SANUWAVE HEALTH, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS
AND LIMITATIONS
OF
SERIES
D CONVERTIBLE PREFERRED STOCK
PURSUANT
TO SECTION 78.1955 OF THE
NEVADA
REVISED STATUTES
The
undersigned, Kevin A. Richardson, II, does hereby certify
that:
1. They
are the Chief Executive Officer of SANUWAVE Health, Inc., a Nevada
corporation (the “Corporation”).
2. The
Corporation is authorized to issue 5,000,000 shares of preferred
stock, 6,558 of which are issued and 90 are currently
outstanding.
3. The
following resolutions were duly adopted by the board of directors
of the Corporation (the “Board of
Directors”):
WHEREAS, the Articles of Incorporation
of the Corporation provides for a class of its authorized stock
known as preferred stock, consisting of 5,000,000 shares, $0.001
par value per share, issuable from time to time in one or more
series;
WHEREAS, the Board of Directors is
authorized to fix the dividend rights, dividend rate, voting
rights, conversion rights, rights and terms of redemption and
liquidation preferences of any wholly unissued series of preferred
stock and the number of shares constituting any series and the
designation thereof, of any of them; and
WHEREAS, it is the desire of the Board
of Directors, pursuant to its authority as aforesaid, to fix the
rights, preferences, restrictions and other matters relating to a
series of the preferred stock, which shall consist of up to eight
(8) shares of the preferred stock which the Corporation has the
authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the
Board of Directors does hereby provide for the issuance of a series
of preferred stock for cash or exchange of other securities, rights
or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series
of preferred stock as follows:
TERMS OF PREFERRED STOCK
Section
1. Definitions.
For the purposes hereof, the following terms shall have the
following meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Alternate Consideration”
shall have the meaning set forth in Section 7(d).
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 6(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Buy-In” shall have the
meaning set forth in Section 6(c)(iv).
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
“Fundamental Transaction”
shall have the meaning set forth in Section 7(d).
“Holder” shall have the
meaning given such term in Section 2.
“Junior Securities” means
the Common Stock and all other Common Stock Equivalents of the
Corporation other than those securities which are explicitly senior
to or pari
passu with the
Preferred Stock in dividend rights or liquidation
preference.
“Liquidation” shall have
the meaning set forth in Section 5.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred
Stock regardless of the number of transfers of any particular
shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred
Stock.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Purchase Agreement” means
that certain Series D Preferred Stock Purchase Agreement dated May
__, 2020 among the Corporation and the original Holders, as
amended, modified or supplemented from time to time in accordance
with its terms.
“Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
“Share Delivery Date”
shall have the meaning set forth in Section 6(c).
“Shareholder Approval”
means the vote of holders of the requisite number of shares of
capital stock of the Corporation as required by Nevada law
to approve an increase in the number
of authorized shares of Common Stock to
permit conversion of all of the then outstanding shares
of Series D Preferred Stock into shares of Common Stock in
accordance with the terms of this Certificate.
“Stated Value” shall have
the meaning set forth in Section 2.
“Subsidiary” means any
Person (i) at least 50% of the outstanding voting securities of
which are at the time owned or controlled directly or indirectly by
the Corporation or (ii) with respect to which the Corporation
possesses, directly or indirectly, the power to direct or cause the
direction of the affairs or management of such Person.
“Successor Entity” shall
have the meaning set forth in Section 7(d).
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC
Bulletin Board (or any successors to any of the
foregoing).
“Transaction Documents”
means the Purchase Agreement, this Certificate of Designation and
all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the
transactions contemplated hereunder
“Transfer Agent” means
Action Stock Transfer Corp, the current transfer agent for the
Common Stock, and any successor transfer agent of the
Corporation.
“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion of
the Preferred Stock.
Section
2. Designation,
Amount and Par Value. The series of preferred stock shall be
designated as Series D Convertible Preferred Stock (the
“Preferred
Stock”) and the number of shares so designated shall
be eight (8) (which shall not be subject to increase without the
written consent of the holders of a majority of the Underlying
Shares (each, a “Holder” and collectively,
the “Holders”)). Each share of
Preferred Stock shall have a par value of $0.001 per share and a
stated value equal to $25,000.00 (the “Stated
Value”).
Section
3. Dividends.
(a) Holders shall be
entitled to receive, and the Corporation shall pay, dividends on
shares of Preferred Stock equal (on an
as-if-converted-to-Common-Stock basis) to and in the same form as
dividends (other than dividends in the form of Common Stock)
actually paid on shares of the Common Stock when, as and if such
dividends (other than dividends in the form of Common Stock) are
paid on shares of the Common Stock. Other than as set forth in the
previous sentence, no other dividends shall be paid on shares of
Preferred Stock; and the Corporation shall pay no dividends (other
than dividends in the form of Common Stock) on shares of the Common
Stock unless it simultaneously complies with the previous
sentence.
(b) Other Securities. So long as
any Preferred Stock shall remain outstanding, the Corporation shall
not redeem, purchase or otherwise acquire directly or indirectly
more than a de minimis
amount of any Junior Securities other than as to repurchases of
Common Stock or Common Stock Equivalents from departing, officers,
directors or employees of the Corporation or any
Subsidiary.
Section
4. Voting
Rights. In addition to the voting rights provided by
applicable law, the Preferred Stock shall have the right to vote on
any matter on which the Common Stock is eligible to vote on an
as-if-converted-to-Common-Stock basis (as determined in Section
6(a) by dividing the Stated Value of such share of Preferred Stock
by the Conversion Price, regardless of whether or not the Preferred
Stock is then convertible into shares of Common Stock pursuant to
Section 6); provided that
each Holder shall only have the right to vote such shares of
Preferred Stock as are eligible for conversion without exceeding
the Beneficial Ownership Limitation.
Section
5. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a “Liquidation”), after the
satisfaction in full of the debts of the Corporation and the
payment of any liquidation preference owed to the holders of shares
of capital stock of the Corporation ranking prior to the Preferred
Stock upon liquidation, the Holders of the Preferred Stock shall
participate pari passu with the holders of the Common Stock (on an
as-if-converted-to-Common-Stock basis without regard to any
limitation in Section 6(d) on the conversion of the Preferred
Stock) in the net assets of the Corporation. The Corporation shall
mail written notice of any such Liquidation, not less than forty
five (45) days prior to the payment date stated therein, to each
Holder.
Section
6. Conversion.
(a) Conversions at Option of
Holder. At any time and from time to time after the
date that the Corporation shall have amended its Articles of
Incorporation to increase the number of shares of Common Stock
authorized for issuance thereunder or effect a reverse stock split
of the outstanding shares of Common Stock by a sufficient amount to
permit the conversion of all Preferred Stock into shares
of Common Stock
(such date, the “Initial Convertibility Date”),
each issued and outstanding share of Preferred Stock shall be
convertible at the option of the Holder thereof into that number of
whole shares of Common Stock (subject to the limitations set forth
in Section 6(d)) determined by dividing the Stated Value of such
share of Preferred Stock by the Conversion Price and rounding to
the nearest whole share. Holders shall effect conversions by
providing the Corporation with the form of conversion notice
attached hereto as Annex
A (a “Notice
of Conversion”). Each Notice of Conversion shall
specify the number of shares of Preferred Stock to be converted,
the number of shares of Preferred Stock owned prior to the
conversion at issue, the number of shares of Preferred Stock owned
subsequent to the conversion at issue and the date on which such
conversion is to be effected, which date may not be prior to the
date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. The calculations and
entries set forth in the Notice of Conversion shall control in the
absence of manifest or mathematical error. No ink-original Notice
of Conversion shall be required, nor shall any medallion guarantee
(or other type of guarantee or notarization) of any Notice of
Conversion form be required. To effect conversions of shares of
Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
(b) Conversion Price. The
conversion price for the Preferred Stock shall equal $0.14, subject
to adjustment herein (the “Conversion
Price”).
