Document:

Exhibit 10.4

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as of February 24, 2017, by and among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the Lenders listed on Schedule 1.1 of the Loan Agreement (as defined below) or otherwise a party thereto from time to time including Oxford in its capacity as a Lender (each a “Lender” and collectively, the “Lenders”), and INSPIRE MEDICAL SYSTEMS, INC., a Delaware corporation, with offices located at 9700 63rd Avenue North, Suite 200, Maple Grove, MN 55369 (“Borrower”).

 

RECITALS

 

A.                                    Collateral Agent, Lenders and Borrower have entered into that certain Loan and Security Agreement dated as of August 7, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”).

 

B.                                    Lenders have extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C.                                    Borrower has requested that Collateral Agent and Lenders make certain revisions to the Loan Agreement as more fully set forth herein.

 

D.                                    Collateral Agent and Lenders have agreed 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.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.                                      Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

 

2.                                      Amendments to Loan Agreement.

 

2.1                               Section 2.2 (Term Loans). Sections 2.2(a)-(b) of the Loan Agreement are amended and restated as follows:

 

“(a)                           Availability.

 

(i)                                     Subject to the terms and conditions of this Agreement, Oxford loaned to Borrower a term loan in a principal amount of Fifteen Million Five Hundred Thousand Dollars ($15,500,000.00) on the Effective Date (the “Original Oxford Term Loan”). Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make term loans to Borrower in a single draw on the First Amendment Effective Date in an aggregate amount of One Million Dollars ($1,000,000.00) (the “New Oxford Term Loan”, and together with the Original Oxford Term Loan, each a “Term A Loan” and collectively, the “Term A Loans”).  After repayment, no Term A Loan may be re-borrowed.

 

(ii)                                  Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second Draw Period, to make term loans in a single draw to Borrower, if requested by Borrower, in an aggregate amount determined by Borrower  of  at  least  Five  Million  Dollars  ($5,000,000.00)  and  up  to  Nine  Million   Dollars

 

 

($9,000,000.00) according to each Lender’s Term B Loan  Commitment  as  set  forth  on  Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term B Loan”, and collectively as the “Term B Loans”; each Term A Loan and Term B Loan is hereinafter referred to singly as a “Term Loan” and the Term A Loans and the Term B Loans are hereinafter referred to collectively as the “Term Loans”). After repayment, no Term B Loan may be re-borrowed.

 

(b)  Repayment. Borrower shall make monthly payments of interest only commencing on the first (1st) Payment Date following the Funding Date of each 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 each Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of such 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 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 (i) if the Amortization Date is March 1, 2019, thirty six (36) months, and (ii) if the Amortization Date is March 1, 2020, twenty four (24) months. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date. Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d). The Funding Date of each Term A Loan shall be the First Amendment Effective Date.”

 

2.2                               Section 2.3 (Payment of Interest on the Credit Extensions). Sections 2.3(a)-(c) of the Loan Agreement are amended and restated as follows:

 

“(a)  Interest  Rate.  Subject  to  Section 2.3(b),  the  principal  amount outstanding under the Term Loans shall accrue interest at a floating per annum rate equal to the Basic Rate, which interest shall be payable monthly in  arrears  in  accordance  with  Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under  such Term Loan through and including the day on which such Term Loan is paid in full.

 

(b)                                         Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a floating per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “Default Rate”). Payment or acceptance  of  the  increased  interest  rate  provided  in  this  Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.

 

(c)                                          360-Day Year. Interest shall be computed on the basis of a three hundred sixty (360) day year, and the actual number of days elapsed.”

 

2.3                               Section 2.5 (Fees).        Section 2.5(b) of the Loan Agreement is amended and restated as

 

follows:

 

(b)                                 Intentionally Omitted.

 

2.4                               Section 6.2 (Financial Statements, Reports, Certificates). Section 6.2(a)(ii) of the  Loan Agreement is amended and restated as follows:

 

“(ii)   as soon as available, but no later than one hundred fifty (150) days after the last  day of Borrower’s fiscal year or within five (5) days of filing with the SEC, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified

 

 

opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion;”

 

2.5                               Section 13.1 (Definitions). The following defined terms and their respective definitions are amended and restated in or added to Section 13.1 of the Loan Agreement as follows:

 

“Amortization Date” is March 1, 2019, provided, however,  upon  the occurrence of the Interest Only Extension Event, such date shall be March 1, 2020.

 

“Basic Rate” is, with respect to the Term Loans, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the greater of (i) seven and ninety five hundredths percent (7.95%) and (ii) the sum of (a) the thirty (30) day U.S. LIBOR rate reported in The Wall Street Journal on the last Business Day of the month that immediately precedes the month  in  which  the  interest   will   accrue,   plus   (b)   six   and   nine   tenths   percent   (6.90%). Notwithstanding the foregoing, the Basic Rate for the Term Loans for the period from  the First Amendment Effective Date through and including February 28, 2017 shall be seven and ninety five hundredths percent (7.95%).

 

“Final Payment Percentage” is five percent (5.00%); provided, however, upon the occurrence of the Interest Only Extension Event, such percentage shall be five and a half percent (5.50%).

 

“First Amendment Effective Date” means February 24, 2017.

 

“Interest Only Extension Event” is Borrower’s achievement of consolidated product revenues, measured on a trailing twelve (12) month basis as of December 31, 2018, of at least Twenty Five Million Dollars ($25,000,000.00), as determined in accordance with GAAP by the Lenders based upon written evidence satisfactory to the Lenders.

