Document:

Exhibit 10.3

 

STANDSTILL AGREEMENT

 

This
Standstill Agreement, dated as of April 13, 2021 (this “Agreement”), is by and between Liquidia Corporation, a Delaware
corporation (the “Company”), and Caligan Partners CV IV LP (the “New Company Investor”).

 

RECITALS

 

WHEREAS,
on the date hereof, the Company, the New Company Investor and certain other parties as identified therein (collectively, such other parties
being referred to herein as the “PIPE Investors”) have entered into that certain Common Stock Purchase Agreement (the
 “Purchase Agreement”) pursuant to which the PIPE Investors have purchased an aggregate of 8,626,037 shares of common
stock, $0.001 par value per share, of the Company (the “Common Stock”) on the date hereof, at a price per share of
Common Stock equal to $2.52; and

 

WHEREAS,
the Company and the New Company Investor have determined to come to an agreement with respect to certain matters, as provided in this
Agreement.

AGREEMENT

 

NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby,
agree as follows:

 

Section 1. Board Composition and Related Agreements.

 

(a) Board Appointment.

 

(i)                
On or prior to the date hereof, the Board of Directors of the Company (the “Board”) and all applicable committees
thereof shall take all necessary actions to, effective on the date hereof (A) increase the size of the Board to nine (9) members and (B)
appoint David Johnson (“Mr. Johnson”) as a Class II director for a term expiring at the Company’s 2023 annual
meeting of stockholders (the “2023 Annual Meeting”), and until his successor is duly elected and qualified, or until
such director’s earlier resignation, removal or death; provided, however, that, notwithstanding the foregoing, in
the event that (x) each of the conditions precedent to consummating the transactions contemplated by the Purchase Agreement have not been
satisfied, (i) Mr. Johnson shall immediately resign as a director of the Company as well as a member of any committees of the Company
which Mr. Johnson is then serving, (ii) the New Company Investor shall not have any rights to appoint a Replacement Designee pursuant
to Section 1(a)(iv) hereto, and (iii) the Company shall not be obligated to nominate Mr. Johnson as a Class II director for the
election of directors at the 2023 Annual Meeting pursuant to Section 1(b).

 

(ii)             
The Parties acknowledge that, at all times while serving as a member of the Board (and as a condition to such service), Mr. Johnson
shall be subject to all policies, codes, guidelines and reasonable requests applicable to Board members generally, each as may be amended
from time to time, including the Company’s Code of Conduct, and shall have the same rights and benefits, including with respect
to insurance, indemnification, compensation, fees and reimbursement of expenses, as are applicable to all non-employee directors
of the Company.

 

     

     

    

 

(iii)           
Subject to any applicable corporate governance documents of the Company and applicable stock exchange rules, concurrently with
the Mr. Johnson’s appointment to the Board, Mr. Johnson shall also be appointed to the Audit Committee of the Board, subject to
Section 1(a)(i), the Company agrees to maintain such committee appointment during the term of this Agreement, as long as Mr. Johnson
(or, as applicable, his Replacement Designee (as defined below)) continues to serve on the Board.

 

(iv)            
Subject to Section 1(a)(i), during the Standstill Period (defined below), as long as the New Company Investor owns at least
66% of the Company’s Voting Securities (as defined below) owned by the New Company Investor as of the Closing Date (as defined in
the Purchase Agreement) (and subject to adjustment for stock splits, reclassifications, combinations, buybacks or similar transactions,
the “Ownership Minimum”) and in the event that Mr. Johnson (or any Replacement Designee (as defined below), as applicable)
becomes unwilling or unable to serve as a director and ceases to be a director, resigns as a director or is removed as a director, or
for any other reason fails to serve or is not serving as a director at any time prior to the end of the Cooperation Period, then the members
of the New Company Investor shall be entitled to designate, subject to the approval (not to be unreasonably withheld) of the applicable
committee of the Board, a candidate for replacement of such New Director (such replacement, a “Replacement Designee”).
Any Replacement Designee shall qualify as an independent director of the Company under applicable rules of the SEC, the rules of any stock
exchange on which the Company is traded and applicable governance policies of the Company. Following the approval of a candidate for Replacement
Designee by the applicable committee of the Board, the Board shall promptly appoint such Replacement Designee to the Board. Upon his or
her appointment to the Board, such Replacement Designee shall be deemed a New Director for all purposes under this Agreement.

 

(v)              
New Director Nominations. Subject to Section 1(a)(i), provided that the New Company Investor owns the Ownership Minimum,
the Company’s slate of Class II director nominees for the election of directors at the 2023 Annual Meeting shall include Mr. Johnson
as a nominee. Subject to Section 1(a)(i), provided that the New Investor owns the Ownership Minimum, the Company will recommend that the
Company’s stockholders vote in favor of the election of Mr. Johnson at the 2023 Annual Meeting and will support Mr. Johnson for
election in a manner consistent with its support for the other nominees of the Company. Subject to Section 1(a)(i), provided that the
New Company Investor owns the Ownership Minimum, the Company will cause all Voting Securities represented by proxies granted to it (or
any of its Representatives) to be voted in favor of the election of Mr. Johnson as a director at the 2023 Annual Meeting, to the extent
permitted pursuant to such proxies.

 

(b) Additional Agreements.

 

(i)                
The New Company Investor agrees (A) to cause its Affiliates and Representatives (each as defined below) to comply with the terms
of this Agreement and (B) that it shall be responsible for any breach of this Agreement by any such Affiliate or Representative. A breach
of this Agreement by an Affiliate or Representative of the New Company Investor, if such Affiliate or Representative is not a Party hereto,
shall be deemed to occur if such Affiliate or Representative engages in conduct that would constitute a breach of this Agreement if such
Affiliate or Representative were a Party hereto to the same extent as the New Company Investor.

