Document:

snwv_ex10-26

Exhibit 10.26

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY
HARMFUL IF PUBLICLY DISCLOSED. SUCH PORTIONS ARE MARKED AS
INDICATED WITH BRACKETS (“[***]”) BELOW

 

 

JOINT VENTURE AGREEMENT

 

This
JOINT VENTURE AGREEMENT (the “Agreement”) is
entered into on December, 13, 2019 (the “Effective
Date”), by and between (each a “Party” and
jointly the “Parties”):

 

(1)

SANUWAVE HEALTH, INC. a corporation
organized and existing under the laws of the State of Nevada,
United States of America, with its headquarters at 3360 Martin Farm
Road, Suite 100, Suwanee, Georgia 30024, United States of America
(“Sanuwave”);

 

(2)

UNIVERSUS GLOBAL ADVISORS LLC, a limited
liability company organized and existing under the laws of the
State of Delaware, United States of America, with its headquarters
at 251 Little Falls Drive, New Castle, Delaware 19808, United
States of America (“Universus”);

 

(3)

VERSANI HEALTH CONSULTING CONSULTORIA EM
GESTÃO DE NEGÓCIOS EIRELI, a empresa individual de responsabilidade
limitada organized and existing under the laws of Brazil
having its principal place of business at Rua Francisco
Leitão, 177, Conj. 92, Pinheiros, Municipality of São
Paulo, State of São Paulo – 05.414- 020, Brazil,
enrolled with the Brazilian Taxpayer Secretariat under number CNPJ
31.025.914/0001-30 (“Versani”);

 

(4)

CURARUS LIMITED, a private limited
company organized and existing under the laws of England and Whales
having its principal place of business at Unit C, Harcourt Way,
Meridian Business Park, Leicester, LE19 1WP (“Curarus”);

 

(5)

DANIEL FELICIANO FERREIRA, Brazilian,
married, manager, resident and domiciled in the city of São
Paulo, State of São Paulo, at (“Daniel”);

 

(6)

FERNANDO DELMONTE MOREIRA, Brazilian,
married, physician, resident and domiciled in the city of Salvador,
State of Bahia, at (“Fernando”);

 

(7)

PAULO HENYAN YUE CESENA, Brazilian,
divorced, engineer, resident and domiciled in the city of São
Paulo, State of São Paulo, at (“Paulo”);

 

(8)

FABIO DELMONTE MOREIRA, Brazilian,
married, pharmacist, resident and domiciled in the city of Miami,
State of Florida, at (“Fabio”);

 

(9)

PARVINDER
PUNIA, a citizen of the Czech
Republic, regulatory affairs consultant, resident and domiciled in
the city of Ricany, at (“Parvinder”);
and

 

(10)

LAURA NAE, a citizen of the Czech
Republic, regulatory affairs consultant, resident and domiciled in
the city of Prague, at (“Laura” and,
together with Curarus, Daniel, Fernando, Paulo, Fabio and
Parvinder, the “IDIC
Group”).

 

WHEREAS,

 

(A)

Sanuwave develops
and commercializes high-energy, focused, shock wave technology used
in devices for the repair and regeneration of bones, muscles,
tendons and skin, and for the separation of solids and fluid in
non-medical systems;

 

(B)

Sanuwave has
developed and commercializes the dermaPACE device and wound kits
consisting of a standard ultrasound gel and a custom size sterile
sleeves used for the treatment of various acute and chronic wounds
using extracorporeal shockwave therapy technology (the
“Device”);

 

(C)

On November
6th, 2019, the IDIC Group
completed the payment to Sanuwave of the first installment of the
Partnership Fee in the total amount of USD $250,000.00 (two hundred
and fifty thousand U.S. Dollars);

 

(D)

Subject to the
terms and conditions of this Agreement, the Parties agreed (i) to
form a joint venture in Brazil to manufacture, import, export, use,
offer for sale, and distribute the Device and related treatments on
an exclusive basis in Brazil, and (ii) to enter into this
Agreement, to further regulate their rights and obligations with
respect to the joint venture; and (iii) to incorporate the JV
Company, and execute the other Transaction Documents to govern the
operations and management of the JV Company;

 

(E)

Upon formation of
the JV Company, Sanuwave will own forty-five per cent (45%) of the
equity interests of the JV Company, the IDIC Group, through a
holding company to be formed, will collectively own forty-five per
cent (45%) of the equity interests of the JV Company and each of
Versani and Universus will own five per cent (5%) of the equity
interests of the JV Company.

 

NOW, THEREFORE, the Parties agree,
subject to the terms and conditions hereinafter set forth, as
follows:

 

SECTION
1

DEFINITIONS
AND INTERPRETATION

 

 DEFINITIONS 

 

1.1 For the purposes of
this Agreement, the following capitalized terms shall have the
meanings ascribed to them below:

 

 

 

 

Affiliate means any Person which
directly or indirectly Controls, is Controlled by, or is under
common Control with, another Person.

 

Agreement means this Agreement and its
Schedules and Exhibits.

 

Anti-Corruption Laws has the meaning set
forth in Section 9.2.

 

ANVISA means Agência Nacional de Vigilância
Sanitária, the National Health Surveillance Agency of
Brazil.

 

Applicable Law means any and all laws,
rules, statutes, decrees, regulations, ordinances or orders valid
and enforceable in the United Kingdom, Brazil and any other
jurisdiction in the proper exercise of its jurisdiction, as
applicable, including all applicable public, environmental and
competition laws and regulations; and any administrative decision,
judgment and other pronouncement enacted, issued, promulgated,
enforced or entered into by any Governmental
Authority.

 

Arbitral Tribunal has the meaning set
forth in Section 23.4.

 

Arbitration Chamber has the meaning set
forth in Section 23.2.

 

Board of Directors means the board of
directors of the Company.

 

Brazil means the Federative Republic of
Brazil.

 

Business means the manufacturing,
import, export, use, sale, and distribution of the Device and
related treatments on an exclusive basis within the
Brazil.

 

Business Day means a day on which
commercial banks are generally open for business in São
Paulo.

 

Business Plan means the annual operating
and financial plan of the JV Company, which shall be agreed between
Sanuwave and the members of the IDIC Group prior to the formation
of the JV Company.

 

Bylaws means the bylaws of the Company
to be enacted at the general meeting of incorporation of the JV
Company.

 

Change of Control has the meaning set
forth in Section 7.1.

 

Confidential Information has the meaning
set forth in Section 24.1.

 

Conflict has the meaning set forth in
Section 23.1.

 

Consenting Meeting of Representatives
has the meaning set forth in Section 10.2.

 

Consenting Meeting of the Senior
Management has the meaning set forth in Section
10.3. 

 

 

2

 

 

Control (including the terms
“Controls”, “Controlled by” and
“under common Control with”) means with respect to any
Person or group of Persons (the “Controlling Person”),
(a) the ability of the Controlling Person, whether through the
ownership of voting securities of another Person (the
“Controlled Person”) or by contract or otherwise, to
directly or indirectly (i) elect a majority of the board of
directors or other similar governing or managing body of such
Controlled Person, or (ii) direct or cause the direction of the
management or policies of such Controlled Person, or (b) the
ownership rights that entitle the Controlling Person to have the
majority of the voted in such Controlled Person general
meetings.

 

Defense Costs has the meaning set forth
in Section 19.5(b).

 

Direct Claim has the meaning set forth
in Section 19.5(a).

 

Direct Transfer means, when used as a
noun, any direct transfer, assignment (including any fiduciary
assignment) conveyance, exchange, donation, gift, sale, merger, or
other disposition or attempted disposition of equity interests,
whether voluntary or involuntary; and when used as a verb and/or as
an adjective, shall have a meaning correlative with the
foregoing.

 

Director means a member of the Board of
Directors.

 

Drag-Along Conditions has the meaning
set forth in Section 6.4.2.

 

Drag-Along Transferor has the meaning
set forth in Section 6.4.1.

 

Drag-Along Notice has the meaning set
forth in Section 6.4.1.

 

Drag-Along Potential Buyer has the
meaning set forth in Section 6.4.1.

 

Drag-Along Right has the meaning set
forth in Section 6.4.1.

 

[***]
has the meaning set forth in Section 3.10.

 

Encumbrance means any charge, pledge,
mortgage, encumbrance, option, deposit, usufruct, reservation of
title, preemptive right, preferential right, fiduciary transfer or
other third party rights affecting the property, asset or right in
question, or security interest of any kind, or promise, agreement
or obligation to provide any of the above-listed
items.

 

Effective Date has the meaning set forth
in the Preamble.

 

Fiscal Year means the period commencing
on January 1 and ending on December 31 each year.  

 

Follow-on Offer Period has the meaning
set forth in Section 6.2.1.

 

Governmental Authority means any court,
whether tribunal or administrative, governmental or regulatory
body, agency, commission, division, department, autarchy,
organization, public body, State, municipality or other
governmental authority (including the Brazilian judicial,
legislative and executive branches) having jurisdiction over the
Parties and/or the matters which
are subject to this Agreement.

 

 

3

 

Gross Sales means the total amount of
sales recognized for a reporting period, prior to any deductions or
discounts.

 

IDIC Group has the meaning set forth in
the Preamble.

 

IDIC Group Change of Control Put Option
Affected Shares has the meaning set forth in Section
7.3.1.

 

IDIC Group Change of Control Put Option
has the meaning set forth in Section 7.3.1.

 

IDIC Group Change of Control Put Option
Exercise Notice has the meaning set forth in Section
7.3.1.

 

[***]
has the meaning set forth in Section 3.10.

 

IDIC Group Indemnified Parties has the
meaning set forth in Section 19.2.

 

IDIC Group Nominee Shareholder has the
meaning set forth in Section 25

 

Indemnified Parties has the meaning set
forth in Section 19.2.

 

Indemnifying Party has the meaning set
forth in Section 19.4.

 

Initial Closing has the meaning set
forth in Section 16.1.

 

Initial Closing Conditions has the
meaning set forth in Section 15.1.

 

Initial Closing Date has the meaning set
forth in Section 16.1.

 

Initial Closing Long Stop Date means
(including) December 17, 2019.

 

Initial Offer Period has the meaning set
forth in Section 6.2.1.

 

Indirect Transfer means, when used as a
noun, (a) with respect to any Party (other than Sanuwave) (a
“Subject Person”): (i) any corporate recapitalization,
reorganization, amalgamation or change of ownership of any of the
issued and outstanding securities or other ownership of such
Subject Person; (ii) any transfer, assignment (including any
fiduciary assignment), conveyance, exchange, donation, gift, sale,
merger or other transaction or disposition or attempted disposition
or abandonment of the equity interest of a Subject Person, whether
voluntary or involuntary; (iii) the issuance of any treasury or
other securities or ownership interests of such Subject Person to
any Person, in each case, where as a result of such action or
transaction described in (i), (ii) or (iii) above, any of the
issued and outstanding securities or other ownership interests of
such Subject Person would be owned, directly or indirectly, by a
person other than the Person or Persons or beneficial owners or
beneficial owners) that owned such securities immediately prior to
such action and/or transactions (and when used as a verb and/or as
an adjective, shall have a meaning correlative to the
foregoing).

 

 

4

 

 

Intellectual Property Rights means any
intellectual property rights, including, without limitation, (i)
patents, patent applications and statutory invention registrations,
(ii) registered, unregistered and applications to register
trademarks, service marks, trade names, trade dress, logos,
commercial names, domain names or corporate names, including any
trademarks registered before the Brazilian Intellectual Property
Agency (Instituto Nacional da
Propriedade Intelectual – INPI) and including all
goodwill associated with the foregoing, (iii) registered,
unregistered and applications to register copyrights, together with
translations, adaptations, derivations and combinations thereof,
(iv) trade secrets, know-how, and proprietary information,
including trade secrets, know-how and invention rights and (v)
algorithms and software, domain names, websites, inventions
(whether patentable or unpatentable and whether or not reduced to
practice) and all improvements thereto, and all other similar
intellectual property rights.

 

JV Company means the corporation or
other Person which the Parties agree to establish, or cause to be
establish, as provided for in this Agreement to explore the
Business pursuant to the terms and conditions of this Agreement,
the Bylaws and the other Transaction Documents.

 

JV Transaction has the meaning set forth
in Section 13.1.

 

License means any licenses, permits,
authorizations, consents or other approvals required by Applicable
Law (especially any environmental laws) or by any Governmental
Authority.

 

Lock-Up has the meaning set forth in
Section 5.1.

 

Losses means any and all damages,
losses, amounts paid pursuant to judicial, administrative or
arbitration decisions, costs and expenses, tax assessments,
interest, fines and charges of any nature, including
attorneys’ fees and deposits due to judicial and
administrative proceedings, it being agreed that neither Party
shall be liable in an action initiated by one against the other for
special, indirect or consequential damages resulting from or
arising out of, without limitation, loss of profit or business
opportunities, and/or business interruptions.

 

Marketing Policy means the marketing
policy of the JV Company which shall be agreed between the Parties
prior to the Subsequent Closing Date.

 

New Transfer Terms has the meaning set
forth in Section 6.2.2.

 

Net Sales means the gross amount
invoiced by the JV Company for Device procedures or products sold
in bona fide, arms-length transactions to third parties for use in
the field, less sales, use, occupation and excise taxes, and
transportation, discounts, returns and allowances in lieu of
returns.

 

Non-Compete Obligation has the meaning
set forth in Section 21.1.

 

Notice of Change of Control has the
meaning set forth in Section 7.1.

 

Officer means the officers of the JV
Company appointed in accordance with the Shareholders’
Agreement and Bylaws.

 

Organizational Expenses means the cost
of organizational expenses for the incorporation and operation of
the JV Company such as the INMETRO certification, ANVISA
authorization, pharma economic study, RADAR licenses, the cost of
the initial three Devices, insurance, and pre- launch costs for key
opinion leader development and symposiums or congresses, provided
that any costs related to employees, contract labor, or back office
facilities are excluded from this definition.

 

 

5

 

 

Partnership Fee means the total amount
to be paid by the IDIC Group to Sanuwave in the aggregate amount of
$600,000.00 (six hundred thousand U.S. Dollars) payable in
accordance with Section 3.1.

 

Parties has the meaning ascribed to it
in the Preamble.

 

Party has the meaning ascribed to it in
the Preamble.

 

Person means any natural person, legal
entity, firm, partnership, association, business or non-business
company, corporation, joint venture, limited liability company,
association, trust, unincorporated organization, pension fund,
trust, Governmental Authority, investment fund or other entity, as
well as any syndicate or group of two or more of such Persons
acting as a syndicate or group for purposes of acquiring, holding
or disposing of securities or other interests in any such
Person.

 

Policy has the meaning set forth in
Section 12.6.2.

 

Remaining Parties has the meaning set
forth in Section 6.2.1.

 

Remaining Party Transfer Terms has the
meaning set forth in Section 6.2.1.

 

Required Approvals has the meaning set
forth in Section 17.1.1.

 

Requisite Vote of the Board has the
meaning set forth in Section 9.5.8.

 

Right of First Offer has the meaning set
forth in Section 6.2.1.

 

ROFO Acceptance has the meaning set
forth in Section 6.2.1.

 

ROFO Completion Date has the meaning set
forth in Section 6.2.3.

 

ROFO Offered Shares has the meaning set
forth in Section 6.2.1.

 

ROFO Offer Price has the meaning set
forth in Section 6.2.1.

 

Rules of Arbitration has the meaning set
forth in Section 23.2.

 

Sanuwave has the meaning set forth in
the Preamble.

 

Sanuwave Indemnified Parties has the
meaning set forth in Section 19.1.

 

Sanuwave Post Ramp-Up Change of Control
Affected Shares has the meaning set forth in Section
7.3.1.

 

 

6

 

 

Sanuwave Post Ramp-Up Change of Control Call
Option has the meaning set forth in Section
7.3.1.

 

Sanuwave Post Ramp-Up Change of Control Call
Option Exercise Notice has the meaning set forth in Section
7.3.1.

 

Sanuwave Pre Ramp-Up Change of Control Affected
Shares has the meaning set forth in Section
7.2.

 

Sanuwave Pre Ramp-Up Change of Control Call
Option has the meaning set forth in Section
7.2.

 

Sanuwave Pre Ramp-Up Change of Control Call
Option Exercise Notice has the meaning set forth in Section
7.2.

 

Sanuwave’s Technology means all
know how, methods, processes, pathway, technology, inventions,
expertise, trade secrets, techniques, specifications, formulations,
formulae, combinations of components, and tangible and intangible
information that Sanuwave has developed or otherwise owns or holds
related to the Device.

 

Shareholders’ Agreement means the
shareholders’ agreement of the JV Company to be entered into
by the Parties prior to the formation of the JV
Company.

 

Shares mean the issued and outstanding
ordinary and preferred shares of the capital stock of the JV
Company.

 

Subsequent Closing has the meaning set
forth in Section 18.1.

 

Subsequent Closing Conditions has the
meaning set forth in Section 17.1.

 

Subsequent Closing Date has the meaning
set forth in Section 18.1.

 

Subsequent Closing Long Stop Date means
(including) December 31, 2020.

 

Supply Agreement means the agreement to
be entered into by Sanuwave and the JV Company for the supply of
Devices.

 

Tag-Along Exercise Notice has the
meaning set forth in Section 6.3.3.

 

Tag-Along Conditions has the meaning set
forth in Section 6.3.2.

 

Tag-Along Notice has the meaning set
forth in Section 6.3.1.

 

Tag-Along Potential Buyer has the
meaning set forth in Section 6.3.1.

 

Tag-Along Right has the meaning set
forth in Section 6.3.1.

 

Tag-Along Shares has the meaning set
forth in Section 6.3.1.

 

 

7

 

 

Tag-Along Transferor has the meaning set
forth in Section 6.3.1.

 

Technology License Agreement means the
technology license agreement to be entered into by Sanuwave and the
JV Company on the Subsequent Closing Date related to the ownership
and use of the Intellectual Property Rights to be transferred to
and/or developed by JV Company.

 

Third-Party Claim has the meaning set
forth in Section 19.5(b).

 

Third Party Claim Notice has the meaning
set forth in Section 19.4.

 

Trademark License Agreement means the
trademark license agreement to be entered into by the JV Company
and Sanuwave prior to the Subsequent Closing.

 

Transfer means any Indirect Transfer or
Direct Transfer.

 

Transfer Notice has the meaning set
forth in Section 6.2.1.

 

Transferor has the meaning set forth in
Section 6.2.1.

 

Transaction Documents means this
Agreement, the Shareholders’ Agreement, the Promissory Notes,
the Trademark License Agreement, the Supply Agreement and the
Technology License Agreement.

 

INTERPRETATION

 

1.2 All references to
Sections, Recitals, Exhibits and Schedules are, unless otherwise
expressly stated, references to sections of, and Recitals, Exhibits
and Schedules to, this Agreement.

 

1.3 The headings in
this Agreement are inserted for convenience only and shall be
ignored in construing this Agreement.

 

1.4 Any reference to
any statute, statutory instrument or contract, agreement or other
similar arrangement in this Agreement shall be a reference to the
same as amended, supplemented, re-enacted or replaced from time to
time.

 

1.5    
References to “include” or “including” are
to be construed without limitation.

 

1.6 Unless the context
otherwise requires, reference to the singular shall include a
reference to the plural and vice-versa; and reference to any gender
shall include a reference to all genders.

 

1.7 The Exhibits and
Schedules form part of this Agreement. In the event of any conflict
between the provisions of this Agreement, the Exhibits and the
Schedules, the provisions of this Agreement shall
prevail.

 

SECTION
2

SCOPE
OF THIS AGREEMENT

 

 

8

 

 

2.1 The purpose of this
Agreement is to set forth the rights and obligations of the Parties
in connection with (i) the establishment of the joint venture, (ii)
the incorporation, management and governance of the JV Company;
(iii) the development and operation of the Business by the JV
Company.

 

2.2 The Parties agree
that upon the formation of the JV Company and subsequent execution
of the Shareholders’ Agreement, the Parties’
relationship as shareholders of the JV Company shall be governed by
the provisions of the Bylaws and the Shareholders’ Agreement
in respect of all matters requiring shareholders or Board of
Directors approval, which are relevant for the carrying out of the
JV Company’s Business and the pursuit of its
objectives.

 

2.3 Each Party
acknowledges and agrees that it shall vote in the General
Shareholders’ Meeting, and shall cause the members of the
Board of Directors appointed by them to vote in the Board of
Directors’ Meetings so as to comply with and give effect to
the terms and conditions of this Agreement, and that such Party and
such members of the Board of Directors shall act in accordance with
the provisions of this Agreement. The Parties undertake to take all
the necessary measures to ensure that the members of the Board of
Directors and the Officers will comply with this Agreement,
including through the execution of a deed of adherence by each
member of the Board of Directors and the Officers.

 

2.4 The Parties also
agree that it is of the essence of this Agreement that, in their
capacity as shareholders, they shall endeavor to generate value for
the JV Company and the Business by their mutual cooperation and
contribution in their respective areas of expertise within the
scope of the Business.

 

2.5 The Business shall
be conducted so as to maximize the benefit to the Parties as
shareholders, and to prioritize the JV Company’s financial
independence from the Parties as shareholders, using (in light of
the tax, legal, regulatory and economic circumstances at the time)
the financing tools and instruments which are available in the
market and the guarantees secured on its own assets and credit
health, avoiding as far as reasonably possible the request by it
for financial support from one or more Parties as
shareholders.

 

 

SECTION
3

THE
JOINT VENTURE AND JV COMPANY

 

3.1 IDIC Group shall
pay to Sanuwave the Partnership Fee, in exchange for the right of
establishing a joint venture company which will hold the exclusive
territorial rights to be granted to the JV Company to use, offer
for sale, import, and export the Device within Brazil on the
Subsequent Closing Date. The Partnership Fee has been and shall be
paid in three separate installments as follows: (a) USD $250,000.00
(two hundred and fifty thousand U.S. dollars) paid in full on
November 14th, 2019; (b) USD
$250,000.00 (two hundred and fifty thousand U.S. dollars) to be
paid on the Initial Closing Date (no later than December
31st, 2019); and (c)
USD $100,000.00 (one
hundred thousand U.S. dollars) to be paid by Sanuwave upon receipt
of applicable regulatory approval by ANVISA for the JV Company to
commercialize the Device in Brazil, on the Subsequent Closing
Date.

 

 

9

 

 

3.1.1 In
the event that the Parties have not reached agreement on the
Shareholders’ Agreement, the Promissory Notes, the Trademark
License Agreement, the Supply Agreement and the Technology License
Agreement by January 31, 2020, IDIC Group shall have the right to
terminate this Agreement for cause, [***],and Sanuwave
[***].

 

3.1.2 In
the event ANVISA does not grant regulatory approval for the JV
Company to commercialize the Device in Brazil, or in the event
ANVISA grants the approval with restrictions that will materially
impact the JV Company’s operation, IDIC Group shall have the
right to terminate this Agreement for cause, [***], and Sanuwave
[***].

 

3.2 In exchange for the
payment of the first installment of the Partnership Fee, Sanuwave
issued to each member of the IDIC Group, the Promissory Notes. Each
of such Promissory Notes is attached hereto as Exhibit A.

 

3.3 The IDIC Group
shall be responsible for the incorporation of the JV Company and
shall pay any and all fees and expenses in connection with the
incorporation, formation, and startup of the JV Company, including
but not limited to all expenses to form the JV Company, obtain the
required approvals and filings with any Governmental Authority for
the operation of the JV Company, the registration and
commercialization of the Device, attorneys' fees and fees of other
advisors involved and all other disbursements or expenses of the
types customarily incurred in connection with the procedures herein
contemplated.

 

3.4 Sanuwave shall
cooperate with the IDIC Group and bear its own costs associated
with it becoming a shareholder of the JV Company, including but not
limited, to any requested legal opinions outside of Brazil and its
own travel expenses.

 

3.5 The JV Company
shall be a corporation incorporated in Brazil governed by Law No.
6.404/76, the Bylaws and the Shareholders’ Agreement. The
following provisions of Sections 3.5 through
and including
Section 3.12 shall apply after the formation of the JV Company and
shall be reflected in the Bylaws and Shareholders’ Agreement
of the JV Company.

 

3.6 The corporate name
of the JV Company shall be Diversa S.A. and the JV Company’s
headquarters will be at Santana do Parnaíba.

