Document:

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.

 

 

6

 

 

(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.

 

 

8

 

 

(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.

 

 

14

 

 

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.

 

 

15

 

 

(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.

 

 

16

 

 

(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.

 

 

19

 

 

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:

 

25snwv_ex105

 

EXHIBIT 10.5

 

 

 

SANUWAVE
HEALTH, INC.

 

 

NOTE
AND WARRANT PURCHASE AND SECURITY AGREEMENT

 

Issue
Date: August 6, 2020

 

$15,000,000

 

 

 

1

 

This
NOTE AND WARRANT PURCHASE AND SECURITY AGREEMENT (this
“Agreement”) is entered into as of August 6, 2020, by
and among NH EXPANSION CREDIT FUND
HOLDINGS LP (“North
Haven Expansion”), as agent (in such capacity,
together with its successors or permitted assigns,
“Agent”), the
Holders from time to time signatory hereto, including North Haven
Expansion in its capacity as a Holder (each, a “Holder” and collectively, the
“Holders”), and
SANUWAVE
HEALTH, INC.,
a Nevada corporation (“Issuer”).

 

RECITALS

 

WHEREAS, Issuer
wishes to issue the Notes and the Warrants (each as defined below),
and the Holders desire to purchase from Issuer the Notes and the
Warrants. This Agreement sets forth the terms on which the Holders
will (i) purchase the Notes and Warrants from Issuer and Issuer
will issue the Notes and Warrants, and (ii) repay the amounts owing
to the Holders under the Notes.

 

1.

Note Terms

 

1.1 Payments
and Prepayments

 

(a) Purchase.
Subject to the terms and conditions of this Agreement, on the Issue
Date, each Holder shall purchase secured promissory notes, in the
form attached hereto as Exhibit D (as amended,
restated, amended and restated, supplemented or otherwise modified
from time to time, the “Notes,” and each, a
“Note”), in an
aggregate original principal amount of Fifteen Million Dollars
($15,000,000), in accordance with each Holder’s Commitment as
set forth on Schedule
1.1 hereto, and warrants to purchase shares of common stock
of Issuer in an aggregate amount of two percent (2.00%) of
Issuer’s fully-diluted capital stock as of the Issue Date,
after giving effect to the Celularity Acquisition and the Equity
Financing, in the form attached hereto as Exhibit E, and on terms, and
subject to adjustments, as set forth therein (as amended, restated,
amended and restated, supplemented or otherwise modified from time
to time, the “Warrants,” and each, a
“Warrant”).

 

(b) Payment.
All unpaid principal and accrued interest is due and payable in
full on the Maturity Date. The Notes may not be prepaid, except as
set forth in subsection
(d).

 

(c) Mandatory
Prepayment Upon an Acceleration. If the Notes are
accelerated following the occurrence of an Event of Default, Issuer
shall immediately pay to Holders an amount equal to the sum of: (i)
all outstanding principal of the Notes plus accrued but unpaid
interest on the Notes, (ii) (x) the Prepayment Fee, if such
acceleration occurs after the Initial Prepayment Date, or (y) the
Prepayment Amount, if such acceleration occurs prior to the Initial
Prepayment Date and (iii) all other sums, if any, that shall have
become due and payable pursuant to the Note Documents, including
interest at the Default Rate with respect to any past due amounts,
and the Put Amount (unless the Warrant was earlier exercised in
full and the Put Amount paid).

 

(d) Permitted
Prepayment of the Notes. Issuer shall have the option to
prepay the Notes, in whole but not in part, provided Issuer
provides written notice to Holders of its election to prepay the
Notes at least five (5) Business Days prior to such prepayment. In
the case of any prepayment pursuant to this Section 1.1(d), Issuer shall
pay, on the date of such prepayment, (A) all outstanding principal
of the Notes plus accrued but unpaid interest on the Notes, (B) (x)
the Prepayment Fee, if such prepayment occurs after the Initial
Prepayment Date, or (y) the Prepayment Amount, if such prepayment
occurs prior to the Initial Prepayment Date, and (C) all other
sums, if any, that shall become due and payable, including interest
at the Default Rate with respect to any past due
amounts.

 

 

2

 

 

(e) AHYDO
Catch-Up Payment. Notwithstanding anything to the contrary
contained herein, commencing with the first accrual period (as
defined in IRC Section 1272(a)(5)) following the fifth
(5th)
anniversary of the “issue date” of the Notes (as
defined in Treasury Regulations Section 1.1273-2(a)(2)), and
continuing with each accrual period thereafter, the Issuer shall be
permitted to pay in respect of the Notes, on or before the end of
such accrual period, an amount in cash equal to (but not exceeding)
the amount required to be paid to the extent necessary to prevent
the Notes from being treated as an “applicable high yield
discount obligation” within the meaning of the IRC, such
amount to be determined by Issuer in consultation with
Holder.

 

1.2 Interest

 

(a) Interest
Rate. Subject to Section 1.2(b), the principal
amount outstanding on the Notes shall accrue interest, consisting
of (i) interest payable in cash quarterly in arrears on the last
day of each fiscal quarter (each, a “Payment Date”), at a per annum
rate equal to the sum of (A) the greater of (x) the Prime Rate in
effect as of each Payment Date, and (y) three percent (3.00%), plus
(B) nine percent (9.00%); and (ii) interest (I) not paid when due
in accordance with Section 1.2(a)(i) above for any reason,
including but not limited to any blockage under any intercreditor
or subordination agreement, and (II) at a rate of three percent
(3.00%) per annum (collectively, the “Deferred Interest”), which shall
be compounded by being added to the principal amount of the Notes
on each Payment Date and which shall be payable in cash upon the
earliest to occur of (x) the Maturity Date, (y) prepayment of the
Notes, or (z) acceleration of the maturity of the Notes upon an
Event of Default.

 

(b) Default
Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest
at a rate per annum equal to five (5) percent (5.00%) above the
rate that is otherwise applicable thereto (the “Default Rate”). Payment or
acceptance of the increased interest rate provided in this
Section 1.2(b) is
not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice
or limit any rights or remedies of Agent or any
Holder.

 

(c) 360-Day
Year. Interest shall be computed on the basis of a 360-day
year for the actual number of days elapsed.

 

(d) Payments.
Agent will invoice Issuer for payments of any amounts due
hereunder, and Issuer shall promptly pay such amounts invoiced
within three (3) Business Days. Payments received after 3:00 p.m.
Eastern time are considered received at the opening of business on
the next Business Day. When a payment is due on a day that is not a
Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to
accrue. Payments received by Agent with respect to Obligations will
be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any
Governmental Authority (including any interest, additions to tax or
penalties applicable thereto) (“Taxes”) except as required by any
Governmental Authority, applicable law, regulation or international
agreement, in which case, except to the extent such withholding or
deduction is on account of Excluded Taxes, the amount due with
respect to such payment or other sum payable hereunder will be
increased to the extent necessary to ensure that, after the making
of such required withholding or deduction (including any
withholding or deduction made with respect to such additional
amounts payable pursuant to this sentence), each Holder receives a
net sum equal to the sum which it would have received had no
withholding or deduction been required. Issuer will, upon request,
furnish each Holder with proof reasonably satisfactory to each
Holder indicating that Issuer has made such withholding payment;
provided, however, that Issuer need not make any withholding
payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and
as to which payment in full is bonded or reserved against by
Issuer. The agreements and obligations of Issuer contained in this
Section 1.2(d) shall survive the termination of this
Agreement.

 

(e) Expense
Deposit. Issuer has paid to Agent an expense deposit of
Thirty-Five Thousand Dollars ($35,000) (the “Expense Deposit”) to initiate
Holders’ due diligence review process. The Expense Deposit
shall be applied to the payment of Holder Expenses incurred through
the Issue Date, with any remaining amounts promptly remitted to
Issuer.

 

1.3 Fees.
Issuer shall pay to Agent, for disbursement to Holders (except
otherwise indicated) according to their pro rata percentage of the
Commitment:

 

(a) Origination
Fee. A fully earned, non-refundable fee in an amount of two
percent (2.00%) of the original principal amount of each Note, on
the Issue Date;

 

 

3

 

 

(b) Prepayment
Amount. The Prepayment Amount, if due pursuant to
Section 1.1(c) or
Section
1.1(d);

 

(c) Prepayment
Fee. The Prepayment Fee, if due pursuant to Section 1.1(c) or Section 1.1(d);

 

(d) Monitoring
Fee. A fully earned, non-refundable monitoring fee in an
amount of Thirty Thousand Dollars ($30,000) (i) on the Issue Date
and (ii) on each anniversary thereof; provided that such fee shall
be (x) solely for the account of and payable to North Haven
Expansion; and (y) pro-rated based on the number of days elapsed
for any period not constituting a full year (and refunded to the
extent of any excess payment); and

 

(e) Holder
Expenses. All Holder Expenses incurred through and after the
Issue Date promptly upon request.

 

2.

CONDITIONS TO NOTE
ISSUANCE.

 

The
obligation of each Holder to purchase the Note(s) under this
Agreement on the Issue Date (as set forth in Section 1.1(a)) is subject to
the satisfaction (or waiver) of the conditions to issuance set
forth on Schedule 1 hereto; provided that each Holder that has
signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to such Holder.

 

3.

CREATION OF SECURITY INTEREST

 

Issuer
hereby grants to Agent, for the ratable benefit of each Holder, to
secure the payment and performance in full of all of the
Obligations, a continuing security interest in, and pledges to
Agent, the Collateral, wherever located, whether now owned or
hereafter acquired or arising, and all proceeds and products
thereof. Issuer hereby authorizes Agent to file financing
statements, without notice to Issuer, at Issuer’s expense,
with all appropriate jurisdictions to perfect or protect
Agent’s interest or rights hereunder. If this Agreement is
terminated, Agent’s Lien in the Collateral granted hereunder
shall continue until the Obligations (other than inchoate indemnity
obligations, and any other obligations which, by their terms, are
to survive the termination of this Agreement) are repaid in full in
cash. Upon payment in full in cash of the Obligations (other than
inchoate indemnity obligations, and any other obligations which, by
their terms, are to survive the termination of this Agreement),
Agent’s Lien shall be automatically released and all rights
therein shall revert to Issuer, at which time Agent shall promptly
execute and deliver to Issuer, at Issuer’s expense, all
documents (including relevant certificates, securities and other
instruments) that Issuer shall reasonably request to evidence such
termination or release and shall perform such other actions
reasonably requested by Issuer to effect such release, including
delivery of certificates, securities and instruments.

 

Without
limiting the foregoing: Issuer hereby pledges, assigns and grants
to Agent, for the ratable benefit of each Holder, a security
interest in all the Shares, together with all proceeds and
substitutions thereof, all cash, stock and other moneys and
property paid thereon, all rights to subscribe for securities
declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance
of the Obligations. Subject to the prior satisfaction of the Senior
Debt, or upon the written consent of the Senior Lender, the
certificate or certificates for the Shares (if any) will be
delivered to Agent, accompanied by an instrument of assignment duly
executed in blank by Issuer. To the extent required by the terms
and conditions governing the Shares, Issuer shall cause the books
of each entity whose Shares are part of the Collateral and any
transfer agent to reflect the pledge of the Shares. Upon the
occurrence and during the continuance of an Event of Default
hereunder, but subject to the prior satisfaction of the Senior
Debt, Agent may effect the transfer of any securities included in
the Collateral (including but not limited to the Shares) into the
name of Agent and cause new (as applicable) certificates
representing such securities to be issued in the name of Agent or
its transferee. Subject to the prior satisfaction of the Senior
Debt, or upon the written consent of the Senior Lender, Issuer will
execute and deliver such documents, and take or cause to be taken
such actions, as Agent may reasonably request to perfect or
continue the perfection of Agent’s security interest in the
Shares. Unless an Event of Default shall have occurred and be
continuing, Issuer shall be entitled to exercise any voting rights
with respect to the Shares and to give consents, waivers and
ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which
would be inconsistent with any of the terms of this Agreement or
which would constitute or create any violation of any of such
terms. All such rights to vote and give consents, waivers and
ratifications shall terminate upon the occurrence and continuance
of an Event of Default. Agent reserves the right, subject to the
prior satisfaction of the Senior Debt, or upon the written consent
of the Senior Lender, to take such steps in any jurisdiction of
organization of any Foreign Subsidiary to perfect and maintain the
perfection of any security interest granted with respect to the
Shares (and any assets, as applicable) of any Foreign Subsidiary.
Notwithstanding anything herein to the contrary, Issuer shall not
be required to take any steps to obtain, perfect or maintain the
perfection of any Lien granted with respect to the Collateral if
and for so long as, in the sole judgment of Agent, the cost,
difficulty, burden or consequences of obtaining, perfecting or
maintaining a Lien in such Collateral exceeds the practical
benefits to the Holders afforded thereby.

 

 

4

 

 

4.

REPRESENTATIONS AND
WARRANTIES.

 

Issuer
represents and warrants as follows:

 

(a) Due
Organization and Qualification. Issuer and each Subsidiary
is duly existing and in good standing in its jurisdiction of
organization or formation and is qualified and licensed to do
business and is in good standing in any jurisdiction in which the
conduct of its business or its ownership of property requires that
it be qualified except where the failure to do so could not
reasonably be expected to have a material adverse effect on its
business.

 

(b) Authorization,
Power and Authority. The execution, delivery and performance
by Issuer of the Note Documents to which it is a party:
(i) have been duly authorized, and constitute legal, valid and
binding obligations of Issuer, enforceable in accordance with their
respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of
creditor’s rights or by general principles of equity; (ii) do
not conflict with Issuer’s organizational documents; (iii) do
not contravene, conflict or violate any applicable order, writ,
judgment, injunction, decree, determination or award of any
Governmental Authority by which Issuer or any of its Subsidiaries
or any of their property or assets may be bound or affected; (iv)
do not require any action by, or approval from, any Governmental
Approval from, any Governmental Authority (except such Governmental
Approvals which have already been obtained and are in full force
and effect); and (v) do not conflict with, contravene, constitute a
default or breach under, or result in or permit the termination or
acceleration of, any material agreement by which Issuer is
bound.

 

(c) Collateral.
Issuer has good title to, rights in, and the power to transfer each
item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted
Liens. Issuer has no Collateral Accounts at or with any bank or
financial institution except for the Collateral Accounts described
in the Perfection Certificate delivered to the Holders in
connection herewith and which Issuer has taken such actions as are
reasonably necessary to give Agent a perfected security interest
therein. The Accounts are bona fide, existing obligations of the
Account Debtors.

 

(d) Intellectual
Property. Issuer is the sole owner of the Intellectual
Property which it owns or purports to own except for (a)
non-exclusive licenses granted to its customers in the ordinary
course of business, (b) over-the-counter software that is
commercially available to the public, and (c) material Intellectual
Property licensed to Issuer and noted on the Perfection
Certificate. Each Patent which it owns or purports to own and which
is material to Issuer’s business is valid and enforceable,
and no part of the Intellectual Property which Issuer owns or
purports to own and which is material to Issuer’s business
has been judged invalid or unenforceable, in whole or in part.
Issuer has not received any written notice of any claim that any
part of the Intellectual Property violates the rights of any third
party except to the extent such claim would not reasonably be
expected to have a material adverse effect on Issuer’s
business. All Intellectual Property material to the business of
Issuer and its Subsidiaries that is owned by Issuer or a Subsidiary
is set forth in the Perfection Certificate.

 

(e) Financial
Statements, Financial Condition. All consolidated financial
statements for Issuer and its Subsidiaries delivered to Agent
fairly present in all material respects Issuer’s consolidated
financial condition and results of operations as of the date
thereof and for the period represented thereby, and there has not
been any material deterioration in Issuer’s consolidated
financial condition since the date of the most recent financial
statements submitted to Agent.

 

(f) Solvency.
The fair salable value of Issuer’s consolidated assets
(including goodwill minus disposition costs) exceeds the fair value
of its consolidated liabilities; Issuer is not left with
unreasonably small capital after the transactions in this
Agreement; and Issuer and its Subsidiaries as a whole are able to
pay their debts (including trade debts) as they
mature.