 

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(ii)             
During the Standstill Period, the New Company Investor agrees that it shall, and shall cause each of its Affiliates to, appear
in person or by proxy at each annual or special meeting of the stockholders of the Company (each, a “Stockholder Meeting”)
and vote all Voting Securities beneficially owned, directly or indirectly, by the New Company Investor or such Affiliate (or which the
New Company Investor or such Affiliate has the right or ability to vote as of the applicable record date) at such meeting (A) in favor
of the slate of directors recommended by the Board, (B) against the election of any nominee for director not approved, recommended and
nominated by the Board for election at any such Stockholder Meeting and (C) in accordance with the Board’s recommendation with respect
to any other matter presented at such Stockholder Meeting; provided, that the New Company Investor shall be permitted to vote
in its sole discretion with respect to any proposals relating to (i) an Extraordinary Transaction (as defined below) with a third party
that is not an Affiliate of the New Company Investor, or (ii) amendments to the Company’s Certificate of Incorporation, Bylaws,
or other governing documents of the Company that materially diminish stockholder rights.

 

(iii)           
During the Standstill Period, upon reasonable written request from the Company, the New Company Investor will promptly provide
the Company with information regarding the amount of the Voting Securities then beneficially owned by the New Company Investor. Such information
provided to the Company will be kept strictly confidential unless required to be disclosed pursuant to law, legal process, subpoena, the
rules of any stock exchange or any legal requirement or as part of a response to a request for information from any governmental authority
with jurisdiction over the Company.

 

(iv)            
Each Party (as defined below) agrees that, during the Standstill Period, it shall not institute, solicit, join or assist in any
litigation, arbitration or other proceeding (each, a “Legal Proceeding”) against or involving the other Party, any
Affiliate of the other Party or any of their respective current or former directors or officers (including derivative actions), other
than (A) to enforce the provisions of this Agreement, (B) to make counterclaims with respect to any proceeding initiated by, or on behalf
of one Party or its Affiliates against the other Party or its Affiliates, (C) to bring bona fide commercial disputes that do not relate
to the subject matter of this Agreement, or (D) to exercise statutory appraisal rights; provided, that the foregoing shall
not prevent any Party or any of its Representatives from responding to oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands or similar processes (each, a “Legal Requirement”) in connection with any Legal
Proceeding if such Legal Proceeding has not been initiated by, on behalf of or at the suggestion of such Party; provided, further,
that in the event that any Party or any of its Representatives receives such Legal Requirement, such Party shall give prompt written notice
of such Legal Requirement to the other Party (except where such notice would be legally prohibited or not practicable). Each Party represents
and warrants that neither it nor any assignee has filed any lawsuit against the other Party.

 

Section 2.  Standstill Agreement.
During the period commencing with the execution of this Agreement and ending on the earlier of (A) the one-year anniversary of the date
on which Mr. Johnson or any Replacement Designee no longer serves on the Board, and (B) the two-year anniversary of the Closing Date (the
 “Standstill Period”), the New Company Investor shall not, and it will cause each of its Affiliates not to, directly
or indirectly (including through any director, officer, employee, partner, member, manager, consultant, legal or other advisor, agent
or other representative (each of the foregoing, a “Representative”) of the New Company Investor or any Affiliate of
the New Company Investor acting on behalf of the New Company Investor or any Affiliate of the New Company Investor), in any manner, alone
or in concert with others, without the prior written consent of the Board:

 

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(a) (i) acquire, cause to be
acquired, or offer, seek or agree to acquire (except by way of stock dividends or other distributions or offerings made available to holders
of voting securities of the Company generally on a pro rata basis or any acquisitions through a broad-based market basket or index), whether
by purchase, merger, tender or exchange offer, through the acquisition of control of another person, by joining or forming a partnership,
limited partnership, syndicate or other group (including any group of persons that would be treated as a single “person” under
Section 13(d) of the Exchange Act (as defined below)), through swap or hedging transactions or otherwise (the taking of any such action,
an “Acquisition”), ownership (beneficial or otherwise) of any securities or assets of the Company (or any direct or
indirect rights or options to acquire such ownership, including voting rights decoupled from the underlying Voting Securities) such that
after giving effect to any such Acquisition, the New Company Investor or any of its Affiliates holds, directly or indirectly, on an aggregate
basis in excess of 20% of the then outstanding Voting Securities (the "Ownership Cap"); provided, however,
that the Board may increase the Ownership Cap by an affirmative vote of a majority of the Board, (ii) acquire, cause to be acquired, or
offer, seek or agree to acquire, whether by purchase or otherwise, any interest in any indebtedness of the Company, (iii) acquire, cause
to be acquired, or offer, seek or agree to acquire (whether through equity purchase, asset purchase, merger or otherwise), ownership (including
Beneficial Ownership (as defined below)) of any asset or business of the Company or any right or option to acquire any such asset or business
from any person, in each case other than securities of the Company, or (iv) effect or seek to effect, offer or propose to effect, cause
or participate in, or knowingly assist, facilitate, advise or encourage any other Person to effect or seek, offer or propose to effect
or participate in an Extraordinary Transaction; provided, that nothing in Section 2(a)(iv) shall prohibit
of the New Company Investor from tendering into a tender or exchange offer commenced by a third party who is not a Representative of the
New Company Investor or receiving payment for shares or otherwise participating in any Extraordinary Transaction on the same basis as
the other stockholders of the Company or from participating in any such transaction that has been approved by the Board; provided, further,
that nothing in Section 2(a)(iii) or Section 2(a)(iv) shall prohibit the New Company Investor from participating
as a co-investor in, or consultant with respect to, any offer, proposal or transaction otherwise prohibited by Section 2(a)(iii) or Section 2(a)(iv) so
long as (A) such transaction has been approved by the disinterested members of the Board or such offer, proposal or transaction is made
or entered into, as applicable, in accordance with a process established by the Company (which may include any potential counterparty’s
entry into a confidentiality agreement with the Company), (B) neither the counterparty to the Company in such transaction nor its Affiliates
is Affiliated with the New Company Investor, (C) the New Company Investor does not, directly or indirectly, engage in any discussions
or enters into any arrangements, agreements or understandings with the counterparty to the Company or its Affiliates other than to the
extent that (x) the New Company Investor is initially directly invited or solicited to do so by such counterparty or its Affiliates, (y)
such counterparty has been invited or solicited by the Company or its legal or financial advisors to participate in a transaction process
established by the Company or (z) such transaction has been presented by such counterparty to the Company, (D) the New Company Investor
enters into a confidentiality agreement at least as favorable to the Company as the confidentiality agreement entered into by the Company’s
counterparty in such transaction, if applicable, and (E) such transaction and the New Company Investor’s participation in such transaction
does not arise, directly or indirectly, from any breach of this Agreement (including Section 2(f) and Section 2(k))
by the New Company Investor.

