SECURITY AGREEMENT

 

This Security Agreement, dated as of March 1, 2018 (as amended, supplemented or
otherwise modified from time to time in accordance with the provisions hereof,
this “Agreement”), made by and among Windtree Therapeutics, Inc., a Delaware
corporation with its principal offices at 2600 Kelly Rd., Suite 100, Warrington,
PA 18976 (the “Grantor”), in favor of LPH Investments Ltd., a Cayman Islands
company organized and existing under the laws of Cayman Islands with its
principal offices at Unit 110-111, Bio-Informatics Centre, No. 2 Science Park
West Avenue, Hong Kong Science Park, Shatin, Hong Kong (the “Secured Party”).

 

WHEREAS, the Grantor and the Secured Party have entered into (i) a loan
agreement (the “First Loan Agreement”) dated January 10, 2018, pursuant to which
the Secured Party, as lender, subject to the terms and conditions contained
therein, has agreed to make a loan to the Grantor, as borrower, in an aggregate
principal amount of One Million and Five Hundred Thousand Dollars ($1,500,000)
(the “First Loan”), and (ii) a second loan agreement (the “Second Loan
Agreement”, and together with the First Loan Agreement, as the same may be
amended from time to time, collectively, the “Loan Agreements”) dated the date
hereof, pursuant to which the Secured Party, as lender, subject to the terms and
conditions contained therein, has agreed to make a loan to the Grantor, as
borrower, in an aggregate principal amount of One Million Dollars ($1,000,000)
(the “Second Loan”, and together with the First Loan, collectively, the
“Loans”). Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the applicable Loan Agreements;

 

WHEREAS, this Agreement is given by the Grantor in favor of the Secured Party to
secure the payment and performance of all of the Secured Obligations; and

 

WHEREAS, in order to fully secure the Grantor’s obligations under the Loan
Agreements, the Secured Party has requested the Grantor to execute this
Agreement.

 

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

 

1.  Definitions.

 

    (a)  Unless otherwise specified herein, all references to Sections and
Schedules herein are to Sections and Schedules of this Agreement.

 

    (b)  Unless otherwise defined herein, terms used herein that are defined in
the UCC shall have the meanings assigned to them in the UCC. However, if a term
is defined in Article 9 of the UCC differently than in another Article of the
UCC, the term has the meaning specified in Article 9.

 

    (c)  For purposes of this Agreement, the following terms shall have the
following meanings:

 

 

    “Collateral” has the meaning set forth in Section 2.

 

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    “Copyrights” means, collectively, with respect to the Grantor, all
copyrights (whether statutory or common law, whether established or registered
in the United States or any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished), all
tangible embodiments of the foregoing and all copyright registrations and
applications made by the Grantor, in each case, whether now owned or hereafter
created or acquired by or assigned to the Grantor, together with any and all (i)
rights and privileges arising under applicable law and international treaties
and conventions with respect to the Grantor’s use of such copyrights, (ii)
reissues, renewals, continuations and extensions thereof and amendments thereto,
(iii) income, fees, royalties, damages, claims and payments now or hereafter due
and/or payable with respect thereto, including damages and payments for past,
present or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present or future
infringements thereof.

 

    “Event of Default” has the meaning set forth in the Loan Agreements.

 

“First Priority” means, with respect to any lien and security interest purported
to be created in any Collateral pursuant to this Agreement, such lien and
security interest is the most senior lien to which such Collateral is subject
(subject only to liens permitted under the Loan Agreements).

 

“Intellectual Property Collateral” means, collectively, the Patents, Trademarks
(excluding only United States intent-to-use Trademark applications to the extent
that and solely during the period in which the grant of a security interest
therein would impair, under applicable federal law, the registrability of such
applications or the validity or enforceability of registrations issuing from
such applications), Copyrights, Trade Secrets, Intellectual Property Licenses
and all other industrial, intangible and intellectual property of any type,
including mask works and industrial designs.