(c) Mechanics of
Conversion
(i) Delivery of Certificate Upon
Conversion. Not later than three (3) Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Corporation shall deliver, or cause to be delivered, to the
converting Holder (A) a certificate or certificates representing
the Conversion Shares which, on or after the six month anniversary
of the Original Issue Date, shall be free of restrictive legends
and trading restrictions (other than those which may then be
required by the Purchase Agreement) representing the number of
Conversion Shares being acquired upon the conversion of the
Preferred Stock (including, if the Corporation has given continuous
notice pursuant to Section 3(b) for payment of dividends in shares
of Common Stock at least twenty (20) Trading Days prior to the date
on which the Notice of Conversion is delivered to the Corporation,
shares of Common Stock representing the payment of accrued
dividends otherwise determined pursuant to Section 3(a) but
assuming that the Dividend Notice Period is the twenty (20) Trading
Days period immediately prior to the date on which the Notice of
Conversion is delivered to the Corporation and excluding for such
issuance the condition that the Corporation deliver the Dividend
Share Amount as to such dividend payment prior to the commencement
of the Dividend Notice Period), and (B) a bank check in the amount
of accrued and unpaid dividends (if the Corporation has elected or
is required to pay accrued dividends in cash). On or after the
earlier of the six month anniversary of the Original Issue Date,
the Corporation shall use its best efforts to deliver any
certificate or certificates required to be delivered by the
Corporation under this Section 6 electronically through the
Depository Trust Company or another established clearing
corporation performing similar functions (a “DWAC
Delivery”).
(ii) Failure
to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date,
the Holder shall be entitled to elect by written notice to the
Corporation at any time on or before its receipt of such
certificate or certificates, to rescind such Conversion, in which
event the Corporation shall promptly return to the Holder any
original Preferred Stock certificate delivered to the Corporation
and the Holder shall promptly return to the Corporation the Common
Stock certificates issued to such Holder pursuant to the rescinded
Conversion Notice.
(iii) Obligation
Absolute. The Corporation’s obligation to issue and
deliver the Conversion Shares upon conversion of Preferred Stock in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by a Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by such
Holder or any other Person of any obligation to the Corporation or
any violation or alleged violation of law by such Holder or any
other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Corporation to such
Holder in connection with the issuance of such Conversion Shares;
provided, however, that
such delivery shall not operate as a waiver by the Corporation of
any such action that the Corporation may have against such Holder.
In the event a Holder shall elect to convert any or all of the
Stated Value of its Preferred Stock, the Corporation may not refuse
conversion based on any claim that such Holder or anyone associated
or affiliated with such Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and/or enjoining conversion
of all or part of the Preferred Stock of such Holder shall have
been sought and obtained, and the Corporation posts a surety bond
for the benefit of such Holder in the amount of 150% of the Stated
Value of Preferred Stock which is subject to the injunction, which
bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly
noticed conversion. Nothing herein shall limit a Holder’s
right to pursue all remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit a Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable
law.
(iv) Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the
Holder, if the Corporation fails for any reason to deliver to a
Holder the applicable certificate or certificates or to effect a
DWAC Delivery, as applicable, by the Share Delivery Date pursuant
to Section 6(c)(i), and if after such Share Delivery Date such
Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares
which such Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Corporation shall (A) pay in cash to such Holder (in addition to
any other remedies available to or elected by such Holder) the
amount, if any, by which (x) such Holder’s total purchase
price (including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder was entitled to receive
from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase
obligation was executed (including any brokerage commissions) and
(B) at the option of such Holder, either reissue (if surrendered)
the shares of Preferred Stock equal to the number of shares of
Preferred Stock submitted for conversion (in which case, such
conversion shall be deemed rescinded) or deliver to such Holder the
number of shares of Common Stock that would have been issued if the
Corporation had timely complied with its delivery requirements
under Section 6(c)(i). For example, if a Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise
to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Corporation shall be
required to pay such Holder $1,000. The Holder shall provide the
Corporation written notice indicating the amounts payable to such
Holder in respect of the Buy-In and, upon request of the
Corporation, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Corporation’s failure to timely
deliver certificates representing shares of Common Stock upon
conversion of the shares of Preferred Stock as required pursuant to
the terms hereof; provided, however, that the Holder shall
not be entitled to both (i) require the reissuance of the shares of
Preferred Stock submitted for conversion for which such conversion
was not timely honored and (ii) receive the number of shares of
Common Stock that would have been issued if the Corporation had
timely complied with its delivery requirements under Section
6(c)(ii).
(v) Reservation of Shares Issuable Upon
Conversion. The Corporation covenants that it will at all
times from and after the Initial Convertibility Date reserve and
keep available out of its authorized and unissued shares of Common
Stock for the sole purpose of issuance upon conversion of the
Preferred Stock and payment of dividends on the Preferred Stock,
each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder
(and the other holders of the Preferred Stock), not less than such
aggregate number of shares of the Common Stock as shall be issuable
(taking into account the adjustments and restrictions of Section 7)
upon the conversion of the then outstanding shares of Preferred
Stock and payment of dividends hereunder. The Corporation covenants
that all shares of Common Stock that shall be so issuable shall,
upon issue, be duly authorized, validly issued, fully paid and
non-assessable.
(vi) Fractional
Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the
Preferred Stock. As to any fraction of a share which the Holder
would otherwise be entitled to purchase upon such conversion, the
Corporation shall at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole
share.
(vii) Transfer
Taxes and Expenses. The issuance of certificates for shares
of the Common Stock on conversion of the Preferred Stock shall be
made without charge to any Holder for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that the Corporation shall
not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the
Holders of such shares of Preferred Stock and the Corporation shall
not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall
have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax
has been paid. The Corporation shall pay all Transfer Agent fees
required for same-day processing of any Notice of
Conversion.