 

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(b) (i) nominate, give notice
of an intent to nominate, or recommend for nomination a person for election to the Board or take any action in respect of the removal
of any director, (ii) knowingly seek or encourage any person to submit any nomination in furtherance of a “contested solicitation”
or take any other action in respect of the election or removal of any director, provided, that nothing in this Agreement shall
prevent the New Company Investor or its Affiliates or Representatives from taking actions in furtherance of identifying director candidates
to the Company’s Nominating and Corporate Governance Committee in connection with 2021 Annual Meeting, the 2022 Annual Meeting or
the 2023 Annual Meeting so long as such actions do not create a public disclosure obligation for the New Company Investor or the Company,
are not publicly disclosed by any of the New Company Investor or its Affiliates or Representatives and are undertaken on a basis reasonably
designed to be confidential, (iii) submit, or knowingly seek or encourage the submission of, any stockholder proposal (pursuant to Rule 14a-8 or
otherwise) for consideration at, or bring any other business before, any Stockholder Meeting, (iv) request, or knowingly initiate, encourage
or participate in any request, to call a Stockholder Meeting, (v) publicly seek to amend any provision of the Certificate of Incorporation,
Bylaws, or other governing documents of the Company (each as may be amended from time to time), (vi) seek to change or control, or knowingly
influence control of, the management, the Board, the business, the corporate structure or policies of the Company or (vii) take any action
similar to the foregoing with respect to any subsidiary of the Company;

 

(c) solicit any proxy, consent
or other authority to vote of stockholders or conduct any other referendum (binding or non-binding) (including any “withhold,”
 “vote no” or similar campaign) with respect to, or from the holders of, Voting Securities, or become a “participant”
(as such term is defined in Instruction 3 to Item 4 of Schedule 14A promulgated under the Exchange Act) in, or knowingly assist, advise,
initiate, encourage or influence any person (other than the Company) in, any “solicitation” of any proxy, consent or other
authority to vote any Voting Securities (other than such assistance, advice, encouragement or influence that is consistent with the Board’s
recommendation in connection with such matter);

 

(d) (i) grant any proxy, consent
or other authority to vote with respect to any matters (other than to the named proxies included in the Company’s proxy card for
any Stockholder Meeting) or (ii) deposit or agree or propose to deposit any Voting Securities in any voting trust or similar arrangement,
or subject any Voting Securities to any agreement or arrangement with respect to the voting of such securities (including a voting agreement
or pooling arrangement), other than (A) any such voting trust or arrangement solely for the purpose of delivering to the Company or its
designee a proxy, consent or other authority to vote in connection with a solicitation made by or on behalf of the Company or (B) customary
brokerage accounts, margin accounts and prime brokerage accounts;

 

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(e) knowingly encourage, advise
or influence any person, or knowingly assist any person in so encouraging, advising or influencing any person, with respect to the giving
or withholding of any proxy, consent or authority to vote any Voting Securities or in conducting any referendum (binding or non-binding) (including
any “withhold,” “vote no” or similar campaign);

 

(f) form, join, knowingly encourage
the formation of or in any way participate in any partnership, limited partnership, syndicate or group (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any Voting Securities (provided, that nothing herein shall limit the ability of an
Affiliate of the New Company Investor to join a group with the New Company Investor following the execution of this Agreement, so long
as any such Affiliate agrees to be bound by the terms and conditions of this Agreement);

 

(g) make or publicly advance
any request or submit any proposal to amend, modify or waive any provision of this Agreement, or take any action challenging the validity
or enforceability of any provision of or obligation arising under this Agreement; provided, that the New Company Investor
may make private requests to the Board to amend, modify or waive any provision of this Agreement, which the Board may accept or reject
in its sole and absolute discretion, so long as any such request is not publicly disclosed by the New Company Investor and is made by
the New Company Investor in a manner that could not reasonably be expected to require, and that does not require, the public disclosure
thereof by the Company, the New Company Investor or any other person;

 

(h) (i) make a request for a
list of the Company’s stockholders or for any books and records of the Company whether pursuant to Section 220 of the General Corporation
Law of the State of Delaware or otherwise or (ii) engage any private investigations firm or other person to investigate any of the Company’s
directors or officers;

 

(i) make any public proposal
with respect to, any material change in the capitalization, stock repurchase programs and practices, capital allocation programs and practices
or dividend policy of the Company;

 

(j) take any action that could
reasonably be expected to require the New Company Investor, the Company or any of its subsidiaries or any other person to make a public
announcement or disclosure regarding this Agreement (other than the Press Release (as defined below) and related Current Report on Form
8-K) or any matter addressed in this Section 2; or

 

(k) enter into any discussion,
negotiation, agreement, arrangement or understanding concerning any of the foregoing (other than this Agreement) or knowingly assist,
encourage, solicit, seek or seek to cause any person to undertake any action inconsistent with this Section 2;

 

provided, however, that
the restrictions in this Section 2 shall not prevent the New Company Investor or its Representatives from making any factual statement
as required by applicable legal process, subpoena or legal requirement from any governmental authority with competent jurisdiction over
the party from whom information is sought (so long as such request did not arise as a result of action by the New Company Investor). For
the avoidance of doubt, nothing in this Section 2 shall be deemed to limit the exercise in good faith by Mr. Johnson (or any Replacement,
as applicable) of his fiduciary duties in his capacity as a director of the Company.

