2024 CONTINGENT CONVERTIBLE DEBT AGREEMENT

EXHIBIT 10.1

2024 CONTINGENT CONVERTIBLE DEBT AGREEMENT

THIS 2024 CONTINGENT CONVERTIBLE DEBT AGREEMENT (this “Agreement”) is dated as of the Effective Date among (a) SILICON VALLEY BANK, A DIVISION OF FIRST-CITIZENS BANK & TRUST COMPANY (“FCB”), in its capacity as administrative agent and collateral agent (“Agent”), (b) SILICON VALLEY BANK, A DIVISION OF FIRST-CITIZENS BANK & TRUST COMPANY, as a lender (“FCB”, together with each of the other “Lenders” from time to time a party hereto are referred to herein collectively as the “Lenders” and each individually as a “Lender”), and (c) and the borrower listed on Schedule I hereto (“Borrower”).

WHEREAS, each of the Borrower, SVB Innovation Credit Fund VIII L.P., Innovation Credit Fund VIII-A, L.P. and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank), as lender and as agent thereunder, have heretofore entered into that certain 2023 Contingent Convertible Debt Agreement (as amended, supplemented and otherwise modified prior to the date hereof, “2023 Contingent Convertible Debt Agreement”);

WHEREAS, the Borrower wishes to refinance the aggregate amount of term loans and obligations outstanding under the 2023 Contingent Convertible Debt Agreement (the “Existing Indebtedness”) in full and terminate the 2023 Contingent Convertible Debt Agreement on the terms and subject to the conditions contained herein;

WHEREAS, FCB is willing to make a term loan advance under this Agreement on the Effective Date for the purpose of, together with cash on hand of the Borrower, prepaying in full the Existing Indebtedness, which will extinguish the Borrower’s obligations under the 2023 Contingent Convertible Debt Agreement; and

WHEREAS, FCB, for itself and on behalf of each lender under the 2023 Contingent Convertible Debt Agreement, wishes to waive its right to receive the Call Price (as defined in the 2023 Contingent Convertible Debt Agreement) payable by Issuer pursuant to Section 1.3 of the 2023 Contingent Convertible Debt Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

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Notwithstanding anything to the contrary in this Section 1.2(a), if the number of shares of Common Stock deliverable pursuant to this Section 1.2(a) to settle any conversion is not a whole number, then such number will be rounded down to the nearest whole number and the Issuer will deliver, in addition to the shares of Common Stock due upon such conversion, cash in lieu of the related fractional share in an amount equal to the product of (1) such fraction and (2) the fair market value per share of Common Stock on the date of the related Conversion Notice (which fair market value will, in the event the Common Stock is then listed on an national securities exchange, be the closing price per share of Common Stock).

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For the avoidance of doubt, the limitations on the convertibility of any Associated Debt pursuant to this Section 1.2(f) will not, in themselves, cause any Associated Debt to cease to be outstanding (and interest will continue to accrue on any Associated Debt that has been tendered for conversion and whose convertibility is suspended pursuant to this Section 1.2(f)), and such limitations will cease to apply if and when such Associated Debt’s convertibility and conversion will not violate this Section 1.2(f).

 

A Conversion Right Holder may, by written notice to the Issuer, elect to change the Conversion Right Holder Ownership Percentage that applies to such Conversion Right Holder to any percentage that is less than 20%; provided, however, that such notice will not be effective (and the Conversion Right Holder Ownership Limitation will not cease to apply or be reduced as to such beneficial owner) until the sixty first (61st) calendar day after the date on which such notice is delivered to the Issuer.

 

Upon the occurrence of a Common Stock Change Event (as defined below), (i) the Conversion Right Holder Ownership Limitation will thereafter apply as if each reference to “Common Stock” in this

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Section 1.2(f) were instead a reference to the common equity (including depositary receipts representing common equity), if any, forming part of the Reference Property (as defined below) of such Common Stock Change Event; and (ii) if such Reference Property includes no such common equity or depositary receipts, then the Conversion Right Holder Ownership Limitation will thereafter cease to apply.

Notwithstanding anything to the contrary in this Agreement, this Section 1.2(f) will not apply to any Conversion Right Holder who is a BHC Conversion Right Holder and such Conversion Right Holder will instead be subject to Section 1.2(j).

(A) recapitalization, reclassification or change of the Common Stock (other than (x) changes solely resulting from a subdivision or combination of the Common Stock, (y) a change only in par value or from par value to no par value or no par value to par value and (z) stock splits and stock combinations that do not involve the issuance of any other series or class of securities);

 

(B) consolidation, merger, combination or binding or statutory share exchange involving the Issuer;

 

(C) sale, lease or other transfer of all or substantially all of the assets of the Issuer and its Subsidiaries, taken as a whole, to any Person; or

 

(D) other similar event,

 

and, as a result of which, the Common Stock is converted into, or is exchanged for, or represents solely the right to receive, other securities, cash or other property, or any combination of the foregoing (such an event, a “Common Stock Change Event,” and such other securities, cash or property, the “Reference Property,” and the amount and kind of Reference Property that a holder of one (1) share of Common Stock would be entitled to receive on account of such Common Stock Change Event (without giving effect to any arrangement not to issue or deliver a fractional portion of any security or other property), a “Reference Property Unit”), then, notwithstanding anything to the contrary in this Agreement, from and after the effective time of such Common Stock Change Event, (I) the consideration due upon conversion of any Associated Debt will be determined in the same manner as if each reference to any number of shares of Common Stock in Agreement were instead a reference to the same number of Reference Property Units; and (II) for purposes of the provisions relating to Mandatory Conversion, the reference to the “closing price per share of Common Stock” in the definition of Price Event will instead be deemed to be a reference to the “closing price or fair market value per Reference Property Unit.”

 

(A) BHC Act Ownership Limitation. The Issuer shall not directly or indirectly, repurchase, redeem, retire or otherwise acquire any of the Issuer’s capital securities, or take any other action (including converting any Associated Debt into securities) if, as a result, a Conversion Right Holder who is a BHC Conversion Right Holder would own or control, or be deemed to own

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or control, collectively, greater than 4.99% of any class of voting securities of the Issuer (as such term is defined and used, and as such percentage is calculated, under the BHC Act, the “BHC Act Ownership Limitation”).

