SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/9A
Under the Securities Exchange Act of 1934 (Amendment No. 9)*
Sanuwave Health, Inc.
(Name of Issuer)
Common Stock, Par Value $0.001
(Title of Class of Securities)
80303D 107
(CUSIP Number)
David N. Nemelka
732 N. Main Street
Springville, UT 84663
(801) 361-4746
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
May 27, 2014
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d01(f) or 240.13d-1(g), check the following box. G.
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 80303D 107
1 | Names of Reporting Persons David N. Nemelka | ||
2 | Check the Appropriate Box if a Member of a Group (See Instructions) (a) _____ (b) _____ | ||
3 | SEC Use Only | ||
4 | Source of Funds (See Instructions) PF and OO | ||
5 | Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) . | ||
6 | Citizenship or Place of Organization United States | ||
Number of Shares Beneficially Owned by Each Reporting Person With | 7 | Sole Voting Power 5,048,510 | |
8 | Shared Voting Power 0 | ||
9 | Sole Dispositive Power 5,048,510 | ||
10 | Shared Dispositive Power 0 | ||
11 | Aggregate Amount Beneficially Owned by Each Reporting Person
5,048,510 | ||
12 | Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o G | ||
13 | Percent of Class Represented by Amount in Row (11) 9.9% | ||
14 | Type of Reporting Person (See Instructions) IN | ||
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ITEM 1.
Security and Issuer
This Amendment No. 9 to Schedule 13D (“Amendment No. 9”) relates to the shares of common stock, par value $0.001 (the “Common Stock”), of Sanuwave Health, Inc., a Nevada corporation (the “Issuer”). Amendment No. 9 is being filed by David N. Nemelka (the “Reporting Person” or “Mr. Nemelka”) to amend and supplement the Items set forth below of the Reporting Person’s Schedule 13D filed with the Securities and Exchange Commission on October 20, 2010, as amended by Amendment No. 1 thereto filed on November 16, 2010, Amendment No. 2 thereto filed on November 26, 2010, Amendment No. 3 thereto filed on December 7, 2010, Amendment No. 4 thereto filed on April 12, 2011, Amendment No. 5 thereto filed on May 3, 2011, Amendment No. 6 thereto filed on January 19, 2012, Amendment No. 7 thereto filed on December 27, 2012 and Amendment No. 8 thereto filed on January 14, 2013. All capitalized terms contained herein but not otherwise defined shall have the meanings ascribed to such terms in the Schedule 13D.
ITEM 3
Source of Funds
As previously reported in Amendment No. 7 hereto, on November 27, 2012, the Reporting Person entered into a subscription agreement (the “Subscription Agreement”) with the Issuer whereby the Reporting Person agreed to purchase 4,000,000 shares of Common Stock at a purchase price of $0.25 per share for an aggregate purchase price of $1,000,000. The purchase price was payable as follows: (i) Fifty Thousand Dollars ($50,000) on or before January 31, 2013; (ii) Fifty Thousand Dollars ($50,000) on or before February 15, 2013; and (iii) the balance of Nine Hundred Thousand Dollars ($900,000) on or before May 27, 2014. The Reporting Person previously paid the subscription amounts due in January and February, 2013 and was issued 400,000 shares of the Issuer’s common stock. Pursuant to a Loan and Security Agreement dated as of May 23, 2014 between the Reporting Person and Linley Ltd. (the “Holder”), the Reporting Person borrowed $1,000,000 from the Holder (the “Loan”) to pay the $900,000 subscription payment due May 27, 2014. The Loan is evidenced by a $1,000,000 secured promissory note from the Reporting Person to the Holder (the “Secured Note”), which is due on or before February 23, 2015. The Secured Note is secured by 3,700,000 shares of the Reporting Person’s Common Stock. As consideration for the Loan, the Reporting Person granted the Holder a profit sharing interest in the 3,700,000 shares of Common Stock and agreed to pay all profit from the sale of such shares to the Holder until such time as the Holder has received $200,000 (the “Profit Sharing Interest”). In addition, the Reporting Person transferred and delivered to the Holder 500,000 shares of Common Stock as interest on the Loan. In the event the Reporting Person should fail to pay the Secured Note or the Profit Sharing Interest when due, the Holder could acquire investment and dispositive power with respect to some or all of the 3,700,000 shares of Common Stock pledged as collateral for the Loan. The Reporting Person, Linley and a third party escrow agent (the “Escrow Agent”), entered into an escrow agreement pursuant to which the Escrow Agent agreed to hold 3,700,000 shares of Common Stock pledged as collateral for the Secured Note and to deliver such shares to the Reporting Person upon the timely payment of the Loan and Profit Sharing Amount or to deliver the shares to the Holder if the Reporting Person should fail to pay the Loan and Profit Sharing Amount on or before February 23, 2015.
