ACHV Achieve Life Sciences Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 25, 2024

ACHIEVE LIFE SCIENCES, INC.

(Exact name of Registrant as Specified in Its Charter)

Delaware		033-80623		95-4343413
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)
22722 29th Drive SE, Suite 100 Bothell, WA				98021
1040 West Georgia, Suite 1030 Vancouver, B.C., Canada				V6E 4H1
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s Telephone Number, Including Area Code: (604) 210-2217

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.001 per share	ACHV	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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1.01. Entry into a Material Definitive Agreement

On July 25, 2024, Achieve Life Sciences, Inc. (“Achieve”) entered into a contingent convertible debt agreement (the “Debt Agreement”) with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (“FCB”), in its capacity as administrative agent and collateral agent (in such capacity, the “Agent”), and FCB, as a lender (the “Lender”), pursuant to which the Lender provided term loans having an aggregate original principal amount of $10.0 million, with additional term loans of up to $10.0 million available upon the occurrence of certain events as provided for in the Debt Agreement and further described below (the “Convertible Term Loan”). Achieve’s obligations under the Debt Agreement are secured by substantially all of Achieve’s assets, other than intellectual property.

The Debt Agreement refinanced Achieve’s previous contingent convertible debt agreement (the “Prior Debt Agreement”) entered into on May 15, 2023, by and among Achieve, FCB, in its capacity as administrative agent and collateral agent, and FCB, SVB Innovation Credit Fund VIII, L.P., and Innovation Credit Fund VIII-A, L.P., as lenders, pursuant to which such lenders provided Achieve with terms loans having an aggregate principal amount of $16.6 million (the “Prior Convertible Term Loan”). Achieve’s obligations under the Prior Debt Agreement and Prior Convertible Term Loan were satisfied in full and the Prior Debt Agreement and Prior Convertible Term Loan were terminated in connection with the entrance into the Debt Agreement and Convertible Term Loan.

The Convertible Term Loan matures on December 1, 2027, which maturity date may be extended to June 1, 2028 upon the occurrence of certain events as provided for in the Debt Agreement. The first tranche of the Convertible Term Loan, which was advanced on July 25, 2024, has an aggregate original principal amount of $10.0 million. The Lender will further make available to Achieve, upon Achieve’s request: (a) on or prior to October 31, 2025, a second tranche of the Convertible Term Loan having an aggregate principal amount of $5.0 million in the event that Achieve receives written notice that the U.S. Food and Drug Administration has accepted for filing Achieve’s New Drug Application with respect to cytisinicline for a smoking cessation indication, and (b) on or prior to December 31, 2025, a third tranche of the Convertible Term Loan having an aggregate principal amount of $5.0 million, subject to the Lender’s sole discretion. Interest is calculated on the outstanding principal amount of the Convertible Term Loan at a floating rate per annum equal to the greater of (i) 7.0% and (ii) the prime rate minus 1.0%, which interest shall be payable in cash monthly in arrears and shall be payable on the earlier to occur of (x) the first day of the first month following any extension of credit by the Lender for Achieve’s credit, (y) the date of any prepayment pursuant to the Debt Agreement, or (z) the maturity date. The Convertible Term Loan will be “interest-only” until December 31, 2025, subject to extension as provided for in the Debt Agreement.

The conversion feature grants the Lender or, pursuant to an assignment, any designee thereof (each, a “Conversion Right Holder,” and collectively, the “Conversion Right Holders”) the right to convert part or all of the outstanding aggregate original principal amount of the Convertible Term Loan, plus accrued and unpaid interest, into shares of Achieve’s common stock (an “Initial Voluntary Conversion”) at a conversion price equal to $7.00, as may be adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like (the “Initial Conversion Price”), for a maximum of 1,428,571 shares of common stock (the “Initial Conversion Shares”). The Conversion Rights Holders have the further right to convert part or all of the outstanding principal amount of the second and third tranches of the Convertible Term Loan, plus accrued and unpaid interest, into shares of Achieve’s common stock (a “Subsequent Voluntary Conversion,” and together with an Initial Voluntary Conversion, a “Voluntary Conversion”) at a conversion price equal to the greater of (i) $4.854, as may be adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like, and (ii) the lower of (a) 150% of the average of the closing sale price of Achieve’s common stock during the 10 trading days preceding the effective date of such tranche and (b) 150% of the closing sale price of Achieve’s common stock on the trading day immediately preceding the effective date of such tranche (the “Subsequent Conversion Price,” and together with the Initial Conversion Price, the “Conversion Price”), for a maximum of 2,060,156 shares of common stock (the “Subsequent Conversion Shares,” and together with the Initial Conversion Shares, the “Conversion Shares”).