 

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Section 3. Representations
and Warranties of All Parties. Each Party represents and warrants to the other Party that (a) such Party has all requisite power
and authority to execute and deliver this Agreement and to perform its obligations hereunder, (b) this Agreement has been duly and validly
authorized, executed and delivered by it and is a valid and binding obligation of such Party, enforceable against such Party in accordance
with its terms (subject to applicable bankruptcy and similar laws relating to creditors’ rights and to general equity principles)
and (c) this Agreement will not result in a material violation of any (i) term or condition of any agreement to which such person is a
party or by which such Party may otherwise be bound or (ii) law, rule, license, regulation, judgment, order or decree governing or affecting
such Party.

 

Section 4. Representations
and Warranties of the New Company Investor. The New Company Investor represents, warrants and covenants to the Company that (a)
as of the date of this Agreement, the New Company Investor owns, on the date of this Agreement after giving effect to the Closing, the
number of shares of Common Stock adjacent to the New Company Investor’s name on Schedule A hereto; and (b) as of the
date of this Agreement, the New Company Investor does not have a Synthetic Position (other than the shares of Common Stock beneficially
owned as set forth in clause (a) above) in any Voting Securities.

 

Section 5. Press Release;
Communications. Promptly following the execution of this Agreement, the Company shall issue a mutually agreeable press release in
the form attached hereto as Exhibit A (the “Press Release”) announcing certain terms of this
Agreement and the material terms of the Purchase Agreement and the other transactions contemplated hereby and thereby. Neither the Company
nor the New Company Investor shall make or cause to be made, and the Company and the New Company Investor will cause their respective
Affiliates not to make or cause to be made, any public announcement or statement with respect to the subject matter of this Agreement
that is contrary to the statements made in the Press Release or the terms of this Agreement, except as required by law or the rules of
any stock exchange or with the prior written consent of the other Party. The New Company Investor acknowledges and agrees that the Company
may file this Agreement and file or furnish the Press Release with the SEC as exhibits to a Current Report on Form 8-K and other
filings with the SEC. The New Company Investor shall be given a reasonable opportunity to review and comment on such Current Report on
Form 8-K or other filing with the SEC to be made by the Company with respect to this Agreement, and the Company shall give reasonable
consideration to any comments of the New Company Investor.

 

Section 6. Expenses.
Each Party shall be responsible for its own fees and expenses incurred in connection with the negotiation, execution and effectuation
of this Agreement and the transactions contemplated hereby.

 

Section 7. Certain Defined
Terms. For purposes of this Agreement:

 

(a) “Affiliate”
has the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act, and shall include all persons or entities
that at any time during the term of this Agreement become Affiliates of any person or entity referred to in this Agreement; provided,
that “Affiliates” of a person shall not include any other person, solely by reason of the fact that such person or one or
more of such person’s employees or principals serves as a member of such other person’s or such other person’s affiliated
or related entity’s board of directors or similar governing body, unless such person otherwise controls such entity (as the term
 “control” is defined in Rule 12b-2 promulgated by the SEC under the Exchange Act).

 

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(b) “Beneficial Ownership”
means having the right or ability to vote, cause to be voted or control or direct the voting of any Voting Securities (in each case whether
directly or indirectly, including pursuant to any agreement, arrangement or understanding, whether or not in writing); provided,
that a person shall be deemed to have “Beneficial Ownership” of any Voting Securities that such person has a right, option
or obligation to own, acquire or control or direct the voting of upon conversion, exercise, expiration, settlement or similar event (“Exercise”)
under or pursuant to (i) any Derivative (whether such Derivative is subject to Exercise immediately or only after the passage of time
or upon the satisfaction of one or more conditions) and (ii) any Synthetic Position that is required or permitted to be settled, in whole
or in part, in Voting Securities. A person shall be deemed to be the “Beneficial Owner” of, or to “beneficially
own,” any securities that such person has Beneficial Ownership of.

 

(c) “Business Day”
means any day that is not (i) a Saturday, (ii) a Sunday or (iii) a day on which commercial banks in the State of New York are authorized
or required to be closed by applicable law.

 

(d) “Exchange Act”
means the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder).

 

(e) “Extraordinary
Transaction” means any merger, acquisition, disposition of all or substantially all of the assets of the Company or other business
combination involving the Company requiring a vote of stockholders of the Company.

 

(f) “Party”
means the Company, or the New Company Investor, individually, and “Parties” means the Company and the New Company Investor,
collectively.

 

(g) “SEC”
means the U.S. Securities and Exchange Commission.

 

(h) “Synthetic Position”
means any option, warrant, convertible security, stock appreciation right or other security, contract right or derivative position or
similar right (including any “swap” transaction with respect to any security, other than a broad based market basket or index)
(each of the foregoing, a “Derivative”), whether or not presently exercisable, that has an exercise or conversion privilege
or a settlement payment or mechanism at a price related to the value of Voting Securities or a value determined in whole or in part with
reference to, or derived in whole or in part from, the value of Voting Securities and that increases in value as the market price or value
of Voting Securities increases or that provides an opportunity, directly or indirectly, to profit or share in any profit derived from
any increase in the value of Voting Securities, in each case regardless of whether (x) it conveys any voting rights in such Voting Securities
to any person, (y) it is required to be or capable of being settled, in whole or in part, in Voting Securities or (z) any person (including
the holder of such Synthetic Position) may have entered into other transactions that hedge its economic effect.

 

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(i) “Voting Securities”
means, the Company Common Stock and any other securities of the Company entitled to vote in the election of directors.