 

(g) Perfection
Certificate. All information set forth on the Perfection
Certificate is accurate and complete in all material respects,
provided that Issuer may from time to time update certain
information in the Perfection Certificate after the Issue Date to
reflect updated information resulting from changes not restricted
by this Agreement or as otherwise approved in writing by Holders,
and, from and after such update, all references to the Perfection
Certificate in this Agreement shall be the Perfection Certificate
as so updated; provided, however, any
representations, warranties or covenants in this Agreement
specifically relating to a date certain (including the Issue Date)
shall not be so modified by such updates to the Perfection
Certificate.

 

 

5

 

 

(h) Material
Agreements. Neither Issuer nor any of its Subsidiaries is in
default under any agreement to which it is a party or by which it
is bound in which the default could reasonably be expected to have
a material adverse effect on Issuer’s or such
Subsidiary’s business.

 

(i) Compliance
with Sanctions, Anti-Money Laundering and Anti-Corruption
Laws. Issuer and its Subsidiaries, Affiliates, directors,
officers, employees, agents, or representatives will not, directly
or, to the knowledge of Issuer and its Subsidiaries, indirectly,
use the proceeds from any Note, or lend, contribute or otherwise
make available such proceeds to any Subsidiary, joint venture
partner or any other person (i) to fund or facilitate any
activities or business of or with any individual, entity or
government that is, or is owned or controlled by one or more
persons that are, at the time of such funding or facilitation, the
subject of any economic or financial sanctions or trade embargoes
administered or enforced by the U.S. Department of Treasury’s
Office of Foreign Assets Control, the United Nations Security
Council, the Council of the European Union or Her Majesty’s
Treasury (United Kingdom), or any other relevant sanctions
authority) (collectively, “Sanctions”), or resident, located
or organized in any country or territory that is the subject of
comprehensive territorial Sanctions (currently including, Crimea,
Cuba, Iran, North Korea, and Syria) (each, a “Sanctioned Jurisdiction”); or (ii)
in any other manner that would result in a violation of any
Sanctions by Issuer, any Holder or any other person. Neither Issuer
nor any of its Subsidiaries nor, to the knowledge of Issuer, any
Affiliates, directors, officers, or employees of Issuer or any of
its Subsidiaries, is the subject of any Sanctions or resident,
located or organized in a Sanctioned Jurisdiction. Issuer and its
Subsidiaries have conducted their businesses in compliance with (i)
Sanctions; (ii) applicable anti-corruption laws, rules, and
regulations, including without limitation the U.S. Foreign Corrupt
Practices Act and the U.K. Bribery Act, each as may be amended, and
any rules or regulations thereunder (collectively,
“Anti-Corruption
Laws”); and (iii) applicable anti-money laundering
laws, rules, and regulations, including without limitation the
Money Laundering Control Act of 1986, as amended from time
(collectively, “Anti-Money
Laundering Laws”). Neither Issuer nor its
Subsidiaries, Affiliates, directors, officers, employees, agents,
or representatives will use, directly or, to the knowledge of
Issuer and its Subsidiaries, indirectly, the proceeds of the
financing in any manner or for any purpose that would result in a
violation of any Anti-Corruption Laws or Anti-Money Laundering Laws
by Issuer, or its Subsidiaries or Affiliates, any Holder or any
other person or entity. Issuer has instituted and maintained and
will continue to maintain policies, procedures and controls
reasonably designed to promote and achieve compliance with all
Sanctions, Anti-Corruption Laws, and Anti-Money Laundering Laws and
with the representations and warranties contained in this
subsection.

 

(j) Regulatory
Compliance. Issuer is not an “investment
company” or a company “controlled” by an
“investment company” under the Investment Company Act
of 1940, as amended. Issuer is not engaged as one of its important
activities in extending credit for margin stock (under Regulations
X, T and U of the Federal Reserve Board of Governors). Issuer (a)
has complied in all respects with all Requirements of Law the
noncompliance with which could reasonably be expected to have a
material adverse effect on its business, and (b) has not violated
any Requirements of Law the violation of which could reasonably be
expected to have a material adverse effect on its business. None of
Issuer’s or any of its Subsidiaries’ properties or
assets has been used by Issuer or any Subsidiary or, to
Issuer’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous
substance other than legally. Issuer and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all
Governmental Authorities that are necessary to continue their
respective businesses as currently conducted, except to the extent
that failure to obtain, make or file the same could not reasonably
be expected to have a material adverse effect on its
business.

 

(k) Investments.
Issuer does not own any stock, partnership, or other ownership
interest or other equity securities except for Permitted
Investments.

 

(l) Tax
Returns and Payments. Issuer has timely filed all required
tax returns and reports, and Issuer has timely paid all foreign,
federal, state and local taxes, assessments, deposits and
contributions owed by Issuer except (a) to the extent such taxes
are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, so long as such
reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor, (b)
if such taxes, assessments, deposits and contributions do not,
individually or in the aggregate, exceed Twenty-Five Thousand
Dollars ($25,000) or (c) to the extent that such filings and
payments may be made pursuant to automatic extensions. Issuer is
unaware of any claims or adjustments proposed for any of
Issuer’s prior tax years which could result in additional
taxes becoming due and payable by Issuer in excess of Twenty-Five
Thousand Dollars ($25,000).

 

 

6

 

 

(m) Shares.
Issuer has full power and authority to create a first lien on the
Shares (subject only to Permitted Liens that are permitted pursuant
to the terms of this Agreement to have superior priority to
Agent’s Lien in this Agreement) and no disability or
contractual obligation exists that would prohibit Issuer from
pledging the Shares pursuant to this Agreement. Except with respect
to the Lien in favor of the Senior Lender, to Issuer’s
knowledge, there are no subscriptions, warrants, rights of first
refusal or other restrictions on transfer relative to, or options
exercisable with respect to the Shares. The Shares have been and
will be duly authorized and validly issued, and are fully paid and
non-assessable. To Issuer’s knowledge, the Shares are not the
subject of any present or threatened suit, action, arbitration,
administrative or other proceeding, and Issuer knows of no
reasonable grounds for the institution of any such
proceedings.

 

(n) Full
Disclosure. No written representation, warranty or other
statement of Issuer or any Subsidiary in any certificate or written
statement given to Agent or any Holder, as of the date such
representation, warranty, or other statement was made, taken
together with all such written certificates and written statements
given to Agent or any Holder, contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not
misleading (it being recognized by Agent and the Holders that the
projections and forecasts provided by Issuer in good faith and
based upon reasonable assumptions are not viewed as facts and that
actual results during the period or periods covered by such
projections and forecasts may differ from the projected or
forecasted results).

 

(o) Definition
of “Knowledge.” For purposes of the Note
Documents, whenever a representation or warranty is made to
Issuer’s knowledge or awareness, to the “best of”
Issuer’s knowledge, or with a similar qualification,
knowledge or awareness means the actual knowledge, after reasonable
investigation, of any Responsible Officer.

 

5.

AFFIRMATIVE COVENANTS

 

5.1 Government
Compliance. Issuer shall, and shall cause each Subsidiary,
to (i) maintain its legal existence and good standing in its
jurisdiction of organization or formation and maintain
qualification in each jurisdiction in which the failure to so
qualify could reasonably be expected to have a material adverse
effect on Issuer’s or such Subsidiary’s business or
operations; (ii) comply with all laws, ordinances and regulations
to which it is subject; provided, that any such
noncompliance that could not reasonably be expected to have a
material adverse effect on Issuer’s business shall not be
deemed to be a breach of the foregoing covenant (iii) obtain all
material Governmental Approvals necessary for the performance by
Issuer or any Subsidiary of its obligations under the Note
Documents to which it is a party, promptly provide copies of any
such obtained Governmental Approvals to Agent; (iv) timely file all
required material tax returns and reports, and pay prior to
delinquency all federal and state and material foreign and local
taxes, assessments, deposits and contributions owed by Issuer or
such Subsidiary, except to the extent payment is deferred in
connection with taxes being contested by appropriate proceedings
promptly and diligently instituted and conducted with notification
to Agent and posting a bond or taking any other steps required to
prevent the governmental authority levying such contested taxes
from obtaining a Lien upon any of the Collateral that is other than
a “Permitted Lien”, and (v) maintain and comply with,
and shall cause each of its Subsidiaries to maintain and comply
with, in force all licenses, approvals and agreements, the loss of
which or failure to comply with which would reasonably be expected
to have a material adverse effect on Issuer’s business or
operations.

 

 

7

 

 

5.2 Financial
Statements, Reports, Certificates.

 

Issuer
shall:

 

(a) Deliver
to each Holder for as long as this Agreement is outstanding: (i) as
soon as available, but no later than forty-five (45) days after the
last day of each of the first three fiscal quarters of each fiscal
year, a company prepared consolidated balance sheet, income
statement and cash flow statement covering Issuer’s
consolidated operations for such quarter certified by a Responsible
Officer and in a form reasonably acceptable to Agent; (ii) as soon
as available, but in any event within ninety (90) days after the
end of Issuer’s fiscal year, audited consolidated financial
statements of Issuer prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial
statements from an independent certified public accounting firm
reasonably acceptable to Agent (it being understood that
Issuer’s accounting firm as of the Issue Date shall be
acceptable to Agent); (iii) promptly after approval by
Issuer’s board of directors (but in no event later than
thirty (30) days after last day of Issuer’s fiscal year), and
promptly but in any event within ten (10) days after any update
from time to time thereto, annual operating budgets for such fiscal
year (including income statements, balance sheets and cash flow
statements, by month) as approved by Issuer’s board of
directors, together with annual financial projections for such
fiscal year (on a quarterly basis) as approved by Issuer’s
board of directors, and any related business forecasts used in the
preparation of such annual financial projections; (iv) a prompt
report of any legal actions pending or threatened in writing
against Issuer or any of its Subsidiaries that could result in
damages or costs to Issuer or any of its Subsidiaries of
Seventy-Five Thousand Dollars ($75,000) or more or invalidation of
any material Intellectual Property; (v) a prompt report of all
returns, recoveries, disputes and claims, individually or in the
aggregate in excess of Fifty Thousand Dollars ($50,000), with
Account Debtors of Issuer or any Subsidiary; (vi) prompt notice of
an event that materially and adversely affects the value of the
Intellectual Property owned by Issuer or any Subsidiary or could
have a material adverse effect on Issuer’s business; (vii)
any financial statements, notices, reports or other information not
delivered pursuant to this Agreement provided to Senior Lender or
holders of Subordinated Debt and any amendments or other agreements
entered into with respect to the Senior Debt or Subordinated Debt;
and (viii) any budgets, sales projections, operating plans and
other information or reports as Agent may reasonably request from
time to time. In the event that Issuer becomes subject to the
reporting requirements under the Exchange Act, within five (5) days
of filing, Issuer shall deliver to Holders all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or notify Holders that a link thereto has been posted on
Issuer’s or another website on the Internet. Notwithstanding
anything herein to the contrary, in the case of documents required
to be delivered pursuant to this Section 5.2(a) and included in
materials otherwise filed with the SEC, (x) Issuer shall be deemed
to satisfy the requirements of this Section 5.2(a) to the extent
such documents are included in materials filed with the SEC in
compliance with the reporting requirements under the Exchange Act,
and (y) such documents may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on
which Issuer posts such documents, or provides a link thereto, on
Issuer’s website on the internet at Issuer’s website
address; provided, however, Issuer shall promptly notify Agent in
writing (which may be by electronic mail) of the posting of any
such documents.

 

(b) Together
with financial statements pursuant to Section 5.2(a)(i) and (ii),
deliver a duly completed Compliance Certificate signed by a
Responsible Officer.

 

(c) Allow
Agent to audit or inspect Issuer’s Collateral at reasonable
times during normal business hours and upon reasonable advance
notice to Issuer. Such audits or inspections shall be conducted no
more often than once every twelve (12) months, unless an Event of
Default has occurred and is continuing, in which case such
inspections and audits shall occur as often as Agent shall
determine is necessary.

 

(d) [reserved].

 

(e) Deliver
to Agent a copy of Issuer’s Articles of Incorporation, as
amended in connection with such equity financing and an updated
capitalization table in form acceptable to Agent in connection with
the next Compliance Certificate.

 

(f) Deliver
to Agent, within five (5) Business Days after the same are sent or
received, copies of all material correspondence, reports, documents
and other filings with any Governmental Authority that could
reasonably be expected to have a material adverse effect on any of
the Governmental Approvals material to Issuer’s or any
Subsidiary’s business or otherwise could reasonably be
expected to have a Material Adverse Change.

 

 

8

 

 

(g) Allow
representatives of Agent to attend (to the extent in person, one
person reasonably acceptable to Issuer at the sole cost and expense
of Issuer, or by conference call) all meetings of Issuer’s
board of directors in a non-voting observer capacity, and provide
such representatives with copies of all notices, minutes, written
consents, and other materials that it provides to members of
Issuer’s board of directors, at the time it provides them to
such members, provided that Issuer may redact (i) any portions of
such materials that are subject to attorney-client privilege, and
(ii) any portions of such materials result in a conflict of
interest between any Holder and its representative or their
respective affiliates or representatives, on the one hand, and
Issuer or its affiliates or representatives on the other hand,
concerning the financing transaction between Issuer and Holders or
other matters involving any Holder or their affiliates.
Notwithstanding the foregoing, Issuer may exclude such
representatives from portions of any meeting if (i) the attendance
by such representatives during such portion of the meeting would
jeopardize or otherwise impair the attorney-client privilege, or
(ii) if attendance at such meeting could result in a conflict of
interest between Holders and its representative or their respective
affiliates or representatives, on the one hand, and Issuer or its
affiliates or representatives on the other concerning the financing
transaction between Issuer and Holders or other matters involving
Holders or their Affiliates.

 

5.3 Collateral.
Issuer shall, and shall cause each Subsidiary, to (i) maintain good
title to, rights in, and the power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder, free
and clear of any and all Liens except Permitted Liens; (ii)
maintain possession of all Collateral, except for third party
bailees in the ordinary course of business, Inventory in transit
and movable items of personal property such as laptop computers;
and (iii) maintain all Equipment and personal property in good
operating condition and Inventory in good marketable condition,
free from material defects.

 

5.4 Inventory;
Returns. Issuer shall, and shall cause its Subsidiaries to,
keep all Inventory in good and marketable condition, free from
material defects. Returns and allowances between Issuer or a
Subsidiary and its Account Debtors shall follow Issuer’s
customary practices as they exist at the Issue Date.

 

5.5 Insurance.
Issuer shall, and shall cause each Subsidiary to, keep its business
and the Collateral insured for risks and in amounts standard for
companies in Issuer’s industry and location. Insurance
policies shall be in a form, with financially sound and reputable
insurance companies that are not Affiliates of Issuer, and in
amounts that are standard for companies in Issuer’s industry
and location and reasonably satisfactory to Agent; it being
understand that Issuer’s insurance in effect as of the Issue
Date is acceptable to Agent. All property policies covering real
and personal property with respect to Issuer shall have a lender
loss payable endorsement showing Agent as lender loss payee, and
all commercial general, products and auto liability policies shall
show, or have endorsements showing, Agent as an additional insured.
Notwithstanding the foregoing, (a) so long as no Event of Default
has occurred and is continuing, Issuer shall have the option of
applying proceeds with respect to any Collateral of any casualty
policy of Issuer in an amount up to Three Hundred Fifty Thousand
Dollars ($350,000) toward the replacement or repair of destroyed or
damaged property, or the purchase of property that is otherwise
useful to Issuer’s business; provided that any such replaced
or repaired property (i) shall be of equal or like value as the
replaced or repaired Collateral and (ii) shall be deemed Collateral
in which Agent has been granted a security interest, subject to
Permitted Liens, and (b) after the occurrence and during the
continuance of an Event of Default, except to the extent required
to be applied to the prepayment of any Senior Debt, all proceeds
with respect to Collateral payable under such casualty policy
shall, at the option of Agent, be payable to Agent, for the ratable
benefit of each Holder, on account of the Obligations.

