ($10,000,000.00); minus (ii) the
Tranche A Amount (as originally funded on the Funding Date thereof).

“Tranche B Draw Period” is the period commencing on the Effective Date through
the earlier to occur of (i) an Event of Default that has occurred and is
continuing; or (ii) December 31, 2017.

“Tranche C Amount” is defined in Section 2.1.1(a).

“Tranche C Availability Amount” is the lesser of (a) Five Million Dollars
($5,000,000.00); or (b) (i) Fifteen Million Dollars ($15,000,000.00); minus (ii)
the Tranche A Amount (as originally funded on the Funding Date thereof); minus
(iii) the Tranche B Amount (as originally funded on the Funding Date thereof). 

“Tranche C Availability Event” means the occurrence of both a Positive Clinical
Trial Event and a Pre-Clinical Event.

“Tranche C Draw Period” is the period commencing on the occurrence of the
Tranche C Availability Event through the earlier to occur of (i) an Event of
Default that has occurred and is continuing; or (ii) July 31, 2018.

“Transfer” is defined in Section 7.1.

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

BORROWER:

GEMPHIRE THERAPEUTICS INC.

By___/s/ Jeff Mathiesen_________________

Name: Jeff Mathiesen

Title: Chief Financial Officer

BANK:

SILICON VALLEY BANK

By____/s/ Tom Hertzberg________________
Name: Tom Hertzberg
Title: Director

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EXHIBIT A – COLLATERAL DESCRIPTION

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as provided below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts, fixtures,
letters of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations,
and financial assets, whether now owned or hereafter acquired, wherever located;
and

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include (1) any
Intellectual Property; provided,  however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property, (2) any lease, permit,
license or any other contractual obligation entered into by Borrower (x) that
prohibits or requires consent which has not been obtained as a condition to the
creation of a Lien on any right, title or interest in such lease, permit,
license or contractual obligation or any stock or other equity interest related
thereto or (y) to the extent that any requirement of law applicable thereto
prohibits the creation of a Lien thereon, but only, with respect to the
prohibition in (x) and (y), to the extent, and for as long as, such prohibition
is not terminated or rendered unenforceable or otherwise deemed ineffective by
the Code or any other requirement of law, and (3) property owned by Borrower
that is subject to a purchase money Lien or a capital lease permitted under the
Agreement if the contractual obligation pursuant to which such Lien is granted
(or in the document providing for such capital lease) prohibits or requires the
consent of any entity or person which has not been obtained as a condition to
the creation of any other Lien on such equipment.

Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its Intellectual Property, other than
Permitted Liens, without Bank’s prior written consent.

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EXHIBIT B

COMPLIANCE CERTIFICATE

 

 

 

 

 

TO:

SILICON VALLEY BANK

Date:

 

FROM:

GEMPHIRE THERAPEUTICS INC.

 

 

 

The undersigned authorized officer of Gemphire Therapeutics, Inc. (“Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”):

(1) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided,
 however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided,  further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;
(4) Borrower, and each of its Subsidiaries, has timely filed all required income
and other Tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local Taxes owed by Borrower except as otherwise permitted
pursuant to the terms of Section 5.8 of the Agreement; and (5) no Liens have
been levied or claims made against Borrower or any of its Subsidiaries relating
to unpaid employee payroll or benefits of which Borrower has not previously
provided written notification to Bank. 

Attached are the required documents supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

 

 

 

 

Reporting Covenants

 

Required

 

Complies

Quarterly financial statements with
Compliance Certificate

 

Quarterly within 45 days

 

Yes   No

Monthly Cash Reconciliation Reports

 

Monthly within 30 days

 

Yes   No

Annual financial statement (CPA Audited)

 

FYE within 120 days

 

Yes   No

10‑Q, 10‑K and 8-K

 

Within 5 days after filing with SEC

 

Yes   No

Annual Projections and Operating Budgets

 

FYE within 30 days

 

Yes   No

 

 

 

Other Matters

 

 

 

Have there been any amendments of or other changes to the capitalization table
of Borrower and to the Operating Documents of Borrower or any of its
Subsidiaries?  If yes, provide copies of any such amendments or changes with
this Compliance Certificate.

Yes

No

 

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

 

 

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

 

 

 

 

Gemphire Therapeutics Inc.

 

BANK USE ONLY

 

 

 

 

 

 

By:

 

 

Received by:

 

 

 

 

 

AUTHORIZED SIGNER

 

Name:

 

 

 

 

 

 

 

Date:

 

 

Title:

 

 

 

 

 

 

 

Verified:

 

 

 

 

 

AUTHORIZED SIGNER

 

 

 

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

Compliance Status:        Yes        No

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT C – LOAN PAYMENT/ADVANCE REQUEST FORM

Deadline for same day processing is Noon Pacific Time

 

 

Fax To:

Date:

 

 

 

 

 

 

 

  Loan Payment:

 

GEMPHIRE THERAPEUTICS, INC.

 

 

 

 

 

  From Account #

 

 

To Account #

 

 

(Deposit Account #)

 

 

(Loan Account #)

 

 

 

  Principal $

 

 

and/or Interest $

 

 

 

 

 

 

  Authorized Signature:

 

 

Phone Number:

 

 

 

 

 

 

  Print Name/Title:

 

 

 

 

 

 

 

 

  Loan Advance:

 

 

 

 

 

  Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

 

 

  From Account #

 

 

To Account #

 

 

(Loan Account #)

 

 

(Deposit Account #)

 

 

 

  Amount of Advance $

 

 

 

 

 

 

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided,  however, that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided,
 further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as
of such date:

 

 

 

  Authorized Signature:

 

 

Phone Number:

 

 

 

 

 

 

  Print Name/Title:

 

 

 

 

 

 

 

 

  Outgoing Wire Request:

 

 

 

 

 

  Complete only if all or a portion of funds from the loan advance above is to
be wired.

 

 

 

  Deadline for same day processing is noon, Pacific Time

 

 

 

 

 

  Beneficiary Name:

 

 

Amount of Wire: $

 

 

 

 

  Beneficiary Bank:

 

 

Account Number:

 

 

 

 

  City and State:

 

 

 

 

 

 

  Beneficiary Bank Transit (ABA) #:

 

 

Beneficiary Bank Code (Swift, Sort, Chip, etc.):

 

 

 

(For International Wire Only)

 

--------------------------------------------------------------------------------

 

 

  Intermediary Bank:

 

 

Transit (ABA) #:

 

 

 

 

  For Further Credit to:

 

 

 

 

 

 

  Special Instruction:

 

 

 

 

 

 

 

 

 

 

 

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

 

 

  Authorized Signature:

 

 

2nd Signature (if required):

 

 

 

 

  Print Name/Title:

 

 

Print Name/Title:

 

 

 

 

  Telephone #:

 

 

Telephone #:

 

 

 

 

 

 

 

--------------------------------------------------------------------------------