 

“Maturity Date” is February 1, 2022.

 

“New Oxford Term Loan” is defined in Section 2.2(a)(i) hereof.

 

“Original Oxford Term Loan” is defined in Section 2.2(a)(i) hereof.

 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:

 

(i)                                     for a prepayment made on or after the Funding Date of such Term Loan through and including the date immediately prior to the first anniversary of the Funding Date of such Term Loan, two and a half percent (2.50%) of the principal amount of such Term Loan prepaid;

 

(ii)                                  for a prepayment made on or after the first anniversary of the Funding Date of such Term Loan through and including the date immediately prior to the second anniversary of the Funding Date of such Term Loan, one and a half percent (1.50%) of the principal amount of the Term Loans prepaid; and

 

(iii)                               for a prepayment made on or after the second anniversary of the Funding Date of such Term Loan and prior to the Maturity Date, one percent (1.00%) of the principal amount of the Term Loans prepaid.

 

For purposes of this definition, the “Funding Date” of each Term A Loan shall  be the First Amendment Effective Date.

 

 

“Revenue Event” is Borrower’s achievement of consolidated product revenues, measured on a trailing twelve (12) month basis as of November 30, 2017, of at least Twenty Million Dollars ($20,000,000.00), as determined in accordance with GAAP by Lenders based  upon written evidence satisfactory to the Lenders.

 

“Second Draw Period” is the period commencing on the Revenue Event Date and ending on the earlier of (i) March 31, 2018, and (ii) the occurrence of an Event of Default; provided, however, that the Second Draw Period shall not commence prior to January 1, 2018 or if on the Revenue Event Date an Event of Default has occurred and is continuing. Notwithstanding the foregoing, no Term B Loans shall be advanced if, at the time of the advance, Borrower’s consolidated product revenues, measured on a trailing twelve (12) month basis for the most recently ended month, are less than Twenty Million Dollars ($20,000,000.00), as determined in accordance with GAAP by the Lenders based upon written evidence satisfactory to the Lenders.

 

2.6                               Section 13.1 (Definitions). The following defined terms and their respective definitions are deleted in their entirety from Section 13.1 of the Loan Agreement:

 

“Interest Only Extension Event I”; “Interest Only Extension Event II”.

 

2.7                               Schedules.  Schedule 1.1 to the Loan Agreement is replaced with Schedule 1.1   attached hereto.

 

2.8                               Exhibits.  Exhibit C to the Loan Agreement is replaced with Exhibit C attached hereto.

 

2.9                               The original Secured Promissory Notes dated as of August 7, 2015 and issued by Borrower in favor of Oxford hereby are amended and restated to reflect the outstanding principal balances and date as of the First Amendment Effective Date, and such original Secured Promissory Notes that have been amended and restated are hereby cancelled, null and void and of no further force and effect.

 

3.                                      Limitation of Amendment.

 

3.1                               The amendments set forth in Section 2 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment,  waiver or modification of any other term or condition of any other Loan Document, or (b) otherwise prejudice any right or remedy which Collateral Agent or any Lender may now have or may have in the future under or in connection with any Loan Document.

 

3.2                               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.

 

4.                                      Representations and Warranties. To induce Collateral Agent and Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and Lenders as follows:

 

4.1                               Immediately after giving effect to this Amendment (a) 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, accurate and correct in all material respects as of such date), and (b) no Event of Default has occurred and is continuing;

 

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

 

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

 

 

4.4                               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, have been duly authorized;

 

4.5                               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 (a), any material Requirement of Law applicable to Borrower, (b) any material agreement by which Borrower is bound, (c) any order, judgment or decree of any court or other governmental or public body or  authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

4.6                               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 action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect); and

 

4.7                               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.

 

5.                                      Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

6.                                      Effectiveness. This Amendment shall be deemed effective upon the due execution and delivery to Collateral Agent and Lenders, in form and substance satisfactory to Collateral Agent and each Lender, of such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation:

 

a)             this Amendment, executed by Borrower, Collateral Agent and each Lender;

 

b)             a warrant to purchase stock, executed by Borrower;

 

c)              secured promissory notes, executed by Borrower;

 

d)             a Corporate Borrowing Certificate by Borrower dated as of the First Amendment Effective Date;

 

e)              a Perfection Certificate for Borrower dated as of the First Amendment Effective Date;

 

f)               the Operating Documents and good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the First Amendment Effective Date;

 

g)              certified copies of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been terminated or released;

 

h)             a Disbursement Letter executed by Borrower;

 

i)                 payment of a fee with respect to the Original Oxford Term Loan in an amount equal to Five Hundred Forty Two Thousand Five Hundred Dollars ($542,500), which for the avoidance of doubt, is in addition to and not a substitution for the Final Payment to be paid with respect to the Term Loans (including the Original Oxford Term Loan) in accordance with Section 2.5(c) of the Loan Agreement; and

 

 

j)                Borrower’s payment of all Lenders’ Expenses incurred through the date of this Amendment.