(d) Beneficial Ownership
Limitation. The
Corporation shall not effect any conversion of the Preferred Stock,
and a Holder shall not have the right to convert any portion of the
Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any
Persons acting as a group together with such Holder or any of such
Holder’s Affiliates) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by such Holder and its Affiliates shall include
the number of shares of Common Stock issuable upon conversion of
the Preferred Stock with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock
which are issuable upon (i) conversion of the remaining,
unconverted Stated Value of Preferred Stock beneficially owned by
such Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Corporation subject to a limitation on conversion
or exercise analogous to the limitation contained herein
(including, without limitation, the Preferred Stock) beneficially
owned by such Holder or any of its Affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 6(d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred
Stock is convertible (in relation to other securities owned by such
Holder together with any Affiliates) and of how many shares of
Preferred Stock are convertible shall be in the sole discretion of
such Holder, and the submission of a Notice of Conversion shall be
deemed to be such Holder’s determination of whether the
shares of Preferred Stock may be converted (in relation to other
securities owned by such Holder together with any Affiliates) and
how many shares of the Preferred Stock are convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure
compliance with this restriction, each Holder will be deemed to
represent to the Corporation each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Corporation shall
have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 6(d), in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Corporation’s most recent periodic or annual report filed
with the Commission, as the case may be, (ii) a more recent public
announcement by the Corporation or (iii) a more recent written
notice by the Corporation or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Corporation shall within two
Trading Days confirm orally and in writing to such Holder the
number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of
the Corporation, including the Preferred Stock, by such Holder or
its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
conversion of Preferred Stock held by the applicable Holder. The
provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this
Section 6(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial
Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply
to a successor holder of Preferred Stock.
Section
7. Certain
Adjustments.
(a) Stock Dividends and Stock
Splits. If the Corporation, at any time while the Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock
on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or
payment of a dividend on, the Preferred Stock), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 7(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
(b) Subsequent Rights Offerings. In
addition to any adjustments pursuant to Section 7(a) above, if at
any time the Corporation grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete conversion of such
Holder’s Preferred Stock (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights (provided, however, to the extent that
the Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
(c) Pro Rata Distributions. During
such time as the Preferred Stock is outstanding, if the Corporation
declares or makes any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”), at any
time after the issuance of the Preferred Stock, then, in each such
case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete Conversion of the Preferred
Stock (without regard to any limitations on Conversion hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, to the extent that
the Holder’s right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Distribution to such extent (or in the beneficial ownership of
any shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
(d) Fundamental Transaction. If, at
any time while the Preferred Stock is outstanding, (i) the
Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation
with or into another Person, (ii) the Corporation, directly or
indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any,
direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of fifty percent
(50.0%) or more of the outstanding Common Stock, (iv) the
Corporation, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Corporation, directly or indirectly, in one or more
related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person whereby such other Person
acquires more than fifty percent (50.0%) of the outstanding shares
of Common Stock (not including any shares of Common Stock held by
the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
the Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of the Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which the Preferred
Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of the Preferred Stock). For purposes of any such
conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and
the Corporation shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of the
Preferred Stock following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any
successor to the Corporation or surviving entity in such
Fundamental Transaction shall file a new Certificate of Designation
with the same terms and conditions and issue to the Holders new
preferred stock consistent with the foregoing provisions and
evidencing the Holders’ right to convert such preferred stock
into Alternate Consideration. The Corporation shall cause any
successor entity in a Fundamental Transaction in which the
Corporation is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Corporation under
this Certificate of Designation and the other Transaction Documents
(as defined in the Purchase Agreement) in accordance with the
provisions of this Section 7(d) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of
the Preferred Stock, deliver to the Holder in exchange for the
Preferred Stock a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to
the Preferred Stock which is convertible for a corresponding number
of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of the Preferred Stock (without regard
to any limitations on the conversion of the Preferred Stock) prior
to such Fundamental Transaction, and with a conversion price which
applies the conversion price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of the Preferred Stock immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Certificate of Designation and the other Transaction Documents
referring to the “Corporation” shall refer instead to
the Successor Entity), and may exercise every right and power of
the Corporation and shall assume all of the obligations of the
Corporation under this Certificate of Designation and the other
Transaction Documents with the same effect as if such Successor
Entity had been named as the Corporation herein.
(e) Calculations. All calculations
under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Corporation) issued and outstanding.
(f) Notice to the
Holders.
(i) Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 7, the Corporation shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(ii) Notice
to Allow Conversion by Holder. If (A) the Corporation shall
declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Corporation shall authorize the granting to all holders of
the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Corporation shall be required
in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Corporation is a party, any
sale or transfer of all or substantially all of the assets of the
Corporation, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property, or (E)
the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Corporation, then, in each case, the Corporation shall cause to be
filed at each office or agency maintained for the purpose of
conversion of the Preferred Stock, and shall cause to be delivered
to each Holder at its last address as it shall appear upon the
stock books of the Corporation, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert the Conversion Amount of the
Preferred Stock (or any part hereof) during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section
8. Mandatory
Redemption of Preferred Stock.
(a) Redemption Obligation.
Notwithstanding any other provision hereof to the contrary, if the
Corporation, for any reason or no reason, shall not have obtained
Shareholder Approval on or before December 31, 2020, or if, having
so obtained such Shareholder Approval, shall not have amended its
Articles of Incorporation to increase its authorized Common Stock
to provide for conversion in full of all issued and outstanding
shares of Preferred Stock (either such event, an
“Authorization
Failure”), then the Corporation shall be obligated to
redeem from each Holder all shares of Preferred Stock held by such
Holder in accordance with the provisions of this Section
8.
(b) Redemption Procedure. Not later
than thirty (30) days following an Authorization Failure, the
Corporation shall redeem, to the extent of its funds then lawfully
available therefor, all then-issued and outstanding shares of
Preferred Stock from the Holders thereof. The redemption repurchase
price per share of Preferred Stock (the “Redemption Price”) shall
be the greater of (i) two hundred percent (200%) of the Stated
Value of such share, and (ii)(A) the volume-weighted average sale
price of a share of Common Stock reported on the Trading Market for
the thirty (30) consecutive Trading Days immediately preceding the
date of the Authorization Failure, multiplied by (B) the number of
shares of Common Stock each share of Preferred Stock would be
convertible into as of the date of such Authorization Failure had
such Authorization failure not occurred. The Corporation shall
notify in writing each Holder, promptly following an Authorization
Failure, of its obligation to redeem such Holder’s shares of
Preferred Stock pursuant to this Section 8, which Corporation
notice shall specify a date, not later than thirty (30) days
following such Authorization Failure (the “Redemption Date”), for
the closing of such redemption (the “Redemption Closing”),
which shall occur at the principal offices of the Corporation. At
the Redemption Closing, each Holder shall sell and deliver to the
Corporation, free and clear of all liens, claims and encumbrances,
all shares of Preferred Stock then held by such Holder, together
with all certificates (if any) representing such shares of
Preferred Stock, duly endorsed for transfer on the books of the
Corporation or accompanied by duly executed stock powers, against
receipt from the Corporation of the aggregate Redemption Price
therefor in a single installment of immediately available
funds.
(c) Partial Redemption. If the
funds legally available on the Redemption Date for redemption of
the Preferred Stock shall be insufficient to permit the payment to
all Holders the full aggregate Redemption Price, then the
Corporation shall effect such redemption pro rata among the Holders so that each
Holder shall receive a redemption payment equal to a fraction of
the aggregate amount available for redemption, the numerator of
which is the number of shares of Preferred Stock held by such
Holder multiplied by the Redemption Price of each share of
Preferred Stock held by such Holder, and the denominator of which
is the number of shares of Preferred Stock outstanding multiplied
by the Redemption Price of each such outstanding share of Preferred
Stock. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares
Preferred Stock, such funds will immediately be used to redeem the
balance of the shares of Preferred Stock not theretofore
redeemed.