ITEM 4.
Purpose of Transaction
The Reporting Person acquired the Issuer’s Common Stock for investment purposes. In pursuing such investment purposes, the Reporting Person may further purchase, hold, vote, trade, dispose or otherwise deal in the Common Stock at such times, and in such manner, as he deems advisable to benefit from changes in market prices of the Common Stock, changes in the Issuer's operations, business strategy or prospects, or from sale or merger of the Issuer. To evaluate such alternatives, the Reporting Person will routinely monitor the Issuer's operations, prospects, business development, management, competitive and strategic matters, capital structure, and prevailing market conditions, as well as alternative investment opportunities, liquidity requirements of the Reporting Person and other investment considerations. The Reporting Person may discuss such matters with management or directors of the Issuer, other shareholders, industry analysts, investment and financing professionals, sources of credit and other investors. Such factors and discussions may materially affect, and result in, the Reporting Person modifying his ownership of Common Stock, exchanging information with the Issuer pursuant to appropriate confidentiality or similar agreements, proposing changes in the Issuer's operations, governance or capitalization, or in proposing one or more of the other actions described in subsections (a) through (j) of Item 4 of Schedule 13D. As reported herein, the Reporting Person may be deemed to be the beneficial owner of warrants to acquire additional shares of Common Stock. The Reporting Person may elect to exercise some or all of the common stock purchase warrants based on various factors including the market price for the Common Stock, the respective exercise prices of the warrants, the respective expiration dates of the warrants and the factors discussed above with respect to the Reporting Person’s evaluation of alternatives. Except as discussed above, the Reporting Person currently has no plans to engage in the actions described in subsections (a) through (j) of Item 4 of Schedule 13D.
The Reporting Person reserves the right to formulate other plans and/or make other proposals, and take such actions with respect to his investment in the Issuer, including any or all of the actions set forth in paragraphs (a) through (j) of Item 4 of Schedule 13D, or acquire additional Common Stock or dispose of all the Common Stock beneficially owned by him, in the public market or privately negotiated transactions. The Reporting Person may at any time reconsider and change his plans or proposals relating to the foregoing.
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ITEM 5.
Interest in Securities of the Issuer
(a)
As of the date hereof, the Reporting Person is the beneficial owner of 5,048,510 shares of Common Stock, representing approximately 9.9% of the Issuer’s outstanding Common Stock based on the 46,966,519 shares of Common Stock outstanding as of May 11, 2014 as reported in the Issuer’s Form 10-Q for the fiscal quarter ended March 31, 2014. In calculating the Reporting Person’s ownership percentage, shares of Common Stock which are subject to options, warrants, call agreements and other rights to purchase, exercisable within 60 days, have been treated as outstanding shares. The shares of Common Stock beneficially owned by the Reporting Person consist of the following: (i) 605,000 shares held of record by McKinley Capital, Inc. Roth 401(k) Plan over which the Reporting Person acts as trustee; (ii) 4,000,000 shares held directly by the Reporting Person; (iii) Class A Warrants held by the Reporting Person to purchase 66,755 shares at a price of $4.00 per share at any time on or before September 25, 2014; (iv) Class B Warrants held by the Reporting Person to purchase 66,755 shares at a price of $8.00 per share at any time on or before September 25, 2014; and (v) Class E Warrants held by the Reporting Person to purchase up to 310,000 shares of Common Stock at an exercise price of $4.00 per share at any time on or before April 11, 2016.
(b)
Number of shares of Common Stock as to which the Reporting Person has:
(i)
Sole power to vote or direct the vote:
5,048,510
(ii)
Shared power to vote or direct the vote: 0
(iii)
Sole power to dispose or direct the disposition: 5,048,510
(iv)
Shared power to dispose or direct the disposition: 0
(c)
The following constitute all transactions with respect to the Common Stock effected by the Reporting Person during the past sixty days:
(i)
On May 27, 2014, the Reporting Person acquired 3,600,000 shares of the Issuer’s common stock from the Issuer at a purchase price of $0.25 per share pursuant to the Subscription Agreement.