 

3.7 When the formation
of the JV Company occurs, the corporate capital of the JV Company
shall be represented by ordinary and preferred registered shares,
all with a par value of R$ 1.00 (one Brazilian Real) each, free
from any Encumbrances, in a total of R$5,001.00 (five thousand and
one Brazilian Reais) represented by five thousand (5,000) ordinary
shares and one preferred share each held as follows:

 

(a) [***] held by
Sanuwave;

 

(b)
[***] held by the
IDIC Group, through a holding company to be formed by IDIC
Group;

 

 

10

 

 

Group;

 

(c) [***] held by
the IDIC

 

(d) [***] held by
Versani; and

 

(e) [***] held by
Universus.

 

3.8   
The preferred shares of the JV
Company will not grant any voting right to [***], are not
convertible into ordinary shares, and shall not be transferred by
[***], except among its
members and/or Affiliates of its members.

 

3.9 Notwithstanding the
foregoing, in case preferred shares are granted any voting rights
to [***] by virtue of law, [***] hereby fully waives any such
rights and, if such rights may not be waived by [***] for any
reason whatsoever, [***] shall always exercise such voting rights
with respect to the preferred shares in the same manner as [***]
exercise voting rights with respect to its ordinary shares. In
addition, for all purposes of this Agreement (including verifying
whether any minimum ownership percentage thresholds set forth
herein were met), the preferred shares shall not be considered to
constitute part of the voting capital of the JV Company. The
preferred shares do not participate in the capital increases
arising from capitalization of reserves or profits and do not give
any rights to remaining profits.

 

3.10 The right granted to [***] as the
sole holder of preferred shares shall exclusively consist of
receiving fixed prioritized dividends from the profits of the JV
Company until full reimbursement of the amounts paid by [***] in
connection with the Partnership Fee and the Organizational
Expenses, including the amount corresponding to any taxes paid by
[***] in connection with the payment of the Partnership Fee, always
net of any applicable taxes (the “[***]”). Such
dividends shall be paid exclusively based on the Bylaws reserve to
be established in the Bylaws of the Company. The Parties agree that
the [***] will not be paid through interest on net capital
(juros sobre capital
próprio).

 

3.11 The
Parties undertake to vote in the General Shareholders’
Meeting in order to distribute to [***], as the sole holder of
preferred share, the totality of the [***] as soon as the
applicable Bylaws reserve has received enough cash to pay the
[***].

 

3.12 The
preferred share shall be redeemed by the JV Company for the price
equivalent to the equity value of the share on the Effective Date
as soon as the [***] is paid in full, solely by making use of funds
allocated to the Bylaws reserve to be created. The Parties hereby
undertake to carry out: (a) an Extraordinary General
Shareholders’ Meeting within thirty days counted as from the
date on which the [***] is paid in full and to approve the
redemption of the preferred shares, under the terms
hereof.

 

3.13 The
ordinary shares shall be paid-in by the shareholders in cash (in
Brazilian Reais) or with assets and rights pursuant to the terms of
the Shareholders’ Agreement and the Business Plan. Upon
contribution, the JV Company shall be entitled to use
Sanuwave’s Technology as per the terms and conditions of the
Technology License Agreement.

 

 

11

 

 

SECTION
4

FINANCING,
CAPITAL INCREASES AND DIVIDENDS

 

4.1 The following
provisions of this Section 4 shall apply after the formation of the
JV Company, and shall be incorporated into the Shareholders’
Agreement and the Bylaws of the JV Company.

 

4.2 None of the Parties
shall be obligated to pay any debt or provide any equity financing
or other financial support of any kind or nature to the JV Company,
including loans or guarantees or other assurances to third parties
in connection with the extension of credit or other financial
support provided to the JV Company, unless it has separately
committed in writing (in a legally binding manner) to the JV
Company to do so.

 

4.3 Upon approval by
the requisite number of shareholders at a General
Shareholders’ Meeting, the JV Company may obtain financing
through the issuance of securities, including equity and debt
securities, if the Board of Directors determines that such
financing is in the best interest of the JV Company.

 

4.4 The capital
increases involving issuance of Shares by the JV Company shall be
carried out in the best interests of the JV Company, shall comply
with the Applicable Law, and must be approved by a General
Shareholders’ Meeting, upon recommendation of the Board of
Directors.

 

4.4.1 Notwithstanding
the above mentioned, for the purposes of increasing the capital of
the JV Company, the Parties hereby agree that the JV Company shall
be evaluated by its book value until it reaches US$ 2,000,000.00 in
Gross Sales. Once this threshold is reached, the JV Company may be
evaluated by any methods available, according to the Applicable
Law, the recommendation of the Board of Directors and approval of
the General Shareholders’ Meeting.

 

4.5 In case of a
capital increase, each Party shall have the right to subscribe for
and contribute to the capital increase pro-rata in proportion to
its ownership interest as of the date of the approval of the
capital increase. If a Party does not subscribe for and contribute
its share of capital increase, then any other Party may subscribe
for and contribute that share pro-rata in proportion to its
ownership interest, in which case the ownership interest of the
non-contributing Party may be diluted, and that of the other
Parties’ increased.

 

4.6 Within [***] days
as from the approval of: (i) a capital increase by issuance of
Shares by the JV Company; or (ii) any issuances of other Shares by
the JV Company, each Party will be offered the opportunity to
subscribe for up to its pro rata share of the new Shares relative
to its then-current participation in the corporate capital of the
JV Company in accordance with the Applicable Law. In the event that
any Party does not exercise, in whole or in part, its preemptive
rights, but one or more other Parties exercised its or their
preemptive rights in full, such other subscribing Party(ies) shall
first have the opportunity (for an additional period of [***] days
after the date of elapse of the [***]-day term provided by this
Section) to subscribe for such unsubscribed-for Shares (on a pro
rata basis among them), before such unsubscribed Shares are offered
to third parties.

 

 

12

 

 

SECTION
5

GENERAL
ASPECTS OF THE TRANSFER OF SHARES

 

5.1 No member of the IDIC
Group shall Transfer any of their respective direct or indirect
participation in the joint venture or the JV Company (except among
its undersigned members and/or to one or more Affiliates of such
members) either totally or partially, until the third anniversary
of the payment in full of the Partnership Fee (“Lock-Up”).

 

5.2 The following
remaining provisions of this Section 5 shall apply after the
formation of the JV Company, and shall be incorporated into the
Shareholders’ Agreement and the Bylaws of the JV
Company.

 

5.3 Except as
contemplated by this Section 5 or Section 6, no Party shall
Transfer, any portion of their respective Shares without complying
with the provisions of this Section 5 or Section 6.

 

5.4 The Parties agree
that the following Transfers will not be subject to the
restrictions on transfer established under this Agreement: (i)
Transfers among the current members of the IDIC Group, or transfers
by the current members of the IDIC Group to one or more Affiliates,
provided that in case a current member ceases to be a member of the
IDIC Group, a transfer to such former member shall not be permitted
or if a Transfer is made to a member of the IDIC Group and such
Person ceases to be a member of the IDIC Group, such shares must be
re-transferred to a member of the IDIC Group; and (ii) transfers by
Sanuwave to an Affiliate.

 

5.5 Any Transfer of
Shares performed in violation of the provisions of this Agreement
shall be null and void and the Company shall not register such
transaction under the Shares Registry Book or the Shares Transfer
Book, in which case the defaulting Party undertakes to be liable
towards the JV Company, the remaining Parties and any third parties
for any losses and damages resulting from such
violation.

 

5.6 The issue of Shares
or the Transfer of Shares to a Person who is not already a Party to
this Agreement (including any Affiliate of the transferring Party)
shall only be performed upon irrevocable and irreversible
obligation of such Person to adhere to the Shareholders’
Agreement by means of the execution of an adhesion agreement to be
attached as an exhibit to the Shareholders’
Agreement.

 

 

SECTION
6

RIGHT
OF FIRST OFFER; TAG-ALONG RIGHT; DRAG-ALONG RIGHT

 

6.1 The following
provisions of this Section 6 shall apply after the formation of the
JV Company, and shall be incorporated into the Shareholders’
Agreement and the Bylaws of the JV Company.

 

6.2    
Right of First Offer

 

6.2.1 Subject
to the Lock-Up, if a Party (“Transferor”)
desires to Transfer all or any portion of its Shares (the
“ROFO
Offered Shares”) to a Third Party (other than a
permitted assignee), the Transferor shall first permit each of the
other Parties (“Remaining
Parties”) to exercise its right
of first offer in respect of all of the ROFO Offered Shares (the
“Right of
First Offer”). The Transferor shall notify the
Remaining Parties about its intention to Transfer the Shares, which
notice shall include the number of ROFO Offered Shares (the
“Transfer
Notice”). Within [***] days of the Transfer Notice
(the “Initial Offer
Period”), each Remaining Party may, on a pro-rata
basis to its then current participation in the corporate capital of
the JV Company, make an offer to the Transferor to acquire all (but
not less than all) of the ROFO Offered Shares at an all-cash price
(the highest such price shall be the “ROFO Offer
Price”) and on an “as-is, where-is” basis,
except for customary representations and warranties
(“Remaining Party Transfer
Terms”); any exercise by the IDIC Group as a
“Remaining Party” of the Right of First Offer hereunder
may be exercised by the IDIC Group as a whole, or by its individual
members, at their sole discretion. In making such offer, each
Remaining Party will have the right to over-elect, on a pro-rata
basis relative to its then current participation in the corporate
capital of the JV Company, to acquire the pro rata portion of any
Remaining Party which does not elect to participate. Each Remaining
Party that in the Initial Offer Period offered less than the ROFO
Offer Price shall have [***] Business Days following the expiry of
the Initial Offer Period (the “Follow-on Offer
Period”) to notify the Transferor and the other
Remaining Parties that it is willing to also pay the ROFO Offer
Price. The Transferor shall have a [***]-day period following the
end of the Initial Offer Period or the Follow-on Offer Period (as
applicable), to accept the ROFO Offer Price (“ROFO
Acceptance”) at its discretion.

 

 

13

 

 

6.2.2 If
the Transferor elects not to sell its ROFO Offered Shares at the
ROFO Offer Price with the Remaining Parties, it may, during a
further period of [***] months, enter into definitive transaction
documents to sell all (but not less than all) of the ROFO Offered
Shares to an arm’s length third party at a price higher than
the ROFO Offered Price, which sale shall not include any collateral
agreements or any other terms that would reasonably be expected to
make the transaction price with such third party less than the ROFO
Offer Price (“New Transfer
Terms”). In the event that no ROFO Offer Price is
offered, the Transferor may sell to a third party purchaser at any
price, provided that execution of the definitive transaction
documents to effect the sale occurs within [***] months after the
lapse of a [***] days period for presentation of the ROFO Offer
Price. In case of lapse of the [***] month period without the
execution of the definitive transaction documents to be entered
into with a Third Party, in case the Transferor still intends to
sell the ROFO Offered Shares, the Transferor shall restart the
procedure indicated in this Section 6.2.

 

6.2.3 If
the Transferor elects to consummate the Transfer of the ROFO
Offered Shares at the ROFO Offer Price with the Remaining Parties
then within [***] days of the date of the ROFO Acceptance, the
Transferor must provide written notice to the Remaining Parties of:
the number of ROFO Offered Shares that each Remaining Party is
obliged to acquire; and the date, place and time (the "ROFO Completion
Date") between [***] and [***] Business Days after the date
of the ROFO Acceptance, on which the sale and purchase of the ROFO
Offered Shares is to be completed.

 

6.2.4 On
or before the ROFO Completion Date, the Transferor shall effect the
Transfer to the Remaining Party(ies) by executing an instrument of
transfer in respect of the relevant ROFO Offered Shares and will
Transfer on the ROFO Completion Date the relevant ROFO Offered
Shares to the relevant Remaining Parties) free from all
Encumbrances with full title guarantee, and on the Remaining Party
Transfer Terms against payment in cash of the aggregate ROFO
Offered Price due to it in respect of the ROFO Offered Shares from
the Remaining Parties on the ROFO Completion
Date.

 

 

14

 

 

6.3

Tag-Along
Right

 

6.3.1 Subject
to the Lock-Up and the Right of First Offer, a Party which intends
to sell its Shares of the JV Company (“Tag-Along
Transferor”) shall not sell its Shares in the JV
Company to a Third Party (other than a permitted transferee)
(“Tag-Along Potential
Buyer”), except in case (i) the terms and conditions
of such Transfer of Shares include an offer, by the Tag- Along
Potential Buyer to the other Parties other than the Tag-Along
Transferor for the acquisition of the Shares held by the other
Parties (“Tag-Along
Shares” and “Tag-Along
Right”, respectively), on a pro rata basis to their
share ownership in the corporate capital of the JV Company, and
(ii) the Tag-Along Transferor delivers a notice of such offer to
the other Parties not less than forty-five days prior to such
proposed transfer to such Tag-Along Potential Buyer
(“Tag-
Along Notice”).

 

6.3.2 The
Tag-Along Notice shall include the following information
(“Tag-Along
Conditions”): (a) the number of Shares held by the
Tag-Along Transferor to be transferred to the Tag-Along Potential
Buyer; (b) the cash price to be paid per share and the conditions
of payment; (c) the transfer
terms agreed with the Tag-Along Potential Buyer; (d) the name and
the identity of the Tag-Along Potential Buyer; (e) copy of the
principal final documents for the purchase and sale of shares or,
in their absence, copy of the offer or the purchase terms submitted
by the Tag-Along Potential Buyer.

 

6.3.3 The
other Parties shall have the right, to be exercised by notice to
the Tag- Along Transferor within [***] days after the receipt of
the Tag-Along Notice, to notify the Tag Along Transferor in writing
whether it intends to exercise the Tag-Along Right
(“Tag-Along Exercise
Notice”). Upon the timely delivery of any Tag-Along
Exercise Notice, it shall be a condition precedent for the closing
of such Transfer of Shares to the Tag-Along Potential Buyer that
the Tag-Along Potential Buyer acquires at the same time the
Tag-Along Shares of the Parties which provided the Tag-Along
Exercise Notice. In this case, the Tag-Along Transferor shall cause
the amount to be paid by the Tag-Along Potential Buyer in the terms
of the Tag-Along Offer to be transferred directly to the applicable
Parties upon delivery of its/their Tag-Along Shares and any other
documents reasonably agreed between the Tag-Along Transferor and
the Tag-Along Potential Buyer.

 

6.3.4 Any
Shares transferred by the other Parties to the Tag-Along Potential
Buyer shall be transferred at the same price per share transferred
by the Tag-Along Transferor to the Tag-Along Potential Buyer. In
case the other Parties exercise the Tag-Along Right under the terms
hereof, the Transfer of Shares held by the Tag-Along Transferor and
the Tag-Along Shares to the Tag-Along Potential Buyer shall be
concluded within [***] days after the receipt of the Tag-Along
Exercise Notice by the Tag-Along Transferor. In case the Transfer
of Shares is not concluded as soon as reasonably possible, the
Tag-Along Transferor shall again comply with the terms hereof prior
to the Transfer of Shares to the Tag-Along Potential Buyer Notice
(extendable to accommodate any required Governmental Authority
approvals, which shall be obtained as soon as possible with all
necessary action by the parties involved).

 

 

15

 

 

6.3.5 In
case no other Party decides not to exercise its Tag-Along Right
under the terms hereof, the Transfer of Shares by the Tag-Along
Transferor to the Tag-Along Potential Buyer shall be concluded as
soon as reasonably possible. In case the Transfer of Shares to the
Tag-Along Potential Buyer is not totally concluded within [***]
months counted as from the date in which the term for the issuance
of the Tag-Along Exercise Notice expires, the provisions of this
Section 6.3.5 shall be
required to be complied with again by the Tag-Along Transferor
prior to the Transfer of Shares to the Tag-Along Potential Buyer
Notice (extendable to accommodate any required Governmental
Authority approvals, which shall be obtained as soon as possible
with all necessary action by the parties involved).

 

6.4

Drag-Along
Right

 

6.4.1 Subject
to the Lock-up and Right of First Offer, in the event a Party or
Parties holding not less than [***] percent ([***]%) of the equity
interests of the JV Company receives a bona fide purchase offer
(“Drag-Along
Transferor”) from a Third Party (“Drag-Along Potential
Buyer”), the Drag-Along Transferor shall be entitled
to cause the other Parties to transfer all, but not less than all,
of their Shares jointly with the Drag-Along Transferor to the
Drag-Along Potential Buyer for the same price per share on a pro
rata basis to their share ownership in the corporate capital of the
JV Company and on the same conditions applicable to the transfer of
the Drag-Along Transferor (“Drag-Along
Right”). The Drag-Along Transferor shall send a prior
notice on such offer to the other Parties informing them about such
Transfer of Shares (“Drag-Along
Notice”).

 

6.4.2 The
Drag-Along Notice shall include the following information
(“Drag-
Along Conditions”): (a) the number of Shares held by
the Drag-Along Transferor to be transferred to the Drag-Along
Potential Buyer; (b) the cash price to be paid per share and the
conditions of payment; (c) the transfer terms agreed with the
Drag-Along Potential Buyer; (d) the name and the identity of the
Drag-Along Potential Buyer; (e) copy of the principal final
documents for the purchase and sale of shares or, in their absence,
copy of the offer or the purchase terms submitted by the Drag-Along
Potential Buyer.

 

6.4.3 In
the event of exercise of the Drag-Along Right by the Drag-Along
Transferor, the other Parties shall take or cause to be taken all
necessary or reasonable actions required for the expeditious
completion of the Transfer of Shares and shall execute and deliver
any reasonable documents determined by the Drag-Along Transferor,
including, if necessary, a share purchase agreement. The Transfer
of Shares shall be concluded within [***] days from the date of
delivery of the Drag-Along Notice (extendable to accommodate any
required Governmental Authority approvals, which shall be obtained
as soon as possible with all necessary action by the parties
involved).

 

6.4.4 In
the event of exercise of the Drag-Along Right by the Drag-Along
Transferor, all costs and expenses proven to have been incurred for
the preparation and execution of the Transfer of Shares, including
attorneys’ and professional fees, shall be borne by the Drag-
Along Transferor, except if the other Parties engage lawyers or
other advisers to assist them in the transaction, provided that
each Party shall be responsible for any and all taxes that may be
due by such Party as a result of such Transfer of
Shares.

 

 

16

 

 

6.4.5 For
purposes of the completion of the Transfer of Shares as a result of
the exercise of the Drag-Along Right, the Parties shall grant
irreversible and irrevocable powers of attorney pursuant to
articles 684 and 685 of the Brazilian Civil Code to execute any
transaction documents required to document the sale of shares and
the relevant share transfer form so as to perfect the Transfer of
Shares as a result of the Drag-Along Right.

 

SECTION
7

OPTION
UPON CHANGE OF CONTROL OF SANUWAVE

 

7.1 In case of a change
of Control of Sanuwave (“Change of
Control”), Sanuwave shall deliver written notice to
the other Parties informing about the consummation of the Change of
Control, within [***] days counted from the closing of the Change
of Control transaction (“Notice of Change of
Control”).

 

7.1.1 Notwithstanding
the above, Sanuwave undertakes to notify IDIC Group whenever it
starts a negotiation with third parties that could end up in a
Change of Control.

 

7.2

Sanuwave Pre
Ramp-Up Change of Control Call Option

 

7.2.1   
In case a Change of Control occurs prior to the JV Company
achieving USD $2,000,000.00 (two million U.S. Dollars) in Gross
Sales, Sanuwave shall have the right to cause the other Parties to
sell all (but not less than all) of the equity interests held by
the other Parties (“Sanuwave Pre Ramp-Up Change
of Control Affected Shares”) to the new Controlling
Entity of Sanuwave (“Sanuwave Pre Ramp-Up Change
of Control Call Option”) and shall have a term of
[***] days from the receipt of the Notice of Change of Control by
the other Parties, to notify the other Parties of its intention to
exercise the Sanuwave Pre Ramp-Up Change of Control Call Option
(the “Sanuwave Pre Ramp-Up
Change of Control Call Option Exercise Notice”). In
case Sanuwave does not so notify the other Parties of such
intention within such [***]-day term, its omission shall be deemed
as a waiver of its Sanuwave Pre Ramp-Up Change of Control Call
Option.

 

7.2.2 If
Sanuwave exercises its Sanuwave Pre Ramp-Up Change of Control Call
Option, the price to be paid by the new Controlling Entity of
Sanuwave to the other Parties for all the Shares owned by such
other Parties shall be an amount equivalent to the multiple of four
(4) times the total amount invested in the JV Company, including
the Partnership Fees and Organizational Expenses, before the
closing of the Change of Control transaction, provided that such
amount shall be paid to the other Parties on a pro rata basis to
their share ownership in the corporate capital of the JV Company.
In case Sanuwave exercises its Sanuwave Pre Ramp-Up Change of
Control Call Option, the transfer of the Sanuwave Pre Ramp-Up
Change of Control Affected Shares to the new Controlling Entity of
Sanuwave shall be made within [***] days counted from the receipt
of the Sanuwave Pre Ramp-Up Change of Control Call Option Exercise
Notice (extendable to accommodate any required Governmental
Authority approvals, which shall be obtained as soon as possible
with all necessary action by the parties involved). In case
Sanuwave does not exercise its Sanuwave Pre Ramp-Up Change of
Control Call Option, the other Parties shall not be required to
sell the Sanuwave Pre Ramp-Up Change of Control Affected Shares to
Sanuwave, and such Sanuwave Pre Ramp-Up Change of Control Affected
Shares shall remain

 

 

17

 

 

subject
to the terms and conditions provided for in this Agreement,
including the Right of First Offer, the Tag-Along Right and the
Drag-Along Right.

 

7.3

Sanuwave Post
Ramp-Up Change of Control Call Option

 

7.3.1   
If a Change of Control occurs after the JV Company achieves USD
$2,000,000.00 (two million U.S. Dollars) in gross sales, Sanuwave
shall have the right to cause the other Parties to sell the
totality (but not less than the totality) of the Shares held by the
other Parties (“Sanuwave Post Ramp-Up
Change of Control Affected Shares”) to the new
Controlling Entity of Sanuwave (“Sanuwave Post Ramp-Up
Change of Control Call Option”) and shall have a term
of [***] days counted as from the receipt of the Notice of Change
of Control by the other Parties, to notify the other Parties of its
intention to exercise the Sanuwave Post Ramp-Up Change of Control
Call Option (the “Sanuwave Post Ramp-Up
Change of Control Call Option Exercise Notice”). In
case Sanuwave does not so notify the other Parties of such
intention within such 30 (thirty)-day term, its omission shall be
deemed as a waiver of its Sanuwave Post Ramp- Up Change of Control
Call Option.

 

7.3.2 If
Sanuwave exercises its Sanuwave Post Ramp-Up Change of Control Call
Option, the price to be paid by the new Controlling Entity of
Sanuwave to the other Parties for all the Shares owned by such
other Parties shall be an amount equivalent to the multiple of
twelve (12) times the Net
Sales of the JV Company for the last twelve (12) months before the
closing of the Change of Control transaction, provided that such
amount shall be paid to the other Parties on a pro rata basis to
their share ownership in the corporate capital of the JV Company.
In case Sanuwave exercises its Sanuwave Post Ramp-Up Change of
Control Call Option, the transfer of the Sanuwave Post Ramp-Up
Change of Control Affected Shares to the new Controlling Entity of
Sanuwave shall be made within [***] days counted from the receipt
of the Sanuwave Post Ramp-Up Change of Control Exercise Notice
(extendable to accommodate any required Governmental Authority
approvals, which shall be obtained as soon as possible with all
necessary action by the parties involved). In case Sanuwave does
not exercise its Post-Ramp-Up Change of Control Call Option, the
other Parties shall not be required to sell the Sanuwave Post
Ramp-Up Change of Control Affected Shares, which shall remain
subject to the terms and conditions provided for in this Agreement,
including the Right of First Offer, the Tag-Along Right and the
Drag-Along Right.

 

7.4

IDIC Group Change
of Control Put Option

 

7.4.1 If
a Party receives a Notice of Change of Control after the JV Company
achieves USD $2,000,000.00 (two million U.S. Dollars) in gross
sales, such Party shall have a put option to sell all (but not less
than all) of its equity interests (“IDIC Group Change of
Control Put Option Affected Shares”) to the new
Controlling Entity of Sanuwave (“IDIC Group Change of
Control Put Option”). Each such Party shall deliver a
written notice of its intention to exercise the IDIC Group Change
of Control Put Option to Sanuwave within [***] days from the
earlier of the receipt of the Notice of Change of Control, or the
date of its actual knowledge of the occurrence of such Change of
Control (if such Notice of Change of Control was not delivered)
(the “IDIC Group Change of
Control Put Option Exercise Notice”).