(d) Rights as Holders. From and
after the Redemption Date, unless there shall have been a default
in payment of the Redemption Price, all rights of the Holders as
holders of Preferred Stock (except the right to receive the
Redemption Price without interest) shall cease, and no shares of
Preferred Stock shall thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose
whatsoever.
Section
9. Miscellaneous.
(a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to
the Corporation, at the address set forth above Attention: Chief Financial Officer, or
at any facsimile number or other address as the Corporation may
specify for such purposes by notice to the Holders delivered in
accordance with this Section 9. Any and all notices or other
communications or deliveries to be provided by the Corporation
hereunder shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address
of such Holder appearing on the books of the Corporation, or if no
such facsimile number or address appears on the books of the
Corporation, at the principal place of business of such Holder, as
set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number set forth in this Section prior to 5:30 p.m. (New York City
time) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth in this Section on a
day that is not a Trading Day or later than 5:30 p.m. (New York
City time) on any Trading Day, (iii) the second Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be
given.
(b) Absolute Obligation. Except as
expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated
damages, accrued dividends and accrued interest, as applicable, on
the shares of Preferred Stock at the time, place, and rate, and in
the coin or currency, herein prescribed.
(c) Lost or Mutilated Preferred Stock
Certificate. If a Holder’s Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the Corporation
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated certificate, or in lieu of or in
substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the
Corporation.
(d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws
of the State of Nevada, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal
proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction
Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the
City of New York, Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of
Designation and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of
Designation or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of
this Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
(e) Waiver. Any waiver by the
Corporation or a Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a
waiver by any other Holders. The failure of the Corporation or a
Holder to insist upon strict adherence to any term of this
Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of
the right thereafter to insist upon strict adherence to that term
or any other term of this Certificate of Designation on any other
occasion. Any waiver by the Corporation or a Holder must be in
writing.
(f) Severability. If any provision
of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to
all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law.
(g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
(h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Certificate of Designation and shall not be deemed to limit
or affect any of the provisions hereof.
(i) Status of Converted or Redeemed
Preferred Stock. Shares of Preferred Stock may only be
issued pursuant to the Purchase Agreement. If any shares of
Preferred Stock shall be converted, redeemed or reacquired by the
Corporation, such shares shall resume the status of authorized but
unissued shares of preferred stock and shall no longer be
designated as Series D Convertible Preferred Stock.
*********************
RESOLVED, FURTHER, that the Chairman,
the president or any vice-president, and the secretary or any
assistant secretary, of the Corporation be and they hereby are
authorized and directed to prepare and file this Certificate of
Designation of Preferences, Rights and Limitations in accordance
with the foregoing resolution and the provisions of Nevada
law.
IN WITNESS WHEREOF, the undersigned has
executed this Certificate this 14th day of May,
2020.
|
By:
|
_/s/Kevin A. Richardson
II___
|
|
Name:
|
Kevin A. Richardson,
II
|
|
Title:
|
Acting Chief Executive
Officer
|
ANNEX A
NOTICE OF CONVERSION
(To be
Executed by the Registered Holder in order to Convert Shares of
Preferred Stock)
The
undersigned hereby elects to convert the number of shares of Series
D Convertible Preferred Stock indicated below into shares of common
stock, par value $0.001 per share (the “Common Stock”), of
SANUWAVE Health, Inc., a Nevada corporation (the
“Corporation”),
according to the conditions hereof, as of the date written below.
If shares of Common Stock are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such
certificates and opinions as may be required by the Corporation in
accordance with the Purchase Agreement. No fee will be charged to
the Holders for any conversion, except for any such transfer
taxes.
Conversion
calculations:
|
Date to Effect
Conversion:
|
_________________________________
|
|
Number of shares of
Preferred Stock owned prior to Conversion:
|
_________________________________
|
|
Number of shares of
Preferred Stock to be Converted:
|
_________________________________
|
|
Stated Value of
shares of Preferred Stock to be Converted:
|
_________________________________
|
|
Number of shares of
Common Stock to be Issued:
|
_________________________________
|
|
Applicable
Conversion Price:
|
_________________________________
|
|
Number of shares of
Preferred Stock subsequent to Conversion:
|
_________________________________
|
|
Address for
Delivery:
or
|
_________________________________
|
|
DWAC
Instructions:
|
_________________________________
|
|
Broker
no:
|
_________________________________
|
|
Account
no:
|
_________________________________
|
[HOLDER]
Name:
Title:
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Series D Preferred Stock Purchase Agreement (this
“Agreement”)
is dated as of May 14, 2020, between SANUWAVE Health, Inc.,
a Nevada corporation (the
“Company”),
and the purchasers identified on the signature page hereto
(including their successors and assigns, the
“Purchasers,” and each individually a
“Purchaser”).
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from
securities registration afforded by Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities
Act”).
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to sell to the Purchasers, and each
Purchaser desires to purchase from the Company, that aggregate
number of shares of the Company’s Series D Convertible
Preferred Stock, par value $0.001 per share (the
“Preferred
Stock”), set
forth opposite such Purchaser’s name on the signature page
hereto (which aggregate number for all Purchasers together shall
collectively be referred to herein as the
“Preferred
Shares”).
NOW, THEREFORE, the Company and the Purchasers hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement: the
following terms have the meanings set forth in this Section
1.1:
“Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person as such
terms are used in and construed under Rule 405 under the Securities
Act.
“Business Day” means any day except any Saturday, any
Sunday, any day that is a federal legal holiday in the United
States or any day on which banking institutions in the State of New
York are authorized or required by law or other governmental action
to close.
“Closing” means the closing of the purchase and sale of
the Preferred Shares pursuant to Section 2.1.
“Closing Date” means the Trading Day on which all of
the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchaser’s obligations to pay the Subscription Amount, (ii)
the Company’s obligations to deliver the Preferred Shares, in
each case, have been satisfied or waived, and (iii) the Company has
received the full Subscription Amount for such Preferred Shares in
immediately available funds, but in no event later than the third
Trading Day following the date hereof.
“Common Stock” means the common stock of the Company,
par value $0.001 per share, and any other class of securities into
which such securities may hereafter be reclassified or
changed.
“Common Stock Equivalents” means any securities of the
Company or the Subsidiaries that would entitle the holder thereof
to acquire, at any time, Common Stock, including, without
limitation, any debt, preferred stock, right, option, warrant or
other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Liens” means a lien, charge, pledge, security
interest, encumbrance, right of first refusal, preemptive right or
other restriction.
“Person” means an individual or corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of
any kind.
“Proceeding” means an action, claim, suit,
investigation or proceeding (including, without limitation, an
informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or
interpreted from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
purpose and effect as such rule.
“Short Sales” means all “short sales” as
defined in Rule 200 of Regulation SHO under the Exchange Act (but
shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“Subscription Amount” means the aggregate amount to be
paid for the Preferred Shares purchased hereunder as specified
below the Purchaser’s name on the signature page of this
Agreement and next to the heading “Subscription Amount”
in United States dollars and in immediately available
funds.