 

5.6 Collateral
Accounts. Issuer shall not, and shall not permit any
Subsidiary to, maintain Collateral Accounts other than those
described in the Perfection Certificate delivered to Holders in
connection herewith, or of which Issuer has given Holders notice
and taken such actions as are necessary to give Agent a perfected
security interest therein pursuant to a Control Agreement in
accordance with this Section. For each Collateral Account that
Issuer or any Subsidiary at any time maintains, Issuer shall cause
the applicable bank or financial institution at or with which any
Collateral Account is maintained to execute and deliver a Control
Agreement with respect to such Collateral Account to perfect
Holder’s Lien in such Collateral Account. Notwithstanding the
foregoing, Issuer shall be permitted to maintain, and shall not be
required to deliver Control Agreements with respect to, its
Collateral Accounts with SunTrust Bank (the “SunTrust Accounts”), provided that
(i) the SunTrust Accounts shall not at any time maintain more than
Three Hundred Thousand Dollars ($300,000) in the aggregate and (ii)
the SunTrust Accounts must be closed, and the balances therein
transferred to a Collateral Account subject to a Control Agreement
in favor of Agent, by no later than August 14, 2020.

 

5.7 Litigation
Cooperation. From the date hereof and continuing through the
termination of this Agreement, Issuer shall, and shall cause any
Subsidiary, to make available to Holders, without expense to any
Holder, Issuer, its Subsidiaries, and its officers, employees and
agents and books and records, to the extent that any Holder may
deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against any Holder
with respect to any Collateral or relating to Issuer or its
Subsidiaries.

 

 

9

 

 

5.8 Intellectual
Property. Issuer shall, and shall cause its Subsidiaries to
(a) protect, defend and maintain the validity and enforceability of
the Intellectual Property that is material to its business; (b)
promptly advise Agent in writing of infringements of its
Intellectual Property that could reasonably be expected to
materially and adversely affect the value of its Intellectual
Property; and (c) not allow any Intellectual Property material to
Issuer’s or any Subsidiary’s business to be abandoned,
forfeited or dedicated to the public without Agent’s written
consent. Issuer and Guarantors are and shall remain the sole owner
of its Intellectual Property, except for (a) non-exclusive licenses
granted to its customers in the ordinary course of business, (b)
over-the-counter software that is commercially available to the
public, and (c) material Intellectual Property licensed to Issuer
and noted on the Perfection Certificate. Except as noted on the
Perfection Certificate, no Issuer or Subsidiary is a party to, nor
is it bound by, any Restricted License. Issuer shall provide
written notice to Agent within thirty (30) days of it or any
Subsidiary entering or becoming bound by any Restricted License
(other than over-the-counter software that is commercially
available to the public). Issuer shall take such steps as Agent may
reasonably request to obtain the consent of, or waiver by, any
person whose consent or waiver is necessary for (i) any Restricted
License to be deemed “Collateral” and for Agent to have
a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such Restricted License,
whether now existing or entered into in the future, and (ii) Agent
to have the ability in the event of a liquidation of any Collateral
to dispose of such Collateral in accordance with Agent’s
rights and remedies under this Agreement and the other Note
Documents. As used in this Agreement, the term “non-exclusive
license” shall include any license that provides limited
exclusivity to the licensee based on geography outside the United
States or distinct market segments (provided, in all events, such
license is not actually, tantamount to, or deemed to be for
accounting purposes, a sale or other transfer of the underlying
Intellectual Property).

 

If
Issuer or any Subsidiary (i) obtains any patent, registered
trademark or servicemark, registered copyright, registered mask
work, or any pending application for any of the foregoing, or (ii)
applies for any patent or the registration of any trademark or
servicemark, then Issuer shall provide written notice thereof in
the Compliance Certificate delivered to Agent pursuant to
Section 5.2(b) and
shall execute such IP Agreements and other documents and take such
other actions as Agent shall reasonably request to perfect and
maintain a perfected security interest (subject to Permitted Liens)
in favor of Agent for the ratable benefit of the Holders in such
property. Issuer shall upon Agent’s request provide to Agent
copies of all applications that filed by it or a Subsidiary for
patents or for the registration of trademarks, servicemarks,
copyrights or mask works, together with evidence of the recording
of the IP Agreement necessary for Agent to perfect and maintain a
perfected security interest (subject to Permitted Liens) in such
property. If Issuer or any Subsidiary decides to register any
copyrights or mask works in the United States Copyright Office
which Issuer determines to be material to Issuer’s or such
Subsidiary’s business, Issuer shall: (x) provide Agent with
at least fifteen (15) days prior written notice of Issuer’s
intent to register such copyrights or mask works together with a
copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (y) execute an IP
Agreement and such other documents and take such other actions as
Agent may reasonably request in its good faith business judgment to
perfect and maintain a perfected security interest (subject to
Permitted Liens) in favor of Agent for the ratable benefit of
Holders in the copyrights or mask works intended to be registered
with the United States Copyright Office; and (z) record such IP
Agreement with the United States Copyright Office contemporaneously
with filing the copyright or mask work application(s) with the
United States Copyright Office. Upon Agent’s request, Issuer
shall provide to Agent copies of all applications filed by it or a
Subsidiary for patents or for the registration of trademarks,
servicemarks, copyrights or mask works, together with evidence of
the recording of the IP Agreement necessary for Agent to perfect
and maintain a perfected security interest (subject to Permitted
Liens) in such property.

 

5.9 Use
of Proceeds. Issuer shall use the proceeds of the Notes: (i)
as working capital and to fund its general corporate and business
requirements and not for personal, family, household or
agricultural purposes, (ii) to repay the Existing Indebtedness in
full on the Issue Date and (iii) to finance a portion of the
Celularity Acquisition.

 

5.10 Holder
Meetings. Issuer will, (i) within ninety (90) days after the
close of each fiscal year of Issuer, at the request of any Holder,
hold a meeting (at a mutually agreeable location and time or, at
the option of any Holder, by conference call), at which meeting
shall be reviewed the financial results of the previous fiscal
year, the financial condition of Issuer and its Subsidiaries and
the projections and business plan for the following fiscal year, as
well as the prospects of the business of Issuer and its
Subsidiaries and any other matters that any Holder may wish to
discuss, and (ii) within forty-five (45) days after the close of
the first three fiscal quarters of each fiscal year, at the request
of any Holder and upon reasonable prior notice, participate in a
conference call to review the financial results of the fiscal
quarter then ended, as well as prospects of the business of Issuer
and its Subsidiaries and any other matters that any Holder may wish
to discuss.

 

5.11 Formation
or Acquisition of Subsidiaries. If Issuer forms any new
Subsidiary or acquires any new Subsidiary after the Issue Date,
Issuer shall (a) cause such Subsidiary to provide to Agent a
Guaranty of this Agreement, together with such appropriate
collateral security documents, including any Control Agreements,
all in form and substance reasonably satisfactory to Agent, (b)
provide to Agent appropriate certificates and powers and financing
statements, pledging all of the direct or beneficial ownership
interest held in such Subsidiary, in form and substance reasonably
satisfactory to Agent, and (c) provide to Agent all other
documentation in form and substance reasonably satisfactory to
Agent. Without limiting the foregoing, Agent reserves the right to
take appropriate steps, as Agent reasonably determines, to perfect
the security interest granted over the assets of, or equity
interests in, any Foreign Subsidiary, in each case, in the relevant
jurisdiction of organization of such Foreign
Subsidiary.

 

 

10

 

 

5.12 SBA
PPP Loan.

 

() Issuer shall use
all of the proceeds of the SBA PPP Loan exclusively for CARES
Forgivable Uses in the manner required under the CARES Act to
obtain forgiveness of the largest possible amount of the SBA PPP
Loan, which as of the date hereof requires that Issuer use not less
than sixty percent (60.00%) of the SBA PPP Loan proceeds for CARES
Payroll Costs.

 

(a) On the date of
delivery of each Compliance Certificate following the SBA PPP Loan
Date, Issuer shall deliver to Agent (x) a report on the use of the
proceeds of the SBA PPP Loan and supporting documentation with
respect thereto, in each case in form and substance reasonably
satisfactory to Agent or (y) such other, similar report and/or
documentation as is provided to the SBA and/or the SBA PPP Loan
Lender related.

 

(b) Issuer shall (i)
maintain all records required to be submitted in connection with
the forgiveness of the SBA PPP Loan, (ii) apply for forgiveness of
the SBA PPP Loan in accordance with regulations implementing
Section 1106 of the CARES Act within thirty (30) days after the
last day of the eight (8) week period immediately following the SBA
PPP Loan Date and (iii) provide Holder with a copy of its
application for forgiveness and all supporting documentation
required by the SBA or the SBA PPP Loan Lender in connection with
the forgiveness of the SBA PPP Loan.

 

5.13 Further Assurances. Subject to the last
sentence of Section
3, Issuer shall execute any further instruments and take
further action as Agent may reasonably request to perfect or
continue Agent’s Lien in the Collateral or to effect the
purposes of this Agreement.

 

6.

NEGATIVE COVENANTS

 

Issuer
shall not, and shall not permit any Subsidiary to, do any of the
following, without Holders’ prior written
consent:

 

6.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of
(collectively, “Transfer”) all or any part of its
business or property, except for Transfers (a) of Inventory in the
ordinary course of business, (b) of Accounts in the ordinary course
of business (and otherwise made in accordance with this Agreement),
(c) of worn-out, unused, obsolete or surplus Equipment; (d) in
connection with Permitted Liens and Permitted Investments; (e) made
in accordance with Section 6.3, (f) by any Subsidiary that is not a
Guarantor to (x) Issuer or any Guarantor and (y) any other
Subsidiary which is not a Guarantor; and (g) other Transfers in an
aggregate amount not to exceed One Hundred Thousand ($100,000) in
any fiscal year.

 

6.2 Changes
in Business, Management, Ownership, or Business Locations.
(a) Engage in any business other than the businesses currently
engaged in by Issuer or such Subsidiary, as applicable, or
reasonably related thereto or contemplated by Issuer’s
research and development plan as approved by its board of
directors; (b) cease doing business, liquidate or dissolve; (c)
suffer Issuer’s chief executive officer to cease holding such
office without a replacement being appointed within ninety (90)
days; (d) permit or suffer a Change in Control of Issuer or any
Subsidiary. Issuer shall not, without at least ten (10) days’
prior written notice to Agent: (1) add any new offices or business
locations, unless such new offices or business locations contain
less than One Hundred Thousand Dollars ($100,000) in Issuer’s
assets or property, (2) change its jurisdiction of organization,
(3) change its organizational structure or type, (4) change its
legal name, or (5) change any organizational number (if any)
assigned by its jurisdiction of organization.

 

 

11

 

 

6.3 Mergers
or Acquisitions. Merge or consolidate with any other Person,
or acquire all or substantially all of the capital stock or
property of another Person, except that a Subsidiary may merge or
consolidate into another Subsidiary or into Issuer, provided that
if a Guarantor or Issuer is a party to such transaction, such
Guarantor or Issuer shall be the surviving entity.

 

6.4 Indebtedness:
Encumbrance; Investments; Distributions. (a) Create, incur,
assume, or be liable for any Indebtedness other than Permitted
Indebtedness; (b) create, incur, assume or suffer to exist any Lien
of any kind upon any of its property, whether now owned or
hereafter acquired except Permitted Liens; (c) make any Investment
except for Permitted Investments; and (d) pay any dividends or make
any distribution or payment or redeem, retire or purchase any
capital stock except for Permitted Distributions.

 

6.5 Minimum
Liquidity. Issuer and its Subsidiaries shall at all times
maintain Liquidity, on a consolidated basis, of at least Five
Million Dollars ($5,000,000); provided, that, the proceeds of the
SBA PPP Loan shall not be considered for purposes of compliance
with this Section 6.5.

 

6.6 Transactions
with Affiliates. Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Issuer,
except for (i) transactions with any Affiliate of Issuer that are
in the ordinary course of Issuer’s business (including but
not limited to the payment of ordinary course compensation and
benefits to Issuer’s or such Subsidiary’s employees),
upon fair and reasonable terms that are no less favorable to Issuer
or such Subsidiary than would be obtained in an arm’s length
transaction with a non-affiliated Person, (ii) transactions between
or among Issuer and its Subsidiaries which are expressly permitted
by this Agreement and any other, (iii) equity and bridge financings
constituting Subordinated Debt with Issuer’s existing
investors and (iv) the Subordinated Notes. The participation of any
then-existing investors of Issuer in future bona fide equity
financings and subordinated note financings of Issuer and
transactions between Issuer and its Subsidiaries that are not
otherwise restricted pursuant hereto shall not be deemed to be a
violation of this Section (including any equity financings or
subordinated note financings led by such investors of
Issuer).

 

6.7 Subordinated
Debt. (a) Make or permit any payment on any Subordinated
Debt, except (i) under the terms of the subordination,
intercreditor, or other similar agreement to which such
Subordinated Debt is subject and (ii) in the case of any cash
payment on any Subordinated Note, solely to the extent that (A)
immediately prior, and after giving pro forma effect, to such
payment, no Potential Default or Event of Default has occurred and
is continuing or could reasonably be expected to result therefrom,
including with respect to Section 6.5, and (B) such payment shall
be made solely with the proceeds from an substantially
contemporaneous equity financing consummated after the Issue Date,
or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof, provide
for earlier or greater principal, interest, or other payments
thereon, or adversely affect the subordination thereof to
Obligations owed to Holders, except as may be permitted by the
subordination, intercreditor or other similar agreement to which
such Subordinated Debt is subject; provided, however, that the
issuance of equity securities upon conversion of Subordinated Debt
shall not be prohibited by the foregoing.

 

6.8 Compliance.
Become an “investment company” or a company controlled
by an “investment company” under the Investment Company
Act of 1940, as amended or undertake as one of its important
activities extending credit to purchase or carry margin stock (as
defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of the Notes for that purpose;
fail to (a) meet the minimum funding requirements of the ERISA, (b)
permit a Reportable Event or Prohibited Transaction, as defined in
ERISA, to occur; or (c) comply with the Federal Fair Labor
Standards Act or any other law or regulation; if the failure of any
of the conditions described in clauses (a) through (c) could
reasonably be expected to have a material adverse effect on
Issuer’s business or operations or could reasonably be
expected to cause a Material Adverse Change.

 

7.

EVENTS OF DEFAULT

 

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

 

7.1 Payment
Default. Issuer fails to (a) make any payment of principal
or interest due under any Note on its due date, or (b) pay any
other Obligations within three (3) Business Days of the date when
due (which three (3) Business Day grace period shall not apply to
payments due on the Maturity Date or the date of acceleration
pursuant to section 8.1 hereof).

 

 

12

 

 

7.2 Covenant
Default.

 

(a) Issuer
fails or neglects to perform any obligation in Sections 5.2, 5.5, 5.6, 5.8 or
5.10 or violates any covenant in Section 6; or

 

(b) Issuer
fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this
Agreement or any other Note Documents, and as to any such default
other than those specified in Section 7.1 or 7.2 (a), Issuer has failed to
cure such default within ten (10) days of the occurrence of such
default; and as to any default (other than those specified in this
Section 7) under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that
if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Issuer be cured
within such ten (10) day period, and such default is likely to be
cured within a reasonable time, then Issuer shall have an
additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an
Event of Default (but no credit extensions shall be made during
such cure period).