 

“Intellectual Property Licenses” means, collectively, with respect to the
Grantor, all license and distribution agreements with, and covenants not to sue,
any other party with respect to any Patent, Trademark, Copyright or Trade Secret
or any other patent, trademark, copyright or trade secret, whether the Grantor
is a licensor or licensee, distributor or distributee under any such license or
distribution agreement, together with any and all (i) renewals, extensions,
supplements and continuations thereof, (ii) income, fees, royalties, damages,
claims and payments now and hereafter due and/or payable thereunder and with
respect thereto including damages and payments for past, present or future
infringements or violations thereof, (iii) rights to sue for past, present and
future infringements or violations thereof and (iv) other rights to use, exploit
or practice any or all of the Patents, Trademarks, Copyrights or Trade Secrets
or any other patent, trademark, copyright or trade secret.

 

“Patents” means, collectively, all patents issued or assigned to, and all patent
applications and registrations made by (whether issued, established or
registered or recorded in the United States or any other country or any
political subdivision thereof), the Grantor including all tangible embodiments
of the foregoing, together with any and all (i) rights and privileges arising
under applicable law and international treaties and conventions with respect to
the Grantor’s use of any patents, (ii) inventions and improvements described and
claimed therein, (iii) reissues, divisions, continuations, renewals, extensions
and continuations-in-part thereof and amendments thereto, (iv) income, fees,
royalties, damages, claims and payments now or hereafter due and/or payable
thereunder and with respect thereto including damages and payments for past,
present or future infringements thereof, (v) rights corresponding thereto
throughout the world and (vi) rights to sue for past, present or future
infringements thereof.

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    “Proceeds” means “proceeds” as such term is defined in section 9-102 of the
UCC and, in any event, shall include, without limitation, all dividends or other
income from the Collateral, collections thereon or distributions with respect
thereto.

 

“Secured Obligations” has the meaning set forth in Section 3.

 

“Trade Secrets” means, collectively, with respect to the Grantor, all know-how,
trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, technical, marketing,
financial and business data and databases, pricing and cost information,
business and marketing plans, customer and supplier lists and information, all
other confidential and proprietary information and all tangible embodiments of
the foregoing, together with any and all (i) rights and privileges arising under
applicable law and international treaties and conventions with respect to such
trade secrets, (ii) income, fees, royalties, damages, claims and payments now or
hereafter due and/or payable with respect thereto including damages and payments
for past, present or future misappropriations thereof, (iii) rights
corresponding thereto throughout the world and (iv) rights to sue for past,
present or future misappropriations thereof.

 

“Trademarks” means, collectively, with respect to the Grantor, all trademarks
(including service marks), slogans, logos, symbols, certification marks,
collective marks, trade dress, uniform resource locators (URL’s), domain names,
corporate names and trade names, whether statutory or common law, whether
registered or unregistered and whether established or registered in the United
States or any other country or any political subdivision thereof, that are owned
by or assigned to the Grantor, all registrations and applications for the
foregoing and all tangible embodiments of the foregoing, together with, in each
case, the goodwill symbolized thereby and any and all (i) rights and privileges
arising under applicable law and international treaties and conventions with
respect to the Grantor’s use of any trademarks, (ii) reissues, continuations,
extensions and renewals thereof and amendments thereto, (iii) income, fees,
royalties, damages and payments now and hereafter due and/or payable thereunder
and with respect thereto, including damages, claims and payments for past,
present or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present and future
infringements thereof.

 

    “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of Delaware or, when the laws of any other state govern the method or
manner of the perfection or enforcement of any security interest in any of the
Collateral, the Uniform Commercial Code as in effect from time to time in such
state.

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2.  Grant of Security Interest. The Grantor hereby pledges and grants to the
Secured Party, and hereby creates a continuing First Priority lien on and
security interest in and to, all of the right, title and interest of the Grantor
in, to and under the following property, wherever located, and whether now
existing or hereafter arising or acquired from time to time (collectively, the
“Collateral”):

 

    (a)  all personal property of every kind and nature including all accounts
(including health-care-insurance receivables), goods (including inventory and
equipment), documents (including, if applicable, electronic documents),
instruments, promissory notes, chattel paper (whether tangible or electronic),
letters of credit, letter-of-credit rights (whether or not the letter of credit
is evidenced by a writing), securities and all other investment property,
general intangibles (including all payment intangibles), money, deposit
accounts, and any other contract rights or rights to the payment of money;

 

      (b) all Intellectual Property Collateral; and

 

    (c)  all Proceeds and products of each of the foregoing, all books and
records relating to the foregoing, all supporting obligations related thereto,
and all accessions to, substitutions and replacements for, and rents, profits
and products of, each of the foregoing, and any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Grantor from time to
time with respect to any of the foregoing. 