“Subsidiary” means
any subsidiary of the Company as set forth on Exhibit 21.1 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2019, and shall, where applicable, also include
any direct or indirect subsidiary of the Company formed or acquired after the date
hereof.
“Trading Day” means a day on which the principal
Trading Market is open for trading.
“Trading Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to
any of the foregoing).
“Transaction Documents” means this Agreement and any
other documents or agreements executed in connection with the
transactions contemplated hereunder.
ARTICLE II
PURCHASE AND SALE OF PREFERRED SHARES
2.1 Purchase
of Preferred Shares; Closing. On the Closing Date, upon the terms
and subject to satisfaction of the conditions set forth in Section
2.3, below, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchaser agrees to purchase, the amount of
Preferred Shares as set forth on the signature page hereto. Upon
satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the
offices of the Company or such other location as the parties shall
mutually agree. The parties agree that the Closing may occur
remotely by the electronic delivery of the closing documents set
forth in Section 2.2(a) and (b), with delivery of original,
executed documents to follow promptly
thereafter.
(a) On or prior to the Closing Date, the
Company shall deliver or cause to be delivered to the Purchaser the
following:
(i) this
Agreement duly executed by the Company;
(ii) evidence
that the Certificate of Designation of the Preferred Shares in the
form attached hereto as Exhibit
A (the
“Certificate of
Designation”)
has been filed and accepted by the Secretary of State of the State
of Nevada; and
(iii) a
certificate or certificates for the number of shares of Preferred
Stock, equal to the number of Preferred Shares set forth on the
signature page hereto.
(b) On or prior to the Closing Date, the
Purchaser shall deliver or cause to be delivered to the Company the
following:
(i) this
Agreement duly executed by the Purchaser; and
(ii) immediately
available funds equal to the Purchaser’s Subscription Amount
by wire transfer in accordance with the Company’s written
wire instructions to the account as set forth on the signature page
hereto.
(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the
representations and warranties of each Purchaser contained herein
(unless as of a specific date therein, in which case they shall be
accurate as of such date);
(ii) all
obligations, covenants and agreements of the Purchaser required to
be performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Purchaser of the items set forth in Section
2.2(b) of this Agreement;
and
(iv) the
Certificate of Designation has been filed and accepted by the
Secretary of State of the State of Nevada.
(b) The
obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the
accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein
(unless as of a specific date therein, in which case they shall be
accurate as of such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
(v) from the date hereof to the Closing
Date, trading in the Common Stock shall not have been suspended by
the U.S. Securities and Exchange Commission (the
“Commission”)
or the Company’s principal Trading Market, and, from the date
hereof and at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium
have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, makes
it reasonably impracticable or inadvisable to purchase the
Preferred Shares at the Closing; and
(vi) the
Certificate of Designation has been filed and accepted by the
Secretary of State of the State of Nevada.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as described in the SEC
Reports (as defined in Section 3.1(h), below) or any information
contained or incorporated therein, which collectively shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the SEC Reports, the Company hereby
makes the following representations and warranties to the Purchaser
that, as of the date hereof and as of the Closing
Date:
(a) Subsidiaries.
The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries, or any of
them, in the Transaction Documents shall be
disregarded.
(b) Organization and
Qualification. The
Company and each of the Subsidiaries is an entity duly incorporated
or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents, except to the extent that any such default would
not have or reasonably be expected to result in: (i) a material
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) a material adverse effect on the Company’s ability
to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse
Effect”),
provided that none of the following alone shall be deemed, in and
of itself, to constitute a Material Adverse Effect: (i) a change in
the market price or trading volume of the Common Stock or (ii) a
change in general economic conditions or affecting the industry in
which the Company operates generally (as opposed to
Company-specific changes), so long as such changes do not have a
materially disproportionate effect on the Company. Each of the
Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, would not reasonably be expected to result in a
Material Adverse Effect, and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or
qualification.
(c) Authorization;
Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company, and
no further action is required by the Company, the board of
directors of the Company (the “Board of
Directors”) or
the Company’s stockholders in connection herewith or
therewith, other than in connection with the Required Approvals.
This Agreement and each other Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof
and thereof, will constitute the valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(d) No
Conflicts. The
execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which it is a
party, the issuance and sale of the Preferred Shares and the
consummation by it of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time
or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as would not
reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents
and Approvals. The
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required
pursuant to Section 4.6 of this Agreement and (ii) such filings
as are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).
(f) Issuance
of the Preferred Shares. The Preferred Shares are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed
by the Company. Assuming the accuracy
of each of the representations and warranties of each Purchaser set
forth in Section 3.2 of this Agreement, the offer and issuance by
the Company of the Preferred Shares is exempt from registration
under the Securities Act.
(g) Capitalization.
As of the date hereof, the capitalization of the Company is
described in Schedule 3.1(g) attached hereto. The Company has not
issued any capital stock since its most recently filed Form 8-K
current report under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), other
than pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee
stock purchase plans and pursuant to the conversion and/or exercise
of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person
has any right of first refusal, preemptive right, right of
participation or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Preferred Shares or as
disclosed in the SEC Reports, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares
of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents. The issuance and sale of the Preferred Shares
will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchaser) and will
not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. Other than the Required Approvals, no further approval
or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Preferred
Shares. Except as disclosed in the SEC Reports, there are no
stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.
(h) SEC Reports;
Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, are collectively
referred to herein as the “SEC
Reports”) on a
timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles
(“GAAP”)
applied on a consistent basis during the periods involved, except
as may be otherwise specified in such financial statements or the
notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the results
of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal recurring
adjustments.
(i) Absence of Material
Changes. Since the
date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no event,
occurrence or development that has had or that would reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made
with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans.
(j) No Undisclosed
Events, Liabilities or Developments. Except for the issuance of the
Preferred Shares contemplated by this Agreement or as disclosed in
the SEC Reports, no event, liability, fact, circumstance,
occurrence or development has occurred or exists or is reasonably
expected to occur or exist with respect to the Company or its
Subsidiaries or their respective businesses, properties,
operations, assets or financial condition that would be required to
be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to
an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
(k) Absence of
Litigation. There is
no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”)
that (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Preferred
Shares or (ii) would reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any director or officer thereof, is or
has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim
of breach of fiduciary duty that would be required to be disclosed
in SEC Reports. There has not been, and, to the knowledge of the
Company, there is not pending or contemplated, any investigation by
the Commission involving the Company or, to the knowledge of the
Company, any current or former director or officer of the Company.
The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by
the Company or any Subsidiary under the Exchange Act or the
Securities Act.
(l) Employee
Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company that would
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all United States federal, state, local and foreign
laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours,
except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(m) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except, in each case, as
would not reasonably be expected to result in a Material Adverse
Effect.
(n) Regulatory
Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as currently conducted as described in the SEC Reports,
except where the failure to possess such permits would not
reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or adverse modification of
any Material Permit.
(o) Title to
Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance, except
where the failure to be in compliance would not reasonably be
expected to result in a Material Adverse
Effect.
(p) Intellectual
Property Rights.