 

[Balance of Page Intentionally Left Blank]

 

 

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

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
INSPIRE MEDICAL SYSTEMS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Timothy P. Herbert
    	
 
    
	
Name:
    	
Timothy   P. Herbert
    	
 
    
	
Title:
    	
President
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
COLLATERAL AGENT AND LENDER:
    	
 
    
	
 
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

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

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
INSPIRE MEDICAL SYSTEMS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
COLLATERAL AGENT AND LENDER:
    	
 
    
	
 
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Mark Davis
    	
 
    
	
Name:
    	
Mark   Davis
    	
 
    
	
Title:
    	
Vice   President — Finance, Secretary & Treasurer
    	
 
    

 

 

EXHIBIT C

 

Compliance Certificate

 

TO:                                                                 OXFORD FINANCE LLC, as Collateral Agent and Lender

 

FROM:                                             INSPIRE MEDICAL SYSTEMS, INC.

 

The undersigned authorized officer (“Officer”) of INSPIRE MEDICAL SYSTEMS, INC. (“Borrower”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “Loan Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement),

 

(a)                                 Borrower is in complete compliance for the period ending                    with all required covenants except as noted below;

 

(b)                                 There are no Events of Default, except as noted below;

 

(c)                                  Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date and for the period described in (a), above; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

 

(d)                                 Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;

 

(e)                                  No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to  Collateral Agent and the Lenders.

 

Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements.

 

Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.

 

	
 
    	
 
    	
Reporting Covenant
    	
 
    	
Requirement
    	
 
    	
Actual
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
Financial statements (including unit sales report)
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
Annual (CPA Audited) statements
    	
 
    	
Within 150 days after FYE
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
Annual Financial Projections/Budget (prepared on a   monthly basis)
    	
 
    	
Annually (draft prior to FYE, and Board-approved on   or before February 28), and when revised
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    

 

 

	
4)
    	
 
    	
A/R &   A/P agings
    	
 
    	
If applicable
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5)
    	
 
    	
8-K,   10-K and 10-Q Filings
    	
 
    	
If applicable, within 5 days of filing
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6)
    	
 
    	
Compliance Certificate
    	
 
    	
Monthly   within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7)
    	
 
    	
IP   Report
    	
 
    	
When required
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8)
    	
 
    	
Month-end account statements for each deposit   account and securities account of Borrower and its Subsidiaries
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9)
    	
 
    	
Total amount of Borrower’s cash and cash equivalents   at the last day of the measurement period
    	
 
    	
 
    	
 
    	
$
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10)
    	
 
    	
Total amount of Borrower’s Subsidiaries’ cash and   cash equivalents at the last day of the measurement period
    	
 
    	
 
    	
 
    	
$
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    

 

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

	
 
    	
 
    	
Institution Name
    	
 
    	
Account Number
    	
 
    	
New Account?
    	
 
    	
Account Control Agreement in place?
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    

 

Other Matters

 

	
Has a Key Person ceased to be actively engaged in   the management of Borrower since the last Compliance Certificate?
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Have there been any   transfers/sales/disposals/retirement of Collateral or IP prohibited by the   Loan Agreement?
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Have there been any new or pending claims or causes   of action against Borrower that involve more than One Hundred Thousand   Dollars ($100,000.00)?
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Have there been any amendments or other changes to   the capitalization table of Borrower and to the Operating Documents of   Borrower or any of its Subsidiaries? If yes, provide copies of any such   amendments or changes with this Compliance Certificate.
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Are Borrower’s consolidated product revenues,   measured on a trailing twelve (12) month basis, at least Twenty Million   Dollars ($20,000,000.00).
    	
 
    	
Yes
    	
 
    	
No
    

 

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.” Attach separate sheet if additional space needed.)

 

 

	
INSPIRE   MEDICAL SYSTEMS, INC.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
      Name:
    	
 
    	
     Title:
    	
 
    	
 
    

 

	
Date:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
  LENDER   USE ONLY
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Received by:
    	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Verified by:
    	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Compliance Status:        Yes                    NoExhibit 10.5

 

BRIDGE NOTE PURCHASE AGREEMENT

 

This Bridge Note Purchase Agreement (this “Agreement”) is made and entered into effective as of the 7th day of July, 2016 by and among Inspire Medical Systems, Inc., a Delaware corporation (the “Company”), and the Investors listed on Schedule 1 hereto (the “Investors”).

 

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Sale and Purchase of Notes. Subject to the terms and conditions hereof, the Company agrees to sell to the Investors at the Closing (as defined herein), and each Investor agrees to purchase from the Company at the Closing, Convertible Promissory Notes in the form attached hereto as Exhibit A (the “Notes”) in the maximum principal amount specified opposite each Investor’s name on Schedule 1 attached hereto.

 

2.                                      Closing. The closing of the transactions contemplated by Section 1 of this Agreement (the “Closing”) shall take place at the offices of the Company, or other location designated by the Company. At the Closing, the Company shall deliver to each Investor (a) a Note representing the principal amount specified opposite each Investor’s name on Schedule 1 attached hereto, and (b) an executed copy of this Agreement. Before the Closing, each Investor shall cause to be delivered to the Company, by wire transfer or check payable to the Company, the principal amount specified opposite each Investor’s name on Schedule 1 attached hereto as the initial advance amount.

 

3.                                      Representations and Warranties of the Company. To induce the Investors to enter into this Agreement and to purchase the Notes, the Company hereby represents and warrants to the Investors as follows:

 

3.1                               Organization, Good Standing, Etc. The Company is duly organized and validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and conduct its business as now conducted and proposed to be conducted.  The Company has no subsidiaries.

 

3.2                               Authorization and Enforceability. The Company has full legal power, right and authority to enter into this Agreement and to issue the Notes. This Agreement and the Notes have been duly authorized, executed and delivered on behalf of the Company and are the valid and binding obligations of the Company, enforceable in accordance with their respective terms and subject, as to enforcement, to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally, and to the exercise of judicial discretion as to the availability of equitable remedies such as specific performance and injunction.

