10-K
Madison Technologies Inc. (MDEX)
United
states
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
| ☒ | **Annual report pursuant to section 13 Or 15(**d) of the securities exchange act of 1934 |
|---|
For the fiscal year ended December 31, 2022
| ☐ | **transition report pursuant to section 13 Or 15(**d) of the securities exchange act of 1934 |
|---|
For
the transition period from ___________ to___________
Commission
file number 000-51302
MadisonTechnologies Inc. ****
(Exact name of registrant as specified in its charter)
| Nevada | 85-2151785 |
|---|---|
| (State or other jurisdiction<br> of incorporation or organization) | (I.R.S. Employer<br> Identification No.) |
| 2500<br> Westchester Avenue, Purchase, NY | 10577 |
| --- | --- |
| (Address of principal<br> executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 257-4193
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common stock - $0.001 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☐ Yes ☒ No
Note
- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act from their obligations under those sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☐ Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☐ Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company in Rule 12b-2 of the Exchange Act.
| Larger accelerated filer | ☐ | Accelerated filer | ☐ |
|---|---|---|---|
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
☐Yes ☒ No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
The aggregate market value of the voting
and non-voting common equity held by non-affiliates as of June 30, 2022 was $37,565,946, based on 453,694,998 shares of common stock, par value $0.001 per share (“Common Stock”), outstanding and held by non-affiliates on such date and a closing price of our Common Stock equal to $0.828 per share on such date. Shares of Common Stock held by each director, each officer and each person who owns 10% or more of the outstanding Common Stock have been excluded from this calculation in that such persons may be deemed to be affiliates. Such determination of affiliate status is not necessarily conclusive.
Indicate the number of shares outstanding of each of the registrant’s classes of common shares, as of the latest practicable date.
The registrant had 1,603,095,243 shares
of Common Stock outstanding as of January 23, 2024.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
| Page | ||
|---|---|---|
| PART I | ||
| Item 1. | Business | 1 |
| Item 1A. | Risk Factors | 4 |
| Item 1B. | Unresolved Staff Comments | 15 |
| Item 2. | Properties | 15 |
| Item 3. | Legal Proceedings | 15 |
| Item 4. | Mine Safety Disclosures | 16 |
| PART II | ||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 17 |
| Item 6. | Selected Financial Data | 19 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 24 |
| Item 8. | Financial Statements and Supplementary Data | |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 25 |
| Item 9A. | Controls and Procedures | 25 |
| Item 9B. | Other Information | 27 |
| PART III | ||
| Item 10. | Directors, Executive Officers and Corporate Governance | 28 |
| Item 11. | Executive Compensation | 31 |
| Item 12. | Security Ownership of Certain Beneficial Holders and Management and Related Stockholder Matters | 32 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 33 |
| Item 14. | Principal Accountant Fees and Services | 33 |
| Item 15. | Exhibits, Financial Statement Schedules | 34 |
| Items 16. | Form 10-K Summary | 37 |
| SIGNATURES | 38 |
i
part
I
Item1. Business.
Summary
Madison Technologies Inc. (“Madison” or the “Company” or “we” or “us” or “our”) is a Nevada corporation that was incorporated on June 15, 1998.
Madison Technologies Inc. is seeking to create, develop and launch BlockchainTV (“BCTV”), the first-to-market 24/7 television broadcast and streaming communications network designed to bring the most up-to-date cryptocurrency information and entertainment to the masses in the U.S. and around the world.
We believe there is an information void in the blockchain global community where there is no credible, reliable and unbiased source for the most up-to-date information. We created BCTV to fill that void with a live broadcast network and distribution platform to deliver unbiased information in the global blockchain marketplace. We intend for BCTV to engage with viewers by bringing experts, entrepreneurs and entertainment programming into their living rooms and on their devices with a focus on unpacking trends, separating fact from fiction and providing insight into the volatile global marketplace.
The BCTV live news programming will be delivered by a team of anchors who will provide breaking news, in-depth stories and interviews around the clock in studio settings and on location through contributing journalists. Our vision is to broadcast BCTV initially from Niagara Falls in Ontario, Canada and to expand our broadcast locations to New York, Miami and Dubai, which are markets with relatively large numbers of people and businesses connected to the cryptocurrency marketplace.
Productand Services
To achieve the North American rollout, we are focusing on strategic partnerships and distribution deals that deliver BCTV to households through more than 300 over-the-air television stations, through television distributors such as Comcast Cable, DirecTV and DishTV and through alternative distribution platforms such as Roku, Hulu, YouTube, Pluto and Xumo.
The core revenue streams envisioned for BCTV media content would be generated by selling advertising and sponsorships. We seek to supplement core revenues by transacting through e-commerce with our audience. Building, growing and knowing your audience is a significant factor in developing core and supplemental revenues.
1
Recent Developments
On February 17, 2021, we entered into a securities purchase agreement with funds affiliated with Arena Investors, LP (collectively, the “Investors”) pursuant to which we issued convertible notes in an aggregate principal amount of $16.5 million for an aggregate purchase price of $15 million (collectively, the “Notes”). We used proceeds from the Notes to acquire KNET and KNLA, Class A television stations in Los Angeles, California, KVVV, a low power television station in Houston, Texas, and KYMU-LD, a low power television station in Seattle, Washington. The Notes accrued interest at a rate of 11% per annum, subject to increase to 20% per annum upon and during the occurrence of an event of default. We did not make the $0.4 million interest payments on the Notes that were due on April 1, 2022, July 1, 2022, October 1, 2022, and December 31, 2022, and accrued default interest accordingly. The Notes were secured by a blanket lien on all of the Company’s assets and the shares of common stock, par value $0.001 per share, of the Company (“Common Stock”) and the Company’s preferred stock, par value $0.001 per share (collectively, the “Pledged Assets”), held by Philip Falcone, FFO 1 2021 Irrevocable Trust (“FFO1”), FFO 2 2021 Irrevocable Trust (“FFO2”) and Korr Value LP (collectively, the “Pledgors”), which shares the Investors had been granted the right to vote in the event of default.
On January 28, 2023, Arena Investors, LP (“Arena”), in its capacity as the agent (the “Agent”) for the Investors delivered a notice to us (the “Acceleration Notice”), which stated that the Agent and the Investors (a) elected to cause the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof, to become immediately due and payable in cash, (b) intended to commence legal action to collect any or all of the amounts due under the Notes, and (c) sought the appointment of a receiver or trustee as a means of realizing proceeds on their collateral.
On September 21, 2023, the Agent for the Investors delivered a notice to us that the Agent exercised the Investors’ rights to vote the Pledged Interests (as defined in such notice) and to exercise the Pledgees’ rights, powers and privileges, to pass certain resolutions and to amend our then-existing bylaws to, among other things, (i) remove the board of directors of the Company (the “Board of Directors”) and all officers of the Company, and (ii) reduce the number of the Board of Directors from three directors to one director. As a result of the Agent delivering such notice and exercising its rights to vote the Pledged Interests, a change of control of the Company occurred (the “Change of Control”).
On November 6, 2023, the shareholders of the Company removed Philip Falcone and Warren Zenna from the Board of Directors and appointed Thomas Amon as the sole member of the Board of Directors. Mr. Amon removed all of the Company’s then-serving officers and appointed himself as the Company’s President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer, Principal Executive Officer and Principal Accounting Officer.
As of the date of this Annual Report and since the last day of the year ended December 31, 2022, we have not been able to timely repay certain of our other outstanding debt obligations in addition to those obligations to Arena and Z4 described above, with an aggregate of approximately $3.5 million currently in default, including accrued interest, default interest and late fees. As a result of the Change of Control, we intend to strategize with the holders of such notes to extend, modify or otherwise revisit the terms of such indebtedness in order to resolve such outstanding defaults.
Since October 2023, and as a result of the Change of Control, we have had minimal operations and nominal assets consisting almost entirely of cash. However, in December 2023, we held discussions with the head of content production of BCTV regarding initial plans to continue the Company’s business plans described above as intended prior to the Change of Control. However, we cannot make any guarantee as of the date of the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (this “Annual Report”) as to the timing and success of these plans, business relationships or reaching any self-imposed expectations, or that we will ultimately continue the Company’s business as so described. See “Cautionary Note Regarding Future Looking Statements”.
Discontinued Operations
On February 1, 2023, we entered into a Partial Strict Foreclosure Agreement with the Investors, pursuant to which we transferred ownership of our Federal Communications Commission (“FCC”) licenses and other broadcast television assets associated with the broadcast television business of SovRyn Holdings, Inc (“Sovryn”), then our subsidiary, to a third-party entity controlled by the Investors (the “Partial Foreclosure Agreement”). In consideration therefor, the Investors agreed to reduce the indebtedness under the Notes by $11,600,000. As a result, the revenues, expenses, assets and liabilities of Sovryn were deemed discontinued operations for the year ended December 31, 2022.
Competitive Conditions
Through our BCTV content, we intend to compete for viewership in a marketplace that is fragmented and niche. Major media organizations such as Bloomberg and Comcast, which operate CNBC and MSNBC, respectively, deliver content about cryptocurrencies, but none have a dedicated source for viewers to continuously consume that content.
Dependence on Customers
Currently, we are not, and plan not to be, dependent on one or a few major customers. Our business is designed to generate revenue from four primary categories of customers: (1) advertisers and sponsors of our BCTV content airing on our broadcast over-the-air content distribution platform (the “OTA Platform”), applications and websites, as well as through third-party broadcasters, cable television operators, and alternative video distribution platforms, such as YouTube, Roku, Pluto and Xumo; (2) viewers of our BCTV content, who form the audience that attracts advertisers and sponsors; and (3) third-party networks that lease channels on our OTA Platform.
2
Technologyand Intellectual Property
We do not currently own any patents, trademarks or other intellectual property.
Governmentaland Industry Regulations
Broadcast licenses are issued by and subject to the rules and regulations of the FCC, pursuant to the Communications Act of 1934. The FCC regulates broadcasting businesses and has the authority to issue, renew, revoke and modify broadcast licenses and impose penalties for the violation of its regulations. In the event we continue to conduct our business in the same manner prior the Change of Control, we would potentially be subject to FCC rules and regulations. In order to obtain, renew, assign or modify a license, purchase a new station or sell an existing station, we must obtain approval from the FCC.
Depending on our anticipated and future operations, we expect to continue to be subject to other federal and state laws and regulations that relate directly or indirectly to our operations, including federal securities laws. We are also subject to common business and tax rules and regulations pertaining to the operation of our business.
Researchand Development Activities and Costs
We have not spent any funds on research and development activities to date.
Compliancewith Environmental Laws
Our current operations are not subject to any environmental laws.
Facilities
Our principal executive office, at which minimal operations are conducted and which we do not own or lease, is located at 2500 Westchester Avenue, Suite 401, Purchase, New York.
Numberof Total Employees and Number of Full Time Employees
We have one employee who serves as our President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer.
CautionaryNote Regarding Forward Looking Statements
The information in this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve risks and uncertainties, including statements regarding Madison’s capital needs, future cash flows, financial results, business strategy, business plans and objectives, current and future operations, intentions, expectations any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “likely”. “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “forecast”, “seek”, “target”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined from time to time, in other reports Madison’s files with the U.S. Securities and Exchange Commission (“SEC”).
Such forward-looking statements in this Annual Report, as well as in our other periodic reports on Form 10-Q and Form 8-K filed with the SEC, in our press releases, in our presentations, on our website and in other materials released to the public, are out of our control and subject to risks and uncertainties that could cause actual results to differ materially from the results expressed in or implied by the statements contained in this Annual Report. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of such forward-looking statements. No assurance can be given that any of the assumptions relating to such forward-looking statements are accurate.