Except as set forth in the SEC Reports, the Company and the
Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other similar intellectual property rights that are used in and
necessary for the conduct of their respective businesses as
currently conducted as described in the SEC Reports and which the
failure to so have would reasonably be expected to result in a
Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). Neither the Company nor any
Subsidiary has received notice (written or otherwise) that the
conduct of its business as currently conducted as described in the
SEC Reports violates or infringes upon the intellectual property
rights of others, except for such conflicts or infringements that,
individually or in the aggregate, are not reasonably likely to
result in a Material Adverse Effect. To the knowledge of the
Company, all of the Intellectual Property Rights of the Company and
its Subsidiaries are enforceable. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy and
confidentiality of all of their Intellectual Property Rights,
except where failure to do so would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
(q) Insurance.
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.
(r) Transactions with
Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company or any
Subsidiary and, to the knowledge of the Company, none of the
employees of the Company or any Subsidiary is presently a party to
any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money
from or lending of money to or otherwise requiring payments to any
officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee, stockholder, member or partner, in each case, in excess of
$150,000, other than for (i) payment of salary or consulting fees
for services rendered, (ii) reimbursement for expenses incurred on
behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the
Company.
(s) Sarbanes-Oxley
Act. The Company is
in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002, as amended, that are effective as of
the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date, except where the
failure to be in compliance would not result in a Material Adverse
Effect.
(t) Internal Accounting
and Disclosure Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (i) transactions are executed in
accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) for the Company and designed such disclosure controls
and procedures to ensure that information required to be disclosed
by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and
forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the most recently
filed periodic report under the Exchange Act (such date, the
“Evaluation
Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company’s
internal control over financial reporting (as such term is defined
in the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control
over financial reporting.
(u) Certain
Fees. No brokerage
or finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(v) Investment Company
Status. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Preferred Shares, will not be or be an Affiliate
of, and for so long as the Purchasers hold any Preferred Shares,
will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of
1940, as amended (the “Investment Company
Act”). The
Company shall conduct its business in a manner so that it will not
become an “investment company” subject to registration
under the Investment Company Act. To the Company’s knowledge,
the Company is not controlled by an “investment
company.”
(w) Listing and
Maintenance Requirements. The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements.
(x) Application of
Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the
Company’s certificate of incorporation (or similar charter
documents) or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the
Purchaser and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including,
without limitation, as a result of the Company’s issuance of
the Preferred Shares and the Purchaser’s ownership of the
Preferred Shares.
(y) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided the Purchaser or its agents or counsel with any
information that it believes constitutes material, non-public
information. The Company understands and confirms that the
Purchaser will rely on the foregoing representation in effecting
transactions in securities of the Company. The press releases
disseminated by the Company during the twelve months preceding the
date of this Agreement, each as of the date of its issuance, did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made and when made, not misleading. The
Company acknowledges and agrees that the Purchaser does not make
and has not made any representations or warranties with respect to
the transactions contemplated hereby, other than those specifically
set forth in Section 3.2 hereof.
(z) No Integrated
Offering. Assuming
the accuracy of the Purchaser’s representations and
warranties set forth in Section 3.2, neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalves, has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would cause this offering of the Preferred Shares to be integrated
with prior offerings by the Company for purposes of any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(aa) Solvency.
As disclosed in the SEC Reports, the Company does not currently
generate significant recurring revenue. The SEC Reports set forth,
as of the date hereof, all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness, except where such default
would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.
(bb) Tax
Status. Except for
matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the
Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(cc) Anti-Bribery.
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company or any Subsidiary, any officer, employee, agent or other
person acting on behalf of the Company or any Subsidiary, has (i)
directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign
or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) that is in violation of law,
or (iv) violated, in any material respect, any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended (the
“FCPA”).
(dd) Acknowledgment
Regarding Purchaser’s Purchase of Preferred
Shares. The Company
acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby.
The Company further acknowledges that the Purchaser is not acting
as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby, and any advice given by the
Purchaser or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions
contemplated thereby, is merely incidental to the Purchaser’s
purchase of the Preferred Shares. The Company further represents to
the Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely
on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
(ee) Acknowledgement
Regarding Purchaser’s Trading Activity. Anything in the Transaction Documents
to the contrary notwithstanding, it is understood and acknowledged
by the Company that: (i) the Purchaser has not been asked by the
Company to agree, nor has the Purchaser agreed, to desist from
purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities
issued by the Company or to hold the Preferred Shares for any
specified term; (ii) past or future open market or other
transactions by the Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions,
before or after the closing of this or future private placement
transactions, may negatively impact the market price of the
Company’s publicly-traded securities; (iii) the Purchaser,
and counter-parties in “derivative” transactions to
which the Purchaser is a party, directly or indirectly, presently
may have a “short” position in the Common Stock, and
(iv) the Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) the Purchaser may engage in
hedging activities at various times during the period that the
Preferred Shares are outstanding and (z) such hedging activities
(if any) could reduce the value of the existing stockholders’
equity interests in the Company at and after the time that the
hedging activities are being conducted. The Company acknowledges
that such aforementioned hedging activities do not constitute a
breach of any of the Transaction Documents.
(ff) Regulation
M Compliance. The
Company has not, and to its knowledge no one acting on its behalf
has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of any of the Preferred Shares, (ii) sold, bid for, or
purchased, or paid any compensation for soliciting purchases of,
any of the Preferred Shares, or (iii) paid or agreed to pay to any
Person any compensation for soliciting another Person to purchase
any other securities of the Company.
(gg) No
Conflicts with Sanctions Laws. Neither the Company nor any
Subsidiary nor, to the Company’s knowledge, any director,
officer, agent, employee or Affiliate of the Company or any
Subsidiary, is currently subject to any U.S. sanctions administered
or enforced by the U.S. government (including, without limitation,
the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”)).
(hh) U.S.
Real Property Holding Corporation. The Company is not and has never
been, and so long as any of the Preferred Shares are held by any of
the purchasers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify
upon Purchaser’s request.
(ii) Bank
Holding Company Act.
Neither the Company nor any of its Subsidiaries or Affiliates is
subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”),
and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal
Reserve”).
Neither the Company nor any of its Subsidiaries or Affiliates owns
or controls, directly or indirectly, five percent (5%) or more of
the outstanding shares of any class of voting securities or
twenty-five percent (25%) or more of the total equity of a bank or
any entity that is subject to the BHCA and to regulation by the
Federal Reserve. Neither the Company nor any of its Subsidiaries or
Affiliates exercises a controlling influence over the management or
policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.
(jj) Compliance
with Anti-Money Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the USA Patriot Act of 2001 and the applicable money
laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering
Laws”), and no
action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.
3.2 Representations
and Warranties of the Purchaser. The Purchaser hereby makes the
following representations and warranties to the
Company:
(a) Organization;
Authority. The
Purchaser is an entity duly incorporated or formed, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or formation with full right, corporate,
partnership, limited liability company or similar power and
authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its
obligations hereunder and thereunder.