 

 

18

 

 

7.4.2 The
price to be paid by the new Controlling Entity of Sanuwave to the
Parties exercising their put option for the exercise of the IDIC
Grup Change of Control Put Option shall be a price to be determined
proportionally based on the same EBITDA multiple paid by the new
Controlling Entity of Sanuwave for Sanuwave, provided that such
amount shall be paid to the other Parties exercising their put
option on a pro rata basis to their share ownership in the
corporate capital of the JV Company. In case any Party fails to
notify Sanuwave of its intention to exercise its IDIC Group Change
of Control Put Option within such [***]-day term, its omission
shall be deemed as a waiver of its IDIC Group Change of Control Put
Option. In case any Party exercises its IDIC Group Change of
Control Put Option, the transfer of the respective Shares to the
new Controlling Entity of Sanuwave shall occur within [***] days
counted as from the receipt of the IDIC Group Change of Control Put
Option Exercise Notice (extendable to accommodate any required
Governmental Authority approvals, which shall be obtained as soon
as possible with all necessary action by the parties
involved).

 

SECTION
8

GENERAL
SHAREHOLDERS’ MEETING

 

8.1 The following
provisions of this Section 8 shall apply after the formation of the
JV Company, and shall be incorporated into the Shareholders’
Agreement and the Bylaws of the JV Company.

 

8.2 The JV Company
shall hold (a) an Ordinary General Shareholders’ Meeting
annually, and (b) Extraordinary General Shareholders’
Meetings, each as required by Applicable Law.

 

8.3 The Ordinary
General Shareholders’ Meeting shall be held within the
four-month period following the end of each Fiscal Year of the JV
Company to vote on the following matters, and any other matters
properly brought before the Ordinary General Shareholders’
Meeting in accordance with the Bylaws and Applicable
Law:

 

(i) the examination,
discussion and approval of the accounts and financial statements of
the JV Company, as presented by the Board;

 

(ii) the
allocation of the net profit of the ended Fiscal Year, and the
declaration and distribution of dividends of the JV Company;
and

 

(iii) election
of the members of the Board of Directors and the members of the
Fiscal Board, if its installation is required.

 

8.4 Except for the
matters set forth above in Section 8.3 and the matters required by
Applicable Law to be approved by Extraordinary General
Shareholders’ Meetings, all decisions with respect to the
governance or operations of the JV Company shall be decided by the
Board of Directors.

 

8.5 The General
Shareholders’ Meeting may be called by any Party holding at
least a twenty-five percent (25%) equity interest in the JV
Company, by any two members of the Fiscal Board, or by any two
members of the Board of Directors with due regard to all
formalities provided for in Applicable Law and the Bylaws. Subject
to the provisions of Brazilian Corporation Law,

 

 

19

 

 

the
call notices shall be delivered to each Party at least fifteen (15)
days in advance of the date scheduled for the General
Shareholders’ Meeting, and shall contain information on the
place, date, time and agenda of such meeting, as well as any
supporting documentation related to the agenda.

 

8.6 The presence of
Parties representing at least sixty percent (60%) of the
outstanding equity interests of the JV Company shall be required to
constitute a quorum for any General Shareholders’ Meeting. If
the quorum is not reached at any scheduled General
Shareholders’ Meeting, the meeting shall be called again in
accordance with the above, at least 8 (eight) days in advance of
the date scheduled for such meeting. The quorum for such recalled
meeting shall be satisfied by the attendance of any number of
Parties, which shall remain applicable to issues resolved during
the General Shareholders’ Meeting installed through the
subsequent call. The General Shareholders’ Meeting shall be
chaired by one of the shareholders chosen by the majority of votes
in attendance. The Chairman of the General Shareholders Meeting
shall choose, among the present shareholders, the secretary of the
meeting.

 

8.7 Each Party shall be
entitled to cast a number of votes that is equal to the number of
voting Shares that it owns. Any matter submitted to a General
Shareholders’ Meeting shall be approved by the affirmative
vote of at least 2/3 (two thirds) of the voting capital of the JV
Company.

 

8.8 No Party shall vote
at any General Shareholders’ Meeting resolving on any issue
with respect to which it has a conflict of interest in accordance
with the Applicable Law. For the avoidance of doubt, no Party shall
vote at any General Shareholders’ Meeting resolving on any
issue as to whether such Party should have its rights suspended in
accordance with this Agreement.

 

SECTION
9 MANAGEMENT

 

9.1 The Company shall
be managed by a Board of Directors, pursuant to the
Shareholders’ Agreement and the Bylaws and in accordance with
Applicable Laws.

 

9.2 Each of the
Shareholders and the JV Company shall, and shall cause their
respective directors, officers, employees, agents and other
representatives to always comply, in connection with the ownership
and operation of the JV Company, with the provisions of: (i) the
Brazilian anticorruption law (Law 12,846/13) and Decree 8,420/15;
(ii) the United States Foreign Corrupt Practices Act (FCPA) of
1977, as amended; (iii) the United Kingdom Bribery Act (UKBA) of
2010; (iv) the Sarbanes-Oxley Act of 2002; and (v) any other
compliance, anticorruption and/or anti-bribery legislation
(collectively, the “Anti-Corruption
Laws”), in each case to the extent applicable to the
Company, to the Shareholders and/or their respective business and
assets, as the case may be. Each Party undertakes to each other
Party that it will procure (insofar as it is lawfully able to do
so) that the JV Company has, and at all times maintains in place,
such procedures as may be reasonably required by any Party to
ensure the ongoing compliance by the JV Company with all applicable
Anti-Corruption Laws.

 

9.3 The members of the
Board of Directors and the Officers of the JV Company shall be
appointed and elected upon execution of the respective term of
investiture in the registered book of meetings of the Board of
Directors, being subject to the requirements, impairments,
duties,

 

 

20

 

 

obligations and
responsibilities provided by the Brazilian Corporation law, the
Bylaws and the Shareholders’ Agreement, and shall remain in
their offices until their successors are appointed and
elected.

 

9.4 Each Party
(directly or through its designated directors, officers and/or
members of the Fiscal Board) shall be entitled to examine the books
and records, and have reasonable access, at all reasonable times
and with prior written notice addressed to the Company, to any and
all information, documentation, properties and assets, of the
Company.

 

9.5

Board of
Directors

 

9.5.1 The
Board of Directors of the JV Company shall be composed of 4 (four)
members elected and dismissible at any time by the General
Shareholders’ Meeting, with a term of office of 3 (three)
years, reelection being permitted, considering that: (i) Sanuwave
shall have the right to nominate 2 (two) Directors; and (ii) the
members of the IDIC Group shall have the right to jointly nominate
2 (two) Directors. Sanuwave hereby appoints Kevin Richardson and
Michael Hubert as members of the Board of Directors and the members
of the IDIC Group hereby collectively appoint Daniel Feliciano
Ferreira and Paulo Cesena as members of the Board of Directors.
IDIC Group shall have the right to appoint the Chairman of the
Board of Directors and Sanuwave shall have the right to appoint the
Vice Chairman of the Board of Directors. Each Party agrees to vote
their Shares in favor of the nominees (or any replacement nominee)
nominated by Sanuwave or the IDIC Group in accordance with Section
9.5.1.

 

9.5.2 The
Shareholders shall inform each other of the names and complete
qualifications of the individuals indicated above who they intend
to appoint to the Board of Directors at least [***] Business Days
before the scheduled date of the General Shareholders’
Meeting resolving on the election of the members of the Board of
Directors.

 

9.5.3 Each
Director shall state in his/her respective term of investiture that
he or she is aware of the terms of this Agreement, and shall
execute a deed of adherence, acknowledging the obligations of such
Director to comply with the terms and conditions of this Agreement,
the Bylaws and the Shareholders’ Agreement and not to take
any unauthorized action in contravention thereof.

 

9.5.4 The
Parties expressly recognize that the members of the Board of
Directors of the JV Company shall be elected solely based on the
procedure provided herein above and, during the term of this
Agreement or the Shareholders’ Agreement, they waive the
right and state that they shall refrain from requesting the
election of members of the Board of Directors by means of the
proceeding of multiple vote provided for in the Brazilian
Corporation Law.

 

9.5.5 A
Party shall have the right to request at any time the dismissal of
any member of the Board of Directors appointed by such Party (and,
for the avoidance of doubt, shall not have the right to request the
dismissal of any member appointed by any other Party). Upon a
dismissal request, the Parties undertake to immediately adopt all
necessary measures (including
the
calling of any General Shareholders’ Meeting or aiming at the
dismissal and replacement of such member of the Board of
Directors).  

 

 

21

 

 

9.5.6 In
the event of dismissal, resignation, replacement, permanent
impairment or any other event which may result in the vacancy of
the office of any member of the Board of Directors of the JV
Company appointed by one of the Parties, the Chairman of the Board
of Directors shall acknowledge to the relevant body and the full
board appoint the alternative member, by recommendation of the
Party which appointed the member to be replaced, until another
person appointed by such Party be elected in a Shareholders’
General Meeting to exercise the position of alternative member,
having to complete the term of management of the previous member.
In such case, the other Parties undertake to vote in accordance
with the interest of the Party which appointed the replaced
member.

 

9.5.7 In
case of temporary impairment or absence of the Chairman of the
Board of Directors, such member shall be replaced by an effective
member appointed by Sanuwave during the period of his/her absence,
who, in turn, shall be automatically replaced, during the period of
replacement of the Chairman.

 

9.5.8 The Board of Directors shall be
responsible for all actions taken by or on behalf of the JV
Company, except those matters specifically designated to be taken
by an Officer or other Person designated by the Board of Directors.
Any action taken by the Board of Directors shall require a majority
vote of the Directors (i.e. three of four directors) (the
“Requisite Vote of the
Board”), and the provisions of Section 10.1 shall
apply.

 

9.5.9 The
meetings of the Board of Directors shall be held on an ordinary
basis at least once during each fiscal quarter, extraordinarily,
whenever the business activities of the JV Company or the Business
require. The meetings shall take place at the JV Company’s
headquarters, or telephonically or by other means. The meetings of
the Board of Directors and the resolutions approved in such
meetings shall be registered in the book of registration of Board
of Directors’ meeting minutes. Such minutes shall be filed
with the competent Board of Trade (Junta Comercial) if required to have
effects before third parties.

 

9.5.10 The
Chairman of meetings of the Board of Directors of the Company shall
not compute votes casted in violation to the provision hereunder as
provided for in Article 118, Paragraph 8 of the Brazilian
Corporation Law.

 

9.5.11 The
meetings of the Board of Directors, ordinarily or extraordinarily,
shall be convened by at least two Directors upon notice addressed
to the other Directors at least fifteen (15) days in
advance of the envisaged date for the meeting of the Board of
Directors. The notice shall specify all matters to be discussed and
voted at the meeting, as well as the place, date and time of the
meeting. The notice shall be accompanied with all necessary
documents for the analysis of the agenda by the members. No
resolution with respect to any matter can be taken at any meeting
of the Board of Directors unless the notice of the meeting contains
reasonable details of the matter. The call procedure may be waived
whenever all of the effective members of the Board of Directors are
present in the meeting and so agree or upon previous acceptance in
writing by the absent members.

 

 

22

 

 

9.5.12 The
quorum for the meeting of the Board of Directors shall be at least
three Directors present at such meeting. If a quorum is not present
at any scheduled meeting of the Board of Directors, the meeting
shall be once again convened, at least 8 (eight) days in advance of
the scheduled date for such meeting of the Board of Directors. The
quorum for such reconvened meeting shall be satisfied by the
attendance of any of the members of the Board of Directors;
provided that at such reconvened meeting, no action by the Board
may be approved without the Requisite Vote of the
Board.

 

9.5.13 The
members of the Board of Directors shall always act in a manner
consistent with the (i) most recently approved Business Plan, (ii)
terms of this Agreement and (iii) decisions approved at the
Company’s General Shareholders’ Meetings and the Board
of Directors’ Meetings.

 

9.5.14 In
case of a tie in the resolutions of the Board of Directors, the
Chairman of the Board of Directors shall exercise the deciding
vote.

 

9.5.15 The
members of the Board of Directors may participate in any meeting of
the Board of Directors by means of conference call, video
conference or any other means of communication in which all members
can hear each other, and a member participating in such manner
shall be deemed as present at the referred meeting. In such event,
the members of the Board of Directors shall express their votes by
means of letter, fax or e-mail message which clearly identifies the
sender.

 

9.6

Officers

 

9.6.1 The
JV Company shall have at least two (2) executives, that will manage
the Brazilian operation, all indicated by the IDIC Group, being one
Chief Executive Officer and one Chief Technical
Officer.

 

9.6.2 The
Officers shall exercise the powers assigned to them by Applicable
Law, the Board of Directors and the Bylaws.

 

9.6.3 Each
Officer shall always act in a manner consistent with (i) the most
recently approved Business Plan, (ii) terms of this Agreement and
(iii) the decisions of the Board of Directors

 

9.6.4 The
Party designating an Officer shall cause such Officer to sign a
deed of adherence, acknowledging the obligations of such Officer to
comply with the terms and conditions of this Agreement, the Bylaws
and the Shareholders’ Agreement and not to take any
unauthorized action in contravention thereof.

 

9.6.5 In
case of dismissal, resignation, replacement, permanent impairment
or any other event which results in the vacancy of the office of
any Officer of the JV Company, the Party which appointed such
Officer shall have the right to appoint the respective replacement
and the directors appointed by the other Party undertake to vote in
accordance with the interest of the Party which nominated such
Officer.

 

 

23

 

 

SECTION
10

DEADLOCK
RESOLUTION

 

10.1 In
the event the minimum voting threshold for approval is not obtained
with respect to any matter subject to the resolution of the General
Shareholders’ Meeting, the matter shall be considered a
“Deadlock”. The Deadlock matter shall be deemed as
non-approved in the General Shareholders’ Meeting, and shall
be subject to the resolution of the representatives of the
Parties.

 

10.2 In
the event of Deadlock, the Parties shall call within [***] Business
Days from the date of the General Shareholders’ Meeting which
resulted in Deadlock, a meeting in which up to [***]
representatives of each Party, considering the objectives and
interests of the JV Company, shall in good faith seek to achieve an
agreement on how to resolve the Deadlock issue (“Consenting Meeting of
Representatives”).

 

10.3 In
case the Deadlock persists for [***] Business Days after the
Consenting Meeting of Representatives is convened, the Parties
shall call within [***] Business Days counted from the Consenting
Meeting of Representatives a new meeting with members of the Senior
Management of each Party, who, considering the objectives and
interests of the JV Company, shall in good faith seek to achieve an
agreement on how to resolve the Deadlock issue (“Consenting Meeting of the
Senior Management”).

 

10.4 In
case an agreement is not achieved in the Consenting Meeting of the
Senior Management within [***] Business Days after it is convened,
the matter subject to Deadlock shall be deemed definitively not
approved and not resolved in the General Shareholders’
Meeting unless consensus is reached in a new Consenting Meeting of
the Senior Management.

 

 

SECTION
11

FISCAL
BOARD

 

11.1 The
JV Company shall have a non-permanent Fiscal Board composed of four
effective members, comprised of the following: (i) Sanuwave shall
appoint two members and their respective alternates; and (ii) the
members of the IDIC Group shall collectively appoint two
members.

 

11.2 The
Fiscal Board shall only undertake such activities as provided for
under the Brazilian Corporation Law without adverse effects to the
rights, obligations and duties of other Persons or bodies set forth
in the Bylaws or the Shareholders’ Agreement.

SECTION
12

BUSINESS
OF THE JV COMPANY, BUSINESS PLANS, PROTOCOLS

 

12.1

The
Business

 

12.1.1 The
main purpose of the JV Company shall be the manufacturing, import,
export, use, sale, and distribution of the Device and related
treatments on an exclusive basis within Brazil (the
“Business”).

 

12.2

Supply of the
Device by Sanuwave

 

24

 

12.2.1 For
the duration of the JV Company’s existence, Sanuwave shall
supply the Device to the JV Company at its cost without mark-up,
which at the time of the execution of this Agreement is USD $[***]
per device and USD $[***] per wound kit, and the JV Company agrees
to purchase the Device from Sanuwave in accordance with the terms
of the Supply Agreement to be entered into by Sanuwave and the JV
Company following the formation of the JV Company. The Supply
Agreement shall also contain provisions providing for improvement
opportunities, use of an alternative source of supply, cost of
goods, supply interruptions and the Joint Venture Company
establishing its own source of supply in Brazil for the Wound Kits
and assembly of the Devices in Brazil when the Parties approve that
Device assembly in Brazil is appropriate for the JV Company’s
business. Refurbishment of Devices will initially be performed by
Sanuwave at Sanuwave’s facility in Suwanee, Georgia, USA
until such time when the Parties approve that the JV Company starts
refurbishing Devices in Brazil.

 

12.2.2 The
Parties hereby agree that the initial five (5) Devices imported to
Brazil by the IDIC Group on behalf of the JV Company will be
provided by Sanuwave on deferred payment terms to be agreed by the
Parties under the Supply Agreement, with the invoiced amount for
the Devices from Sanuwave due by the time the JV Company reaches
USD $1,000,000.00 (one million U.S. dollars) in Gross Sales. Such
deferred payments shall be made without withholding or deducting
any taxes unless required by law, in which case an additional
amount will be added to the applicable invoice to make sure
Sanuwave will receive the same amount as it would have received
without such withholding or deduction.

 

12.3

The Trademark
License Agreement; Trademark Protection

 

12.3.1 Subsequent
to the formation of the JV Company, Sanuwave and the JV Company
shall enter into a Trademark License Agreement, which shall include
the terms and conditions of the use of certain trademarks by the JV
Company. The JV Company shall be required to use Sanuwave’s
trademarks on the Device, but it shall also be permitted to use its
own trademarks on the Device as long as the parties’
trademarks are used separately and are not combined to create a
single composite mark. The JV Company shall not register or attempt
to register the trademarks or any trademark confusingly similar to
Sanuwave’s trademarks, and Sanuwave shall retain the
exclusive right to apply for and obtain registrations for the
trademarks throughout the world. The JV Company shall not challenge
the validity of the trademarks, Sanuwave’s ownership of the
trademarks or the enforceability of Sanuwave’s rights
therein.

 

12.4

The Technology
License Agreement

 

12.4.1 On
the Subsequent Closing Date, Sanuwave shall enter into a Technology
License Agreement which shall set forth the terms and conditions
for the granting by Sanuwave to the JV Company of exclusive
territorial rights for the use, offer for sale, import, and export
of the Device within Brazil and an exclusive, royalty-free right
and license for the JV Company to use Sanuwave’s selected
trademarks in Brazil solely for the purpose of and in connection
with the marketing of the Device. Such use of trademarks shall
comply with Applicable Laws and the Trademark License
Agreement.

 

12.4.2 The
Technology License Agreement shall contain detailed customary
provisions relating to Intellectual Property Rights, including: (a)
the license terms and sublicense

 

25

 

 

terms;
(b) pre-existing Intellectual Property Rights; (c) third party
rights; (d) ownership of new patent, trademark or other
Intellectual Property Rights created during the term of the
Technology License Agreement; and (e) rights for the JV Company to
use, reference and access existing Devices and clinical or other
study data.

 

12.5

The Manufacturing
of the Device by the JV Company

 

12.5.1 Both
the Trademark License Agreement and the Technology License
Agreement shall set forth the rights and obligations of Sanuwave
and the JV Company with respect to the sharing of Sanuwave’s
rights to patents, designs, and trademarks, trade dress, copyright
or other intellectual property related to the Device and
improvements thereof. Each Party shall have the sole right to
prosecute and maintain intellectual property unrelated to the
Device and shall bear all costs associated therewith. Prosecution
and maintenance of jointly owned intellectual property shall be a
responsibility of the Party in the best position to defend the
intellectual property as determined under both the Trademark
License Agreement and the Technology License
Agreement.

 

12.5.2 The
Trademark License Agreement and the Technology License Agreement
shall also contemplate obligations of the Parties to notify one
another if either learns of any existing or threatened infringement
of any intellectual property relevant to the JV Company. In Brazil,
the JV Company shall have priority rights, but not the obligation,
to bring an infringement action, while outside Brazil, Sanuwave
shall have priority rights, but not the obligation, to bring such
action. The Parties shall collaborate and neither Party shall
unilaterally settle any claim, if such settlement would negatively
impact the other Party.

 

12.6 The
Business Plan. The Board of Directors shall prepare an
annual Business Plan, which shall include (a) a strategic and
operating plan for the development of the JV Company; (b) a
financial business plan including a consolidated profit and loss
statement for the following Fiscal Year, and a cash flow outlook
including working capital and investment requirements; (c) a
management proposal on the objectives and top priorities for the
following year; (d) details of capital expenditure and investment
requirements; (e) a detailed annual capital and operational
expenditure and investment budget; (f) a balance sheet forecast;
(g) a management report giving business objectives for the
following year; (h) a financial report which will include an
analysis of the estimated results of the JV Company for the
following Fiscal Year compared with the Business Plan for that
year, identifying variations in revenues, costs, and other material
items; and (i) any other terms and details that are customary of
the medical device industry commercialization and business plans,
including elements such as pricing and the reimbursement approval
strategy.

 

12.6.1 The
Parties agree to carry on the Business in good faith and in
accordance with Applicable Laws, general standards used by
comparable companies in the medical device industry for
commercializing similar medical device products with similar market
potential, and international guidelines, including those on
corporate governance, anti-corruption, and
sustainability.

 

12.6.2 The JV Company shall implement
written policies setting out the parameters of the decision-making
processes of the Board of Directors the protocols to be followed by
the JV Company in the conduct of the Business (each a
“Policy”).

 

26

 

 

12.6.3 The
JV Company shall implement (i) the Marketing Policy; (ii) the Risk
Policy; (iii) the Code of Conduct and (iv) the Intellectual
Property Policy, as approved by the Board of Directors, each of
which may be amended from time to time, with the approval of the
Board of Directors.

 

 

SECTION
13

REPRESENTATIONS
AND WARRANTIES OF THE IDIC GROUP MEMBERS

 

Each
member of the IDIC Group hereby individually represents and
warrants that the following statements are true in relation to
themselves, accurate and complete as of the Effective Date, and
shall be true, accurate on the Initial Closing Date and Subsequent
Closing Date.

 

13.1 Authority; Execution;
Enforceability. When applicable, all members of the IDIC
Group, as applicable, are validly incorporated, in existence and
duly registered under the laws of its jurisdiction of incorporation
and have full power to conduct its business as conducted at the
Effective Date and have full capacity to execute this Agreement,
perform its obligations, as well as to consummate the transactions
contemplated by the Transaction Documents (the “JV Transaction”). This Agreement
constitutes a legal, valid and binding obligation of the IDIC Group
Members enforceable against them and their successors, according to
the terms contained herein.

 

13.2 No
Conflicts; Consents. The execution of each of the
Transaction Documents by the members of the IDIC Group, as well as
the completion of the Transaction (and the performance of all of
the IDIC Group Members’ other obligations provided for
therein) does not as of the Effective Date or will not as of the
Initial Closing Date or the Subsequent Closing Date (as
applicable), result in any breach of an obligation or right, or
constitute fraud in the execution or against creditors by virtue of
(i) any legally binding agreement or other arrangement, verbal or
written, to which any of the IDIC Group Members is a party to, (ii)
any court decision of any nature or instance or (iii) any
Applicable Law, decree, ruling or regulation applicable to the IDIC
Group Members. The execution of the Transaction Documents, as well
as the completion of the Transaction (and the performance of all of
the IDIC Group Members’ other obligations provided for
therein) also does not (i) result in any breach or violation of or
default under, give rise to a right of termination or acceleration
of any obligation under, allow for the amendment of or result in
the imposition of any additional obligations or loss of rights
under any contract to which any of the IDIC Group Members is a
party to or whereby any of its properties or assets is bound; (ii)
violate any Law or License applicable to or held by the IDIC Group
Members or any properties or assets owned or used by the IDIC Group
Members; or (iii) result in the creation of any Encumbrance upon
any of the shares held by the IDIC Group Members. No consent or
approval must be obtained from any third party, competent
Government Authority or any court, administrative agency or
commission or other Government Authority by the IDIC Group Members
regarding the execution of and compliance with this Agreement, as
well as regarding the consummation of the Transaction.

 

13.3 Intellectual
Property. The operations and activities of the members of
the IDIC Group and the Intellectual Property Rights which shall be
the subject of the Technology License Agreement and the Trademark
License Agreement, to the best of its knowledge, do not and shall
not in the future infringe on, misappropriate or otherwise violate
any Intellectual Property Rights of any other Person
or shall require the payment of any royalty, fees or other payments
to any other Person.