 

7.3 Material
Adverse Change. A Material Adverse Change
occurs.

 

7.4 Attachment;
Levy; Restraint on Business. (a) (i) The service of process
seeking to attach, by trustee or similar process, any funds of
Issuer or any Subsidiary, or (ii) a notice of lien, levy, or
assessment is filed against any of Issuer’s or a
Subsidiary’s assets by any Government Authority, and the same
under subclauses (i) and (ii) hereof are not, within twenty (20)
days after the occurrence thereof, discharged or stayed (whether
through the posting of a bond or otherwise); (b) any material
portion of Issuer’s or a Subsidiary’s assets is
attached, seized, levied on, or comes into possession of a trustee
or receiver, or any court order enjoins, restrains, or prevents
Issuer or a Subsidiary from conducting any part of its business; or
(c) the delivery of a notice of foreclosure or exclusive control to
any entity holding or maintaining Issuer’s or a
Subsidiary’s deposit accounts or accounts holding securities
by any Person (other than by Agent or any Holder) seeking to
foreclose or attach any such accounts or securities.

 

7.5 Insolvency.
(a) Issuer or any Subsidiary is unable to pay its debts (including
trade debts) as they become due or otherwise becomes insolvent; (b)
Issuer or any Subsidiary begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Issuer or any Subsidiary and
is not dismissed or stayed within forty-five
(45) days.

 

7.6 Other
Agreements. There is a default in any agreement to which
Issuer is a party with a third party or parties which consists of
the failure to pay any Indebtedness at maturity or which results in
a right by such third party or parties, whether or not exercised,
to accelerate the maturity of Indebtedness in an aggregate amount
in excess of One Million Dollars ($1,000,000); provided, however,
that (i) the Event of Default under this Section 7.6 caused by the
occurrence of a breach or default under such other agreement shall
be cured or waived for purposes of this Agreement upon Agent
receiving written notice from the party asserting such breach or
default of such cure or waiver of the breach or default under such
other agreement, if at the time of such cure or waiver under such
other agreement (x) Agent has not declared an Event of Default
under this Agreement and/or exercised any rights with respect
thereto; (y) any such cure or waiver does not result in an Event of
Default under any other provision of this Agreement or any other
Note Document; and (z) in connection with any such cure or waiver
under such other agreement, the terms of any agreement with such
third party are not modified or amended in any manner which could
in the good faith business judgment of Agent be materially less
advantageous to Issuer or any Guarantor; and (ii) this Section 7.6 shall not apply to
any Subordinated Debt or Subordinated Note, any breach or default
with respect to which shall be governed by Section 7.10.

 

7.7 Judgments.
One or more judgments, orders, or decrees for the payment of money
in an amount, individually or in the aggregate, of at least One
Million Dollars ($1,000,000) shall be rendered against Issuer and
shall remain unsatisfied, unvacated, or unstayed for a period of
ten (10) days after the entry thereof.

 

7.8 Misrepresentations.
Issuer or any Person acting for Issuer makes any representation,
warranty, or other statement now or later in this Agreement, any
other Note Document or in any writing delivered to Agent or any
Holder or to induce Agent or any Holder to enter this Agreement or
any other Note Document, and such representation, warranty, or
other statement is incorrect in any material respect when
made.

 

 

13

 

 

7.9 Senior
Debt. A default or breach occurs and is continuing under any
agreement with respect to Senior Debt and all applicable cure
periods have elapsed; provided, however, that the Event of Default
under this Section
7.9 caused by the occurrence of a breach or default with
respect to the Senior Debt shall be cured or waived for purposes of
this Agreement upon Agent receiving written notice from the Senior
Lender of such cure or waiver of the breach or default with respect
to the Senior Debt, if at the time of such cure or waiver with
respect to the Senior Debt (x) Agent has not declared an Event of
Default under this Agreement and/or exercised any rights with
respect thereto; (y) any such cure or waiver does not result in an
Event of Default under any other provision of this Agreement or any
other Note Document; and (z) in connection with any such cure or
waiver with respect to the Senior Debt, the terms of the Senior
Debt are not modified or amended in any manner which could in the
good faith business judgment of Agent be materially less
advantageous to Issuer or any Guarantor.

 

7.10 Subordinated
Debt. Any document, instrument, or agreement evidencing the
subordination of any Subordinated Debt shall for any reason be
revoked or invalidated or otherwise cease to be in full force and
effect; any Person shall be in breach thereof or contest in any
manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder; or there shall
occur any default or event of default (howsoever defined) under any
Subordinated Note.

 

7.11 Guaranty.
(a) Any Guaranty terminates or ceases for any reason to be in full
force and effect; (b) any Guarantor does not perform any obligation
or covenant under any Guaranty within any applicable cure or grace
period in any Guaranty; (c) the liquidation, winding up, or
termination of existence of any Guarantor; (d) there is a material
impairment in the perfection or priority of Agent’s Lien in
the Collateral, taken as a whole, provided by Guarantor or in the
value of such Collateral; or (e) if any of the circumstances
described in Section 7.3 through 7.8 occurs with respect to a
Guarantor.

 

7.12 Governmental
Approvals. Any Governmental Approval material to Issuer or
any Subsidiary’s business shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term, or (b) subject to any
decision by a Governmental Authority that designates a hearing with
respect to any applications for renewal of any of such Governmental
Approval or that could result in the Governmental Authority taking
any of the actions described in clause (a) above, and such decision
or such revocation, rescission, suspension, modification or
non-renewal (i) will cause, or could reasonably be expected to
cause, a Material Adverse Change, or (ii) adversely affects the
legal qualifications of Issuer or any Subsidiary to hold such
Governmental Approval in any applicable jurisdiction and such
revocation, rescission, suspension, modification or non-renewal
could reasonably be expected to affect the status of or legal
qualifications of Issuer or any Subsidiary to hold any Governmental
Approval in any other jurisdiction, that will cause, or could
reasonably be expected to cause, a Material Adverse
Change.

 

 

14

 

 

8.

AGENT’S RIGHTS AND REMEDIES

 

8.1 Rights
and Remedies. While an Event of Default occurs and continues
Agent may, without notice or demand, do any or all of the
following: (a) declare all Obligations immediately due and payable
(but if an Event of Default described in Section 7.5 occurs all
Obligations are immediately due and payable without any action by
Agent or any Holder); (b) stop extending credit for Issuer’s
benefit under this Agreement or under any other agreement between
Issuer and any Holder; (c) settle or adjust disputes and claims
directly with Account Debtors for amounts on terms and in any order
that Agent consider advisable, notify any Person owing Issuer money
of Agent’s security interest in such funds, and verify the
amount of such account; (d) make any payments and do any acts it
considers necessary or reasonable to protect the Collateral and/or
its security interest in the Collateral; (e) apply to the
Obligations any amount held by any Holder owing to or for the
credit or the account of Issuer; (f) ship, reclaim, recover, store,
furnish, maintain, repair, prepare for sale, advertise for sale,
and sell the Collateral; (g) deliver a notice of exclusive control,
any entitlement order, or other directions or instructions pursuant
to any Control Agreement or similar agreements providing control of
any Collateral; (h) demand and receive possession of Issuer’s
Books; and (i) exercise all rights and remedies available to Agent
under the Note Documents or at law or equity, including all
remedies provided under the Code (including disposal of the
Collateral pursuant to the terms thereof). Issuer shall assemble
the Collateral if Agent requests and make it available as Agent
designates. Agent may enter premises where the Collateral is
located, take and maintain possession of any part of the
Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and
pay all expenses incurred. Issuer grants Agent a license to enter
and occupy any of its premises, without charge, to exercise any of
Agent’s rights or remedies. Agent is hereby granted a
non-exclusive, royalty-free license or other right, solely pursuant
to the provisions of this Section 8.1, to use, without charge,
Issuer’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any similar property as it
pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection
with Agent’s exercise of its rights under this Section,
Issuer’s rights under all licenses and all franchise
agreements inure to Agent’s benefit; provided such license
and rights shall only be exercisable in connection with the
disposition of Collateral upon Agent’s exercise of its
remedies hereunder. Issuer hereby irrevocably appoints Agent as its
lawful attorney-in-fact, exercisable only upon the occurrence and
only during the continuance of an Event of Default, to: (i) endorse
Issuer’s name on any checks or other forms of payment or
security; (ii) sign Issuer’s name on any invoice or bill of
lading for any Account or drafts against Account Debtors; (iii)
settle and adjust disputes and claims about the Accounts directly
with Account Debtors, for amounts and on terms Agent determines
reasonable; (iv) make, settle, and adjust all claims under
Issuer’s insurance policies; (v) pay, contest or settle any
Lien, charge, encumbrance, security interest, and adverse claim in
or to the Collateral, or any judgment based thereon, or otherwise
take any action to terminate or discharge the same; and (vi)
transfer the Collateral into the name of Agent or any Holder or a
third party as the Code permits. Issuer hereby appoints Agent as
its lawful attorney-in-fact to sign Issuer’s name on any
documents necessary to perfect or continue the perfection of
Agent’s security interest in the Collateral regardless of
whether an Event of Default has occurred until all Obligations
(other than inchoate indemnity obligations, and any other
obligations which, by their terms, are to survive the termination
of this Agreement) have been satisfied in full. Agent’s
foregoing appointment as Issuer’s attorney in fact, and all
of Agent’s rights and powers, coupled with an interest, are
irrevocable until all Obligations (other than inchoate indemnity
obligations, and any other obligations which, by their terms, are
to survive the termination of this Agreement) have been fully
repaid and performed. Issuer waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Agent on which Issuer is liable. If Issuer fails
to pay any amounts or furnish any required proof of payment due to
third persons or entities, as required under the terms of this
Agreement, then Agent or any Holder may do any or all of the
following: (x) make payment of the same or any part thereof; or (y)
obtain and maintain insurance policies of the type discussed in
Section 5.5, and
take any action with respect to such policies as Agent or such
Holder deems prudent. Any amounts paid or deposited by Agent or any
Holder shall constitute Holder Expenses, shall be immediately due
and payable, shall bear interest at the Default Rate and shall be
secured by the Collateral. Any payments made by Agent or any Holder
shall not constitute an agreement by Agent or any Holder to make
similar payments in the future or a waiver by Agent or any Holder
of any Event of Default under this Agreement.

 

8.2 Application
of Payments and Proceeds. All payments received by Agent or
any Holder prior to an Event of Default shall be applied as
follows: (1) first, to Holder Expenses then due and owing; and (2)
second to all payments on each Note then due and owing
(provided,
however, if such
payments are not sufficient to pay the whole amount then due, such
payments shall be applied first to fees, then unpaid interest, then
to the remaining amount then due). After the occurrence and during
the continuance of an Event of Default, Agent and Holders may apply
any funds in its possession, whether from payments, proceeds
realized as the result of any collection of Accounts or other
disposition of the Collateral, or otherwise, to the Obligations in
such order as Agent shall determine in its sole discretion. Any
surplus shall be paid to Issuer or other Persons legally entitled
thereto; Issuer shall remain liable to Agent and Holders for any
deficiency. If Agent or any Holder, in its good faith business
judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of
Collateral, Agent and Holders shall have the option, exercisable at
any time, of either reducing the Obligations by the principal
amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Agent and Holders of cash
therefor.

 

 

15

 

 

8.3 Agent’s
and Holders’ Liability for Collateral. So long as
Agent complies with the Code regarding the safekeeping of the
Collateral (including Section 9-207 of the Code) in the possession
or under the control of Agent, neither Agent nor any Holder shall
be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person.
Issuer bears all risk of loss, damage or destruction of the
Collateral.

 

8.4 No
Waiver; Remedies Cumulative. Agent’s and
Holders’ failure, at any time or times, to require strict
performance by Issuer of any provision of this Agreement or any
other Note Document shall not waive, affect, or diminish any right
of Agent and Holders thereafter to demand strict performance and
compliance herewith or therewith. No waiver hereunder shall be
effective unless signed by Agent and the Required Holders and then
is only effective for the specific instance and purpose for which
it is given. Agent’s and Holders’ rights and remedies
under this Agreement and the other Note Documents are cumulative.
Holder has all rights and remedies provided under the Code, by law,
or in equity. Agent’s or Holders’ exercise of one right
or remedy is not an election, and Agent’s or Holders’
waiver of any Event of Default is not a continuing waiver.
Agent’s or Holders’ delay in exercising any remedy is
not a waiver, election, or acquiescence.

 

8.5 Share
Collateral. Issuer recognizes that Agent may be unable to
effect a public sale of any or all the Collateral comprising shares
of Issuer’s Subsidiaries, by reason of certain prohibitions
contained in federal securities laws and any other applicable
securities laws or otherwise, and may be compelled to resort to one
or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view
to the distribution or resale thereof or other applicable
restrictions. Issuer acknowledge and agree that any such private
sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to
have been made in a commercially reasonable manner. Holder shall be
under no obligation to delay a sale of any of the Shares for the
period of time necessary to permit the issuer thereof to register
such securities for public sale under federal securities laws or
under applicable state or foreign securities laws.

 

9.

NOTICES.

 

All
notices or other communication by any party to this Agreement or
any other Note Document must be in writing and shall be deemed to
have been validly served, given, or delivered: (a) upon the earlier
of actual receipt and three (3) Business Days after deposit in the
U.S. mail, first class, registered or certified mail return receipt
requested, with proper postage prepaid; (b) upon transmission, when
sent by electronic mail or facsimile transmission; (c) one (1)
Business Day after deposit with a reputable overnight courier with
all charges prepaid; or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email
address indicated below its signature block on the signature page
hereof. Agent or Issuer may change its mailing or electronic mail
address or facsimile number by giving the other parties written
notice thereof in accordance with the terms of this Section 9.

 

10.

CHOICE OF LAW, VENUE, JURY TRIAL WAIVER

 

New
York law governs the Note Documents without regard to principles of
conflicts of law. Issuer, Agent and each Holder each submit to the
exclusive jurisdiction of the State and Federal courts in New York
County, City of New York, New York; provided, however, that nothing
in this Agreement shall be deemed to operate to preclude Agent or
any Holder from bringing suit or taking other legal action in any
other jurisdiction to realize on the Collateral or any other
security for the Obligations, or to enforce a judgment or other
court order in favor of Agent or any Holder. Issuer expressly
submits and consents in advance to such jurisdiction in any action
or suit commenced in any such court, and Issuer hereby waives any
objection that it may have based upon lack of personal
jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is
deemed appropriate by such court.

 

TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ISSUER, AGENT AND
EACH HOLDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE
NOTE DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT,
TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR ALL PARTIES TO ENTER INTO THIS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT OR ANYWHERE ELSE, EACH PARTY AGREES THAT IT SHALL NOT
SEEK FROM ANY OTHER PARTY UNDER ANY THEORY OF LIABILITY (INCLUDING
ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.

 

This
Section 10 shall
survive the termination of this Agreement.

 

 

16

 

 

11.

GENERAL PROVISIONS

 

11.1 Successors
and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party hereto. Issuer
may not assign this Agreement or any rights or obligations under it
without Agent’s prior written consent (which may be granted
or withheld in Agent’s discretion).

 

11.2 Indemnification.
Issuer agrees to indemnify, defend and hold Agent and each Holder
and their respective directors, officers, employees, agents or
attorneys, or any other Person affiliated with or representing
Agent or any Holder (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”) asserted by any other
party in connection with the transactions contemplated by the Note
Documents; and (b) all losses or Holder Expenses incurred, or paid
by such Indemnified Person from, following, or arising from
transactions between Agent, any Holder and Issuer (including
reasonable and documented out-of-pocket attorneys’ fees and
expenses), except, in the case of clauses (a) and (b), for Claims
and/or losses directly caused by such Indemnified Person’s
gross negligence, bad faith or willful misconduct.

 

11.3 Amendments
in Writing; Integration. All amendments to this Agreement
must be in writing and signed by the Required Holders and Issuer.
This Agreement and the other Note Documents represent the entire
agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations among the parties
hereto about the subject matter of this Agreement and the other
Note Documents merge into this Agreement and the other Note
Documents. Issuer acknowledges that it is not relying on any
representation or agreement made by Agent or any Holder or any
employee, attorney or agent thereof, other than the specific
agreements set forth in this Agreement and the Note
Documents.