The conversion rights may be exercised at each Conversion Right Holder’s option any time prior to repayment of the Convertible Term Loan; provided, however, that a Voluntary Conversion will not be permitted without the agreement of the relevant Conversion Right Holder and Achieve if the “Conversion Percentage Amount” (as defined in the Debt Agreement) exceeds 50%. Additionally, the outstanding principal of the Convertible

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Term Loan, plus accrued and unpaid interest, will automatically be converted into Conversion Shares at the Conversion Price on the first date where, (i) the closing price per share of Achieve’s common stock is equal to or greater than (a) in the case of the outstanding aggregate original principal amount of the Convertible Term Loan, $24.00 or, (b) in the case of the outstanding principal amount of the second and third tranches of the Convertible Term Loan, three times the applicable Subsequent Conversion Price, in each case, for the thirty consecutive trading days prior to such date, and (ii) the “Liquidity Conditions” (as defined in the Debt Agreement) have been satisfied. Subject to the terms and conditions of the Debt Agreement, no Conversion Shares will be issued or delivered upon conversion of any amount outstanding pursuant to the Convertible Term Loan, and no outstanding debt will be convertible by any Conversion Right Holder, in each case to the extent, and only to the extent, that such issuance, delivery, conversion or convertibility would result in such Conversion Right Holder, or a “person” or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that includes such Conversion Right Holder, beneficially owning in excess of 9.99% (the “Ownership Percentage”) of the then-outstanding shares of Achieve’s common stock; provided, however, that with respect to any Conversion Right Holder that is subject to Section 16(a) or (b) of the Exchange Act with respect to Achieve by virtue of being deemed to be a “director” or “officer” of Achieve within the meaning of Section 16 of the Exchange Act, the applicable Ownership Percentage shall be 19.99%; and provided, further, that with respect to any Conversion Right Holder that is subject to the U.S. Bank Holding Company Act of 1956, as amended, the applicable Ownership Percentage shall be 4.99%. Any Conversion Shares will be issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The Convertible Term Loan may be repaid at Achieve’s election and upon notice to the Agent by paying the Lender an amount equal to (i) a prepayment fee equal to (a) 3.0% of the aggregate outstanding principal balance if such prepayment occurs on or prior to the first anniversary of the Convertible Term Loan, (b) 2.0% of the aggregate outstanding principal balance if such prepayment occurs after the first anniversary, but on or prior to the second anniversary, of the Convertible Term Loan or (c) 1.0% of the aggregate outstanding principal balance if such prepayment occurs after the second anniversary of the Convertible Term Loan and before the maturity date; (ii) 4.0% of the original aggregate principal amount of the Convertible Term Loan and (iii) all other sums due and payable under the Convertible Term Loan.

The Debt Agreement contains customary affirmative and restrictive covenants, including covenants regarding the incurrence of additional indebtedness or liens, investments, transactions with affiliates, delivery of financial statements, payment of taxes, maintenance of insurance, dispositions of property, mergers or acquisitions, among other customary covenants. Achieve is also restricted from paying dividends or making other distributions or payments on its capital stock, subject to limited exceptions. The Debt Agreement also includes customary representations and warranties, events of default and termination provisions. The Lender may not engage in any short sales of, or other hedging transactions in, Achieve’s common stock while any amounts are outstanding under the Debt Agreement.

In connection with the Debt Agreement, Achieve entered into a Registration Rights Agreement (the “RRA”) with the Lender, pursuant to which Achieve is required to register for resale shares of its common stock issuable to the Conversion Right Holders upon the conversion of outstanding debt under the Debt Agreement within 30 days of the date of the RRA. Achieve’s obligations under the RRA will terminate with respect to a holder of applicable registrable securities if, as of the date Achieve would be required to provide written notice of such registration, (x) the aggregate number of registrable securities then issued and issuable to such holder and to such holder’s affiliates, together with all other shares then held beneficially and/or of record by such holder and its affiliates, does not exceed 7.0% of Achieve’s then-total shares issued and outstanding (calculated including all such registrable securities and other shares), or (y) Achieve and such holder mutually reasonably agree that all registrable securities then issued and issuable to such holder and its affiliates may then be sold by such holder without the requirement to be in compliance with Rule 144 (“Rule 144”) promulgated under the Securities Act, and otherwise without restriction or limitation pursuant to Rule 144.

