First Loan Modification Agreement to the Loan and Security Agreement, dated as of March 9, 2020, by and between Silicon Valley Bank and Molekule, Inc

Exhibit 10.21

FIRST LOAN MODIFICATION AGREEMENT

This First Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of March 9, 2020, by and between SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 505 Howard Street, 3^rd Floor, San Francisco, California 94105 (“Bank”) and MOLEKULE, INC., a Delaware corporation whose address is 1184 Harrison Street, San Francisco, California 94103 (“Borrower”).

1.DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of August 29, 2019, evidenced by, among other documents, a certain Amended and Restated Loan and Security Agreement dated as of August 29, 2019, between Borrower and Bank (as amended, the “Loan Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

2.DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as defined in the Loan Agreement (together with any other collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

3.DESCRIPTION OF CHANGE IN TERMS.

A.Modifications to Loan Agreement.

“(a)Availability. Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. For the avoidance of doubt, subject in each case to terms and conditions of this Agreement with respect to the amount available to borrow with respect to Eligible Accounts, Eligible Inventory and the Working Capital Amount at any time, Borrower shall have the right to designate with each request for an Advance the portion of such Advance that shall be based on Eligible Accounts, Eligible Inventory and the Working Capital Amount. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. With respect to any voluntary repayment

​

1

of amounts under the Revolving Line by Borrower (i) made when a Streamline Period is in effect, Borrower may designate, prior to making such repayment, the portion of such repayment that will be applied to each of the outstanding Obligations with respect to Advances made based upon Eligible Accounts, the outstanding Obligations with respect to Advances made based upon Eligible Inventory and the outstanding Obligations with respect to Advances made based upon the Working Capital Amount (provided that the amount of any such repayment with respect to which Borrower has not made a designation prior to the repayment being made shall be applied in the order set forth in subsection (ii)) or (ii) made when a Streamline Period is not in effect, the amount of such repayment will be applied first to the outstanding Obligations with respect to Advances made based upon Eligible Accounts (up to the total amount of such Obligations), second to the outstanding Obligations with respect to Advances made based upon Eligible Inventory (up to the total amount of such Obligations) and third to the outstanding Obligations with respect to Advances made based upon the Working Capital Amount (up to the total amount of such Obligations).”

and inserting in lieu thereof the following:

“(a)Availability. Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. For the avoidance of doubt, subject in each case to terms and conditions of this Agreement with respect to the amount available to borrow with respect to Eligible Accounts and Eligible Inventory at any time, Borrower shall have the right to designate with each request for an Advance the portion of such Advance that shall be based on Eligible Accounts and Eligible Inventory. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. With respect to any voluntary repayment of amounts under the Revolving Line by Borrower (i) made when a Streamline Period is in effect, Borrower may designate, prior to making such repayment, the portion of such repayment that will be applied to each of the outstanding Obligations with respect to Advances made based upon Eligible Accounts and the outstanding Obligations with respect to Advances made based upon Eligible Inventory (provided that the amount of any such repayment with respect to which Borrower has not made a designation prior to the repayment being made shall be applied in the order set forth in subsection (ii)) or (ii) made when a Streamline Period is not in effect, the amount of such repayment will be applied first to the outstanding Obligations with respect to Advances made based upon Eligible Accounts (up to the total amount of such Obligations) and second to the outstanding Obligations with respect to Advances made based upon Eligible Inventory (up to the total amount of such Obligations).”

“(i)Advances. Subject to Section 2.6(b), (x) the principal amount outstanding under the Revolving Line in respect of Advances based on Eligible Accounts shall accrue interest at a floating per annum rate equal to the greater of (A) the Prime Rate and (B) four and three-quarters of one percent (4.75%), (y) the principal amount outstanding under the Revolving Line in respect of Advances based on Eligible Inventory shall accrue interest at a floating per annum rate equal to the greater of (A) the Prime Rate plus one-quarter of one percent (0.25%) and (B) five percent (5.00%), and (z) the principal amount

​

2

outstanding under the Revolving Line in respect of Advances based on the Working Capital Amount shall accrue interest at a floating per annum rate equal to the greater of (A) the Prime Rate plus one-half of one percent (0.50%) and (B) five and one-quarter of one percent (5.25%). In each case, such interest shall be payable monthly in accordance with Section 2.6(d) below.”

and inserting in lieu thereof the following:

“(i)Advances. Subject to Section 2.6(b), (x) the principal amount outstanding under the Revolving Line in respect of Advances based on Eligible Accounts shall accrue interest at a floating per annum rate equal to the greater of (A) the Prime Rate and (B) four and three-quarters of one percent (4.75%) and (y) the principal amount outstanding under the Revolving Line in respect of Advances based on Eligible Inventory shall accrue interest at a floating per annum rate equal to the greater of (A) the Prime Rate plus one-quarter of one percent (0.25%) and (B) five percent (5.00%). In each case, such interest shall be payable monthly in accordance with Section 2.6(d) below.”

