snwv_ex104





 







Exhibit 10.4

 



SECURITIES PURCHASE AGREEMENT

 



This Securities Purchase Agreement (this “Agreement”)
is dated as of August 6, 2020, between SANUWAVE Health, Inc., a
Nevada corporation (the “Company”),
and the purchasers identified on the signature page hereto
(including their successors and assigns, the
“Purchasers,”
and each individually a “Purchaser”).

 



WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from
securities registration afforded by Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities
Act”).

 



WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to sell to the Purchasers, and each
Purchaser desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

 



NOW, THEREFORE, the Company and the Purchasers hereby agree as
follows:

 



ARTICLE I

 



DEFINITIONS

 

1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement: the
following terms have the meanings set forth in this Section
1.1:

 



“Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person as such
terms are used in and construed under Rule 405 under the Securities
Act.

 



“Closing” means the closing of the purchase and sale of
the Securities pursuant to Section 2.1.

 



“Closing Date” means the Trading Day on which all of
the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchaser’s obligations to pay the Subscription Amount, (ii)
the Company’s obligations to deliver the Securities, in each
case, have been satisfied or waived, and (iii) the Company has
received the full Subscription Amount for such Securities in
immediately available funds, but in no event later than the third
Trading Day following the date hereof.

 



“Common Stock” means the common stock of the Company,
par value $0.001 per share, and any other class of securities into
which such securities may hereafter be reclassified or
changed.

 



“Common Stock Equivalents” means any securities of the
Company or the Subsidiaries that would entitle the holder thereof
to acquire, at any time, Common Stock, including, without
limitation, any debt, preferred stock, right, option, warrant or
other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

 



“Liens” means a lien, charge, pledge, security
interest, encumbrance, right of first refusal, preemptive right or
other restriction.

 



 

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“Person” means an individual or corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of
any kind.

 



“Proceeding” means an action, claim, suit,
investigation or proceeding (including, without limitation, an
informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.

 



“Rule 144” means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same purpose and effect
as such Rule.

 



“Rule 424” means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or
interpreted from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
purpose and effect as such rule.

 



“Securities” means the Shares, the Warrants and the
Warrant Shares.

 



“Shares” means the shares of Common Stock issued to
Purchaser pursuant to this Agreement (including any additional
shares of Common Stock issued to Purchase pursuant to Section
6.1).

 



“Short Sales” means all “short sales” as
defined in Rule 200 of Regulation SHO under the Exchange Act (but
shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).

 



“Subscription Amount” means the aggregate amount to be
paid for the Securities purchased hereunder as specified below the
Purchaser’s name on the signature page of this Agreement and
next to the heading “Subscription Amount” in United
States dollars and in immediately available funds.

 


“Subsidiary” means
any subsidiary of the Company as set forth on Exhibit 21.1 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2019, and shall, where applicable, also include
any direct or indirect subsidiary of the Company formed or acquired after the date
hereof.

 



“Trading Day” means a day on which the principal
Trading Market is open for trading.

 



“Trading Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE American, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).

 



“Transaction Documents” means this Agreement, the
Warrants and any other documents or agreements executed in
connection with the transactions contemplated
hereunder.

 


“VWAP”
means, for any date, the daily volume weighted average price of the
Common Stock for such date (or, if such date is not a Trading Day,
the nearest preceding Trading Day) on the primary Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. Eastern Time
to 4:00 p.m. Eastern Time).

 



 

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“Warrants” means warrants
to purchase shares of Common Stock issued or issuable to the
Purchaser pursuant to this Agreement in the form attached hereto
as Exhibit
A, which will be
exercisable commencing the Closing Date until the third anniversary
of the Closing Date, at an exercise price per share of the
Company’s Common Stock equal to $0.25.

 



“Warrant Shares” means the shares of Common Stock
issuable upon exercise of the Warrants.

 



ARTICLE II

 



PURCHASE AND SALE

 

2.1 Purchase
of Common Stock and Warrants; Closing. On the Closing Date, upon the terms
and subject to satisfaction of the conditions set forth in Section
2.3, below, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchaser agrees to purchase, the amount of
shares of Common Stock and Warrants as set forth on the signature
page hereto. Upon satisfaction of the covenants and conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of the Company or such other location as the parties shall
mutually agree. The parties agree that the Closing may occur
remotely by the electronic delivery of the closing documents set
forth in Section 2.2(a) and (b), with delivery of original,
executed documents to follow promptly
thereafter.

 

2.2 Deliveries.

 

(a) On or prior to the Closing Date, the
Company shall deliver or cause to be delivered to the Purchaser the
following:

 

(i) this
Agreement duly executed by the Company;

 

(ii) a
certificate or certificates for the number of shares of Common
Stock, equal to the number of shares Common Stock set forth on the
signature page hereto; and

 

(iii) a
Warrant registered in the name of such Purchaser to purchase a
number of shares of Common Stock equal to one hundred percent
(100%) of such Purchaser’s Shares.

 

(b) On or prior to the Closing Date, the
Purchaser shall deliver or cause to be delivered to the Company the
following:

 



 

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(i) this
Agreement duly executed by the Purchaser; and

 

(ii) immediately
available funds equal to the Purchaser’s Subscription Amount
by wire transfer in accordance with the Company’s written
wire instructions to the account as set forth on the signature page
hereto.

 

2.3 Closing
Conditions.

 

(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:

 

(i) the
accuracy in all material respects on the Closing Date of the
representations and warranties of each Purchaser contained herein
(unless as of a specific date therein, in which case they shall be
accurate as of such date);

 

(ii) all
obligations, covenants and agreements of the Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and

 

(iii) the
delivery by the Purchaser of the items set forth in Section
2.2(b) of this Agreement.

 

(b) The
obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:

 

(i) the
accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein
(unless as of a specific date therein, in which case they shall be
accurate as of such date);

 

(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;

 

(iii) the
delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;

 

(iv) the
Company shall have entered into definitive agreements to consummate
the transactions contemplated by that certain letter of intent
between the Company and Celularity Inc. (“Celularity”)
dated as of June 7, 2020 to acquire the UltraMIST assets and for
partnership rights for Celularity’ wound care biologic
products and such transactions shall be consummated simultaneously
with or immediately following the Closing;

 



 

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(v) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and

 

(vi) from
the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the U.S. Securities and Exchange
Commission (the “Commission”)
or the Company’s principal Trading Market, and, from the date
hereof and at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium
have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, makes
it reasonably impracticable or inadvisable to purchase the
Securities at the Closing.