 

11.4 Miscellaneous.
All sums payable by Issuer pursuant to this Agreement or any of the
other Note Documents shall be payable without notice or demand and
shall be payable in United States Dollars without set-off or
reduction of any manner whatsoever. This Agreement may be executed
in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, are an
original, and all taken together, constitute one Agreement. All
covenants, representations and warranties made in this Agreement
continue in full force until this Agreement has terminated pursuant
to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to
survive the termination of this Agreement) have been satisfied. The
obligation of Issuer in Section 11.2 to indemnify Agent
and each Holder shall survive until the statute of limitations with
respect to such claim or cause of action shall have
run.

 

11.5 Register.
MS Expansion Credit GP, L.P., acting solely for this purpose as an
agent of Issuer, shall maintain at one of its offices a copy of any
assignment with respect to the Note Documents delivered to it and a
register for the recordation of the names and addresses of any
Holder of any Note from time to time (the “Register”). The entries in the
Register shall be conclusive absent manifest error, and Issuer,
Agent and each Holder shall treat each Person whose name is
recorded in the Register pursuant to the terms hereof as the Holder
of each Note for all purposes hereof and thereof. The Register
shall be available for inspection by Issuer, Agent and any Holder
from time to time, at any reasonable time and from time to time
upon reasonable prior notice. If a Holder sells a participation,
such Holder shall, acting solely for this purpose as a
non-fiduciary agent of Issuer, maintain a register on which it
enters the name and address of each such participant and the
principal amounts (and stated interest) of each participant’s
interest in the Notes or other obligations under the Note Documents
(the “Participant
Register”); provided that a Holder shall not have any
obligation to disclose all or any portion of the Participant
Register (including the identity of any participant or any
information relating to a participant’s interest in this
Agreement or any other obligations under any Note Document) to any
Person except to the extent that such disclosure is necessary to
establish that such obligation is in registered form under Section
5f.103-1(c) of the United States Treasury Regulations. The entries
in the Participant Register shall be conclusive absent manifest
error, and Issuer Agent and each Holder shall treat each Person
whose name is recorded in the Participant Register as the owner of
such participation for all purposes of this Agreement
notwithstanding any notice to the contrary.

 

11.6 Purchase
Price Allocation. Issuer and each Holder acknowledges and
agrees that the Notes and Warrants are parts of an investment unit
within the meaning of Section 1273(c)(2) of the IRC. Issuer and
each Holder further agree as between them, that the fair market
value of each Warrant is Two Million One Hundred Forty-Two Thousand
Nine Hundred Seventy Dollars ($2,142,970) and that, pursuant to
Treas. Reg. § 1.1273-2(h), Two Million One Hundred Forty-Two
Thousand Nine Hundred Seventy Dollars ($2,142,970) of the issue
price of the investment unit of each Holder will be allocable to
the Warrant of such Holder and the balance shall be allocable to
the Note issued to such Holder. Issuer and each Holder agree to
prepare their federal income tax returns in a manner consistent
with the foregoing. Issuer agrees that it shall not (and shall
cause its Subsidiaries not to) challenge or support any challenge
to the agreed-upon value of the Warrants.

 

11.7 Time
of Essence. Time is of the essence for the performance of
all Obligations in this Agreement.

 

11.8 Severability
of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any
provision.

 

 

17

 

 

11.9 Correction
of Note Documents. Agent may correct patent errors and fill
in any blanks in the Note Documents consistent with the agreement
of the parties hereto so long as Agent provides Issuer with prior
written notice of such correction and allows Issuer at least ten
(10) days to object to such correction. In the event of such
objection, such correction shall not be made except by an amendment
signed by Agent and Issuer.

 

11.10 Confidentiality.
In handling any confidential information, Agent and each Holder
shall exercise the same degree of care that it exercises for its
own proprietary information, but disclosure of information may be
made: (a) to its Subsidiaries or Affiliates so long as such
Subsidiaries or Affiliates are subject to this Section 11.10; (b)
to prospective transferees or purchasers of any interest in this
Agreement (provided, however, that any prospective transferee or
purchaser shall have entered into an agreement containing
provisions substantially the same as this Section 11.10); (c) as
required by law, regulation, subpoena, or other order; (d) to its
regulators or as otherwise required in connection with its
examination or audit; (e) as it consider appropriate in exercising
remedies under the Note Documents; and (f) to its third-party
service providers so long as such service providers are subject to
the same or similar confidentiality requirements. Confidential
information does not include information that either: (i) is in the
public domain or in Agent’s or any Holder’s possession
when disclosed to it, or becomes part of the public domain after
disclosure to Agent or any Holder; or (ii) is disclosed to Agent or
any Holder by a third party, if Agent or a Holder does not know
that the third party is prohibited from disclosing the
information.

 

12.

THE AGENT

 

12.1 Appointment,
Powers and Immunities. Each Holder hereby irrevocably
appoints and authorizes North Haven Expansion to act as its agent
hereunder and under the other Note Documents with such powers as
are specifically delegated to Agent by the terms of this Agreement
and the other Note Documents, together with such other powers as
are reasonably incidental thereto. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement
and the other Note Documents and shall not be a trustee for any
Holder. Agent shall not be responsible to the Holders for any
recitals, statements, representations or warranties contained in
this Agreement or the other Note Documents, or in any certificate
or other document referred to or provided for in, or received by
any of them under, this Agreement or the other Note Documents, or
for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement, the other Note Documents, or any
other document referred to or provided for herein or therein, or
for the collectability of the Obligations or for the validity,
effectiveness or value of any interest or security granted herein
or for the value of any Collateral or for the validity or
effectiveness of any assignment, mortgage, pledge, security
agreement, financing statement, document or instrument, or for any
failure by any Issuer to perform any of its obligations hereunder
or under the other Note Documents. Agent may employ agents and
attorneys-in-fact and shall not be answerable, except as to money
or securities received by it or its authorized agents, for the
negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Neither Agent nor any of its
directors, officers, members, managers, employees or agents shall
be liable or responsible for any action taken or omitted to be
taken by it or them hereunder or under the other Note Documents or
in connection herewith or therewith, except for its or their own
gross negligence, willful misconduct, or breach of this
Agreement.

 

12.2 Reliance
by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof
by telephone, facsimile transmission, or email) believed by it to
be genuine and correct and to have been signed or sent by or on
behalf of the proper person or persons, and upon advice and
statements of legal counsel, independent accountants and other
experts selected by Agent. As to any matters not expressly provided
for by this Agreement or the other Note Documents, Agent shall in
all cases be fully protected in acting, or in refraining from
acting, hereunder or under the Note Documents in accordance with
instructions signed by the Required Holders, and such instructions
of the Required Holders and any action taken or failure to act
pursuant thereto shall be binding on all of the
Holders.

 

12.3 Knowledge
of Default; Cross Defaults. Agent shall not be deemed to
have knowledge of the occurrence of a Potential Default or Event of
Default, unless Agent has received notice from a Holder or an
Issuer specifying such default or event of default and stating that
such notice is a “Notice of Default.” If Agent receives
such a notice of the occurrence of a Potential Default or Event of
Default, Agent shall give notice thereof to the Holders. Upon
becoming aware of the occurrence of a Potential Default or Event of
Default, a Holder shall give notice thereof to Agent.

 

12.4 Rights
as a Holder. With respect to its Commitment and its Notes,
Agent, in its capacity as a Holder hereunder, shall have the same
rights and powers hereunder as any other Holder and may exercise
the same as though it were not acting as an Agent, and the term
“Holder” or “Holders” shall, unless the
context otherwise indicates, include Agent in its individual
capacity.

 

12.5 Indemnification.
The Holders shall indemnify Agent ratably in accordance with the
aggregate principal amount of the Notes made by the Holders, for
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever that may be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of this
Agreement or any of the other Note Documents or any other documents
contemplated by or referred to herein or therein or the
transactions contemplated by or referred to herein or therein or
the transactions contemplated hereby and thereby (but excluding,
unless a default or event of default has occurred and is
continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or of any such other documents, provided
that no Holder shall be liable for any of the foregoing to the
extent they arise from the gross negligence, breach of the Note
Documents, or willful misconduct of the party to be
indemnified.

 

12.6 Failure
to Act. Except for action expressly required of Agent
hereunder, Agent shall in all cases be fully justified in failing
or refusing to act hereunder or thereunder unless it shall be
indemnified to its satisfaction by the Holders against any and all
liability, cost and expense that may be incurred by it by reason of
taking or continuing to take any such action.

 

 

18

 

 

12.7 Resignation
or Removal of Agent. If at any time Agent deems it
advisable, in its sole discretion, it may submit to each of the
Holders a written notification of its resignation as Agent under
this Agreement, such resignation to be effective on the thirtieth
(30th) day after the date of such notice. Agent may be removed at
any time, with or without cause, by vote of the Required Holders.
Upon any such resignation or removal, the Required Holders shall
have the right to appoint a successor Agent from among the Holders.
If no successor Agent shall have been so appointed by the Required
Holders and accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of Holders, appoint a successor
Agent, which successor Agent shall be either an existing Holder or
a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and
surplus of at least $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and
obligations under this Agreement. Issuer and the Holders shall
execute such documents as shall be necessary to effect such
appointment. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 12.7 shall inure to its
benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.

 

12.8 Purchase
Decision. Each Holder acknowledges that none of Agent or the
other Holders has made any representation or warranty to it, and
that no act by Agent or a Holder hereinafter taken, including any
review of the affairs of any Issuer, shall be deemed to constitute
any representation or warranty by Agent or such Holder to any other
Holder. Each Holder represents to the other Holders that it has,
independently and without reliance upon any other Holder and based
on such documents and information as it has deemed appropriate,
made its own appraisal of, and investigation into, the business,
prospects, operations, property, financial and other condition and
creditworthiness of Issuer, and all applicable bank, lending,
interest rate and securities regulatory laws relating to the
transactions contemplated hereby, and made its own decision to
enter into this Agreement and to purchase Notes hereunder. Each
Holder also represents that it will, independently and without
reliance upon any other Holder and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Note
Documents, and to make such investigations as it deems necessary to
inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of Issuer.
Except for any notices, reports and other documents expressly
herein required to be furnished to other Holders by a Holder, such
Holder shall not have any duty or responsibility to provide such
other Holders with any credit or other information concerning the
business, prospects, operations, property, financial and other
condition or creditworthiness of any Issuer which may come into the
possession of any of such Holder.

 

12.9 Holders'
Representations Regarding IRS Withholding; Delivery of Tax
Forms. Each Holder represents and agrees as
follows:

 

(a) Such
Holder will furnish to Agent and Issuer, upon request, such forms,
certifications, statements and other documents as Agent and Issuer
may request from time to time to evidence such Holder's exemption
from the withholding of any tax imposed by any jurisdiction or to
enable Agent and Issuer to comply with any applicable laws or
regulations relating thereto;

 

(b) Without
limiting the effect of the foregoing, if such Holder is not created
or organized under the laws of the United States or any state
thereof, such Holder further represents and warrants (i) that it is
engaged in the conduct of a business within the United States and
that the payments made hereunder are or are reasonably expected to
be effectively connected with the conduct of that trade or business
and are or will be includible in its gross income; or (ii) if such
Holder is not engaged in a U.S. trade or business with which such
payments are effectively connected, that such Holder is entitled to
the benefits of a tax convention which exempts the income from U.S.
withholding tax and that it has satisfied all requirements to
quality for the exemption from tax;

 

(c) Such
Holder will, immediately upon the request of Agent or Issuer,
furnish to it Form W-8ECI or Form W-8BEN-E of the Internal Revenue
Service, or such other forms, certifications, statements or
documents, duly executed and completed by Holder as evidence of
such Holder's exemption from the withholding of U.S. tax with
respect thereto. If such Holder determines that, as a result of any
change in applicable law, regulation, or treaty or in any official
application or interpretation thereof, it ceases to quality for
exemption from any tax imposed by any jurisdiction with respect to
payments made hereunder, such Holder shall promptly notify Agent
and Issuer of such fact and Agent and Issuer may, but shall not be
required to withhold the amount of any such applicable tax from
amounts paid to such Holder hereunder. Issuer and Agent shall not
be obligated to make any payments hereunder to such Holder in
respect of such Holder's Note or Notes until such Holder shall have
furnished to Issuer and Agent the requested form, certification,
statement or document and may withhold the amount of such
applicable tax from amounts paid to such Holder hereunder;
and

 

(d) Such
Holder shall reimburse, indemnify and hold Issuer and Agent
harmless for all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed
upon, incurred by or asserted against Issuer and Agent due to its
reliance upon the representation hereby made that such Holder is
exempt from withholding of tax. Unless Agent and Issuer receive
written notice to the contrary, such Holder shall be deemed to have
made the representations contained in this Section 12.9 and in each
subsequent tax year of such Holder.

 

 

19

 

 

12.10 Expenses
of Agent; Annual Agent Fee.

 

(a) Except
as otherwise expressly provided in this Agreement, Agent shall not
be entitled to compensation or reimbursement of expenses from the
Holders, unless such expenses are approved by the Required Holders,
but may receive compensation or reimbursement of expenses from
Issuer under a separate agreement with Issuer.

 

(b) If
the Holders at any time replace North Haven Expansion as Agent with
a Person that is not an Affiliate of the Holders, then Issuer shall
be jointly and severally obligated to reimburse such Agent for its
fees charged and expenses incurred in serving as Agent to the
extent that they do not exceed Forty Thousand Dollars ($40,000)
during any year.

 

13.

DEFINITIONS

 

13.1 Definitions.
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made
following GAAP (except for (i) non-compliance with FAS 123R in
monthly reporting and (ii) with respect to unaudited financial
statements, for the absence of footnotes and subject to year-end
audit adjustments), provided that if at any time any change in GAAP
would affect the computation of any financial ratio or covenant
requirement set forth in any Note Documents, and either Issuer.
Agent or any Holder shall so request, Issuer, Agent and the Holders
shall negotiate in good faith to amend such ratio or covenant
requirement to preserve the original intent thereof in light of
such change in GAAP; provided, further, that until so amended, (a)
such ratio or covenant requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (b) Issuer
shall provide Agent and the Holders financial statements and other
documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of
such ratio or requirement made before and after giving effect to
such change in GAAP), provided, however, that (x) any obligations
of a Person under a lease (whether existing now or entered into in
the future) that is not (or would not be) a capital lease
obligation under GAAP as in effect on the Issue Date shall not be
treated as a capital lease obligation solely as a result of the
adoption of changes in GAAP. As used in this Agreement, the
following terms have the meanings set forth below. All other terms
contained in this Agreement, unless otherwise indicated, shall have
the meaning provided by the Code to the extent such terms are
defined therein.

 

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

 

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

 

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

 

“Agent” is defined in the
preamble.

 

“Anti-Corruption Laws” has the
meaning set forth in Section 4(i).

 

“Anti-Money Laundering Laws” has
the meaning set forth in Section 4(i).

 

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

 

“Business Day” is any day that is
not a Saturday, Sunday or a day on which banks in New York City are
closed.

 

 

20

 

 

“CARES Act” means the Coronavirus
Aid, Relief, and Economic Security Act (H.R. 748), or the CARES Act
and applicable rules and regulations, promulgated under the Small
Business Act (in each case as amended from time to
time).

 

“CARES Payroll Costs” means
“payroll costs” as defined in 15 U.S.C.
636(a)(36)(A)(viii) (as added to the Small Business Act by Section
1102 of the CARES Act).

 

“CARES Forgivable Uses” means uses
of proceeds of an SBA PPP Loan that are eligible for forgiveness
under Section 1106 of the CARES Act.

 

“Cash Equivalents” means (a)
marketable direct obligations issued or unconditionally guaranteed
by the United States or any agency or any State thereof having
maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s
Investors Service, Inc.; (c) certificates of deposit, time deposits
or bankers’ acceptances maturing no more than one (1) year
after issue; and (d) any market fund that has at least ninety-five
percent (95%) of its assets invested in Cash Equivalents of the
kinds described in clauses (a) through (c) of this
definition.

 

“Celularity” means Celularity Inc.,
a Delaware corporation.