 

(B) Limitations on Conversion. Notwithstanding anything to the contrary contained herein, and upon the occurrence of any Voluntary Conversion or Mandatory Conversion (other than a conversion that is part of a Permitted Regulatory Transfer), to the extent a BHC Conversion Right Holder, upon any such conversion, would own or control, or be deemed to own or control, shares of voting securities of the Issuer in an amount greater than the BHC Act Ownership Limitation, (i) the Associated Debt shall not be convertible into any Conversion Shares in excess of the BHC Act Ownership Limitation (“Deemed Converted Associated Debt”) and shall no longer be entitled to any rights of the applicable Associated Debt that are not also applicable to shares of Common Stock, including without limitation the right to receive the amounts payable to holders of the Associated Debt, and such holder of Deemed Converted Associated Debt shall be deemed to have forever and finally waived all such rights; provided, however, that the rights set forth in this Section 1.2(j) shall continue to apply to Deemed Converted Associated Debt; and (ii) each holder of Deemed Converted Associated Debt thereafter shall be entitled to receive, in lieu of any amounts otherwise payable on the Associated Debt, only an amount per share equal to the amounts that may become payable to the holders of Common Stock as if such Deemed Converted Associated Debt had been converted (but without actually converting) into Conversion Shares at the same time that all Associated Debt has been automatically converted; provided, however, that in lieu of receiving any voting securities (as such term is defined under the BHC Act) otherwise payable to the holders of Conversion Shares, each holder of Deemed Converted Associated Debt shall be entitled to receive, per share of Common Stock as if such Deemed Converted Associated Debt had been converted (but without actually converting), the cash equivalent of the fair market value per share of such voting security on the record date for such distribution (which fair market value will, in the event such voting security is then listed on a national securities exchange, be the closing price per share of such voting security).

 

For the avoidance of doubt, Deemed Converted Associated Debt pursuant to this Section 1.2(j) shall not be entitled to vote on any matters for which shares of Common Stock were entitled to vote, except for matters that are permitted for non-voting securities under 12 C.F.R. § 225.2(q)(2). Notwithstanding anything to the contrary contained herein, in no event may a BHC Conversion Right Holder convert any Associated Debt into securities to the extent that such conversion, when combined with any other shares held by the BHC Conversion Right Holder, would provide the BHC Conversion Right Holder with control of more than 33.33% of the total equity of the Issuer (as such term is defined and used, and as such percentage is calculated, under the BHC Act).

 

For the avoidance of doubt, the limitations on the convertibility of any Associated Debt pursuant to this Section 1.2(j) will not, in themselves, cause such Associated Debt to cease to be outstanding (and interest will continue to accrue on any portion of Associated Debt that has been tendered for conversion and has not been paid in accordance with the foregoing). Any purported delivery of Conversion Shares upon conversion of any Associated Debt will be void and have no effect to the extent, and only to the extent, that such delivery would contravene the BHC Act Ownership Limitation.

 

(C) Transfer. The rights, limitations and conditions set forth in this Section 1.2(j) shall apply to any transferee in receipt of Associated Debt from a BHC Conversion Right Holder unless such transferee receives such Associated Debt or related Conversion Shares in a transfer that is part of a Permitted Regulatory Transfer. Any Associated Debt that is convertible into a number of shares in excess of the BHC Act Ownership Limitation held by a BHC Act Conversion Right Holder may be converted into Conversion Shares as part of a Permitted Regulatory Transfer.

 

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Unless otherwise provided in this Agreement or in a separate writing by Agent, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Agent or any Lender pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of any Lender’s obligation to make loans and advances hereunder. Agent may deduct amounts owing by Borrower under the clauses of this Section 1.5 pursuant to the terms of Section 1.6(c). Agent shall provide Borrower written notice of deductions made pursuant to the terms of the clauses of this Section 1.5.

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Borrower represents and warrants as follows:

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Borrower shall do all of the following:

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Any submission by Borrower of a Compliance Statement or any other financial statement submitted to the Financial Statement Repository pursuant to this Section 5.3 or otherwise submitted to Agent and the Lenders shall be deemed to be a representation by Borrower that (i) as of the date of such Compliance Statement or other financial statement, the information and calculations set forth therein are true and correct, (ii) as of the end of the compliance period set forth in such submission, Borrower is in complete compliance with all required covenants except as noted in such Compliance Statement or other financial statement, as applicable, (iii) as of the date of such submission, no Events of Default have occurred or are continuing, (iv) all representations and warranties other than any representations or warranties that are made as of a specific date in Section 4 remain true and correct in all material respects as of the date of such submission except as noted in such Compliance Statement or other financial statement, as applicable, (v) as of the date of such submission, Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 4.8, and (vi) as of the date of such submission, 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 Agent and the Lenders.

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Borrower shall not do any of the following without the prior written consent of Agent and each Lender in accordance with Section 12.6 hereof:

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

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Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders, (ii) or as Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 12.6 or (iii) in the absence of its own gross negligence or willful misconduct.

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Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 2 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to Agent.

 

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(i) Waivers and Amendments. Such Defaulting ▇▇▇▇▇▇’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as long as said Lender is a Defaulting Lender.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section 7 or otherwise, and including any amounts made available to the Agent by such Defaulting Lender pursuant to Section 12.10), shall be applied at such time or times as may be determined by the Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Agent hereunder; second, as Borrower may request (so long as no Event of Default exists), to the funding of any Credit Extension in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Agent; third, if so determined by the Agent and Borrower, to be held in a Deposit Account and released pro rata to satisfy such Defaulting Lender’s potential future funding obligations with respect to each Credit Extension under this Agreement; fourth, so long as no Event of Default has occurred and is continuing, to the payment of any amounts owing to Borrower as a result of any judgment of a court of competent jurisdiction obtained by Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and fifth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (A) such payment is a payment of the principal amount of each Credit Extension in respect of which such Defaulting Lender has not fully funded its appropriate share and (B) each Credit Extension was made at a time when the conditions set forth in Section 2.1 were satisfied or waived, such payment shall be applied solely to pay the Credit Extensions of all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of the Credit Extensions of such Defaulting Lender until such time as the Credit Extensions are held by the Lenders pro rata in accordance with the Credit Extensions under this Agreement. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section 9.12(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees. No Defaulting Lender shall be entitled to receive any fee pursuant to Section 1.6 for any period during which such Lender is a Defaulting Lender (and Borrower shall

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not be required to pay any such fee that otherwise would have been required to have been paid to such Defaulting Lender).

(a) If Agent notifies a Lender, or any Person who has received funds on behalf of a Lender (any such Lender, or other recipient, a “Payment Recipient”) that Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately succeeding clause (b)) that any funds received by such Payment Recipient from Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, or other Payment Recipient on its behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of Agent, and such Lender shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than two Business Days thereafter, return to Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to Agent in same day funds at a rate determined by Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error.

(b) Without limiting immediately preceding clause (a), each Lender, or any Person who has received funds on behalf of a Lender, hereby further agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a

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notice of payment, prepayment or repayment sent by Agent (or any of its Affiliates), or (z) that such Lender, or other such recipient, otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part) in each case:

(i) (A) in the case of immediately preceding clauses (x) or (y), an error shall be presumed to have been made (absent written confirmation from Agent to the contrary) or (B) an error has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and

(ii) such Lender shall (and shall cause any other recipient that receives funds on its respective behalf to) promptly (and, in all events, within one Business Day of its knowledge of such error) notify Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying Agent pursuant to this Section 9.13(b).

