ex_119219.htm


Exhibit 10.7


 


WAIVER AND FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT


 


THIS WAIVER AND FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as of July 30, 2018 (the “Fourth Amendment Date”), by and among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314, as collateral agent (in its individual capacity, “Oxford”; and in its capacity as collateral agent, “Collateral Agent”), the Lenders listed on Schedule 1.1 of the Loan Agreement (as defined below) from time to time including Oxford in its capacity as a Lender (each a “Lender” and collectively, the “Lenders”), and AirXpanders, Inc., a Delaware corporation with offices located at 1047 Elwell Court, Palo Alto, CA 94303 (“Borrower”).


 


WHEREAS, Collateral Agent, Borrower and the Lenders party to the Loan Agreement from time to time have entered into that certain Loan and Security Agreement, dated as of August 4, 2017 (as amended, supplemented or otherwise modified from time to time, including, but without limitation, by that certain Waiver and First Amendment to Loan and Security Agreement dated as of November 9, 2017, that certain Waiver and Second Amendment to Loan and Security Agreement dated as of April 26, 2018, and that certain Third Amendment to Loan and Security Agreement dated as of June 5, 2018 the “Loan Agreement”) pursuant to which the Lenders have provided to Borrower certain loans in accordance with the terms and conditions thereof;


 


WHEREAS, an Event of Default has occurred and is continuing under Section 8.2(a) (Covenant Default) of the Loan Agreement as a result of a violation of Section 6.10 of the Loan Agreement resulting from Borrower’s failure to achieve at least 70% of budgeted total revenues on a trailing six-month basis (tested quarterly), for the reporting period ending June 30, 2018 (the “Existing Default”). By reason of the Existing Default, Collateral Agent has the right to accelerate the maturity of the unpaid balance of the Obligations. In addition, as a result of the foregoing Existing Default, Collateral Agent and the Lenders are entitled to exercise any and all default-related rights and remedies under the Loan Agreement, other Loan Documents and/or applicable Law;


 


WHEREAS, Borrower has requested that Collateral Agent and the Lenders waive the Existing Default;


 


WHEREAS, although the Lenders and Collateral Agent are under no obligation to do so, the Lenders and Collateral Agent have agreed to waive the Existing Default, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below; and


 


WHEREAS, Borrower, the Lenders and Collateral Agent desire to amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below;


 


NOW, THEREFORE, in consideration of the promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, the Lenders and Collateral Agent hereby agree as follows:


 


	 	
			1.

				
			Capitalized terms used herein but not otherwise defined shall have the respective meanings given to them in the Loan Agreement.

			



 


	 	
			2.

				
			Borrower acknowledges and agrees that unless the Existing Default is waived by Collateral Agent and the Lenders, the Existing Default would constitute an Event of Default under the Loan Documents as of the date hereof. Collateral Agent and the Lenders hereby waive the Existing Default. Collateral Agent’s and the Lenders’ agreement to waive the Existing Default shall in no way obligate Collateral Agent or any Lender to make any other modifications to the Loan Agreement or to waive Borrower’s compliance with any other terms of the Loan Documents, and shall not limit or impair Collateral Agent’s and the Lenders’ right to demand strict performance of all other terms and covenants as of any date. The waiver set forth above shall not be deemed or otherwise construed to constitute a waiver of any other provisions of the Loan Agreement in connection with any other transaction.

			



 



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			3.

				
			Section 2.2(b) of the Loan Agreement is hereby amended and restated in its entirety as follows:

			



 


“(b)     Repayment. Borrower shall make monthly payments of interest-only commencing on the first (1st) Payment Date following the Funding Date of the Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date. Borrower agrees to pay, on the Funding Date of the Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of the Term Loan and the first Payment Date thereof. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicable accrued interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to thirty-two (32) months. All unpaid principal and accrued and unpaid interest with respect to the Term Loan is due and payable in full on the Maturity Date. The Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).”


 


	 	
			4.

				
			Section 6.10 of the Loan Agreement is hereby amended and restated in its entirety as follows:

			



 


“6.10     Financial Covenants.