3
Such forward-looking statements are made as of the date of the filing of this Annual Report with the SEC and Madison disclaims any obligation to publicly update such forward-looking statements, or disclose any difference between its actual results and those reflected in such forward-looking statements, as a result of new information, future events or otherwise. The Company’s management may, from time to time, make oral forward-looking statements. Madison strongly advises that the above paragraphs and the risk factors described in this Annual Report and in Madison’s other documents filed with the SEC should be read for a description of certain factors that could cause the actual results of Madison to materially differ from those in such oral forward-looking statements. Madison disclaims any intention or obligation to update or revise any such oral forward-looking statements whether as a result of new information, future events or otherwise. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Item1A. Risk Factors.
Our business involves significant risks,some of which are described below. You should carefully consider the risks and uncertainties described below, together with allof the other information in this Annual Report. The risks and uncertainties described below are not the only ones we face. Additionalrisk and uncertainties of which we are unaware or that we deem immaterial may also become important factors that adversely affectour business. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business,financial condition, results of operations, growth and future prospects as well as our ability to accomplish our strategic objectives.In that event, the market price of our Common Stock could decline and you could lose part or all of your investment.
RisksRelated to Our Business
We have a history of losses, havenot been profitable historically and may not achieve or maintain profitability in the future.
We have a history of losses. Our ability to forecast our future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from expectations, our business could suffer and the trading price of our stock may decline.
We have incurred net losses of $13.1 million and $14.3 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had accumulated deficit of $28.9 million.
We are not certain whether or when we will obtain a high enough volume of sales of our products and services to sustain or increase our growth or achieve or maintain profitability in the future. We expect our costs to increase in future periods, which could negatively affect our future operating results if our revenue does not increase. In particular, we may, among other things, expend substantial financial and other resources on:
| ● | content production<br> related to BCTV, including investments in expanding our content and production teams; |
|---|---|
| ● | sales and marketing, including a significant<br> expansion of our sales organization; |
| --- | --- |
| ● | continued expansion of our business into adjacent geographic markets; |
| ● | re-establishing our business operations after the Change of Control; and |
| ● | general administration expenses, including legal<br> and accounting expenses related to being a public company. |
These investments may not result in increased revenue or growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not be able to achieve or maintain profitability in the future.
4
We have incurred debt in connectionwith our acquisitions of television station assets, some of which is currently in default, and this has and may continue to materiallyand adversely affected our financial condition and could restrict our operating flexibility.
In connection with our planned launch of BCTV, we issued promissory and convertible notes that include negative covenants that restrict our ability to, among other things: incur additional indebtedness; create liens or other encumbrances on assets; make loans, guarantees, investments and acquisitions; sell or otherwise dispose of assets; make negative pledges; enter into affiliate transactions; and make cash distributions to our stockholders.
In January 2023, outstanding principal amounts under the Notes of not less than $16.5 million were accelerated by Arena in its capacity as Agent due to the occurrence of certain events of default under the Notes, which ultimately resulted in the Change of Control.
On November 10, 2023, Philip Falcone, individually and on behalf of Madison and other named defendants, filed a Confession of Judgment affirming that a promissory note (the “Z4 Note”) had been issued by the Company, dated December 28, 2021, by Z4 Mgmt. LLC (“Z4”), which was guaranteed by each of FFO1 and FFO2. The Z4 Note was initially payable on February 15, 2022, and had an original principal balance of $500,000 with an interest rate of 12% per annum. The Z4 Note’s expiration date was extended to July 5, 2022, then further extended to March 31, 2023, and as of October 1, 2023, the revised principal balance, along with interest accrued, totaled $581,304. On such date, Z4 filed an Affidavit of Default affirming that the Z4 Note was in default and requesting a judgment in the amount of $581,304 against the Company, FFO1, FFO2, and Mr. Falcone personally, in favor of Z4. On December 5, 2023, a judgement in favor Z4 in the sum of $581,304 was rendered against us, Mr. Falcone, FFO1 and FFO2.
In addition to the defaults described above, as of the date of this Annual Report, and since the last day of the year ended December 31, 2022, we are in default under a certain loans payable for failure to pay principal and accrued interest on such loans, with an aggregate of approximately $3.5 million and $3.0 million of principal, accrued interest and late fees, as of such date and as of December 31, 2022, respectively. We have not yet made principal and interest payments on such notes when due and as a result, under terms of the notes, the interest rate is as much as 22% per annum. As a result of the Change of Control, we intend to strategize with the holders of such notes to extend, modify or otherwise revisit the terms of such indebtedness in order to resolve such outstanding defaults.
Such convertible notes and related obligations, including interest payments, covenants and restrictions, had and could have in the future important consequences, including the following:
| ● | reserving cash in order to satisfy the obligations relating to such notes could adversely affect the amount or timing of investments to grow our business, impairing our ability to invest in and successfully grow our business; |
|---|---|
| ● | limit our ability to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, acquisitions, debt obligations and other general corporate requirements; |
| --- | --- |
| ● | result in foreclosure of certain pledged assets pursuant to such notes; |
| --- | --- |
| ● | increase our vulnerability to general economic downturns, competition and industry conditions and we may be unable to take advantage of opportunities that our leverage prevents us from exploiting, placing us at a disadvantage to our competitors that are less leveraged; and |
| --- | --- |
| ● | impose restrictions on the manner in which we conduct our business, including restrictions on our ability to pay dividends, incur additional debt and sell assets. |
| --- | --- |
The obligations under such promissory and convertible notes could have a material adverse effect on our business, financial condition, operating results or cash flows. In addition, our failure to comply with the covenants under such convertible notes could result in an event of default and acceleration of the outstanding balance, which could significantly harm our business and cause our stock price to decline.
Our products may never achieve marketacceptance.
Our ability to generate revenues from sales of our products and services and to achieve profitability will depend upon our ability to successfully commercialize such products and services. Because we have not yet begun to offer any of our products or services for sale, we have no basis to predict whether any of our products or services will achieve market acceptance. A number of factors may limit the market acceptance of any of our products or services, including:
| ● | the competitive features of our products and services, including price, as compared to other similar products and services; |
|---|---|
| ● | the extent and success of our marketing efforts and those of our collaborators; |
| ● | unfavorable publicity concerning our products or similar products; and |
| ● | the timing of regulatory approvals of our products or services and market entry compared to competitive products. |
If we are unableto attract viewers or acquire customers, our future revenues and operating results will be harmed. Likewise, potential customerturnover in the future, or costs we incur to retain our existing customers, could materially and adversely affect our financialperformance.
Our success depends on our ability to acquire new customers in new and existing vertical markets, and in new and existing geographic markets. If we are unable to attract a sufficient number of new customers, we may be unable to generate revenue growth at desired rates. The markets in which we now and may in the future operate are competitive and many of our competitors have substantial financial, personnel and other resources that they utilize to develop solutions and attract viewers and customers. As a result, it may be difficult for us to add new viewers and customers to our base. Competition in the marketplace may also lead us to attract fewer new viewers and customers or result in us providing discounts and other commercial incentives. Additional factors that impact our ability to acquire new viewers or customers include keeping pace with technological developments, including with respect to production and programming capabilities, network and information systems and the utility of our OTA Platform, as well as general economic conditions. These factors may have a meaningful negative impact on future revenues and operating results.
5
If we are unableto sell services to our customers and grow our customer retention rates, our future revenue and operating results may be harmed.
Our future success depends, in part, on our ability to deploy our services to viewers and other customers. This may require increasingly sophisticated and costly sales efforts and may not result in any sales. In addition, the rate at which our customers purchase our services may depends on a number of factors, including the perceived need for additional TV entertainment, information and other content as well as general economic conditions. If our efforts to sell our services to such viewers and customers are not successful, our business may suffer.
Our business modelis predicated, in part, on building a customer base that will generate a recurring stream of revenue. If such revenue stream doesnot develop as expected, or if our business model changes as the broadcasting industry evolves, our operating results may be adverselyaffected.
Our business model is dependent, in part, on our ability to maintain and increase distribution to generate recurring revenues. Our customers may not utilize our television broadcast assets at the same rate at which we intend them to do currently. If our customers are to reduce their utilization, our recurring revenue stream relative to our total revenues would be reduced and our operating results would be adversely affected.
Fluctuatingeconomic conditions make it difficult to predict revenue for a particular period, and a shortfall in revenue may harm our operatingresults.
Our revenue depends significantly on general economic conditions. Economic weakness and customer financial difficulties may result in decreased revenue and earnings. Such factors could make it difficult to accurately forecast our sales and operating results and could negatively affect our ability to provide accurate forecasts of our costs and expenses. General economic weakness may also lead to longer collection cycles for payments due from our customers, an increase in customer bad debt, restructuring initiatives and associated expenses and impairment of investments.
Uncertainty about future economic conditions also makes it difficult to forecast operating results and to make decisions about future investments. Future or continued economic weakness for us or our customers, failure of our customers and markets to recover from such weakness and customer financial difficulties could have a material adverse effect on demand, and consequently on our business, financial condition and results of operations.
Our brand, reputationand ability to attract, retain, and serve our customers will be dependent in part upon the reliable performance of our productsand infrastructure.
Our brand, reputation and ability to attract, retain, and serve our customers will be dependent in part upon the reliable performance of, and the ability of our customers to access and use our television broadcast assets. We may in the future experience disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, equipment failure, human or software errors, capacity constraints, and fraud or cybersecurity attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.
Interruptions in our systems or the third-party systems on which we rely, whether due to system failures, computer viruses, physical or electronic break-ins, or other factors, could affect the security or availability of our television broadcast assets, network infrastructure, cloud infrastructure and website.
Problems with the reliability or security of our systems could harm our reputation. Damage to our reputation and the cost of remedying these problems could negatively affect our business, financial condition and operating results.
Any disruptions or other performance problems with our television broadcast assets could harm our reputation and business and may damage our customers’ businesses. Interruptions in our service delivery might reduce our revenue, cause us to issue credits to customers, subject us to potential liability and cause customers not to renew any subscriptions that we may offer.
6
If we are notable to position our brand or reputation as an industry leader, our business and operating results may be adversely affected.
We believe that if we position ourselves as the leader in next-generation television, it will help build relationships with our end-user customers and our ability to attract customers and reseller partners. The successful promotion of our brand will depend on multiple factors, including our marketing efforts, our ability to continue to deliver a superior customer experience and develop high-quality features and our ability to successfully differentiate our broadcast services from those of our competitors. Our brand promotion activities may not be successful or yield increased revenue. The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive, and as we expand into new geographies and vertical markets. To the extent that these activities yield increased revenue; this revenue may not offset the increased expenses we incur. If we do not successfully position our brand and reputation as an industry leader, our business and operating results may be adversely affected.
We are dependenton the continued services and performance of Thomas Amon and other key employees we intend to hire in the future, as well as onour ability to successfully hire, train, manage and retain qualified personnel.
Our future performance depends on the continued services and contributions of Thomas Amon, our President, Chief Executive Officer and Chief Financial Officer, to execute on our business plan and to identify and pursue new opportunities and product innovations. We do not maintain key man insurance for Mr. Amon. From time to time, there may be changes in our senior management team resulting from the termination or departure of executive officers and key employees. We currently intend for our senior management and key employees to be generally employed on an at-will basis, which means that they could terminate their employment with us at any time. The loss of the services of Mr. Amon, or any other future key employees, for any reason could significantly delay or prevent our development or the achievement of our strategic objectives and harm our business, financial condition and results of operations.