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All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or email address indicated below; provided that, for clause (b), if such notice, consent, request, approval, demand or other communication is not sent during the normal business hours of the recipient, it shall be deemed to have been sent at the opening of business on the next Business Day of the recipient. Agent or Borrower may change its mailing or electronic mail address by giving the other party written notice thereof in accordance with the terms of this Section 9.

If to Borrower: Achieve Life Sciences, Inc.

▇▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇, ▇▇▇▇▇ ▇▇▇

▇▇▇▇▇▇▇, WA 98021

Attn: ▇▇▇▇ ▇▇▇▇▇▇▇

Email:

With a copy to: Fenwick & West LLP

▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Seattle, Washington

Attn: ▇▇▇▇ ▇▇▇▇▇

Email:

 

If to Agent or FCB: First-Citizens Bank & Trust Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Email:

with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇

Los Angeles, CA 90071
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇

Email:

Except as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles of conflicts of law that would require the application of the laws of another jurisdiction. Borrower, Agent and Lenders each irrevocably and unconditionally submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Agent or Lenders from bringing suit or taking other legal action in any other jurisdiction with respect to the Loan Documents or to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Agent or any Lender. Borrower expressly, irrevocably and

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unconditionally submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby irrevocably and unconditionally consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or 3 days after deposit in the U.S. mails, proper postage prepaid.

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

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

This Section 11 shall survive the termination of this Agreement and the repayment of all Obligations.

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This Section 12.3 shall survive the termination of this Agreement and the repayment of all Obligations until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.

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

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

“Acquisition” means:

(iii) the sale, assignment or other transfer by holders of the Issuer’s outstanding voting equity securities, in a single transaction or series of related transactions, of such securities representing a majority of the total combined outstanding voting power of the Issuer.

“Additional Term Loan Event” and “Additional Term Loan Events” is set forth on Schedule I hereto.

“Additional Term Loan Availability Amount” is set forth on Schedule I hereto.

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

“Agent” is defined in the preamble hereof.

“Agreement” is defined in the preamble hereof.

“Agreement Currency” is defined in Section 12.3.

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“Anti-Terrorism Law” means any law relating to terrorism or money-laundering, including Executive Order No. 13224 and the USA Patriot Act.

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 12.2), and accepted by Agent, in any form approved by Agent.

“Associated Debt” as of any date means, with respect to a Conversion Right Holder, the total outstanding principal amount of the Term Loan Advance and accrued and unpaid interest thereon (i) which such Conversion Right Holder would have the right to convert in a Voluntary Conversion occurring on such date, or (ii) which would be automatically converted on the Price Event occurring on such date, in either case without regard to the limitations described in Section 1.2(f) or 1.2(j).

“Authorized Signer” means any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of Borrower.

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

“Bank Services Agreement” is defined in the definition of Bank Services.

“BHC Act” means the U.S. Bank Holding Company Act of 1956, as amended.

 

“BHC Act Ownership Limitation” is defined in Section 1.2(j).

 

“BHC Conversion Right Holder” means any Conversion Right Holder that is subject to the BHC Act, including any “affiliate” of such Conversion Right Holder as that term is defined for purposes of the BHC Act, that provides the Issuer with written notice stating that the Conversion Right Holder irrevocably elects to be treated as a BHC Conversion Right Holder and subject to Section 1.2(j). A BHC Conversion Right Holder shall cease to be a BHC Conversion Right Holder upon providing written notice to the Issuer that, due to a change of law or regulation, change to its business or operations, divestiture or other transaction, it has ceased to be a BHC Conversion Right Holder.

“Board” is ▇▇▇▇▇▇▇▇’s board of directors or equivalent governing body.

“Borrower” is set forth on Schedule I hereto.

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

“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and, if required under the terms of such Person’s Operating Documents, stockholders) and delivered by such Person to Agent approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance

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by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Agent and Lenders may conclusively rely on such certificate unless and until such Person shall have delivered to Agent and Lenders a further certificate canceling or amending such prior certificate.

“Business Day” is a day other than a Saturday, Sunday or other day on which commercial banks in the State of California are authorized or required by law to close, except that if any determination of a “Business Day” shall relate to an FX Contract, the term “Business Day” shall also mean a day on which dealings are carried on in the country of settlement of the Foreign Currency.

“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States, or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation or acquisition and having the highest rating from either Standard & Poor’s Ratings Group or ▇▇▇▇▇’▇ Investors Service, Inc.; (c) FCB’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least 90.0% of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.

“Cayman Islands Electronic Signature Law” is defined in Section 12.9.

“Change in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)‑5 under the Exchange Act), directly or indirectly, of 35.0% or more of the ordinary voting power for the election of directors, partners, managers and members, as applicable, of Borrower (determined on a fully diluted basis) other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Agent and the Lenders the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Agent and the Lenders a description of the material terms of the transaction; (b) during any period of 12 consecutive months, a majority of the members of the Board of Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) at any time, Borrower shall cease to own and control, of record and beneficially, directly or indirectly, 100.0% of each class of outstanding stock, partnership, membership, or other ownership interest or other equity securities of each Subsidiary of Borrower (other than Subsidiaries formed in any jurisdictions in which Borrower is prohibited by law from owning 100.0% of the outstanding capital stock of such Subsidiary) free and clear of all Liens (except Permitted Liens).

“Change in Law” means the occurrence, after the Effective Date, of: (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in Applicable Law or in the administration, interpretation, implementation or application thereof by any Governmental Authority; or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇ Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by Agent or the Lenders for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Claims” is defined in Section 12.3.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such

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term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

“Collateral” consists of all of ▇▇▇▇▇▇▇▇’s right, title and interest in and to the following personal property:

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

“Commitment” and “Commitments” means the Term Loan Commitment(s).

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

“Common Stock” means the common stock, $0.001 par value per share, of the Issuer, having the relative rights, powers, preferences and privileges set forth in the Issuer’s Certificate of Incorporation, as amended and/or restated and in effect from time to time; and any other class and/or series of capital stock or other security of the Issuer into or for which the outstanding shares of such common stock may from time to time be converted, exchanged or substituted in connection with any recapitalization or reorganization of the Issuer or reclassification of its equity securities.

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“Common Stock Change Event” is defined in Section 1.2(i).

“Compliance Statement” is that certain statement in the form attached hereto as Exhibit A.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

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

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

“Conversion Notice” is defined in Section 1.2(b).

“Conversion Percentage Amount” is defined in Section 1.2.