 

“Celularity Acquisition” means the
acquisition by Issuer of certain assets under, as defined in, and
subject to the terms of the Celularity Acquisition
Documents.

 

“Celularity Acquisition Documents”
means that certain Asset Purchase Agreement, dated as of August 6,
2020, by and between Issuer, as purchaser, and Celularity, as
seller, together with all exhibits and schedules thereto, and all
principal instruments and agreements and/or other agreements
executed and/or delivered in connection therewith; all in form and
content reasonably acceptable to Agent and substantially in the
forms attached hereto as Annex Y.

 

“Celularity Subordinated Note”
means that certain Convertible Promissory Note, dated as of August
6, 2020, by and between Issuer and Celularity, in the original
principal amount of Four Million Dollars ($4,000,000); provided the
same is subject to a subordination agreement in form and content
reasonably acceptable to Agent.

 

“Change in Control” means any
event, transaction, or occurrence (other than (i) the sale or
issuance of Issuer’s equity securities and/or Subordinated
Debt in a bona fide private equity financing or series of private
equity financings with Issuer’s existing investors as of the
Issue Date and (ii) the Equity Financing) as a result of which (i)
with respect to Issuer, any “person” (as such term is
defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act that
is not a stockholder of Issuer as of the Issue Date (other than a
trustee or other fiduciary holding securities under an employee
benefit plan of Issuer) is or becomes a beneficial owner (within
the meaning Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of Issuer, representing
forty-nine percent (49.00%) or more of the combined voting power of
Issuer’s then outstanding securities (determined on a fully
diluted basis), or with respect to a Subsidiary, such Subsidiary
ceases to be wholly-owned by Issuer or a Subsidiary; or (ii) during
any period of twelve (12) consecutive calendar months, individuals
(x) who were members of that board or equivalent governing body on
the first day of such period, (y) whose election or nomination to
that board or equivalent governing body was approved by individuals
referred to in clause (x) above constituting at the time of such
election or nomination at least a majority of that board or
equivalent governing body or (z) whose election or nomination to
that board or other equivalent governing body was approved by
individuals referred to in clauses (x) and (y) above constituting
at the time of such election or nomination at least a majority of
that board or equivalent governing body, cease for any reason other
than death or disability to constitute a majority of the directors
then in office.

 

“Code” is the Uniform Commercial
Code, as the same may, from time to time, be enacted and in effect
in the State of New York; provided, that, to the extent that the
Code is used to define any term herein or in any Note Document and
such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or
Division 9 shall govern; provided further, that in the event that,
by reason of mandatory provisions of law, any or all of the
attachment, perfection, or priority of, or remedies with respect
to, Agent’s Lien on any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of
New York, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes on the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

 

“Collateral” is any and all
properties, rights and assets of Issuer described on Exhibit A.

 

“Collateral Account” is any Deposit
Account, Securities Account, or Commodity Account of Issuer or any
Domestic Subsidiary.

 

 

21

 

 

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

 

“Compliance Certificate” is that
certain certificate in the form attached hereto as Exhibit C.

 

“Commitment” means, with respect to
a Holder, the commitment of such Holder to purchase Notes from
Issuer for the aggregate purchase price set forth opposite such
Holder’s name on Schedule 1.1 hereto, as the
same may be amended from time to time.

 

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

 

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

 

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

 

“Corporate Resolutions” are those
resolutions substantially in the form attached hereto as
Exhibit
B.

 

“Default Rate” is defined in
Section
1.2(b).

 

“Deferred Interest” has the meaning
set forth in Section
1.2(a) of this Agreement.

 

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

 

“Dollars,” “dollars” and “$” each mean lawful money of the
United States.

 

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

 

“Disbursement Letter” is that
certain form attached hereto as Annex X.

 

 

22

 

 

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

 

“Equity Financing” is
Issuer’s receipt of gross cash proceeds from the issuance of
its common stock, from investors reasonably acceptable to Agent, of
at least Twenty Three Million Five Hundred Thousand Dollars
($23,500,000); provided, that, at least Ten Million Dollars
($10,000,000) of the Equity Financing shall be used for
Issuer’s working capital needs.

 

“Equity Financing Documents” means
the documents evidencing the Equity Financing, in form and content,
and on terms and conditions, reasonably acceptable to
Agent.

 

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

 

“Event of Default” is defined in
Section
7.

 

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

 

“Excluded Taxes” shall mean any of
the following Taxes imposed on or with respect to Agent or any
Holder (or any successor or assign of Agent or any Holder) or
required to be withheld or deducted from a payment to Agent or any
Holder (or any successor or assign of Agent or any Holder)
(a) any Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each
case, (ii) imposed as a result of Agent’s or any
Holder’s (or such successor’s or assign’s) being
organized under the laws of, or having its principal office or its
applicable lending office located in, the jurisdiction imposing
such Tax (or any political subdivision thereof) or
(ii) imposed as a result of a present or former connection
between Agent or any Holder (or such successor or assign) and the
jurisdiction imposing such Tax (other than connections arising from
Agent or any Holder (or such successor or assign) having executed,
delivered, become a party to, performed its obligations under,
received payments under, received or perfected a security interest
under, engaged in any other transaction pursuant to or enforced any
Note Document (other than the Warrants), or sold or assigned an
interest in the Note or any Note Document (other than the
Warrants)), (b) any U.S. federal withholding Taxes imposed
with respect to an applicable interest in any Obligation pursuant
to a law in effect on the date on which (i) Agent or any
Holder (or such successor or assign) acquires such interest in such
Obligation or (ii) Agent or any Holder (or such successor or
assign) changes its lending office, except in each case to the
extent that, pursuant to Section 1.2(d), amounts with respect to
such Taxes were payable either to such successor’s or
assign’s applicable predecessor or assignor immediately
before such successor or assign became a party hereto or to Agent
or any Holder (or such successor or assign) immediately before it
changed its lending office and (c) any U.S. federal
withholding Taxes imposed under Sections 1471 through 1474 of the
IRC, as of the date of this Agreement (or any amended or successor
version of such law that is substantively comparable and not
materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreement
entered into pursuant to Section 1471(b)(1) of the IRC; provided
that, following an Event of Default, subsections (b) and (c) shall
not be considered “Excluded Taxes” to the extent Agent
or any Holder (or any successor or assign of Agent or any Holder)
assigns its interests in the Note or any Note Document (other than
the Warrants) following such Event of Default.

 

“Existing HealthTronics Seller
Notes” means (a) that certain Promissory Note, dated
as of August 1, 2005, by and among SanuWave, Issuer and
HealthTronics, in the original principal amount of $2,000,000, and
(b) that certain Promissory Note, dated as of August 1, 2005, by
and among SanuWave, Issuer and HealthTronics, in the original
principal amount of $2,000,000, in each case, as amended, restated,
amended and restated, supplemented or otherwise modified from time
to time

 

“Existing Indebtedness” is the
indebtedness of Issuer in connection with (a) the Existing
HealthTronics Seller Notes; (b) the Short-Term Notes; and (c) the
Existing Line of Credit.

 

“Existing Line of Credit” means
that certain Line of Credit Agreement, dated as of December 29,
2017, in the original principal amount of Three Hundred Thousand
Seventy Dollars ($370,000), by and between Issuer and A. Michael
Stolarski, as amended, restated, amended and restated, supplemented
or otherwise modified from time to time.

 

“Existing Short-Term Notes” means
each of (a) that certain Promissory Note, dated as of June 5, 2020,
in the original principal amount of One Million Two Hundred Ten
Thousand Dollars ($1,210,000), issued by Issuer in favor of LGH
Investments, LLC, a Wyoming limited liability company, (b) that
certain promissory note, dated as of December 13, 2019, in the
original principal amount of One Hundred Ten Thousand Dollars
($110,000), issued by Issuer in favor of George Johnson, and (c)
that certain promissory note, dated as of December 13, 2019, issued
by Issuer in favor of Kerri Johnson, in the original principal
amount of One Hundred Thousand Dollars ($100,000); in each case, as
amended, restated, amended and restated, supplemented or otherwise
modified from time to time

 

 

23

 

 

“Expense Deposit” is defined in
Section
1.2.

 

“Foreign Subsidiary” is a
Subsidiary that is not an entity organized under the laws of the
United States, any state thereof or the District of
Columbia.

 

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

 

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

 

“Governmental Approval” is any
consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.

 

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

 

“Guarantor” is any Person providing
a Guaranty in favor of Agent. As of the Issue Date,
“Guarantor” means each of SANUWAVE and SanuWave
Services.

 

“Guaranty” is that certain
Unconditional Guaranty executed as of the Issue Date by each
Guarantor in favor of Agent, guaranteeing payment and performance
of all Obligations, as the same may from time to time be amended,
restated, amended and restated, supplemented or otherwise modified
from time to time.

 

“HealthTronics” means
HealthTronics, Inc., a Georgia corporation.

 

“HealthTronics Subordinated Note”
means that certain Convertible Promissory Note, dated as of August
6, 2020, by and between Issuer and HealthTronics, in the original
principal amount of One Million Three Hundred Seventy Two Thousand
Seven Hundred Forty Three Dollars ($1,372,743); provided the same
is subject to a subordination agreement in form and content
reasonably acceptable to Agent.

 

“Holder” or “Holders” is defined in the
preamble hereof.

 

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

 

“Indebtedness” is, with respect to
Issuer or any Subsidiary, (a) indebtedness for borrowed money or
the deferred price of property or services, such as reimbursement
and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar
instruments, (c) capital lease obligations, and (d) Contingent
Obligations with respect to Indebtedness described in clauses (a)
through (c) of this definition.

 

 

24

 

 

“Indemnified Person” is defined in
Section
11.2.

 

“Initial Prepayment Date” is
September 30,
2023.

 

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

 

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

 

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

 

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

 

(a)           its
Copyrights, Trademarks and Patents;

 

(b)           any
and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how,
operating manuals;

 

(c)           any
and all source code;

 

(d)           any
and all design rights which may be available to such
Person;

 

(e)           any
and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the
obligation, to sue for and collect such damages for said use or
infringement of the Intellectual Property rights identified above;
and

 

(f)           all
amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents.

 

“IP Agreement” is each Intellectual
Property Security Agreement executed and delivered by Issuer and
each Guarantor to Agent dated as of the Issue Date, or any
subsequently delivered similar agreement.

 

“IRC” means the U.S. Internal
Revenue Code of 1986, as amended.

 

“Issue Date” is the date of
issuance of this Agreement, as indicated on the cover page
hereof.

 

“Issuer” is defined in the preamble
hereof.

 

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

 

 

25

 

 

“Liquidity” is, at any time, the
sum of (i) the aggregate amount of unrestricted cash and Cash
Equivalents held at such time by Issuer and its Subsidiaries in
Deposit Accounts or Securities Accounts that are subject to Control
Agreements in favor of Agent and (ii) undrawn availability under
the Senior Debt.

 

“Material Adverse Change” is (a) a
material impairment in the perfection or applicable priority of
Agent’s Lien in the Collateral, taken as a whole, or in the
value of such Collateral; (b) a material adverse change in the
business, operations, or condition (financial or otherwise) of
Issuer and its Subsidiaries taken as a whole; or (c) a material
impairment of the prospect of repayment of any portion of the
Obligations.

 

“Maturity Date” is September 30,
2025.

 

“NFS Master Equipment Lease” means
that certain Master Equipment Lease, dated as of January 19, 2018,
by and between NFS Leasing, Inc., a Massachusetts corporation, and
Issuer, as amended, restated, amended and restated, supplemented or
otherwise modified from time to time; provided that, as of the
Issue Date, the principal amount of the Indebtedness thereunder is
Four Hundred Fifty Six Thousand One Hundred Thirty Nine Dollars and
Twenty Cents ($456,139.20); provided the same is subject to a
subordination agreement in form and content reasonably acceptable
to Agent.

 

“Note” is defined in the preamble
hereof.

 

 “Note
Documents” are, collectively, this Agreement, the
Warrants, the IP Agreements, the Perfection Certificate, any
Guaranty, the Security Agreement, the Disbursement Letter and any
other present or future agreement between Issuer any Guarantor
and/or for the benefit of Agent or any Holder in connection with
this Agreement, all as amended, restated, amended and restated,
supplemented or otherwise modified.

 

“Obligations” are Issuer’s
obligation to pay when due any debts, principal, interest, Holder
Expenses and other amounts Issuer owes Agent or any Holder now or
later under this Agreement or the other Note Documents (other than
the Warrants), including, without limitation, interest accruing and
Holder Expenses incurred after Insolvency Proceedings begin, and
the performance of Issuer’s duties under the Note Documents
(other than the Warrants), and including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations
of Issuer assigned to Agent or any Holder.

 

“Participant Register” has the
meaning set forth in Section 11.5.

 

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

 

“Payment Date” has the meaning set
forth in Section
1.2(a).

 

 “Perfection
Certificate” is the completed certificate signed by
Issuer and each Guarantor, entitled “Perfection
Certificate” delivered by Issuer to Holders in connection
with this Agreement, as updated by Issuer from time to time in
accordance with Section
4(g).

 

“Permitted Distributions”
are

 

 

26

 

 

(a) any
conversion of Issuer’s convertible securities into other
securities pursuant to the terms of such convertible securities or
otherwise in exchange thereof,

 

(b) the
payment of dividends solely in common stock by Issuer;

 

(c) the
payment of cash in lieu of the issuance of fractional
shares

 

(d) the
repurchase by Issuer of its stock from former employees, directors
or consultants pursuant to stock repurchase agreements so long as
an Event of Default does not exist at the time of such repurchase
and would not exist after giving effect to such repurchase,
provided such repurchase does not exceed in the aggregate of One
Hundred Thousand Dollars ($100,000) per fiscal year;
and

 

(e) any
distributions by a Subsidiary to Issuer.

 

“Permitted Indebtedness”
is:

 

(a) Issuer’s
Indebtedness to Holders under this Agreement and the other Note
Documents;

 

(b) Indebtedness
existing on the Issue Date and shown on the Perfection
Certificate;

 

(c) Indebtedness
with respect to surety bonds and similar obligations not to exceed
One Hundred Thousand Dollars ($100,000), in each case incurred in
the ordinary course of business;

 

(d) Indebtedness
incurred as a result of endorsing negotiable instruments received
in the ordinary course of business and Indebtedness to trade
creditors;

 

(e) Subordinated
Debt;

 

(f) Indebtedness
in an aggregate principal amount not to exceed One Hundred Thousand
Dollars ($100,000) secured by a Permitted Lien described in clause
(c) of the defined term “Permitted Liens”;

 

(g) Senior
Debt;

 

 

27

 

 

(h) Indebtedness
that constitutes a Permitted Investment under clause (f) of the
defined term “Permitted Investments”;

 

(i) unsecured
Indebtedness consisting of the SBA PPP Loan;

 

(j) unsecured
Indebtedness to trade creditors incurred in the ordinary course of
business and not past due;

 

(k) Indebtedness
incurred under that certain NFS Master Equipment Lease

 

(l) extensions,
refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness described in clause (b) above,
provided that the principal amount thereof is not increased other
than the amount of any reasonably premiums or the terms thereof,
taken as a whole, are not modified to impose materially more
burdensome terms upon Issuer or its Subsidiary, as the case may be;
and

 

(m) other unsecured
Indebtedness in an amount not to exceed One Hundred Thousand
Dollars ($100,000).