Our ability to successfully pursue our growth strategy will also depend on our ability to attract, motivate and retain personnel. We expect to face escalating compensation demands from new and prospective employees, as well as intense competition for these employees from numerous technology, software and other companies, especially in certain geographic areas in which we intend to operate, and we cannot ensure that we will be able to attract, motivate and/or retain additional qualified employees in the future. If we are unable to attract new employees or retain Mr. Amon, we may not be able to adequately develop, market and maintain new products or services at the same levels as our competitors and may, therefore, lose customers and market share. Our failure to attract and retain personnel could have an adverse effect on our ability to execute our business objectives and, as a result, our ability to compete could decrease, our operating results could suffer and our revenue could decrease. Even if we are able to identify and recruit a sufficient number of new hires, these new hires will require significant training before they achieve full productivity and they may not become productive as quickly as we would like, or at all.
If we cannot maintainour Company’s culture as it grows, we could lose the innovation, teamwork, passion and focus on execution that we believecontributes to a successful business and as a result, our business may be harmed.
We believe that a critical component to a successful business is mission-driven company culture based on a shared commitment to make television accessible to younger consumers, which we believe fosters innovation, teamwork, passion for customers, a focus on execution, and facilitates critical knowledge transfer, knowledge sharing and professional growth. Any failure to preserve such culture could negatively affect our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. As we grow and develop the Company’s infrastructure, we may find it increasingly difficult to maintain these important aspects. If we fail to do so, our business may be adversely impacted.
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Ifwe are unable to compete effectively with new entrants and other potential competitors, our sales and profitability could be adverselyaffected.
The sales prices for our products and services may decline for a variety of reasons, including competitive pricing pressures, discounts, a change in our mix of products and services, anticipation of the introduction of new products or promotional programs. Competition continues to increase in the market segments in which we may participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse product and service offerings may reduce the price of products that compete with theirs or may bundle them with other products and services. Additionally, currency fluctuations in certain countries and regions may negatively impact prices that partners and customers are willing to pay in those countries and regions. We cannot be certain that we will be successful in developing and introducing products with enhanced functionality on a timely basis, or that our product offerings, if introduced, will enable us to maintain our prices and gross profits at levels that will allow us to maintain positive gross margins and achieve profitability.
Wemay acquire or invest in other companies or technologies in the future, which could divert management’s attention, failto meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or otherwiseharm our operating results.
We may in the future acquire or invest in, businesses, television broadcast assets or other assets or technologies that we believe could complement or expand our business, enhance our capabilities or otherwise offer growth opportunities. We may not be able to fully realize the anticipated benefits of any future acquisitions or anticipated benefits may not transpire. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses related to identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
There are inherent risks in integrating and managing acquisitions. If we acquire additional businesses, we may not be able to assimilate or integrate the acquired personnel, operations, products, services and technologies successfully or effectively manage the combined business following the acquisition and our management may be distracted from operating our business. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including, without limitation:
| ● | unanticipated costs or liabilities associated<br> with the acquisition; |
|---|---|
| ● | incurrence of acquisition-related costs, which<br> would be recognized as a current period expense; |
| --- | --- |
| ● | inability to generate sufficient revenue to<br> offset acquisition or investment costs; |
| --- | --- |
| ● | inability to maintain relationships with customers<br> and partners of the acquired business; |
| --- | --- |
| ● | difficulty of incorporating acquired technology and rights into our operations and of maintaining quality<br>and security standards consistent with our intended brands; |
| --- | --- |
| ● | delays in customer purchases due to uncertainty<br> related to any acquisition; |
| --- | --- |
| ● | the potential loss of key employees; |
| --- | --- |
| ● | use of resources<br> that are needed in other parts of our business and diversion of management and employee resources; |
| --- | --- |
| ● | inability to recognize acquired deferred revenue<br> in accordance with our revenue recognition policies; and |
| --- | --- |
| ● | use of substantial portions of our available<br> cash and equity or the incurrence of debt to consummate the acquisition. |
| --- | --- |
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Acquisitions also increase the risk of unforeseen legal liability, including for potential shareholder suits or potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses that are not discovered by due diligence during the acquisition process or new regulatory restrictions at the federal, state, or local levels. Generally, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our business, results of operations and financial condition.
In addition, a significant portion of the purchase price of companies we may acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions do not ultimately yield expected returns, we may be required to take charges to our operating results based on our impairment assessment process, which could harm our results of operations.
Because our servicesmay collect and store viewer and related information, domestic and international privacy and cyber security concerns, and otherlaws and regulations, could result in additional costs and liabilities to us or inhibit sales of our products or services.
We may be affected by cyber-attacks and other means of gaining unauthorized access to our products, services, systems, and data. For instance, cyber criminals or insiders may target us or third parties with which we have business relationships to obtain data, or in a manner that disrupts our operations or compromises our products or the systems into which our products are integrated. The evolution of technology systems introduces ever more complex security risks that are difficult to predict and defend against. An increasing number of companies, including those with significant online operations, have recently disclosed breaches of their security, some of which involved sophisticated tactics and techniques allegedly attributable to criminal enterprises or nation-state actors. While we take measures to protect the security of personal information, it is possible that our security controls over personal information and other practices we follow may not prevent the unauthorized access to, or the unintended release of, personal information. In addition, we do not know whether our current practices will be deemed sufficient under applicable laws or whether new regulatory requirements might make our current practices insufficient. If there is a breach of our computer systems and we know or suspect that certain personal information has been accessed, or used inappropriately, we may need to inform the affected individual and may be subject to significant fines and penalties. In the event of a breach, we could face government scrutiny or consumer class actions.
Cybersecurity incidents directed at us or third-parties with whom we have relationships can range from uncoordinated individual attempts to gain unauthorized access to information technology systems to sophisticated and targeted measures known as advanced persistent threats. Cybersecurity incidents are also constantly evolving, increasing the difficulty of detecting and successfully defending against them. In the ordinary course of our business, we and such third-parties expect to collect and store personal information, as well as our proprietary business information and intellectual property and that of our customers and employees. Additionally, we expect to rely on third parties and their security procedures for the secure storage, processing, maintenance, and transmission of information that is critical to our operations. Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents, such incidents may occur to us or our third-party providers and, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including personal information of our customers and employees) and the disruption of business operations. We expect to experience attempted routine cyber-attacks of our information technology networks, such as through phishing scams and ransomware. Although we do not except any of these actual or attempted cyber-attacks to have a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future. For example, we may be at higher risk for interruptions, outages and breaches of: operational systems, including business, financial, accounting, product development, data processing or production processes owned by us or such third-parties; facility security systems, owned by us or such third-parties; in-product technology owned by us or such third-parties; any integrated software in our solutions; or customer or other data that we process or such third-parties process on our behalf. Such cyber incidents could materially disrupt operational systems; result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, or others; jeopardize the security of any of our facilities or equipment; or affect the performance of in-product technology and any integrated software in our solutions.
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A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although we maintain information technology measures designed to protect us against intellectual property theft, data breaches and other cyber incidents, such measures will require updates and improvements, and we cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents.
Any actual or alleged security breaches or alleged violations of federal or state laws or regulations relating to privacy and data security could result in mandated user notifications, litigation, government investigations, significant fines, and expenditures; divert management’s attention from operations; deterring people from using our products or services; damage our brand and reputation; and materially adversely affect our business, results of operations, and financial condition. Defending against claims or litigation based on any security breach or incident, regardless of their merit, will be costly and may cause reputation harm. In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage, and compensation to customers, employees, and business partners. The successful assertion of one or more large claims against us that exceed available insurance coverage, denial of coverage as to any specific claim, or any change or cessation in our insurance policies and coverages, including premium increases or the imposition of large deductible requirements, could have a material adverse effect on our business, results of operations, and financial condition.
We may be subjectto governmental regulation and other legal obligations, particularly related to privacy, data protection and information security,and our actual or perceived failure to comply with such obligations could harm our business.
We may be subject to a number of domestic and international laws and regulations that apply to cloud services and the internet generally. These laws, rules and regulations address a range of issues, including data privacy and cyber security, breach notification and restrictions or technological requirements regarding the collection, processing, use, storage, protection, disclosure, retention or transfer of data. The regulatory framework for online services, data privacy and cyber security issues worldwide can vary substantially from jurisdiction to jurisdiction, is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state, local and foreign government bodies and agencies have adopted or are considering adopting laws, rules and regulations regarding the collection, processing, use, storage and disclosure of information, web browsing and geolocation data collection, data analytics, facial recognition, cyber security and breach response and notification procedures. Furthermore, existing laws and regulations are constantly evolving, and new laws and regulations that apply to our business are being introduced at every level of government in the United States, as well as internationally. As we seek to develop our business, we are, and may increasingly become subject to various laws, regulations, and standards, and may be subject to contractual obligations relating to data privacy and security in the jurisdictions in which we operate. Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of personal information, or regarding the manner in which the express or implied consent of customers for the use and disclosure of personal information is obtained, could require us to modify our products and features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to develop new products and features that make use of the personal information that our customers may voluntarily share. Any failure, or perceived failure, by us to comply with any federal or state privacy or security laws, regulations, industry self-regulatory principles, or codes of conduct, regulatory guidance, orders to which we may be subject, or other legal obligations relating to data privacy or security could adversely affect our reputation, brand and business, and may result in claims, liabilities, proceedings or actions against us by governmental entities, customers or others. Any such claims, proceedings or actions could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of customers and result in the imposition of monetary penalties.
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In the United States, there are numerous federal and state data privacy and security laws, rules, and regulations governing the collection, use, disclosure, retention, security, transfer, storage, and other processing of personal data, including federal and state data privacy laws, data breach notification laws, and consumer protection laws. For example, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. Such standards require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue or inaccurate, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Moreover, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal data secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. State consumer protection laws provide similar causes of action for unfair or deceptive practices.
In March 2021, the Governor of Virginia signed into law the Virginia Consumer Data Protection Act (the “VCDPA”). The VCDPA creates consumer rights, similar to the CCPA, but also imposes security and assessment requirements for businesses. In addition, in July 2021, Colorado enacted the Colorado Privacy Act (“COCPA”), becoming the third comprehensive consumer privacy law to be passed in the United States (after the CCPA and VCDPA). The COCPA closely resembles the VCDPA, and both will be enforced by the respective states’ Attorney General and district attorneys, although the two differ in many ways. We must comply with each if our operations fall within the scope of these newly enacted comprehensive mandates, which may increase our compliance costs and potential liability. Similar laws have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. This legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, could impact strategies and availability of previously useful data, and could result in increased compliance costs and/or changes in business practices and policies.
In addition, some laws may require us to notify governmental authorities and/or affected individuals of data breaches involving certain personal information or other unauthorized or inadvertent access to or disclosure of such information. We may need to notify governmental authorities and affected individuals with respect to such incidents. For example, laws in all 50 U.S. states may require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach may be difficult and costly. We also may be contractually required to notify consumers or other counterparties of a security breach. Regardless of our contractual protections, any actual or perceived security breach or breach of our contractual obligations could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach.
We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection to the extent possible. Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or with our existing practices or the features of our products and may conflict with other rules or regulations, making enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent. Any failure or perceived failure by us to comply with our privacy policies, privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized access to or unintended release of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others. Any of these events could cause us to incur significant costs in investigating and defending such claims and, if found liable, pay significant damages. Further, these proceedings and any subsequent adverse outcomes may cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
We may also be subject to claims of liability or responsibility for the actions of third parties with whom we interact or upon whom it relies in relation to various products or services, including but not limited to vendors and business partners. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. Any inability to adequately address privacy and/or data concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.