 

 

27

 

 

13.4 Sufficient
Capital. The members of the IDIC Group each have sufficient
financial resources and capacity to carry out all payments and
perform all obligations under the Transaction Documents and to
support any and all of its obligations hereunder and will continue
to have sufficient financial capacity to carry on its activities
after such obligations have been complied with. There is no act or
fact, nor, to the best of the members of the IDIC Group’s
knowledge any threatened action or proceeding affecting the members
of the IDIC Group that could be expected to affect the Transaction
or the financial condition or operations of the members of the IDIC
Group, including insolvency, winding up, bankruptcy, or similar
proceedings.

 

13.5 Compliance.
The members of the IDIC Group have not (nor, to their knowledge,
have any agent, representative or other person acting on their
behalf) (a) corruptly made, offered or agreed to make or offer any
loan, gift or other payment, directly or indirectly, whether in
cash or in kind, for the use or benefit of a government official
for the purposes of influencing any act or decision of such
government official in its official capacity, or inducing such
government official to do or omit to do any act in order to obtain
or retain business or otherwise to secure any improper advantage
such that, if the members of the IDIC Group or any of their
respective employees, representatives or agents were: (i) United
States persons, such action would constitute a violation of the
FCPA; or (ii) nationals of the United Kingdom, would constitute an
offense under the United Kingdom Bribery Act of 2010, or (iii)
nationals of Brazil, would constitute an offense under Brazilian
Law 12.846/13, or (b) otherwise breached any other applicable
regulations relating to anti-bribery as well as any applicable
sanctions or embargoes imposed on any person, company or
country.

 

 

SECTION
14

REPRESENTATIONS
AND WARRANTIES OF SANUWAVE

 

14.1 Sanuwave
hereby represents and warrants that the following statements are
true, accurate and complete as of the Effective Date, and shall be
true, accurate and complete on the Initial Closing Date and
Subsequent Closing Date.

 

14.2 Authority;
Execution; Enforceability. Sanuwave is validly incorporated,
in existence and duly registered under the laws of its jurisdiction
of incorporation and has full power to conduct its business as
conducted at the Effective Date and has full capacity to execute
this Agreement, perform its obligations, as well as to consummate
the Transaction. This Agreement constitutes a legal, valid and
binding obligation of Sanuwave, enforceable against it and its
successors, according to the terms contained herein.

 

14.3 No
Conflicts; Consents. The execution of the Transaction
Documents by Sanuwave, as well as the completion of the JV
Transaction (and the performance of all of Sanuwave other
obligations provided for therein) does not result in any breach of
an obligation or right, or constitute fraud in the execution or
against creditors by virtue of (i) any legally binding agreement or
other arrangement, verbal or written, to which Sanuwave is a party
to, (ii) any court decision of any nature or instance or Applicable
Law, decree, ruling or regulation applicable to Sanuwave. The
execution of the Transaction Documents, as well as the completion
of the JV Transaction (and
the performance of all of Sanuwave’s other obligations
provided for therein) also does not (i) result in any breach or
violation of or default under, give rise to a right of termination
or acceleration of any obligation under, allow for the amendment of
or result in the imposition of any additional obligations or loss
of rights under any contract to which Sanuwave is a party to or
whereby any of its properties or assets are bound; nor (ii) violate
any Law or License applicable to or held by Sanuwave or any
properties or assets owned or used by Sanuwave. No consent or
approval must be obtained from any third party, competent
Governmental Authority or any court, administrative agency or
commission or other Governmental Authority by Sanuwave regarding
the execution of and compliance with this Agreement, as well as
regarding the consummation of the JV
Transaction.

 

28

 

 

14.4 Intellectual
Property. The operations and activities of Sanuwave and the
Intellectual Property Rights which shall be the subject of the
Technology License Agreement and the Trademark License Agreement,
to the best of its knowledge, do not and shall not in the future
infringe on, misappropriate or otherwise violate any Intellectual
Property Rights of any other Person or shall require the payment of
any royalty, fees or other payments to any other
Person.

 

14.5 Sufficient
Capital. Sanuwave has sufficient financial resources and
capacity to carry out all payments and perform all obligations
under the Transaction Documents and to support any and all of its
obligations hereunder and will continue to have sufficient
financial capacity to carry on its activities after such
obligations have been complied with. There is no act or fact, nor
any threatened action or proceeding affecting Sanuwave or the
entities pertaining to Sanuwave’s economic group that could
be expected to affect the JV Transaction or their financial
condition or operations, including insolvency, winding up,
bankruptcy, or similar proceedings.

 

14.6 Compliance.
Sanuwave and/or its Affiliates have not (nor, to their knowledge,
has any agent, representative or other person acting on their
behalf (a) corruptly made, offered or agreed to make or offer any
loan, gift or other payment, directly or indirectly, whether in
cash or in kind, for the use or benefit of a government official
for the purposes of influencing any act or decision of such
government official in its official capacity, or inducing such
government official to do or omit to do any act in order to obtain
or retain business or otherwise to secure any improper advantage
such that, if Sanuwave or any of its Affiliates or any of their
respective directors, officers, shareholders, employees,
representatives or agents were: (i) United States persons, such
action would constitute a violation of the FCPA; or (ii) nationals
of the United Kingdom, would constitute an offense under the United
Kingdom Bribery Act of 2010, or (c) nationals of Brazil, would
constitute an offense under Brazilian Law 12.846/13,; or (b)
otherwise breached any other applicable regulations relating to
anti-bribery as well as any applicable sanctions or embargoes
imposed on any person, company or country.

 

 

SECTION
15

CONDITIONS
PRECEDENT TO INITIAL CLOSING

 

15.1 The Initial Closing of the JV
Transaction shall be subject to the following conditions precedent
(“Initial
Closing Conditions”):

 

29

 

 

15.1.1 the
members of the IDIC Group shall have paid to Sanuwave the second
installment of the Partnership Fee in the total amount of USD
$250,000.00 (two hundred and fifty thousand U.S.
dollars);

 

15.1.2 the
representations and warranties provided by the Parties above shall
be true, legitimate, accurate, correct and complete in all aspects
on the Initial Closing Date, as reflected in a certificate to be
issued by the Parties on the Initial Closing Date;

 

15.1.3 the
Parties shall not have materially violated any provision of this
Agreement; and

 

15.1.4 inexistence
of any temporary restraining order, preliminary or permanent
injunction or other order in effect issued by a Governmental
Authority prohibiting or preventing the consummation of the JV
Transaction.

 

15.2 The
Parties agree that the Initial Closing Conditions set forth above
shall inure to the benefit of Sanuwave only, who shall waive or not
such Initial Closing Conditions at its sole discretion and that the
members of the IDIC Group shall not claim such conditions in order
to not proceed with the Initial Closing of the JV
Transaction.

 

15.3 Sanuwave
may, but shall not be obliged to, to the fullest extent permitted
by Applicable Law, waive one or more of its respective Initial
Closing Conditions at its sole discretion. Upon fulfillment of all
Initial Closing Conditions (or waiver by Sanuwave, as the case may
be), the Closing of the JV Transaction shall take place as
agreed.

 

15.4 The
Parties shall cooperate with each other to meet the conditions
precedent herein established and keep each other informed as to the
progress towards the satisfaction of the such conditions and shall
disclose in writing to the other Party anything which shall or may
prevent the conditions from being satisfied on or before the
Initial Closing Long Stop Date, as soon as reasonably practicable
upon such matter coming to the notice of such Party. The Parties
shall each notify the other promptly upon becoming aware that any
of the Initial Closing Conditions have been fulfilled and deliver
evidence of the same.

 

15.5 Upon
the satisfaction or waiver of all Initial Closing Conditions,
Sanuwave shall notify the IDIC Group, Versani and Universus to
proceed with the Initial Closing.

 

 

SECTION
16

INITIAL
CLOSING

 

16.1 The
Initial Closing of the JV Transaction shall take place at
[***] (“Initial Closing
Date”) unless another place and time is agreed upon in
writing between the Parties, when the Parties shall carry out
and/or execute and/or deliver the following actions and documents,
which shall all be deemed to have occurred simultaneously for the
purposes hereunder (“Initial
Closing”):

 

30

 

 

16.1.1 Confirmation
of Representations and Warranties and Conditions. The
Parties shall deliver to each other a written statement confirming
that (a) the representations and warranties granted to each other
hereby remain true, legitimate, accurate, correct and complete on
the Initial Closing Date; and (b) all Initial Closing Conditions
that each of the Parties should have completed until the Initial
Closing Date have been fulfilled (or waived, as the case may
be);

 

16.1.2
Execution of the
Agreement. Execution by the Parties of this Agreement;
and

 

16.1.3

Payment
of the Second Installment of the Partnership Fee and Release
of the Promissory
Notes. The members
of the IDIC Group shall provide evidence of payment to Sanuwave of
the second installment of the Partnership Fee in the total amount
of USD $250,000.00 (two hundred and fifty thousand U.S. dollars)
and evidence of the termination and satisfaction in full of the
Promissory Notes.

 

16.2 The
Parties shall cooperate in good faith with each other (or third
parties indicated by them) including, but not limited to, by
undertaking to execute any document and provide all necessary
assistance and information necessary to allow the performance of
any obligation under this Agreement for the Initial
Closing.

 

 

SECTION
17

CONDITIONS
PRECEDENT TO SUBSEQUENT CLOSING

 

17.1 The Subsequent Closing shall be
subject to the following conditions precedent (“Subsequent Closing
Conditions”):

 

17.1.1 the
JV Company shall be duly formed and existing under the laws of
Brazil and the IDIC Group shall provide evidence of registration of
the JV Company’s Bylaws with the applicable State Registry in
Brazil;

 

17.1.2

the Parties shall
have executed the Shareholders’ Agreement;

 

17.1.3 the JV Company shall have
obtained all required approvals to operate in Brazil and to
manufacture, import, export, use, sell, and distribute the Device
and related treatments in Brazil (“Required
Approvals”);

 

17.1.4 the Parties shall have executed
the Trademark License Agreement, Supply Agreement and Technology
License Agreement;

 

17.1.5 the members of the IDIC Group
shall have paid to Sanuwave the third installment of the
Partnership Fee in the total amount of USD $100,000.00 (one hundred
thousand U.S.
dollars);

 

 

17.1.6

the Parties shall
have paid-up their Shares in the JV Company;

 

17.1.7 the IDIC Group shall have
invested R$ 1,00 (one Real) in preference shares of the JV
Company;

 

31

 

 

17.1.8 the
representations and warranties provided by the Parties above shall
be true, legitimate, accurate, correct and complete in all aspects
on the Subsequent Closing Date, as reflected in a certificate to be
issued by the Parties on the Subsequent Closing Date;

 

17.1.9 the
Parties shall not have materially violated any provision of this
Agreement; and

 

17.1.10 inexistence
of any temporary restraining order, preliminary or permanent
injunction or other order in effect issued by a Governmental
Authority prohibiting or preventing the consummation of the JV
Transaction.

 

17.2 The
Parties agree that the Subsequent Closing Conditions set forth in
items 17.1.3 and 17.1.4 above shall inure to the exclusive benefit
of IDIC Group, who shall waive or not such Subsequent Closing
Conditions at its sole discretion; and the Subsequent Closing
Conditions set forth in items 17.1.5 and 17.1.7 above shall inure
to the exclusive benefit of Sanuwave, who shall waive or not such
Subsequent Closing Conditions at its sole discretion. The remaining
Subsequent Closing Conditions shall inure to the benefit of both
IDIC Group and Sanuwave, which may not be waived by either
Party.

 

17.3 Sanuwave
and IDIC Group may, but shall not be obliged to, to the fullest
extent permitted by Applicable Law, waive one or more of its
respective Subsequent Closing Conditions at their sole discretion.
Upon fulfillment of all Subsequent Closing Conditions (or waiver,
as the case may be), the Subsequent Closing of the JV Transaction
shall take place as agreed.

 

17.4 The
Parties shall cooperate with each other to meet the conditions
precedent herein established and keep each other informed as to the
progress towards the satisfaction of the such conditions and shall
disclose in writing to the other Party anything which shall or may
prevent the conditions from being satisfied on or before the
Subsequent Closing Long Stop Date, as soon as reasonably
practicable upon such matter coming to the notice of such Party.
The Parties shall each notify the other promptly upon becoming
aware that any of the Subsequent Closing Conditions have been
fulfilled and deliver evidence of the same.

 

17.5 Upon
satisfaction or waiver of all Subsequent Closing Conditions,
Sanuwave and IDIC Group shall notify each other, as well as Versani
and Universus to proceed with the Subsequent Closing.

SECTION
18

SUBSEQUENT
CLOSING

 

18.1 The Subsequent Closing shall take
place at [***] after receipt of the notice sent pursuant to Section
16.5 above (“Subsequent Closing
Date”) unless another place and time is agreed upon in
writing between the Parties, when the Parties shall carry out
and/or execute and/or deliver the following actions and documents,
which shall all be deemed to have occurred simultaneously for the
purposes hereunder (“Subsequent
Closing”):

 

18.1.1 Required
Approvals. The IDIC Group shall deliver to Sanuwave evidence
that the JV Company obtained all Required Approvals;

 

32

 

 

18.1.2 Technology
License Agreement. The Parties shall have entered into the
Technology License Agreement, and

 

18.1.3 Payment
of the Third Installment of the Partnership Fee. The members of the IDIC Group shall
provide evidence of payment to Sanuwave of the third installment of
the Partnership Fee in the total amount of USD $100,000.00 (one
hundred and fifty thousand U.S. dollars).

 

18.1.4 Investment
in the JV Company.
The members of the IDIC Group shall provide evidence of investment
of the total amount of R$ 1,00 (one Real) in preference shares of
the JV Company; and

 

18.1.5 Amendment
to the Bylaws of the JV Company and Shareholders’
Agreement. The
Parties shall execute an amendment to the Bylaws of the JV Company
and Shareholders’ Agreement, reflecting all rules related to
their rights and obligations in connection with the JV Company, as
a result of the termination of this Agreement.

 

18.2 The
Parties shall cooperate in good faith with each other and the JV
Company (or third parties indicated by them) including, but not
limited to, by undertaking to execute any document and provide all
necessary assistance and information necessary to allow the
performance of any obligation under this Agreement for the
Subsequent Closing.

 

SECTION
19

INDEMNIFICATION

 

19.1 The members of the IDIC Group, as
represented by its holding company to be formed, jointly and
severally agree to, indemnify, defend and hold Sanuwave, Universus,
Versani and the JV Company as the case may be, their Affiliates and
each of their respective officers, directors, employees, agents and
representatives (other than the IDIC Group) (“Sanuwave Indemnified
Parties”) harmless from and against any and all
Losses, as set forth in this Agreement and as effectively suffered
or incurred by the Sanuwave Indemnified Parties as a result
of:

 

(a) any violation,
inaccuracy, misrepresentation, untruthfulness or breach of any
representation or warranty made by any members of the IDIC Group
under this Agreement;

 

(b) any breach,
non-compliance or failure by any member of the IDIC Group to
perform any covenant or obligation contained in this
Agreement;

 

(c) any facts,
omissions or actions performed, occurred or related to members of
the IDIC Group occurred prior or after the Subsequent Closing Date
and that may affect the JV Company and/or other Sanuwave
Indemnified Parties; and

 

(d) any facts,
omissions or actions performed, occurred or related to any member
of the IDIC Group occurred until the Subsequent Closing, even if
the effects thereof materialize only after the Subsequent
Closing.

 

19.2 Sanuwave agrees to indemnify,
defend and hold the members of the IDIC Group, Universus, Versani
and the JV Company (“IDIC Group Indemnified
Parties” and together with the Sanuwave
Indemnified Parties, the “Indemnified
Parties”) harmless from and against any and all
Losses, as set forth in this Agreement and as suffered or incurred
by the IDIC Group Indemnified Parties as a result
of:

 

33

 

 

(a) any violation,
inaccuracy, misrepresentation, untruthfulness or breach of any
representation or warranty made by Sanuwave contained in this
Agreement;

 

(b) any breach,
non-compliance or failure by Sanuwave to perform any covenant or
obligation contained in this Agreement; and

 

(c) any facts,
omissions or actions performed, occurred or related to Sanuwave and
its Affiliates occurred prior or after the Subsequent Closing Date
and that may affect the JV Company and/or other IDIC Members’
Indemnified Parties; and

 

(d) any facts,
omissions or actions performed, occurred or related to Sanuwave or
any of its Affiliates occurred until the Subsequent Closing, even
if the effects thereof materialize only after the Subsequent
Closing.

 

19.3 Without
prejudice to any other limitation under this Agreement, the Parties
shall be exempt from any indemnification obligation pursuant to
this Section 18 in relation to any amount of a Loss that has been
fully reimbursed, indemnified, or compensated in any other way,
including indemnifications received due to insurance coverage or by
any other third-parties, but excluding any self-insurance or
similar self-coverage.

 

19.4 If any Indemnified Party seeks
indemnification for a Loss which give rise to obligations to
indemnify pursuant to Sections 19.1.1 or 19.2, as applicable, the
Indemnified Party shall promptly notify the other responsible party
for indemnification (the “Indemnifying
Party”) of any claim for which indemnification may be
payable, specifying in detail the nature of the claim and the
amount of the related Loss or an estimate thereof when determinable
and attaching all relevant documentation relating thereto,
including a copy of the notice document received by any
third-parties in case of a Third-Party Claim (the
“Third
Party Claim Notice”).

 

19.5 In
any case the Third Party Claim Notice shall be sent within 15
(fifteen) Business Days from the date on which the Indemnified
Party became aware of such claim and/or condition which could give
rise to a Loss or such shorter time as required to timely present a
response to such Third Party Claim. Failure by the Indemnified
Party to notify the Indemnifying Party within the periods set forth
in this Section 18.5 will not release the Indemnifying Party from
its obligation to indemnify the Indemnified Party for the Losses
related to such Claim, except to the extent that the Indemnifying
Party is objectively prejudiced thereby or is not able to file the
proper defense to a Third-Party Claim as a result of the lack of
time.

 

(a) If a Loss shall
arise and such event does not involve any third-party (a
“Direct Claim”),
the Indemnifying Party shall send a written response to the
Indemnified Party in which the Indemnifying Party states its
intention to either (i) pay the amount involved or commence any
required remedial measures in connection with the Loss pursuant to
Section 19.4; (ii) refuse to
consider the event as a Loss; or (iii) discuss the matter. In case
of item (iii), the Indemnifying Party and the Indemnified Party
shall discuss the issues involved during a period of thirty (30)
days from the receipt of the Third Party Claim Notice, and if they
reach an agreement,

 

34

 

 

any
payment required thereby shall be made by the Indemnifying Party to
the Indemnified Party as agreed between them and pursuant to
Section 19.4. In case of item “ii” above or, if the
Parties do not reach an agreement after discussion between them in
case of item “iii” above, then the Indemnified Party
may commence, at its option, any required action to pursue its
rights and remedies.

 

(b) If a Loss shall
arise and such event involves any third party (“Third-Party
Claim”), the Indemnifying Party shall have the right
to assume the defense (at its own expense) of such claim through
counsel of its own choice by so notifying the Indemnified Party.
The Indemnifying Party response shall be given within thirty
Business Days of receipt of notice thereof and shall indicate its
intention either to (i) pay the amount involved; (ii) assume the
defense of the litigation or proceeding with the counsel of its
choice (in which case, the Indemnifying Party shall be responsible
for all costs, expenses, legal and court fees, any guaranties which
may be required to be paid, advanced or deposited for the
respective defense (“Defense
Costs”), and the Indemnified Party shall have the
right to retain its own counsel at its own expense to monitor the
defense); or (iii) not assume the defense of the litigation or
proceeding. If the Indemnifying Party does not notify the
Indemnified Party of its decision to assume the defense of a
Third-Party Claim within the proper time, or if the Indemnifying
Party expressly does not assume the defense of the litigation or
proceeding and denies the existence of a Loss, the Indemnified
Party shall carry on the defense of the litigation or proceeding
diligently and no settlement or agreement nor any appeal may be
waived by the Indemnified Party without the prior written consent
of the Indemnifying Party. The Party that assumes the defense shall
be entitled to: (i) the cooperation of the other Party in preparing
the defense; and (ii) a reimbursement of all Defense Costs in the
event the Third-Party Claim effectively becomes a Loss to the
Indemnified Party. The indemnified Party agrees to provide the
Indemnifying Party with access to all of the Indemnified Party
files, information and records concerning said defense and to grant
to the attorneys appointed by the Indemnifying Party all necessary
powers-of-attorney to allow the defense of the Third-Party Claim
assumed by the Indemnifying Party.

 

19.6 The
Parties agree that if the JV Company is a Party and has been duly
notified of a Third-Party Claim that may be regarded as a Loss,
then the Parties agree that the JV Company shall always be the one
to take all actions to defend this Third-Party Claim, without
prejudice to the obligation of the Indemnifying Party to indemnify
the Indemnified Parties as the case may be. In this case the claim
shall be conducted in cooperation with the Indemnifying Party, who
may appoint (at their own cost) any legal advisor in addition to
the one(s) appointed by the JV Company.

 

19.7 Subject to the other provisions
of this Section 19.7, any amount due under the terms of this
Section 19 related to any Loss effectively incurred under the terms
of Section 19 (including the corresponding Defense Costs) shall be
paid by the Indemnifying Party to the Indemnified Party as follows:
(i) if related to a Third-Party Claim, within the fifteen (15)
Business Days following the receipt by the Indemnifying Party of a
written notice from the Indemnified Party informing about the Loss,
it being agreed that any indemnification shall be due only and
after final and non- appealable court or arbitral decision in
relation to the Third-Party Claim; and (ii) in the event of a
Direct Claim, (a) within fifteen (15) Business Days as from the
agreement in writing of the Indemnifying Party to be liable for the
requested indemnification; or (b) within fifteen (15) Business Days
as from the end of the arbitral proceeding provided in this
Agreement. Any such indemnification
obligation to be paid by the Indemnifying Party shall be adjusted
by the IPCA variation between the date in which the Losses were
incurred and the date of the actual payment to the Indemnified
Party.

 

35

 

 

19.8 When
the Loss has been suffered by the JV Company (after the Subsequent
Closing) the Indemnifying Party shall, at its discretion, indemnify
the JV Company in the full amount of the Loss. When the Loss has
been suffered directly by the Indemnified Parties that are not the
JV Company, then the Loss shall be fully indemnified to such
Indemnified Party.

 

19.9 The
Parties undertake to act in good faith in the event any Loss
occurs, as to mitigate in each case, the amount of any Losses to be
indemnified by the other Party. In this sense, Parties shall in
good faith (i) avoid performing acts, omissions, and/or letting or
making facts or events occur which could cause Losses
indemnifiable, (ii) in the event any event triggering Losses
occurs, remedy or mitigate the amount of any Losses to be
indemnified; and (iii) receive full indemnification under any
insurance policy that covers any Loss under this Agreement or seek
full indemnification before any responsible third-party for the
relevant Loss, undertaking to take all necessary judicial or
arbitration measures to receive such indemnification.

 

19.10 Any
amounts paid in connection with this Section 19 shall be made to
hold the Indemnified Party harmless with respect to the Losses
incurred, with the transfer of amounts necessary for reinstating
the Indemnified Party to the status quo ante. In that respect, the
payments of any indemnification shall be made taking into account
any possible deduction of any Taxes imposed on the receipt of such
amounts and/or on their transfer to the relevant party, with the
gross-up of such amounts when necessary.

 

SECTION
20

TERM
AND TERMINATION

 

20.1 This
Agreement shall be effective from the Effective Date and shall be
automatically terminated upon the earliest to occur of any one of
the following events: (a) the Initial Closing Date; (b) the date
fixed for termination by a separate written instrument executed by
Sanuwave and the IDIC Group; or (c) on the Initial Closing Long
Stop Date, if the applicable Parties have not satisfied or waived
the Initial Closing Conditions.

 

20.2 This
Agreement may be terminated by Sanuwave, subject to a 30-day cure
period if any member of the IDIC Group or any other Party (a) fails
to make any payments when due; (b) materially breaches any term or
condition of this Agreement, provided that such material breach
would be reasonably foreseeable to cause a material adverse effect
on the business, financials or results of operations of the
non-breaching Party with respect to the Business; or (c) if any
member of the IDIC Group or any other Party files for bankruptcy,
judicial recovery or becomes insolvent.

 

20.3 This
Agreement may be terminated by the IDIC Group, subject to a 30-day
cure period, if Sanuwave (a) fails to make any payments when due;
(b) materially breaches any term or condition of this Agreement,
provided that such material breach would be reasonably foreseeable
to cause a material adverse effect on the business, financials or
results of operations of the non- breaching Party with respect to
the Business; or (c) files for bankruptcy, judicial recovery or
becomes insolvent.