 



ARTICLE III

 



REPRESENTATIONS AND WARRANTIES

 

3.1 Representations
and Warranties of the Company. Except as described in the SEC
Reports (as defined in Section 3.1(h), below) or any information
contained or incorporated therein, which collectively shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the SEC Reports, the Company hereby
makes the following representations and warranties to the Purchaser
that, as of the date hereof and as of the Closing
Date:

 

(a) Subsidiaries.
The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries, or any of
them, in the Transaction Documents shall be
disregarded.

 

(b) Organization and
Qualification. The
Company and each of the Subsidiaries is an entity duly incorporated
or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents, except to the extent that any such default would
not have or reasonably be expected to result in: (i) a material
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) a material adverse effect on the Company’s ability
to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse
Effect”),
provided that none of the following alone shall be deemed, in and
of itself, to constitute a Material Adverse Effect: (i) a change in
the market price or trading volume of the Common Stock or (ii) a
change in general economic conditions or affecting the industry in
which the Company operates generally (as opposed to
Company-specific changes), so long as such changes do not have a
materially disproportionate effect on the Company. Each of the
Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, would not reasonably be expected to result in a
Material Adverse Effect, and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or
qualification.

 

(c) Authorization;
Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company, and
no further action is required by the Company, the board of
directors of the Company (the “Board of
Directors”) or
the Company’s stockholders in connection herewith or
therewith, other than in connection with the Required Approvals.
This Agreement and each other Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof
and thereof, will constitute the valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.

 



 

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(d) No
Conflicts. The
execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which it is a
party, the issuance and sale of the Securities and the consummation
by it of the transactions contemplated hereby and thereby do not
and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as would not
reasonably be expected to result in a Material Adverse
Effect.

 

(e) Filings, Consents
and Approvals. The
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required
pursuant to Section 4.5 of this Agreement and (ii) such filings
as are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).

 

(f) Issuance of the
Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company. Assuming the accuracy of each of
the representations and warranties of each Purchaser set forth in
Section 3.2 of this Agreement, the offer and issuance by the
Company of the Securities is exempt from registration under the
Securities Act.

 

(g) Capitalization.
As of the date hereof, the capitalization of the Company is
described in Schedule 3.1(g) attached hereto. The Company has not
issued any capital stock since its most recently filed Form 8-K
current report under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), other
than pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee
stock purchase plans and pursuant to the conversion and/or exercise
of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person
has any right of first refusal, preemptive right, right of
participation or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities or as disclosed
in the SEC Reports, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person
(other than the Purchaser) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.
Other than the Required Approvals, no further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. Except as
disclosed in the SEC Reports, there are no stockholders agreements,
voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the
Company’s stockholders.

 



 

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(h) SEC Reports;
Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, are collectively
referred to herein as the “SEC
Reports”) on a
timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles
(“GAAP”)
applied on a consistent basis during the periods involved, except
as may be otherwise specified in such financial statements or the
notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the results
of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal recurring
adjustments.

 

(i) Absence of Material
Changes. Since the
date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no event,
occurrence or development that has had or that would reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made
with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans.

 

(j) No Undisclosed
Events, Liabilities or Developments. Except for the issuance of the
Securities contemplated by this Agreement or as disclosed in the
SEC Reports, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to
occur or exist with respect to the Company or its Subsidiaries or
their respective businesses, properties, operations, assets or
financial condition that would be required to be disclosed by the
Company under applicable securities laws on a registration
statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been
publicly announced.

 

(k) Absence of
Litigation. There is
no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”)
that (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) would reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary,
nor, to the knowledge of the Company, any director or officer
thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty that would be required to be
disclosed in SEC Reports. There has not been, and, to the knowledge
of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or, to the
knowledge of the Company, any current or former director or officer
of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

 



 

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(l) Employee
Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company that would
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all United States federal, state, local and foreign
laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours,
except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

 

(m) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except, in each case, as
would not reasonably be expected to result in a Material Adverse
Effect.

 

(n) Regulatory
Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as currently conducted as described in the SEC Reports,
except where the failure to possess such permits would not
reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or adverse modification of
any Material Permit.

 

(o) Title to
Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance, except
where the failure to be in compliance would not reasonably be
expected to result in a Material Adverse
Effect.

 

(p) Intellectual
Property Rights.
Except as set forth in the SEC Reports, the Company and the
Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other similar intellectual property rights that are used in and
necessary for the conduct of their respective businesses as
currently conducted as described in the SEC Reports and which the
failure to so have would reasonably be expected to result in a
Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). Neither the Company nor any
Subsidiary has received notice (written or otherwise) that the
conduct of its business as currently conducted as described in the
SEC Reports violates or infringes upon the intellectual property
rights of others, except for such conflicts or infringements that,
individually or in the aggregate, are not reasonably likely to
result in a Material Adverse Effect. To the knowledge of the
Company, all of the Intellectual Property Rights of the Company and
its Subsidiaries are enforceable. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy and
confidentiality of all of their Intellectual Property Rights,
except where failure to do so would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.

 

(q) Insurance.
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.

 



 

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(r) Transactions with
Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company or any
Subsidiary and, to the knowledge of the Company, none of the
employees of the Company or any Subsidiary is presently a party to
any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money
from or lending of money to or otherwise requiring payments to any
officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee, stockholder, member or partner, in each case, in excess of
$150,000, other than for (i) payment of salary or consulting fees
for services rendered, (ii) reimbursement for expenses incurred on
behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the
Company.

 

(s) Sarbanes-Oxley
Act. The Company is
in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002, as amended, that are effective as of
the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date, except where the
failure to be in compliance would not result in a Material Adverse
Effect.

 

(t) Internal Accounting
and Disclosure Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (i) transactions are executed in
accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) for the Company and designed such disclosure controls
and procedures to ensure that information required to be disclosed
by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and
forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the most recently
filed periodic report under the Exchange Act (such date, the
“Evaluation
Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company’s
internal control over financial reporting (as such term is defined
in the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control
over financial reporting.

 

(u) Investment Company
Status. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
and for so long as the Purchasers hold any Securities, will not be
or be an Affiliate of, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended (the
“Investment Company
Act”). The
Company shall conduct its business in a manner so that it will not
become an “investment company” subject to registration
under the Investment Company Act. To the Company’s knowledge,
the Company is not controlled by an “investment
company.”

 

(v) Listing and
Maintenance Requirements. The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements.

 

(w) Application of
Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the
Company’s certificate of incorporation (or similar charter
documents) or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the
Purchaser and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including,
without limitation, as a result of the Company’s issuance of
the Securities and the Purchaser’s ownership of the
Securities.