 

3.  Secured Obligations. The Collateral secures the due and prompt payment and
performance of:

 

    (a)  the obligations of the Grantor from time to time arising under the Loan
Agreements, this Agreement or otherwise with respect to the due and prompt
payment of (i) the principal of and premium, if any, and interest on the Loans
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise and (ii)
all other monetary obligations, including fees, costs, attorneys’ fees and
disbursements, reimbursement obligations, contract causes of action, expenses
and indemnities, whether primary, secondary, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, fixed or
otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Grantor under or in
respect of the Loan Agreements and this Agreement; and

 

    (b)  all other covenants, duties, debts, obligations and liabilities of any
kind of the Grantor under or in respect of the Loan Agreements, this Agreement
or any other document made, delivered or given in connection with any of the
foregoing, in each case whether evidenced by a note or other writing, whether
allowed in any bankruptcy, insolvency, receivership or other similar proceeding,
whether arising from an extension of credit, issuance of a letter of credit,
acceptance, loan, guaranty, indemnification or otherwise, and whether primary,
secondary, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, fixed or otherwise (all such obligations,
covenants, duties, debts, liabilities, sums and expenses set forth in Section 3
being herein collectively called the “Secured Obligations”).

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4.  Perfection of Security Interest and Further Assurances.

 

    (a)  The Grantor shall, from time to time, as may be required by the Secured
Party with respect to all Collateral, immediately take all actions as may be
requested by the Secured Party to perfect the security interest of the Secured
Party in the Collateral, including, without limitation, with respect to all
Collateral over which control may be obtained within the meaning of sections
8-106, 9-104, 9-105, 9-106 and 9-107 of the UCC, section 201 of the federal
Electronic Signatures in Global and National Commerce Act and, as the case may
be, section 16 of the Uniform Electronic Transactions Act, as applicable, the
Grantor shall immediately take all actions as may reasonably be requested from
time to time by the Secured Party so that control of such Collateral is obtained
and at all times held by the Secured Party. All of the foregoing shall be at the
sole cost and expense of the Grantor.

 

    (b)  The Grantor hereby irrevocably authorizes the Secured Party at any time
and from time to time to file in any relevant jurisdiction any financing
statements and amendments thereto that contain the information required by
Article 9 of the UCC of each applicable jurisdiction for the filing of any
financing statement or amendment relating to the Collateral, including any
financing or continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the security
interest granted by the Grantor hereunder, without the signature of the Grantor
where permitted by law, including the filing of a financing statement describing
the Collateral as all assets now owned or hereafter acquired by the Grantor, or
words of similar effect. The Grantor agrees to provide all information required
by the Secured Party pursuant to this Section promptly to the Secured Party upon
request.

 

    (c)  If the Grantor shall at any time hold or acquire any certificated
securities, promissory notes, tangible chattel paper, negotiable documents or
warehouse receipts relating to the Collateral, the Grantor shall immediately
endorse, assign and deliver the same to the Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as the Secured
Party may from time to time specify.

 

    (d)  If the Grantor shall at any time hold or acquire a commercial tort
claim, the Grantor shall immediately notify the Secured Party in a writing
signed by the Grantor of the particulars thereof and grant to the Secured Party
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
satisfactory to the Secured Party.

 

(e)  If any Collateral is at any time in the possession of a bailee, the Grantor
shall promptly notify the Secured Party thereof and, at the Secured Party’s
request and option, shall promptly obtain an acknowledgment from the bailee, in
form and substance satisfactory to the Secured Party, that the bailee holds such
Collateral for the benefit of the Secured Party and the bailee agrees to comply,
without further consent of the Grantor, at any time with instructions of the
Secured Party as to such Collateral.

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    (f)  The Grantor agrees that at any time and from time to time, at the
expense of the Grantor, the Grantor will promptly execute and deliver all
further instruments and documents, obtain such agreements from third parties,
and take all further action, that may be necessary or desirable, or that the
Secured Party may request, in order to create and/or maintain the validity,
perfection or priority of and protect any security interest granted or purported
to be granted hereby or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder or under any other agreement with respect to any
Collateral.