 

Section 8. Injunctive Relief.
Each Party acknowledges and agrees that any breach of any provision of this Agreement shall cause the other Party irreparable harm which
would not be adequately compensable by money damages. Accordingly, in the event of a breach or threatened breach by a Party of any provision
of this Agreement, the other Party shall be entitled to seek the remedies of injunction or other preliminary or equitable relief, without
having to prove irreparable harm or actual damages or post a bond or other security. The foregoing right shall be in addition to such
other rights or remedies that may be available to the non-breaching Party for such breach or threatened breach, including the
recovery of money damages.

 

Section 9. Securities Laws.
The New Company Investor acknowledges that it is aware that United States securities laws prohibit any person who has received material, non-public information
from purchasing or selling securities on the basis of such information or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person may trade securities on the basis of such information. For the avoidance
of doubt, and subject to compliance with United States securities laws, the members of the New Company Investor and its Representatives
shall in any event be free to trade or engage in such transactions during periods when the members of the Board are permitted to do so,
and the Company shall notify the New Company Investor via email and reasonably in advance when such “open window” director
trading periods begin and end. The Company acknowledges that none of the provisions herein shall in any way limit the activities of the
New Company Investor or its Representatives in their respective ordinary course of businesses if such activities will not violate applicable
securities laws or the obligations specifically agreed to under this Agreement. In addition, nothing contained in this Agreement shall
restrict the ability of the members of the New Company Investor or its Representatives from purchasing, selling or otherwise trading Voting
Securities pursuant to any Rule 10b5-1 trading plan adopted prior to the execution of this Agreement.

 

Section 10. Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated. Each Party agrees to use its commercially reasonable best efforts to agree upon
and substitute a valid and enforceable term, provision, covenant or restriction for any of such that is held invalid, void or unenforceable
by a court of competent jurisdiction.

 

Section 11. Notices.
Any notices, consents, determinations, waivers or other communications required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally, (ii) upon transmission, when
sent by e-mail or (iii) one Business Day (as defined below) after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the Party to receive the same. The addresses for such communications shall be:

 

If to the Company:  

 

P.O. Box
110085

Research
Triangle Park, NC 27709

Attention:
General Counsel

E-mail: russell.schundler@liquidia.com

 

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with a copy (which shall not
constitute notice) to:  

 

DLA Piper LLP (US)

51 John F. Kennedy Parkway, Suite 120

Short Hills, NJ 07078

Attention:   Andrew P. Gilbert, Esq.

E-mail:   andrew.gilbert@us.dlapiper.com

 

If to the New Company Investor:

 

Caligan Partners
LP

590 Madison
Avenue, 21st Floor

New York,
NY 10022

Attn: David
E. Johnson

Email: dj@caliganpartners.com

 

with a
copy (which shall not constitute notice) to:  

 

Schulte Roth
 & Zabel LLP

919 Third
Avenue

New York,
NY 10022

Attn: Eleazer
Klein, Esq.

Email: eleazer.klein@srz.com

 

Section 12. Governing Law;
Jurisdiction; Jury Waiver. This Agreement and all actions, proceedings or counterclaims (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or any action of the Company or the New Company Investor in the negotiation, administration,
performance or enforcement hereof shall be governed by and construed and enforced in accordance with the laws of the State of Delaware
without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of Delaware. Each Party irrevocably agrees that
any legal action or proceeding with respect to this Agreement and any rights and obligations arising hereunder, or for recognition and
enforcement of any judgment in respect of this Agreement and any rights and obligations arising hereunder brought by the other Party or
its successors or assigns, shall be brought and determined exclusively in the Court of Chancery of the State of Delaware (the “Court
of Chancery”) and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery declines to
accept jurisdiction over a particular matter, any federal court within the State of Delaware) (the “Chosen Courts”).
Each Party hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally
and unconditionally, to the personal jurisdiction of the Chosen Courts and agrees that it will not bring any action relating to this Agreement
in any court other than the Chosen Courts. Each Party hereby irrevocably waives, and agrees not to assert in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the Chosen Courts for any reason,
(b) any claim that it or its property is exempt or immune from jurisdiction of any Chosen Court or from any legal process commenced in
the Chosen Courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution
of judgment or otherwise) and (c) to the fullest extent permitted by applicable legal requirements, any claim that (i) the suit, action
or proceeding in any Chosen Court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or
(iii) this Agreement, or the subject matter hereof, may not be enforced in or by the Chosen Courts. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.

 

    10

     

    

 

Section 13. Counterparts;
Electronic Transmission. This Agreement may be executed in two or more counterparts, which together shall constitute a single agreement.
Any signature to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”)
form or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, shall have the
same effect as physical delivery of the paper document bearing the original signature.

 

Section 14. Non-Disparagement.

 

(a) Subject to applicable law,
each of the Parties covenants and agrees that during the period commencing upon the execution of this Agreement and ending on the earlier
of (i) the conclusion of the Standstill Period and (ii) such time as the other Party or any of its Affiliates, Representatives, successors
or assigns shall have breached this Section 14(a), neither it nor any of its respective Affiliates or any Representatives
acting on their behalf, or its successors or assigns, shall in any way disparage, slander, attempt to discredit, call into disrepute,
defame, make or cause to be made any statement or announcement that constitutes an ad hominem attack on the other Party
or such other Party’s subsidiaries, Affiliates, successors, assigns, officers (including any current or former officer of a Party
or a Party’s subsidiaries), directors (including any current or former director of a Party or a Party’s subsidiaries) or Representatives.

 

(b) Nothing in this Section 14 will
be deemed to prevent either the Company or the New Company Investor from complying with its respective disclosure obligations under law,
legal process, subpoena, the rules of any stock exchange or any legal requirement or as part of a response to a request for information
from any governmental authority with jurisdiction over the Party from whom information is sought.