 



 

9







 





 

(x) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided the Purchaser or its agents or counsel with any
information that it believes constitutes material, non-public
information. The Company understands and confirms that the
Purchaser will rely on the foregoing representation in effecting
transactions in securities of the Company. The press releases
disseminated by the Company during the twelve months preceding the
date of this Agreement, each as of the date of its issuance, did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made and when made, not misleading. The
Company acknowledges and agrees that the Purchaser does not make
and has not made any representations or warranties with respect to
the transactions contemplated hereby, other than those specifically
set forth in Section 3.2 hereof.

 

(y) No Integrated
Offering. Assuming
the accuracy of the Purchaser’s representations and
warranties set forth in Section 3.2, neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalves, has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.

 

(z) Solvency.
As disclosed in the SEC Reports, the Company does not currently
generate significant recurring revenue. The SEC Reports set forth,
as of the date hereof, all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Except as disclosed in the SEC Reports,
neither the Company nor any Subsidiary is in default with respect
to any Indebtedness, except where such default would not reasonably
be expected to result, individually or in the aggregate, in a
Material Adverse Effect.

 

(aa) Tax
Status. Except for
matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the
Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.

 

(bb) Anti-Bribery.
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company or any Subsidiary, any officer, employee, agent or other
person acting on behalf of the Company or any Subsidiary, has (i)
directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign
or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) that is in violation of law,
or (iv) violated, in any material respect, any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended (the
“FCPA”).

 

(cc) Acknowledgment
Regarding Purchaser’s Purchase of
Securities. The
Company acknowledges and agrees that the Purchaser is acting solely
in the capacity of an arm’s length purchaser with respect to
the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that the Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and
the transactions contemplated thereby, and any advice given by the
Purchaser or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions
contemplated thereby, is merely incidental to the Purchaser’s
purchase of the Securities. The Company further represents to the
Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely
on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.

 



 

10







 





 

(dd) Acknowledgement
Regarding Purchaser’s Trading Activity. Anything in the Transaction Documents
to the contrary notwithstanding, it is understood and acknowledged
by the Company that: (i) the Purchaser has not been asked by the
Company to agree, nor has the Purchaser agreed, to desist from
purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified
term; (ii) past or future open market or other transactions by the
Purchaser, specifically including, without limitation, Short Sales
or “derivative” transactions, before or after the
closing of this or future private placement transactions, may
negatively impact the market price of the Company’s
publicly-traded securities; (iii) the Purchaser, and
counter-parties in “derivative” transactions to which
the Purchaser is a party, directly or indirectly, presently may
have a “short” position in the Common Stock, and (iv)
the Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) the Purchaser may engage in
hedging activities at various times during the period that the
Securities are outstanding and (z) such hedging activities (if any)
could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging
activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any
of the Transaction Documents.

 

(ee) Regulation
M Compliance. The
Company has not, and to its knowledge no one acting on its behalf
has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of any of the Securities, (ii) sold, bid for, or purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another Person to purchase any other
securities of the Company.

 

(ff) No
Conflicts with Sanctions Laws. Neither the Company nor any
Subsidiary nor, to the Company’s knowledge, any director,
officer, agent, employee or Affiliate of the Company or any
Subsidiary, is currently subject to any U.S. sanctions administered
or enforced by the U.S. government (including, without limitation,
the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”)).

 

(gg) U.S.
Real Property Holding Corporation. The Company is not and has never
been, and so long as any of the Securities are held by any of the
purchasers, shall become, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of
1986, as amended, and the Company shall so certify upon
Purchaser’s request.

 

(hh) Bank
Holding Company Act.
Neither the Company nor any of its Subsidiaries or Affiliates is
subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”),
and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal
Reserve”).
Neither the Company nor any of its Subsidiaries or Affiliates owns
or controls, directly or indirectly, five percent (5%) or more of
the outstanding shares of any class of voting securities or
twenty-five percent (25%) or more of the total equity of a bank or
any entity that is subject to the BHCA and to regulation by the
Federal Reserve. Neither the Company nor any of its Subsidiaries or
Affiliates exercises a controlling influence over the management or
policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.

 

(ii) Compliance
with Anti-Money Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the USA Patriot Act of 2001 and the applicable money
laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering
Laws”), and no
action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.

 

3.2 Representations
and Warranties of the Purchaser. The Purchaser hereby makes the
following representations and warranties to the
Company:

 



 

11







 





 

(a) Organization;
Authority. The
Purchaser is an entity duly incorporated or formed, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or formation with full right, corporate,
partnership, limited liability company or similar power and
authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its
obligations hereunder and thereunder.

 

(b) Validity;
Enforcement. The
execution and delivery of this Agreement and performance by the
Purchaser of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the
part of the Purchaser. Each Transaction Document to which it is a
party has been duly executed by the Purchaser, and when delivered
by the Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.

 

(c) No
Conflicts. The
execution, delivery and performance by such Purchaser of this
Agreement and the consummation by such Purchaser of the
transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Purchaser or
(ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which
such Purchaser is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment, or decree (including
federal and state securities laws) applicable to such Purchaser,
except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the ability of such Purchaser to
perform its obligations hereunder or consummate the transactions
contemplated hereby and thereby on a timely
basis.

 

(d) No Public Sale or
Distribution; No Understandings or Arrangements. Such Purchaser understands
that the Securities are “restricted securities” and
have not been registered under the Securities Act or any applicable
state securities law and is
acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or
any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities (this
representation and warranty not limiting the Purchaser’s
right to sell the Securities otherwise in compliance with
applicable federal and state securities laws). The Purchaser is
acquiring the Securities hereunder in the ordinary course of its
business.

 

(e) Accredited Investor
Status. Such
Purchaser is, and on each date on which it exercises any Warrants
it will be, an “accredited investor” as
defined in Regulation D under the Securities
Act.

 

(f) Reliance on
Exemptions. Such
Purchaser understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of the United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy
of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgements and
understandings of such Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Purchaser to acquire the Securities.

 

(g) Experience of the
Purchaser. The
Purchaser, either alone or together with its representatives, has
such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has
requested, received, reviewed and considered all information it
deemed relevant in making an informed decision to purchase the
Securities. The Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 



 

12







 





 

(h) Access to
Information. The
Purchaser acknowledges that it has had the opportunity to review
the Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares
and the merits and risks of investing in the Shares; (ii) access to
information about the Company and its financial condition, results
of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment. The Purchaser acknowledges and agrees
that neither the placement agent, if any, nor any Affiliate of the
placement agent, if any, has provided the Purchaser with any
information or advice with respect to the Securities nor is such
information or advice necessary or desired. Neither the placement
agent, if any, nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the placement agent, if any, and any of its Affiliates may have
acquired non-public information with respect to the Company that
the Purchaser agrees need not be provided to it. In connection with
the issuance of the Securities to the Purchaser, neither the
placement agent, if any, nor any of its Affiliates has acted as a
financial advisor or fiduciary to the
Purchaser.