“Conversion Price” means (i) in the case of the first Additional Term Loan requested after the Effective Date, a price per Conversion Share equal to $7.00; (ii) in the case of the second Additional Term Loan Advance requested after the Effective Date, a price per Conversion Share equal to the greater of (A) $4.854 (subject to proportional adjustments for stock dividends, stock splits, stock combinations and similar events) and (B) the lesser of (x) 150% of the average of the closing sale price per share of Common Stock on the Nasdaq Capital Market during the 10 consecutive trading days ending on, and including the trading day immediately before the funding date for the second Additional Term Loan Advance; and (y) 150% of the closing sale price per share of Common Stock on the Nasdaq Capital Market on the trading day immediately prior to the funding date for the second Additional Term Loan Advance; and (iii) in the case of the third Additional Term Loan Advance requested after the Effective Date, a price per Conversion Share equal to the greater of (A) $4.854 (subject to proportional adjustments for stock dividends, stock splits, stock combinations and similar events) and (B) the lesser of (x) 150% of the average of the closing sale price per share of Common Stock on the Nasdaq Capital Market during the 10 consecutive trading days ending on, and including the trading day immediately before the funding date for the third Additional Term Loan Advance; and (y) 150% of the closing sale price per share of Common Stock on the Nasdaq Capital Market on the trading day immediately prior to the funding date for the third Additional Term Loan Advance, in each case of clauses (i), (ii) and (iii), as such price may be adjusted for stock splits, dividends or distributions of securities, rights, cash or other property, reorganizations, recapitalizations and the like occurring after the Effective Date.

 

“Conversion Right” means the separately assignable right to elect a Voluntary Conversion of Associated Debt pursuant to and in accordance with the terms and conditions of Section 1.2.

 

“Conversion Right Holder” means each person or entity entitled to exercise the Conversion Right with respect to a specified amount of outstanding principal hereunder and accrued interest thereon and to receive and/or designate the recipient(s) of the Conversion Shares issuable on any conversion. Each Lender party making a Credit Extension hereunder shall be the original Conversion Right Holder with respect to the outstanding principal of such Credit Extension and the accrued and unpaid interest thereon. The Conversion Right in respect of such ▇▇▇▇▇▇’s

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Credit Extension and the interest thereon may be assigned by such ▇▇▇▇▇▇, and by any assignee of such right, to any Person by execution and delivery to the Issuer of an assignment in substantially the form of Exhibit D-2 hereto.

“Conversion Right Holder Ownership Limitation” is defined in Section 1.2(f).

 

“Conversion Right Holder Ownership Percentage” is defined in Section 1.2(f).

 

“Conversion Shares” means any shares of Common Stock that are issued or issuable upon conversion of any Associated Debt pursuant to Section 1.2.

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

“Credit Extension” is the Term Loan Advance or any other extension of credit by the Lenders for ▇▇▇▇▇▇▇▇’s benefit.

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

“Deemed Converted Associated Debt” is defined in Section 1.2(j).

“Default” means any event which with notice or passage of time or both, would constitute an Event of Default.

“Default Rate” is defined in Section 1.4(c).

“Defaulting Lender” is, subject to Section 9.12(b), any Lender that (a) has failed to (i) fund all or any portion of its Credit Extension within two (2) Business Days of the date such Credit Extension were required to be funded hereunder unless such Lender notifies Agent and Borrower in writing that such failure is the result of such Lender’s reasonable determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Agent or any other Lender any other amount required to be paid by it hereunder within two (2) Business Days of the date when due, (b) has notified Borrower or Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Credit Extension hereunder and states that such position is based on such ▇▇▇▇▇▇’s reasonable determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by Agent or Borrower, to confirm in writing to Agent and Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Agent and Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of an Insolvency Proceeding, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 9.12(b)) upon delivery of written notice of such determination to Borrower and each Lender.

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

“Designated Deposit Account” is the deposit account established by Borrower with FCB for purposes of receiving Credit Extensions.

“Disbursement Letter” is that certain form attached hereto as Exhibit C.

“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, Section 17-220 of the Delaware Revised Uniform Limited Partnership Act for limited partnerships formed under Delaware law, or any analogous action taken pursuant to any other Applicable Law with respect to any corporation, limited liability company, partnership or other entity.

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

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

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.

“Effective Date” is set forth on Schedule I hereto.

“Effective Date Term Loan Availability Amount” is set forth on Schedule I hereto.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 12.2 (subject to such consents, if any, as may be required thereunder).

“Environmental Laws” means any Applicable Law (including any permits, concessions, grants, franchises, licenses, agreements or governmental restrictions) relating to pollution or the protection of health, safety or the environment or the release of any materials into the environment (including those related to hazardous materials, air emissions, discharges to waste or public systems and health and safety matters).

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

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

“Erroneous Payment” has the meaning assigned to it in Section 9.13(a).

“Erroneous Payment Deficiency Assignment” has the meaning assigned to it in Section 9.13(d).

“Erroneous Payment Impacted Class” has the meaning assigned to it in Section 9.13(d).

“Erroneous Payment Return Deficiency” has the meaning assigned to it in Section 9.13(d).

“Erroneous Payment Subrogation Rights” has the meaning assigned to it in Section 9.13(d).

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“Event of Default” is defined in Section 7.

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

“Excluded Taxes” means any of the following Taxes imposed on or with respect to Lender or Agent or required to be withheld or deducted from a payment to a Lender or Agent, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Lender or Agent being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Credit Extension pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Credit Extensions or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 1.9, amounts with respect to such Taxes were payable either to such ▇▇▇▇▇▇’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such ▇▇▇▇▇▇’s failure to comply with Section 1.9(a), and (d) any withholding Taxes imposed under FATCA.

“Existing Indebtedness” is defined in the second recital hereof.

“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Internal Revenue Code.

“FCB” is defined in the preamble hereof.

“FCBG Conversion Shares” is defined in Section 1.2(f).

“FCBG Other Shares” is defined in Section 1.2(f).

“Federal Funds Effective Rate” means, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by FCB from three federal funds brokers of recognized standing selected by it.

“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest), payable to Agent, for the ratable benefit of the Lenders based on their Pro Rata Share, due on the earliest to occur of (a) the Term Loan Maturity Date, (b) the repayment of the Term Loan Advances in full, (c) as required pursuant to Sections 1.1.1(d) or 1.1.1(d), or (d) the termination of this Agreement, in an amount equal to the original aggregate principal amount of the Term Loan Advances multiplied by four percent (4%).

“Financial Statement Repository” is Bank’s email address specified in Section 10 or such other means of collecting information approved and designated by Agent and each Lender after providing notice thereof to Borrower from time to time.

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

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

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

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

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

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

“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority, including, without limitation, Healthcare Permits.

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

“Group Member” means Borrower and its Subsidiaries.

“Guarantor” is any Person providing a Guaranty in favor of Agent and the Lenders.

“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.