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The costs of compliance with, and other burdens imposed by, the laws, rules, regulations and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products or services. Even the perception of privacy concerns, whether or not valid, may harm our reputation, inhibit adoption of our products or services by current and future customers, or adversely impact our ability to attract and retain workforce talent. Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action against us, including fines, imprisonment of our employees or directors and public censure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have a material adverse effect on our operations, financial performance and business.
Periods of rapid growth and expansioncould place a significant strain on our resources, including our future employees, which could negatively impact our operatingresults.
We may experience periods of rapid growth and expansion, which may place a significant strain and demands on our management, our operational and financial resources, customer operations, research and development, sales and marketing, administrative, and other resources. To manage our possible future growth effectively, we will be required to continue to improve our management, operational and financial systems. Future growth would also require us to successfully hire, train, motivate and manage employees. In addition, our continued growth and the evolution of our business plan will require significant additional management, technical and administrative resources. If we are unable to manage our growth successfully, we may not be able to effectively manage the growth and evolution of our current business and our operating results could suffer.
Our future performance may dependon the success of products and services we have not yet developed or acquired.
Our success depends on the development, implementation and acceptance of our products and services. Commitments to develop new products and services must be made well in advance of any resulting sales, and technologies and standards may change during development, potentially rendering our products and services outdated or uncompetitive before their introduction. Our ability to develop products and services to meet evolving industry requirements and at prices acceptable to our customers will be significant factors in determining our competitiveness. We may expend considerable funds and other resources on the development of our products and services without any guarantee that these products will be successful. If we are not successful in bringing one or more products or types of services to market, whether because we fail to address marketplace demand, fail to develop viable technologies or otherwise, our revenues may decline and our results of operations could be seriously harmed.
Ouroperating results may be harmed if we are required to collect taxes on our billings in jurisdictions where it has not historicallydone so.
Taxing jurisdictions, including state, local and federal taxing authorities, have differing rules and regulations governing taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, significant judgment is required in evaluating our tax positions and our provision for taxes. While we believe that we are in material compliance with our obligations under applicable taxing regimes, one or more states, localities or the federal government may seek to impose tax collection obligations on us. It is possible that we could face tax audits and that such audits could result in tax-related liabilities for which we have not accrued. A successful assertion that we should be collecting taxes in jurisdictions where it has not historically done so and do not accrue for taxes could result in substantial tax liabilities for past sales, discourage customers from purchasing from us or otherwise harm our business and operating results.
In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, jurisdictional mix of profits at varying statutory tax rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period or periods for which a determination is made.
We expect to requireadditional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and expect to require additional funds to respond to business challenges, including the potential need to develop new business segments, services, features or enhance our products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we expect to need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities that we issue could have rights, preferences and privileges superior to those of holders of our Common Stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to it, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to it when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
Without obtaining adequate capitalfunding or improving our financial performance, we may not be able to continue as a going concern.
Our recurring losses from operations and negative cash flows raise substantial doubt about our ability to continue as a going concern without additional capital-raising activities. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern. Failure to secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, financial condition, and ability to achieve our intended business objectives.
The requirements of being a publiccompany may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations. The Exchange Act requires, among other things, that we file annual and current reports with the SEC with respect to our business and operating results. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming, or costly, and increases demand on our systems and resources.
As a result of disclosure of information in this Annual Report and in filings required of a public company, our business and financial condition is more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert resources of our management and harm our business and operating results.
As a smaller reporting company, weare subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operationsand financial prospects.
As a “smaller reporting company,” we (i) are able to provide simplified executive compensation disclosures in our filings, (ii) are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting and (iii) have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.
We will remain a smaller reporting company until the beginning of a fiscal year in which we had a public float of $250 million held by non-affiliates as of the last business day of the second quarter of the prior fiscal year, assuming our Common Stock is registered under Section 12 of the Exchange Act on the applicable evaluation date. Even if we remain a smaller reporting company, if our public float exceeds $250 million and our annual revenues are greater than $100 million, we will become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.
As a result ofbeing a public company, we are responsible for establishing and maintaining adequate internal control over financial reporting.We have identified material weaknesses in our internal control over financial reporting, and if we are unable to remediate thematerial weaknesses, or if we fail to develop and maintain effective disclosure controls and procedures and internal control overfinancial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable lawsand regulations could be impaired, which may adversely affect our business and the price of our Common Stock.
As a public company, we are required to furnish a report by our management on the effectiveness of our internal control over financial reporting for each Annual Report on Form 10-K that we file with the SEC. This assessment will need to include disclosure of any material weaknesses identified by our management in internal control over financial reporting. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock.
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We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of personnel with an appropriate level of internal controls and accounting knowledge, training and experience commensurate with our financial reporting requirements. Additionally, the limited personnel resulted in our inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions. This material weakness contributed to the following additional material weaknesses:
(1) lack of a functioning audit committee and no outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
(2) inadequate segregation of duties consistent with control objectives;
(3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of U.S. generally accepted accounting principles (“GAAP”) and SEC disclosure requirements; and
(4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified and communicated to management in connection with the preparation and audit of our financial statements as of December 31, 2022 and the preparation of our 2023 quarterly financial statements.
While we are undertaking efforts to remediate these material weaknesses, the material weaknesses will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively. At this time, we cannot predict the success of such efforts or the outcome of our assessment of the remediation efforts. We can give no assurance that our efforts will remediate these material weaknesses in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future.
The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If we are unable to remediate the material weaknesses, our ability to record, process and report financial information accurately, and to prepare the consolidated financial statements within the time periods specified by the rules and regulations of the SEC, could be adversely affected which, in turn, may adversely affect our reputation and business and the trading price of our Common Stock. Our failure to design and maintain effective internal control over financial reporting could also result in errors in our consolidated financial statements that could result in a restatement of such financial statements, and could cause us to fail to meet such time periods, any of which could diminish investor confidence in us and cause a decline in the price of our Common Stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, our Common Stock no longer being quoted on the over-the-counter market, harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.
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Ourreported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
GAAP is subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions already completed before the announcement of such change.
We may be vulnerable to continuedglobal economic uncertainty causing volatility in financial markets.
Our business may be sensitive to changes in general economic conditions and the financial markets inside the United States and internationally, which have experienced extreme disruption in recent times, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, and declining valuations of investments. We believe these disruptions are likely to have an ongoing adverse effect on the world economy. A continued economic downturn and financial market disruptions could have a material adverse effect on our business, financial condition and results of operations. Any uncertainties relating to COVID-19 or other adverse public health developments, inflation, the foreign and domestic government sanctions imposed on Russia as a result of its invasion of Ukraine, or global supply chain disruptions may cause consumers, businesses, and governments to defer purchases in response to tighter credit, decreased cash availability and declining consumer confidence. Accordingly, demand for our products or services could decrease and differ materially from current expectations. Further, some of our customers may require substantial financing in order to fund their operations and subscribe or purchase products or services from us. The inability of these customers to obtain sufficient credit to finance purchases of our products or services and meet their payment obligations to us or possible insolvencies of our customers could result in decreased customer demand and could adversely impact our financial results.
RisksRelated to Our Common Stock
The market priceof our Common Stock is likely to be highly volatile given our status as a relatively unknown company with a small and thinly tradedpublic float, and lack of profits, and you may lose some or all of your investment.
The market for our Common Stock is characterized by significant price volatility when compared to the securities of larger, more established companies that have large public floats, and we expect that the price of our Common Stock will continue to be more volatile than the securities of such larger, more established companies for the indefinite future. The volatility in the price of our Common Stock is attributable to a number of factors. First, as noted above, our Common Stock is, compared to the securities of such larger, more established companies, sporadically and thinly traded. The price of our Common Stock could, for example, decline precipitously in the event that a large number of shares of our Common Stock is sold on the market without commensurate demand. Secondly, we are a speculative or “risky” investment due to our lack of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares of Common Stock on the market more quickly and at greater discounts than would be the case with the securities of a larger, more established company that has a large public float. Such volatility can also occur due to a variety of other factors, including the following:
| ● | the inability to maintain the quotation of the<br> Common Stock on the over-the-counter market; |
|---|---|
| ● | changes in applicable laws or regulations; |
| --- | --- |
| ● | risks relating to the uncertainty of our projected<br> financial information; and |
| --- | --- |
| ● | risks related to the organic and inorganic growth<br> of our business and the timing of expected business milestones. |
| --- | --- |
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of our Common Stock, regardless of our actual operating performance. Many of these factors are beyond our control and may decrease the market price of our Common Stock regardless of our operating performance.
Volatility inthe prices of our Common Stock could subject us to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities or the completion of a merger. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
Our Common Stock is quoted on theExperts Market tier of the OTC Markets Group Inc., which may have an unfavorable impact on the price of our Common Stock and liquidity.Our Common Stock may not be eligible for listing on a national securities exchange.
Our Common Stock is quoted on the Experts Market tier of OTC Markets Group, Inc. This tier is a significantly more limited market than other national securities exchanges, such as those operated by The Nasdaq Stock Market LLC. The quotation of our Common Stock on the over-the-counter market may result in a less liquid market available for existing and potential stockholders to trade shares of our Common Stock, could depress the trading price of our Common Stock and could have a long-term adverse impact on our ability to raise capital in the future. There is no guarantee that any such national securities exchange or other quotation system will permit our Common Stock to be listed and traded. As a result, investors may find it difficult to buy or sell or obtain accurate quotations for our Common Stock, and the liquidity of our Common Stock remain limited. These factors may have an adverse impact on the trading and price of our Common Stock.
We cannot predict the extent to whichan active public trading market for our Common Stock will develop or be sustained. If an active public trading market for our CommonStock does not develop or cannot be sustained, you may be unable to liquidate your investment in our securities.
At present, there is minimal public trading in our Common Stock. We cannot predict the extent to which an active public market for our Common Stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our Common Stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on market price. We cannot give you any assurance that an active public trading market for our securities will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our securities.
U.S. broker-dealers may be discouragedfrom effecting transactions in shares of our Common Stock because they may be considered penny stocks and thus be subject to thepenny stock rules.
The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares of Common Stock have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our Common Stock, which could severely limit the market liquidity of such shares of Common Stock and impede their sale in the secondary market.
A U.S. broker-dealer selling a penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with a net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.
Stockholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include: (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Because certain of our stockholderscontrol a significant number of shares of our Common Stock, they may have effective control over actions requiring stockholderapproval.
As of the date of the filing of this Annual Report and in part due to the Change of Control, Arena, together with its affiliates, beneficially owns an aggregate of 2,347,661,906 shares of Common Stock as well as all shares of outstanding Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), providing such holder the ability to vote approximately 90.2% of the total voting power of our capital stock. One of the entities affiliated with Arena, Portents Holdings LLC, beneficially owns all of our outstanding Series B Preferred Stock, which shares alone entitles it to voting power equivalent to the number of votes equal to 51% of the total voting power of each class of stock outstanding. Due to such disproportionate voting power, new investors will not be able to effect a change in our business or management, and therefore, stockholders would have limited recourse as a result of decisions made by management. As a result, Arena has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, Arena has the ability to control the management and affairs of our Company. Accordingly, this concentration of ownership might harm the market price of our Common Stock by:
| ● | delaying, deferring or preventing a change in corporate control; |
|---|---|
| ● | impeding a merger, consolidation, takeover or other business combination involving us; or |
| ● | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
If securitiesor industry analysts do not publish research or reports about us, or publish negative reports, the price of our Common Stock andtrading volume could decline.