 

(i) General Solicitation. Such Purchaser is
not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(j) Certain Transactions
and Confidentiality.
Such Purchaser has not, nor has any Person acting on behalf of or
pursuant to any understanding with the Purchaser, directly or
indirectly, executed any purchases or sales, including Short Sales,
of the securities of the Company during the period commencing as of
the time that the Purchaser first received a term sheet (written or
oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof.
Other than to other Persons party to this Agreement or to such
Purchaser’s representatives, including, without limitation,
its officers, directors, partners, legal and other advisors,
employees, agents and Affiliates, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar
transactions in the future.

 

(k) Ownership of
Securities. The
Purchaser, together with the Purchaser’s Affiliates and
associates and any Person with which the Purchaser is acting
jointly or in concert, will upon Closing beneficially own less than
10% of the issued and outstanding shares of Common Stock, and,
solely for purposes of calculating such beneficial ownership for
purposes of this Agreement, any such Person will be deemed to
beneficially own any shares of Common Stock that such Person
otherwise has the right to acquire within 60 days (including upon
the occurrence of a contingency or the making of a payment)
pursuant to any convertible security, agreement, arrangement,
pledge or understanding, whether or not in
writing.

 

(l) No Governmental
Review. Such
Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor
have such authorities passed upon or endorsed the merits of the
offering of the Securities.

 

(m) Brokers or
Finders. Neither
such Purchaser nor any of its affiliates (as defined in Rule 144)
or any of their respective officers or directors has employed any
broker or finder or incurred any liability for any financial
advisory fee, brokerage fees, commissions or finder’s fee,
and no broker or finder has acted directly or indirectly for such
Purchaser or any of its affiliates or any of their respective
officers or directors in connection with this Agreement or the
transactions contemplated hereby.

 

(n) Transfer or Resale. Such Purchaser
understands that the Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or Rule 144, to the Company or to an
Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 3.2(o), the Company may require the
transferor thereof to provide the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights and obligations of a
Purchaser under this Agreement.

 

(o) Legends. Such Purchaser understands that
the book-entry or other instruments representing the Securities
shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such
Securities):

 



 

13







 





 



[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS
SECURITY IS [EXERCISABLE] HAS [NOT] BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR ASSIGNED 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 THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.

 



The Company acknowledges and agrees that the representations
contained in Section 3.2 shall not modify, amend or affect the
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.

 



ARTICLE IV

 



COVENANTS

 

4.1 Best
Efforts. Each party shall use its reasonable best efforts to
timely satisfy each of the covenants and the conditions to be
satisfied by it as provided in Section 2.3 of this
Agreement.

 

4.2 Blue Sky.
The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the
applicable Closing under applicable securities or “Blue
Sky” laws of the states of the United States, and shall
provide evidence of such actions promptly upon request of any
Purchaser.

 

4.3 Exercise
Procedures. The form
of Notice of Exercise included in the Warrants set forth the
totality of the procedures required of the Purchasers in order to
exercise the Warrants. Without limiting the preceding sentences, no
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise form be required in order to exercise the
Warrants. No additional legal opinion, other information or
instructions shall be required of the Purchasers to exercise their
Warrants. The Company shall honor exercises of the Warrants and
shall deliver Warrants Shares in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.

 

4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such
subsequent transaction. 

 

4.5 Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m.
(New York City time) on the fourth Trading Day immediately
following the date hereof, issue a press release disclosing the
material terms of the transactions contemplated hereby, and (b)
file a Current Report on Form 8-K with the Commission within the
time required by the Exchange Act. From and after the issuance of
such press release, the Company shall have publicly disclosed all
material, non-public information delivered to the Purchaser by the
Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction
Documents.

 

4.6 Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor
any other Person acting on its behalf, will provide any Purchaser
or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement
with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

 



 

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4.7 Use
of Proceeds. The
Company shall use the net proceeds from the sale of the Securities
hereunder for general corporate purposes, repayment of
Indebtedness, business development, working capital and general and
administrative expenses and shall not use such proceeds in
violation of FCPA, OFAC regulations and Anti-Money Laundering Laws,
except where such violations would not reasonably be expected to
result, either individually or in the aggregate, in a Material
Adverse Effect.

 

4.8 Certain
Transactions and Confidentiality. The Purchaser covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales,
including Short Sales, of any of the Company’s securities
during the period commencing with the execution of this Agreement
and ending at such time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial
press release as described in Section 4.5. The Purchaser covenants
that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company pursuant to the
initial press release as described in Section 4.5, the Purchaser
will maintain the confidentiality of the existence and terms of
this transaction. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) the Purchaser does not
make any representation, warranty or covenant hereby that it will
not engage in effecting transactions in any securities of the
Company after the time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial
press release as described in Section 4.5, (ii) the Purchaser shall
not be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.5
and (iii) the Purchaser shall not have any duty of confidentiality
to the Company or its Subsidiaries after the issuance of the
initial press release as described in Section
4.5.

 



ARTICLE V



REGISTRATION RIGHTS

 


5.1           Registration;
Definitions.

 


(a)
Following the date of this Agreement, the Company shall use
commercially reasonable efforts to prepare and file with the
Commission a registration statement covering the resale of all of
the Registrable Securities (as defined below) (the
“Registration
Statement”). The Registration Statement required
hereunder will be on Form S-3 (or Form S-1 or any other applicable
form, at the sole discretion of the Company, if Form S-3 is not
available to the Company). Subject to the terms of this Agreement,
the Company shall use its commercially reasonable efforts to file
the Registration Statement with the Commission as promptly as
possible after the Closing Date, but not later than sixty (60) days
following the Closing Date (the “Filing Deadline”), and shall use
its commercially reasonable efforts to (i) cause the Registration
Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof (and in any event, no
later than one hundred twenty (120) days following the Closing Date
or one hundred fifty (150) days following the Closing Date if the
SEC has elected to review the Registration Statement (the
“Effectiveness
Deadline”)) , and (ii) keep the Registration Statement
continuously effective under the Securities Act until the date when
all Registrable Securities covered by the Registration Statement
have been sold or may be sold without volume restrictions pursuant
to Rule 144, as determined by the counsel to the Holder (as defined
below) pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s counsel, the
Company’s transfer agent and the affected Holders (the
“Effectiveness
Period”). By 9:30 a.m. EDT on the Trading Day
following the date that the Registration Statement is declared
effective by the Commission, the Company shall file with the
Commission in accordance with Rule 424 under the Securities Act the
final prospectus to be used in connection with sales pursuant to
such Registration Statement.

