Item 1.01. Entry into a Material Definitive Agreement.
On December 13, 2019, SANUWAVE Health, Inc. (the "Company") entered into a joint
venture agreement (the "Agreement") with Universus Global Advisors LLC, a
limited liability company organized under the laws of the State of Delaware
("Universus"), Versani Health Consulting Consultoria em Gestão de Negócios
EIRELI, an empresa individual de responsabilidade limitada organized under the
laws of Brazil ("Versani"), Curacus Limited, a private limited company organized
under the laws of England and Whales ("Curacus"), and certain individual
citizens of Brazil and the Czech Republic (the individuals together with
Curacus, the "IDIC Group").
The principal purpose of the joint venture company will be to manufacture,
import, use, sell, and distribute, on an exclusive basis in Brazil, dermaPACE
devices and wound kits consisting of a standard ultrasound gel and custom size
sterile sleeves used for the treatment of various acute and chronic wounds using
extracorporeal shockwave therapy technology. The joint venture company will also
provide treatments related to the dermaPACE devices.
The IDIC Group has agreed to pay to the Company a partnership fee in the total
amount of $600,000 for the granting of exclusive territorial rights to the joint
venture company to distribute the dermaPACE devices and wound kits in Brazil.
The partnership fee is to be paid as follows: (i) a $250,000 payment was made by
IDIC Group to the Company on November 14, 2019 which was initially provided in
the form of a loan that was forgiven and terminated on December 13, 2019, (ii)
an additional payment of $250,000 was made by the IDIC Group to the Company on
December 31, 2019, and (iii) the remaining $100,000 is to be paid by the IDIC
Group upon receipt of required regulatory approvals from ANVISA (the Brazilian
Health Regulatory Agency). The parties intend to execute a shareholders'
agreement, a trademark license agreement, a supply agreement and a technology
license agreement January 31, 2020. The IDIC Group will also have the right to
receive prioritized dividends until full reimbursement of the partnership fee
and expenses incurred in the formation of the joint venture company, which are
required to be paid by the IDIC Group.
ANVISA is part of the Brazilian Ministry of Health and the Brazilian National
Health System and is responsible for the protection of the health of the
Brazilian population by enforcing sanitary control over the production,
marketing and use of products and services subject to health regulation in
Brazil.
The Company will supply the dermaPACE devices and wound kits to the joint
venture company at cost and the joint venture company will purchase the devices
from the Company in accordance with the terms of the Supply Agreement to be
entered into upon formation of the joint venture company. The parties also
agreed that the initial five devices imported to Brazil by the IDIC Group on
behalf of the joint venture company will be provided by the Company on deferred
payment terms to be agreed, provided that the amounts invoiced for such devices
will be due by the time the joint venture company reaches $1,000,000 in gross
sales.
Upon formation of the joint venture company, the Company will own 45% of its
equity interests, the IDIC Group, through a holding company, will collectively
own 45% of the equity interests of the joint venture company and each of Versani
and Universus will own 5% of the joint venture company's equity interests. The
joint venture company will be managed by a four-member board (two appointed by
the Company and two appointed by the IDIC Group), each with a term of three
years. The joint venture company will have two officers, a Chief Executive
Officer and a Chief Commercial Officer. The IDIC Group will have the right to
appoint the Chairman of the board of directors.
The Agreement may be terminated if the parties fail to meet certain conditions
precedent before December 31, 2020 (unless extended by mutual agreement) and
upon default by either party which is not cured within a certain cure period,
among others. In case AVISA does not grant its approval, or such approval is
granted with restrictions that materially impact the joint venture company's
operation, the IDIC Group may terminate the Agreement and require the Company to
refund the partnership fee amount, plus the amounts incurred by the IDIC Group
for payment of other expenses related to the formation of the joint venture
company.
In the event of a change of control of the Company, the Company will have the
right to cause the other parties to the Agreement to sell their ownership
interests to the Company's new controlling entity, at a price which varies,
depending on whether the change of control occurs prior to or after the joint
venture company achieves $2,000,000 in gross sales. If the change of control
occurs before the joint venture company achieves $2,000,000 gross sales, the
price to be paid for the equity interests of the other joint venture parties (on
a pro rata basis) will be equivalent to four times the total amount invested by
such parties in the joint venture company, including the partnership fee and
organizational expenses. If the change of control occurs after the joint venture
company achieves $2,000,000 in gross sales, the price will be equivalent to the
multiple of twelve times the net sales of the joint venture company in the
previous twelve months before the closing of the change of control transaction,
also paid on a pro rata basis.
In addition, in the event of a change of control of the Company after the joint
venture company achieves $2,000,000 in gross sales, the other parties to the
joint venture will also have the right to put their equity interests to the new
controlling entity of the Company, for a price based on the same EBITDA multiple
paid for the acquisition of the Company.
The foregoing is only a brief description of the Agreement, does not purport to
be a complete description of the rights and obligations of the parties
thereunder and is qualified in its entirety by reference to the full text of the
Agreement.
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