 

5.  Representations and Warranties. The Grantor represents and warrants as
follows:

 

    (a)  It has previously provided to the Secured Party information relating to
the Grantor’s (i) exact legal name, (ii) type of organization and jurisdiction,
and (iii) place of business (or, if more than one, its chief executive office),
and its mailing address, and all such information relating to the Grantor is
accurate and complete.

 

    (b)  All information provided by the Grantor to the Secured Party relating
to the Collateral is accurate and complete.

 

    (c)  The Collateral consisting of securities have been duly authorized and
validly issued, and are fully paid and non-assessable and subject to no options
to purchase or similar rights. The Grantor has at all times operated its
business in substantial compliance with all applicable provisions of the federal
Fair Labor Standards Act, as amended, and with all applicable provisions of
federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances.

 

    (d)  At the time the Collateral becomes subject to the lien and security
interest created by this Agreement, with the exception of Permitted Encumbrances
set forth in the Loan Agreement, the Grantor will be the sole, direct, legal and
beneficial owner thereof, free and clear of any lien, security interest,
encumbrance, claim, option or right of others except for the security interest
created by this Agreement and other liens permitted by the Loan Agreements.

 

    (e)  The pledge of the Collateral pursuant to this Agreement creates a valid
and perfected First Priority security interest in the Collateral, with the
exception of Permitted Encumbrances set forth in the Loan Agreement, securing
the payment and performance when due of the Secured Obligations.

 

    (f)  It has full power, authority and legal right to borrow the Loans and
pledge the Collateral pursuant to this Agreement.

 

    (g)  Each of this Agreement and the Loan Agreements has been duly
authorized, executed and delivered by the Grantor and constitutes a legal, valid
and binding obligation of the Grantor enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors’ rights generally and subject to
equitable principles (regardless of whether enforcement is sought in equity or
at law).

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    (h)  No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
borrowing of the Loans and the pledge by the Grantor of the Collateral pursuant
to this Agreement or for the execution and delivery of the Loan Agreements and
this Agreement by the Grantor or the performance by the Grantor of its
obligations thereunder.

 

    (i)  The execution and delivery of the Loan Agreements and this Agreement by
the Grantor and the performance by the Grantor of its obligations thereunder,
will not violate any provision of any applicable law or regulation or any order,
judgment, writ, award or decree of any court, arbitrator or governmental
authority, domestic or foreign, applicable to the Grantor or any of its
property, or the organizational or governing documents of the Grantor or any
agreement or instrument to which the Grantor is party or by which it or its
property is bound, except for such violations that individually or in the
aggregate would not have a material adverse effect.

 

    (j)  The Grantor has taken all action required on its part for control (as
defined in sections 8-106, 9-104, 9-105, 9-106 and 9-107 of the UCC, section 201
of the federal Electronic Signatures in Global and National Commerce Act and, as
the case may be, section 16 of the Uniform Electronic Transactions Act, as
applicable) to have been obtained by the Secured Party over all Collateral with
respect to which such control may be obtained pursuant to the UCC. No person
other than the Secured Party has control or possession of all or any part of the
Collateral.

 

6.  Voting, Distributions and Receivables.

 

    (a)  The Secured Party agrees that unless an Event of Default shall have
occurred and be continuing, the Grantor may, to the extent the Grantor has such
right as a holder of the Collateral consisting of securities, other equity
interests or indebtedness owed by any obligor, vote and give consents,
ratifications and waivers with respect thereto, except to the extent that, in
the Secured Party’s reasonable judgment, any such vote, consent, ratification or
waiver would detract from the value thereof as Collateral or which would be
inconsistent with or result in any violation of any provision of the Loan
Agreements or this Agreement, and from time to time, upon request from the
Grantor, the Secured Party shall deliver to the Grantor suitable proxies so that
the Grantor may cast such votes, consents, ratifications and waivers.

 

    (b)  The Secured Party agrees that the Grantor may, unless an Event of
Default shall have occurred and be continuing, receive and retain all dividends
and other distributions with respect to the Collateral consisting of securities,
other equity interests or indebtedness owed by any obligor.