(ii)
On May 27, 2014, the Reporting Person transferred 500,000 shares of the Issuer’s Common Stock to the Holder as the payment of interest on the Secured Note.
(iii)
On May 27, 2014, the Reporting Person acquired 200,000 shares of the Issuer’s Common Stock in a private transaction at a price of $0.40 per share.
(iv)
On May 28, 2014, the Reporting Person acquired 300,000 shares of the Issuer’s Common Stock in a private transaction at a price of $0.45 per share payable within 60 days.
(d)
Except as described herein and in Item 3 hereof, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of the Issuer’s common stock described in subparagraph (a) above.
(e)
Not applicable.
ITEM 6.
Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
The information contained in Items 3, 4 and 5 above is incorporated herein by reference.
Other than as described in Items 3, 4 and 5 hereof, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Person and any other person with respect to any securities of the Issuer, including but not limited to, the transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies or any pledge or contingency, the occurrence of which would give another person voting or investment power over the securities of the Issuer.
ITEM 7.
Material to be Filed as Exhibits
Exhibit 1
Loan and Security Agreement between the Reporting Person and the Holder dated as of May 23, 2014.
Exhibit 2
Escrow Agreement among the Reporting Person, the Holder and the Escrow Agent, dated as of May 23, 2014.
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Signature
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
Dated: June 6, 2014
/s/ David N. Nemelka
David N. Nemelka
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EXHIBIT 1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (the “Agreement”) is made and entered into as of May 23, 2014 between David N. Nemelka (“Borrower”), and Linley, Ltd. (“Lender”).
WHEREAS, Borrower desires to borrow funds from Lender and Lender is willing to lend such funds to Borrower upon the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the mutual covenants to be performed and benefits to be received hereunder, the parties agree as follows.
1.
The Loan.
(a) Concurrently with the execution of this Agreement, Lender shall lend to Borrower the principal amount of One Million Dollars ($1,000,000) (the “Loan”), which shall be repaid by Borrower on or before February 23, 2015 (the “Maturity Date”) together with interest thereon payable in the form of 500,000 shares of common stock of Sanuwave Health, Inc. (“Sanuwave”), which have an agreed upon value of $125,000 and which shall be delivered to Lender within 5 business days following the execution of this Agreement. In the event the entire Loan has not been paid by the Maturity Date, additional interest shall begin to accrue on the outstanding principal balance of the Loan at the rate of Fifteen Percent (15%) per annum from the Maturity Date until the date payment is made; provided that in no event shall the rate of interest payable hereunder exceed the maximum rate of interest permitted by applicable law. The Loan may be prepaid by Borrower, at any time, in whole or in part, without penalty or premium; provided that in no event shall any portion of the Sanuwave shares paid as interest be refunded. The Loan shall be evidenced by a secured promissory note, the form of which is attached hereto as Exhibit “A.”
(b) Borrower shall utilize the proceeds from the Loan for the purpose of paying to Sanuwave the purchase price for 4,000,000 shares of Sanuwave common stock (the “Sanuwave Shares”) pursuant to that certain subscription agreement between Sanuwave and Borrower dated as of November 27, 2012. The purchase price for the Sanuwave Shares shall be paid by Borrower as quickly as practicable following its receipt of the proceeds from the Loan which shall in no event be later than May 27, 2014.
2.
Participation and Profit Sharing. Borrower shall permit Lender to participate in any upside resulting from Borrower’s investment in the Sanuwave Shares by granting Lender a profits interest in the shares of Sanuwave common stock pledged as collateral for the Loan pursuant to Section 5 hereof, pursuant to which Borrower shall pay Lender 100% of the profit from the sale of such shares until Lender has received a total of Two Hundred Thousand Dollars ($200,000) (the “Profit Sharing Amount”), at which time the profit sharing arrangement shall terminate.
3.
Representations, Warranties and Covenants of Borrower. Borrower represents, warrants and covenants to Lender that:
(a) Borrower is the sole owner of the shares of Sanuwave common stock pledged as collateral hereunder and such shares are or will be when issued owned by Borrower free and clear of any liens, security interests or other encumbrances whatsoever (other than those imposed by the terms of this Agreement).