“Healthcare Laws” means all applicable laws relating to the operation or management of hospitalist practices, the provision of hospitalist services, proper billing and collection practices relating to the payment for healthcare services, insurance law (including law related to payment for “no-fault” claims) and workers compensation law as they relate to the provision of, and billing and payment for, healthcare services, patient healthcare, patient healthcare information, patient abuse, the quality and adequacy of rehabilitative care, rate setting, equipment, personnel, operating policies, fee splitting, including, without limitation, (a) all federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)), the ▇▇▇▇▇ Law (42 U.S.C. §1395nn), the civil False Claims Act (31 U.S.C. §3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Anti-Inducement Law (42 U.S.C. § 1320a-7a(a)(5)), the exclusion laws (42 U.S.C. § 1320a-7); (b) the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009; (c) the Medicare Regulations and the Medicaid Program (Title XIX of the Social Security Act); (d) quality, safety and accreditation standards and requirements of all applicable state laws or regulatory bodies; (e) all laws, policies, procedures, requirements and regulations pursuant to which Healthcare Permits are issued; (f) any laws, regulations or administrative guidance with respect to fee splitting by healthcare professionals and the corporate practice of medicine in any jurisdiction in which any Borrower or any Guarantor operates; and (g) any and all comparable state or local laws and other applicable health care laws, regulations, manual provisions, policies and administrative guidance, each of (a) through (g) as may be amended from time to time and the regulations promulgated pursuant to each such law.

“Healthcare Permit” means, with respect to any Person, a permit issued or required under Healthcare Laws applicable to the business of Borrower or any Guarantor, or necessary in the possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of goods or services under Healthcare Laws applicable to the business of Borrower or any Guarantor.

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“HIPAA” means, collectively, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic Clinical Health (HITECKH) Act and the implementing regulations thereto.

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

“Indemnified Person” is defined in Section 12.3.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrower under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“Information” is defined in Section 12.8.

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

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

“Interest-Only Period” is set forth on Schedule I hereto.

“Internal Revenue Code” means the U.S. Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, each as amended or modified from time to time.

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

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

“Issuer” means Achieve Life Sciences, Inc., a Delaware corporation, and any successor thereto.

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“Judgment Currency” is defined in Section 12.3.

“Key Person” is ▇▇▇▇▇▇▇▇’s Chief Executive Officer, who is ▇▇▇▇ ▇▇▇▇▇▇▇ as of the Effective Date.

“Lender” and “Lenders” is defined in the preamble.

“Lender Entities” is defined in Section 12.8.

“Lender Intercreditor Agreement” is, collectively, any and all intercreditor agreement, master arrangement agreement, subordination agreement or similar agreement by and among the Lenders, as each may be amended from time to time in accordance with the provisions thereof.

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

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

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

“Liquidity Conditions” means, with respect to a call of the Term Loan Advance pursuant to Section 1.3 or a Mandatory Conversion pursuant to Section 1.2, that, as of the date on which the Call Notice is sent or the date as of which the condition set forth in clause (1) of the definition of Price Event, as applicable, either (i) (A) no material breach by the Issuer of the Registration Rights Agreement has occurred and is continuing; and (B) a “Registration Statement” (as defined in the Registration Rights Agreement) covering the resale of all Registrable Securities (as defined in the Registration Rights Agreement) is (and is reasonably expected to continue to be so effective and usable through at least the thirtieth (30th) calendar day after the date of the Call Closing or such Mandatory Conversion is settled, as applicable) effective under the Securities Act and available for use as contemplated by the Registration Rights Agreement; or (ii) all shares of Common Stock issuable upon conversion of the Term Loan Advance, when issued, would be eligible to be offered, sold or otherwise transferred pursuant to Rule 144 under the Securities Act or otherwise if held by a person that is not an affiliate of the Issuer, and that has not been an affiliate of the Issuer during the immediately preceding three months, without any requirements as to volume, manner of sale, availability of current public information or notice under the Securities Act.

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Perfection Certificate, Control Agreements, each Disbursement Letter, the Registration Rights Agreement, the Lender Intercreditor Agreement, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, landlord waivers and consents, bailee waivers and consents, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Agent and the Lenders in connection with this Agreement or Bank Services, all as amended, restated, or otherwise modified in accordance with the terms thereof and the Lender Intercreditor Agreement.

“Mandatory Conversion” is defined in Section 1.2.

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

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“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, fees, Lenders’ Expenses, the Prepayment Fee, the Final Payment and other amounts Borrower owes Agent or any Lender now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, all obligations relating to Bank Services, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Agent and/or the Lenders, and to perform ▇▇▇▇▇▇▇▇’s duties under the Loan Documents.

“OFAC” is the Office of Foreign Assets Control of the United States Department of the Treasury and any successor thereto.

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

“Original Lender” is defined in the definition of Required Lenders.

“Other Connection Taxes” means, with respect to Agent and the Lenders, Taxes imposed as a result of a present or former connection between Agent, Lenders and the jurisdiction imposing such Tax (other than connections arising from Agent and ▇▇▇▇▇▇▇ having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Credit Extension or Loan Document).

“Other Taxes” means all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Participant” is defined in Section 12.2(c).

“Participant Register” is defined in Section 12.2(c).

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

“Payment/Advance Form” is that certain form in the form attached hereto as Exhibit B.

“Payment Date” is set forth on Schedule I hereto.

“Payment Recipient” is defined in Section 9.13(a).

“Perfection Certificate” is the Perfection Certificate delivered by Borrower in connection with this Agreement.

“Permitted Credit Cards” is defined in clause (g) of the definition of Permitted Indebtedness.

“Permitted Foreign Accounts” are defined in Section 5.7(a).

“Permitted Indebtedness” is:

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“Permitted Insurance Financing” is defined in clause (h) of the definition of Permitted Indebtedness.

“Permitted Investments” are:

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“Permitted Liens” are:

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“Permitted RBC Accounts” are defined in Section 5.7(a).

“Permitted Regulatory Transfer” means a transfer of Conversion Shares subject to the BHC Act Ownership Limitation from a BHC Conversion Right Holder or its transferees to a Person in any of the following transfers:

 

(a) a widespread public distribution;

 

(b) a transfer in which no transferee (or group of associated transferees) would receive two percent (2%) or more of the outstanding securities of any class of voting securities (as such term is used for purposes of the BHC Act) of the Issuer;

 

(c) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widespread public distribution;

 

(d) a transfer to a party who would control more than fifty percent (50%) of every class of the voting securities (as such term is used for purposes of the BHC Act) of the Issuer without any transfer from the BHC Conversion Right Holder or any of its transferees; or

 

(e) a transfer to the Issuer.

“Permitted Repurchases” are defined in Section 6.7.

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“Permitted US Bank Account” is defined in Section 5.7(a).

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

“Prepayment Fee” shall be an additional fee, payable to Agent, for the ratable benefit of the Lenders based on their Pro Rata Share, with respect to the Term Loan Advances, in an amount equal to (a) three percent (3.0%) of the aggregate outstanding principal balance of Term Loan Advances made by Lender to Borrower if such prepayment occurs on or prior to the first (1st) anniversary of the Effective Date, (b) two percent (2.0%) of the aggregate outstanding principal balance of Term Loan Advances made by ▇▇▇▇▇▇▇ to Borrower if such prepayment occurs after the first (1st) anniversary of the Effective Date and on or prior to the second (2nd) anniversary of the Effective Date, and (c) one percent (1.0%) of the aggregate outstanding principal balance of the Term Loan Advances made by ▇▇▇▇▇▇▇ to Borrower if such prepayment occurs after the second (2nd) anniversary of the Effective Date and before the Term Loan Maturity Date; provided, however, no Prepayment Fee shall be charged if the outstanding Term Loan Advances are refinanced and replaced with a new facility from or led by FCB or its Affiliates.