“Subject to Bank’s right to maintain a reserve pursuant to Section 6.3(d), all amounts received in the Cash Collateral Account shall be (i) when a Streamline Period is not in effect, applied to immediately reduce the Obligations under the Revolving Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply such amounts), which amounts will be applied first to the outstanding Obligations with respect to Advances made based upon Eligible Accounts (up to the total amount of such Obligations), second to the outstanding Obligations with respect to Advances made based upon Eligible Inventory (up to the total amount of such Obligations) and third to the outstanding Obligations with respect to Advances made based upon the Working Capital Amount (up to the total amount of such Obligations), or (ii) when a Streamline Period is in effect, transferred on a daily basis to Borrower’s operating account with Bank.”

and inserting in lieu thereof the following:

“Subject to Bank’s right to maintain a reserve pursuant to Section 6.3(d), all amounts received in the Cash Collateral Account shall be (i) when a Streamline Period is not in effect, applied to immediately reduce the Obligations under the Revolving Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply such amounts), which amounts will be applied first to the outstanding Obligations with respect to Advances made based upon Eligible Accounts (up to the total amount of such Obligations) and second to the outstanding Obligations with respect to Advances made based upon Eligible Inventory (up to the total amount of such Obligations), or (ii) when a Streamline Period is in effect, transferred on a daily basis to Borrower’s operating account with Bank.”

“(a)Maintain its and all of its Subsidiaries’ primary Deposit Accounts, the Cash Collateral Account and primary Securities Accounts with Bank and Bank’s Affiliates. In respect of payment processor accounts disclosed in the Perfection Certificate delivered on the Effective Date or otherwise

​

3

disclosed to Bank in writing, Borrower may maintain such payment processor accounts so long as proceeds in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) received in such accounts are transferred to a Deposit Account of Borrower maintained at Bank promptly, and in any event on a weekly basis (the “Payment Processor Accounts”). Any Guarantor shall maintain all depository, operating and securities/investment accounts with Bank and Bank’s Affiliates.”

and inserting in lieu thereof the following:

“(a)Maintain its and all of its Subsidiaries’ primary Deposit Accounts, the Cash Collateral Account and excess cash with Bank and Bank’s Affiliates. In addition to the foregoing, Borrower, any Subsidiary of Borrower and any Guarantor shall conduct all of its business credit cards banking exclusively with Bank and Bank’s Affiliates. In respect of payment processor accounts disclosed in the Perfection Certificate delivered on the Effective Date or otherwise disclosed to Bank in writing, Borrower may maintain such payment processor accounts so long as proceeds in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) received in such accounts are transferred to a Deposit Account of Borrower maintained at Bank promptly, and in any event on a weekly basis (the “Payment Processor Accounts”). Any Guarantor shall maintain all depository, operating and excess cash with Bank and Bank’s Affiliates.”

“6.9Financial Covenant – Equity Event. Deliver evidence to Bank, reasonably satisfactory to Bank, on or prior to December 31, 2019, that the Equity Event occurred on or prior to such date.”

and inserting in lieu thereof the following:

“6.9Financial Covenants.

(a)Cash and Cash Equivalents at Bank. Maintain at all times, to be tested as of any day, unrestricted and unencumbered cash and Cash Equivalents maintained with Bank of at least Two Million Five Hundred Thousand Dollars ($2,500,000.00).

(b)Liquidity Ratio. Maintain at all times, to be tested as of any day, a Liquidity Ratio of at least 1.50:1.00.”

“(h)unsecured Indebtedness of Borrower arising from corporate credit cards and bank service agreements in the ordinary course of business not exceeding Five Hundred Thousand Dollars ($500,000.00) in the aggregate outstanding at any time;”

and inserting in lieu thereof the following:

“(h)unsecured Indebtedness of Borrower arising from bank service agreements (other than bank services related to credit cards) in the ordinary

​

4

course of business not exceeding Five Hundred Thousand Dollars ($500,000.00) in the aggregate outstanding at any time;”

““Liquidity Ratio” is, as of any date of determination, the ratio of (a) the sum of Borrower’s (i) unrestricted and unencumbered cash and Cash Equivalents maintained with Bank plus (ii) net billed trade accounts receivable determined according to GAAP, to (b) the aggregate amount of all Obligations in connection with the Revolving Line.”