(b) Borrower has full right, power and authority to execute, deliver, and perform his obligations under this Agreement without the consent or approval of any third party and this Agreement constitutes the legal, valid, and binding obligation of Borrower, and is enforceable against Borrower in accordance with its terms.
4.
Events of Default. If one or more of the following events (“Events of Default”) shall have occurred and be continuing:
(a) Borrower shall fail to pay the entire amount of the Loan when due and such failure has not been cured within five (5) days following notice of such default from Lender;
(b) Borrower shall fail to pay the entire participation and profit sharing amount described in Section 2 hereof on or before February [23], 2015 and such failure has not been cured within five (5) days following notice of such default from Lender; or
(c) Any representation or warranty made by Borrower in this Agreement shall prove to have been incorrect or inaccurate in any material respect when made.
5.
Security Interest and Pledge.
() Borrower’s obligations under this Agreement are secured by, and Borrower hereby pledges and grants to Lender, a security interest in, a total of 3,700,000 shares of Sanuwave common stock (the “Collateral”), of which 400,000 shares were acquired by Borrower from Sanuwave in February 2014 and shall be freely tradable commencing July 1, 2014 (the “July Shares”), and 3,300,000 shares are part of the Sanuwave Shares being acquired by Buyer with the proceeds of the Loan, which shares shall constitute restricted securities within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended, and shall be freely tradable in November 2014 (the “November Shares”). Concurrently with the execution of this Agreement, Borrower and Lender shall enter into an escrow agreement with Catalina Reynolds Law Office PLC, a law firm licensed in the State of New York, as escrow agent (the “Escrow Agent”), containing the applicable terms set forth herein and such additional terms and conditions as may be mutually agreed upon by the parties and the Escrow Agent. The escrow agreement shall provide that the Collateral shall be delivered to Lender as follows: (i) Borrower shall deliver stock certificates for the 400,000 July Shares to the Escrow Agent concurrently with the execution of the escrow agreement to perfect Lender’s security interest in such shares; and (ii) Borrower shall irrevocably instruct Sanuwave to deliver stock certificates for the 3,300,000 November Shares directly to the Escrow Agent following Borrower’s payment therefor to perfect Lender’s security interest in such shares. The stock certificates representing the Collateral shall be accompanied by stock powers that have been duly executed and Medallion signature guaranteed.
(b) Unless and until an Event of Default shall occur, Borrower shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral for any purpose not inconsistent with the terms hereof. If an Event of Default shall occur, all rights of Borrower to exercise its voting and other consensual rights to which it would otherwise be entitled to exercise with respect to the Collateral shall cease, and all such rights shall thereupon become vested in Lender, who shall thereupon have the sole right to exercise such voting and other consensual rights. In order to permit Lender to exercise the voting and other rights to which he may be entitled to exercise pursuant to this subparagraph, Borrower shall, if necessary, upon written notice from Lender, from time to time, execute and deliver to Lender appropriate proxies, dividend payment orders, and other instruments as Lender may reasonably request.
6.
Remedies.
(a) Upon the occurrence of an Event of Default, the then outstanding balance of the Loan and the Profit Sharing Amount, and any accrued and unpaid interest thereon, shall automatically become immediately due and payable without presentment, demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower, and Lender may pursue and enforce all of the rights and remedies provided to a secured creditor with respect to the Collateral under the UCC.
(b) Lender may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of Borrower, and in connection with any such action or proceeding shall be entitled to receive from Borrower the outstanding balance of the Loan and Profit Sharing Amount plus accrued interest to the date of payment plus reasonable expenses of collection, including without limitation, attorneys' fees and expenses. Notwithstanding the foregoing, Lender shall not proceed with any claims against the personal assets of Borrower until the Collateral has been sold and the proceeds applied to payment of the Profit Sharing Amount and repayment of the Loan.
(c) Until an Event of Default occurs and is continuing, Lender shall have no right to sell, pledge, hypothecate, transfer, encumber or otherwise dispose of any of the Collateral without the prior written consent of Borrower except as and to the extent specifically provided herein.
7.
Further Assurances. Each party agrees to execute such other documents, instruments, agreements and consents, and take such other actions as may be reasonably requested by the other party hereto to effectuate the purposes of this Agreement.
8.
Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:
If to Borrower:
David N. Nemelka
743 West 1200 North, Suite 100
Springville, Utah 84663
If to Lender:
Linley Ltd. c/o Blackfish Services Ltd
5 Savile Row
London, W1S 3PD
2
or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.