 


(a)     Borrower shall achieve minimum trailing six-month revenue, to be tested as of the last day of each applicable quarter (as set forth in that certain Financial Covenant Side Letter) through and including the month ending December 31, 2018, on a consolidated basis with respect to Borrower and its Subsidiaries, of at least the amounts set forth in the Financial Covenant Side Letter; and thereafter, the required revenues of Borrower shall be determined by Collateral Agent and the Lenders upon receipt and review by Collateral Agent and the Lenders of Borrower’s Annual Projections delivered in accordance with Section 6.2(a)(iii); provided that such required revenues shall be:


 


(i) based on a minimum revenue requirement of a percentage of Borrower’s board of directors-approved revenue plan (provided that such plan is acceptable to Collateral Agent and the Lenders) to be set by Collateral Agent in its sole discretion,


 


(ii) in no event less than the amounts required hereunder with respect to the 2018 fiscal year of Borrower, and


 


(iii) at such levels that require Borrower to grow revenues sequentially quarter-over-quarter;


 


(b)     Borrower shall at all times maintain unrestricted cash and/or Cash Equivalents in a minimum aggregate amount of at least the amount set forth in the Financial Covenant Side Letter in accounts which are subject to a Control Agreement in favor of Collateral Agent.”


 



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			5.

				
			A new Section 6.14 is hereby added to the Loan Agreement immediately following Section 6.13 to read as follows:

			



 


“6.14 Additional Warrants in Connection with Fourth Amendment. Within five (5) Business Days following the last closing of the Next Equity Financing, Borrower shall deliver to the Lenders a warrant (or split warrants) exercisable for such number of shares of the Class A Common Stock (“Common Stock”) as shall equal to One Hundred Fifty Thousand Dollars ($150,000.00), divided by the lower of (i) ten-day average of the closing prices of Borrower’s CDIs on the Australian Securities Exchange prior to the Fourth Amendment Date, multiplied by three and converted to U.S. dollars at the prevailing Australian dollar to U.S. dollar exchange rate as published by the Reserve Bank of Australia on the last day of the relevant ten day period, or  (ii) the Next Equity Financing Price, subject to adjustment thereafter from time to time in accordance with the provisions of the Warrant; provided, that, if an Event of Default occurs after the Fourth Amendment Date but prior to the closing of the Next Equity Financing, then, at the Lenders’ option, Borrower shall deliver to the Lenders a warrant (or split warrants) exercisable for such number of shares of Common Stock as shall equal to One Hundred Fifty Thousand Dollars ($150,000.00), divided by the lower of (i) ten-day average of the closing prices of Borrower’s CDIs on the Australian Securities Exchange prior to the Fourth Amendment Date, multiplied by three and converted to U.S. dollars at the prevailing Australian dollar to U.S. dollar exchange rate as published by the Reserve Bank of Australia on the last day of the relevant ten day period, or  (ii) ten-day average of the closing prices of Borrower’s CDIs on the Australian Securities Exchange prior to the occurrence of such Event of Default, multiplied by three and converted to U.S. dollars at the prevailing Australian dollar to U.S. dollar exchange rate as published by the Reserve Bank of Australia on the last day of the relevant ten day period.  As used herein (i) “CDI” means a CHESS Depositary Interest representing one-third of a share of Common Stock; (ii) “Next Equity Financing” means the first sale or issuance by the Company on or after the Fourth Amendment Date, in a single transaction or series of related transactions (but specifically excluding sales or issuances to directors of Borrower that require separate shareholder approval and the filing of proxies), of shares of its stock (including Common Stock, convertible preferred stock or other senior equity securities to one or more investors for cash for financing purposes); (iii) “Next Equity Financing Securities” means the type, class and series of stock (including Common Stock, convertible preferred stock or other senior equity security sold or issued by the Company in the Next Equity Financing); and (iv) “Next Equity Financing Price” means the lowest price per share in U.S. dollars for which Next Equity Financing Securities are sold or issued by the Company in the Next Equity Financing, provided that, if the Next Equity Financing includes the sale or issuance of CDIs in Australian dollars then the Next Equity Financing Price will be lowest price per CDI in Australian dollars sold or issued in the Next Equity Financing, multiplied by three and converted to U.S. dollars at the prevailing Australian dollar to U.S. dollar exchange rate as published by the Reserve Bank of Australia on the business day immediately prior to the closing of the Next Equity Financing. For the avoidance of doubt, (i) the warrant price per share shall be the applicable price per share used to calculate the number of warrants shares in the foregoing provision; and (ii) for purposes of determining the “Next Equity Financing” under the foregoing provision, both private placements and rights offerings in a series of related transactions shall be included.


6.     Section 13.1 of the Loan Agreement is hereby amended by amending and restating the following definitions therein as follows:


 


“‘Amortization Date’ is, with respect to a Term Loan, January 1, 2020.”


 


    “‘Financial Covenant Side Letter’ is that certain second amended and restated financial covenant side letter dated as of the Fourth Amendment Date, or any date thereafter, among Borrower, Collateral Agent and the Lenders.”