 

36

 

 

20.3.1 Even
if this Agreement is terminated due to any of the reasons described
in Clause 20.3 (c), the Supply Agreement, Trademark License
Agreement and Technology License Agreement shall survive for the
benefit of the JV Company.

 

20.4 The
Shareholders’ Agreement shall provide that if the Subsequent
Closing has not occurred by the Subsequent Closing Long Stop Date,
that the Parties can mutually agree to extend the Subsequent
Closing Long Stop Date. In the event that the Parties do not agree
to extend the Subsequent Closing Long Stop Date and if the
Subsequent Closing has not occurred by the Subsequent Closing Long
Stop Date, Sanuwave shall reimburse to the members of the IDIC
Group all reasonable and documented out-of-pocket expenses incurred
by the IDIC Group with respect to the Business or the JV Company
from the Effective Date until the Subsequent Closing Long Stop
Date. In such case, all rights granted to the IDIC Group hereunder,
under the Supply Agreement, the Trademark License Agreement and the
Technology License Agreement shall be terminated and reverted to
Sanuwave. The IDIC Group shall return all equipment and materials
provided by Sanuwave in connection with the JV Company and pay all
amounts due to Sanuwave. The members of the IDIC Group shall also
return to Sanuwave any and all tangible embodiments of any and all
Intellectual Property licensed to the IDIC Group by Sanuwave. The
IDIC Group shall also provide Sanuwave with a certificate attesting
the return of all items indicated above.

 

20.5 Sections
19, 22, 23, and 24 shall survive the termination of this Agreement.
Nothing in this Section 19 shall be deemed to release any Party
from any liability for any breach of this Agreement prior to the
effective date of its termination.

 

20.6 The
JV Company may otherwise be terminated and/or wound up pursuant to
the terms and provisions set forth in the Shareholders’
Agreement.

 

SECTION
21

NON-COMPETE
AND NON SOLICIT

 

21.1 If the Subsequent Closing occurs,
the Parties undertake that they shall not, directly or indirectly,
either on their own account or through third parties (whether as
owner, quotaholder, shareholder, investor, partner, joint venture,
consultant, employee, agent, services provider, distributor,
licensor or otherwise), conduct activities identical to the
Business in Brazil, as carried out by the JV Company at the
corresponding time, other than through the JV Company, register,
make, have made, develop, license, sell, market or distribute a
competing product in Brazil or attempt to register any Intellectual
Property of the other Party in its name or in the name of the JV
Company, nor shall they permit, consent to, or authorize any of
their respective sub-licensees, distributors, contractors or agents
to do any of the foregoing (the “Non-Compete
Obligation”). For the avoidance of doubt, the
Non-Compete Obligation shall also include the production, sale and
commercialization, directly or indirectly, either on their own
account or through third parties (whether as owner, quotaholder,
shareholder, investor, partner, joint venture, consultant,
employee, agent, services provider, distributor, licensor or
otherwise) of any Device for the treatment of various acute and
chronic wounds using extracorporeal shockwave therapy. The Non-
Compete obligation does not include the consulting
activities of Pharmexon Consulting s.r.o, in any territory
whatsoever, which are expressly authorized.

 

37

 

 

21.2 The
Non-Compete Obligation shall be valid in Brazil for the IDIC Group,
Versani and Universus and binding on such Parties on and from the
Subsequent Closing Date and shall survive for one (1) year as from
the date on which either Party ceases to have any direct or
indirect equity in the JV Company.

 

SECTION
22

SPECIFIC
PERFORMANCE AND ANNULLMENT OF VOTE

 

22.1
The Shareholders’ Agreement of the JV Company shall
contemplate that the General Shareholders’ Meeting shall have
powers to approve the suspension of the voting rights and/or of
right to receive dividends of the Parties which are proven in
default to the obligations established thereunder, under this
Agreement or under Applicable Law, with due regard to Articles 115
and 120 of Brazilian Corporations Law; provided that such
suspension shall be valid only until the relevant default has been
cured by the defaulting shareholder. The default or failure to
comply with any of the obligations set forth under the
Shareholders’ Agreement or under this Agreement will grant
any harmed Party the right to demand judicially the performance of
the obligation under Applicable Law. The Shareholders’
Agreement shall be executed by 2 (two) witnesses and shall create
an out-of-court enforceable deed under the terms of Article 585, II
of the Civil Procedure Code and the obligations contained therein
shall be subject to specific performance pursuant to the civil
procedure legislation currently in force. The Shareholders’
Agreement shall be filed at the JV Company’s head office
pursuant to and for the purposes of Article 118 of the Brazilian
Corporation Law. The members of the Board of Directors shall not
cast a vote which does not comply with the provisions of this
Agreement.

 

SECTION
23

DISPUTE
RESOLUTION

 

23.1 In case of controversies or
disagreements of any nature, direct or indirectly related or
arising from this Agreement, including (i) with respect to its
validity, existence and effectiveness; (ii) the existence and/or
exercise of any right or obligation arising out of this Agreement;
(iii) the existence and/or occurrence of any loss; or (iv)
interpretation of terms, conditions and provisions of this
Agreement (a “Conflict”),
involving any Party and/or the Company, including its successors on
any account, the Parties, represented by the member of their Senior
Management, shall meet aiming to solve the Conflict in an amicable
manner. If an agreement is not reached within 30 (thirty) days or a
longer period as may be agreed in writing among the Parties, the
Dispute shall be solved by arbitration proceeding pursuant to the
following terms.

 

23.2 The arbitration shall be managed
by the International Chamber of Commerce - ICC (“Arbitration
Chamber”) pursuant to its internal arbitration rules
in force at the time of filling the request by the interested Party
(“Rules
of Arbitration”).

 

23.3 The
arbitration shall be conducted in English and the seat of the
arbitration shall be the City of London, United Kingdom, without
prejudice to the designation by the Arbitral Tribunal on the
inquiries and hearings to be held elsewhere. The arbitration award
shall be rendered in the City of London, United Kingdom. The main
documents of the arbitration shall be translated into Portuguese
language, provided that the English language version shall prevail
in case of conflict.

 

38

 

 

23.4 The arbitral tribunal shall be
composed of 1 (one) arbitrator (“Arbitral
Tribunal”), to be nominated in accordance with the
Rules of Arbitration.

 

23.5 All
expenses related to the arbitration, as well as fees of the
arbitrators and administrative expenses with the Arbitration
Chamber shall be borne in accordance with the arbitration award. In
no event, however, shall the losing party, total or partially, be
required to bear the cost of the legal fees agreed between the
winning party(ies) and its attorney.

 

23.6 The
arbitration award shall be definitive and shall be binding upon the
Parties, the Company and their successors. The arbitration award
shall not be subject to appeal, except for requests for correction
and clarifications.

 

23.7 The
Parties and the Company agree that the arbitration shall be kept
strictly confidential and that its elements (including the
arguments of the parties, evidence, reports, third- party
statements and any other document presented or exchanged during the
arbitration proceeding) shall only be disclosed to the Arbitral
Tribunal, to the Parties, the Company, their lawyers and to any
Person required to the development of the arbitration, except for
the disclosure requested for the fulfilment of obligations imposed
by Law or by any competent Governmental Authority.

 

23.8 The
arbitration provisions set forth herein provided only binds the
Parties and the Company, and its effects shall not be extended to
any other Person who is not a signatory of this Agreement, even if
the other Person is part of the same group of the Parties or of the
Company, or is a party to any other agreement with any of the
Parties.

 

SECTION
24

CONFIDENTIALITY

 

24.1 Each Party agrees not to disclose
any Confidential Information of or concerning any other Party, the
Business or the JV Company to any Person without the express prior
authorization of such other Party. “Confidential
Information” means any information concerning the JV
Company, the Parties and/or their Affiliates obtained hereunder or
in connection herewith. The obligation sets forth in this Section
23 shall not apply to Confidential Information that is or becomes
generally available to the public other than as a result of an
action or omission by a Party obligated hereunder to preserve the
confidentiality of such information or any of its
representatives.

 

24.2 The
confidentiality obligations under this Section 24 shall not prevent
the disclosure by a Party of any Confidential Information (i) to
the extent required under Applicable Law or any regulation
applicable to such Party or its Affiliates or for its or their
compliance with requirements made by competent Governmental
Authority, including public agencies of supervision and control;
(ii) for accounting purposes, including for the consolidation of
the Party’s investments; or (iii) to such Party’
Affiliates and their respective officers, partners, shareholders,
auditors, consultants, financing parties, business partners,
investors, advisors or to third parties potentially interested in
acquiring the shares, provided that each such Person to which
Confidential Information is disclosed has committed to
confidentiality obligations no less stringent than those
established in this Section 23 or is bound by professional duties
of confidentiality.

 

39

 

 

24.3   If
a Party discloses Confidential Information under the terms of item
“i” of Section 24.2 above, such
Party shall immediately notify the Person who provided the
Confidential Information in order to give that Person an
opportunity to challenge the legal/regulatory request. The Party
shall also cooperate with the referred Person and shall take
reasonable efforts to mitigate the disclosure or the use of
Confidential Information, as well as to make the Confidential
Information to be treated as confidential by the Person to whom the
Confidential Information was disclosed.

 

24.4

Each
Party:

 

(i) shall limit the
disclosure of Confidential Information to its directors, officers,
employees, the directors, officers and employees of their
Affiliates, as well as to the other Persons to whom disclosure is
authorized herein, which may be required to use the Confidential
Information for the purposes authorized under this Agreement or as
a result of their duties, considering that such Persons shall be
bound to the Party by means of a confidentiality agreement, with
terms no less stringent than those established under this Section
24, or by a professional ethical obligation which requires the
maintenance of secrecy and does not violate the terms of this
Agreement;

 

 

(ii) shall
cause (a) each one of its directors, officers and employees, (b)
directors, officers and employees of their Affiliates, and (c) each
other Person to which it discloses Confidential Information to
comply with the obligations provided herein; and

 

(iii) shall
use its best efforts to cause its Affiliates and the Persons
mentioned in item “ii” above to comply with the terms
of this Section 24, being responsible for the breach of the terms
set forth by any such Person.

 

24.5 The
Parties shall use their best efforts to make only the press
releases or other public disclosures as are required by law;
observing that no press release or other public disclosure shall be
made without prior consultation with the other
Party(ies).

 

24.6 The
Parties hereby acknowledge that Sanuwave is subject to certain
securities laws, compliance with which may require the disclosure
of Confidential Information. The Parties hereby agree that Sanuwave
may disclose Confidential Information in connection with its
ongoing reporting requirements under applicable securities laws and
pursuant to any other acts it may take in connection with its
obligation to comply with such securities laws.

 

SECTION
25

IDIC GROUP NOMINEE
SHAREHOLDER

 

25.1 The
members of the IDIC Group hereby grant irrevocable powers to the
IDIC Group Nominee Shareholder to exercise or waive, as applicable,
any and all rights attached to the Shares held by the members of
the IDIC Group, including but not limited to the following rights,
which the IDIC Group Nominee Shareholder shall exercise in
accordance with the terms and conditions of this
Agreement:

 

(a) propose to convene
shareholders meetings and exercise voting rights in any Ordinary or
Extraordinary General Shareholders Meetings of the JV
Company;

 

40

 

 

(b) exercise any and
all rights of the members of the IDIC Group in connection with any
Transfer of Shares, including for the purposes of the exercise of
any Right of First Offer, Tag-Along Right and Drag-Along Right,
which shall be exercised by the IDIC Group as a whole, and not by
its individual members;

 

(c) exercise any and
all rights of the members of the IDIC Group in connection with an
IDIC Group Change of Control Put Option, which shall be exercised
by the IDIC Group as a whole, and not by its individual
members;

 

(d) appoint any members
of the Board of Directors and Fiscal Board of the JV Company which
the members of the IDIC Group are entitled to appoint jointly as a
whole, and not by its individual members; or request the dismissal
of any such members of the Board of Directors and Fiscal Board of
the JV Company appointed by the members of the IDIC Group as herein
provided;

 

(e) represent the
members of the IDIC Group in any Consenting Meetings of
Representatives and Consenting Meetings of the Senior Management in
connection with a Deadlock;

 

(f) issue any and all
documents required for the Initial Closing and the Subsequent
Closing on behalf of the members of the IDIC Group;

 

(g) represent the
members of the IDIC Group in connection with any Event Subject to
Indemnification;

 

(h) execute any
amendments to this Agreement on behalf of the members of the IDIC
Group;

 

(i)     
grant any consent or approval on behalf of the members of the IDIC
Group;

 

(j) issue any and all
notices and written statements required to be issued by the members
of the IDIC Group under this Agreement to exercise any of the
rights attached to the Shares held by the members of the IDIC Group
Members, including but not limited to the rights listed
above.

 

25.2 The
members of the IDIC Group hereby agree to execute any and all
documents necessary to grant the necessary required for the IDIC
Group Nominee Shareholder to exercise the rights provided for
herein on behalf of the members of the IDIC Group
Members.

 

25.3 The
authority conferred to the IDIC Group Nominee Shareholder is
binding on the members of the IDIC Group until another joint
representative is notified to the other Parties in writing with a
30-day prior notice. In the event that the IDIC Group Nominee
Shareholder becomes unable to perform his responsibilities
hereunder or resigns from such position, the members of the IDIC
Group shall appoint a new IDIC Group Nominee Shareholder or another
representative without delay to fill such vacancy and notify the
other Parties of such replacement in writing.

 

41

 

 

25.4 The
members of the IDIC Group hereby acknowledge and agree that all
members of the IDIC Group shall be jointly and severally liable for
any legal consequences arising from the IDIC Group Nominee
Shareholder's exercise of the aforesaid rights in accordance with
this Agreement.

 

25.5 Any
member of the IDIC Group who sells and transfers all of its Shares
in the JV Company to a Party or a Third-Party shall cease to be a
member of the IDIC Group as of the date on which the respective
sale and transfer of all of such Shares becomes
effective.

 

 
SECTION
26

MISCELLANEOUS

 

26.1 All
costs and expenses incurred by each Party in connection with the
preparation, execution and delivery of this Agreement and the other
agreements referred to herein shall, unless otherwise expressly
agreed in writing between the Parties, be borne exclusively by the
Party that incurred such costs.

 

26.2 All
notices authorized or required between the Parties by any of the
provisions of this Agreement shall be in writing, in English
(except for documents and/or information received from
third-parties attached that may be attached to such notices), and
delivered in person or by courier service or by e-mail provided
that the other party provides confirmation of transmission, and
addressed to such Parties as designated below. Oral communication
does not constitute notice for the purposes of this Agreement and
telephone numbers of the Parties are listed below as a matter of
convenience only. The originating notice given under any provision
of this Agreement shall be deemed delivered only when received by
the Party to whom such notice is directed, and the time for such
Party to deliver any notice in response to such originating notice
shall run from the Business Day following receipt of the
originating notice. "Received" for the purposes of this Section
shall mean actual delivery of the notice to the address, including
electronic address as applicable, of the Party to be notified as
specified in this Section. Each Party shall have the right to
change its address at any time and/or designate that copies of all
such notices be directed to another Person at another address, by
giving at least five (5) Business Days written Notice thereof to
all other Parties.

 

26.3 Any
Notice hereunder shall be deemed sufficiently given and received at
the time of receipt, if delivered by hand, sent by registered mail
or courier service, or, if delivered by email or fax, on the date
the other Party receives transmission thereof, free of any
transmission error.

 

26.4 Each
Party shall, immediately upon receipt of any Notice given
hereunder, acknowledge receipt thereof by any of the means under
this Section 26.4, whenever requested to do so by the sender,
provided that the lack of such acknowledgment shall not prejudice
the validity of any notice given in accordance with this Section
26.4.

 

26.5 The
waiver of any provision of this Agreement by a Party shall not be
valid unless in writing and signed by authorized officers of such
Party. The waiver by any Party in any instance of the other Party's
noncompliance with any obligation or responsibility herein shall
not be deemed a waiver of other instances of
noncompliance.

 

42

 

 

26.6 Neither
this Agreement nor any provision hereof may be amended in any
manner except by an instrument in writing which refers to this
Agreement and is executed by each one of the Parties.

 

26.7 All
Schedules and/or Exhibits referred to in, or relating to, this
Agreement are attached hereto and are incorporated herein by
reference as if fully set forth herein and shall be an integral
part hereof. Unless otherwise expressly provided in the text
hereof, all references to this Agreement shall be considered to
include this Agreement and its Schedules and Exhibits.

 

26.8 The
provisions of this Agreement and its Schedules and Exhibits, (i)
set forth the entire agreement and understanding of the Parties as
to the subject matter hereof; and (ii) supersede all prior
agreements, oral or written, and all other communications between
the Parties relating to the subject matter hereof, including, but
not limited to, the Term Sheet. In the event of any conflict or
discrepancy between the provisions of this Agreement and those of
the other Transaction Documents (i) first, the provisions of the
Shareholders’ Agreement shall prevail vis-à-vis the
provisions of all other Transaction Documents; and (ii) second, the
provisions of this Agreement shall (to the extent permitted by
Applicable Law) prevail vis-à-vis the provisions of all other
Transaction Document.

 

26.9 This
Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns;
provided, however, that no rights, obligations or liabilities
hereunder shall be assignable by any Party without the prior
written consent of the other Party, except as otherwise
specifically provided herein. None of the conditions, provisions,
rights and obligations arising under this Agreement, except as
otherwise expressly set forth, shall function to bind other
companies, divisions, business units or businesses comprising the
respective business groups of each Party.

 

26.10 Should
any provision of this Agreement be held to be definitively
unenforceable by a competent court under the Applicable Law, (i)
the Parties hereto shall in good faith adopt such measures as are
legally permitted and reasonable, so as to actually effect their
intent under such provision; and (ii) in any event, the legality
and enforceability of the remaining provisions of this Agreement
shall not be affected or impaired thereby.

 

26.11 This
Agreement shall in all respects be interpreted, construed and
governed by and in accordance with the laws of England and
Wales.

 

26.12 No
public release, announcement or other form of publicity concerning
the transactions contemplated by this Agreement shall be issued by
any Party without the prior consent of the other Party, which
consent shall not be unreasonably withheld.

 

26.13 This
Agreement is not intended, nor should anything herein be construed,
to create a relationship of partners, principal and agent, employer
and employee, or other fiduciary relationship among the Parties,
except as expressly provided herein. Except as expressly provided
herein, no Party shall have any authority to represent or to bind
the other Party in any manner whatsoever, and each Party shall be
solely responsible and liable for its own acts.

 

26.14 This
Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same document.

 

 

43

 

 

IN WITNESS WHEREOF, the Parties have
caused this Agreement to be executed by their respective duly
authorized officers as of the date first above mentioned. This
Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall
constitute the entire document and may be executed by
electronically scanned or “pdf”
signatures.

 

SANUWAVE HEALTH
INC.

 

/s/ Kevin A. Richardson II

Name:
Kevin A. Richardson II

Title:
Chairman & CEO

 

 

VERSANI
HEALTH CONSULTING CONSULTORIA EM GESTÃO DE NEGÓCIOS
EIRELI

 

/s/ Mauricio Grimoni

Name:
Mauricio Grimoni

Title:
Partner

 

 

UNIVERSUS GLOBAL
ADVISORS LLC

 

/s/ Michael Hubert

Name:
Michael Hubert

Title:
Principal

 

 

IDIC
GROUP

 

/s/ Paulo Cesena                                                                             

/s/ Daniel Feliciano Ferreira

Name: Paulo
Cesena                                                  
               
   Name: Daniel
Feliciano Ferreira

 

/s/ Fabio Delmonte
Moreira                                                           
/s/ Parvinder
Punia

Name:
Fabio Delmonte
Moreira                                                    
Name:
Parvinder
Punia   

                                                 

/s/ Laura Nae                                                                                  

/s/ Fernando Delmonte Moreira

Name: Laura
Nae                                                                           
Name: Fernando Delmonte Moreira

 

CURARUS
LIMITED

 

/s/ Danesh Gadhia

Name:
Danesh GadhiaEXHIBIT 4.3

 

DESCRIPTION OF Procaccianti
Hotel REIT, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) 

OF THE SECURITIES EXCHANGE ACT OF 1934

  

The following is a summary of the material
terms of shares of common stock of Procaccianti Hotel REIT, Inc. registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as set forth in our charter and bylaws, as amended and supplemented
from time to time. This summary is qualified in its entirety by reference to our charter and bylaws. References herein to “us,”
 “we,” “our,” or the “Company” refer to Procaccianti Hotel REIT, Inc. Our charter authorizes
the issuance of 248,125,000 shares of capital stock, of which (a) 55,500,000 shares are classified as Class K-I Common
Stock with a par value of  $0.01 per share, which we refer to as our K-I Shares, (b) 55,500,000 shares are classified
as Class K Common Stock with a par value of  $0.01 per share, which we refer to as K Shares, (c) 116,000,000 shares
are classified as Class K-T Common Stock with a par value of  $0.01 per share, which we refer to as K-T Shares, (d)125,000
shares are classified as Class B Capital Stock with a par value of  $0.01 per share, which we refer to as our B Shares,
and (e) 21,000,000 shares are classified as Class A Common Stock with a par value of  $0.01 per share, which we
refer to as our A Shares.

  

In addition, our board of directors may
amend our charter from time to time without stockholder approval to increase or decrease the aggregate number of authorized shares
of stock or the number of authorized shares of stock of any class or series. Our board of directors may also classify or reclassify
unissued shares of stock of any class or series into other classes or series of stock. Notwithstanding the preceding two sentences,
we may not (i) issue or sell additional B Shares, or increase the authorized number of B Shares or (ii) amend, alter,
modify or repeal any provision of our charter in a manner disproportionately adversely affecting the rights, privileges and preferences
of the B Shares, without the consent of the holders of at least 75% of the issued and outstanding B Shares. The preferences, conversion
or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption
of any new class or series of capital stock will be designated and set forth in articles supplementary to our charter filed with
the State Department of Assessments and Taxation of Maryland.

  

K-I Shares, K Shares and K-T Shares

  

Subject to the restrictions in our charter
on the ownership and transfer of shares and except as may otherwise be specified in our charter, each holder of K-I Shares, K Shares
and K-T Shares will be entitled at each meeting of our stockholders to one vote per K-I Share, K Share or K-T Share owned by such
stockholder on all matters submitted to a vote of our stockholders, including, but not limited to, the election of our directors.

 

The K-I Shares, K Shares and K-T Shares
will rank, with respect to distribution rights and rights upon our company’s liquidation, winding-up and dissolution:

 

		·	pari passu with each other and any other class or
                                                                                                               series of our capital stock, the terms of which expressly provide that the K-I Shares, K Shares and K-T Shares rank on parity
                                                                                                               with such class or series as to distribution rights and rights on liquidation, winding-up and dissolution of our company
                                                                                                               (which such other class or series we refer to as parity securities),
and senior to the A Shares, B Shares, and any other class or series of our capital stock, the terms of which expressly provide
that the K-I Shares, K Shares and K-T Shares rank senior to such class or series as to distribution rights or rights on our liquidation,
winding-up, and dissolution of our company. We refer to such classes or series of capital stock ranking junior to our K-I Shares,
K Shares and K-T Shares as junior securities; and

 

		·	junior to all of our existing and future debt obligations and other
liabilities (except for deferred asset management fees, acquisition fees, and disposition fees (and any interest accrued thereon)
payable to our advisor.

 

     

     

    

 

Distribution Rights.   Subject
to the preferential rights of the holders of any class or series of our capital stock ranking senior to K-I Shares, K Shares, and
K-T Shares, if any such class or series is authorized in the future, the holders of each K-I Share, K Share and K-T Share will
be entitled to receive, when and as authorized by our board of directors and declared by us, out of legally available funds, cumulative
cash distributions on each K-I Share at the rate of 6% per annum of the K-I Share Distribution Base for such K-I Share, cumulative
cash distributions on each K Share at the rate of 6% per annum of the K Share Distribution Base for such K Share, and cumulative
cash distributions on each K-T Share at the rate of 6% per annum of the K-T Share Distribution Base for such K-T Share. The K-I
Share Distribution Base is $10.00 per K-I Share, subject to reduction as described under “— Special Distributions”
below; the K Share Distribution Base is $10.00 per K Share, subject to reduction as described under “— Special
Distributions” below; and the K-T Share Distribution Base is $10.00 per K-T Share, subject to reduction as described
under “ — Special Distributions” below. The distributions on the K-I Shares, K Shares and K-T Shares
will accrue on each such share, whether or not authorized by our board and declared by us and whether or not there are funds legally
available for the payment of such distributions, on a cumulative basis, from the date of issuance of such K-I Share, K Share or
K-T Share. While distributions on the K-I Shares, K Shares and K-T Shares will accrue on a daily basis, distributions on K-I Shares,
K Shares and K-T Shares will be payable in arrears to holders of record as they appear in our stock records at the close of
business on the applicable record date or record dates, which shall be each day of the period for which such distributions are
payable or such other date or dates designated by our board of directors. We expect to pay distributions on our K-I Shares, K Shares
and K-T Shares quarterly, unless our results of operations, general financing conditions, general economic conditions, applicable
provisions of Maryland law, or other factors make it imprudent to do so. Our goal is to eventually be in a position to make monthly
distributions payments. The timing and amount of any distributions will be determined by our board, in its sole discretion, and
may vary. Payment of distributions on our K-I Shares, K Shares and K-T Shares will be influenced in part by our intention to comply
with the real estate investment trust, or the REIT, requirements of the Internal Revenue Code of 1986, as amended, or the Internal
Revenue Code. To qualify as a REIT, we will be required to distribute 90% of our annual taxable income, determined without regard
to the distributions paid deduction and by excluding net capital gains, to our stockholders.