 



 

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(b) The
term “Registrable
Securities” means (i) the Shares, (ii) the Warrant
Shares, and (iii) any shares of Common Stock issued or issuable
upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing;
provided, however, that securities will only be treated as
Registrable Securities if and only for so long as they (x) have not
been sold (A) pursuant to a registration statement; (B) to or
through a broker, dealer or underwriter in a public distribution or
a public securities transaction; and/or (C) in a transaction exempt
from the registration and prospectus delivery requirements of the
Securities Act under Section 4(a)(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto, if any,
are removed upon the consummation of such sale; (y) are held by a
Holder (as defined below) or a permitted transferee; and (z) are
not eligible for sale without volume limitations pursuant to Rule
144 (or any successor thereto) under the Securities
Act.

 


(c) The
term “Holder” means any person owning or having the
right to acquire Registrable Securities or any permitted transferee
of a Holder.

 


5.2           Registration
Procedures; Company. In
connection with the Company’s registration obligations set
forth in Section 5.1 above, the Company shall:


 


(a)
Not less than three (3) Trading Days prior to the filing of the
Registration Statement or any related prospectus or any amendment
or supplement thereto (i) furnish to the Holders copies of all such
documents proposed to be filed (other than those documents
incorporated or deemed incorporated by reference to the extent
requested by such Person), which documents will be subject to the
review of such Holders, and (ii) cause its officers, directors,
counsel and independent certified public accountants to respond to
such inquiries as will be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such prospectus or any amendments or
supplements thereto to which the Holders of a majority of the
Registrable Securities have reasonably objected in good faith,
provided that the Company is notified of such objection in writing
no later than two (2) Trading Days after the Holders have been so
furnished copies of such documents.


 


(b)
Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the
prospectus used in connection therewith 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 in order to register for resale under the Securities Act
all of the Registrable Securities.


 


(c)
Use commercially reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension
of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.


 


(d)
Comply with all applicable rules and regulations of the
Commission.


 


(e)
Furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a copy of the most recent
annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (ii) 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.


 


5.3           Registration
Procedures; Purchaser. In
connection with the Company’s registration obligations set
forth in Section 5.1 above:


 


(a)
Each Purchaser shall cooperate with the Company, as requested by
the Company, in connection with the preparation and filing of any
Registration Statement hereunder. Each Purchaser shall provide the
Company with such information that the Company may reasonably
request from such Purchaser as may be required in connection with
such registration including, without limitation, all such
information as may be requested by the Commission or FINRA or any
state securities commission and all such information regarding the
Purchaser, the Registrable Securities held by such Purchaser and
the intended method of disposition of the Registrable Securities.
Each Purchaser agrees to provide such information requested in
connection with such registration within two (2) Trading Days after
receiving such written request. The Company will not be responsible
for any delays in filing or obtaining or maintaining the
effectiveness of the Registration Statement caused by any
Purchaser’s failure to timely provide a completed Selling
Stockholder Questionnaire or such other information requested by
the Company.


 



 

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(b) If, in the good faith judgment of the Company,
it would be detrimental to the Company or its stockholders for the
Registration Statement to be filed or for resales of Registrable
Securities to be made pursuant to the Registration Statement due to
(i) the existence of a material development or potential material
development involving the Company that the Company would be
obligated to disclose in the Registration Statement, which
disclosure would be premature or otherwise inadvisable at such time
or would have a material adverse effect on the Company or its
stockholders or (ii) a proposed filing of or use of an existing
registration statement in connection with a Company-initiated
registration of any class of its equity securities, which, in the
good faith judgment of the Company, would adversely affect or
require premature disclosure of the filing or use of such
Company-initiated registration (notice thereof, a
“Blackout
Notice”), upon receipt of
a Blackout Notice from the Company, each Purchaser will immediately
discontinue disposition of Registrable Securities pursuant to the
Registration Statement (the period during which such disposition is
discontinued, the “Blackout
Period”) covering such
Registrable Securities until (A) the Company advises such Purchaser
that the Blackout Period has terminated and (B) such Purchaser
receives copies of a supplemented or amended prospectus, if
necessary; provided, however, that (x) no Blackout Period will exceed thirty
(30) consecutive days, (y) during any three hundred sixty-five
(365) day period such Blackout Periods will not exceed an aggregate
of sixty (60) days, and (z) the first day of any Blackout Period
must be at least five (5) Trading Days after the last day of any
prior Blackout Period. If so directed by the Company, each
Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Purchaser’s possession (other
than a limited number of file copies) of the prospectus covering
such Registrable Securities that is current at the time of receipt
of such notice.


 


(c) If any Purchaser determines to engage an
underwriter (other than such Purchaser) in connection with the
offering of any Registrable Securities (an
“Underwritten
Offering”), such
Purchaser will enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering, and
will take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable
Securities. Such Purchaser shall consult with the Company prior to
any Underwritten Offering and shall defer such Underwritten
Offering for a reasonable period upon the request of the
Company.


 


(d)
No Purchaser will take any action with respect to any distribution
deemed to be made pursuant to the Registration Statement, which
would constitute a violation of Regulation M under the Exchange Act
or any other applicable rule, regulation or law.


 


5.4                      Registration
Expenses. All fees and expenses
of the Company incident to the performance of or compliance with
Section 5.1 and Section 5.2 hereof by the Company will be borne by
the Company.


 


5.5           Indemnification.
In the event that any Registrable Securities are included in a
Registration Statement:


 

(a) To the fullest
extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Holder and each of its
directors, officers, managers, shareholders, members, partners,
employees, agents, advisors, representatives (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding the lack of such title or any other title) and each
Person, if any, who controls such Holder within the meaning of the
Securities Act or the Exchange Act and each of the directors,
officers, managers, shareholders, members, partners, employees,
agents, advisors, representatives (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding the lack of such title or any other title) of such
controlling Persons (each, an “Indemnified Person”), against any
losses, obligations, claims, damages, liabilities, contingencies,
judgments, fines, penalties, charges, costs (including, without
limitation, court costs, reasonable attorneys’ fees and costs
of defense and investigation), amounts paid in settlement or
expenses, joint or several, (collectively, “Claims”) incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a
party thereto (“Indemnified
Damages”), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of
a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which
Registrable Securities are offered (“Blue Sky Filing”), or the omission
or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files
any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”). Subject to Section
5.5(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 5.5(a): (i)
shall not apply to a Claim by an Indemnified Person arising out of
or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by
such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto, or
any preliminary or final prospectus, and (ii) shall not be
available to a particular Holder to the extent such Claim is based
on a failure of such Holder to deliver or to cause to be delivered
the prospectus made available by the Company (to the extent
applicable), including, without limitation, a corrected prospectus,
if such prospectus or corrected prospectus was timely made
available by the Company pursuant to Section 5.2(a) and then only
if, and to the extent that, following the receipt of the corrected
prospectus no grounds for such Claim would have existed; and (iii)
shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of any of the
Registrable Securities by any of the Holders pursuant to Section
3.2(n).