9.
Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and may only be modified by a subsequent writing executed by both parties.
10.
Construction. This Agreement is the result of negotiations among, and has been reviewed by, Borrower, Lender and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of both parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lender.
11.
Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction.
12.
Governing Law. This Agreement shall be governed by, enforced and construed under and in accordance with the laws of the State of New York.
13.
Consent to Jurisdiction. Lender and Borrower hereby irrevocably and unconditionally submit to the exclusive jurisdiction of the courts of the State of New York and the Federal courts sitting in the state of New York. Lender and Borrower agree that all actions or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby must be litigated exclusively in any such state or Federal court that sits in New York County, New York, and Lender and Borrower hereby waive any objection which they may now or hereafter have to the laying of the venue of any such litigation in any such court.
14.
Attorney’s Fees. In the event that any party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the breaching party or parties shall reimburse the nonbreaching party or parties for all costs, including reasonable attorneys’ fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.
15.
Headings. Headings used in this Agreement are inserted for convenience only and shall not affect the meaning of any term or provision of the Agreement.
16.
Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original instrument, but all of which collectively shall constitute one and the same agreement.
17.
Assignment. This Agreement and the rights and obligations of the parties hereunder shall not be assignable or transferable by either party without the prior written consent of the other party.
18.
Binding Effect. The rights and obligations of Borrower and Lender shall be binding upon and inure to the benefit of their respective heirs and successors.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
“Borrower”
/s/ David N. Nemelka
David N. Nemelka
“Lender”
Linley Ltd.
By /s/ David Rowland
Name: David Rowland
Title: Authorized Signatory
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Exhibit A to Loan and Security Agreement
US$1,000,000 | May 23, 2014 |
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, David N. Nemelka (“Borrower”) hereby promises to pay to the order of Linley Ltd. (“Lender”), at the principal offices of Lender at 5 Savile Row, London, W1S 3PD, the principal amount of One Million U.S. Dollars (US$1,000,000) in lawful money of the United States on or before February 23, 2015 (the “Maturity Date”), together with interest thereon in the form of 500,000 shares of common stock of Sanuwave Health, Inc. (“Sanuwave”), which shall have an agreed value of $125,000 and shall be delivered by Borrower to Lender within 5 business days of the date hereof. In the event the entire amount of this Note has not been paid by the Maturity Date, additional interest shall begin to accrue on the outstanding principal balance of this Note at the rate of Fifteen Percent (15%) per annum from the Maturity Date until the date payment is made; provided that in no event shall the rate of interest payable hereunder exceed the maximum rate of interest permitted by applicable law. This Note may be prepaid by Borrower at any time and from time to time without premium or penalty; provided that in no event shall any portion of the Sanuwave shares paid as interest be refunded.
This Note is the Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement dated as of May 23, 2014 by and between Borrower and Lender (as the same may from time to time be amended, modified or supplemented in accordance with its terms, the “Loan Agreement”), and is entitled to the benefit and security of the Loan Agreement to which reference is made for a statement of all of the terms and conditions thereof.
If this Note is not paid when due the entire unpaid balance of this Note shall immediately become due and payable without presentment, demand for payment, notice of dishonor, protest or other notice of any kind, all of which are hereby expressly waived by Borrower.
This Note shall be governed by and construed in accordance with the laws of the State of New York, United States of America excluding any conflicts of law rules or principles that would cause the application of the laws of any other jurisdiction. All actions or proceedings arising out of or relating to this Note must be litigated exclusively in any such state or Federal court that sits in New York County, New York, and Borrower hereby waives any objection which he may now or hereafter have to the laying of the venue of any such litigation in any such court.
In Witness Whereof, this Note has been executed as of the date first written above.
Borrower:
/s/ David N. Nemelka
David N. Nemelka
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EXHIBIT 2
ESCROW AGREEMENT
This Escrow Agreement (this “Agreement”) is made and entered into as of May 22, 2014 among Linley, Ltd. (“Lender”), David N. Nemelka (“Borrower”), and Carolina Reynolds Law Offices PLLC, a law firm licensed in the State of New York (the “Escrow Agent”). The parties to this Agreement are sometimes referred to herein individually as a “party” and collectively as the “parties.”