The foregoing descriptions of the Debt Agreement and Convertible Term Loan and the RRA do not purport to be complete and are subject to, and qualified in their entirety by, the full text of each such document attached as Exhibit 10.1 and 10.2, respectively, to this Current Report on Form 8-K, each of which is incorporated herein by reference.

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Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 above is incorporated by reference into this Item 2.03.

Item 3.02. Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 above is incorporated by reference into this Item 3.02.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

The following exhibit is filed herewith:

Exhibit No.		Description
10.1		Contingent Convertible Debt Agreement, dated July 25, 2024, between Achieve Life Sciences, Inc., and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company.
10.2		Registration Rights Agreement, dated July 25, 2024, between Achieve Life Sciences, Inc., and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ACHIEVE LIFE SCIENCES, INC.
Date: July 29, 2024	/s/ John Bencich
	John Bencich Chief Executive Officer (Principal Executive and Financial Officer)

 

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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 Lender’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.

22722 29th Dr. SE, Suite 100

Bothell, WA 98021

Attn: John Bencich

Email:

With a copy to: Fenwick & West LLP

1191 Second Avenue, 10th Floor

Seattle, Washington

Attn: Alan Smith

Email:

 

If to Agent or FCB: First-Citizens Bank & Trust Company
505 Howard Street, Floor 3
San Francisco, California 94105
Attn: Pete Sletteland
Email:

with a copy to: Latham & Watkins LLP
355 South Grand Avenue, Suite 100

Los Angeles, CA 90071
Attn: Gregory P. Rodgers

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 Borrower’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 Borrower’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 Moody’s 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 Dodd-Frank Wall 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 Borrower’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 Lender’s

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Credit Extension and the interest thereon may be assigned by such Lender, 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 Borrower’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 Lender’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 Lender’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 Lender’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 Stark 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 Borrower’s Chief Executive Officer, who is John Bencich 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 Borrower’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 Lenders 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 Lenders 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 Lenders 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 Lender’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/ John Bencich

 

 

Name: John Bencich

 

Title: Chief Executive Officer

 

 

AGENT:

 

FIRST-CITIZENS BANK & TRUST COMPANY,

as Agent

 

By: /s/ Peter Sletteland

 

Name: Peter Sletteland

 

Title: Managing Director

 

 

 

LENDERS:

 

FIRST-CITIZENS BANK & TRUST COMPANY,

as Lender

 

By: /s/ Peter Sletteland

 

Name: Peter Sletteland

 

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	$_______________
Lender’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:	3003 Tasman Drive Santa Clara, California 95054
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:	3003 Tasman Drive Santa Clara, California 95054
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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EXHIBIT 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of July 25, 2024 by and between Achieve Life Sciences, Inc., a Delaware corporation (the “Company”) and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender”).

 

RECITALS

 

WHEREAS, the Company and the Lender are parties to that certain 2024 Contingent Convertible Debt Agreement of even date herewith, as amended or otherwise modified or supplemented and in effect from time to time (the “Loan Agreement”); and

 

WHEREAS, Company and the Lender desire to provide for certain rights of registration under the Securities Act of 1933, as amended (the “Securities Act”) with respect to the Conversion Shares (as defined in the Loan Agreement).

 

NOW, THEREFORE, in consideration of the promises, covenants and conditions set forth herein, the parties hereto hereby agree as follows:

 

1. Registration Rights.

 

1.1 Definitions. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Loan Agreement. As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a) “Affiliate” has the meaning given in Rule 501 promulgated under the Securities Act.

 

(b) “Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

(c) “Commission” means the United States Securities and Exchange Commission.

 

(d) “Common Stock” means the Company’s common stock, par value $0.001.

 

(e) “Effectiveness Date” means the 60th day following the Filing Date; provided that, in the event that (x) such day would fall during the period between the time when the Company has filed its Annual Report on Form 10-K but has not yet filed its definitive proxy statement for its annual meeting of stockholders or (y) the Registration Statement is reviewed by the Commission, “Effectiveness Date” shall mean the 90th day following the Filing Date.