 

Section 15. Termination.
The obligations of the Parties under this Agreement will terminate on the date that is the end date of the Standstill Period, unless another
period is specifically set forth herein or otherwise mutually agreed in writing by each Party. The obligations of the New Company Investor
pursuant to Sections 1 and 2 shall terminate in the event that the Company materially breaches its obligations to the New
Company Investor pursuant to Section 1 or the representations and warranties in Section 3 of this Agreement (as they pertain
to the Company) and such breach (if capable of being cured) has not been cured within thirty (30) calendar days following written notice
of such breach from the New Company Investor, or, if impossible to cure within 30 calendar days, the Company has not taken substantive
action to correct within thirty (30) calendar days following written notice of such breach from the New Company Investor. Notwithstanding
the foregoing, (a) Section 7 through Section 13, this Section 15, and Section 16 through Section 20 of
this Agreement will survive the termination of this Agreement; and (b) no termination of this Agreement will relieve any Party of liability
for any breach of this Agreement arising prior to such termination.

 

    11

     

    

 

Section 16. No Waiver.
Any waiver by any Party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Agreement. The failure of a Party to insist upon strict adherence
to any term of this Agreement on one or more occasions shall not be considered a waiver of, or deprive that Party of the right thereafter
to insist upon strict adherence to, that term or any other term of this Agreement.

 

Section 17. Entire Agreement;
Amendments. This Agreement contains the entire understanding of the Parties with respect to the subject matter hereof. This Agreement
may only be amended pursuant to a written agreement executed by the Company and the New Company Investor.

 

Section 18. Successors
and Assigns. This Agreement may not be transferred or assigned by any Party without the prior written consent of the other Party.
Any purported assignment without such consent is null and void. Subject to the foregoing, this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by and against the permitted successors and assigns of each Party.

 

Section 19. No Third Party
Beneficiaries. This Agreement is solely for the benefit of the Parties and is not enforceable by any other person.

 

Section 20. Interpretation
and Construction. Each Party acknowledges that it has been represented by independent counsel of its choice throughout all negotiations
that have preceded the execution of this Agreement, and that it has executed the same with the advice of said independent counsel. Each
Party and its counsel cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein,
and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the Parties and may not
be construed against any Party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Agreement against any Party that drafted or prepared it is of no application and is
hereby expressly waived by each Party, and any controversy over any interpretation of this Agreement shall be decided without regard to
events of drafting or preparation. The section headings contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. In this Agreement, (i) the word “including” (in its various forms)
means “including, without limitation,” (ii) the words “hereunder,” “hereof,” “hereto”
and words of similar import are references to this Agreement as a whole and not to any particular provision of this Agreement and (iii)
the word “or” is not exclusive.

 

[Remainder of page intentionally left blank; signature
pages follow]

 

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IN WITNESS WHEREOF, each
Party has executed this Agreement or caused the same to be executed by its duly authorized representative as of the date first above written.

 

	 	 	 	 
	 	LIQUIDIA CORPORATION
	 	 
	 	By:	 	
    /s/ Damian deGoa

	 	Name:	 	Damian deGoa
	 	Title:	 	Chief Executive Officer

 

[Signature Page to Standstill Agreement]

 

     

     

    

 

IN WITNESS WHEREOF,
each Party has executed this Agreement or caused the same to be executed by its duly authorized representative as of the date first above
written.

 

NEW COMPANY INVESTOR:

	 	CALIGAN PARTNERS CV IV LP
	 	 
	 	By: 	 	/s/ David Johnson
	 	Name:	 	David Johnson
	 	Title:	 	Managing Member of General Partner
	 	 	 

 

[Signature Page to Standstill Agreement]

 

     

     

    

 

SCHEDULE A

 

New Company Investor

 

	Name and Address	 	Number of

                                                                                Shares of

                                                                                Common Stock Held on the

                                                                                Date of This Agreement
	 	 	Number of Shares of Company Common Stock to be Held on the Closing Date	 
	Caligan Partners CV IV LP 
590 Madison Avenue 
New York, NY 10022 
	 	 	0	 	 	 	7,167,663	 

 

     

     

    

 

EXHIBIT A

 

Press Release

 

(See attached)Document

CRIMSON WINE GROUP, LTD.

DESCRIPTION OF CAPITAL STOCK
 
The following description of capital stock of Crimson Wine Group, Ltd. (the “Company,” “we,” “us”, and “our”) summarizes certain provisions of our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), and our Amended and Restated Bylaws (the “Bylaws”), both of which are exhibits to our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The description is intended as a summary and is qualified in its entirety by reference to the Certificate of Incorporation and the Bylaws. 

The common stock of Crimson Wine Group, Ltd. is traded in the over-the-counter market, OTC Market, under the symbol “CWGL.” All outstanding shares of common stock are validly issued, fully paid, and nonassessable. Our authorized capital stock consists of 165,000,000 (one hundred sixty-five million) shares, consisting of (a) 150,000,000 (one hundred fifty million) shares of common stock, par value $0.01 per share (the “Common Stock”), and (b) 15,000,000 (fifteen million) shares of one or more series of preferred stock, par value $0.01 per share (the “Preferred Stock”). 

Common Stock 
 
Dividend Rights
 
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and only then at the times and in the amounts that our board of directors may determine. 

Right to Receive Liquidation Distributions
 
Upon our dissolution, liquidation or winding-up, the assets legally available for distribution to our stockholders are distributable ratably among the holders of our common stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock.

Voting Rights
 
The holders of our common stock are entitled to one vote per share on all questions to the exclusion of all other stockholders. 
  
No Preemptive or Similar Rights
 
Our common stock is not entitled to preemptive rights and is not subject to conversion, redemption or sinking fund provisions.

Preferred Stock
 
Subject to limitations prescribed by the Delaware General Corporation Law (the “DGCL”), our board of directors is authorized to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, including, without limitation, voting rights (if any), dividend rights, dissolution rights, conversion rights, exchange rights and redemption rights thereof. Our board of directors also can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company.