 

If at any time we pay less than the total
amount of accumulated, accrued, and unpaid distributions on the K-I Shares, K Shares, K-T Shares and any parity securities, such
payment will be distributed pro rata among the holders of each class of shares based upon the aggregate K-I Shares, K Shares, K-T
Shares and parity securities held by each such stockholder as of the close of business on each record date. Payment of distributions
on our K-I Shares, K Shares and K-T Shares is not guaranteed.

 

Unless and until all accumulated, accrued,
and unpaid distributions on our K-I Shares, K Shares, K-T Shares and any parity securities for all past distribution periods
have been or contemporaneously are declared and paid on such K-I Shares, K Shares, K-T Shares and parity securities (or declared
and a sum sufficient for the payment thereof is set aside for payment), we will not, directly or indirectly, declare and pay dividends
or other distributions of cash or other property on junior securities (including our A Shares and B Shares), provided that,
if we terminate our advisory agreement without cause or elect not to renew it, we will repurchase all A Shares as described in
our prospectus.

 

Special Distributions.   In
certain situations, we may have excess cash (as defined below), and our board of directors will authorize special distributions
in which the holders of our K-I Shares, K Shares, K-T Shares and any parity securities will be entitled to participate (pro
rata based on the number of K-I Shares, K Shares, K-T Shares and parity securities). In the case of such distributions, the
holders of our K-I Shares, K Shares, K-T Shares and any parity securities will receive, pari passu with the holders
of A Shares and B Shares, 50% of any such excess cash (or 87.5% of such excess cash if the A Shares have been repurchased
in connection with a Non-cause Advisory Agreement Termination (as defined in our prospectus). Our board of directors will determine
annually, other than upon a liquidation, the amount, if any, of  “excess cash” and will authorize distribution
payments of any excess cash on an annual basis. “Excess cash” will equal any cash available for distribution after
the board establishes working capital reserves or other reserves it deems necessary (but excluding net sales proceeds from the
sale of our assets) and after the full payment of  (i) all accumulated, accrued, and unpaid distributions on our K-I
Shares, K Shares, K-T Shares and any parity securities; (ii) the full asset management fees payable to our advisor, including
any deferred amounts and any interest accrued thereon; and (iii) all accumulated, accrued and unpaid common ordinary distributions,
as described below under “— A Shares — Distribution Rights.”

 

     

     

    

 

In addition, if we sell properties generating
net cash proceeds other than in accordance with a plan of liquidation, our board of directors will have the right to redeploy that
capital, including any profits realized on the sale of such properties, although our board generally expects to attempt to minimize
any taxes payable at regular corporate tax rates arising from any failure to distribute all of our net capital gains. Alternatively,
our board may authorize a distribution on the K-I Shares, K Shares, K-T Shares and any parity securities, which would first be
applied against any accumulated, accrued, and unpaid distributions on the K-I Shares, K Shares, K-T Shares and any parity securities,
and then would be applied to reduce the liquidation preference due on such K-I Shares, K Shares, K-T Shares and any parity securities
in liquidation, as described below. Any such distributions arising from the proceeds of the sale of our assets, except to the extent
they are applied against any accumulated, accrued, and unpaid distributions on the K-I Shares, K Shares, K-T Shares and any
parity securities, would also decrease the K-I Share Distribution Base, K Share Distribution Base, and K-T Share Distribution Base.

 

Liquidation.   Upon
any voluntary or involuntary liquidation or dissolution of our company, which we refer to as a liquidation event, before any
distribution or payment may be made to holders of the A Shares and B Shares, the holder of each K-I Share, K Share, K-T Share
and parity security will be entitled to be paid out of our assets legally available for distribution, after payment or
provision for our debts and liabilities (excluding any deferred asset management fees, acquisition fees and disposition fees
(plus interest accrued thereon), as discussed below under “— Liquidation — Deferred Fees”), a
liquidation preference. The liquidation preference for each K-I Share, K Share, and K-T Share will initially equal $10.00,
$10.00, and $10.00 per share, plus an amount equal to any and all accumulated, accrued, and unpaid 6.0% distributions on
K-I Shares, K Shares and K-T Shares (whether or not authorized) up to and including the date of payment on such K-I
Share, K Share and K-T Share. The liquidation preference may be reduced as a result of the payment of distributions on our
K-I Shares, K Shares and K-T Shares arising from the distribution of net sales proceeds. See “— Special
Distributions” immediately above. The liquidation preference on parity securities will be determined at the time,
if any, that our board of directors authorizes a class or series of parity securities, but such liquidation preference would
operate in all material respects in the manner described for the K-I Shares, K Shares, and K-T Shares.

 

In addition, upon a liquidation event,
50% (or 87.5% if the A Shares have been repurchased in connection with a Non-cause Advisory Agreement Termination) of any remaining
liquidation cash (as described below) available for distribution by us (as determined by our board, in its discretion) will be
paid to the holders of the K-I Shares, K Shares, K-T Shares and any parity securities, pro rata based on the number of K-I Shares,
K Shares, K-T Shares and parity securities outstanding. “Remaining liquidation cash” means all cash available for distribution,
as determined by our board after (i) payment in full of, or the setting aside of reserves for, all of our debts and liabilities,
limited, in the case of non-recourse liabilities secured by properties, to the value of those properties, and excluding liabilities
for the payment of deferred asset management fees, acquisition fees, and disposition fees (and any interest accrued thereon); (ii) payment
in full of the liquidation preference on all outstanding K-I Shares, K Shares, K-T Shares and any parity securities; (iii) the
full asset management fees are paid, including any deferred amounts and interest accrued thereon; (iv) the full acquisition
fees and disposition fees are paid, including any interest accrued thereon; (v) all accrued common ordinary distributions
on our A Shares are paid (as described below under “— A Shares — Distribution Rights”); and (vi) payment
in full of the stated value of all outstanding A Shares (as described below under — Liquidation — Stated Value
of A Shares.” We intend to invest 100% of the proceeds from K-I Shares, K Shares and K-T Shares in assets, therefore
holders of our K-I Shares, K Shares and K-T Shares would be limited in their potential return on investment should we return
in excess of 9.84% on their investment.

 

Merger or Acquisition Transaction.   Pursuant
to our charter, if we enter into a merger or acquisition transaction, the merger or acquisition consideration would be distributed
amongst our stockholders, including holders of K-I Shares, K Shares, K-T Shares and any parity securities, pursuant to the same
order of priority as if we liquidated for an amount equal to the aggregate consideration payable in such merger or acquisition
transaction. See “— Liquidation” below.

 

     

     

    

 

Conversion of K-T Shares.   Each
K-T Share sold in our primary offering and any associated K-T Share issued pursuant to our DRIP will automatically and without
any action on the part of the holder thereof convert into a number of K Shares equal to a fraction, the numerator of which is the
estimated NAV per K-T Share and the denominator of which is the estimated NAV per K Share, on the earliest of (i) the end
of the month in which our transfer agent, on our behalf, determines that the aggregate underwriting compensation paid from all
sources with respect to the offering in which such K-T Share was sold equals 10% of the gross proceeds from the sale of shares
in the primary portion of such offering (i.e., excluding proceeds from our DRIP), (ii) the end of the month in which our transfer
agent, on our behalf, determines that total underwriting compensation, including selling commissions, dealer manager fees, the
stockholder servicing fee and other elements of underwriting compensation with respect to such K-T Share, exceeds 10% of the total
gross investment amount at the time of purchase of such K-T Share, (iii) the end of the month in which our transfer agent,
on our behalf, determines that the stockholder servicing fee paid with respect to such K-T Share exceeds 3% of the total gross
investment amount at the time of purchase of such K-T Share, (iv) the date on which the holder of such K-T Share or its agent
notifies us or our agent that such holder is represented by a new participating broker-dealer unless such new participating broker-dealer
enters into a participating dealer agreement or otherwise agrees to ongoing services set forth in the dealer manager agreement
or (v) the listing of any class or series of our stock on a national securities exchange, the merger or consolidation of the
company or the sale of all or substantially all of our assets.

 

B Shares

 

B Shares will not be sold to investors
as part of this offering. We issued B Shares to the Service Provider in a private placement under Section 4(a)(2) of
the Securities Act. The holders of B Shares have no voting rights, other than the right to vote on and approve any further issuances
of or increase in the authorized number of B Shares and any amendments to our charter that would disproportionately adversely impact
the rights, preferences or privileges of the B Shares. Except for those special distributions and payments described below, the
holders of B Shares hold no other rights under our charter, including rights to participate in stockholder meetings or to receive
any other distributions on liquidation.

 

Special Distributions.   In
certain situations, we may have excess cash (as defined under the heading “— K-I Shares, K Shares and K-T Shares —
Special Distributions”), and our board of directors may authorize special distributions in which holders of our B Shares
will be entitled to participate (pro rata based on the number of B Shares). In the case of such distributions, the B Shares will
receive, pari passu with the holders of A Shares, K-I Shares, K Shares, K-T Shares and parity securities, 12.5%
of any such excess cash. Our board of directors will determine annually, other than upon a liquidation, the amount, if any, of 
 “excess cash” and will authorize distribution payments of any excess cash on an annual basis.

 

Liquidation.   Upon
our liquidation, 12.5% of any remaining liquidation cash (as described under “— K-I Shares, K Shares and K-T Shares
 — Liquidation” above) available for distribution by us (as determined by our board, in its discretion) will be paid
to the holders of the B Shares, pro rata based on the number of B Shares.

 

Merger or Acquisition Transaction.   Pursuant
to our charter, if we enter into a merger or acquisition transaction, the merger or acquisition consideration would be distributed
amongst our stockholders, including holders of B Shares, pursuant to the same order of priority as if we liquidated for an amount
equal to the aggregate consideration payable in such merger or acquisition transaction. See “ — Liquidation”
below.

 

Listing.   Pursuant
to our charter, if we list any of our shares of capital stock on a national securities exchange (which automatically results in
a termination of the advisory agreement), we will repurchase the B Shares as described under “— Listing Event”
below.

 

A Shares

 

Subject to the restrictions in our charter
on the ownership and transfer of stock and except as may otherwise be specified in our charter, each holder of A Shares will be
entitled at each meeting of our stockholders to one vote per A Share owned by such stockholder on all matters submitted to a vote
of our stockholders, including but not limited to the election of our directors.

 

     

     

    

 

The intended use of proceeds from the
sale of A Shares to our advisor and its affiliates in a private placement is to fund (i) our payment of our organization
and offering expenses, including the selling commissions, stockholder servicing fees, dealer manager fees and expense
reimbursements payable to the dealer manager, (ii) an amount equal to the difference between $10.00 per K-I Share and
the $9.30 per K-I share initial purchase price of K-I Shares sold in the primary offering (in order that we will have an
amount equal to $10.00 per K-I Share available for investment in assets), and (iii) an amount equal to any discount on
the initial offering price of K-I Shares, K Shares and K-T Shares arising from reduced or waived selling commissions
(other than reduced selling commissions for volume discounts) or dealer manager fees (in order that we will have an amount
equal to $10.00 per K-I Share, K Share and K-T Share available for investment in assets). In some cases, however,
particularly early in our life, in order to finance the acquisition of properties, we may use the proceeds of the sale of A
Shares to our advisor and its affiliates to acquire properties. To the extent we use the proceeds from the sale of A Shares
to acquire properties, we would sell additional A Shares to our adviser and its affiliates to pay for the organization and
offering expenses of the K Shares, K-I Shares and K-T Shares.

 

As described below, our advisor and its
affiliates will purchase A Shares in amounts sufficient to fund (i) our payment of our organization and offering expenses,
including selling commissions, stockholder servicing fees, dealer manager fees and expense reimbursements payable to the dealer
manager, (ii) an amount equal to the difference between $10.00 per K-I Share and the $9.30 per K-I share purchase price of
K-I Shares sold in the primary offering and (iii) an amount equal to any discount on the initial offering price of K-I Shares,
K Shares and K-T Shares arising from reduced or waived selling commissions (other than reduced selling commissions for volume
discounts) or dealer manager fees.

 

Advisor’s Obligation to Purchase
A Shares.   Our advisor and its affiliates have agreed to purchase A Shares in a private placement at the applicable
estimated NAV per K Share in order to provide us with funds sufficient to pay the selling commissions, dealer manager fees, stockholder
servicing fees, and other organization and offering expenses related to this offering and also to account for the difference between
the applicable NAV per K-I Share and the applicable offering price per K-I Share and any amount equal to any discount to the initial
offering price of K-I Shares, K Shares, and K-T Shares (excluding volume discounts).

 

Distribution Rights.   Following
the payment in full of all accumulated, accrued, and unpaid distributions on the K-I Shares, K Shares, K-T Shares and any parity
securities, and the payment of any accrued asset management fees (and any interest thereon), each A Share will be entitled to receive,
when and as authorized by our board and declared by us, out of legally available funds, distributions on each A Share at a
rate not to exceed 6.0% of the stated value of an A Share ($10.00) from income and cash flow from ordinary operations on a cumulative
basis. We refer to such distributions as “common ordinary distributions.” Except in the case of a liquidation, A Shares
are not entitled to participate or receive any distributions on account of net sales proceeds arising from the sale of properties.

 

The distributions on the A Shares will
accrue on each such share, whether or not authorized by our board and declared by us and whether or not there are funds legally
available for the payment of such distributions, on a cumulative basis, from the date of issuance of such A Share. Distributions
on the A Shares will accrue on a daily basis and will be payable in arrears to holders of record as they appear in our stock
records at the close of business on the applicable record date, if any, selected by our board of directors. The timing and amount
of common ordinary distributions will be determined by our board, in its sole discretion, and may vary. To the extent necessary
to preserve our status as a REIT, we will not be prohibited from declaring or paying or setting apart for payment any dividend
or other distribution on the A Shares or any other junior security.

 

Special
Distributions.   In certain situations, we may have excess cash (as defined above under the heading
 “— K-I Shares, K Shares and K-T Shares — Special Distributions”), and our board of directors may
authorize special distributions in which holders of our A Shares will be entitled to participate (pro rata based on the
number of A Shares). In the case of such distributions, the holders of A Shares will receive, pari
passu with the holders of K-I Shares, K Shares, K-T Shares, parity securities, and B Shares, a special distribution
equal to 37.5% of such excess cash (unless all such A Shares previously have been repurchased because of a Non-cause Advisory
Agreement Termination, in which case the excess cash otherwise apportioned to the A Shares would be distributed to the
holders of the K-I Shares, K Shares, K-T Shares and any parity securities). We expect that our board of directors will
authorize payments of any excess cash on an annual basis.

 

     

     

    

 

Liquidation.   Upon
our liquidation, as described under “— Liquidation — Stated Value of A Shares” below, each holder
of A Shares will be entitled to be paid out of our assets legally available for distribution, after payment or provision for our
debts and liabilities and the other amounts described under “— Liquidation,” an amount equal to the stated value
($10.00) of an A Share for each A Share then held. In addition, if there is any remaining liquidation cash (as described above
under “— K-I Shares, K Shares and K-T Shares — Liquidation” and as determined by our board, in its
discretion) the holders of A Shares will receive a distribution of 37.5% of the remaining liquidation cash, pro rata based on the
number of A Shares (unless all such A Shares previously have been repurchased because of a Non-cause Advisory Agreement Termination,
in which case the excess cash otherwise apportioned to the A Shares would be distributed to the holders of the K-I Shares, K Shares,
K-T Shares and any parity securities).

 

Merger or Acquisition Transaction.   Pursuant
to our charter, if we enter into a merger or acquisition transaction, the merger or acquisition consideration would be distributed
amongst our stockholders, including holders of A Shares, pursuant to the same order of priority as if we liquidated for an amount
equal to the aggregate consideration payable in such merger or acquisition transaction. See “— Liquidation” below.

 

Listing.   Pursuant
to our charter, if we list any of our shares of capital stock on a national securities exchange, our board of directors must give
prior notice of such listing to the holders of A Shares, and such holders of A Shares (including our advisor and its affiliates)
will have the right to either (a) receive one share of the applicable listed share in exchange for each A Share held as of
the date our board gives notice of an intended listing to our holders of A Shares (to be effective on the date of such listing)
or (b) require us to repurchase each A Share for the consideration described under “— Listing Event”, which
will equal the amount each A Share would be entitled to receive if we liquidated and received liquidation proceeds equal to the
 “market value” of our company (as defined in “— Listing Event”). Each holder of A Shares will
have at least 20 days to make such election.

 

Advisory Agreement Termination.   The
holders of A Shares may also be entitled to receive amounts similar to those described above if we terminate our advisory agreement
in the event of a Non-cause Advisory Agreement Termination (i.e., if we terminate our advisory agreement without cause and other
than in connection with a liquidity event or if we elect not to renew it).

 

Distributions

 

The timing of the distributions will
be determined by our board of directors. Our board of directors has adopted a policy to refrain from funding distributions
with offering proceeds; instead, we plan to fund distributions from cash flows from operations and capital transactions
(other than this or other securities offerings, but which may include the sale of one or more assets). However, our charter
does not restrict us from paying distributions from any particular source, including proceeds from securities offerings, and
our board of directors has the ability to change our policy of only paying distributions from cash flows from operations or
capital transactions (other this or other securities offerings, but which may include the sale of one or more assets).
However, in accordance with Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our
debts as they become due in the usual course of business; or (2) cause our total assets to be less than the sum of our
total liabilities plus, unless our charter provides otherwise, senior liquidation preferences. Our charter currently provides
that amounts that would be needed, if we were to dissolve at the time of such distribution, to satisfy the preferential
rights upon dissolution of holders of K-I Shares, K Shares, K-T Shares and any parity securities shall not be added to our
total liabilities for these purposes. Subject to the preceding, our board of directors will determine the amount of
distributions we will pay to our stockholders.

 

We currently pay regular quarterly distributions
to our stockholders, and while our goal is to declare and pay distributions on our K-I Shares, K Shares and K-T Shares on a monthly
basis as of daily record dates, initially we expect to declare and pay distributions on our K-I Shares, K Shares and K-T Shares
on a quarterly basis as of daily record dates. We will pay such quarterly distributions within 30 days of the end of each
calendar quarter. If we raise $150,000,000 in K-I Shares, K Shares and K-T Shares within one year and we are able to deploy that
capital in accordance with our strategic plan, we believe that we will be in a position to pay monthly distributions on our K-I
Shares, K Shares and K-T Shares at that time. We can provide no assurance that we will be able to pay distributions on our K-I
Shares, K Shares or K-T Shares. Distributions will be authorized at the discretion of our board of directors, which will be influenced
in part by its intention to comply with the REIT requirements of the Internal Revenue Code. We intend to make distributions sufficient
to meet the annual distribution requirement and to avoid U.S. federal income and excise taxes on our earnings; however, it may
not always be possible to do so. Each distribution will be accompanied by a notice which sets forth: (a) the record date;
(b) the amount per share that will be distributed; (c) the equivalent annualized yield; and (d) the amount and percentage
of the distributions paid from operations, offering proceeds and other sources. The funds we receive from operations that are available
for distribution may be affected by a number of factors, including the following:

 

     

     

    

 

		·	the amount of time required for us to invest the funds received in
the offering;

 

		·	our operating and interest expenses;

 

		·	operating results of our properties;

 

		·	the amount of dividends or other distributions received by us from
our indirect real estate investments;

 

		·	our ability to keep our properties occupied;

 

		·	our ability to maintain or increase rental rates when renewing or
replacing current leases;

 

		·	capital expenditures and reserves for such expenditures;

 

		·	the issuance of additional shares; and

 

		·	financings and refinancings.

 

Further, our cash flows may not be sufficient
to offset any shortfalls that may occur as a result of the seasonality of the hospitality industry, in which case we may have to
reduce distributions or enter into short-term borrowings in some quarterly periods in order to make distributions to our stockholders.

 

We must annually distribute at least 90%
of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to
the deduction for dividends paid and excluding net capital gain, in order to meet the requirements for qualification as a REIT
under the Internal Revenue Code. This 90% requirement is described in greater detail in the “Material U.S. Federal Income
Tax Considerations” section of this prospectus. Our board of directors may authorize distributions in excess of this percentage
as it deems appropriate. Because we may receive income from interest or rents at various times during our fiscal year, distributions
may not reflect our income earned in that particular distribution period, but may be made in anticipation of cash flow that we
expect to receive during a later period and may be made in advance of actual receipt of funds in an attempt to make distributions
relatively uniform. To allow for such differences in timing between the receipt of income and the payment of expenses, and the
effect of required debt payments, among other things, we could be required to borrow funds from third parties on a short-term basis,
issue new securities, or sell assets to meet the distribution requirements that are necessary to achieve the tax benefits associated
with qualifying as a REIT. These methods of obtaining funding could affect future distributions by increasing operating costs and
decreasing available cash. In addition, such distributions may constitute a return of capital. Because our board of directors has
adopted a policy to refrain from funding distributions with offering proceeds, we plan to fund distributions from cash flows from
operations and capital transactions (other than this or other securities offerings, but which may include the sale of one or more
assets) and we do not expect to use return of capital sources to pay distributions. See the section entitled “Material U.S.
Federal Income Tax Considerations” in this prospectus.

 

Distributions in kind will not be permitted, except for:

 

		·	distributions of readily marketable securities;

 

		·	distributions of beneficial interests in a liquidating trust established
for our dissolution and the liquidation of our assets in accordance with the terms of the charter; or

 

		·	distributions of in-kind property, so long as, with respect to such
in-kind property, the board of directors advises each stockholder of the risks associated with direct ownership of the property,
offers each stockholder the election of receiving in-kind property
distributions, and distributes in-kind property only to those stockholders who accept the directors’ offer.

 

     

     

    

 

Restrictions on Transfer

 

REIT Qualification Protections

 

To assist us in complying with the REIT
qualification requirements imposed by the Internal Revenue Code, our charter will prohibit, with certain exceptions, any stockholder
from beneficially or constructively owning, applying certain attribution rules under the Internal Revenue Code, more than
9.8% in value of the aggregate of our outstanding shares of capital stock (which includes K-I Shares, K Shares and K-T Shares we
may issue in this offering) or more than 9.8% (in value or number of shares, whichever is more restrictive) of any class or series
of shares of our stock. The board of directors may, in its sole discretion, prospectively or retroactively, waive the 9.8% ownership
limit with respect to, or establish an excepted holder limit for, a particular stockholder if evidence satisfactory to our directors
is presented that such ownership will not then or in the future jeopardize our status as a REIT. Our advisor and its affiliates
will be exempt from these restrictions with respect to their ownership of A Shares.

 

Our charter will impose other restrictions
designed to protect our status as a REIT, including a prohibition on transferring shares of our capital stock if such transfer
would result in our capital stock being beneficially owned by fewer than 100 persons, would result in us being “closely held”
under the Internal Revenue Code, or would otherwise cause us to fail to qualify as a REIT.

 

Any attempted transfer of our stock
which, if effective, would result in our stock being beneficially owned by fewer than 100 persons will be null and void and
the proposed transferee will acquire no rights in such stock. In the event of any attempted transfer of our stock which, if
effective, would result in (1) violation of the ownership limit discussed above, (2) our being “closely
held” under Section 856(h) of the Internal Revenue Code or (3) our otherwise failing to qualify as a
REIT (including by owning, directly or indirectly, 10% or more of the ownership interests in any tenant or subtenant, other
than certain taxable REIT subsidiaries), then the number of shares causing the violation (rounded to the nearest whole share)
will be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries, and the
proposed transferee will not acquire any rights in the shares. To avoid confusion, these shares so transferred to a
beneficial trust are referred to in this prospectus as “Excess Securities.” Excess Securities will remain issued
and outstanding shares and will be entitled to the same rights and privileges as all other shares of the same class or
series. The trustee of the beneficial trust, as holder of the Excess Securities, will be entitled to receive all
distributions authorized by our board of directors on such securities for the benefit of the charitable beneficiary. Our
charter entitles the trustee of the beneficial trust to vote all Excess Securities and, subject to Maryland law, to rescind
as void any vote cast by the proposed transferee prior to our discovery that the shares have been transferred to the
beneficial trust and to recast the vote in accordance with the desires of the trustee acting for the benefit of the
charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the
authority to rescind and recast the vote. If the transfer to the beneficial trust would not be effective for any reason to
prevent a violation of the limitations on ownership and transfer, then the transfer of that number of shares that otherwise
would cause the violation will be null and void, with the proposed transferee acquiring no rights in such shares.