 

 “Permitted
Investments” are:

 

(a) Investments shown
on the Perfection Certificate and existing on the Issue
Date;

 

(b) Cash
Equivalents;

 

(c) Investments
consisting of the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
Issuer;

 

(d) Investments
consisting of Deposit Accounts;

 

(e) Investments
accepted in connection with Transfers permitted by Section 6.1;

 

(f) Investments
(i) in any Subsidiary that is a Guarantor or in Issuer, (ii)
between Subsidiaries that are not Guarantors, and (iii) by Issuer
or a Subsidiary which is a Guarantor in a Subsidiary which is not a
Guarantor in an amount not to exceed Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate in any fiscal
year;

 

(g) Investments
consisting of (i) travel advances and employee relocation loans and
other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors
relating to the purchase of equity securities of Issuer pursuant to
employee stock purchase plans or agreements approved by
Issuer’s board of directors;

 

(h) Investments
(including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of
business;

 

 

28

 

 

(i) Investments
consisting of notes receivable of, or prepaid royalties and other
credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this
paragraph (i) shall not apply to Investments of Issuer in any
Subsidiary;

 

(j) joint
ventures or strategic alliances in the ordinary course of
Issuer’s business consisting of the non-exclusive licensing
of technology, the development of technology or the providing of
technical support, provided that any cash investments by Issuer do
not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate in any fiscal year;

 

(k) other
Investments in an amount not to exceed One Hundred Thousand Dollars
($100,000) in the aggregate outstanding at any time;
and

 

(l) the
Celularity Acquisition.

 

“Permitted Liens” are:

 

(a) Liens existing on
the Issue Date and shown on the Perfection Certificate or arising
under this Agreement and the other Note Documents;

 

(b) Liens
for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for
which Issuer maintains adequate reserves on its Books, provided that no notice of any
such Lien has been filed or recorded under the IRC and the Treasury
Regulations adopted thereunder;

 

(c) Purchase
money Liens upon any equipment or other personal property acquired
by Issuer to secure (i) the purchase price of such equipment or
other personal property, or (ii) lease obligations or indebtedness
incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that such Liens are
confined solely to the equipment or other personal property so
acquired and the amount secured does not exceed the acquisition
price thereof.

 

(d) Liens
of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business in
the aggregate so long as such Liens attach only to Inventory,
securing liabilities in the aggregate amount not to exceed One
Hundred Thousand Dollars ($100,000) and which are not delinquent or
remain payable without penalty or which are being contested in good
faith and by appropriate proceedings which proceedings have the
effect of preventing the forfeiture or sale of the property subject
thereto;

 

(e) Liens
to secure payment of workers’ compensation, employment
insurance, old-age pensions, social security and other like
obligations incurred in the ordinary course of business (other than
Liens imposed by ERISA);

 

(f) Liens
incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in clauses (a) through (c)
above, provided
that any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness may not increase;

 

(g) leases
or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or
sublicenses of property (other than real property or Intellectual
Property) granted in the ordinary course of Issuer’s business
(or, if referring to another Person, in the ordinary course of such
Person’s business), if the leases, subleases, licenses and
sublicenses do not prohibit granting Agent or any Holder a security
interest;

 

(h) Liens
securing Subordinated Debt;

 

(i) deposits to secure
the performance of leases, statutory obligations, stay, and appeal
bonds, and other obligations of a like nature incurred in the
ordinary course of business not representing an obligation for
borrowed money in an amount not to exceed One Hundred Thousand
Dollars ($100,000);

 

(j) non-exclusive
licenses of Intellectual Property granted to third parties in the
ordinary course of business and licenses of Intellectual Property
that could not result in a legal transfer of title of the licensed
property that may be exclusive in respects other than territory and
that may be exclusive as to territory only as to discrete
geographical areas outside of the United States;

 

 

29

 

 

(k) Liens
arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under
Sections 7.4 and
7.7;

 

(l) Liens
securing Senior Debt; and

 

(m) Liens
securing obligations under the NFS Master Equipment
Lease.

 

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

 

“Potential Default” means the
occurrence of any event or condition which, with the giving of
notice, the passage of time, or both, could constitute an Event of
Default.

 

“Prepayment Amount” means, for any
prepayment that occurs prior to the Initial Prepayment Date,
including in connection with a Change in Control or an acceleration
of the Notes prior to the Initial Prepayment Date, an amount equal
to the total of all the cash interest remaining to be paid from the
date of prepayment through the Initial Prepayment Date, with the
interest rate for the period from the date of prepayment through
the Initial Prepayment Date calculated at the then-current Prime
Rate, plus one hundred three percent (103.00%) of the principal
amount calculated to be outstanding on the Initial Prepayment Date
(including the accretion of the Deferred Interest through that
date); all as calculated by Holder and deemed to be correct absent
manifest error.

 

“Prepayment Fee” means, for any
prepayment that occurs on or after the Initial Prepayment Date, an
amount equal to one hundred percent (100.00%) of the accreted value
of the Notes then outstanding, plus all accrued but unpaid cash
interest, plus all Deferred Interest, at the time of such
prepayment, whether by mandatory or voluntary prepayment,
acceleration or otherwise.

 

 “Prime Rate” means the
Prime Rate published in the Money Rates section of the Eastern
Edition of The Wall Street Journal or any successor publication
thereto; provided
that if such rate of interest, as set forth from time to time in
the Money Rates section of the Eastern Edition of the Wall Street
Journal, becomes unavailable for any reason, as determined by
Agent, the “Prime Rate” shall mean such other rate of
interest publicly announced from time to time by Agent as the prime
rate. Any change in the Prime Rate shall take effect at the opening
of business on the day specified in the public announcement of a
change in the Prime Rate.

 

“Purchase Price” means Fifteen
Million Dollars ($15,000,000).

 

“Register” is defined in Section
11.5.

 

“Required Holders” means, at any
time, the Holders of at least a majority of the aggregate principal
amount of the Notes at the time outstanding; provided that, for so
long as North Haven Expansion is a holder of a Note, North Haven
Expansion shall be considered a Required Holder.

 

“Requirement of Law” is as to any
Person, the organizational or governing documents of such Person,
and any law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its
property is subject.

 

“Responsible Officer” is any of the
Chief Executive Officer, President, Chief Financial Officer, Chief
Operating Officer and Controller of Issuer.

 

 

30

 

 

“Restricted License” is any
material license agreement with respect to which Issuer or a
Subsidiary is the licensee (a) that validly prohibits or otherwise
restricts Issuer from granting a security interest in
Issuer’s or such Subsidiary’s interest in such license
or agreement or any other property, or (b) for which a default
under or termination of could interfere with Agent’s or a
Holder’s right to sell any Collateral.

 

“Sanctions” has the meaning set
forth in Section 4(i).

 

“SANUWAVE” means SANUWAVE, Inc., a
Delaware corporation.

 

“SanuWave Services” means SanuWave
Services, LLC, a Delaware limited liability company.

 

“SEC” means the Securities and
Exchange Commission.

 

“SBA” means the U.S. Small Business
Administration.

 

“SBA PPP Loan” means a loan
incurred by Issuer under 15 U.S.C. 636(a)(36) (as added to the
Small Business Act by Section 1102 of the CARES Act) in the
original principal amount of Four Hundred Fifty Four Thousand Three
Hundred Thirty Five Dollars ($454,335), as amended, restated,
amended and restated, supplemented or otherwise modified from time
to time.

 

“SBA PPP Loan Date” means the date
on which Issuer receives the proceeds of the SBA PPP
Loan.

 

“SBA PPP Loan Lender” means the
lender making the SBA PPP Loan.

 

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

 

“Security Agreement” is that
certain Security Agreement executed as of the Issue Date by each
Guarantor in favor of Agent, securing repayment of the
Unconditional Guaranty, as the same may from time to time be
amended, restated, amended and restated, supplemented or otherwise
modified from time to time.

 

“Senior Debt” means the
Indebtedness outstanding to Senior Lender on terms acceptable to
Agent, provided that (i) a Subordination Agreement is in effect,
and (ii) the aggregate principal amount outstanding thereunder
shall not exceed Five Million Dollars ($5,000,000).

 

“Senior Lender” means any bank
providing Senior Debt on terms acceptable to Agent.

 

“Shares” is one hundred percent
(100%) of the issued and outstanding capital stock, membership
units or other securities owned or held of record by Issuer or
Issuer’s Subsidiaries, in any Subsidiary.

 

“Small Business Act” means the
Small Business Act (15 U.S. Code Chapter 14A – Aid to Small
Business).

 

“Stolarski” means A. Michael
Stolarski, an individual.

 

 

31

 

 

“Stolarski Subordinated Note” means
that certain Convertible Promissory Note, dated as of August 6,
2020, by and between Issuer and Stolarski, in the original
principal amount of Two Hundred Twenty-Three Thousand Five Hundred
Eleven and 26/100 Dollars ($223,511.26); provided the same is
subject to a subordination agreement in form and content reasonably
acceptable to Agent.

 

“Subordination Agreement” means a
subordination agreement by and between Senior Lender and Holder
reasonably acceptable to Holder.

 

“Subordinated Debt” is indebtedness
incurred by Issuer subordinated to all of Issuer’s now or
hereafter indebtedness to Holders (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance
reasonably satisfactory to Agent, and entered into between Agent
and the other creditor), on terms reasonably acceptable to Agent.
For the avoidance of doubt, “Subordinated Debt” shall
include the Subordinated Notes.

 

“Subordinated Notes” means each,
and “Subordinated
Note” means either, of (a) the Celularity Subordinated
Note, (b) the HealthTronics Subordinated Note and (c) the Stolarski
Subordinated Note.

 

“Subsidiary” means, with respect to
any Person, a corporation, partnership, limited liability company
or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless the context
otherwise requires, each reference to a Subsidiary herein shall be
a reference to a Subsidiary of Issuer.

 

“SunTrust Accounts” is defined in
Section
5.6.

 

“Taxes” is defined in Section 1.2(d).

 

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

 

“Transfer” is defined in
Section
6.1.

 

“Warrant” is defined in Section
1.1(a).

 

 

 

 

[Balance of Page Intentionally
Left Blank]

 

32

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.

 

ISSUER:

 

SANUWAVE HEALTH,
INC.

 

By /s/ Lisa E.
Sundstrom                                            

Name: Lisa E.
Sundstrom                                                       

Title: Chief Financial
Officer                                                       

 

Address for
Notice:

SANUWAVE HEALTH,
INC.

3360
Martin Farm Road, Suite 100

Suwanee, Georgia
30024

Attn:
Lisa E. Sundstrom, Chief Financial Officer

Email:
lisa.sundstrom@sanuwave.com

 

with a
copy, not constituting notice, to:

 

Morrison &
Foerster LLP

425
Market Street

San
Francisco, CA 94105

Attention: Murray
Indick

Email:
MIndick@mofo.com

 

 

 

 

33

 

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.

 

 

AGENT AND HOLDER:

 

NH
EXPANSION CREDIT FUND HOLDINGS LP

 

By: MS
Expansion Credit GP, L.P.

Its:
General Partner

 

By: MS
Expansion Credit GP Inc.

Its:
General Partner

 

By /s/ William
Reiland   

Name: William
Reiland   

Title: Managing
Director         

 

Address
for Notice:

1585
Broadway, 39th Floor

New
York, NY 10036

Attn:
Debra Abramovitz

Expansion_credit_reporting@morganstanley.com

 

with a
copy to:

 

1585
Broadway, 37th Floor

New
York, NY 10036

Attn:
William Reiland

 

and

 

555
California Street, 14th Floor

San
Francisco, CA 94104

Attn:
Melissa Daniels

 

with a
copy, not constituting notice, to:

 

Barnes
& Thornburg LLP

655 W.
Broadway, Suite 900

San
Diego, CA 92101

Attn:
Troy Zander

 

 

 

34

 

SCHEDULE 1

 

Conditions to Note Issuance

 

Issuer
shall have delivered to Agent and Holders or Agent and Holders
shall have received the following, in form and substance reasonably
satisfactory to Agent and Holders, duly executed by all parties
thereto, as applicable:

 

1.

this
Agreement;

 

2.

the
Note;

 

3.

the
Warrant;

 

4.

the IP
Agreement;

 

5.

the
Guaranty;

 

6.

the Security
Agreement;

 

7.

the Equity
Financing Documents;

 

8.

evidence of
Issuer’s receipt of the Equity Financing;;

 

9.

the Celularity
Acquisition Documents (including the Celularity Subordinated
Note);

 

10.

the HealthTronics
Subordinated Note;

 

11.

subordination
agreements with respect to each of (i) the Celularity Subordinated
Note; (ii) the HealthTronics Subordinated Note; (iii) the NFS
Master Equipment Lease; and (iv) the Stolarski Subordinated
Note;

 

12.

evidence of
Issuer’s consummation of the Celularity
Acquisition;

 

13.

one or more payoff
letters in respect of the Existing Indebtedness;

 

 

35

 

 

14.

evidence that
(i) the Existing Indebtedness will be satisfied in full from
the Note proceeds; (ii) any Liens securing the Existing
Indebtedness will be terminated; and (iii) any documents
and/or filings evidencing the perfection of such Liens, including
without limitation any financing statements and/or control
agreements, have or will, concurrently with the Note issuance, be
terminated;

 

15.

a Control Agreement
with respect to each Deposit Account and Securities Account
existing as of the Issue Date;

 

16.

a
landlord’s waiver (or consent) with respect to each of
Issuer’s leased locations; provided that Issuer shall (i)
deliver to Agent the same with respect to Issuer’s leased
location at 3360 Martin Farm Road, Suite 100, Suwanee, Georgia
30024 within five (5) Business Days of the Issue Date, or such
later date as Agent specifies in its sole discretion, and (ii) with
respect to the leased location at 11495 Valley View Road, Eden
Prairie, MN 55344, use commercially reasonable efforts to deliver
the same within sixty (60) days of the Issue Date, or such later
date as Agent specifies in its sole discretion;

 

17.

(i) Issuer’s
certificate of incorporation, as amended to date; and (ii) a copy
of its signed bylaws, as amended to date;

 

18.

duly executed
signatures to the completed Corporate Resolutions;

 

19.

the Perfection
Certificate;

 

20.

the Stolarski
Subordinated Note;

 

21.

legal opinions of
(x) Morrison & Foerster LLP, as counsel to Issuer and
Guarantors; and (y) Hutchinson & Steffon, PLLC, as Nevada
counsel to Issuer;

 

22.

evidence
satisfactory to Agent that the insurance policies required by
Section 5.5 hereof
are in full force and effect, together with, within ten (10)
Business Days of the Issue Date, or such later date as Agent
specifies in its sole discretion, appropriate evidence showing
Agent as loss payable and/or additional insured clauses or
endorsements in favor of Agent;

 

23.

payment of the fees
and Holder Expenses then due as specified in Section 1.3
hereof.

 

 

36

 

SCHEDULE 1.1

 

 

 

Holders and Commitments

 

	
 

	
 

	
 

	

Lender

	

Commitment Amount

	

Commitment Percentage

	

NH
EXPANSION CREDIT FUND HOLDINGS LP

	

$15,000,000.00

	

100.00%

	

TOTAL

	

$15,000,000.00

	

100.00%

 

 

37

 

 

 

EXHIBIT A

 

The
Collateral consists of all of Issuer’s right, title and
interest in and to the following personal property wherever
located, whether now owned or hereafter acquired or
arising:

 

All
goods, Accounts (including but not limited to health-care
receivables), Equipment, Inventory, contract rights or rights to
payment of money, leases, license agreements, franchise agreements,
General Intangibles, commercial tort claims, documents, instruments
(including any promissory notes), chattel paper (whether tangible
or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting
obligations, and financial assets, whether now owned or hereafter
acquired, wherever located, equity interests of any Subsidiary, and
all Issuer’s Books relating to the foregoing, and any and all
claims, rights and interests in any of the above and all
substitutions for, additions, attachments, accessories, accessions
and improvements to and replacements, products, proceeds and
insurance proceeds of any or all of the foregoing.

 

 

38

 

EXHIBIT B

 

OMNIBUS OFFICER’S CERTIFICATE

 

SANUWAVE HEALTH, INC.

SANUWAVE, INC.

SANUWAVE SERVICES, LLC

 

August
6, 2020

 

This
Omnibus Officer’s Certificate is being delivered pursuant to
Schedule 1 of
that certain Note and Warrant Purchase and Security Agreement,
dated as of the date hereof (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time, the
“NWPSA”), by
and among SANUWAVE Health, Inc., a Nevada corporation (the
“Issuer”), the
Holders from time to time party thereto and NH Expansion Credit
Fund Holdings LP, as the agent (in such capacity, together with it
successors and permitted assigns, the “Agent”). Each
of the Issuer, SANUWAVE, Inc., a Delaware corporation, and SanuWave
Services, LLC, a Delaware limited liability company, are
hereinafter referred to each as a “Company.”
Capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the NWPSA. The undersigned
Chief Financial Officer of each Company hereby certifies, solely in
such capacity and not in any individual capacity, as
follows:

 

1.