“Price Event” means (i) in the case of the first Additional Term Loan Advance, the first date (if any) on which all of the following conditions have been satisfied: (1) the closing price per share of Common Stock on the principal stock exchange, market or inter-dealer quotation system on which shares of Common Stock are then traded is equal to or greater than $24.00 (appropriately adjusted for stock splits and combinations, stock dividends and similar transactions) on each of at least thirty (30) consecutive trading days prior to such date; and (2) the Liquidity Conditions have been satisfied; (ii) in the case of the second or the third Additional Term Loan Advance, the first date (if any) on which all of the following conditions have been satisfied: (1) the closing price per share of Common Stock on the principal stock exchange, market or inter-dealer quotation system on which shares of Common Stock are then traded is equal to or greater than three (3) times the Conversion Price for such Additional Term Loan Advance on each of at least thirty (30) consecutive trading days prior to such date; and (2) the Liquidity Conditions have been satisfied.

“Prime Rate” is set forth on Schedule I hereto.

“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of the Credit Extension held by such Lender by the aggregate outstanding principal amount of the Credit Extension.

“Receiver” is defined in Section 8.1(l).

“Reference Property” is defined in Section 1.2(i).

“Reference Property Unit” is defined in Section 1.2(i).

“Register” is defined in Section 9.11.

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

“Registration Rights Agreement” means that certain Registration Rights Agreement dated as of the Effective Date among the Issuer and the Lenders, as amended and in effect from time to time.

“Removal Effective Date” is defined in Section 9.12(d).

“Representatives” is defined in Section 12.8.

“Required Lenders” means:

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(a) at any time multiple Lenders have advanced Credit Extensions or have Term Loan Commitments, at least two Lenders who hold more than a majority of the sum of (i) the aggregate unpaid principal amount of the Credit Extensions then outstanding and (ii) the aggregate Term Loan Commitments then in effect; provided that (x) a Lender and its Affiliates shall be deemed one Lender and (y) for so long as a Lender on the Effective Date (each an “Original Lender”) has not assigned or transferred any of its interests in their Credit Extensions other than to an Affiliate of such Lender, such Original Lender shall be a Required Lender; and

(b) at any time only one Lender has outstanding Credit Extensions and Term Loan Commitments, “Required Lenders” means such Lender; provided that no Defaulting Lender shall at any time be included in the determination of “Required Lenders”.

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

“Restricted License” is any material license or other material agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with Agent’s right to sell any Collateral. Off-the-shelf software, open source code, application programming interfaces (APIs) and/or other trademarks, copyrights or patents or similar proprietary rights of others that are commercially available to the public under shrink wrap licenses, clickwrap licenses, online terms of service or other terms of use or similar agreements in the ordinary course of business shall not constitute a Restricted License.

“Sanctioned Person” means a Person that: (a) is listed on any Sanctions list maintained by OFAC or any similar Sanctions list maintained by any other Governmental Authority having jurisdiction over Borrower; (b) is located, organized, or resident in any country, territory, or region that is the subject or target of Sanctions; or (c) is 50.0% or more owned or controlled by one (1) or more Persons described in clauses (a) and (b) hereof.

“Sanctions” means the economic sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by the United States government and any of its agencies, including, without limitation, OFAC and the U.S. State Department, or any other Governmental Authority having jurisdiction over Borrower.

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

“Secured Guarantor” is a Guarantor which has granted Agent a first-priority Lien in such assets of the Guarantor consistent with the description of the Collateral hereunder (as if the Collateral were deemed to pertain to such Guarantor), and has executed and delivered to Agent such agreements, certificates and other documents in connection with the foregoing as reasonably required by Agent.

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

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute.

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

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock, partnership, membership, or other ownership interest or other equity securities having ordinary voting power (other than stock, partnership, membership, or other ownership interest or other equity securities having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is

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otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.

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

“Term Loan Advance” is defined in Section 1.1.1 of this Agreement.

“Term Loan Amortization” is set forth on Schedule I hereto.

“Term Loan Commitment” means, for any Lender, the obligation of such Lender to make the Term Loan Advance as and when available, up to the principal amount shown on Schedule II.

“Term Loan Commitments” means the aggregate amount of such commitments of all Lenders.

“Term Loan Commitment Percentage” means, as to any Lender at any time, the percentage (carried out to the fourth decimal place) of the Term Loan Commitments represented by such ▇▇▇▇▇▇’s Term Loan Commitment at such time. The initial Term Loan Commitment Percentage of each Lender is set forth opposite the name of such Lender on Schedule II.

“Term Loan Maturity Date” is set forth on Schedule I hereto.

“Trademarks” means, with respect to any Person, any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of such Person connected with and symbolized by such trademarks.

“Transfer” is defined in Section 6.1.

“USA Patriot Act” means the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (Public Law 107-56, signed into law on October 26, 2001), as amended from time to time.

“Voluntary Conversion” is defined in Section 1.2.

[Signature page follows]

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

 

BORROWER:

 

ACHIEVE LIFE SCIENCES, INC.

 

By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇

 

 

Name: ▇▇▇▇ ▇▇▇▇▇▇▇

 

Title: Chief Executive Officer

 

 

AGENT:

 

FIRST-CITIZENS BANK & TRUST COMPANY,

as Agent

 

By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇

 

Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇

 

Title: Managing Director

 

 

 

LENDERS:

 

FIRST-CITIZENS BANK & TRUST COMPANY,

as Lender

 

By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇

 

Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇

 

Title: Managing Director

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SCHEDULE I

LSA PROVISIONS

 