 

Within 20 days of receiving notice from
us that the Excess Securities have been transferred to the beneficial trust, the trustee of the beneficial trust shall sell the
Excess Securities. The trustee of the beneficial trust may select a transferee to whom the Excess Securities may be sold as long
as such sale does not violate the 9.8% ownership limit or the other restrictions on ownership and transfer. Upon sale of the Excess
Securities, the intended transferee (the transferee of the Excess Securities whose ownership would violate the 9.8% ownership limit
or the other restrictions on ownership and transfer) will receive from the trustee of the beneficial trust the lesser of such sale
proceeds (net of any commissions and other expenses of sale) or the price per share the intended transferee paid for the Excess
Securities (or, in the case of a gift or devise to the intended transferee, the price per share equal to the market value per share
on the date of the transfer to the intended transferee). The trustee may reduce the amount payable to the intended transferee upon
such sale by the amount of any dividends and other distributions we pay to an intended transferee on Excess Securities prior to
our discovery that such Excess Securities have been transferred in violation of the provisions of the charter. The trustee of the
beneficial trust will distribute to the charitable beneficiary any amount the trustee receives in excess of the amount to be paid
to the intended transferee. If, prior to our discovery that shares of our stock have been transferred to the beneficial trust,
the shares are sold by the intended transferee, then the shares will be deemed to have been sold on behalf of the beneficial trust
and, to the extent that the intended transferee received an amount for the shares that exceeds the amount such intended transferee
was entitled to receive, the excess shall be paid to the trustee upon demand.

 

     

     

    

 

In addition, Excess Securities will be
deemed to have been offered for sale to us or our designee at a price per share equal to the lesser of the price per share in the
transaction that resulted in the transfer of the Excess Securities to the beneficial trust (or, in the case of a devise or gift,
the market price at the time of such devise or gift) and the market price on the date we or our designee accept such offer. We
will have the right to accept such offer until the trustee of the beneficial trust has sold the Excess Securities. Upon such a
sale to us, the interest of the charitable beneficiary in the Excess Securities sold will terminate and the trustee of the beneficial
trust will distribute the net proceeds of the sale to the intended transferee. We may reduce the amount payable to the intended
transferee upon such sale by the amount of any dividends and other distributions we pay to an intended transferee on Excess Securities
prior to our discovery that such Excess Securities have been transferred in violation of the provisions of the charter. We may
pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary.

 

If our board of directors or a committee
thereof determines that a proposed transfer or other event has taken place that violates the restrictions on ownership and transfer
of our stock set forth in our charter, our board of directors or such committee may take such action as it deems necessary to refuse
to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem shares of stock, refusing to
give effect to the transfer on our books or instituting proceedings to enjoin the transfer.

 

Any person who acquires or attempts or
intends to acquire shares in violation of the foregoing restrictions, or would have owned shares that resulted in a transfer to
a charitable trust, is required to give us immediate written notice or, in the case of a proposed or attempted transaction, 15
days’ written notice prior to such transaction. In both cases, such persons must provide to us such other information as
we may request in order to determine the effect, if any, of such transfer on our status as a REIT. The foregoing restrictions will
continue to apply until our board of directors determines it is no longer in our best interests to continue to qualify as a REIT
or that compliance with these restrictions is no longer required for us to qualify as a REIT.

 

The ownership limit does not apply to the
underwriter in a public offering or private placement of shares or to a person or persons exempted (prospectively or retroactively)
from the ownership limit by our board of directors based upon certain representations and undertakings required by our charter
and other appropriate assurances that our qualification as a REIT is not jeopardized. Any person who owns more than 5% of the outstanding
shares during any taxable year will be asked to deliver a notice setting forth the number of shares beneficially owned, directly
or indirectly. The securities offered hereby have not been registered under the Securities Act or the securities laws of any state
and are being offered and sold in reliance upon exemptions from the registration requirements of the Securities Act and such state
securities laws. The securities offered hereby may not be transferred or resold except as permitted under the Securities Act and
applicable state securities laws pursuant to registration or exemption therefrom.

 

Minimum Purchase Transfer Restrictions

 

You must initially invest at least $4,000
in any combination of our K-I Shares, K Shares or K-T Shares to be eligible to participate in this offering.

 

A stockholder may not transfer fewer shares
than the minimum purchase requirement. Unless a stockholder is transferring all of its shares of our common stock, a stockholder
may not transfer your shares in a manner that causes the stockholder or its transferee to own fewer than the number of shares required
to meet the minimum purchase requirements, except for the following transfers made without consideration: (a) transfers by
gift, (b) transfers by inheritance, (c) intrafamily transfers, (d) family dissolutions, (e) transfers to affiliates
and (f) transfers by operation of law. These minimum purchase requirements are applicable until our shares of common stock
are listed on a national securities exchange, and these requirements may make it more difficult for our stockholders to sell their
shares.

 

     

     

    

 

Amended and Restated Share Repurchase Program

 

Our share repurchase program, as described
below, may provide eligible stockholders with limited, interim liquidity by enabling them to sell shares back to us, subject to
restrictions and applicable law. Stockholders are not required to sell their shares to us. The share repurchase program is only
intended to provide interim liquidity for stockholders until a liquidity event occurs, such as the commencement of execution on
a plan of liquidation, the listing of our K Shares, K-I Shares or K-T Shares (or successor security) on a national securities exchange,
or our merger with a listed company. We cannot guarantee that a liquidity event will occur.

 

On March 20, 2020, our board of directors decided to temporarily suspend repurchases under our share repurchase program effective
with repurchase requests that would otherwise be processed in April 2020 due to the negative impact of the coronavirus (COVID-19)
pandemic on our portfolio to date. However, we will continue to process repurchases due to death in accordance with the terms
of our share repurchase program. We will announce any updates concerning its share repurchase program in a Current Report on Form
8-K. Any unprocessed requests will automatically roll over to be considered for repurchase when we fully reopens our share repurchase
program, unless a stockholder withdraws the request for repurchase five business days prior to the next repurchase date. 

 

Repurchase of
Shares.   A holder of K Shares, K-I Shares or K-T Shares, as applicable, must have beneficially held its
shares for at least one year prior to offering them for sale to us through our share repurchase program, unless the K Shares,
K-I Shares or K-T Shares, as applicable, are being repurchased in connection with a stockholder’s death, qualifying
disability (as defined herein) or other exigent circumstance as determined by our board of directors in its sole discretion.
If you have made more than one purchase of K Shares, K-I Shares or K-T Shares in our primary offering, and/or private
offering, the one-year holding period will be calculated separately with respect to each such purchase. The Company may, at
its sole discretion, repurchase K Shares, K-I Shares and K-T Shares presented to the Company for cash to the extent it has
sufficient funds to do so and subject to the conditions and limitations set forth herein. Repurchases of our shares generally
will be made quarterly. Shares repurchased under our share repurchase program will become unissued shares and will not be
resold unless such sales are made pursuant to transactions that are registered or exempt from registration under applicable
securities laws. We will not pay our sponsor, board of directors, advisor or their affiliates any fees to complete
transactions under the share repurchase program.

 

Purchase Price.   The
per share repurchase price will depend on the length of time you have held such shares as follows:

 

		·	after one year from the purchase date, 92.5% of the most recent per
share net asset value of the K  Shares, K-I Shares or K-T Shares, as applicable;

 

		·	after two years from the purchase date, 95% of the most recent
per share net asset value of the K Shares, K-I Shares or K-T Shares, as applicable;

 

		·	after three years from the purchase date, 97.5% of the most recent
per share net asset value of the K Shares, K-I Shares or K-T Shares, as applicable; and

 

		·	after four years from the purchase date, 100% of the most recent
per share net asset value of the K Shares, K-I Shares or K-T Shares, as applicable.

 

Shares repurchased in connection with a
stockholder’s death or qualifying disability will be repurchased at a purchase price per share equal to 100% of the most
recent per share net asset value of the K Shares, K-I Shares and K-T Shares, as applicable. Notwithstanding the foregoing, pursuant
to securities laws and regulations, at any time we are engaged in an offering, the repurchase amount shall never be more than the
current offering price of such shares. Shares repurchased in connection with a stockholder’s bankruptcy or other exigent
circumstance, in the sole discretion of our board of directors, within one year from the purchase date will be repurchased at a
price per share equal to the price per share we would pay had the stockholder held the shares for one year from the purchase date.

 

The purchase price for repurchased
shares will be adjusted for any stock dividends, combinations, splits, recapitalizations, or similar corporate actions with
respect to our common stock. If we have sold any properties and have made one or more special distributions to our
stockholders of all or a portion of the net proceeds from such sales, the per share repurchase price will be reduced by the
net sale proceeds per share distributed to stockholders prior to the repurchase date to the extent such distributions are not
used to pay accumulated, accrued and unpaid distributions on such K Shares, K-I Shares and K-T Shares. Our board of directors
will, in its sole discretion, determine which distributions, if any, constitute a special distribution. While our board of
directors does not have specific criteria for determining a special distribution, we expect that a special distribution will
occur only upon the sale of a property and the subsequent distribution of net sale proceeds.

 

     

     

    

 

No Encumbrances.   All
shares presented for repurchase must be owned by the stockholder(s) making the presentment, or the party presenting the shares
must be authorized to do so by the owner(s) of the shares. Such shares must be fully transferable and not subject to any liens
or encumbrances. Upon receipt of a request for repurchase, we may conduct a Uniform Commercial Code search to ensure that no liens
are held against the shares. Any costs in conducting the Uniform Commercial Code search will be borne by us.

 

Holding Period.   Only
our K Shares, K-I Shares and K-T Shares that have been held by the presenting stockholder for at least one year are eligible for
repurchase, except under certain limited circumstances.

 

		a.	Distribution Reinvestment Plan Shares.   In the event that we repurchase all of your shares, any
shares that you purchased pursuant to our DRIP will be excluded from the one-year holding requirement. Such shares will be repurchased
at a discount based on the applicable holding period of the associated primary shares. In the event that you request a repurchase
of all of your shares, and you are participating in the DRIP, you will be deemed to have notified us, at the time you submit your
repurchase request, that you are terminating your participation in the DRIP and have elected to receive future distributions in
cash. This election will continue in effect even if less than all of your shares are accepted for repurchase unless you notify
us that you wish to resume your participation in our DRIP.

 

		b.	Death of a Stockholder.   Subject to the conditions and limitations described below, we will repurchase
our K Shares, K-I Shares and K-T Shares held for less than one year upon the death of a stockholder who is a natural person, including
shares held by such stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan, after
receiving written notice from the estate of the stockholder, the recipient of the shares through bequest or inheritance, or, in
the case of a revocable grantor trust, the trustee of such trust, who shall have the sole ability to request repurchases on behalf
of the trust, within two years from the date of death. If spouses are joint registered holders of the shares, the request
to repurchase the shares may be made only if both registered holders die. The waiver of the one-year holding period will not apply
to a stockholder that is not a natural person, such as a trust (other than a revocable grantor trust), partnership, corporation
or other similar entity.

 

		c.	Qualifying Disability.   Subject to the conditions and limitations described below, we will repurchase
K Shares, K-I Shares and K-T Shares held for less than one year requested by a stockholder who is a natural person, including shares
of our common stock held by such stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing
plan, with a “qualifying disability” as defined herein, after receiving written notice from such stockholder within
two years from the date of the qualifying disability, provided that the condition causing the qualifying disability was not
pre-existing on the date that the stockholder became a stockholder. The waiver of the one-year holding period will not apply to
a stockholder that is not a natural person, such as a trust (other than a revocable grantor trust), partnership, corporation, or
similar entity.

 

In order for a disability to be considered a “qualifying
disability,” (1) the stockholder must receive a determination of disability based upon a physical or mental condition
or impairment arising after the date the stockholder acquired the Shares to be redeemed, and (2) such determination of disability
must be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder could
be eligible to receive (the “applicable governmental agency”). The “applicable governmental agencies” are
limited to the following: (1) if the stockholder paid Social Security taxes and therefore could be eligible to receive Social
Security disability benefits, then the applicable governmental agency is the Social Security Administration or the agency charged
with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration;
(2) if the stockholder did not pay Social Security benefits and therefore could not be eligible to receive Social Security
disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System
(“CSRS”), then the applicable governmental agency is the U.S. Office of Personnel Management or the agency charged
with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (3) if
the stockholder did not pay Social Security taxes and therefore could not be eligible to receive Social Security benefits but suffered
a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable
and therefore could be eligible to receive military disability benefits, then the applicable governmental agency is the Veteran’s
Administration or the agency charged with the responsibility for administering military disability benefits at that time if other
than the Veteran’s Administration.

 

     

     

    

 

Disability determinations by governmental agencies
for purposes other than those listed above, including but not limited to worker’s compensation insurance, administration
or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums, will not entitle
a stockholder to the special repurchase terms applicable to stockholders with a “qualifying disability” unless permitted
in the discretion of our board of directors. Repurchase requests following an award by the applicable governmental agency of disability
benefits must be accompanied by: (1) the investor’s initial application for disability benefits and (2) a Social
Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Veteran’s
Administration record of disability-related discharge or such other documentation issued by the applicable governmental agency
that we deem acceptable and demonstrates an award of the disability benefits.

 

We understand that the following disabilities do not
entitle a worker to Social Security disability benefits:

 

		·	Disabilities occurring after the legal retirement age;

 

		·	Temporary disabilities; and

 

		·	Disabilities that do not render a worker incapable of performing substantial
gainful activity.

 

Therefore, such disabilities will not qualify
for the special repurchase terms except in the limited circumstances when the investor is awarded disability benefits by the
other “applicable governmental agencies” described above. However, where a stockholder requests a repurchase of
his or her shares due to a disability, and such stockholder does not have a “qualifying disability” under the
terms described above, the board of directors may repurchase the stockholder’s shares in its discretion on the special
terms available for a qualifying disability.

 

		d.	Involuntary Exigent Circumstance.   Our board of directors may, in its sole discretion, waive the one-year
holding period requirement in the event of involuntary exigent circumstances such as bankruptcy.

 

Funding and Operation of the Program.   We
are not obligated to repurchase shares of our common stock under our share repurchase program. We will limit the number of shares
repurchased pursuant to our share repurchase program as follows: (1) we will not repurchase in excess of 5.0% of the weighted
average number of K Shares, K-I Shares and K-T Shares outstanding during the trailing 12 months prior to the end of the fiscal
quarter for which repurchases are being paid (provided, however, that while shares subject to a repurchase requested upon the death
of a stockholder will be included in calculating the maximum number of shares that may be repurchased, shares subject to a repurchase
requested upon the death of a stockholder will not be subject to the percentage cap); and (2) funding for the repurchase
of K Shares, K-I Shares and K-T Shares will be limited to net proceeds we receive from the sale of shares under our DRIP and any
other operating funds that may be authorized by our board of directors, in its sole discretion. The foregoing limits might prevent
us from accommodating all repurchase requests made in any fiscal quarter or in any 12-month period, in which case quarterly repurchases
will be made pro rata, except as described below. Further, our management and/or board of directors reserves the right, in
its sole discretion at any time, and from time to time, to reject any request for repurchase for any or no reason.

 

We will determine whether we have sufficient
funds and/or shares available as soon as practicable after the end of each fiscal quarter, but in any event prior to the applicable
repurchase date. If we cannot purchase all shares presented for repurchase in any fiscal quarter, based upon insufficient cash
available and/or the limit on the number of shares we may repurchase during any year, we will give first priority to the repurchase
of deceased stockholders’ shares. While deceased stockholders’ shares will be included in calculating the maximum number
of shares that may be repurchased in any annual period, they will not be subject to the annual percentage caps; therefore,
if the volume of requests to repurchase deceased stockholders’ shares in a particular quarter were large enough to cause
the annual cap to be exceeded, even if no other repurchase requests were processed, the repurchases of deceased stockholders’
shares would be completed in full, assuming sufficient proceeds from the sale of shares under our DRIP or other operating funds
authorized by our board of directors were available. If sufficient funds are not available to pay all such repurchases in full,
the requests to repurchase deceased stockholders’ shares would be honored on a pro rata basis. We will next give priority
to (i) requests of stockholders with qualifying disabilities, and in the discretion of our board of directors, stockholders
with another involuntary exigent circumstance, such as bankruptcy, and (ii) next, to requests for full repurchases of accounts
with a balance of 100 or less K Shares, K-I Shares and/or K-T Shares at the time we receive the request, in order to reduce
the expense of maintaining small accounts. Thereafter, we will honor the remaining quarterly repurchase requests on a pro rata
basis. Unfulfilled requests for repurchase will be carried over automatically to subsequent repurchase periods unless a stockholder
withdraws the request for repurchase five business days prior to the next repurchase date.

 

     

     

    

 

Deadline for Presentment.   Repurchases
of our K Shares, K-I Shares and K-T Shares will be made quarterly upon written request to us at least 15 days prior to the
end of the applicable quarter. Valid repurchase requests will be honored approximately 30 days following the end of the applicable
quarter, which we refer to as the “repurchase date.” Stockholders may withdraw their repurchase request at any time
up to five business days prior to the repurchase date.

 

Account Minimum.   In
the event any stockholder fails to maintain a minimum balance of  $2,000 of K Shares, K-I Shares or K-T Shares, we may
repurchase all of the shares held by that stockholder at the net asset value repurchase price in effect on the date we determine
that the stockholder has failed to meet the minimum balance, less any applicable repurchase discount.

 

Termination, Amendment or Suspension
of the Program.   Our board of directors may suspend (in whole or in part) the share repurchase program at any
time and from time to time upon notice to our stockholders and may amend or terminate the share repurchase program at any time
upon 30 days’ prior written notice to our stockholders. We will notify our stockholders of such developments (1) in
a Current Report on Form 8-K, in an annual or quarterly report, or (2) by means of a separate mailing to you. The share
repurchase program will terminate immediately if our shares are listed on any national securities exchange.

 

We generally repurchase shares approximately
30 days following the end of the applicable quarter in which requests were received.

 

Reporting

 

We will register all securities offered
in this offering under the Exchange Act on or before April 30 of the calendar year in which we are required to register pursuant
to Section 12 of the Exchange Act. We immediately upon effectiveness of this offering, began filing quarterly, annual and
other required reports with the SEC.

 

Meetings and Special Voting Requirements

 

An annual meeting of our stockholders will
be held each year, at least 30 days after delivery of our annual report. The board members, including the independent directors,
shall take reasonable steps to ensure that this requirement is met. Special meetings of stockholders may be called only upon the
request of a majority of our board of directors, a majority of the independent directors, the chief executive officer, the president
or the chairman of the board and must be called by our secretary to act on any matter that may be properly considered at a meeting
of stockholders upon the written request of stockholders entitled to cast at least 10% of the votes entitled to be cast on such
matter proposed to be considered at the special meeting. Holders of our K-I Shares, K Shares and K-T Shares will have identical
voting rights, unless otherwise required under Maryland law.

 

Upon receipt of a written request of stockholders
entitled to cast at least 10% of the votes entitled to be cast on a matter and that states the purpose(s) of the meeting,
the secretary shall provide all stockholders, within ten days after receipt of said request, written notice of the meeting and
the purpose of such meeting. Such meeting must be held on a date not less than 15 nor more than 60 days after the distribution
of such notice at a time and place specified in such notice, or, if none is specified, at a time and place convenient to stockholders.
The presence in person or by proxy of stockholders entitled to cast 50% of all the votes entitled to be cast at a meeting of stockholders
will constitute a quorum. Unless otherwise provided by the Maryland General Corporation Law or our charter, the affirmative vote
of a majority of all votes cast is necessary to take stockholder action. With respect to the election of directors, each candidate
nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order
to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election,
the nominee will not be elected.

 

     

     

    

 

Under Maryland law, a Maryland corporation
generally cannot dissolve, amend its charter, merge, convert, sell all or substantially all of its assets, engage in a share exchange
or engage in similar transactions outside the ordinary course of business, unless approved by the affirmative vote of stockholders
entitled to cast at least two-thirds of the votes entitled to be cast on the matter. However, a Maryland corporation may provide
in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled
to be cast on the matter. Our charter provides for a majority vote of the holders of K-I Shares, K Shares, K-T Shares and
A Shares in these situations. Our charter further provides that, without the approval of a majority of the shares entitled to vote
on the matter, the board of directors may not:

 

		·	amend the charter to materially and adversely affect the rights, preferences
and privileges of our stockholders;

 

		·	amend charter provisions relating to director qualifications, fiduciary
duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions;

 

		·	cause our liquidation or dissolution after our initial investment
in property;

 

		·	sell all or substantially all of our assets other than in the ordinary
course of business or as otherwise permitted by law; or

 

		·	cause our merger or similar reorganization expect as permitted by
law.

 

Our advisor must be approved as our
advisor by our directors. This determination will be made every year upon the expiration of the advisory agreement. Although
our stockholders do not have the ability to vote to approve our advisor or to select a new advisor, stockholders holding K-I
Shares, K Shares, K-T Shares and A Shares do have the ability, by the affirmative vote of a majority of the shares
entitled to vote generally in the election of directors, to remove a director from our board.

 

Inspection of Books and Records

 

Pursuant to our charter, any stockholder
and any designated representative thereof will be permitted access to our corporate records to which such stockholder is entitled
under applicable law at all reasonable times, and may inspect and copy any of them. As a part of our books and records, we will
maintain at our principal office an alphabetical list of the names of our stockholders, along with their addresses and telephone
numbers and the number of shares of capital stock held by each of them. We will update this stockholder list at least quarterly
and, except as provided below, it will be available for inspection at our principal office by a stockholder owning A Shares, K-I
Shares, K Shares, K-T Shares or B Shares or his or her designated agent upon request of the stockholder. We will also mail this
list to any holder of A Shares, K-I Shares, K Shares, K-T Shares or B Shares within ten days of receipt of his or her request except
as provided below. The copy of the stockholder list will be printed in alphabetical order, on white paper and in a type size no
smaller than 10-point type. We may impose a reasonable charge for expenses incurred in reproducing such list. Stockholders, however,
may not sell or use this list for commercial purposes. The purposes for which stockholders may request this list include matters
relating to their voting rights.

 

If our advisor or our board of directors
neglects or unreasonably refuses to exhibit, produce or mail a copy of the stockholder list when properly requested, our advisor
and/or board of directors, as the case may be, shall be liable to the stockholder requesting the list for the costs, including
attorneys’ fees, incurred by that stockholder for compelling the production of the stockholder list and any actual damages
suffered by any stockholder for the neglect or refusal to produce the list. It shall be a defense that the actual purpose and reason
for the requests for inspection or for a copy of the stockholder list is not for a proper purpose but is instead for the purpose
of securing such list of stockholders or other information for the purpose of selling such list or copies thereof, or of using
the same for a commercial purpose other than in the interest of the applicant as a stockholder relative to our affairs. We may
require that the stockholder requesting the stockholder list represent that the request is not for a commercial purpose unrelated
to the stockholder’s interest in us. The remedies provided by our charter to stockholders requesting copies of the stockholder
list are in addition to, and do not in any way limit, other remedies available to stockholders under federal law, or the law of
any state.

 

     

     

    

 

Business Combinations

 

Under the Maryland General Corporation
Law, business combinations between a Maryland corporation and an interested stockholder or the interested stockholder’s affiliate
are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder. For this purpose,
the term “business combination” includes mergers, consolidations, share exchanges, asset transfers and issuances or
reclassifications of equity securities. An “interested stockholder” is defined for this purpose as: (1) any person
who beneficially owns, directly or indirectly, ten percent or more of the voting power of the corporation’s outstanding voting
stock; or (2) an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding
stock of the corporation. A person is not an interested stockholder under the statute if the board of directors approved in advance
the transaction by which he otherwise would have become an interested stockholder. However, in approving a transaction, the board
of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions
determined by the board.

 

After the five-year prohibition, any business
combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the
corporation and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding
voting stock of the corporation; and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the interested stockholder or its affiliate with whom the business combination is to be effected, or
held by an affiliate or associate of the interested stockholder.