 

3.3                               Defaults.  The Company is not in breach, default or violation of, and the consummation of the transactions herein contemplated will not result in any breach default or violation of, any of the terms or conditions of, or constitute a default or violation under, (i) the Company’s Fifth Amended and Restated Certificate of Incorporation or other organizational documents of the Company, in each case as amended through the date hereof, or (ii) any law or any order, rule or regulation applicable to the Company of any court or of any federal or state regulatory body or administrative agency having jurisdiction over the Company or its property, except such breaches, defaults or violations which would not have a material adverse effect on the Company.

 

1

 

3.4                               Consents. No approval, authorization, consent or order of any governmental or public board or body or self-regulatory organization, other than in connection with or in compliance with the provisions of the Securities Act of 1933, as amended (the “Act”), and the securities laws of various jurisdictions of the states in which the Notes are offered and sold, is legally required for the sale of the Notes by the Company.

 

3.5                               Equity Securities. The equity securities of the Company issuable upon conversion of the Notes, when issued and delivered in accordance with the terms thereof, will be duly authorized, validly issued, fully paid and non-assessable and shall be free of any pledges, liens, encumbrances and restrictions (other than as set forth in the Investor Rights Agreement (as defined below)), and will be issued in compliance with all applicable federal and state securities laws.

 

4.                                      Representations and Covenants of the Investors. Each Investor represents and covenants for himself, herself or itself that:

 

4.1                               Investment Intent. The Note acquired by the Investor is being purchased for investment for the Investor’s own account and not with the view to, or for resale in connection with, any distribution or public offering thereof. The Investor understands that the Notes have not been registered under the Act or any state securities laws by reason of their contemplated issuance in a transaction exempt from the registration requirements of the Act and applicable state securities laws, and that the reliance of the Company upon these exemptions is predicated in part upon this representation by the Investors. The Investor further understands that the Note, and the equity securities of the Company issuable upon conversion of the Note, may not be transferred or resold without (i) registration under the Act and any applicable state securities laws, (ii) an exemption from the requirements of the Act and applicable state securities laws, and (iii) compliance with transfer restrictions contained in that certain Amended and Restated Investor Rights Agreement dated March 28, 2014 among the Company, Medtronic, Inc. and the Investors party thereto, as amended from time to time (the “Investor Rights Agreement”) with respect to the equity securities of the Company issuable upon conversion of the Notes.

 

4.2                               Residence, Qualification as an Accredited Investors, Etc. The Investor’s residence is in the state set forth in the Investor’s address on Schedule 1. The Investor qualifies as an “accredited investor” for purposes of Regulation D promulgated under the Act. The Investor acknowledges that he, she or it has made an independent due diligence investigation of the Company and that the Company has made available to the Investor at a reasonable time prior to the execution of this Agreement the opportunity to ask questions and receive answers concerning the business and affairs of the Company and the terms and conditions of the sale of securities contemplated by this Agreement and to obtain any additional information (which the Company possesses or can acquire without unreasonable effort or expense) as may be necessary to verify the accuracy of information furnished to the Investor. The Investor (a) is able to bear the loss of his, her or its entire investment in the Note without any material adverse effect on his, her or its business, operations or prospects, (b) has such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of the investment to be made by him, her or it pursuant to this Agreement, (c) realizes that the Company has a significant need for additional financing and without such additional financing may be unable to continue operations, (d) realizes that an investment in the Company is highly speculative and subject to significant risks, and (e) acknowledges and agrees that any financial projections, forecasts, assumptions or estimates delivered or

 

2

 

communicated to the Investor are not statements of fact and that no representations or warranties are made by the Company or any officer, director, stockholder, employee or agent thereof, with respect to the accuracy of such projections, forecasts, assumptions or estimates or with respect to the future operations or the amount of any future income or loss of the Company. The Investor acknowledges that (a) the operating results, predictions, estimates and projections, if any, provided to the Investor are for illustrative purposes only and are based upon certain assumptions and events over which the Company has only partial or no control, (b) variations in such assumptions, including, but not limited to, sales, costs, selling expenses, general and administrative expenses, development expenses, regulatory matters and competitive developments could significantly affect such projections, (c) to the extent that assumed events do not materialize, the outcome projected will vary substantially from that projected; and (d) there are a number of other factors and risks which could cause actual results to be substantially less than projected.

 

4.3                               Acts and Proceedings. As applicable, this Agreement has been duly authorized by all necessary action on the part of each Investor, has been duly executed and delivered by each Investor, and is a valid and binding agreement of the Investor.

 

4.4                               Legal Representation. Each Investor acknowledges and recognizes that it has not been represented by Stinson Leonard Street LLP in connection with an investment in the Note and, furthermore, consents to such firm’s representation of the Company in this and other matters.

 

4.5                               Securities. Each Investor acknowledges that the equity securities to be issued upon conversion of the Note are subject to dilution as additional equity securities of the Company are issued. The Investor acknowledges that the Company may issue classes or series of equity securities with rights and preferences superior to those rights and preferences granted to the equity security into which the Note may be converted.

 

4.6                               Further Information. Each Investor agrees to furnish any additional information which the Company deems necessary in order to verify the answers set forth herein.