LSA Section	LSA Provision
1.1.1(a) – Term Loan – Availability	After repayment, the Term Loan Advance (or any portion thereof) may not be reborrowed.
1.1.1(b) – Term Loan – Repayment	The Term Loan Advances shall be “interest-only” through the Interest-Only Period, with interest due and payable in accordance with Section 1.4(a). Commencing on the Term Loan Amortization Date and continuing on each Payment Date thereafter, Borrower shall repay each Term Loan Advance in (i) twenty-four (24)) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 1.4(b).
1.4(a) – Interest Payments – Term Loan Advance	Interest on the principal amount of each Term Loan Advance is payable in arrears monthly (i) on each Payment Date commencing on the first Payment Date following the Funding Date of each such Term Loan Advance, (ii) on the date of any prepayment, and (iii) on the Term Loan Maturity Date.
1.4(b) – Interest Rate – Term Loan Advance	The outstanding principal amount of any Term Loan Advance shall accrue interest at a floating rate per annum equal to the greater of (A) seven percent (7.0%) and (B) the Prime Rate minus 1.00% per annum (the “Interest Rate”), which interest shall be payable in accordance with Section 1.4(a).
1.4(e) – Interest Computation	Interest shall be computed on the basis of the actual number of days elapsed and a 360-day year.
13.2 – “Additional Term Loan Events”	“Additional Term Loan Event I” occurs if and when (if ever) Borrower confirms in writing to FCB, in form and substance reasonably satisfactory to FCB, on or prior to October 31, 2025, that Borrower has received written notice that the U.S. Food and Drug Administration (“FDA”) has accepted for filing Borrower’s New Drug Application (“NDA”) with respect to cytisinicline for a smoking cessation indication (a “Filing Communication”). “Additional Term Loan Event II” (together with the Additional Term Loan Event I, the “Additional Term Loan Events” and each an “Additional Term Loan Event”) occurs if and when (if ever) on or prior to December 31, 2025, that Agent and each Lender in their sole discretion have determined to make such Additional Term Loan Advance and have received all necessary internal and credit approvals to make such Additional Term Loan Advance.
13.2 – “Additional Term Loan Availability Amount”	“Additional Term Loan Availability Amount” is an original principal amount equal to (a) $5,000,000.00 with respect to the Additional Term Loan Event I and (b) $5,000,000.00 with respect to the Additional Term Loan Event II.
13.2 – “Borrower”	“Borrower” means Achieve Life Sciences, INC., a Delaware corporation.
13.2 – “Effective Date”	“Effective Date” is July 25, 2024.
13.2 – “Effective Date Term Loan Availability Amount”	“Effective Date Term Loan Availability Amount” is an original principal amount equal to $10,000,000.

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13.2 – “Interest-Only Period”	“Interest-Only Period” is the period of time commencing on the Effective Date and continuing through December 31, 2025; provided, that in the event (x) after the Effective Date, but prior to December 31, 2025, Borrower has received at least $40,000,000 in net cash proceeds from the issuance equity interests and (y) the conditions of Additional Term Loan Event I have been satisfied (provided that, for the avoidance of doubt, Borrower shall not be required to request or borrow an Additional Term Loan Advance), the Interest-Only Period shall be the period of time commencing on the Effective Date and continuing through June 30, 2026.
13.2 – “Payment Date”	“Payment Date” is the first (1st) calendar day of each month.
13.2 – “Prime Rate”	“Prime Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Agent, the “Prime Rate” shall mean the rate of interest per annum announced by Agent as its prime rate in effect at its principal office in the State of California (such Agent announced Prime Rate not being intended to be the lowest rate of interest charged by Agent in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero percent (0.0%) per annum, such rate shall be deemed to be zero percent (0.0%) per annum for purposes of this Agreement.
13.2 – “Term Loan Amortization Date”	“Term Loan Amortization Date” is (a) January 1, 2026 in the event the Interest-Only Period ends on December 31, 2025 and (b) July 1, 2026 in the event the Interest-Only Period is extended and ends on June 30, 2026.
13.2 – “Term Loan Maturity Date”	“Term Loan Maturity Date” is (a) December 1, 2027 in the event the Interest-Only Period ends on December 31, 2025 and (b) June 1, 2028 in the event the Interest-Only Period is extended and ends on June 30, 2026.

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Schedule II

LENDERS AND COMMITMENTS

 

TERM LOAN COMMITMENTS

 

Term Loan Advance

Lender	Term Loan Commitment	Term Loan Advance Commitment Percentage
First-Citizens Bank & Trust	$15,000,000	100.0%
TOTAL	$15,000,000	100.0000%

 

 

 

 

 

 

 

 

 

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Schedule 1

 

EXHIBIT A

COMPLIANCE STATEMENT

 

Date:

 

TO: First-Citizens Bank & Trust Company (“FCB”), as Agent, FCB, as Lenders

 

FROM: ACHIEVE LIFE SCIENCES, INC.

 

Under the terms and conditions of the 2024 Contingent Convertible Debt Agreement among Borrower, FCB and Agent (as amended, modified, supplemented and/or restated from time to time, the “Agreement”), Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below. Attached are the required documents evidencing such compliance, setting forth calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.
Reporting Covenants	Required	Complies
Monthly financial statements with Compliance Statement	Monthly within 30 days (except for the months ending March 31, June 30, September 30, and December 31)	Yes No
Quarterly financial statements with Compliance Statement	Q1, Q2, and Q3 within 45 days	Yes No
10-Q Report	Within 45 days of Q1, Q2, and Q3	Yes No
10-K Report and Annual financial statements (CPA Audited)	FYE within 90 days	Yes No
Board approved projections	FYE within 30 days and as amended/updated	Yes No
Filed 10-Q, 10-K and 8-K	Within 10 days after filing with SEC	Yes No

 

 

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EXHIBIT B

LOAN PAYMENT/ADVANCE REQUEST FORM

Deadline for same day processing is Noon Pacific Time

 

Date: _____________________

 

Loan Payment: ACHIEVE LIFE SCIENCES, INC.

 

From Account #________________________________ To Account #__________________________________________

(Deposit Account #) (Loan Account #)

Principal $____________________________________ and/or Interest $________________________________________

 

Authorized Signature: Phone Number:

Print Name/Title:

 

Loan Advance:

 

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

 

From Account #________________________________ To Account #__________________________________________

(Loan Account #) (Deposit Account #)

 

Amount of Term Loan Advance $___________________________

 

All Borrower’s representations and warranties in the 2024 Contingent Convertible Debt Agreement are true, correct and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true and correct in all material respects as of such date:

 

Authorized Signature: Phone Number:

Print Name/Title:

 

Outgoing Wire Request:

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

Deadline for same day processing is noon, Pacific Time

 

Beneficiary Name: _____________________________ Amount of Wire: $

Beneficiary Bank: ______________________________ Account Number:

City and State:

 

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

(For International Wire Only)

 

Intermediary Bank: Transit (ABA) #:

For Further Credit to:

 

Special Instruction:

 

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

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Authorized Signature: ___________________________ 2nd Signature (if required): _______________________________

Print Name/Title: ______________________________ Print Name/Title: ______________________________________

Telephone #: Telephone #: _____________________________

 

Exhibit C

 

Form of Disbursement Letter

[see attached]

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DISBURSEMENT LETTER

[DATE]

The undersigned, being the duly elected and acting [ ] of (a) Achieve Life Sciences, INC., a Delaware corporation (“Borrower”), does hereby certify to (b) FIRST-CITIZENS BANK & TRUST COMPANY, (“FCB”), in its capacity as administrative agent and collateral agent (“Agent”), (c) FIRST-CITIZENS BANK & TRUST COMPANY, as a lender (each of the other “Lenders” from time to time a party hereto are referred to herein collectively as the “Lenders” and each individually as a “Lender”), in connection with that certain 2024 Contingent Convertible Debt Agreement dated as of [_________], by and among Borrower, Agent and the Lenders from time to time party thereto (the “Agreement”; with other capitalized terms used below having the meanings ascribed thereto in the Agreement) that:

1. The representations and warranties made by Borrower in Section 4 of the Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.