The trading market for our Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our Common Stock, change their opinion, or reduce the target stock price for our Common Stock, our Common Stock price would likely decline. If one or more of these analysts do not publish reports on us regularly or at all, we will not likely have visibility in the financial markets, which could cause our Common Stock price or trading volume to decline.
Because we donot anticipate paying any cash dividends on our shares of Common Stock in the foreseeable future, capital appreciation, if any,would be your sole source of gain if you hold such shares.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and we do not anticipate declaring or paying any cash dividends on our Common Stock for the foreseeable future. As a result, capital appreciation, if any, of our Common Stock would be your sole source of gain on an investment in such shares for the foreseeable future.
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A large numberof outstanding shares of our Common Stock is currently restricted from resale. The number of shares eligible for public sale uponthe lapse of such restrictions and conversions of outstanding convertible notes and preferred stock could depress the market priceof our Common Stock dilute the ownership interests of existing stockholders.
The following summarizes certain transactions in which a large number of shares of Common Stock were issued, which shares are currently restricted from resale but may in the future be sold upon the lapse of such restrictions:
| ● | In connection with the issuance of convertible notes to the Investors, we issued to them shares<br>of our Series F convertible preferred stock, par value $0.001 per share (“Series F Preferred Stock”), which was subsequently<br>converted into 192,073,017 shares of Common Stock. |
|---|---|
| ● | In connection with the issuance of a promissory note to Z4 in December 2021, we issued it warrants<br>to purchase up to 500,000 shares of our Common Stock. |
| --- | --- |
| ● | 155,000 issued and outstanding shares of our Series D convertible preferred stock, par value $0.001<br>per share (the “Series D Preferred Stock”), may be converted into 155,000,000 shares of Common Stock. |
| --- | --- |
| ● | We have issued 1,152,500 shares of the Series E-1 convertible preferred stock, par value $0.001<br>per share (the “Series E-1 Preferred Stock”), which were issued in September 2021 and automatically convert into 1,152,500,000<br>shares of Common Stock two years from the date of issuance. The Company has not processed such conversions as of the date of this<br>Annual Report. |
| --- | --- |
| ● | We have issued 39,895 shares of Series H convertible preferred stock, par value $0.001 per share<br>(the “Series H Preferred Stock”), which may be converted into 39,895,000 shares of Common Stock. |
| --- | --- |
| ● | As of the date of this Annual<br> Report, the outstanding aggregate principal balance, including accrued interest, of outstanding<br> convertible notes, excluding the Investors’ Notes all of which are currently in<br> default is convertible into approximately 163,000,000 shares of Common Stock. |
| --- | --- |
Sales of our Common Stock as such restrictions are lifted and such conversions occur (or in connection with any anticipated conversions) may make it more difficult for us to sell our Common Stock and other equity securities in the future at a time and at a price that we deem appropriate. Such conversions and sales could also cause the trading price of our Common Stock to fall and dilute the ownership of our existing stockholders.
We could issue “blank check”preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairing theirvoting rights; and provisions in our organizational documents could discourage a takeover that stockholders may consider favorable.
Our articles of incorporation, as amended (“Articles of Incorporation”), authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board. Our Board is empowered, without stockholder approval, to issue a series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying, or preventing a change in control of the Company. For example, it would be possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the Company. Currently, shares of our Series B Preferred Stock, Series D Preferred Stock, Series E-1 Preferred Stock and Series H Preferred Stock are currently outstanding, each with preferential rights over the Common Stock.
Our Articles of Incorporation, amendedand restated bylaws (“Bylaws”) and Nevada law have anti-takeover provisions that could discourage, delay or preventa change in control, which may cause the prices of our securities to decline.
Our Articles of Incorporation, Bylaws and Nevada law contain provisions which could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are currently authorized to issue up to 50,000,000 shares of “blank check” preferred stock. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. Currently, shares of our Series B Preferred Stock, Series D Preferred Stock, Series E-1 Preferred Stock and Series H Preferred Stock are currently outstanding, each with preferential rights over the Common Stock. The terms of such series of preferred stock any other series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. Such classes of preferred stock now and hereinafter issued could materially adversely affect the rights of the holders of our securities, and therefore, reduce the value of our securities. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by current management.
Our Articles of Incorporation, Bylaws or Nevada law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:
| ● | the inability of our stockholders to call a special meeting; |
|---|---|
| ● | the right of our Board of Directors to issue preferred stock without stockholder approval; and |
| --- | --- |
| ● | the ability of our directors to fill vacancies on our Board of Directors. |
| --- | --- |
| ● | Provisions of our Articles of Incorporation, Bylaws or<br>Nevada law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or<br>preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or<br>frustrate attempts by our stockholders to replace or remove our management. In particular, our Articles of Incorporation, our<br>Bylaws or Nevada law, as applicable, among other things, may provide our Board of Directors with the ability to alter our Bylaws<br>without stockholder approval, and provide that vacancies on our Board of Directors may be filled by a majority of directors in<br>office, although less than a quorum. |
| --- | --- |
In addition, we are subject to Nevada’s Combination with Interested Stockholders Statute (Nevada Revised Statutes 78.411 – 78.444), which prohibits an interested stockholder from entering into a “combination” with the corporation, unless certain conditions are met. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with our Board of Directors. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our Common Stock to decline.
We are also subject to Nevada’s Acquisition of Controlling Interest Statute (Nevada Revised Statutes 78.378 – 78.3793), which prohibits an acquirer, under certain circumstances, from voting shares of a corporation’s stock after crossing specific threshold ownership percentages. These provisions have the effect of discouraging or delaying from acquiring or merging with us.
Item 1B. Unresolved Staff Comments.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Item 1C. Cybersecurity.
Not applicable.
Item 2. Properties.
We are a remote-only company. Accordingly, we maintain basic headquarters at 2500 Westchester Avenue, Suite 401, Purchase, New York, for which there is no lease.
Item 3. Legal Proceedings
Other than the following proceedings, we are not a party to any material pending legal proceedings and, to the best of our knowledge, none of our property or assets are the subject of any material pending legal proceedings.
On October 12, 2023, the Supreme Court of the State of New York in the County of Albany entered a final judgment against the Company approving the request of the Workers’ Compensation Board of the State of New York, the plaintiff in the case, seeking recovery of an outstanding assessment/award in the sum of $7,500.
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On November 10, 2023, Philip Falcone, individually and on behalf of Madison and other named defendants, filed a Confession of Judgment affirming that the Z4 Note had been issued to the Company, dated December 28, 2021, by Z4 Management, which was guaranteed by each of FFO1 and FFO2. The Z4 Note was initially payable on February 15, 2022, and had an original principal balance of $500,000.00 with an interest rate of 12% per annum. The Z4 Note’s expiration date was extended to July 5, 2022, then further extended to March 31, 2023, and as of October 1, 2023, the revised principal balance, along with interest accrued, totaled $581,304. On such date, Z4 Management filed an Affidavit of Default affirming that the Z4Note was in default and requesting a judgment in the amount of $581,304 against Madison, FFO1, FFO2, and Mr. Falcone personally in favor of Z4 Management. On December 5, 2023, a judgement in favor Z4 Management in the sum of $581,304 was rendered against Madison, Mr. Falcone, FFO1 and FFO2.
Item4. Mine Safety Disclosures.
Not Applicable.
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PART
II
Item5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a)Market Information
Our Common Stock was quoted on the Pink Open Market maintained by the OTC Markets Group Inc. (the “OTC”) under the symbol “MDEX” from April 26, 2006 to July 14, 2023 and is now quoted on the Expert Market operated by the OTC since July 17, 2023. Quotations of Expert Market securities are restricted from public viewing. It is our objective that the Common Stock once again be quoted on the Pink Open Market, but there is no assurance that we will be successful in such regard. The following table lists the high and low prices of our Common Stock for each of our fiscal quarters for the last two fiscal years and for the interim period ended September 30, 2023. The price information was obtained from the OTC and reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
| High and Low Prices of the Common Stock | |||||
|---|---|---|---|---|---|
| For the Period Ended | High | Low | Source | ||
| September 30, 2023 | $ | 0.0017 | $ | 0.002 | OTC Markets Group Inc. |
| June 30, 2023 | $ | 0.0042 | $ | 0.0012 | OTC Markets Group Inc. |
| March 31, 2023 | $ | 0.0174 | $ | 0.0016 | OTC Markets Group Inc. |
| December 31, 2022 | $ | 0.031 | $ | 0.003 | OTC Markets Group Inc. |
| September 30, 2022 | $ | 0.110 | $ | 0.000 | OTC Markets Group Inc. |
| June 30, 2022 | $ | 0.218 | $ | 0.067 | OTC Markets Group Inc. |
| March 31, 2022 | $ | 0.250 | $ | 0.050 | OTC Markets Group Inc. |
| December 31, 2021 | $ | 0.310 | $ | 0.034 | OTC Markets Group Inc. |
| September 30, 2021 | $ | 0.777 | $ | 0.130 | OTC Markets Group Inc. |
| June 30, 2021 | $ | 1.070 | $ | 0.300 | OTC Markets Group Inc. |
| March 31, 2021 | $ | 0.940 | $ | 0.190 | OTC Markets Group Inc. |
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(b)Holders of Record
We have approximately 52 holders of record of our Common Stock as of December 31, 2022, according to a shareholders list provided by Madison’s transfer agent as of that date. The number of registered shareholders does not include any estimate by us of the number of beneficial owners of Common Stock held in street name. The transfer agent for our Common Stock is Pacific Stock Transfer Company, 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119 and its telephone number is (800) 785-7782.
(c)Dividends
We have declared no dividends on our Common Stock, and we are not subject to any restrictions that limit our ability to pay dividends on our shares of Common Stock. Dividends are declared at the sole discretion of our Board of Directors and we do not plan to pay dividends in the future.
(d)Securities Authorized for Issuance under Equity Compensation Plans
As of December 31, 2022, we have not adopted an equity compensation plan.
(e)Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three years that would be required to be disclosed pursuant to Item 701 of Regulation S-K, with the exception of the following:
On February 17, 2021, we entered into a securities purchase agreement with the Investors, pursuant to which we issued the Notes. In connection with the issuance of the Notes, we issued to the Investors warrants to purchase an aggregate of 192,073,017 shares of Common Stock (collectively, the “Warrants”) and 1,000 shares of Series F Preferred Stock.
On September 24, 2021, we issued to the Investors warrants to purchase up to 192,073,016 shares of Common Stock.
On December 28, 2021, in connection with the issuance of the Z4 Note, we issued to Z4 Management a warrant to purchase up to 500,000 shares of our Common Stock at $0.025 per share.
On March 1, 2022, we issued to Mr. Zenna, then our director, a warrant to purchase up to 500,000 shares of our Common Stock at $0.025 per share.
In 2022, we sold a total of $2,520,000 of notes payable, some of which are convertible into our Common Stock at fixed prices, and we issued certain noteholders warrants to purchase up to an aggregate of 10,600,000 shares of our Common Stock at prices ranging from $0.02 to $0.025 per share.
In 2023 to date, we sold a total of $220,000 of notes payable to two noteholders, which are convertible into our Common Stock at fixed prices of $0.02 per share, and we issued such holders warrants to purchase an aggregate of 40,000,000 shares of our Common Stock at prices ranging from $0.02 to $0.025 per share.
(f)Penny Stock Rules
Trading in our Common Stock is subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our Common Stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. The application of the “penny stock” rules may affect your ability to resell our securities.
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Item6. [Reserved]
Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THE FOLLOWING PRESENTATION OF OUR PLANOF OPERATION OF SHOULD BE READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATIONINCLUDED HEREIN.