 

4.7                               Changes. Each Investor represents and warrants to the Company (a) that the information contained herein and furnished to the Company in connection herewith is complete and accurate and contains no material omissions and may be relied upon by the Company,  and (b) that the Investor will notify the Company immediately of any change in any of such information which occurs prior to the issuance of the Note to Investor.

 

5.                                      Covenants of the Company.  The Company covenants and agrees as follows:

 

5.1                               Existence. The Company will maintain its existence in good standing and comply with all applicable laws and regulations of the United States or of any state or political subdivision thereof and of any government authority where failure to so comply would have a material adverse impact on the Company or its business or operations (financial or otherwise).

 

5.2                               Books of Accounts and Reserves. The Company will keep accurate books of record and account in which full, true and correct entries are made of all of its respective dealings, business and affairs.

 

3

 

6.                                      Restriction on Transfer of Note and Equity Securities.

 

6.1                               Legend. Each Note, and each stock certificate representing equity securities of the Company issued upon conversion of the Note, shall be endorsed with a legend in substantially the form which follows:

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

Each stock certificate representing equity securities of the Company issued upon conversion of the Note shall also bear a legend in substantially the form which follows:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.”

 

6.2                               Investor Rights Agreement. Equity securities of the Company issued upon conversion of the Note and shall be subject to the Investor Rights Agreement and shall be Registrable Securities (as such term is defined in the Investor Rights Agreement) thereunder. As part of this Agreement and as a condition to the Company’s obligation to issue such equity securities, each Investor shall execute a counterpart signature page and become a party to the Investor Rights Agreement upon conversion of the Notes if such Investor Rights Agreement remains applicable upon such conversion.

 

7.                                      Miscellaneous.

 

7.1                               Changes, Waivers, Etc. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a statement in writing, signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

 

7.2                               Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be delivered by overnight courier, or mailed first- class, postage prepaid, registered or certified mail:

 

if to an Investor, at the address listed on signature page for such Investor attached hereto, or at such other address as an Investor may specify in writing to the Company;

 

4

 

or

 

if to the Company, at 9700 63rd Avenue North, Suite 200, Maple Grove, MN 55369, Attention: Mr. Timothy P. Herbert, President and Chief Executive Officer, or at such other address as the Company may specify by written notice to the Investors;

 

and such notices and other communications shall for all purposes of this Agreement be treated as being effective or having been given if delivered personally, or, if sent by mail, when received.

 

7.3                               Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, whether so expressed or not, and, in particular, shall inure to the benefit of and be enforceable by the holder or holders from time to time of the Note.

 

7.4                               Headings. The headings of the articles and sections of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement.

 

7.5                               Choice of Law. The laws of the State of Delaware shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereunder, without regard for the conflict of laws provisions thereof.

 

7.6                               Counterparts. This Agreement may be executed at different times and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

5

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date indicated above.

 

	
 
    	
INSPIRE MEDICAL   SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy P. Herbert
    
	
 
    	
Timothy P. Herbert
    
	
 
    	
President and Chief   Executive Officer
    

 

 

ADDITIONAL SIGNATURE PAGE TO 
 BRIDGE NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
MEDTRONIC, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Christopher M.   Cleary
    
	
 
    	
Name: Christopher M.   Cleary
    
	
 
    	
Its: Vice President,   Corporate Development
    
	
 
    	
 
    
	
 
    	
Address: 710 Medtronic   Parkway
    
	
 
    	
              Minneapolis, MN 55432
    
	
 
    	
Fax: ###-###-####
    
	
 
    	
Email:   #####.######@#########.###
    

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE 
 NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
U.S. VENTURE PARTNERS IX, L.P.
    
	
 
    	
By Presidio Managament   Group IX, L.L.C.
    
	
 
    	
Its General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Dale Holladay
    
	
 
    	
 
    	
Dale Holladay,   Attorney-In-Fact
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
Attn: Chief Financial   Officer
    
	
 
    	
1460 El Camino Real,   Suite 1000
    
	
 
    	
Menlo Park, CA 94025
    
	
 
    	
Fax: (###) ###-####
    
	
 
    	
Email: #####@####.###
    

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE 
 NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
ORBIMED PRIVATE INVESTMENTS V,   LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
OrbiMed Capital GP V   LLC,
   Its General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
OrbiMed Advisors, LLC,
    
	
 
    	
 
    	
 
    	
Its Managing Member
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Jonathan   Silverstein
    
	
 
    	
Name: Christopher M.   Cleary
    
	
 
    	
Its: Member
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
OrbiMed Private   Investments V, LP
    
	
 
    	
c/o OrbiMed Advisors   LLC
    
	
 
    	
601 Lexington Avenue,   54th Floor
    
	
 
    	
New York, NY 10022
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
With a copy (that shall   not constitute notice) to:
    
	
 
    	
Wilmer Cutler Pickering   Hale and Dorr LLP
    
	
 
    	
Attention: Stuart M.   Falber
    
	
 
    	
60 State Street
    
	
 
    	
Boston, MA 02109
    

 

 

ADDITIONAL SIGNATURE PAGE TO
 BRIDGE NOTE PURCHASE AGREEMENT

 

Dated: June 30, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
APERTURE   VENTURE PARTNERS III, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Aperture Ventures III   Management, LLC, 
   its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Anthony Natale,   M.D.
    
	
 
    	
Name: Anthony Natale, M.D.
    
