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On March 25, 2020, the Issuer entered into
a credit agreement (the “Credit Agreement”) with the Master Fund pursuant to which the Issuer borrowed from the Master
Fund a principal amount of $2.5 million, with the option to borrow up to an additional $1.0 million pursuant to delayed draw term
loans. The loans outstanding under the Credit Agreement mature on September 24, 2020 and bear interest at a rate per annum equal
to the LIBOR rate plus 2.5%. Further, under the terms of the Credit Agreement, the Master Fund agreed to exercise warrants it currently
holds to purchase 5,085,834 Shares with a current exercise price of $0.12 per Share by no later than April 15, 2020.
In connection with the Credit Agreement, the
Issuer and its wholly-owned subsidiary, ReShape Medical LLC (“ReShape Medical”), entered into a guarantee and collateral
agreement with the Master Fund dated March 25, 2020 (the “Guarantee and Collateral Agreement”) pursuant to which the
Issuer and ReShape Medical granted to the Master Fund a security interest in substantially all of their respective assets as security
for the Issuer’s obligations under the Credit Agreement.
On March 25, 2020, the Issuer also issued to
the Master Fund series G warrants (the “Series G Warrants”) to purchase an aggregate of 1,200,000 Shares pursuant to
the Issuer’s Series G Common Stock Purchase Warrant (the “Series G Common Stock Purchase Warrant”).
In connection with the issuance to the Master
Fund of the Series G Warrants, the Issuer and the Master Fund entered into a registration rights agreement dated March 25, 2020
(the “Registration Rights Agreement”) pursuant to which the Issuer agreed to file a resale registration statement for
the Shares underlying the Series G Warrants within 60 days and to use its best efforts to cause such resale registration statement
to be declared effective within 90 days, or, in the event of a “full review” by the SEC, within 120 days.
On March 31, 2020, the Issuer and the Master
Fund entered into an amendment to the Credit Agreement (the “Credit Agreement Amendment”) relating to the Issuer’s
payment of fees, reasonable costs and reasonable out-of-pocket expenses due and payable under the Credit Agreement and other related
loan documents.
The Issuer and the Master Fund also entered
into an amendment to Series G Common Stock Purchase Warrant on March 31, 2020 (the “Series G Warrant Amendment”) to,
among other things, provide that the exercise price per Share of the Series G Warrants is $3.70.
The foregoing was a summary of certain material
terms of the: (i) Credit Agreement; (ii) Guarantee and Collateral Agreement; (iii) Series G Common Stock Purchase Warrant; (iv)
Registration Rights Agreement; (v) Credit Agreement Amendment; and (vi) Series G Warrant Amendment. The foregoing descriptions
are not, and do not purport to be, complete and, except as otherwise described above, are qualified in their entirety by reference
to the full text of the forms of those documents, which have been filed as Exhibits B, C, D, E, F and G, respectively, and are
incorporated herein by reference.
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