 


“‘Key Person’ is each of Borrower’s (i) Chief Executive Officer, who is Frank Grillo as of the Fourth Amendment Date, and (ii) Chief Financial Officer and Chief Operating Officer, who is Scott Murcray as of the Effective Date.


 


	 	
			7.

				
			Section 13.1 of the Loan Agreement is hereby further amended by adding the following definition thereto in alphabetical order:

			



 


                    “‘Fourth Amendment Date’ is July 30, 2018.”


 


	 	
			8.

				
			Section 13.1 of the Loan Agreement is hereby further amended by deleting the definition of “Compliance Condition” contained therein.

			



 


	 	
			9.

				
			Limitation of Waiver and Amendment.

			



 


	 	
			a.

				
			The waiver set forth in Section 2 and the amendments set forth in Sections 3 through 7, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (ii) otherwise prejudice any right or remedy which the Lenders, or obligation which Borrower, may now have or may have in the future under or in connection with any Loan Document.

			



 


	 	
			b.

				
			This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

			



 



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			10.

				
			Release by Borrower.

			



 


	 	
			a.

				
			FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Collateral Agent and each Lender and their respective present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of time through and including the date of execution of this Amendment solely to the extent such claims arise out of or are in any manner whatsoever connected with or related to the Loan Documents, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing (collectively “Released Claims”).

			



 


	 	
			b.

				
			In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides as follows:

			



 


“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” (Emphasis added.)


 


	 	
			c.

				
			By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected in respect of the Released Claims; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

			



 


	 	
			d.

				
			This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Borrower acknowledges that the release contained herein constitutes a material inducement to Collateral Agent and the Lenders to enter into this Amendment, and that Collateral Agent and the Lenders would not have done so but for Collateral Agent’s and the Lenders’ expectation that such release is valid and enforceable in all events.

			



 


	 	
			e.

				
			Borrower hereby represents and warrants to Collateral Agent and the Lenders, and Collateral Agent and the Lenders are relying thereon, as follows:

			



 


	 	
			i.

				
			Except as expressly stated in this Amendment, neither Collateral Agent, the Lenders nor any agent, employee or representative of any of them has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Amendment.

			



 


	 	
			ii.

				
			Borrower has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary.

			



 



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			iii.

				
			The terms of this Amendment are contractual and not a mere recital.

			



 


	 	
			iv.

				
			This Amendment has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Amendment is signed freely, and without duress, by Borrower.

			



 


	 	
			v.

				
			Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Borrower shall indemnify Collateral Agent and the Lenders, defend and hold each harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

			



 


	 	
			11.

				
			To induce Collateral Agent and the Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and the Lenders as follows:

			



 


	 	
			a.

				
			Immediately after giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date) and (ii) no Event of Default has occurred and is continuing;

			



 


	 	
			b.

				
			Borrower has the power and due authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

			



 


	 	
			c.

				
			The organizational documents of Borrower delivered to Collateral Agent on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

			



 


	 	
			d.

				
			The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (i) any law or regulation binding on or affecting Borrower, (ii) any contractual restriction with a Person binding on Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (iv) the organizational documents of Borrower;

			



 


	 	
			e.

				
			The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

			



 


	 	
			f.

				
			This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

			



 


	 	
			12.

				
			Except as expressly set forth herein, the Loan Agreement shall continue in full force and effect without alteration or amendment. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.

			



 


	 	
			13.

				
			This Amendment shall be deemed effective as of the Fourth Amendment Date upon (a) the due execution and delivery to Collateral Agent of this Amendment, and (b) Borrower’s payment of all Lenders’ Expenses incurred through the date hereof, which may be debited (or ACH’d) from any of Borrower’s accounts with the Lenders.

			



 



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			14.

				
			This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument.

			



 


	 	
			15.

				
			This Amendment and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of California.

			



 


 


[Balance of Page Intentionally Left Blank]


 



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IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Fourth Amendment to Loan and Security Agreement to be executed as of the date first set forth above.


 


	
			BORROWER:

				 	 
	 	 	 
	
			AIRXPANDERS, INC.

				 	 
	 	 	 
	 	 	 
	
			By

				/s/ Frank Grillo	 	 
	
			Name:

				Frank Grillo	 	 
	
			Title:

				President and CEO	 	 
	 	 	 
	 	 	 
	 	 	 
	
			COLLATERAL AGENT AND LENDER:

				 	 
	 	 	 
	
			OXFORD FINANCE LLC

			
	 	 	 
	 	 	 
	
			By

				/s/ Colette H. Featherly	 	 
	
			Name:

				Colette H. Featherly	 	 
	
			Title:

				Senior Vice President