(b) Validity;
Enforcement. The
execution and delivery of this Agreement and performance by the
Purchaser of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the
part of the Purchaser. Each Transaction Document to which it is a
party has been duly executed by the Purchaser, and when delivered
by the Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(c) No
Conflicts. The
execution, delivery and performance by such Purchaser of this
Agreement and the consummation by such Purchaser of the
transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Purchaser or
(ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which
such Purchaser is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment, or decree (including
federal and state securities laws) applicable to such Purchaser,
except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the ability of such Purchaser to
perform its obligations hereunder or consummate the transactions
contemplated hereby and thereby on a timely
basis.
(d) No Public Sale or
Distribution; No Understandings or Arrangements. Such Purchaser understands
that the Preferred Shares, and the shares of Common Stock
underlying the Preferred Shares (together, the “Securities”) are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities as
principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in
violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such
Securities in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding
the distribution of such Securities (this representation and
warranty not limiting the Purchaser’s right to sell the
Securities otherwise in compliance with applicable federal and
state securities laws). The Purchaser is acquiring the Securities
hereunder in the ordinary course of its
business.
(e) Accredited Investor
Status. Such
Purchaser is an “accredited investor” as
defined in Regulation D under the Securities
Act.
(f) Reliance on
Exemptions. Such
Purchaser understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of the United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy
of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgements and
understandings of such Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Purchaser to acquire the Securities.
(g) Experience of the
Purchaser. The
Purchaser, either alone or together with its representatives, has
such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has
requested, received, reviewed and considered all information it
deemed relevant in making an informed decision to purchase the
Securities. The Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(h) Access to
Information. The
Purchaser acknowledges that it has had the opportunity to review
the Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares
and the merits and risks of investing in the Shares; (ii) access to
information about the Company and its financial condition, results
of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment. The Purchaser acknowledges and agrees
that neither the placement agent, if any, nor any Affiliate of the
placement agent, if any, has provided the Purchaser with any
information or advice with respect to the Securities nor is such
information or advice necessary or desired. Neither the placement
agent, if any, nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the placement agent, if any, and any of its Affiliates may have
acquired non-public information with respect to the Company that
the Purchaser agrees need not be provided to it. In connection with
the issuance of the Securities to the Purchaser, neither the
placement agent, if any, nor any of its Affiliates has acted as a
financial advisor or fiduciary to the
Purchaser.
(i) General Solicitation. Such Purchaser is
not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(j) Certain Transactions
and Confidentiality.
Such Purchaser has not, nor has any Person acting on behalf of or
pursuant to any understanding with the Purchaser, directly or
indirectly, executed any purchases or sales, including Short Sales,
of the securities of the Company during the period commencing as of
the time that the Purchaser first received a term sheet (written or
oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof.
Other than to other Persons party to this Agreement or to such
Purchaser’s representatives, including, without limitation,
its officers, directors, partners, legal and other advisors,
employees, agents and Affiliates, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar
transactions in the future.
(k) Ownership of
Securities. The
Purchaser, together with the Purchaser’s Affiliates and
associates and any Person with which the Purchaser is acting
jointly or in concert, will upon Closing beneficially own less than
10% of the issued and outstanding shares of Common Stock, and,
solely for purposes of calculating such beneficial ownership for
purposes of this Agreement, any such Person will be deemed to
beneficially own any shares of Common Stock that such Person
otherwise has the right to acquire within 60 days (including upon
the occurrence of a contingency or the making of a payment)
pursuant to any convertible security, agreement, arrangement,
pledge or understanding, whether or not in
writing.
(l) No Governmental
Review. Such
Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor
have such authorities passed upon or endorsed the merits of the
offering of the Securities.
(m) Brokers or
Finders. Neither
such Purchaser nor any of its affiliates (as defined in Rule 144)
or any of their respective officers or directors has employed any
broker or finder or incurred any liability for any financial
advisory fee, brokerage fees, commissions or finder’s fee,
and no broker or finder has acted directly or indirectly for such
Purchaser or any of its affiliates or any of their respective
officers or directors in connection with this Agreement or the
transactions contemplated hereby.
(n) Transfer or Resale. Such Purchaser
understands that the Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or Rule 144, to the Company or to an
Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 3.2(o), the Company may require the
transferor thereof to provide the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights and obligations of a
Purchaser under this Agreement.
(o) Legends. Such Purchaser understands that
the book-entry or other instruments representing the Securities
shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such
Securities):
THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES
ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
The Company acknowledges and agrees that the representations
contained in Section 3.2 shall not modify, amend or affect the
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE IV
COVENANTS
4.1 Best
Efforts. Each party shall use its reasonable best efforts to
timely satisfy each of the covenants and the conditions to be
satisfied by it as provided in Section 2.3 of this
Agreement.
4.2 Blue Sky.
The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to
qualify the Preferred Shares for, sale to the Purchasers at the
applicable Closing under applicable securities or “Blue
Sky” laws of the states of the United States, and shall
provide evidence of such actions promptly upon request of any
Purchaser.
4.3 Conversion of
Preferred Shares. Within five (5) Business Days following
the Initial Convertibility Date (as such term is defined in the
Certificate of Designation), each Purchaser hereby agrees to effect
the conversion of all of its Preferred Shares into Common Stock in
accordance with Section 6 of the Certificate of Designation by
delivering a Notice of Conversion (as defined in the Certificate of
Designation) to the Company with a Conversion Date (as defined in
the Certificate of Designation) of no later than ten (10) Business
Days following the date on which Notice of Conversion is mailed or
delivered to the Company. In the event that the Purchaser fails to
deliver such Notice of Conversion within the time period required
by this Section 4.3, the Purchaser hereby constitutes and appoints
the Chief Executive Officer and the Chief Financial Officer of the
Company, and each of them, with full power of substitution, as the
proxies of such Purchaser with respect to the execution and
delivery of the Notice of Conversion in accordance with this
Section 4.3 on behalf of such Purchaser. The proxy granted pursuant
to the immediately preceding sentence is given in consideration of
the agreements and covenants of the Company and the parties in
connection with the transactions contemplated by this Agreement
and, as such, is coupled with an interest and shall be
irrevocable.
4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Preferred Shares for purposes of the rules and
regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such
subsequent transaction.
4.5 Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m.
(New York City time) on the fourth Trading Day immediately
following the date hereof, issue a press release disclosing the
material terms of the transactions contemplated hereby, and (b)
file a Current Report on Form 8-K with the Commission within the
time required by the Exchange Act. From and after the issuance of
such press release, the Company shall have publicly disclosed all
material, non-public information delivered to the Purchaser by the
Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction
Documents.
4.6 Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor
any other Person acting on its behalf, will provide any Purchaser
or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement
with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.7 Use
of Proceeds. The
Company shall use the net proceeds from the sale of the Preferred
Shares hereunder for general corporate purposes, repayment of
Indebtedness, business development, working capital and general and
administrative expenses and shall not use such proceeds in
violation of FCPA, OFAC regulations and Anti-Money Laundering Laws,
except where such violations would not reasonably be expected to
result, either individually or in the aggregate, in a Material
Adverse Effect.
4.8 Certain
Transactions and Confidentiality. The Purchaser covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales,
including Short Sales, of any of the Company’s securities
during the period commencing with the execution of this Agreement
and ending at such time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial
press release as described in Section 4.6. The Purchaser covenants that until
such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press
release as described in Section 4.6, the Purchaser will maintain the
confidentiality of the existence and terms of this transaction.