 



 

17







 





 

(b) In connection with
any Registration Statement in which a Holder is participating, such
Holder agrees to severally and not jointly indemnify, hold harmless
and defend, to the same extent and in the same manner as is set
forth in Section 5.5(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each
Person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (each, an “Indemnified Party”), against any
Claim or Indemnified Damages to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise,
insofar as such Claim or Indemnified Damages 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 to the Company by
such Holder expressly for use in connection with such Registration
Statement or any preliminary or final prospectus; and, subject to
Section 5.5(c) and the below provisos in this Section 5.5(b), such
Holder will reimburse an Indemnified Party any legal or other
expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such Claim;
provided, however, the indemnity agreement contained in this
Section 5.5(b) and the agreement with respect to contribution
contained in Section 5.6 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the
prior written consent of such Holder, which consent shall not be
unreasonably withheld or delayed, provided further that such Holder
shall be liable under this Section 5.5(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to
such Holder as a result of the applicable sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and
shall survive the transfer of any of the Registrable Securities by
any of the Holders pursuant to Section 3.2(n).

 

(c) Promptly after
receipt by an Indemnified Person or Indemnified Party (as the case
may be) under this Section 5.5 of notice of the commencement of any
action or proceeding (including, without limitation, any
governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party (as the case may be) shall,
if a Claim in respect thereof is to be made against any
indemnifying party under this Section 5.5, 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 control
of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified
Party (as the case may be); provided, however, an Indemnified
Person or Indemnified Party (as the case may be) shall have the
right to retain its own counsel with the fees and expenses of such
counsel to be paid by the indemnifying party if: (i) the
indemnifying party has agreed in writing to pay such fees and
expenses; (ii) the indemnifying party shall have failed promptly to
assume the defense of such Claim and to employ counsel reasonably
satisfactory to such Indemnified Person or Indemnified Party (as
the case may be) in any such Claim; or (iii) the named parties to
any such Claim (including, without limitation, any impleaded
parties) include both such Indemnified Person or Indemnified Party
(as the case may be) and the indemnifying party, and such
Indemnified Person or such Indemnified Party (as the case may be)
shall have been advised by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such
Indemnified Person or such Indemnified Party and the indemnifying
party (in which case, if such Indemnified Person or such
Indemnified Party (as the case may be) notifies the indemnifying
party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, then the indemnifying party
shall not have the right to assume the defense thereof and such
counsel shall be at the expense of the indemnifying party, provided
further that in the case of clause (iii) above the indemnifying
party shall not be responsible for the reasonable fees and expenses
of more than one (1) separate legal counsel for such Indemnified
Person or Indemnified Party (as the case may be). The Indemnified
Party or Indemnified Person (as the case may be) shall reasonably
cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person (as the case may be) which relates to such
action or Claim. The indemnifying party shall keep the Indemnified
Party or Indemnified Person (as the case may be) reasonably
apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party
shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent; provided,
however, the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall,
without the prior written consent of the Indemnified Party or
Indemnified Person (as the case may be), consent to entry of any
judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party or Indemnified
Person (as the case may be) of a release from all liability in
respect to such Claim or litigation, and such settlement shall not
include any admission as to fault on the part of the Indemnified
Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person (as the case may be) with
respect to all third parties, firms or corporations relating to the
matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party (as the case may be) under this Section
5.5, except to the extent that the indemnifying party is materially
and adversely prejudiced in its ability to defend such action.
Notwithstanding anything to the contrary contained above or
otherwise in this Agreement, a Holder shall be entitled, as to
itself and any of its related Indemnified Parties, including
without limitation its agents and representatives, maintain the
control of the defense of any action for which it (or they) may
seek indemnification hereunder, and the Company and its counsel
shall fully cooperate in such defense as such Holder and its
counsel may request, all at the cost and expense of the Company
(including without limitation, the attorneys’ fees and other
costs and expenses of the Holders and their related Indemnified
Parties’ legal counsel). Any amounts for which the Company is
responsible pursuant to the immediately preceding sentence shall be
paid promptly to, or as directed by, such Holder from time to time,
and may be offset by such Holder, at its discretion, against any
amounts from time to time owed by such Holder to the Company under
the Transaction Documents.

 

(d) No Person involved
in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) in connection with such sale shall be entitled to
indemnification from any Person involved in such sale of
Registrable Securities who is not guilty of fraudulent
misrepresentation.

 

(e) The indemnification
required by this Section 5.5 shall be made by periodic payments of
the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are
incurred.

 

(f) The indemnity and
contribution agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

 



 

18







 





 


5.6           Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 5.5 to the fullest extent
permitted by law; provided, however: (i) no contribution shall be
made under circumstances where the maker would not have been liable
for indemnification under the fault standards set forth in Section
5.5 of this Agreement, (ii) no Person involved in the sale of
Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable
Securities who was not guilty of fraudulent misrepresentation; and
(iii) contribution by any seller of Registrable Securities shall be
limited in amount to the amount of net proceeds received by such
seller from the applicable sale of such Registrable Securities
pursuant to such Registration Statement. Notwithstanding the
provisions of this Section 5.6, no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Holder from the
applicable sale of the Registrable Securities subject to the Claim
exceeds the amount of any damages that such Holder has otherwise
been required to pay, or would otherwise be required to pay under
Section 5.5(b), by reason of such untrue or alleged untrue
statement or omission or alleged omission.


 


5.7           Cutback.
In connection with filing the Registration Statement pursuant to
Section 5.1 hereof, the obligations of the Company set forth in
this Article V are subject to any limitations on the
Company’s ability to register the full complement of such
Registrable Securities in accordance with Rule 415 under the
Securities Act or other regulatory limitations. To the extent the
number of such shares that can be registered is limited, the
Company shall file a subsequent registration agreement that will
provide, among other things, that the Company will use its
commercially reasonable efforts to register additional tranches of
Registrable Securities as soon as permissible thereafter under
applicable laws, rules and regulations so that all of such
Registrable Securities are registered as soon as reasonably
practicable.