RECENT
DEVELOPMENTS
On January 28, 2023, the Agent for the Investors delivered a notice to us (the “Acceleration Notice”) stating that the Agent and Investors (a) elected to hereby cause the outstanding principal amount of the Investor Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof, to become immediately due and payable in cash, (b) intended to commence legal action to collect any or all of the amounts due under the Investor Notes, and (c) sought the appointment of a receiver or trustee as a means of realizing proceeds on their collateral.
On February 1, 2023, we entered into the Partial Foreclosure Agreement with the Investors pursuant to which we transferred ownership of our FCC licenses and other broadcast television assets to a third-party entity controlled by the Investors. In consideration therefor, the Investors agreed to reduce the indebtedness under the Notes by a $11,600,000.
On September 21, 2023, the Agent delivered a notice to us that the Agent exercised the Investors’ rights to vote the Pledged Interests and to exercise the Pledgees’ rights, powers and privileges, to pass certain resolutions and to amend our bylaws then in effect to, among other things, (i) remove the Board of Directors and all Company officers, and (ii) reduce the number of the Board of Directors from three directors to one director. As a result of the Agent sending such notice and exercising its rights to vote the Pledged Interests, a Change of Control occurred.
In addition to the defaults described above, as of the date of this Annual Report, and since the last day of the year ended December 31, 2022, we are in default under a certain loans payable for failure to pay principal and accrued interest on such loans, with an aggregate of approximately $3.5 million and $3.0 million of principal, accrued interest and late fees, as of such date and as of December 31, 2022, respectively. As a result of the Change of Control, we intend to strategize with the holders of such notes to extend, modify or otherwise revisit the terms of such indebtedness in order to resolve such outstanding defaults.
On November 6, 2023, the shareholders of the Company removed Philip Falcone and Warren Zenna as our directors and appointed Thomas Amon as the sole member of our board of directors. Mr. Amon removed all our officers and was appointed as the Company’s President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer.
RESULTS
OF OPERATIONS
Our consolidated financial statements included herein have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Years Ended December 31, 2022 and December31, 2021
Generaland administrative expenses
General and administrative expenses increased to $629,619 for the year ended December 31, 2022, from $8,478 for the year ended December 31, 2021. The increase was primarily the result of recruiting and hiring employees and outside talent to develop BCTV content and distribution arrangements.
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Professional Fees
Professional fees increased to $1,910,039 for the year ended December 31, 2022, from $411,447 for the year ended December 31, 2021. The increase was primarily the result of an increase in the consulting, legal and accounting expense associated with regulatory filings for the SEC, developing the business and fundraising efforts.
Goodwill Impairment Loss
Our goodwill impairment loss was $0 and $4,224,962 for the years ended December 31, 2022 and 2021, respectively. Due to a sustained decline in the market capitalization of our Common Stock during the fourth quarter of 2021, we performed an interim goodwill impairment test. Management considered that, along with other possible factors affecting the assessment of our operations for the purposes of performing a goodwill impairment assessment, including management’s assumptions about expected future revenue forecasts and discount rates, changes in the overall economy, trends in the stock price, estimated control premiums, other operating conditions, and the effect of changes in estimates and assumptions that could materially affect the determination of fair value and goodwill. As a result of the significant decline in our market capitalization despite any of the other positive factors contemplated and relatively little change in our ongoing business operations, the outcome of this goodwill impairment test resulted in a charge for the impairment of goodwill of $4,224,962 recorded in the consolidated financial statements for the year ended December 31, 2021.
Loss from Impairment of Long-Lived Assets
Our loss from impairment of long-lived assets was $197,427 and $0 for the years ended December 31, 2022 and 2021, respectively. Our intangible assets primarily consist of our domain names and access to a third-party streaming platform for our BCTV business, which are considered indefinite-lived intangible assets that are not amortized, but instead are tested at least annually for impairment. Based on management’s assessment of the lack of revenue to date and the prospects for future revenues using the intangible assets, we fully impaired the assets and recognized an impairment charge of $197,427 in the year ended December 31, 2022. ****
Interest Expense
Interest expense increased to $5,952,153 for the year ended December 31, 2022, from $5,260,417 for the year ended December 31, 2021. The increase resulted primarily from accruing default interest on the $16,500,000 of principal amount of Notes issued to the Investors starting on January 1, 2022.
Gain on Debt Extinguishment
Our gain on debt extinguishment was $0 for the year ended December 31, 2022, as compared to $9,126,294 for the year ended December 31, 2021. In 2021, we recognized a non-cash net gain when we amended the conversion price of the Notes held by the Investors and when we extinguished outstanding notes payable by issuing shares of our Series D Preferred Stock.
Gain from Derivative That is not Designatedin a Hedging Relationship
Our gain from derivative that is not designated in a hedging relationship was $0 and $10,065,713 for the years ended December 31, 2022 and 2021, respectively.
Discontinued Operations
Our loss from discontinued operations was $3,671,407 and $3,418,293 for the years ended December 31, 2022 and 2021, respectively. Effective February 1, 2023, we entered into the Partial Foreclosure Agreement with the Investors, pursuant to which we transferred our ownership of the assets associated with the broadcast television business of Sovryn, then our subsidiary, in consideration for a $11,600,000 reduction in the indebtedness due under the Investor Notes. As a result, the revenues, expenses, assets and liabilities of Sovryn are included as discontinued operations for the years ended December 31, 2022. Included in the loss from discontinued operations for the year ended December 31, 2022 is a $1,144,491 loss from impairment of our long-lived assets. On November 15, 2021, we sold our subsidiary, CZJ License Inc. and designated its operations as discontinued.
20
NetLoss
Net loss decreased to $13,139,810 for the year ended December 31, 2022, from $14,262,579 for the year ended December 31, 2021. The decrease was primarily the result of a one-time $4,224,962 goodwill impairment loss in 2021 that was partial offset by a $1,144,941 loss from impairment of long-lived assets from discontinued operations and a $197,427 loss from impairment of long-lived assets from continuing operations. Net loss on a basic and diluted basis of $0.008 per share for the year ended December 31, 2022, based on 1,599,829,313 weighted average shares outstanding, as compared to a net loss of $0.04 per share for the year ended December 31, 2021, based on 352,843,639 weighted average shares outstanding. The increase in weighted average shares outstanding relates primarily to issuances of 192,073,017 shares to the Investors on October 11, 2021 in connection with the Notes we issued, the 1,091,388,889 shares we issued on October 11, 2021 to holders of shares of Series E-1 Preferred Stock pursuant to an exchange agreement and the 255,555,556 shares we issued on November 2, 2021 in exchange for shares of our Preferred Series Stock, which were outstanding for all of 2022.
Liquidityand Capital Resources
Cashand Working Capital
As at December 31, 2022, we had $0 in cash and a $13,860,314 working capital deficit, compared to cash of $729 and working capital deficit of $3,673,317 as at December 31, 2021. The increase in the working capital deficit primarily resulted from classifying our obligations under the Investor’s Notes as a current liability as a result of us being in default under the Notes during the year ended December 31, 2022.
We will require additional capital to meet our long- and short-term operating requirements. For the year ended December 31, 2022, our principal source of liquidity was our cash that we obtained from borrowings. Our principal use of cash was to fund operations. We expect that the principal uses of cash in the future will be for continuing operations associated with rolling out our business plan and repayment of notes payable that are not converted into our Common Stock or renegotiated.
NetCash Used in Operating Activities
We used cash of $2,820,304 in operating activities for the year ended December 31 2022, compared to cash used of $2,802,410 in operating activities during the year ended December 31, 2021.
NetCash Used in Investing Activities
We used cash of $0 in investing activities during the year ended December 31,2022, compared to cash used of $855,750 in investing activities during the year ended December 31, 2021. In the year ended December 31,2021, we used cash to make loans to Top Dog Productions Inc. to build out our website. Top Dog Productions, Inc. is a Los Angeles based TV production company that assisted us with developing BCTV content and production of short segments as prototypes. On September 9, 2021, we issued a secured promissory note with Top Dog Productions, Inc. in the aggregate principal sum of up to $2,000,000. accruing interest at a rate of 5% per annum. As of December 31, 2022, we advanced $527,624 and accrued $26,510 in interest receivable. Based on management’s assessment of the collectability of the principal and interest, we recognized an allowance for the entire amount and included the charge in bad debt expense for the year ended December 31, 2022.
Net Cash Provided by Financing Activities
Net cash provided by financing activities of $1,752,000 came primarily from proceeds from subordinated loans entered into during the year ended December 31, 2022, compared to $20,982,000 of cash provided by financing activities during the year ended December 31, 2021, which consisted primarily of the proceeds from the Arena financing in February 2021, share subscriptions received, but not issued, for our Series G convertible Preferred Stock, par value $0.001 per share (the “Series G Preferred Stock”), and proceeds from subordinated loans.
21
Discontinued Operations
In the fourth quarter of 2022, management at that time determined that Sovryn’s television broadcast business was not an efficient use of our resources to develop and launch BCTV, our core business, and sought to exit Sovryn’s business and reduce Madison’s senior debt it incurred in connection with acquiring Sovryn’s assets and creating its business. As a result, Sovryn is recognized as a discontinued operation in the accompanying consolidated financial statements. The previous year’s assets, liabilities and expenses have been similarly classified for comparative purposes. The following is a summary of Sovryn for the years ended December 31, 2022 and 2021:
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Current assets | $ | 126,331 | $ | 942,713 | ||
| Property, equipment and right-of-use assets | 1,440,937 | 2,887,328 | ||||
| Intangible assets | 10,159,063 | 12,029,646 | ||||
| 11,726,331 | 15,859,687 | |||||
| Liabilities | ||||||
| Accounts payable and accrued liabilities | 1,118,174 | 508,779 | ||||
| Lease liability obligations | 1,464,728 | 1,468,495 | ||||
| 2,582,902 | 21,977,274 | |||||
| Revenues | 1,920,612 | 1,243,655 | ||||
| Selling, general and administrative | (509,867 | ) | (531,899 | ) | ||
| Television operation | (344,260 | ) | (267,193 | ) | ||
| Amortization | (323,484 | ) | (180,210 | ) | ||
| Professional fees | (1,178,043 | ) | (1,652,095 | ) | ||
| Interest expense | 175,695 | (292,704 | ) | |||
| Loss on asset disposals | (52,668 | ) | (1,737,847 | ) | ||
| Impairment loss | (3,008,013 | ) | — | |||
| Loss from discontinued operations | $ | (3,671,407 | ) | $ | (3,418,293 | ) |
Purchaseof Significant Equipment
As of December 31, 2022, we had no intention to purchase any significant equipment during the next twelve months.
Off-BalanceSheet Arrangements
We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
MaterialCommitments for Capital Expenditures
We had no contingencies or long-term commitments at December 31, 2022.
GoingConcern
The independent auditors’ reports accompanying our December 31, 2022 and 2021 consolidated financial statements in this Annual Report contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Such consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
22
Transactions with Related Parties
In March 2021, we entered into a consulting agreement with Zenna Consulting Group, Inc. (“Zenna Consulting”), a corporation affiliated with Warren Zenna, who served as a Board member at such time, to provide oversight of marketing and communications services, which ended on July 31, 2021. We paid Zenna Consulting $0 and $57,000 fees in the years ended December 31, 2022 and 2021, respectively. Mr. Zenna was a member of our Board of Directors until November 6, 2023. On March 1, 2022, we granted a warrant to Mr. Zenna to purchase up to 500,000 shares of our Common Stock at $0.025 per share at any time beginning September 1, 2022 and ending September 1, 2026. We estimate the value such warrant to be approximately $9,000, based on the $0.018 market price per share of our Common Stock on March 1, 2022.