Notwithstanding the foregoing and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) the Purchaser does not make any
representation, warranty or covenant hereby that it will not engage
in effecting transactions in any securities of the Company after
the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as
described in Section 4.6, (ii) the Purchaser shall not be
restricted or prohibited from effecting any transactions in any
securities of the Company in accordance with applicable securities
laws from and after the time that the transactions contemplated by
this Agreement are first publicly announced pursuant to the initial
press release as described in Section 4.6 and (iii) the Purchaser shall not have
any duty of confidentiality to the Company or its Subsidiaries
after the issuance of the initial press release as described in
Section 4.6.
ARTICLE V
TERMINATION
5.1 Termination.
If the Closing shall not been consummated by May 8, 2020, this
Agreement shall automatically terminate without any further action
by the parties hereto; provided, however, that no such termination
will affect the right of either party to sue for any breach by the
other party.
ARTICLE VI
MISCELLANEOUS
6.1 Fees
and Expenses. Except
as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of
any Preferred Shares to the Purchaser.
6.2 Entire
Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
6.3 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature page
attached hereto at or prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature page
attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd) Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, (d) upon actual
receipt by the party to whom such notice is required to be given,
or (e) upon delivery, when sent by electronic mail (provided that
the sending party does not receive an automated rejection notice).
The addresses, facsimile numbers and e-mail addresses for such
notices and communications shall be as set forth on the signature
page attached hereto.
6.4 Amendments;
Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the holders of at least a majority of
the aggregate amount of Preferred Shares issued hereunder, or, in
the case of a waiver, by the party against whom enforcement of any
such waived provision is sought. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right.
6.5 Headings.
The headings of this Agreement are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to
limit or affect the interpretation of any of the provisions of this
Agreement.
6.6 Successors
and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Following the
Closing, the Purchaser may assign any or all of its rights under
this Agreement to any Person to whom the Purchaser assigns or
transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchaser.”
6.7 No
Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and
permitted assigns only, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except that each
Indemnitee shall have the right to enforce the obligations of the
Company with respect to Section 4.11.
6.8 Governing
Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any
of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such
court, or that such court is an improper or inconvenient venue for
such suit, action or proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law. If either party shall commence an suit, action or proceeding
to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section
4.11, the prevailing party in such suit,
action or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other reasonable costs and
expenses incurred with the investigation, preparation and
prosecution of such suit, action or proceeding.
6.9 Survival.
Unless this Agreement is terminated under Section 5, the
representations and warranties contained in Sections 3.1(a) and (b)
shall survive the Closing, and the agreements and covenants
contained in Article IV shall survive the Closing until fully
performed. Each Purchaser shall be responsible only for its own
representations, warranties, agreements, and covenants
hereunder.
6.10 Counterparts.
This Agreement may be executed in two or more identical
counterparts, both of which when taken together shall be considered
one and the same agreement and this Agreement shall become
effective when each party has delivered its signature to the other
party. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such
signature is executed), with the same force and effect as if such
facsimile or “.pdf” signature page were an original
thereof.
6.11 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
6.12 Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
6.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever the Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser
may rescind or withdraw, in its sole discretion, from time to time,
upon written notice to the Company, any relevant notice, demand or
election, in whole or in part, without prejudice to its future
actions and rights.
6.14 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the
Purchaser and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary
damages would not be adequate compensation for any loss incurred by
reason of any breach of obligations contained in the Transaction
Documents and the Company therefore agrees that the Purchasers
shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages
and without posting a bond or other security.
6.15 Payment
Set Aside. To the
extent that the Company makes a payment or payments to the
Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise, or any
part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered, disgorged or
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then, to the
extent of any such restoration, the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
6.16 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in its review and negotiation of the
Transaction Documents. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers.
6.17 Liquidated
Damages. The
Company’s obligation to pay any amounts owing under the
Transaction Documents is a continuing obligation of the Company and
shall not terminate until all unpaid amounts have been paid,
notwithstanding the fact that the instrument or security pursuant
to which such amounts are due and payable shall have been
canceled.
6.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments
thereto.
6.19 WAIVER
OF JURY TRIAL. IN
ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY
EITHER PARTY AGAINST THE OTHER PARTY FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Series D
Preferred Stock Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.
|
SANUWAVE HEALTH, INC.
|
Address
for Notice:
3360
Martin Farm Road, Suite 100
Suwanee,
GA 30024
Attn:
Chief Financial Officer
E-mail
lisa.sundstrom@sanuwave.com
|
|
By: Lisa E.
Sundstrom
Name:
Lisa E. Sundstrom
Title:
Chief Financial Officer
|
Fax:
678-569-0881
|
|
|
|
With a copy to (which shall not constitute notice):
Murray Indick, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
Phone: (415) 268-7000
E-mail
address: MIndick@mofo.com
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
PURCHASER SIGNATURE PAGE TO SANUWAVE HEALTH, INC. SERIES D
PREFERRED STOCK STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the undersigned has caused this Series D
Preferred Stock Purchase Agreement to be duly executed by an
authorized signatory as of the date first indicated
above.
|
Name of
Purchaser:
|
5 Trivedi LLC
|
|
Signature
of Authorized Signatory of Purchaser:
|
__/s/Marle
Trivedi________________
|
|
Name of Authorized
Signatory:
|
Marle
Trivedi
|
|
Title of Authorized
Signatory:
|
Managing Director
|
|
Email Address of
Authorized Signatory:
|
marle.trivedi@tstcap.com
|
|
Facsimile Number of Authorized Signatory:
|
_______________________________
|
Address for Notice to Purchaser:
2203 Vaquero Estates Blvd.
Westlake, TX 76262
Address for Delivery of the Preferred Shares to Purchaser (if not
same as address for notice):
|
Subscription
Amount:
|
$200,000
|
|
Shares:
|
8 Preferred Shares
|
|
EIN Number (if applicable):
|
____________________
|
|
Broker Name:
|
_______________________________
|
|
DTC Participant Number:
|
______________________
|
SCHEDULE 3.1(g)
COMPANY CAPITALIZATION TABLE
COMMON STOCK AND COMMON STOCK EQUIVALENTS
ISSUED, OUTSTANDING AND RESERVED
|
DESCRIPTION
|
AMOUNT
|
|
Authorized
Capital Stock
|
|
355,000,000
|
|
Authorized
Common Stock
|
|
350,000,000
|
|
|
Issued
Common Stock
|
298,663,672
|
|
|
Outstanding
Common Stock
|
298,663,672
|
|
|
Treasury
Stock
|
zero
|
|
Authorized,
but unissued
|
|
48,083,419
|
|
|
|
|
|
Authorized
Preferred Stock
|
|
5,000,000
|
|
Issued
Preferred Stock
|
|
6,558
|
|
|
|
|
|
Reserved
for Equity Incentive Plans
|
|
2,028,281
|
|
Reserved
for Convertible Debt
|
|
zero
|
|
Reserved
for Options and Warrants
|
|
48,083,419
|
|
Reserved
for Other Purposes
|
|
zero
|
|
|
|
|
|
TOTAL
COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING
|
348,775,372
|