 

(f) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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(g) “Filing Date” means thirty (30) days after the date of this Agreement.

 

(h) “Holder” means a Conversion Right Holder.

 

(i) The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

 

(j) [reserved].

(k) “Registrable Securities” means 100% of the maximum number of the Conversion Shares issued and issuable upon conversion of all Associated Debt pursuant to the Loan Agreement; provided, however, that Registrable Securities shall not include any securities of the Company that have previously been registered and remain subject to a currently effective registration statement or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights under this Section 1 are not assigned.

 

(l) “Rule 144” means Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

(m) “Rule 415” means Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

(n) “Shares” means shares of Common Stock.

1.2 Resale Registration.

 

(a) The Company will prepare and file with the Commission, not later than the Filing Date, a registration statement (the “Registration Statement”) covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-1 or, if the Company is so eligible, on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-1 or Form S-3, as the case may be, in which case the Registration Statement shall be on another appropriate form in accordance herewith) and shall contain (unless otherwise directed by Holders holding an aggregate of at least a majority of the Registrable Securities on a fully diluted basis) substantially the “Plan of Distribution” attached hereto as Annex A. The Company shall use commercially reasonable efforts to cause the Registration Statement to become effective under the Securities Act as soon as possible and, in any event, by the Effectiveness Date. The Company shall use commercially reasonable efforts to keep the Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by the Registration Statement have been sold, or may be sold without the requirement to be in compliance with Rule 144(c)(1) and

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otherwise without restriction or limitation pursuant to Rule 144, as determined by the mutual reasonable agreement of the Company and the Holders (the “Effectiveness Period”).

 

(b) The Company shall prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements as necessary in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as practicable to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as practicable provide the Holders true and complete copies of all such comments and other correspondence from and to the Commission relating to the Registration Statement; (iv) file the final prospectus pursuant to Rule 424 of the Securities Act no later than two (2) Business Days following the date the Registration Statement is declared effective by the Commission; and (v) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of Shares then registered in the Registration Statement, the Company shall, upon the request of a majority of the Holders, as soon as reasonably practicable, file, and use its reasonable best efforts to cause to be declared effective, an additional registration statement covering the resale of not less than the number of such Registrable Securities (and such additional registration statement shall be deemed to be a “Registration Statement” for all purposes hereof, excluding Section 1.2(a)).

 

(d) The Company shall bear and pay all costs and expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to this Section 1.2 for each Holder, including (without limitation) all registration, filing and qualification fees, printer’s fees, accounting fees and fees and disbursements of counsel for the Company, but excluding any brokerage or underwriting fees, discounts and commissions relating to Registrable Securities and fees and disbursements of counsel for the Holders; provided, that the Company shall pay the reasonable fees and disbursements, not to exceed $50,000, of one (1) counsel or advisor for the Holders (and designated by Holders of a majority of the participating Registrable Securities) to review and comment on the Registration Statement. The Company covenants it will provide the proposed Registration Statement to Holders and such counsel at least five (5) business days before filing for their review and comment.

 

(e) If at any time there is not an effective Registration Statement covering all of the Registrable Securities, then the Company shall notify each Holder in writing at least ten (10) days prior to the filing of any registration statement under the Securities Act (including, but not limited

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to, registration statements relating to secondary offerings of securities of the Company but excluding any registration statements (i) on Form S-4 or S-8 (or any successor or substantially similar form), or of any employee stock option, stock purchase or compensation plan or of securities issued or issuable pursuant to any such plan, or a dividend reinvestment plan, (ii) otherwise relating to any employee, benefit plan or corporate reorganization or other transactions covered by Rule 145 promulgated under the Securities Act, (iii) on any registration form which does not permit resale registration, or (iv) pursuant to which the only Common Stock being registered are issuable upon the conversion of debt securities that are also being registered). In the event the Holder desires to include in any such registration statement the resale registration of all or any part of the Registrable Securities held by such Holder, the Holder shall within five (5) days after the above-described notice from the Company, so notify the Company in writing, including the number of such Registrable Securities such Holder wishes to register for resale in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company such Holder shall nevertheless continue to have the right to include the resale registration of Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to the offering of the securities, all upon the terms and conditions set forth herein. The Company shall have the right to terminate or withdraw any registration statement initiated by it under this Section 1.2, regardless if any Holder has elected to include Registrable Securities in such registration statement.