Anti-Takeover Effects of Various Provisions of Delaware Law and our Certificate of Incorporation and Bylaws

Provisions of the DGCL and our Certificate of Incorporation and Bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions are summarized below.

Delaware Anti-Takeover Statute. 

In the event that we, in the future, become listed on a national securities exchange and/or have more than 2,000 stockholders of record, we would become subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of Common Stock held by stockholders.

Size of Board and Vacancies. 

Our Bylaws provide that the number of directors on our board of directors will be fixed exclusively by our board of directors. Subject to the rights of the holders of any series of preferred stock then outstanding, newly created directorships resulting from any increase in our authorized number of directors will be filled by a majority of our board of directors then in office, provided that a majority of the entire board of directors, or a quorum, is present and any vacancies in our board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause will be filled generally, subject to the rights of certain parties, by the majority vote of our remaining directors in office, even if less than a quorum is present.

Special Stockholder Meetings. 

Under our Certificate of Incorporation and Bylaws, our board of directors may call special meetings of our stockholders. Stockholders may not call a special meeting.

Stockholder Action by Unanimous Written Consent. 

Our Certificate of Incorporation and Bylaws expressly eliminate the right of our stockholders to act by written consent other than by unanimous written consent. Stockholder action must take place at the annual or a special meeting of our stockholders or be effected by unanimous written consent.

Requirements for Advance Notification of Stockholder Nominations and Proposals. 

Our Bylaws establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of our board of directors or a committee of our board.

No Cumulative Voting.

 The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our Certificate of Incorporation provides otherwise. Our Certificate of Incorporation does not provide for cumulative voting.

Transfer Restrictions on our Common Stock

General. 

In order to protect our net operating loss carryforwards (“NOLs”) and other tax attributes, our Common Stock is subject to certain transfer restrictions contained in our Certificate of Incorporation. The transfer restrictions impose restrictions on the transfer of our capital shares to designated persons or the delivery of our capital shares to certain target shareholders in connection with acquisition transactions.

Tax Law Limitations. 

The benefit of a company’s existing tax loss and credit carryovers, as well as the benefit of built-in losses, can be reduced or eliminated under Section 382 of the Code. Section 382 limits the use of losses and other tax benefits by a company that has undergone an “ownership change,” as defined in Section 382 of the Code. Generally, an “ownership change” occurs if one or more shareholders, each of whom owns 5% or more in value of a company’s capital shares, increase their aggregate percentage ownership by more than 50 percentage points over the lowest percentage of stock owned by such shareholders over the preceding three-year period. For this purpose, all holders who each own less than 5% of a company’s capital shares are generally treated together as one 5% shareholder. In addition, certain attribution rules, which generally attribute ownership of shares to the ultimate beneficial owner thereof without regard to ownership by nominees, trusts, corporations, partnerships or other entities and also attribute ownership between and among certain family members, are applied in determining the level of share ownership of a particular shareholder. Options (including warrants and other rights) to acquire capital shares may be treated as if they had been exercised, on an option-by-option basis, if the issuance, transfer or structuring of the option meets certain tests. All percentage determinations are based on the fair market value of a company’s capital shares, including any preferred shares that are voting or convertible (or otherwise participate in corporate growth).

If an “ownership change” were to occur in respect of the company or any of its subsidiaries or subsidiary groups, the amount of taxable income in any year (or portion of a year) subsequent to the ownership change that could be offset by NOLs or other tax attributes existing (or “built-in”) prior to such “ownership change” could not exceed an amount equal to the product obtained by multiplying (1) the aggregate value of the company, the subsidiary or the subsidiary group that underwent the “ownership change” by (2) the federal long-term tax exempt rate. Because the aggregate value of the company or any of its subsidiaries, as well as the federal long-term tax-exempt rate, fluctuate, it is impossible to predict with any accuracy the annual limitation upon the amount of taxable income that could be offset by such NOLs or other tax attributes (and “built-in” losses) if  an “ownership change” were to occur in the future. However, if such limitation were to exceed the taxable income against which it otherwise would be applied for any year following an “ownership change,” the limitation for the ensuing year would be increased by the amount of such excess.

Description of Transfer Restrictions. 

Our Certificate of Incorporation generally restricts until December 31, 2022 (or earlier, in certain events) any (1) attempted transfer of our Common Stock or any other securities that would be treated as our “stock” under the applicable tax regulations (which we refer to as “Crimson Stock”) or (2) issuance of Crimson Stock by us to a target shareholder in connection with an acquisition transaction (which we refer to as an “acquisition issuance”) if any person or group of persons would become a “5% shareholder” under the tax regulations or would be treated as owning 5% or more of our Common Stock as a result of such transfer or issuance. The transfer restrictions also restrict any attempted transfer of Crimson Stock if such attempted transfer would increase the ownership percentage, as determined under applicable tax regulations, of any person or group of persons who is a “5% shareholder” or treated as owning 5% or more of our Common Stock. This would include, among other things, an attempted acquisition of Crimson Stock from an existing 5% shareholder. For these purposes, numerous rules of attribution, aggregation and calculation prescribed under the Code (and related regulations) will be applied in determining whether the 5% thresholds have been met and whether a group exists. The transfer restrictions may also apply to proscribe the creation or transfer of certain “options,” which are broadly defined, in respect of the Crimson Stock.

The transfer restrictions will restrict a shareholder’s ability to acquire additional Crimson Stock in excess of the specified limitations. Furthermore, in the case of certain large shareholders, the ability to dispose of Crimson Stock currently held, or any other Crimson Stock which the shareholder may acquire, may be restricted as a result of the transfer restrictions.

Generally, the restriction is imposed only with respect to the number of shares of Crimson Stock, or options with respect to Crimson Stock (the “Excess Stock”), purportedly transferred or otherwise deliverable in an acquisition issuance in excess of the thresholds established in the transfer restrictions. In any event, the restriction does not prevent a valid transfer if either the transferor or the purported transferee, in the case of a transfer, or the company or the applicable target shareholder, in the case of an acquisition issuance, obtains the approval of our board of directors.