	
 
    	
Its: Member
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
Aperture Venture   Partners 
   Aperture Venture Partners III, L.P. 
   645 Madison Avenue, 20th   Floor 
   New York, NY 10022
    
	
 
    	
 
    
	
 
    	
with a copy (that shall   not constitute notice) to: 
   Wilmer Cutler Pickering Hale and Dorr LLP 
   Attention: Stuart M. Falber
    
	
 
    	
60 State Street
    
	
 
    	
Boston, MA 02109
    

 

 

ADDITIONAL SIGNATURE PAGE TO 
 BRIDGE NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
KPCB   HOLDINGS, INC., as nominee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Paul M. Vronsky
    
	
 
    	
Name: Paul M. Vronsky
    
	
 
    	
Its: General Counsel
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
2750 Sand Hill Road
    
	
 
    	
Menlo Park, CA 94025
    
	
 
    	
Attn: Paul M. Vronsky
    

 

 

ADDITIONAL SIGNATURE PAGE TO 
 BRIDGE NOTE PURCHASE AGREEMENT

 

Dated: July 6, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SYNERGY   LIFE SCIENCE PARTNERS, LP
    
	
 
    	
 
    
	
 
    	
By:
    	
SYNERGY VENTURE   PARTNERS, LLC
    
	
 
    	
 
    	
The General Partner of   Synergy Life Science Partners, LP
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Mudit Jain
    
	
 
    	
Name: Mudit Jain
    
	
 
    	
Its: Managing Member
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
P.O. Box 22489
    
	
 
    	
San Francisco, CA 94122
    

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE
 NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CURTIS   L. CARLSON FAMILY FOUNDATION
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Flottmeier
    
	
 
    	
Name: John Flottmeier
    
	
 
    	
Its: Authorized Agent
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
301 Carlson Parkway,   Suite 275
    
	
 
    	
Minnetonka, MN 55305
    

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE 
 NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GDN   HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brian Gustafson
    
	
 
    	
Name: John Flottmeier
    
	
 
    	
Its: Vice President
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
301 Carlson Parkway,   Suite 275
    
	
 
    	
Minnetonka, MN 55305
    

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE 
 NOTE PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CARLSON   FAMILY FOUNDATION FOR THE UNIVERSITY OF MINNESOTA
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Flottmeier
    
	
 
    	
Name: John Flottmeier
    
	
 
    	
Its: Authorized Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brian Gustafson
    
	
 
    	
Name: John Flottmeier
    
	
 
    	
Its: Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
301 Carlson Parkway,   Suite 275
    
	
 
    	
Minnetonka, MN 55305
    
				

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE NOTE 
 PURCHASE AGREEMENT

 

Dated: July 7, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NAFCO   INSURANCE CO., LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Flottmeier
    
	
 
    	
Name: John Flottmeier
    
	
 
    	
Its: Authorized Agent
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
301 Carlson Parkway,   Suite 275
    
	
 
    	
Minnetonka, MN 55305
    

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE NOTE 
 PURCHASE AGREEMENT

 

Dated: July 1, 2016

 

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TGAP   VENTURE CAPITAL FUND II, LP
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jack Ahrens
    
	
 
    	
Name: Jack Ahrens
    
	
 
    	
Its: Managing Director
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
7171 Stadium Drive
    
	
 
    	
Kalamazoo, MI 49009
    

 

 

ADDITIONAL SIGNATURE PAGE TO BRIDGE NOTE
 PURCHASE AGREEMENT

 

Dated: July 6, 2016

	
INVESTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Jerry Griffin
    
	
 
    	
Jerry C. Griffin, MD
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
PO Box 2196
    
	
 
    	
Glen Ellen, CA 95442
    

 

 

SCHEDULE 1

 

INVESTORS SCHEDULE

 

	
Name of Investor
    	
 
    	
Initial Bridge Draw
    	
 
    	
Principal Amount of
   Promissory Note
    	
 
    
	
OrbiMed Private   Investments V, L.P.
    	
 
    	
$
    	
371,661.93
    	
 
    	
$
    	
1,114,985.80
    	
 
    
	
Aperture Venture   Partners III, L.P.
    	
 
    	
$
    	
30,971.84
    	
 
    	
$
    	
92,915.51
    	
 
    
	
U.S. Venture   Partners IX, L.P.
    	
 
    	
$
    	
422,178.25
    	
 
    	
$
    	
1,266,534.74
    	
 
    
	
KPCB   Holdings, Inc.
    	
 
    	
$
    	
422,178.25
    	
 
    	
$
    	
1,266,534.74
    	
 
    
	
Synergy Life   Science Partners, LP
    	
 
    	
$
    	
424,092.02
    	
 
    	
$
    	
1,272,276.06
    	
 
    
	
GDN Holdings,   LLC
    	
 
    	
$
    	
99,532.58
    	
 
    	
$
    	
298,597.75
    	
 
    
	
Curtis L.   Carlson Family Foundation
    	
 
    	
$
    	
49,601.33
    	
 
    	
$
    	
148,803.98
    	
 
    
	
NAFCO Insurance   Co., Ltd
    	
 
    	
$
    	
24,603.98
    	
 
    	
$
    	
73,811.94
    	
 
    
	
Carlson Family   Foundation for the University of Minnesota
    	
 
    	
$
    	
4,920.74
    	
 
    	
$
    	
14,762.23
    	
 
    
	
TGap Venture   Capital Fund II, LP
    	
 
    	
$
    	
68,658.93
    	
 
    	
$
    	
205,976.78
    	
 
    