““Adjusted Quick Ratio” is, as of any date of determination, the ratio of (i) Quick Assets, to (ii) the sum of (a) Current Liabilities minus (b) Deferred Revenue minus (c) the current portion of the Obligations constituting the GCTL.”

““Current Liabilities” are all obligations and liabilities of Borrower to Bank, plus, without duplication, the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year.”

““Quick Assets” is, on any date, the sum of Borrower’s (i) unrestricted and unencumbered cash and Cash Equivalents maintained with Bank plus (ii) net billed trade accounts receivable determined according to GAAP.”

““Total Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness, but excluding all Subordinated Debt.”

““Working Capital Amount” means the sum of (x) the Revolving Line, minus (y) the aggregate amount available under clauses (a) and (b) of the Borrowing Base, which shall not at any time be less than zero (0).”

““Borrowing Base” is (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty percent (50%) of the value of Borrower’s Eligible Inventory (valued at the lower of cost or wholesale fair market value), each as determined by Bank from Borrower’s most recent Borrowing Base Report (and as may subsequently be updated by Bank based upon information received by Bank including, without limitation, Accounts that are paid and/or billed following the date of the Borrowing Base Report), plus (c) the Working Capital Amount; provided, however, that Bank has the right to decrease the foregoing percentages in its good faith business judgment to mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the Collateral or its value.”

““Streamline Period” is, on and after the Effective Date, provided no Event of Default has occurred and is continuing, the period (a) commencing on the first day of the month following the day that Borrower provides to Bank a written report that Borrower has maintained an Adjusted Quick Ratio, for each consecutive day in the immediately preceding month as determined by Bank in

​

5

its reasonable business judgment, in an amount at all times of at least 1.25 to 1.00 (the “Streamline Balance”); and (b) terminating on the earlier to occur of (i) the occurrence of an Event of Default, and (ii) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank in its reasonable business judgment. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for one (1) calendar month, as determined by Bank in its reasonable business judgment, prior to entering into a subsequent Streamline Period. Each Streamline Period shall commence on the first day of the monthly period following the date Bank determines, in its reasonable business judgment, that the Streamline Balance has been achieved.”

and inserting in lieu thereof the following:

““Borrowing Base” is (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty percent (50%) of the value of Borrower’s Eligible Inventory (valued at the lower of cost or wholesale fair market value), each as determined by Bank from Borrower’s most recent Borrowing Base Report (and as may subsequently be updated by Bank based upon information received by Bank including, without limitation, Accounts that are paid and/or billed following the date of the Borrowing Base Report).”

““Streamline Period” is, on and after the Effective Date, provided no Event of Default has occurred and is continuing, the period (a) commencing on the first day of the month following the day that Borrower provides to Bank a written report that Borrower has maintained both (i) a Liquidity Ratio, for each consecutive day in the immediately preceding month as determined by Bank in its reasonable business judgment, in an amount at all times of at least 2.00 to 1.00 and (ii) unrestricted and unencumbered cash and Cash Equivalents with Bank of at least Two Million Five Hundred Thousand Dollars ($2,500,000.00) for each consecutive day in the immediately preceding month as determined by Bank in its reasonable business judgment (collectively, the “Streamline Balance”); and (b) terminating on the earlier to occur of (i) the occurrence of an Event of Default, and (ii) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank in its reasonable business judgment. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for one (1) calendar month, as determined by Bank in its reasonable business judgment, prior to entering into a subsequent Streamline Period. Each Streamline Period shall commence on the first day of the monthly period following the date Bank determines, in its reasonable business judgment, that the Streamline Balance has been achieved.”

““Revolving Line Maturity Date” is February 15, 2020.” and inserting in lieu thereof the following:

““Revolving Line Maturity Date” is March 31, 2021.”

​

6

4.FEES AND EXPENSES. Borrower shall pay to Bank a modification fee equal to Ten Thousand Dollars ($10,000.00), which fee shall be fully earned, due and payable as of the date hereof. Borrower shall also reimburse Bank for all documented legal fees and expenses reasonably incurred by Bank in connection with this amendment to the Existing Loan Documents.

5.INTENTIONALLY OMITTED.

6.CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

7.RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral granted to Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

8.RELEASE BY BORROWER.

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

​

7

that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.

E.Borrower hereby represents and warrants to Bank, and Bank is relying thereon, as follows:

3The terms of this Loan Modification Agreement are contractual and not a mere recital.

9.CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.

10.COUNTERSIGNATURE. This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank.

[The remainder of this page is intentionally left blank]

​

​

8

This Loan Modification Agreement is executed as of the date first written above.

​

​

​

​

​

Schedule 1

EXHIBIT B

COMPLIANCE STATEMENT

​