Except for acquisition issuances, acquisitions of Crimson Stock directly from us, whether by way of option exercise or otherwise, are not subject to the transfer restrictions. Consequently, persons or entities that are able to acquire Crimson Stock directly from us, other than in an acquisition issuance, including our employees, officers and directors, may do so without application of the transfer restrictions, irrespective of the number of shares of Crimson Stock they are acquiring. As a result, those persons or entities dealing directly with us may be seen to receive an advantage over persons or entities who are not able to acquire Crimson Stock directly from us and, therefore, are restricted by the terms of the transfer 

restrictions. It should be noted, however, that any direct acquisitions of Crimson Stock from us first requires board approval and in granting such approval, the board will review the implications of any such issuance for our NOLs and other tax attributes.

Our board of directors has the discretion to approve a transfer or acquisition issuance of Crimson Stock that would otherwise violate the transfer restrictions. Nonetheless, if the board of 
directors decides to permit a transfer or acquisition issuance that would otherwise violate the transfer restrictions, that transfer or delivery or later transfers or deliveries would, under the tax rules, be aggregated with other transfers or deliveries and could result in a later “ownership change” that would limit the use of the tax attributes of Crimson. The board of directors intends to consider any attempted transfer or acquisition issuance individually and determine at the time whether it is in the best interest of our company, after consideration of any factors that the board deems relevant, to permit the transfer or acquisition issuance notwithstanding that an “ownership change” may occur.

Our Certificate of Incorporation further provides that all certificates representing Crimson Stock bear the following legend:

“THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO RESTRICTIONS PURSUANT TO ARTICLE IX OF THE CERTIFICATE OF INCORPORATION OF CRIMSON WINE GROUP, LTD. REPRINTED IN ITS ENTIRETY ON THE BACK OF THIS CERTIFICATE.”

In accordance with the transfer restrictions, we will not permit any of our employees or agents, including the transfer agent, to record any transfer or acquisition issuance of Excess Stock. As a result, requested transfers of Crimson Stock may be delayed or refused.

Our Certificate of Incorporation provides that any transfer or acquisition issuance attempted in violation of the restrictions would be void ab initio, even if the transfer or acquisition issuance has been recorded by the transfer agent and new certificates issued. The purported transferee or holder of the Crimson Stock would not be entitled to any rights of shareholders with respect to the Excess Stock, including the right to vote the Excess Stock, or to receive dividends or distributions in liquidation in respect thereof, if any.

If an acquisition issuance would result in the delivery of Excess Stock to a target shareholder, the company would deliver the Excess Stock to the agent instead of the target shareholder who would otherwise receive the Excess Stock in connection with the acquisition issuance (referred to as a “purported holder”). Similarly, if our board of directors determines that a purported transfer or acquisition issuance has violated the transfer restrictions, we will require the purported transferee or purported holder to surrender the Excess Stock, and any dividends the purported transferee or purported holder has received on the Excess Stock, to an agent designated by the board of directors. In each case, the agent will then sell the Excess Stock in one or more arm’s-length transactions, executed on the over-the-counter market or any stock exchange on which the applicable Crimson Stock is listed, if possible, to a buyer or buyers, which may include us; provided that nothing will require the agent to sell the Excess Stock within any specific time frame if, in the agent’s discretion, the sale would disrupt the market for the Crimson Stock or have an adverse effect on the value of the Crimson Stock. If the purported transferee or purported holder has sold the Excess Stock before receiving our demand to surrender the Excess Stock, the purported transferee or purported holder generally will be required to transfer to the agent the proceeds of the sale and any distributions the purported transferee or purported holder has received on the Excess Stock. From any net sales proceeds or amounts received from a purported transferee or purported holder, which in certain circumstances may be reduced by the agent’s expenses, the agent will reimburse the purported transferee 

or purported holder for the price paid for the Excess Stock or the fair market value of the Excess Stock as of the close of the day prior to the acquisition issuance (or the attempted transfer to the purported transferee by gift, inheritance or similar transfer). Any remaining proceeds will then be paid to one or more charities selected by our board of directors.

The transfer restrictions and related provisions contained in our Bylaws may be deemed to have an “anti-takeover” effect because they restrict the ability of a person or entity, or group of persons or entities, from accumulating in the aggregate at least 5% of the total value of the Crimson Stock or 5% of our Common Stock and the ability of persons, entities or groups whose ownership of Crimson Stock meets either of these thresholds from acquiring additional Crimson Stock. The transfer restrictions discourage or prohibit accumulations of substantial blocks of shares for which shareholders might receive a premium above market value.

Notwithstanding the restrictions, however, there remains a risk that certain changes in relationships among shareholders or other events will cause a change of ownership to occur under Section 382 of the Code. Further, there can be no assurance, in the event transfers or acquisition issuances in violation of the transfer restrictions are attempted, that the IRS will not assert that those transfers or acquisition issuances have federal income tax significance notwithstanding the transfer restrictions. As a result, the transfer restrictions serve to reduce, but not necessarily eliminate, the risk that Section 382 of the Code will cause the limitations described above on the use of tax attributes of Crimson.

The determination of 5% shareholder status is based upon a holder’s percentage ownership, taking into account certain rules of attribution, of the total value of the outstanding Crimson Stock, which currently consists of only our Common Stock. Future changes in the capitalization of Crimson may affect who will be deemed a 5% shareholder, thereby affecting the applicability of the transfer restrictions to future transfers or acquisition issuances of Crimson Stock.

Holders are advised to carefully monitor their ownership of Common Stock (and any future securities of Crimson that may constitute Crimson Stock for purposes of the transfer restrictions) and should consult their own legal advisors and/or Crimson to determine whether their ownership approaches the prohibited level.

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