	
Jerry C.   Griffin, MD
    	
 
    	
$
    	
2,086.43
    	
 
    	
$
    	
6,259.29
    	
 
    
	
Medtronic, Inc
    	
 
    	
$
    	
79,513.73
    	
 
    	
$
    	
238,541.19
    	
 
    
	
 
    	
 
    	
$
    	
2,000,000.00
    	
 
    	
$
    	
6,000,000.00
    	
 
    

 

 

EXHIBIT A

 

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

INSPIRE MEDICAL SYSTEMS, INC. 
 CONVERTIBLE PROMISSORY NOTE

 

	
Up to $
    	
Maple Grove,   Minnesota
    
	
Due: December 30,   2016
    	
, 2016
    

 

FOR VALUE RECEIVED, Inspire Medical Systems, Inc., a Delaware corporation (the “Company”), promises to pay to the order of                                          (the “Holder”), or his, her or its registered assigns, on December 30, 2016 (the “Maturity Date”), the principal amount outstanding as recorded by Holder in the column entitled “Outstanding Principal Balance” on Schedule A attached to and forming part of this Note, up to a maximum aggregate principal amount of                                       dollars and NO/100ths ($                                   ), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to ten percent (10.00%) per annum, compounding annually. All unpaid principal, together with any then unpaid and accrued interest payable hereunder, shall convert into equity securities of the Company as provided in Section 4 below if a Qualified Offering (as defined below) occurs prior to the Maturity Date. Otherwise, if such Qualified Offering has not occurred prior to the Maturity Date, this Note shall be due and payable at any time after the Maturity Date upon written demand to the Company by the Holder.  This Convertible Promissory Note (this “Note”) is unsecured in all respects. This Note is issued pursuant to that certain Bridge Note Purchase Agreement, dated                                              , 2016, by and among the Company and the Investors listed on Schedule 1 thereto, as the same may from time to time be amended, modified or supplemented (the “Purchase Agreement”).

 

Holder is authorized and directed to record on Schedule A hereto (i) the date and amount of each advance made by Holder to the Company and the resulting increase of the outstanding principal amount of this Note, and (ii) the date and amount of each repayment on account of the principal paid to Holder by the Company and the resulting decrease of the outstanding principal amount of this Note. Together with acknowledgement receipts from the Company, such notations on Schedule A, in the absence of a manifest mathematical error, shall be prima facie evidence of such advances and repayments.

 

The following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which the Holder, by the acceptance of this Note, agrees:

 

1.                                      Interest. Accrued interest on this Note shall be payable in cash or in equity (as provided in Sections 2 and 4) upon the repayment of the principal amount of this Note.

 

2.                                      Prepayment. At any time while this Note remains unpaid, upon at least thirty (30) days advance written notice to Holder, the Company may prepay this Note together with any accrued interest thereon in whole or in part without premium or penalty.

 

A-1

 

3.                                      Events of Default. The occurrence of any one or more of the following events (whether such occurrence shall be voluntary or involuntary or occur or be effected by operation of law or otherwise) shall constitute an “Event of Default” hereunder:

 

(a)                                  if the Company fails to pay the entire amount of the principal and interest on this Note when due (either in cash or equity in accordance with the terms hereof); or

 

(b)                                  if the Company makes an assignment for the benefit of creditors; or

 

(c)                                   if any order, judgment, or decree is entered adjudicating the Company bankrupt or insolvent; or

 

(d)                                  if the Company petitions or applies to any tribunal for the appointment of a trustee or receiver or commences any proceeding under any bankruptcy, reorganization, insolvency, dissolution or liquidation law of any jurisdiction; or

 

(e)                                   if the Company materially breaches any of its material agreements or covenants contained in the Purchase Agreement and such breach is not cured by the Company within thirty (30)  days after written notice thereof is delivered by the Holder to the Company.

 

The Company shall immediately notify the Holder in writing of the occurrence of any Event of Default, which, for the purpose of subsection (e) above, is at the end of the thirty (30) day period there referenced. Upon or at any time following an Event of Default, the Holder may immediately declare the unpaid principal balance of and all interest accrued on this Note to be immediately due and payable and such amounts shall then be due and payable without further demand, presentment or notice of any kind, all of which are hereby waived by the Company.

 

4.                                      Conversion.

 

(a)                                 Definitions. For purposes of this Section 4, the following terms shall have the meanings set forth below:

 

(i)                                     “Qualified Offering” is a financing transaction in which the Company sells a new series of its Preferred Stock (the “Series F Preferred”) and receives net proceeds of at least $11,000,000.00 (excluding amounts represented by conversion of this Note and the other Notes issued pursuant to the Purchase Agreement).

 

(ii)                                  “Note Conversion Price” means the offering price per share in a Qualified Offering.

 

(b)                                 Automatic Conversion. At or in connection with the completion of the Qualified Offering, the entire principal amount and accrued interest of this Note shall be automatically converted into the Series F Preferred of the Company sold in a Qualified Offering at the Note Conversion Price. If such Qualified Offering has not occurred prior to the Maturity Date, this Note shall be due and payable at any time after the Maturity Date upon written demand to the Company by the Holder.

 

(c)                                  Conversion Procedure.