 

2. No event or condition has occurred that would constitute an Event of Default under the Agreement or any other Loan Document.

 

3. Borrower is in compliance with the covenants and requirements contained in Sections 3, 5 and 6 of the Agreement.

 

4. All conditions referred to in Section 2 of the Agreement to the making of a Credit Extension to be made on or about the date hereof have been satisfied or waived by Agent.

 

5. No Material Adverse Change has occurred.

 

6. The undersigned is an Authorized Signer.

 

 

[Balance of Page Intentionally Left Blank]

 

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7A. The proceeds of the Term Loan Advance shall be disbursed as follows:

 

Disbursement from FCB:
Loan Amount	$_______________
Plus:
‑‑Deposit Received	$__________
Less:
--Lender’s Legal Fees	($_________)*
Net Proceeds due from FCB:	$_______________
Net Proceeds due from Agent	$_____________
TOTAL TERM LOAN ADVANCE NET PROCEEDS FROM LENDER	$_______________

 

7B. Funds from Borrower Designated Deposit Account shall be disbursed as follows:

 

FCB:
Repayment of Existing Indebtedness Term Loan Fees	$_______________
▇▇▇▇▇▇’s Legal Fees	$_______________
Funds due from Borrower (“Total Funds”)	$_______________

[Balance of Page Intentionally Left Blank]

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8A. The aggregate net proceeds of the Term Loan Advance shall be transferred to the Designated Deposit Account as follows:

 

 

Account Name:	____________________________________
Bank Name:	First-Citizens Bank & Trust Company
Bank Address:	▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Account Number:	____________________________________
ABA Number:	____________________________________

 

 

8B. Borrower authorized FCB to debit the Total Funds from the Designated Deposit Account set forth below:

 

 

Account Name:	____________________________________
Bank Name:	First-Citizens Bank & Trust Company
Bank Address:	▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Account Number:	____________________________________
ABA Number:	____________________________________

 

 

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Dated as of the date first set forth above.

 

BORROWER:

 

Achieve Life Sciences, INC.

 

By: _______________________________________

 

Name: _____________________________________

 

Title: ______________________________________

 

 

AGENT:

 

FIRST-CITIZENS BANK & TRUST COMPANY,

as Agent

 

 

By: _______________________________________

 

Name: _____________________________________

 

Title: ______________________________________

 

 

 

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LENDER:

 

FIRST-CITIZENS BANK & TRUST COMPANY,

as Agent

 

 

By: _______________________________________

 

Name: _____________________________________

 

Title: ______________________________________

 

 

 

 

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EXHIBIT D-1

 

Form of Conversion Notice

[Date]

 

[Name of Issuer]

[Issuer Address]

 

 

Reference is made to that certain [2024 Contingent Convertible Debt Agreement] dated ________ among [Name(s) of Borrower(s)], First-Citizens Bank & Trust Company and the other parties thereto, as amended (the “Loan Agreement”). Capitalized terms used herein and not otherwise defined shall have the respective meanings given in the Loan Agreement.

 

(1) The undersigned Conversion Right Holder hereby elects to convert into shares of Common Stock of the above-named Issuer, pursuant to and in accordance with the provisions of the Loan Agreement set forth in Section 1.2 thereof:

 

______ All of the Associated Debt; or

 

______ $_________ of the outstanding principal of the Associated Debt, and

 

$_________ in accrued and unpaid interest thereon.

 

at a Conversion Price of $____, for a total of ____________ Conversion Shares.

 

The Conversion Shares shall be issued to and in the name(s) of the following recipients:

 

Recipient Name and Address Number of Conversion Shares

 

_____________________________ ______________________

 

______________________

 

______________________

 

______________________

 

_____________________________ ______________________

 

______________________

 

______________________

 

______________________

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(2) Each of the above-named recipients hereby makes the following representations and warranties to the Issuer as of the date hereof:

 

(a) It is acquiring the Conversion Shares for investment for its account, not as a nominee or agent, and not with a view to the resale or distribution thereof in violation of applicable federal and state securities laws. Such recipient has not been formed for the specific purpose of acquiring the Conversion Shares.

 

(b) Such recipient is aware of the Issuer’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of the Conversion Shares. Such recipient further has had an opportunity to ask questions and receive answers from the Issuer regarding the terms and conditions of the offering of the Conversion Shares and to obtain additional information (to the extent the Issuer possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such recipient or to which such recipient has access.

 

(c) Such recipient understands that the acquisition of the Conversion Shares involves substantial risk. Such recipient has experience as an investor in securities of companies at a similar stage of development to the Issuer; has such knowledge and experience in financial or business matters that such recipient is capable of evaluating the merits and risks of its investment in the Conversion Shares and/or has a preexisting personal or business relationship with the Issuer and certain of its officers, directors or controlling persons of a nature and duration that enables such recipient to be aware of the character, business acumen and financial circumstances of such persons; and can bear the economic risk of its investment in the Conversion Shares.

 

(d) Such recipient understands that the Conversion Shares have not been registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of such recipient’s investment intent as expressed herein. Such recipient understands that the Conversion Shares must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Such recipient is aware of the provisions of Rule 144 promulgated under the Act.

 

(e) Such recipient is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Conversion Notice as of the date first above written.

 

Conversion Right Holder:

 

[NAME]

 

 

By: ____________________________

Name:

Title:

 

 

Holder of Associated Debt

(if different from Conversion Right Holder)

 

[NAME]

 

 

By: ____________________________

Name:

Title:

 

 

Recipient(s) of Conversion Shares

(if different from or in addition to

Conversion Right Holder:

 

 

_______________________________

 

_______________________________

 

 

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EXHIBIT D-2

 

Form of Assignment of Conversion Right

 

 

Reference is made to that certain [2024 Contingent Convertible Debt Agreement] dated ________ among [Name(s) of Borrower(s)], First-Citizens Bank & Trust Company and the other parties thereto, as amended (the “Loan Agreement”). Capitalized terms used herein and not otherwise defined shall have the respective meanings given in the Loan Agreement.

 

For good and valuable consideration, the undersigned Assignor, being the present Conversion Right Holder in respect of the Associated Debt held by ___________________, hereby assigns and transfers unto _______________________ (“Assignee”), all of Assignor’s right, title and interest in and to the right to convert such Associated Debt into Conversion Shares in accordance with the provisions of Section 1.2 of the Loan Agreement, and Assignee hereby acknowledges and accepts such assignment and transfer of such rights from Assignor.

 

 

 

Date: _______________

 

Assignor:

 

_________________________________

 

 

By: ____________________________

Name:

Title:

 

 

Assignee:

 

_________________________________

 

 

By: ____________________________

Name:

Title:

 

 

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