 

These super-majority vote requirements
do not apply if the corporation’s stockholders receive a minimum price, as defined under the Maryland General Corporation
Law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder
for its shares.

 

None of these provisions of the Maryland
General Corporation Law will apply, however, to business combinations that are approved or exempted by the board of directors of
the corporation prior to the time that the interested stockholder becomes an interested stockholder. We have opted out of these
provisions by resolution of our board of directors. However, our board of directors may, by resolution, opt in to the business
combination statute in the future.

 

Control Share Acquisitions

 

The Maryland General Corporation Law provides
that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent
approved by a vote of stockholders entitled to cast two-thirds of the votes entitled to be cast on the matter. Shares owned by
the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded
from the vote on whether to accord voting rights to the control shares. “Control shares” are voting shares that, if
aggregated with all other shares owned by the acquirer or with respect to which the acquirer has the right to vote or to direct
the voting of, other than solely by virtue of revocable proxy, would entitle the acquirer to exercise voting power in electing
directors within one of the following ranges of voting power:

 

		·	one-tenth or more but less than one-third;

 

		·	one-third or more but less than a majority; or

 

		·	a majority or more of all voting power.

 

     

     

    

 

Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly
from the corporation. Except as otherwise specified in the statute, a “control share acquisition” means the acquisition
of issued and outstanding control shares.

 

Once a person who has made or proposes
to make a control share acquisition has undertaken to pay expenses and has satisfied other required conditions, the person may
compel the board of directors to call a special meeting of stockholders to be held within 50 days of the demand to consider the
voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders
meeting.

 

If voting rights are not approved for the
control shares at the meeting or if the acquiring person does not deliver an “acquiring person statement” for the control
shares as required by the statute, the corporation may repurchase any or all of the control shares for their fair value, except
for control shares for which voting rights have previously been approved. Fair value is to be determined for this purpose without
regard to the absence of voting rights for the control shares, and is to be determined as of the date of any meeting of stockholders
at which the voting rights for control shares are considered and not approved or, if no such meeting is held, as of the date of
the last control share acquisition.

 

If voting rights for control shares are
approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of these appraisal rights may
not be less than the highest price per share paid in the control share acquisition. Some of the limitations and restrictions otherwise
applicable to the exercise of dissenters’ rights do not apply in the context of a control share acquisition.

 

The control share acquisition statute does
not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or to
acquisitions approved or exempted by the charter or bylaws of the corporation.

 

Our bylaws contain a provision exempting
from the control share acquisition statute any and all acquisitions by any person of our stock. There can be no assurance that
this provision will not be amended or eliminated at any time in the future.

 

Subtitle 8

 

Subtitle 8 of Title 3 of the Maryland General
Corporation Law permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least
three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors
and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:

 

		·	a classified board;

 

		·	a two-thirds vote requirement for removing a director;

 

		·	a requirement that the number of directors be fixed only by vote of
the directors;

 

		·	a requirement that a vacancy on the board be filled only by the remaining
directors and for the remainder of the full term of the directorship in which the vacancy occurred; and

 

		·	a majority requirement for the calling of a special meeting of stockholders.

 

Our charter provides that, at such time
as we become eligible to make a Subtitle 8 election and except as may be provided by our board of directors in setting the terms
of any class or series of our preferred stock, vacancies on our board of directors may be filled only by the remaining directors
and for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in our charter and
bylaws unrelated to Subtitle 8, we already vest in our board of directors the exclusive power to fix the number of directorships
provided that the number is not fewer than three. Our bylaws may be amended by our stockholders or the board of directors.

 

     

     

    

 

Tender Offers by a Person

 

Our charter provides that any tender offer
made by a person, including any “mini-tender” offer, must comply with certain notice and disclosure requirements. These
procedural requirements with respect to tender offers apply to any widespread solicitation for shares of our stock at firm prices
for a limited time period.

 

In order for a person to conduct a tender
offer, our charter requires that the person comply with Regulation 14D of the Exchange Act and provide us notice of such tender
offer at least ten business days before initiating the tender offer. Pursuant to our charter, Regulation 14D would require any
person initiating a tender offer to provide:

 

		·	specific disclosure to stockholders focusing on the terms of the offer
and information about the bidder;

 

		·	the ability to allow stockholders to withdraw tendered shares while
the offer remains open;

 

		·	the right to have tendered shares accepted on a pro rata basis throughout
the term of the offer if the offer is for less than all of our shares; and

 

		·	that all stockholders of the subject class of shares be treated equally.

 

In addition to the foregoing, there are
certain ramifications to persons should they attempt to conduct a noncompliant tender offer. No stockholder may transfer shares
to any person who initiates a tender offer without complying with the provisions set forth above unless such stockholder first
offers the shares to us at the tender offer price in such noncompliant tender offer. The noncomplying stockholder shall also be
responsible for all of our expenses in connection with that stockholder’s noncompliance.

 

Advance Notice of Director Nominations and New Business

 

Proposals to elect directors or conduct
other business at an annual or special meeting of stockholders must be brought in accordance with our bylaws. The bylaws provide
that any business may be transacted at the annual meeting of stockholders without being specifically designated in the notice of
meeting. However, with respect to special meetings of stockholders, only the business specified in the notice of the special meeting
may be brought at that meeting.

 

Our bylaws also provide that nominations
of individuals for election to our board of directors and the proposal of other business may be made at an annual meeting, but
only:

 

		·	in accordance with the notice of the meeting;

 

		·	by or at the direction of our board of directors; or

 

		·	by a stockholder who was a stockholder of record at the record date
set by the board of directors for the purpose of determining stockholders entitled to vote at the meeting, at the time of the giving
of notice and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated
or on any such other business and who has complied with the advance notice procedures set forth in our bylaws.

 

A notice of a director nomination or stockholder
proposal to be considered at an annual meeting must be delivered to our secretary at our principal executive offices:

 

		·	not later than 5:00 p.m., Eastern Time, on the 120th day nor
earlier than 150 days prior to the first anniversary of the date of the proxy statement for the previous year’s annual meeting;
or

 

		·	if the date of the annual meeting is advanced or delayed by more than
30 days from the anniversary date of the preceding year’s annual meeting or if an annual meeting has not yet been held, not
earlier than 150 days prior to the annual meeting or not later than 5:00 p.m., Eastern Time, on the later of the 120th day
prior to the date of such annual meeting or the tenth day following our first public announcement of the date of the annual meeting.

 

     

     

    

 

Nominations of individuals for election
to our board of directors may be made at a special meeting, but only:

 

		·	by or at the direction of our board of directors; or

 

		·	provided that the meeting has been called in accordance
with our bylaws for the purpose of electing directors, by a stockholder who was a stockholder of record at the record date set
by the board of directors for the purpose of determining stockholders entitled to vote at the meeting, at the time of the giving
of notice and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated
and who has complied with the advance notice procedures set forth in our bylaws.

 

A notice of a director nomination to be
considered at a special meeting must be delivered to our secretary at our principal executive offices:

 

		·	not earlier than 120 days prior to the special meeting; and

 

		·	not later than 5:00 p.m., Eastern Time, on the later of either:

 

		·	90 days prior to the special meeting; or

 

		·	ten days following the day of our first public announcement of the
date of the special meeting and the nominees proposed by our board of directors to be elected at the meeting.

 

Restrictions on Roll-Up Transactions

 

Our charter requires that some transactions
involving an acquisition, merger, conversion or consolidation in which our stockholders receive securities in a surviving entity
(known in the charter as a “roll-up entity”), must be approved by the holders of a majority of our then-outstanding
shares of common stock. Approval of a transaction with, or resulting in, a “roll-up entity” is required if as part
of the transaction our board of directors determines that it is no longer in our best interest to attempt or continue to qualify
as a REIT. Transactions effected because of changes in applicable law or to preserve tax advantages for a majority in interest
of our stockholders do not require stockholder approval.

 

In connection with any proposed transaction
considered a “Roll-up Transaction” (defined below) involving us and the issuance of securities of an entity, which
we refer to as a “Roll-up Entity,” that would be created or would survive after the successful completion of the Roll-up
Transaction, an appraisal of all properties will be obtained from a competent independent appraiser. If the appraisal will be included
in a prospectus used to offer the securities of the roll-up entity, the appraisal must be filed with the SEC and the state regulatory
commissions as an exhibit to the registration statement for the offering of the roll-up entity’s shares. As a result, an
issuer using the appraisal will be subject to liability for violation of Section 11 of the Securities Act and comparable provisions
under state laws for any material misrepresentations or material omissions in the appraisal. The properties will be appraised on
a consistent basis, and the appraisal will be based on the evaluation of all relevant information and will indicate the value of
the properties as of a date immediately preceding the announcement of the proposed Roll-up Transaction. The appraisal will assume
an orderly liquidation of properties over a 12-month period. The terms of the engagement of the independent appraiser will clearly
state that the engagement is for our benefit and the benefit of our stockholders. A summary of the appraisal, indicating all material
assumptions underlying the appraisal, will be included in a report to stockholders in connection with any proposed Roll-up Transaction.

 

A “Roll-up Transaction” is
a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of
securities of a Roll-up Entity. This term does not include:

 

		·	a transaction involving our securities that have been for at least
12 months listed on a national securities exchange; or

 

		·	a transaction involving the conversion to trust, or association form
of only us if, as a consequence of the transaction, there will be no significant adverse change in common stockholder voting rights,
the term of our existence, compensation to our advisor or its affiliates, or our investment objectives.

 

     

     

    

 

In connection with a proposed Roll-up Transaction,
the person sponsoring the Roll-up Transaction must offer to stockholders entitled to vote on the transaction and who vote “no”
on the proposal the choice of:

 

		·	accepting the securities of the Roll-up Entity offered in the proposed
Roll-up Transaction; or

 

		·	one of the following:

 

		a.	remaining as stockholders of us and preserving their interests therein on the same terms and conditions as existed previously;
or

 

		b.	receiving cash in an amount equal to the stockholder’s pro rata share of the appraised value of our net assets.

 

We would be prohibited from participating in any proposed Roll-up
Transaction:

 

		·	that would result in our voting stockholders having democracy rights
in a Roll-up Entity that are less than those provided in our charter and bylaws and described elsewhere in this prospectus, including
rights with respect to the election and removal of directors, annual reports, annual and special meetings, amendment of our charter,
and dissolution of us;

 

		·	that includes provisions that would operate to materially impede or
frustrate the accumulation of shares by any purchaser of the securities of the Roll-up Entity, except to the minimum extent necessary
to preserve the tax status of the Roll-up Entity, or that would limit the ability of an investor to exercise the voting rights
of its securities of the Roll-up Entity on the basis of the number of shares of stock held by that investor;

 

		·	in which investors’ rights to access of records of the Roll-up
Entity will be less than those provided in this section of this prospectus entitled “— Meetings and Special Voting
Requirements”; or

 

		·	in which any of the costs of the Roll-up Transaction would be borne
by us if the Roll-up Transaction is rejected by our stockholders eligible to vote on such transaction.

 

Rights of Objecting Stockholders

 

Under Maryland law, dissenting stockholders
may have, subject to satisfying certain procedures, the right to receive a cash payment representing the fair value of their shares
of stock under certain circumstances. As permitted by the Maryland General Corporation Law, however, our charter includes a provision
that no stockholder may exercise the rights of an “objecting stockholder” under the law unless our board of directors
determines that appraisal rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring
after the date of such determination in connection with which stockholders would otherwise be entitled to exercise appraisal rights.
As a result of this provision, our stockholders will not have the right to dissent from extraordinary transactions, such as our
merger into another company or the sale of all or substantially all of our assets.

 

Liquidation

 

We expect to complete a liquidity event
approximately five to seven years after the termination of this offering. Our board of directors will consider various forms of
liquidity for our stockholders, including, but not limited to: (i) the sale of all or substantially all of our assets for
cash or other consideration and our subsequent liquidation and distribution of remaining assets to our stockholders, which we refer
to as a “liquidation event”; (ii) the listing of shares of our capital stock on a national securities exchange;
and (iii) our company’s sale or merger in a transaction that provides its stockholders with cash, securities, or a combination
of cash and securities.

 

Consideration from a transaction of our
company involving a merger or acquisition would be distributed amongst our stockholders in the same manner as proceeds arising
from a liquidation event. Proceeds from a liquidation event would be distributed as follows:

 

Liquidation Preference.   Upon
any liquidation event, before any distribution or payment may be made to holders of the A Shares or B Shares, the holder of each
K-I Share, K Share, K-T Share and any parity security will be entitled to be paid out of our assets legally available for distribution,
after payment or provision for our debts and liabilities (limited, in the case of non-recourse liabilities secured by properties,
to the value of those properties and excluding any deferred asset management fees, acquisition fees, and disposition fees (and
any interest accrued thereon)) the “liquidation preference” as described above under “— K-I Shares, K Shares
and K-T Shares — Liquidation”.

 

     

     

    

 

If upon a liquidation event, the
available assets of our company, or proceeds thereof, distributable are insufficient to pay in full the liquidation
preference on each K-I Share, K Share, K-T Share and parity security, then such assets, or the proceeds thereof, will be
distributed among the holders of such shares ratably on a per share basis in the same proportion as the respective amounts
that would be payable if all amounts payable thereon were paid in full.

 

Deferred Fees.   Upon
a liquidation event, if sufficient funds are available to pay the liquidation preference on the K-I Shares, K Shares, K-T Shares
and parity securities in full, then we will pay, in the following order, all deferred and unpaid asset management fees, all deferred
and unpaid acquisition fees, and all deferred and unpaid disposition fees (including interest accrued on all such fees at a non-compounded
rate of 6.0% per annum) to our advisor. The Service Provider will be entitled to receive 25% of any such amounts as a fee pursuant
to the Services Agreement.

 

Common Ordinary Distributions.   Upon
a liquidation event, after payment of all such deferred fees described in the preceding paragraph, the holder of each A Share will
be entitled to be paid out of our assets legally available for distribution, after payment or provision for our debts and liabilities,
all accumulated, accrued, and unpaid common ordinary distributions (as described under “— A Shares — Distributions
Rights,” above).

 

Stated Value of A Shares.   Upon
a liquidation event, after payment of all common ordinary distributions as described in the preceding paragraph, the holder of
each A Share will be entitled to be paid out of our assets legally available for distribution, after payment or provision for our
debts and liabilities, an amount equal to the stated value ($10.00) of an A Share for each A Share then held.

 

Final Distributions.   Upon
a liquidation, following the distribution and payment in full of all obligations, 50% (or 87.5% if the A Shares have been repurchased
in connection with a Non-cause Advisory Agreement Termination (as defined under “Management Compensation — Payment
upon Other Advisory Agreement Termination”) of all remaining liquidation cash (as defined below) available for distribution
(as determined by our board, in its discretion) will be paid to the holders of K-I Shares, K Shares, K-T Shares and any parity
securities (pro rata based on the number of K-I Shares, K Shares, K-T Shares and parity securities), 37.5% of remaining liquidation
cash will be distributed to the holders of A Shares (pro rata based on the number of A Shares) (unless all such A Shares previously
have been repurchased in connection with a Non-cause Advisory Agreement Termination, in which case the remaining liquidation cash
otherwise apportioned to the A Shares would be distributed to the holders of K-I Shares, K Shares, K-T Shares and parity securities),
and 12.5% of remaining liquidation cash will be distributed to the holders of B Shares. “Remaining liquidation cash”
means all cash available for distribution, as determined by our board after (i) payment in full of, or the setting aside of
reserves for, all of our debts and liabilities, limited, in the case of non-recourse liabilities secured by properties, to the
value of those properties, and excluding liabilities for the payment of deferred asset management fees, acquisition fees, and disposition
fees (and any interest accrued thereon); (ii) payment in full of the liquidation preference on all outstanding K-I Shares,
K Shares, K-T Shares and parity securities; (iii) the full asset management fees are paid, including any deferred amounts
and interest accrued thereon; (iv) the full acquisition fees and disposition fees are paid, including any interest accrued
thereon; (v) all accrued common ordinary distributions on our A Shares are paid; and (vi) payment in full of the stated
value of outstanding A Shares (as described above under “Description of Capital Stock — Liquidation — Stated
Value of A Shares”).

 

Listing Event

 

We expect that if we were to list any of
our shares of capital stock on a national securities exchange, we would list K Shares (or successor securities). The following
information assumes that we list K Shares. In such event, outstanding K-T Shares and K-I Shares would automatically convert on
a one-to-one basis to K Shares. Pursuant to our charter, if we list any of our shares of capital stock on a national securities
exchange, our board of directors must give prior notice of such listing to the holders of A Shares, and such holders of A Shares
(including our advisor and its affiliates) will have the right to either (a) receive one K Share (or successor security)
for each A Share held as of the date our board gives notice of an intended listing to our holders of A Shares (to be effective
on the date of such listing) or (b) require us to repurchase each A Share for the consideration described below, which will
equal the amount each A Share would be entitled to receive if we liquidated and received liquidation proceeds equal to the “market
value” of our company (as defined below). Each holder of A Shares will have at least 20 days to make such election.

 

     

     

    

 

“Market value” means the sum
of  (i) the value of the capital stock listed on a national securities exchange based on the average market value of
the shares of such stock issued and outstanding at the listing over the 30 days beginning 180 days after the shares of our stock
are listed or included for quotation plus (ii) the value of any capital stock not listed on an exchange, if any, for the same
period, as determined in good faith by our board of directors, including a majority of our independent directors.

 

In addition, we will be obligated to pay
our advisor the amounts it would be entitled to receive on account of deferred asset management fees, acquisition fees, and disposition
fees (and any accrued interest thereon) as if we liquidated and received liquidation proceeds equal to the market value of our
company; however, for purposes of determining our advisor’s entitlement to the payment of such fees and interest, the effect
of any elections to convert A Shares to K Shares will be disregarded. That is, assuming the market value was at least equal to
the liquidation preference due on our K-I Shares, K Shares, K-T Shares and any parity securities (excluding any liquidation preference
associated with K Shares issued in exchange for A Shares), our advisor would be entitled to receive an amount equal to (a) any
deferred asset management fees, plus any interest accrued thereon, (b) the full acquisition fees previously earned, plus any
interest accrued therein, and (c) the full disposition fees previously earned, plus any interest accrued thereon. However,
any consideration on account of such fees will be limited to the excess of the market value over the liquidation preference on
such K-I Shares, K Shares, K-T Shares and parity securities. The Service Provider (an affiliate of the dealer manager) would be
entitled to receive 25% of any such amounts as a fee pursuant to the Services Agreement. These amounts may be payable to our advisor
and the Service Provider in the form of a promissory note bearing interest at the then-current rate, as determined in good faith
by a majority of our board of directors, including a majority of our independent directors, or in the form of capital stock that
was listed on a national securities exchange, valued at the same price per share as that used to determine market value.

 

We will repurchase the A Shares held by
stockholders not electing to exchange their shares for K Shares (or successor securities) at a repurchase price determined
as if we liquidated and received liquidation proceeds equal to the market value. Specifically, the aggregate repurchase price for
A Shares will equal:

 

		(1)	any accumulated, accrued, and unpaid common ordinary distributions on the A Shares (excluding A Shares exchanged or to be exchanged
for K Shares or successor securities), limited to the excess of the market value over the sum of  (a) the liquidation
preference on our K-I Shares, K Shares, K-T Shares and parity securities outstanding as of the listing (excluding K Shares issued
in exchange for A Shares as described above) plus (b) the deferred asset management, acquisition and disposition fees and
interest thereon; plus

 

		(2)	the aggregate stated value ($10.00 per A Share) of the outstanding A Shares (not otherwise exchanged for K Shares or successor
securities) immediately prior to listing, limited to the excess of the market value over the sum of  (a) the liquidation
preference on our K-I Shares, K Shares, K-T Shares and parity securities outstanding as of the listing (excluding K Shares issued
in exchange for A Shares), plus (b) the deferred fees and interest thereon, plus (c) the accumulated, accrued, and unpaid
common ordinary distributions on our A Shares (excluding A Shares exchanged or to be exchanged for K Shares or successor securities);
plus

 

		(3)	37.5% of the excess, if any, of the market value over the aggregate of  (a) the liquidation preference on our K-I
Shares, K Shares, K-T Shares and parity securities outstanding as of the listing (excluding K Shares issued in exchange for A Shares),
plus (b) the above-described deferred asset management, acquisition, and disposition fees and interest thereon, plus (c) the
accumulated, accrued, and unpaid common ordinary distributions on our A Shares (excluding A Shares exchanged or to be exchanged
for K Shares or successor securities) plus (d) the aggregate stated value of the outstanding A Shares (not otherwise exchanged
for K Shares or successor securities) immediately prior to the listing.

 

If the market value exceeds the aggregate
of  (a) the liquidation preference on our K-I Shares, K Shares, K-T Shares and parity securities outstanding as of the
listing (excluding K Shares issued in exchange for A Shares), plus (b) the deferred asset management, acquisition and
disposition fees and interest thereon, plus (c) the accrued common ordinary distributions on our A Shares (excluding A Shares
exchanged or to be exchanged for K Shares or successor securities), plus (d) the aggregate stated value of the outstanding
A Shares (not otherwise exchanged for K Shares or successor securities) immediately prior to the listing, we will repurchase
the B Shares for an amount equal to 12.5% of such excess, payable to such holders of B Shares pro rata in accordance with
the number of B Shares. If the market value does not support payment of such amounts, the B Shares will be repurchased and canceled
for no consideration.

 

     

     

    

 

All payments of the repurchase price, if
any, and whether on the A Shares or the B Shares, will be in the form of a promissory note bearing interest at the then-current
rate or in the form of shares of our capital stock listed on a national securities exchange, valued at the same price per share
as that used to determine market value. Our board of directors, including a majority of our independent directors, will determine
the form of consideration and the then-current interest rate on any promissory note.

 

If the balances of any promissory notes
issued in payment of the above amounts (whether in respect of deferred fees and interest thereon or in respect of the repurchase
of A Shares or B Shares) have not been paid in full within five years from the date the advisory agreement was terminated, then
our advisor, Service Provider, their successors or assigns, and any other holders of A Shares receiving promissory notes, may elect
to convert the unpaid balance of the notes, including accrued but unpaid interest, into K Shares (or successor securities) at a
value per K Share (or successor security) as determined in accordance with the following paragraph. Promissory notes not redeemed
will mature on the eighth anniversary of the date the advisory agreement was terminated.

 

If the K Shares (or such successor
securities) are then listed on a national securities exchange, the conversion will occur at a price per share equal to the
average closing price of the K Shares (or such successor securities) over the ten trading days immediately preceding the date
of such election. If such securities are not then listed, the conversion will occur at a price per share equal to the most
recently determined NAV per K Share, as adjusted in good faith by our board of directors (including a majority of our
independent directors).

 

Plan of Liquidation

 

If we do not begin the process of achieving
a liquidity event by the seventh anniversary of the termination of this offering, our charter requires a majority of our board
of directors, including a majority of our independent directors, to adopt a resolution declaring that a plan of liquidation of
our company is advisable and directing that the plan of liquidation be submitted for consideration at either an annual or special
meeting of stockholders, unless the adoption of a plan of liquidation by our board of directors and submission of such plan to
stockholders is postponed by a vote of a majority of our board of directors and a majority of the independent directors. If we
submit a plan of liquidation to our stockholders, holders of K-I Shares, K Shares, K-T Shares and A Shares voting together as a
single class, will each be entitled to one vote for each such share held as of the record data established by our board of such
vote. If we have sought and failed to receive approval of such stockholders of a plan of liquidation, we will continue operating
and, upon the written request of the holders of K-I Shares, K Shares, K-T Shares and A Shares owning in the aggregate not less
than 10% of the then outstanding K-I Shares, K Shares, K-T Shares and A Shares, the plan of liquidation will be submitted for consideration
by proxy statement to such stockholders up to once every two years.

 

Market conditions and other factors could
cause us to delay our liquidity event beyond the seventh anniversary of the termination of this or a public offering. Even after
we decide to pursue a liquidity event, we are under no obligation to conclude our liquidity event within a set time frame because
the timing of our liquidity event will depend on real estate market conditions, financial market conditions, U.S. federal income
tax consequences to stockholders, and other conditions that may prevail in the future. We also cannot assure you that we will be
able to achieve a liquidity event.

 

Prior to the completion of a liquidity
event, our share repurchase program may provide a limited opportunity for you to have your K-I Shares, K Shares or K-T Shares
repurchased, subject to certain restrictions and limitations, at a price which may reflect a discount from the purchase price
you paid for the shares being repurchased. See “— Share Repurchase Program” above for a detailed description
of our share repurchase program.

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