(f) Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to effect, or to take any action to effect, a registration pursuant to Section 1.2(a):

 

(i) if the Company has and maintains an effective Registration Statement on Form S-3ASR that provides for the resale of an unlimited number of securities by selling stockholders, including all Registrable Securities of all Holders (a “Company Registration Shelf”); or

 

(ii) during the period forty-five (45) days prior to the Company’s good faith estimate of the date of filing of a Company Registration Shelf.

 

1.3 Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a) Prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use commercially reasonable efforts to cause such Registration Statement to become effective and to keep such Registration Statement effective during the Effectiveness Period (except as otherwise provided in Section 1.2);

 

(b) Prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement;

 

(c) Furnish to each Holder, at no cost or expense to such Holder, such numbers of copies of a prospectus, including a preliminary prospectus, and any amendment or supplement

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thereto, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them (provided that the Company would not be required to print such prospectuses if readily available to Holder from any electronic service, such as on the EDGAR filing database maintained at www.sec.gov); the Company hereby consents to the use of the prospectus, including each preliminary prospectus, by each such Holder in connection with the offering and sale of the shares covered by the prospectus or the preliminary prospectus;

 

(d) (i) Use commercially reasonable efforts to register and qualify the securities covered by such Registration Statement under such other securities’ or blue sky laws of such jurisdictions as shall be reasonably requested by any Holder, (ii) use commercially reasonable efforts to keep each such registration and qualification effective during the Effectiveness Period (subject to Section 1.3(m)) and (iii) do any and all other acts and things which may be reasonably necessary or advisable to enable each Holder to consummate the disposition in each such jurisdiction of such shares owned by such Holder; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process (other than service of process in connection with such registration or qualification or any sale of shares in connection therewith) in any such states or jurisdictions and (iv) use all reasonable efforts to cause the securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, except as may be required solely as a consequence of the nature of the business of any Holder, in which case the Company will cooperate in all reasonable respects with the filing of the applicable Registration Statement and the granting of such approvals, as may be necessary to enable any Holder to consummate the disposition of such shares;

 

(e) Promptly notify each Holder holding Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act, within one business day, (i) of the effectiveness of such registration statement, or (ii) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

 

(f) Cause all such Registrable Securities to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Company are then listed;

 

(g) Provide a transfer agent and registrar for all Registrable Securities a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration statement.

 

(h) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders all documents filed or required to be filed with the Commission, including, but not limited, to, earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal

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year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158.

 

(i) If requested by the Holders of a majority in interest of the Registrable Securities, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment.

 

(j) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates (which may be in electronic form) representing the Registrable Securities to be sold pursuant to a Registration Statement, which certificates shall be free of all restrictive legends in accordance with Section 2(b), and to enable such Registrable Securities to be in such denominations and registered in such names as the Holders may reasonably request in connection with any sale of Registrable Securities;

 

(k) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder.

If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, as reasonably determined by the Company’s counsel) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required.

 

Each Holder covenants and agrees that it will not sell any Registrable Securities pursuant to the Registration Statement until the Company has electronically filed the Prospectus as then amended or supplemented as contemplated in Section 1.3(h) and notice from the Company that the Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 1.3(e).

Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 1.3(e), such Holder will forthwith discontinue disposition of such Registrable Securities pursuant to the Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 1.3(h), or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement.

(l) In connection with each registration of shares to be sold by Holders, the Company will, in accordance with customary practice, make available for inspection by

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representatives of the selling Holders and any counsel or accountant retained by such Holders all relevant financial and other records, pertinent corporate documents and properties of the Company and cause appropriate officers, managers, employees, outside counsel and accountants of the Company to supply all information reasonably requested by any such representative, counsel or accountant in connection with their due diligence exercise, including through in-person meetings, but subject to customary privilege constraints.