 

    (c)  If any Event of Default shall have occurred and be continuing, the
Secured Party may, or at the request and option of the Secured Party the Grantor
shall, notify account debtors and other persons obligated on any of the
Collateral of the security interest of the Secured Party in any account, chattel
paper, general intangible, instrument or other Collateral and that payment
thereof is to be made directly to the Secured Party.

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7.  Covenants. The Grantor covenants as follows:

 

    (a)  The Grantor will not, without providing at least 30 days’ prior written
notice to the Secured Party, change its legal name, identity, type of
organization, jurisdiction of organization, corporate structure, location of its
chief executive office or its principal place of business or its organizational
identification number. The Grantor will, prior to any change described in the
preceding sentence, take all actions reasonably requested by the Secured Party
to maintain the perfection and priority of the Secured Party’s security interest
in the Collateral.

 

    (b)  The Collateral will be kept at those locations as is required in the
Grantor’s ordinary course of business and the Grantor will not remove the
Collateral from such locations without providing at least 30 days’ prior written
notice to the Secured Party. The Grantor will, prior to any change described in
the preceding sentence, take all actions reasonably required by the Secured
Party to maintain the perfection and priority of the Secured Party’s security
interest in the Collateral.

 

    (c)  The Grantor shall, at its own cost and expense, defend title to the
Collateral and the First Priority lien and security interest of the Secured
Party therein against the claim of any person claiming against or through the
Grantor, except such claims arising in connection with Permitted Encumbrances
set forth in the Loan Agreements, and shall maintain and preserve such perfected
First Priority security interest for so long as this Agreement shall remain in
effect.

 

    (d)  The Grantor will not sell, offer to sell, dispose of, convey, assign or
otherwise transfer, grant any option with respect to, restrict, or grant,
create, permit or suffer to exist any mortgage, pledge, lien, security interest,
option, right of first offer, encumbrance or other restriction or limitation of
any nature whatsoever on, any of the Collateral or any interest therein except
as expressly provided for in the Loan Agreements herein or with the prior
written consent of the Secured Party.

 

    (e)  The Grantor will keep the Collateral in good order and repair and will
not use the same in violation of law or any policy of insurance thereon. The
Grantor will permit the Secured Party, or its designee, to inspect the
Collateral at any reasonable time, wherever located.

 

    (f)  The Grantor will pay promptly when due all taxes, assessments,
governmental charges, and levies upon the Collateral or incurred in connection
with the use or operation of the Collateral or incurred in connection with this
Agreement.

 

    (g)  The Grantor will continue to operate its business in compliance with
all applicable provisions of the federal Fair Labor Standards Act, as amended,
and with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances.

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8.  Secured Party Appointed Attorney-in-Fact. The Grantor hereby appoints the
Secured Party the Grantor’s attorney-in-fact, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise, from time
to time during the continuance of an Event of Default in the Secured Party’s
discretion to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement (but the Secured Party shall not be obligated to and shall have no
liability to the Grantor or any third party for failure to do so or take
action). This appointment, being coupled with an interest, shall be irrevocable.
The Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof.

 

9.  Secured Party May Perform. If the Grantor fails to perform any obligation
contained in this Agreement, the Secured Party may itself perform, or cause
performance of, such obligation, and the expenses of the Secured Party incurred
in connection therewith shall be payable by the Grantor; provided that the
Secured Party shall not be required to perform or discharge any obligation of
the Grantor.

 

10.  Reasonable Care. The Secured Party shall have no duty with respect to the
care and preservation of the Collateral beyond the exercise of reasonable care.
The Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Secured Party
accords its own property, it being understood that the Secured Party shall not
have any responsibility for (a) ascertaining or taking action with respect to
any claims, the nature or sufficiency of any payment or performance by any party
under or pursuant to any agreement relating to the Collateral or other matters
relative to any Collateral, whether or not the Secured Party has or is deemed to
have knowledge of such matters, or (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral. Nothing set forth in
this Agreement, nor the exercise by the Secured Party of any of the rights and
remedies hereunder, shall relieve the Grantor from the performance of any
obligation on the Grantor’s part to be performed or observed in respect of any
of the Collateral.

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11.  Remedies Upon Default.