 


5.8                      Sales
by Purchasers. Each Purchaser
shall sell any and all Registrable Securities (as defined below)
purchased hereby in compliance with applicable prospectus delivery
requirements, if any, or otherwise in compliance with the
requirements for an exemption from registration under the
Securities Act and the rules and regulations promulgated
thereunder. No Purchaser will make any sale, transfer or other
disposition of the Shares in violation of federal or state
securities or “blue sky” laws and
regulations.


 


5.9                      Piggy-Back
Registrations. If at any time
during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its
own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other
employee benefit plans, then the Company shall send to each Holder
a written notice of such determination and, if within fifteen (15)
days after the date of such notice, any such Holder may so request
in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such
Holder requests to be registered, subject to customary underwriter
cutbacks applicable to all holders of registration rights and any
limitations imposed by applicable law.


 


5.10           Effect
of Failure to File and Obtain and Maintain Effectiveness of any
Registration Statement. If (i)
the Registration Statement covering the resale of all of the
Registrable Securities required to be covered thereby and required
to be filed by the Company pursuant to Section 5.1 of this
Agreement is (A) not filed with the SEC on or before the Filing
Deadline (a “Filing
Failure”) or (B) not
declared effective by the SEC on or before the Effectiveness
Deadline (an “Effectiveness
Failure”), (ii) other
than during a Blackout Period, on any day after the effective date
of a Registration Statement sales of all of the Registrable
Securities required to be included on such Registration Statement
cannot be made pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration
Statement effective, a failure to disclose such information as is
necessary for sales to be made pursuant to such Registration
Statement, a suspension or delisting of (or a failure to timely
list) the shares of Common Stock on a Trading Market, or a failure
to register a sufficient number of shares of Common Stock or by
reason of a stop order) or the prospectus contained therein is not
available for use for any reason (a “Maintenance
Failure”), or (iii) if
the Company fails to file with the SEC any required reports under
Section 13 or 15(d) of the 1934 Act such that it is not in
compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable)
(a “Current Public Information
Failure”) as a result of
which any of the Purchasers are unable to sell those Registrable
Securities included in such Registration Statement without
restriction under Rule 144 (including, without limitation, volume
restrictions), then, as partial relief for the damages to any
holder by reason of any such delay in, or reduction of, its ability
to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Registrable
Securities relating to such Registration Statement an amount in
cash equal to one percent (1.0%) of such Purchaser’s
Subscription Amount (1) on the date of such Filing Failure,
Effectiveness Failure, Maintenance Failure or Current Public
Information Failure, as applicable, and (2) on every thirty (30)
day anniversary of (I) a Filing Failure until such Filing Failure
is cured; (II) an Effectiveness Failure until such Effectiveness
Failure is cured; (III) a Maintenance Failure until such
Maintenance Failure is cured; and (IV) a Current Public Information
Failure until the earlier of (i) the date such Current Public
Information Failure is cured and (ii) such time that such public
information is no longer required pursuant to Rule 144 (in each
case, pro rated for periods totaling less than thirty (30) days).
In no event shall the aggregate Registration Delay Payments (as
defined below) accruing under this Section 5.10 exceed six percent
(6%) of such Purchaser’s Subscription Amount. The payments to
which a holder of Registrable Securities shall be entitled pursuant
to this Section 5.10 are referred to herein as
“Registration Delay
Payments.” Following the
initial Registration Delay Payment for any particular event or
failure (which shall be paid on the date of such event or failure,
as set forth above), without limiting the foregoing, if an event or
failure giving rise to the Registration Delay Payments is cured
prior to any thirty (30) day anniversary of such event or failure,
then such Registration Delay Payment shall be made on the third
(3rd)
Trading Day after such cure. Notwithstanding the foregoing, (i) no
single event or failure with respect to a particular Registration
Statement shall give rise to more than one type of Registration
Delay Payment with respect to such Registration Statement (other
than a Filing Failure and Effectiveness Failure relating to the
same Registration Statement), (ii) no Registration Delay Payments
shall be owed to a Purchaser (ith respect to any period during
which all of such Purchaser’s Registrable Securities may be
sold by such Purchaser without restriction under Rule 144
(including, without limitation, volume restrictions) and without
the need for current public information required by Rule 144(c)(1)
(or Rule 144(i)(2), if applicable, and (iii) with respect to any
Registrable Securities excluded from a Registration Statement by
election of a Purchaser.


 



 

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5.11                      Waivers.
With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then
outstanding, any provision of this Article V may be waived (either
generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or
indefinitely) or amended, which waiver will be applicable to all
Holders, and will be deemed to have been consented to by all
Holders. Upon the effectuation of each such waiver or amendment,
the Company shall promptly give written notice thereof to the
Holders, if any, who have not previously received notice thereof or
consented thereto in writing.


 



ARTICLE VI

 



ANTI-DILUTION ADJUSTMENT

 

6.1 Potential
Issuance of Additional Shares Post-Nasdaq
Listing. If the
Company lists its shares of Common Stock on the Nasdaq Capital
Market and for the five (5) Trading Day period immediately
following such listing (the “Measurement
Period”) the
average VWAP of the Common Stock for the Measurement Period (the
“Post-Listing
Threshold Price”) is less than $0.20 per share
(as adjusted for any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
Common Stock), then the Purchaser shall be issued an additional
number of shares of Common Stock equal to (i) the quotient obtained
by dividing (x) the Subscription Amount, by (y) the Post-Listing
Threshold Price, minus (ii) the number of Shares originally issued
to Purchaser pursuant to this Agreement (as adjusted for any stock
split, dividend or other distribution, recapitalization or similar
event with respect to the Common Stock), rounded down to the
nearest whole share. Any additional issuance of shares pursuant to
this Section 6.1 shall be made within five (5) Trading Days
following the Measurement Period. For the avoidance of doubt, there
can be no assurance that the Company’s shares of Common Stock
will be listed on the Nasdaq Capital Market or any other national
stock exchange.