 

(m) If (i) there is material non-public information regarding the Company which the Company’s Board of Directors (the “Board”) determines to be in the Company’s best interest not to disclose and which the Company is not otherwise required to disclose, (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Board determines to be in the Company’s best interest not to disclose, or (iii) the Company is required to file a post-effective amendment to the Registration Statement to incorporate the Company’s annual reports and audited financial statements on Forms 10-K, then the Company may (x) postpone or suspend filing of a Registration Statement for a period not to exceed ninety (90) consecutive days or (y) postpone or suspend effectiveness of a Registration Statement for a period not to exceed ninety (90) consecutive days; provided that the Company may not postpone or suspend effectiveness of a Registration Statement under this Section 1.3(m) for more than one hundred twenty (120) days in the aggregate during any three hundred sixty (360) day period; provided, however, that no such postponement or suspension shall be permitted for consecutive ninety (90) day periods arising out of the same set of facts, circumstances or transactions.

 

1.4 Furnish Information. It shall be a condition precedent to the Company’s obligations to effect the registration of Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding such Holder, the Registrable Securities held by such Holder, and the intended method of disposition of such securities in substantially the form attached to this Agreement as Annex B.

1.5 [Reserved]

1.6 Indemnification.

 

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder and its respective Affiliates, directors, officers, shareholders, members, general and limited partners, advisory board members, employees, trustees, managers and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls any Holder (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the respective Affiliates, directors, officers, shareholders, agents, members, general and limited partners, advisory board members, employees, trustees, managers and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person and their respective heirs, personal representatives, successors and assigns (collectively, “Covered Persons”), against any losses, claims, damages, liabilities, expenses and judgments (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act, other federal or state securities law or

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otherwise, including any amount paid in settlement of any litigation commenced or threatened, and shall promptly reimburse such persons, as and when incurred, for any legal or other documented expenses reasonably incurred by them in connection with investigating any claims and defending any actions, insofar as such losses, claims, damages, liabilities, expenses or judgments (or actions in respect thereof), arise out of or are based upon any of the following (collectively, a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or in any document incorporated by reference therein (collectively, the “Filings”), (ii) the omission or alleged omission to state in the Filings a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, any other applicable laws of any state or country in which such shares are offered or any rule or regulation promulgated under the Securities Act, the Exchange Act, any state securities law or any other applicable laws of any state or country in which such shares are offered; and the Company will pay any legal or other documented expenses reasonably incurred by any person to be indemnified pursuant to this Section 1.6(a) in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 1.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall the Company be liable to any Covered Person in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished by such Covered Person expressly for use in connection with such registration by any such Holder or controlling person.

 

(b) To the extent permitted by law, each Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, any other Holder selling securities in such registration statement and any controlling person of any such other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such Registration Statement; and each such Holder will pay any legal or other documented expenses reasonably incurred by any person to be indemnified pursuant to this Section 1.6(b) in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 1.6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld, conditioned or delayed); provided, however, in no event shall any indemnity under this subsection 1.6(b) exceed the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

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(c) Promptly after receipt by an indemnified party under this Section 1.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable and documented fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.6, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.6.

 

(d) If the indemnification provided for in Sections 1.6(a) and 1.6(b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such loss, liability, claim or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. In no event shall any Holder be required to contribute an amount in excess of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

(e) If a claim for indemnification under Section 1.6(a) or 1.6(b) is due but unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other from the transactions contemplated by the Loan Agreement. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault, as applicable, of the Indemnifying Party and Indemnified Party in connection with the

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actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 1.6(c), any reasonable and documented attorneys’ or other reasonable and documented fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. In no event shall any selling Holder be required to contribute an amount under this Section 1.6(e) in excess of the gross proceeds received by such Holder upon sale of such Holder’s Registrable Securities pursuant to the Registration Statement giving rise to such contribution obligation.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 1.6(e) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

(f) The obligations of the Company and Holders under this Section 1.6 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Section 1, and otherwise.

 

(g) The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties pursuant to applicable law.

 

1.7 Reports Under Securities Exchange Act. With a view to making available the benefits of certain rules and regulations of the Commission, including Rule 144, that may at any time permit the Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-1 or Form S-3, the Company agrees to use commercially reasonable efforts to:

 

(a) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the date hereof;

 

(b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 the Securities Act and the Exchange Act, or that it qualifies as

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a registrant whose securities may be resold pursuant to Form S-1 or Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company (except to the extent such reports and documents are available on EDGAR), and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission that permits the selling of any such securities without registration or pursuant to such form.

1.8 Transfer or Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be transferred or assigned, but only with all related obligations, by any Lender or Conversion Right Holder to another Lender or Conversion Right Holder, provided that the Company is furnished with written notice stating the name and address of such transferee or assignee and such transferee or assignee, if not already a party hereto, agrees in writing to be bound by and subject to the terms and conditions of this Agreement.