On April 7, 2021, we issued 1,500,000 shares of our Common Stock valued at $1,500 to Mr. Canouse in exchange for transferring his 100 shares of our Series B Preferred Stock to FFO1, an entity controlled by Mr. Falcone, then our Chief Executive Officer and Chairman of our Board of Directors. The 100 shares of Series B Preferred Stock provide the holder thereof the right to vote 51% of the voting power of each class of outstanding voting shares of capital stock. FFO1 also held 461,000 shares of Series E-1 Preferred Stock and FFO2 held 461,000 shares of Series E-1 Preferred Stock. Lisa Falcone, wife of Mr. Falcone, is the trustee of FFO2 and Ms. Falcone has shared voting and dispositive power. Such shares of preferred stock held by FFO1 and FFO2 are included in the Pledged Assets.
Effective January 1, 2022, we entered into a management consulting agreement with GreenRock LLC, a company controlled by Mr. Falcone, for a period of one year ending December 31, 2022, pursuant to which we provided monthly remuneration of $35,000, plus expenses in connection with his duties, responsibilities and performance as our chief executive officer. In February 2021, Sovryn entered into a consulting agreement with GreenRock LLC to provide us with chief executive officer services. In the years ended December 31, 2022 and 2021, we paid GreenRock LLC $420,000 and $315,000 in fees, respectively. Mr. Falcone is the managing member of GreenRock LLC and is our former Chief Executive Officer. We paid GreenRock LLC bonuses of $505,972 for the year ended December 31, 2022.
On February 1, 2023, we entered into the Partial Foreclosure Agreement with the Investors pursuant to which we transferred ownership of our FCC licenses and other broadcast television assets to a third-party entity controlled by the Investors. In consideration therefor, the Investors agreed to reduce the indebtedness under the Notes by $11,600,000. On September 21, 2023, the Agent for the Investors delivered to us a notice that the Agent has exercised the Investors’ rights to vote the Pledged Interests, including the 100 shares of our Series B Preferred Stock, and to exercise the Pledgees’ rights, powers and privileges to pass certain resolutions and to amend our bylaws then in effect to, among other things, (i) remove the Board of Directors and all Company officers, and (ii) reduce the number of the Board of Directors from three directors to one director. As a result of the Agent sending such notice and exercising its rights to vote the Pledged Interests, a Change of Control occurred.
On November 6, 2023, the shareholders of the Company removed Philip Falcone and Warren Zenna as our directors and appointed Thomas Amon as the sole member of our board of directors. Mr. Amon removed all our officers and appointed himself as the Company’s President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer.
Recent Accounting Pronouncements
New pronouncements issued for future implementation are discussed in Note 3, Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements, in our Notes to the consolidated financial statements included in this Annual Report.
Critical Accounting Policies
We follow certain significant accounting policies when preparing our consolidated financial statements. A complete summary of these policies is included in Note 1 of the Notes to the consolidated financial statements included in this Annual Report. Certain of the policies require management to make significant and subjective estimates or assumptions that may deviate from actual results. In particular, management makes estimates regarding the useful life of long-lived assets related to depreciation and amortization expense, estimates regarding fair value of our reporting units and future cash flows with respect to assessing potential impairment of both long-lived assets and goodwill and estimates of expense related to our debt and equity instruments. Each of these estimates is discussed in greater detail in the following discussion.
23
Long-LivedAssets, Depreciation and Amortization Expense and Valuation
We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset, or related asset group, may not be recoverable from estimated future undiscounted cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the year ended December 31, 2022, we recognized that we would not complete the acquisition of the TV station assets of W27EB and KPHE TV and we wrote off $1,150,000 in deposits paid to sellers of those assets.
For the year ended December 31, 2022, our intangible assets primarily consisted of our domain names and access to a third party streaming platform for our BCTV business, which are considered indefinite-lived intangible assets that are not amortized, but instead are tested at least annually for impairment. Based on management’s assessment of the lack of revenue to date and the prospects for future revenues using the intangible assets, we fully impaired the assets and recognized an impairment charge of $197,427 in the year ended December 31, 2022. ****
GoodwillValuation
Management performed the annual goodwill impairment assessment as of December 31, 2021 and concluded that our goodwill for the Sovryn acquisition was impaired as of that date. Goodwill is tested annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. We follow a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill is measured as the excess of its carrying value over its implied fair value. For the year ended December 31, 2022, we had no goodwill.
DerivativeLiabilities
We have certain financial instruments that are derivatives or contain embedded derivatives. We evaluate all of our financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with us, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.
Item7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
24
Item8. Financial Statements and Supplementary Data.
MADISON
TECHNOLOGIES INC.
DECEMBER
31, 2022 AND 2021
TABLE
OF Contents
| Independent Auditor’s Report (PCAOB ID#: 5041) | F-1 |
|---|---|
| CONSOLIDATED FINANCIAL STATEMENTS | |
| Consolidated Balance Sheets | F-2 |
| Consolidated Statements of Operations | F-3 |
| Consolidated Statements of Stockholders’ Deficit | F-4 |
| Consolidated Statements of Cash Flows | F-5 |
| Notes to the Consolidated Financial Statements | F-6 |
Report
of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Madison Technologies Inc.
Opinionon the Financial Statements
We have audited the accompanying consolidated balance sheets of Madison Technologies Inc. (the “Company”) as of December 31, 2022 and 2021, the related statement of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
SubstantialDoubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basisfor Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
CriticalAudit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or are required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
| /s/ BF Borgers CPA PC |
|---|
| BF Borgers CPA PC |
| We have served as<br> the Company’s auditor since March 28, 2022 |
| PCAOB ID 5041 |
| Lakewood, CO |
| January 24, 2024 |
F-1
MADISON
TECHNOLOGIES INC.
CONSOLIDATED
Balance Sheets
| For the Year Ended December 31,<br><br><br><br>2021 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| CURRENT ASSETS | |||||
| Cash | — | $ | 729 | ||
| Prepaid expenses | 12,722 | — | |||
| Note receivables | — | 738,878 | |||
| Assets from discontinued operations | 11,726,332 | 15,859,685 | |||
| Total Current Assets | 11,739,054 | 16,599,292 | |||
| Intangible assets, net | — | 167,000 | |||
| Investments | 100 | 100 | |||
| Total Assets | 11,739,154 | $ | 16,766,392 | ||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||
| CURRENT LIABILITIES | |||||
| Accounts payable and accrued expenses | 741,399 | $ | 283,024 | ||
| Derivative liability | 4,429,329 | 3,464,529 | |||
| Promissory notes | 936,112 | 491,741 | |||
| Convertible notes | 1,883,295 | 850,000 | |||
| Interest payable on senior secured notes | 3,300,000 | 453,750 | |||
| Senior secured notes, net of discount | 14,599,240 | 12,919,392 | |||
| Liabilities from discontinued operations | 2,582,902 | 1,977,273 | |||
| Total liabilities | 28,472,277 | 20,439,709 | |||
| Preferred Shares - Series C, 0.001 par value; 2%, stated value 100 per share 10,000 shares designated, 0 issued and outstanding, December 31, 2022 and 2021, respectively; | — | — | |||
| Preferred Shares - Series D, 0.001 par value; convertible, stated value 3.32 per share, 230,000 shares designated, 155,000 shares issued and outstanding, December 31, 2022 and 2021, respectively; 75,000 converted | 155 | 155 | |||
| Preferred Shares - Series E, 0.001 par value; convertible, stated value 1,000 per share, 1,000 shares designated, 0 issued and outstanding, December 31, 2022 and 2021, respectively; 1,000 shares exchanged for Series E-1 | — | — | |||
| Preferred Shares - Series E-1, 0.001 par value; convertible, stated value 0.87 per share, 1,152,500 shares designated, 1,152,500 and 0 shares issued and outstanding, December 31, 2022 and 2021, respectively; | 1,153 | 1,153 | |||
| Preferred Shares - Series F, 0.001 par value; convertible, stated value 1 per share, 1,000 shares designated, 0 issued and outstanding, December 31, 2022 and 2021, respectively; 1,000 shares converted | — | — | |||
| Preferred Shares - Series G, 0.001 par value; convertible, stated value 1,000 per share, 4,600 shares designated, 0 issued and outstanding, December 31, 2022 and 2021, respectively; 4,600 shares converted | — | — | |||
| Preferred Shares – Series H, 0.001 par value; convertible, stated value 1 per share, 39,895 shares designated, 39,895 issued and outstanding, December 31, 2022 and 2021, respectively | 40 | 40 | |||
| STOCKHOLDERS’ DEFICIT | |||||
| Preferred Shares – 50,000,000 shares authorized, 0.001 par value Preferred Shares - Series A, 0.001 par value; 3%, stated value 100 per share, 100,000 shares designated, 0 shares issued and outstanding, December 31, 2022 and 2021, respectively | — | — | |||
| Preferred Shares - Series B, 0.001 par value; 100 shares designated, 100 shares issued and outstanding, December 31, 2022 and 2021, respectively | — | — | |||
| Common Shares - 0.001 par value; 6,000,000,000 shares authorized, 1,603,095,243 shares issued and outstanding, December 31, 2022 and 2021, respectively | 1,603,095 | 1,599,095 | |||
| Additional Paid in Capital | 10,549,265 | 10,473,261 | |||
| Accumulated deficit | (28,886,831 | ) | (15,747,021 | ) | |
| Total stockholders’ deficit | (16,734,471 | ) | (3,674,665 | ) | |
| Total liabilities and stockholders’ deficit | 11,739,154 | $ | 16,766,392 |
All values are in US Dollars.
See
the accompanying Notes to the Consolidated Financial Statements.
F-2
MADISON
TECHNOLOGIES INC.
CONSOLIDATED
STATEMENTS of Operations
| For<br> the Year | For<br> the Year | |||||
|---|---|---|---|---|---|---|
| Ended | Ended | |||||
| December<br> 31,<br> <br>2022 | December<br> 31,<br> <br>2021 | |||||
| Revenues | $ | — | $ | — | ||
| Operating Expenses | ||||||
| General and administrative | 629,619 | 8,478 | ||||
| Professional fees | 1,910,039 | 411,447 | ||||
| Bad debt expense | 818,279 | — | ||||
| Long-lived assets impairment<br> loss | 197,427 | — | ||||
| Goodwill<br> impairment loss | — | 4,224,962 | ||||
| Total<br> operating expenses | 3,555,364 | 4,644,887 | ||||
| Loss before other expense | (3,555,364 | ) | (4,644,887 | ) | ||
| Other income (expense) | ||||||
| Interest expense | (5,952,153 | ) | (5,260,417 | ) | ||
| Gain on debt extinguishment | — | 9,126,294 | ||||
| Loss from debt derivative | — | (10,065,713 | ) | |||
| Loss from change in<br> value of warrants | — | (6,008 | ) | |||
| Other<br> income | 39,114 | 6,445 | ||||
| Total non-operating expense | (5,913,039 | ) | (6,199,399 | ) | ||
| Loss from continuing<br> operations | (9,468,403 | ) | (10,844,286 | ) | ||
| Loss<br> from discontinued operations | (3,671,407 | ) | (3,418,293 | ) | ||
| Net<br> loss and comprehensive loss | $ | (13,139,810 | ) | $ | (14,262,579 | ) |
| Net<br> loss per share-Basic and diluted | $ | (0.008 | ) | $ | (0.040 | ) |
| Average number<br> of shares of common stock outstanding | 1,599,829,313 | 352,843,639 |
See the accompanying Notes to the Consolidated Financial Statements.