 

    (a)  If any Event of Default shall have occurred and be continuing, the
Secured Party, without any other notice to or demand upon the Grantor, may
assert all rights and remedies of a secured party under the UCC or other
applicable law, including, without limitation, the right to take possession of,
hold, collect, sell, lease, deliver, grant options to purchase or otherwise
retain, liquidate or dispose of all or any portion of the Collateral. If notice
prior to disposition of the Collateral or any portion thereof is necessary under
applicable law, written notice mailed to the Grantor at its notice address as
provided in Section 15 hereof ten days prior to the date of such disposition
shall constitute reasonable notice, but notice given in any other reasonable
manner shall be sufficient. So long as the sale of the Collateral is made in a
commercially reasonable manner, the Secured Party may sell such Collateral on
such terms and to such purchaser(s) as the Secured Party in its absolute
discretion may choose, without assuming any credit risk and without any
obligation to advertise or give notice of any kind other than that necessary
under applicable law. Without precluding any other methods of sale, the sale of
the Collateral or any portion thereof shall have been made in a commercially
reasonable manner if conducted in conformity with reasonable commercial
practices of creditors disposing of similar property. At any sale of the
Collateral, if permitted by applicable law, the Secured Party may be the
purchaser, licensee, assignee or recipient of the Collateral or any part thereof
and shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold,
assigned or licensed at such sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price of the Collateral or
any part thereof payable at such sale. To the extent permitted by applicable
law, the Grantor waives all claims, damages and demands it may acquire against
the Secured Party arising out of the exercise by it of any rights hereunder. The
Grantor hereby waives and releases to the fullest extent permitted by law any
right or equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the Collateral and
any other security for the Secured Obligations or otherwise. At any such sale,
unless prohibited by applicable law, the Secured Party or any custodian may bid
for and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Secured Party nor any custodian shall
be liable for failure to collect or realize upon any or all of the Collateral or
for any delay in so doing, nor shall it be under any obligation to take any
action whatsoever with regard thereto. The Grantor agrees that it would not be
commercially unreasonable for the Secured Party to dispose of the Collateral or
any portion thereof by utilizing internet sites that provide for the auction of
assets of the type included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets. The Secured
Party shall not be obligated to clean up or otherwise prepare the Collateral for
sale.

 

    (b)  If any Event of Default shall have occurred and be continuing, all
rights of the Grantor to (i) exercise the voting and other consensual rights it
would otherwise be entitled to exercise pursuant to Section 6(a) and (ii)
receive the dividends and other distributions which it would otherwise be
entitled to receive and retain pursuant to Section 6(b), shall immediately
cease, and all such rights shall thereupon become vested in the Secured Party,
which shall have the sole right to exercise such voting and other consensual
rights and receive and hold such dividends and other distributions as
Collateral.

 

    (c)  If any Event of Default shall have occurred and be continuing, any cash
held by the Secured Party as Collateral and all cash Proceeds received by the
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall be applied in whole or in part by
the Secured Party to the payment of expenses incurred by the Secured Party in
connection with the foregoing or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of the
Secured Party hereunder, including reasonable attorneys’ fees, and the balance
of such proceeds shall be applied or set off against all or any part of the
Secured Obligations in such order as the Secured Party shall elect. Any surplus
of such cash or cash Proceeds held by the Secured Party and remaining after
payment in full of all the Secured Obligations shall be paid over to the Grantor
or to whomsoever may be lawfully entitled to receive such surplus. The Grantor
shall remain liable for any deficiency if such cash and the cash Proceeds of any
sale or other realization of the Collateral are insufficient to pay the Secured
Obligations and the fees and other charges of any attorneys employed by the
Secured Party to collect such deficiency.

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    (d)  If the Secured Party shall determine to exercise its rights to sell all
or any of the Collateral pursuant to this Section, the Grantor agrees that, upon
request of the Secured Party, the Grantor will, at its own expense, do or cause
to be done all such acts and things as may be necessary to make such sale of the
Collateral or any part thereof valid and binding and in compliance with
applicable law.

 

12.  No Waiver and Cumulative Remedies. The Secured Party shall not by any act
(except by a written instrument pursuant to Section 14), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. All rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
provided by law.