 

(i)                                     If this Note is converted in accordance with the provisions of this Section 4, the Holder shall surrender this Note at the Company’s principal executive office, or, if this Note has been lost, stolen, destroyed or mutilated, then, in the case of loss, theft or destruction, the Holder shall deliver

 

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an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, the Holder shall surrender and cancel this Note. The Company shall, as soon as practicable after any such conversion, but in any event within fifteen (15) days of the date on which this Note is surrendered for conversion, issue and deliver to such Holder at his, her or its address set forth in Schedule 1 to the Purchase Agreement a certificate or certificates for the number of shares to which the Holder shall be entitled upon such conversion (bearing such legends as are required by the Purchase Agreement or applicable law). On and after any conversion date, the person entitled to receive the shares issuable upon such conversion shall be treated for all purposes as the record holder of such shares.

 

(ii)                                  No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company shall pay to the Holder an amount equal to the product obtained by multiplying the Note Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment of the amounts specified in this Section 4(c)(ii) for fractional shares, if any, the Company shall be forever released from all its obligations and liabilities under this Note.

 

(d)                                 Further Assurances. In connection with the conversion of this Note, the Holder, by acceptance of this Note, agrees at the request of the Company to execute any and all reasonable agreements and other documents executed by the investors in the Qualified Offering.

 

(e)                                  Additional Representations. The Series F Preferred to be issued by the Company upon any conversion of this Note shall be duly authorized, validly issued, fully paid and non-assessable. The Company shall fully comply with all federal and state laws regarding the issuance of any such shares.

 

5.                                      Advances. Holder agrees, on the terms and subject to the conditions herein, to make advances to the Company at any time prior to December 1, 2016 in an amount not to exceed at any time the principal amount of this Note set forth above; provided, however, that Holder shall not be obligated to make advances hereunder more frequently than once per month and, if the Company makes any advance request as provided below, such advance request shall be for not less than $1,000,000 in the aggregate to the holders of all of the Notes purchased pursuant to the Purchase Agreement, with each such holder required to advance his, her or its pro-rata portion of such aggregate amount requested. Such advances shall be evidenced by, and subject to, the terms and conditions of this Note and shall be made by Holder by wire transfer to the bank account specified by the Company’s President in the notice within three (3) business days of e-mail notice sent by the Company’s President to Holder requesting the advance (notwithstanding the notice requirements under Section 6(e) of this Note).

 

6.                                      Miscellaneous.

 

(a)                                 Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, delivery of an indemnity agreement satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Note, the Company shall execute and deliver, in lieu of this Note, a new Note executed in the same manner as this Note, in the same principal amount as the unpaid principal amount of this Note and dated the date to which interest shall have been paid on this Note or, if no interest shall have yet been so paid, dated the date of this Note.

 

(b)                                 Pari Passu Notes. The Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of and all interest on this Note shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Purchase Agreement.

 

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(c)                                  Payment.  All payments under this Note shall be made in lawful tender of the United States.

 

(d)                                 Waiver and Amendment.  Any provision of this Note may be amended, waived or modified upon the written consent of the Company and holders representing a majority of the principal amount of all of the outstanding Notes issued pursuant to the Purchase Agreement.

 

(e)                                  Notices. Any notice, request or other communication required or permitted hereunder shall be given in accordance with the Purchase Agreement.

 

(f)                                   Successors and Assigns. This Note may be assigned or transferred by the Holder only with the prior written approval of the Company, which shall not be unreasonably withheld. Any transfer of this Note may be effected only pursuant to the Purchase Agreement and by surrender of this Note to the Company and reissuance of a new note to the transferee. Subject to the preceding sentence, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

(g)                                  Governing Law. This Note shall be governed by and construed under the laws of the State of Delaware, without regard to its conflict of laws provisions.

 

(h)                                 Tax Treatment. The parties agree (i) that this Note is described in Treasury Regulations Section 1.1272-1(c)(2)  and therefore is governed by the rules set out in Treasury Regulations Section 1.1272-1(c), and is not governed by the rules set out in Treasury Regulations Section 1.1275-4, and therefore, any multiple of the principal payable will not be treated as resulting in original issue discount (“OID”), (ii) any multiple of the principal payable is intended to approximate the economic return from a conversion of this debt instrument into equity under Treasury Regulations Section 1.1272- 1(e), and Treasury Regulations Section 1.1275-4(a)(4), (iii) borrower and lender agree to treat such multiple of principal as such a conversion right, and properly exclude the value of such multiple or any liquidation preference from the calculation of OID or contingent interest under this debt instrument, and (iv) to adhere to this Paragraph (h) for federal income tax purposes and not to take any action or file any tax return, report or declaration inconsistent herewith, unless and until there is a “final determination” to the contrary within the meaning of Section 1313(a) of the Code (or similar provision of any state, local or foreign law).

 

	
 
    	
INSPIRE MEDICAL   SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Timothy P. Herbert
    
	
 
    	
President and Chief   Executive Officer
    

 

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SCHEDULE A

 

ADVANCES AND REPAYMENT OF PRINCIPAL

 

(in U.S. dollars)

 

	
DATE OF
   ADVANCE
    	
 
    	
AMOUNT OF
   ADVANCE
    	
 
    	
PRINCIPAL
   REPAID OR
   PREPAID
    	
 
    	
OUTSTANDING
   PRINCIPAL
   BALANCE
    	
 
    	
NOTATION
   MADE BY
    	
 
    
	
July 7, 2016
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
 
    	
 
    	
Holder
    	
 
    
	
August     , 2016
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
 
    	
 
    	
Holder
    	
 
    
	
September     , 2016
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
 
    	
 
    	
Holder
    	
 
    

 

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