I am the duly
elected and qualified Chief Financial Officer of each
Company.

 

2.

Attached hereto as
Exhibit A is a
true, correct and complete copy of the resolutions duly adopted by
the board of directors or sole member, as applicable, of each
Company authorizing the execution, delivery and performance of the
Note Documents to which such Company is a party; and such
resolutions have not been amended, modified, revoked or rescinded
and are in full force and effect as of the date
hereof.

 

3.

Attached hereto as
Exhibit B is a
true, correct and complete copy of the bylaws or limited liability
company agreement, as applicable, of each Company as in effect on
the date hereof and except as reflected therein there have been no
amendments, restatements or other modifications.

 

4.

Attached hereto as
Exhibit C is a
true, correct and complete copy of the certificate of
incorporation, restated certificate of incorporation or certificate
of formation, as applicable, of each Company as in effect on the
date hereof and except as reflected therein there have been no
amendments, restatements or other modifications.

 

5.

Attached hereto as
Exhibit D is a
good standing certificate for each Company issued by its
jurisdiction of organization.

 

6.

Attached hereto as
Exhibit E is a
true, correct and complete copy of the certificate of incumbency
for each Company certifying that the named individuals therein are
duly elected and appointed officers of such Company holding the
offices set forth opposite their names therein, and that such
officers are authorized to sign, execute, and deliver the Note
Documents and the signatures set out opposite the names of such
officers are their genuine signatures.

 

 

 

 

39

 

IN
WITNESS WHEREOF, I have hereunto set my hand as of the date first
set forth above.

 

 

 

____________________________________

Name:
Lisa E. Sundstrom

Title:
Chief Financial Officer

 

 

I,
Kevin A. Richardson II, in my capacity as Chief Executive Officer
of each Company, do hereby certify in the name and on behalf of
each Company that Lisa E. Sundstrom is the duly elected and
qualified Chief Financial Officer of each Company and that the
signature appearing above is her genuine signature.

 

 

 

____________________________________

Name:
Kevin A. Richardson II

Title:
Chief Executive Officer

 

 

 

40

 

Exhibit A

 

Resolutions

 

[See
attached]

 

 

41

 

Exhibit B

 

Governing Documents

 

[See
attached]

 

 

42

 

Exhibit C

 

Charters

 

[See
attached]

 

 

43

 

Exhibit D

 

Good Standing Certificates

 

[See
attached]

 

 

44

 

Exhibit E

 

Incumbency

 

[See
attached]

 

 

45

 

 

 

EXHIBIT C

 

COMPLIANCE CERTIFICATE

 

TO:            

NH EXPANSION CREDIT
FUND HOLDINGS LP 

Date:

FROM: 

SANUWAVE HEALTH,
INC.

 

This
Compliance Certificate (this “Certificate”),
for the period ended [__________] [__], 20[__], is furnished
pursuant to Section 5.2(b) of that
certain Note and Warrant Purchase and Security Agreement, dated as
of August 6, 2020 (as amended, restated, amended and restated,
supplemented or otherwise modified from time to time, the
“NWPSA”;
capitalized terms used herein and not otherwise defined shall have
the meaning ascribed to such terms in the NWPSA), by and among
SANUWAVE Health, Inc., a [Nevada][Delaware] corporation
(“Issuer”),
each Holder from time to time party thereto (collectively, the
“Holders”
and each individually, a “Holder”)
and NH Expansion Credit Fund Holdings LP, as agent (in such
capacity, together with its successors and permitted assigns, the
“Agent”).

 

The undersigned, a Responsible Officer of Issuer,
hereby certifies to Agent and the Holders, as applicable, on behalf
of Issuer (and not in any individual capacity),
that:

 

 (a)           all
representations and warranties set forth in the Agreement and the
Note Documents are true, accurate and complete, in all material
respects as of the date hereof, provided that the materiality
qualifier is not applicable to any representation or warranty that
is already qualified or modified by materiality in the text
thereof;

 

(b)           Issuer
is in compliance with the terms of the Note Documents to which it
is a party;

 

(c)           no
Event of Default exists under the Agreement;

 

(d)           [attached
hereto as Annex A is a list of any
intellectual property obtained by Issuer or any Subsidiary thereof,
in each case, in which a notice is required to be delivered in
accordance with the last paragraph of Section 5.8;]1;

 

(e)           [attached
hereto as Annex B is a report on the
use of proceeds of the SBA PPP Loan and supporting documentation
with respect thereto, or such other similar report and/or
documentation provided to the SBA and/or the SBA PPP Loan Lender,
in each case, in accordance with Section 5.12(b).]2

 

Attached are the
required documents supporting the certification.

 

Please indicate compliance status by circling Yes/No under
“Complies” column.

 

	

Reporting Covenant

	

Required

	

Complies

	

Quarterly
financial statements

	

Quarterly
within 45 days

	

Yes
No

	

Annual
financial statement (CPA Audited) + CC

	

FYE
within 90 days

	

Yes
No

	

Annual
operating budget (monthly) and projections (quarterly)

	

Within
30 days of FYE and 10 days after any update

	

Yes
No

	

10-Q,
10-K and 8-K

	

Within
5 days after filing with SEC

	

Yes
No

	

Financial Covenant

	

Required

	

Complies

	

Minimum Liquidity

	

$5,000,000, at all times

	

Yes No

 

 

 

 

[Balance of Page Intentionally
Left Blank]

1 To be included only
if an update is required under Section 5.8 of the
NWPSA.

2 To be included until
the SBA PPP Loan is repaid or forgiven.

 

46

 

Other Matters

 

1.

Are any legal
actions pending or threatened against Issuer or Subsidiary which
could reasonably be expected to result in damages of $75,000 or
more?

 

☐
Yes  

☐
No   

[If Yes, please
provide a brief summary.]

 

2.

Have there been any
material returns, recoveries, disputes and claims with Account
Debtors of Issuer or any Subsidiary

 

☐
Yes       

☐
No   

[If Yes, please
provide a brief summary.]

 

3.

Has there been any
event that materially and adversely affects value of IP (owned by
Issuer or Subsidiary)

 

☐
Yes     

☐
No  

[If Yes, please
provide a brief summary.]

 

4.

Since the last
Compliance Certificate Issuer has delivered, has Issuer changed:
(i) the address of its chief executive office, (ii) its legal name,
or (iii) its state of incorporation? If so, please give details
is:

  

5.

Have there been any
amendments of or other changes to the Operating Documents of
Issuer?

 

☐
Yes 

☐
No 

[If Yes, please
provide copies of any such amendments with this Compliance
Certificate.]

 

6.

Have there been any
amendments to or notices provided with respect to Senior Debt or
Subordinated Debt?

 

☐
Yes 

☐
No 

[If Yes, please
provide copies thereof with this Compliance
Certificate.]

 

7.

Has Issuer sent or
received any material correspondence, reports, documents or made
other filings with any Governmental Authority that could reasonably
be expected to have a material adverse effect on any of the
Governmental Approvals material to Issuer’s or any
Subsidiary’s business or that could otherwise reasonably be
expected to have a Material Adverse Change.

 

☐
Yes      

☐
No   

[If Yes, please
provide a brief summary.]

 

8.

Set forth below are
any new Collateral Accounts of Issuer and any Subsidiary not
previously disclosed to Agent and the Holders on a Perfection
Certificate or a previously delivered Compliance
Certificate:

 

	

Issuer
/ Subsidiary

 

	

Institution
Name and Address

 

	

Account
Number

 

	

Balance

 

	

Control
Agreement

 

	
 

	
 

	
 

	
 

	

☐ Yes ☐ No

 

	
 

	
 

	
 

	
 

	

☐ Yes ☐ No

 

 

[Signature Page
Follows]

 

 

47

 

The
following are the exceptions with respect to the certification
above: (If no exceptions exist, state “No exceptions to
note.”)

 

 

 

	

SANUWAVE
HEALTH, INC.

 

 

By:                                                       

Name:                                                       

Title:                                                      

	
 

 

 

 

 

 

[Signature Page to Compliance
Certificate]

 

 

 

 

48

 

ANNEX A

 

[See
attached]

 

 

 

 

 

 

 

 

[Annex A to Compliance
Certificate]

 

 

49

 

 

 

ANNEX B

 

[See
attached]

 

 

 

 

 

[Annex B to Compliance
Certificate]

 

 

50

 

 

 

 

EXHIBIT D

 

FORM OF SECURED PROMISSORY NOTE

 

 

 

 

 

 

51

 

  

SECURED PROMISSORY NOTE

 

$15,000,000.00                                                                                                 

AUGUST 6,
2020

 

FOR
VALUE RECEIVED, SANUWAVE HEALTH, INC., a Nevada corporation
(“Issuer”), hereby
unconditionally promises to pay to NH EXPANSION CREDIT FUND
HOLDINGS LP, a Delaware limited partnership (together with its
registered successors and permitted assigns, “Holder”), at the
Holder’s lending office, or at such other place as Holder may
from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the
principal sum of Fifteen Million Dollars ($15,000,000.00), pursuant
to the terms of that certain Note and Warrant Purchase and Security
Agreement, dated as of the date hereof (as amended, restated,
amended and restated, supplemented or otherwise modified from time
to time, the “NWPSA”), by and among
Issuer, NH EXPANSION CREDIT FUND HOLDINGS LP, as Agent for the
noteholders, Holder and each other noteholder from time to time
party thereto. All capitalized terms used herein (which are not
otherwise specifically defined herein) shall be used in this
Secured Promissory Note (this “Note”) as defined in the
NWPSA.

 

This
Note is issued in accordance with the provisions of the NWPSA and
is entitled to the benefits and security of the NWPSA and the other
Note Documents, and reference is hereby made to the NWPSA for a
statement of the terms and conditions under which this Note was
made and is required to be repaid.

 

The
outstanding principal balance evidenced by this Note shall be
payable in full on the Maturity Date, or on such earlier date as
provided for in the NWPSA.

 

Issuer
promises to pay interest from the date hereof until payment in full
hereof on the unpaid principal balance of this Note at the per
annum rate or rates set forth in the NWPSA. Interest on the unpaid
principal balance of this Note shall be payable on the dates and in
the manner set forth in the NWPSA. Interest as aforesaid shall be
calculated in accordance with the terms of the NWPSA.

 

Upon
and after the occurrence of an Event of Default, and as provided in
the NWPSA, the principal outstanding under this Note may be
declared, and immediately upon such declaration shall become, due
and payable without demand, notice or legal process of any kind;
provided, however, that upon the occurrence of an Event of Default
pursuant to the provisions of Section 7.5(b) or Section 7.5(c) of
the NWPSA, the principal outstanding under this Note shall
automatically be due and payable, without demand, notice or
acceleration of any kind whatsoever.

 

Payments received
in respect of this Note shall be applied as provided in the
NWPSA.

 

Issuer
hereby waives presentment, demand, protest and notice of
presentment, demand, nonpayment and protest.

 

No
waiver by any Holder of any one or more defaults by Issuer in the
performance of any of its obligations under this Note shall operate
or be construed as a waiver of any future default or defaults,
whether of a like or different nature, or as a waiver of any
obligation of Issuer to any other Holder under the
NWPSA.

 

No
provision of this Note may be amended, waived or otherwise modified
unless such amendment, waiver or other modification is in writing
and is signed or otherwise approved by Issuer, Holder and the
Required Holders under the NWPSA, to the extent required under
Section 11.3 of the NWPSA.

 

THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

 

 

 

52

 

 

Whenever possible
each provision of this Note shall be interpreted in such manner as
to be effective and valid under applicable law, but in case any
provision of or obligation under this Note shall be invalid,
illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired
thereby.

 

Whenever in this
Note reference is made to Holder or Issuer, such reference shall be
deemed to include, as applicable, a reference to their respective
successors and permitted assigns. The provisions of this Note shall
be binding upon Issuer and its successors and permitted assigns,
and shall inure to the benefit of Holder and its successors and
permitted assigns.

 

In
addition to, and without limitation, of any of the foregoing, this
Note shall be deemed to be a Note Document and shall otherwise be
subject to all of the general terms and conditions contained in
Section 8.4 and Article 11 of the NWPSA, mutatis mutandis.

 

 

[Signature
Page Follows]

 

53

 

IN
WITNESS WHEREOF, Issuer has caused this Secured Promissory Note to
be executed as of the date first written above.

 

 

ISSUER:

 

SANUWAVE HEALTH,
INC.

 

By                                           

Name:                                           

Title:                                           

 

Address for
Notice:

SANUWAVE HEALTH,
INC.

3360
Martin Farm Road, Suite 100

Suwanee, Georgia
30024

Attn:
Lisa E. Sundstrom, Chief Financial Officer

Email:
lisa.sundstrom@sanuwave.com

 

 

 

 

 

 

[Signature Page to Secured
Promissory Note]

 

54

 

 

EXHIBIT E

 

FORM OF WARRANT TO PURCHASE STOCK

 

 

 

 

 

55

 

 

ANNEX X

(Form
of Disbursement Letter)

 

[see
attached]

 

 

 

 

56

 

 

 

DISBURSEMENT LETTER

 

August 6, 2020

The
undersigned, a Responsible Officer of SANUWAVE HEALTH, INC., a Nevada
corporation (“Issuer”),
hereby certifies to NH EXPANSION
CREDIT FUND HOLDINGS LP (“North Haven
Expansion”), as agent (in such capacity, together with
its successors and permitted assigns, the “Agent”), and the Holders from time
to time signatory to the NWPSA (as defined below), including North
Haven Expansion in its capacity as a Holder (each, a
“Holder”
and collectively, the “Holders”)
in connection with that certain Note and Warrant Purchase and
Security Agreement, dated as of the date hereof, by and among
Issuer, the Agent and the Holders from time to time party thereto
(as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the “NWPSA”;
capitalized terms used herein and not otherwise defined shall have
the meaning ascribed to such terms in the NWPSA) that:

 

1.

The representations
and warranties made by Issuer in Section 4 of the NWPSA and
in the other Note Documents are true and correct in all material
respects as of the date hereof.

 

2.

No event or
condition has occurred that would constitute an Event of Default
under the NWPSA or any other Note Document.

 

3.

Issuer is in
compliance with the covenants and requirements contained in
Sections 5 and
6 of the
NWPSA.

 

4.

All conditions
referred to in Section 3 of the NWPSA to
the purchase of the Notes to be made on or about the date hereof
have been satisfied or waived by Holder.

 

5.

No Material Adverse
Change has occurred and is continuing.

 

6.

The proceeds of the
Notes shall be disbursed pursuant to the instructions set forth on
Exhibit A
attached hereto.

 

[Balance of Page Intentionally Left Blank]

 

57

 

Dated
as of the date first set forth above.

 

	

ISSUER:

	
 

	
 

	
 

	
 

	
 

	

SANUWAVE
HEALTH, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

By                                                                

	
 

	
 

	

Name:                                                                

	
 

	
 

	

Title:                                                                

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

AGENT AND HOLDER:

 

NH
EXPANSION CREDIT FUND HOLDINGS LP

 

By: MS
Expansion Credit GP, L.P.

Its:
General Partner

 

By: MS
Expansion Credit GP Inc.

Its:
General Partner

 

 

By                                                                 

Name:                                                                 

Title:                                                                 

 

 

 

[Signature Page to Disbursement
Letter]

 

58

 

Exhibit A

 

[See
attached]

 

 

 

[Exhibit A to Disbursement
Letter]

 

59

 

ANNEX Y

(Celularity
Acquisition Documents)

 

[see
attached]

 

 

60

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00312-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00312-of-00352.parquet"}]]