Premises
WHEREAS, Lender and Borrower have entered into that certain Loan and Security Agreement (the “Loan Agreement”) dated of even date herewith pursuant to which Lender agreed to loan to Borrower and Borrower agreed to borrow from Lender the amount of One Million Dollars ($1,000,000), with interest (the “Loan”), which Loan is evidenced by a promissory note and secured by 3,700,000 shares of common stock of Sanuwave Health, Inc. with CUSIP number 80303D-10-77 (“Sanuwave”), which shares are referred to herein as the “Collateral”; and
WHEREAS, the Loan Agreement provides that the interest on the Loan shall be payable in the form of 500,000 shares of Sanuwave common stock, which have an agreed upon value of $125,000 and which shall be delivered directly by Borrower to Lender within five (5) business days following the execution of the Loan Agreement; and
WHEREAS, the Loan Agreement provides that the Collateral shall be delivered to Lender as follows: (i) Borrower shall deliver stock certificates for 400,000 shares of Sanuwave common stock, which shall be freely tradable commencing July 1, 2014 (“July Shares”), to the Escrow Agent concurrently with the execution of this Agreement to perfect Lender’s security interest in such shares; and (ii) Borrower shall irrevocably instruct Sanuwave to deliver stock certificates for the 3,300,000 shares of Sanuwave common stock , which shall be freely tradable in November 2014 (the “November Shares”), “” directly to the Escrow Agent following Borrower’s payment therefor to perfect Lender’s security interest in such shares; and
WHEREAS, the Loan Agreement provides that as partial consideration for the Loan Borrower shall permit Lender to participate in any upside resulting from Borrower’s investment in the Sanuwave Shares by granting Lender a profits interest in the shares of Sanuwave common stock pledged as Collateral for the Loan pursuant to Section 5 of the Loan Agreement, pursuant to which Borrower shall pay Lender 100% of the profit from the sale of such shares until Lender has received a total of Two Hundred Thousand Dollars ($200,000) (the “Profit Sharing Amount”), at which time the profit sharing arrangement shall terminate; and
WHEREAS, the parties desire to engage the Escrow Agent to hold the Collateral in accordance with the terms of this Agreement.
Agreement
NOW, THEREFORE, the parties hereto agree as follows:
1.
Deposits of Certificates Representing Shares. The Borrower shall deposit the Collateral with the Escrow Agent as follows: (i) Borrower shall deliver stock certificates for the 400,000 July Shares, to the Escrow Agent concurrently with the execution of the Loan Agreement to perfect Lender’s security interest in such shares; and (ii) Borrower shall irrevocably instruct Sanuwave to deliver stock certificates for the 3,300,000 November Shares “”directly to the Escrow Agent following Borrower’s payment therefor to perfect Lender’s security interest in such shares. The stock certificates representing the Collateral shall be accompanied by duly executed stock powers with the signatures Medallion signature guaranteed by a financial institution or registered broker/dealer.
2.
The Escrowed Shares.
a.
If at any time on or before the close of business on February 23, 2015, the Profit Sharing Amount and the Loan have been paid in full, acknowledged and confirmed by Lender, the Escrow Agent shall cause the Escrowed Shares and the related stock powers to be returned to Borrower in accordance with Borrower's instructions, and the escrow shall thereupon terminate.
b.
Unless and until an Event of Default shall occur, Borrower shall be entitled to exercise any and all voting and other consensual rights pertaining to the Escrowed Shares for any purpose not inconsistent with the terms hereof.
c.
If the Profit Sharing Amount and the Loan have not been paid in full by the close of business on February 23, 2015, the Escrow Agent shall deliver the Escrowed Shares to Lender so that Lender may exercise its rights with respect to such Collateral in the manner provided in the Loan Agreement, and the escrow shall thereupon terminate.
3.
Escrow Agent's Duties Ministerial. It is understood and agreed that the duties of the Escrow Agent are entirely ministerial, being limited to receiving the Collateral and holding and disbursing the Collateral and the proceeds therefrom in accordance with this Agreement.
4.
Escrow Agent Acts as a Depository. The Escrow Agent acts hereunder as a depository only, and is not responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness, or validity of any instrument deposited with it, or with respect to the form or execution of the same, or the identity, authority, or rights of any person executing or depositing the same.
5.
Escrow Agent Not Bound by Notice of Default. The Escrow Agent shall not be required to take or be bound by notice of any default of any person or to take any action with respect to such default involving any expense or liability unless it is indemnified in a manner satisfactory to it against any expense or liability arising therefrom.