 

6.2 Limitation
on Issuance of Additional Shares. The Company shall not issue to
Purchaser any additional shares of Common Stock pursuant to Section
6.1, and Purchaser shall not have the right to such additional
shares, to the extent that after giving effect to such issuance,
the Purchaser (together with the Purchaser’s Affiliates, and
any other Persons acting as a group together with the Purchaser or
any of the Purchaser’s Affiliates), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined
below).  For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Purchaser shall
exclude the number of shares of Common Stock which would be
issuable upon exercise or conversion of the unexercised or
nonconverted portion of any securities of the Company (including,
without limitation, any other securities convertible into Common
Stock) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the
Purchaser or any of its Affiliates.  Except as set forth in
the preceding sentence, for purposes of this Section 6.2,
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Purchaser that the Company
is not representing to the Purchaser that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Purchaser
is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 6.2 applies, the determination of whether the
additional shares of Common Stock are issuable to the Purchaser
pursuant to Section 6.1 (in relation to other securities owned by
the Purchaser together with any Affiliates) shall be in the sole
discretion of the Purchaser, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 6.2, in determining the number of
outstanding shares of Common Stock, a Purchaser may rely on the
number of outstanding shares of Common Stock as reflected in (A)
the Company’s most recent periodic or annual report filed
with the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding.  Upon the written or oral
request of a Purchaser, the Company shall within two (2) Trading
Days confirm orally and in writing to the Purchaser the number of
shares of Common Stock outstanding pursuant to prior
sentence.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company by the
Purchaser or its Affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of any additional shares of Common
Stock pursuant to Section 6.1. The Purchaser, upon not less than 61
days’ prior notice to the Company, may increase or decrease
the Beneficial Ownership Limitation provisions of this Section 6.2,
provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of any
additional shares of Common Stock pursuant to Section 6.1 and the
provisions of this Section 6.2 shall continue to apply. Any such
increase or decrease will not be effective until the 61st day after
such notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 6.2 to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such
limitation.

 



 

20







 





 



ARTICLE VII

 



TERMINATION

 

7.1 Termination.
If the Closing shall not been consummated by August 14, 2020, this
Agreement shall automatically terminate without any further action
by the parties hereto; provided, however, that no such termination
will affect the right of either party to sue for any breach by the
other party.

 



ARTICLE VIII

 



MISCELLANEOUS

 

8.1 Fees
and Expenses. Except
as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser.

 

8.2 Entire
Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.

 

8.3 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature page
attached hereto at or prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature page
attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd) Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, (d) upon actual
receipt by the party to whom such notice is required to be given,
or (e) upon delivery, when sent by electronic mail (provided that
the sending party does not receive an automated rejection notice).
The addresses, facsimile numbers and e-mail addresses for such
notices and communications shall be as set forth on the signature
page attached hereto.

 

8.4 Amendments;
Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the holders of at least a majority of
the aggregate amount of Securities issued hereunder, or, in the
case of a waiver, by the party against whom enforcement of any such
waived provision is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair
the exercise of any such right.

 

8.5 Headings.
The headings of this Agreement are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to
limit or affect the interpretation of any of the provisions of this
Agreement.

 

8.6 Successors
and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Following the
Closing, the Purchaser may assign any or all of its rights under
this Agreement to any Person to whom the Purchaser assigns or
transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchaser.”

 

8.7 No
Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and
permitted assigns only, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except that each
Indemnitee shall have the right to enforce the obligations of the
Company with respect to Section 5.5.

 



 

21







 





 

8.8 Governing
Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, 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 and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any
of the Transaction Documents), 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, or that such court is an improper or inconvenient venue for
such suit, action or 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 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 suit, action or proceeding
to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 5.5, the
prevailing party in such suit, action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’
fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such suit, action or
proceeding.

 

8.9 Survival.
Unless this Agreement is terminated under Section 7, the
representations and warranties contained in Sections 3.1 and 3.2
shall survive the Closing, and the agreements and covenants
contained in Article IV shall survive the Closing until fully
performed. Each Purchaser shall be responsible only for its own
representations, warranties, agreements, and covenants
hereunder.

 

8.10 Counterparts.
This Agreement may be executed in two or more identical
counterparts, both of which when taken together shall be considered
one and the same agreement and this Agreement shall become
effective when each party has delivered its signature to the other
party. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such
signature is executed), with the same force and effect as if such
facsimile or “.pdf” signature page were an original
thereof.

 

8.11 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

8.12 Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

8.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever the Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser
may rescind or withdraw, in its sole discretion, from time to time,
upon written notice to the Company, any relevant notice, demand or
election, in whole or in part, without prejudice to its future
actions and rights.

 

8.14 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the
Purchaser and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary
damages would not be adequate compensation for any loss incurred by
reason of any breach of obligations contained in the Transaction
Documents and the Company therefore agrees that the Purchasers
shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages
and without posting a bond or other security.

 

8.15 Payment
Set Aside. To the
extent that the Company makes a payment or payments to the
Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise, or any
part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered, disgorged or
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then, to the
extent of any such restoration, the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

 



 

22







 





 

8.16 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in its review and negotiation of the
Transaction Documents. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers.

 

8.17 Liquidated
Damages. The
Company’s obligation to pay any amounts owing under the
Transaction Documents is a continuing obligation of the Company and
shall not terminate until all unpaid amounts have been paid,
notwithstanding the fact that the instrument or security pursuant
to which such amounts are due and payable shall have been
canceled.

 

8.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments
thereto.

 

8.19 WAIVER
OF JURY TRIAL. IN
ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY
EITHER PARTY AGAINST THE OTHER PARTY FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY, 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.

 



(Signature Pages Follow)

 


 




 

23








 







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

 


 


	


SANUWAVE HEALTH, INC.

	

Address
for Notice:


 


3360
Martin Farm Road, Suite 100


Suwanee,
GA 30024


Attn:
Chief Executive Officer


 


E-mail:
kevin.richardson@sanuwave.com


	

By:


Name:
Kevin A. Richardson II


Title:
Chief Executive Officer


 

	

Fax:
678-569-0881


	
 

	
 







 



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

 


Murray Indick, Esq. 


Morrison & Foerster
LLP 


425 Market Street 


San Francisco, California
94105 


Phone: (415)
268-7000 



E-mail address: MIndick@mofo.com


 


 


 



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 


SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 


 


 







24








 






 



PURCHASER SIGNATURE PAGE TO SANUWAVE HEALTH, INC.

 


SECURITIES
PURCHASE AGREEMENT

 



IN WITNESS WHEREOF, the undersigned has caused this Securities
Purchase Agreement to be duly executed by an authorized signatory
as of the date first indicated above.

 



Name of
Purchaser:  






 



Signature of
Authorized Signatory of Purchaser:         







 



Name of Authorized
Signatory:






 



Title of Authorized
Signatory:






 



Email Address of Authorized
Signatory:






 



Facsimile Number of Authorized
Signatory:     






 



Address for Notice to Purchaser:

 


 

 



Address for Delivery of the Securities to Purchaser (if not same as
address for notice):

 


 

 



Subscription
Amount:






 



Shares:   






 



Warrants:






 



EIN Number (if
applicable):   






 



Broker Name:






 



DTC Participant Number:

 







25