 

13.  Security Interest Absolute. The Grantor hereby waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. All rights of the
Secured Party and liens and security interests hereunder, and all Secured
Obligations of the Grantor hereunder, shall be absolute and unconditional
irrespective of:

 

    (a)  any illegality or lack of validity or enforceability of any Secured
Obligation or any related agreement or instrument;

 

    (b)  any change in the time, place or manner of payment of, or in any other
term of, the Secured Obligations, or any rescission, waiver, amendment or other
modification of the Loan Agreements, this Agreement or any other agreement,
including any increase in the Secured Obligations resulting from any extension
of additional credit or otherwise;

 

    (c)  any taking, exchange, substitution, release, impairment or
non-perfection of any Collateral or any other collateral, or any taking,
release, impairment, amendment, waiver or other modification of any guaranty,
for all or any of the Secured Obligations;

 

    (d)  any manner of sale, disposition or application of proceeds of any
Collateral or any other collateral or other assets to all or part of the Secured
Obligations;

 

    (e)  any default, failure or delay, willful or otherwise, in the performance
of the Secured Obligations;

 

    (f)  any defense, set-off or counterclaim (other than a defense of payment
or performance) that may at any time be available to, or be asserted by, the
Grantor against the Secured Party; or

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    (g)  any other circumstance (including, without limitation, any statute of
limitations) or manner of administering the Loans or any existence of or
reliance on any representation by the Secured Party that might vary the risk of
the Grantor or otherwise operate as a defense available to, or a legal or
equitable discharge of, the Grantor or any other grantor, guarantor or surety.

 

14.  Amendments. None of the terms or provisions of this Agreement may be
amended, modified, supplemented, terminated or waived, and no consent to any
departure by the Grantor therefrom shall be effective unless the same shall be
in writing and signed by the Secured Party and the Grantor, and then such
amendment, modification, supplement, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which made or given.

 

15.  Addresses for Notices. All notices and other communications provided for in
this Agreement shall be in writing and shall be given in the manner and become
effective as set forth in the Loan Agreements, and addressed to the respective
parties at their addresses as specified on the signature pages hereof or as to
either party at such other address as shall be designated by such party in a
written notice to each other party.

 

16.  Continuing Security Interest; Further Actions. This Agreement shall create
a continuing First Priority lien and security interest in the Collateral and
shall (a) subject to Section 17, remain in full force and effect until payment
and performance in full of the Secured Obligations, (b) be binding upon the
Grantor, its successors and assigns, and (c) inure to the benefit of the Secured
Party and its successors, transferees and assigns; provided that the Grantor may
not assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the Secured Party. Without
limiting the generality of the foregoing clause (c), any assignee of the Secured
Party’s interest in any agreement or document which includes all or any of the
Secured Obligations shall, upon assignment, become vested with all the benefits
granted to the Secured Party herein with respect to such Secured Obligations.

 

17.  Termination; Release. On the date on which all Secured Obligations have
been paid and performed in full, the Secured Party will, at the request and sole
expense of the Grantor, (a) duly assign, transfer and deliver to or at the
direction of the Grantor (without recourse and without any representation or
warranty) such of the Collateral as may then remain in the possession of the
Secured Party, together with any monies at the time held by the Secured Party
hereunder, and (b) execute and deliver to the Grantor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement.

 

18.  Governing Law. This Agreement and any claim, controversy, dispute or cause
of action (whether in contract or tort or otherwise) based upon, arising out of
or relating to this Agreement and the transactions contemplated hereby shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

19.  Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in counterparts (and by different parties
hereto in different counterparts), each of which shall constitute an original,
but all taken together shall constitute a single contract. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile or in
electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a
manually executed counterpart of this Agreement. This Agreement and the Loan
Agreements constitute the entire contract among the parties with respect to the
subject matter hereof and supersede all previous agreements and understandings,
oral or written, with respect thereto.

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

 

 

 

Windtree Therapeutics, Inc., as Grantor

 

By:      /s/ Craig Fraser 

Name: Craig Fraser

Title:   President and Chief Executive Officer

 

 

LPH Investments Ltd., as Secured Party

 

By:     /s/ Benjamin Li, Ph.D.

Name: Benjamin Li, Ph.D.

Title:   Chief Executive Officer