6.
Escrow Agent Not Liable for Acting on Certain Items. The Escrow Agent shall not be liable for acting on any notice, request, waiver, consent, receipt, or other paper or document believed by the Escrow Agent to be genuine and to have been signed by the proper party or parties.
7.
Escrow Agent Not Liable for Errors of Judgment. The Escrow Agent shall not be liable for any error of judgment or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, except its own willful misconduct.
8.
Escrow Agent Not Liable for Misconduct of Certain Agents. The Escrow Agent shall not be answerable for the default or misconduct of any agent, or attorney, appointed by it if such agent or attorney shall have been selected with reasonable care.
9.
Escrow Agent May Consult with Legal Counsel, The Escrow Agent may consult with legal counsel in the event of any dispute or question as to the consideration of the foregoing instructions or the Escrow Agent’s duties hereunder, and the Escrow Agent shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel.
10.
Adverse Claims for the Collateral. In the event of any disagreement between the parties or any of them and/or any other person, resulting in adverse claims and/or demands being made in connection with or for any of the Collateral involved herein or affected hereby, the Escrow Agent shall be entitled at its option to refuse to comply with any such claim or demand so long as such disagreement shall continue and, in so refusing, the Escrow Agent shall not be or become liable to the other parties or any of them for the failure or refusal to comply with such conflicting or adverse demands, and the Escrow Agent shall be entitled to continue to so refrain and refuse to so act until:
a.
the rights of adverse claimants have been finally adjudicated in a court assuming and having jurisdiction of the parties and the Collateral involved herein or affected hereby; and/or
b.
all differences shall have been adjusted by agreement and the Escrow Agent shall have been notified thereof in writing signed by all of the persons interested.
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11.
Fee of Escrow Agent. The fess of the Escrow Agent is One Thousand Seven Hundred Dollars ($1,700.00) which shall be paid by Borrower. The fee agreed on for services rendered hereunder is intended as full compensation for the Escrow Agent's services as contemplated by this Agreement; however, in the event that the conditions of this Agreement are not fulfilled, the Escrow Agent renders any material service not contemplated by this Agreement, there is any assignment of interest in the subject matter of this Agreement, there is any material modification hereof, any material controversy arises hereunder. or the Escrow Agent is made a party to or justifiably intervenes in any litigation pertaining to this Agreement or the subject matter hereof, the Escrow Agent shall be reasonably compensated for such extraordinary expenses, including reasonable attorneys' fees, occasioned by any delay, controversy, litigation, or event and the same may be recoverable from the Lender and the Borrower in equal shares.
12.
Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) day after deposit with a nationally recognized overnight courier specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:
If to Lender:
Linley Ltd.
5 Savile Row
London, W1S 3PD
If to Borrower
David N. Nemelka
743 West 1200 North Suite 100 Springville, Utah 84663
If to the Escrow Agent:
Carolina Reynolds Law Offices PLLC
23 Buckram Road
Locust Valley, NY11560
or to such other address as the parry to whom notice is to be given may have furnished to the other parties in writing in accordance herewith.
13.
Miscellaneous Provisions. The terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the parties and their respective heirs, successors, transferees and assigns. No party may assign or otherwise transfer its interest in this Agreement to any third party except with the prior written consent of the other parties. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and may only be modified by a subsequent writing executed by all parties. If any term, covenant. condition or agreement of this Agreement or the application of it to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term, covenant, condition or agreement to persons or circumstances, other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition or agreement of this Agreement shall be valid and shall be enforced to the extent permitted by law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the state of New York. The Parties hereby irrevocably and unconditionally submit to the exclusive jurisdiction of the courts of the State of New York and the Federal courts sitting in the state of New York. The Parties agree that all actions or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby must be litigated exclusively in any such state or Federal court that sits in New York County, New York, and the Parties hereby waive any objection which they may now or hereafter have to the laying of the venue of any such litigation in any such court.
14.
Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original instrument, but all of which collectively shall constitute one and the same agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the date first written above.
** Signature Page Follows **
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“Borrower”
/s/ David N. Nemelka
David N. Nemelka
“Lender”
Linley Ltd.
/s/ David Rowland
Name: David Rowland
Title: Authorized Signatory
“Escrow Agent”
Carolina Reynolds Law Offices PLLC
By /s/ Carolina Reynolds
Name: Carolina Reynolds, Esq.
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