1.9 Filing Obligations. The Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Holder owns Registrable Securities, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act, annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent reasonably required from time to time to enable such Person to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including providing any legal opinions relating to such sale pursuant to Rule 144. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.

1.10 Limitation. Notwithstanding anything to the contrary herein, the obligations of the Company to register Registrable Securities under this Agreement shall terminate as to any Holder in respect of such Holder’s right to include Registrable Securities in a Company registration pursuant to Section 1.2(e), if, as of the date the Company would be required to deliver written notice of such registration to such Holder, either (a) the aggregate number of Registrable Securities then issued and issuable to such Holder and to such Holder’s Affiliates, together with all other Shares then held beneficially and/or of record by such Holder and its Affiliates, does not exceed seven percent (7%) of the Company’s then-total Shares issued and outstanding (calculated including all such Registrable Securities and other Shares), or (b) the Company and such Holder mutually reasonably agree that all Registrable Securities then issued and issuable to such Holder and its Affiliates may then be sold by such Holder without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144.

 

2. Legend.

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(a) Each certificate representing Shares held by the Holder shall be endorsed with the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

 

(b) The legend set forth above shall be removed, and the Company shall issue a certificate without such legend to the transferee of the Shares represented thereby, if, unless otherwise required by state securities laws, (i) such Shares have been sold under an effective registration statement under the Securities Act, (ii) subject to Section 1.9, in connection with a sale, assignment or other transfer, the Holder provides the Company with an opinion of counsel, reasonably acceptable to the Company, to the effect that such sale, assignment or transfer is being made pursuant to an exemption from the registration requirements of the Securities Act, or (iii) the Holder provides the Company with reasonable assurance that the Shares are being sold, assigned or transferred pursuant to Rule 144 or Rule 144A under the Securities Act.

 

3. Miscellaneous.

 

3.1 Governing Law. The parties hereby agree that any dispute which may arise between them arising out of or in connection with this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the Santa Clara County, California. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Santa Clara County, California for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or

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overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

3.2 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

3.3 Remedies. Except as otherwise provided in Section 3.2 above, in the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, such Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement, and each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

3.4 No Inconsistent Agreements. The Company has not entered into, and shall not enter into on or after the date of this Agreement, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

 

3.5 No Piggyback on Registrations for Other Securities. Neither the Company nor any of its security holders may include securities of the Company in the Registration Statement, and the Company shall not after the date hereof enter into any agreement providing such right to any of its security holders, unless the right so granted is subject in all respects to the prior rights in full of the Holders set forth herein, and is not otherwise in conflict with the provisions of this Agreement.

 

3.6 Waivers and Amendments. This Agreement may be terminated and any term of this Agreement may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and Holders holding at least a majority of the Registrable Securities then outstanding. No such amendment or waiver shall reduce the aforesaid percentage of the Registrable Securities, the holders of which are required to consent to any termination, amendment or waiver without the consent of the record holders of all of the Registrable Securities. Any termination, amendment or waiver effected in accordance with this Section 3.6 shall be binding upon each holder of Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company.

 

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3.7 Successors and Assigns. Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. This agreement may not be assigned by the Company without the consent Holders holding at least a majority of all then-outstanding Registrable Securities.

 

3.8 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein.

 

3.9 Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered personally by hand, by overnight courier, fee prepaid, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail, addressed (a) if to a Holder, at such Holder’s address, facsimile number or electronic mail address set forth in the Loan Agreement or otherwise in the Company’s records, or at such other address, facsimile number or electronic mail address as such Holder may designate by ten (10) days’ advance written notice to the other parties hereto or (b) if to the Company, to its address, facsimile number or electronic mail address set forth in the Loan Agreement and directed to the attention of its President, or at such other address, facsimile number or electronic mail address as the Company may designate by ten (10) days’ advance written notice to the other parties hereto. All such notices and other communications shall be effective or deemed given upon delivery, on the next business day following delivery to courier, on the date that is five (5) days following the date of mailing, upon confirmation of facsimile transfer or upon confirmation of electronic mail delivery.

 

3.10 Interpretation. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.

3.11 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement, and the balance of the Agreement shall be interpreted as if such provision were so excluded, and shall be enforceable in accordance with its terms.

 

3.12 Counterparts; Electronic Signatures. This Agreement may be executed by one or more of the parties hereto in any number of separate counterparts, all of which together shall constitute one and the same instrument. The Company, Holders and any other party hereto may execute this Agreement by electronic means and each party hereto recognizes and accepts the use of electronic signatures and the keeping of records in electronic form by any other party hereto in connection with the execution and storage hereof. To the extent that this Agreement or any agreement subject to the terms hereof or any amendment hereto is executed, recorded or delivered electronically, it shall be binding to the same extent as though it had been executed on paper with an original ink signature, as provided under applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

 

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3.13 Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed by their duly authorized officers, as of the date, month and year first set forth above.

 

Company:

 

ACHIEVE LIFE SCIENCES, INC.

 

By:	/s/ John Bencich
Name:	John Bencich
Title:	Chief Executive Officer

 

 

Lender:

 

FIRST-CITIZENS BANK & TRUST COMPANY

 

By:	/s/ Peter Sletteland
Name:	Peter Sletteland
Title:	Managing Director

 

 

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

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Annex A

Plan of Distribution

 

Each selling stockholder of the shares and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares on the NASDAQ Capital Market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares:

 

		ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

		block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

		purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

		an exchange distribution in accordance with the rules of the applicable exchange;

 

		privately negotiated transactions;

 

		settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

 

		broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

 

		through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

		a combination of any such methods of sale; or

 

		any other method permitted pursuant to applicable law.

 

The selling stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this prospectus.

 

Prior to such time that the selling stockholders offer and sell shares, we or such selling stockholders will provide a supplement to this prospectus that contains specific information about the selling stockholders. The supplement may also add, update or change information contained in this prospectus with respect to any offering of the shares. You should carefully read this prospectus and the applicable prospectus supplement before you invest in our common stock.

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Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the shares or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares in the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended. Each selling stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock.

We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933, as amended.

 

Any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the shares by the selling stockholders.

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration and without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144 or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

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Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act of 1933, as amended, or any similar rule).

 

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Annex B

Selling Securityholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock (the “Registrable Securities”) of Achieve Life Sciences, Inc., a Delaware corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1. Name.

 

(a) Full Legal Name of Selling Securityholder

 

 

(b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:

 

 

2. Address for Notices to Selling Securityholder:

 

Telephone:

Fax:

Contact Person:

 

3. Broker-Dealer Status:

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(a) Are you a broker-dealer?

 

Yes No

(b) If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes No

 

Note: If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

(c) Are you an Affiliate of a broker-dealer?

 

Yes No

 

(d) If you are an Affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes No

 

Note: If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

4. Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder.

 

Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Loan Agreement.

 

 

 

5. Relationships with the Company:

 

Except as set forth below or in connection with the Associated Debt and the Registrable Securities, neither the undersigned nor any of its Affiliates, officers or directors has held any position or office or has had any other material relationship with the Company (or its predecessors or Affiliates) during the past three years.

 

State any exceptions here:

 

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6.	Plan of Distribution:

The undersigned has reviewed the form of Plan of Distribution attached as Annex A to this questionnaire, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.

State any exceptions here:

 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 6 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

 

By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement. The undersigned also acknowledges that it understands that the answers to this Notice and Questionnaire are furnished for use in connection with the Resale Registration Statement and any amendments or supplements thereto filed with the Commission pursuant to the Securities Act.

 

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IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

Date:

 

Beneficial Owner:

 

By:
	Name:
	Title:

 

 

 

 

 

 

 

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v3.24.2

Document and Entity Information	Jul. 25, 2024
Document Information [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 25, 2024
Entity Registrant Name	ACHIEVE LIFE SCIENCES, INC.
Entity Central Index Key	0000949858
Entity Emerging Growth Company	false
Entity File Number	033-80623
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-4343413
Entity Address, Address Line One	22722 29th Drive SE
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Bothell
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98021
City Area Code	604
Local Phone Number	210-2217
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	ACHV
Security Exchange Name	NASDAQ
Principal Address
Document Information [Line Items]
Entity Address, Address Line One	1040 West Georgia
Entity Address, Address Line Two	Suite 1030
Entity Address, City or Town	Vancouver
Entity Address, State or Province	BC
Entity Address, Country	CA
Entity Address, Postal Zip Code	V6E 4H1

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