F-3
MADISON
TECHNOLOGIES INC.
CONSOLIDATED
Statements of stockholders’ DEFICIT
| For the Year Ended December 31, 2022 | Additional | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Common | Preferred | Paid In | Accumulated | |||||||||||||||
| Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||
| Balance, December 31, 2021 | 1,599,095,027 | $ | 1,599,095 | $ | 1,348 | $ | 10,473,261 | $ | (15,747,021 | ) | $ | (3,674,665 | ) | |||||
| Conversion of convertible note into Common Stock | 4,000,216 | 4,000 | — | 76,004 | — | 80,004 | ||||||||||||
| Net loss for the period | — | — | — | — | (13,139,810 | ) | (13,139,810 | ) | ||||||||||
| Balance, December 31, 2022 | 1,599,095,027 | $ | 1,603,095 | $ | 1,348 | $ | 10,549,265 | $ | (28,886,831 | ) | $ | (16,734,471 | ) | |||||
| For the Year Ended December 31, 2021 | Additional | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Common | Preferred | Paid In | Accumulated | |||||||||||||||
| Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||
| Balance, December 31, 2020 | 23,472,565 | $ | 23,472 | $ | 93 | $ | 1,302,977 | $ | (1,484,442 | ) | $ | (157,900 | ) | |||||
| Cancellation of Series A Preferred | — | — | (93 | ) | 93 | — | — | |||||||||||
| Conversion of debt to Series D Preferred | — | — | 230 | 667,984 | — | 668,214 | ||||||||||||
| Series E Preferred issued for acquisition of assets | — | — | 1 | 4,225,061 | — | 4,225,062 | ||||||||||||
| Series F Preferred issued for convertible note | — | — | 1 | 230,030 | — | 230,031 | ||||||||||||
| Equity portion of debts issued and extinguished | — | — | — | 1,023,855 | — | 1,023,855 | ||||||||||||
| Common issued for Series B Preferred transfer | 1,500,000 | 1,500 | — | (1,500 | ) | — | — | |||||||||||
| Series E Preferred exchanged for Series E-1 Preferred | 1,091,388,889 | 1,091,389 | 1,152 | (1,092,541 | ) | — | — | |||||||||||
| Conversion of Series F Preferred into Common Stock | 192,073,017 | 192,073 | (1 | ) | (192,072 | ) | — | — | ||||||||||
| Sale of Series G Preferred and conversion into Common Stock | 255,555,556 | 255,556 | — | 4,344,444 | — | 4,600,000 | ||||||||||||
| Common Stock exchanged for Series H Preferred | (39,895,000 | ) | (39,895 | ) | 40 | 39,855 | — | — | ||||||||||
| Conversion of Series D | 75,000,000 | 75,000 | (75 | ) | (74,925 | ) | — | — | ||||||||||
| Net loss for the period | — | — | — | — | (14,262,579 | ) | (14,262,579 | ) | ||||||||||
| Balance, December 31, 2021 | 1,599,095,027 | $ | 1,599,095 | $ | 1,348 | $ | 10,473,261 | $ | (15,747,021 | ) | $ | (3,674,665 | ) |
See the accompanying Notes to the Consolidated Financial Statements.
F-4
MADISON
TECHNOLOGIES INC.
consolidated
Statements of cash flows
| For the | For the | |||||
|---|---|---|---|---|---|---|
| Year Ended | Year Ended | |||||
| December 31, 2022 | December 31, 2021 | |||||
| Cash flows from operating activities: | ||||||
| Net loss from continuing operations for the period | $ | (9,468,403 | ) | $ | (10,844,286 | ) |
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||
| Amortized interest | 2,428,313 | 2,694,914 | ||||
| Bad debt expense | 725,561 | — | ||||
| Fair value of Warrant issued for services | 9,000 | — | ||||
| Loss on disposal of CZJ License | — | 437,125 | ||||
| Losses from impairment of long-lived assets and goodwill | 167,000 | 4,224,962 | ||||
| Changes in non-cash working capital items: | ||||||
| Prepaid expenses | 595 | 17,183 | ||||
| Accounts payable and accruals | 471,380 | 220,754 | ||||
| Interest payable | 2,846,250 | 453,750 | ||||
| Interest receivable | — | (6,812 | ) | |||
| Net cash used in operating activities | (2,820,304 | ) | (2,802,410 | ) | ||
| Cashflows from investing activities: | ||||||
| Purchases of intangible assets | — | (167,000 | ) | |||
| Funds advanced for note receivable | — | (718,750 | ) | |||
| Net cash used in investing activities | — | (885,750 | ) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from convertible and promissory notes sold | 1,752,000 | 16,730,000 | ||||
| Proceeds from sales of Series G Preferred Stock | — | 4,600,000 | ||||
| Repayment of convertible note | — | (350,000 | ) | |||
| Net cash provided by financing activities | 1,752,000 | 20,980,000 | ||||
| Cash flows from continuing operations | (1,068,304 | ) | 17,291,840 | |||
| Cash flows from discontinued operations: | ||||||
| Net cash provided by (used in) operating activities | 1,082,088 | (2,204,652 | ) | |||
| Net cash used in investing activities | (14,513 | ) | (15,095,950 | ) | ||
| Cash flows from discontinued operations | 1,067,575 | (17,300,602 | ) | |||
| Net decrease in cash | (729 | ) | (8,762 | ) | ||
| Cash, beginning of year | 729 | 9,491 | ||||
| Cash, end of year | $ | — | $ | 729 | ||
| SUPPLEMENTAL DISCLOSURE | ||||||
| Interest paid | $ | 453,750 | $ | 1,139,292 | ||
| Taxes paid | $ | — | $ | — |
During the year ended December 31, 2021 and 2022, the following transactions did not involve cash:
| (a) | Demand notes, convertible<br> notes and interest with a carrying value of $668,214 were exchanged for 230,000 preferred shares of Series D. |
|---|---|
| (b) | $1,463,936 in operating<br> leases for equipment were capitalized and leases payable of the same amount were recorded. |
| (c) | 1,000 shares of Series E Preferred Stock were issued by the Company in exchange for 100% of the common<br>shares of Sovryn Holdings Inc. The shares were valued<br>at $4,225,062 and goodwill of $4,224,962 was recorded and subsequently impaired. $100 of common shares were eliminated upon consolidation. |
| (d) | 1,000 shares of Series E Preferred Stock were exchanged for 1,152,500 shares of Series E-1 Preferred Stock<br>and 1,091,388,889 shares of Common Stock. |
| (e) | Convertible notes<br> and interest with a carrying value of $80,004 were converted into 4,000,216 shares of Common Stock. |
See the accompanying Notes to the Consolidated Financial Statements
F-5
MADISON TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 1 Nature of Operations
Madison Technologies Inc. (the “Company”) was incorporated on June 15, 1998 in the State of Nevada, and our shares of Common Stock are quoted on the Experts Market tier of the over-the-counter market operated by OTC Markets, Inc.
Madison Technologies Inc. is seeking to create, develop and launch BlockchainTV (“BCTV”), the first-to-market 24/7 television broadcast and streaming communications network designed to bring the most up-to-date Crypto information and entertainment to the masses in the U.S. and around the world.
During August 2021, our shareholders approved
to amend our Articles of Incorporation to increase our authorized common stock from 500,000,000 shares to 6,000,000,000 shares.
Note 2 Going Concern
The accompanying consolidated financial
statements have been prepared assuming we will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the year ended December 31, 2022, we generated no revenues from continuing operations, incurred a net loss of $13,139,810 and had a working capital deficit and an accumulated deficit of $13,860,314 and $28,886,831, respectively, at December 31, 2022. It is management’s opinion that these matters raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance date of this report. Our ability to continue as a going concern is dependent upon management’s ability to raise additional capital as needed from the sales of stock or debt and further implement our business plan. The accompanying consolidated financial statements do not include any adjustments that might be required should we be unable to continue as a going concern.
Note 3 Summary of Significant AccountingPolicies
Use of estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
Consolidation
The accompanying consolidated financial statements include the accounts of our current and former wholly owned subsidiaries, Blockchain.tv, Inc., SovRryn Holdings Inc (“Sovryn”) and CZJ License Inc. Sovryn is consolidated up until December 31, 2022 and recognized as a discontinued operation. CZJ License Inc. was consolidated up until it was sold on November 15, 2021. All the intercompany balances and transactions have been eliminated in the consolidation. During the year ended December 31, 2021, the operations of Sovryn and CZJ License Inc. were consolidated into our operations and were designated as discontinued.
F-6
Segment reporting
Our chief operating decision maker is our chief executive officer, who reviews information on an aggregated basis.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Revenue recognition
We adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). We recognize revenue when we transfer promised services to the customer. The performance obligation is the monthly services rendered. We have one main revenue source which is leasing of television station channels. Accordingly, we recognize revenue when services are provided as time passes the customers have access to utilize the channel. These revenues are billed in advance, arrears and/or are prepaid. The performance obligation is the monthly services rendered. At December 31, 2022, we have one main revenue source, which is leasing of television channels. Where there is a leasing contract for channels, we bill monthly for our services as rendered. Where there is no contract, the revenue is recognized as provided.
We recognize revenue in accordance with ASC 606 using the following 5 steps to identify revenues:
| ● | identify the contract with a customer; |
|---|---|
| ● | identify the performance obligations in the contract; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to performance obligations in the contract; and |
| ● | recognize revenue as the performance obligation is satisfied. |
Advances from client deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from client deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract.
Operating leases
In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”). The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. For leases with an initial term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the term of the lease. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We adopted the new standard April 19, 2021. We have elected not to recognize lease assets and lease liabilities for leases with an initial term of 12 months or less.
Intangible assets
Intangible assets are non-monetary identifiable assets, controlled by us that will produce future economic benefits, based on reasonable and supportable assumptions about conditions that will exist over the life of the asset. An intangible asset that does not meet these attributes will be recognized as an expense when it is incurred. Intangible assets that do, are capitalized and initially measured at cost. Those with a determinable life will be amortized on a systematic basis over their future economic life. Those with an indefinite useful life shall not be amortized until its useful life is determined to be longer indefinite. An intangible asset subject to amortization shall be periodically reviewed for impairment. A recoverability test will be performed and, if applicable, unscheduled amortization is considered.
F-7
License agreements have been capitalized, recorded at cost and amortized over the life of the contracts. They will be amortized over the life of the license to which it supports.
Equipment
Equipment represents purchases made for assets, whose useful life was determined to be greater than one year. The assets are initially recorded at cost and depreciated over their estimated useful lives.
Website development costs
We recognized the costs associated with developing a website in accordance with ASC 350-50 “Website Development Cost”. The website development costs are divided into three stages, planning, development and production. The development stage can further be classified as application and infrastructure development, graphics development and content development. In short, website development cost for internal use should be capitalized except content input and data conversion costs in content development stage.
Costs associated with the website consist primarily of website development costs paid to third party. These capitalized costs will be amortized based on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred. Website development costs related to the customers are charged to cost of sales.
Impairment of Long-Lived Assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets*”*, all long-lived assets such as plant and equipment and intangible assets we hold and use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
Concentration of credit risk
We place our cash and cash equivalents with a high credit quality financial institution. We maintain United States Dollars. We minimize its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.
Financial instruments
Our financial instruments consist principally of cash, accounts payable, accrued liabilities and notes payable. The carrying amounts of such financial instruments in the accompanying financial statements approximate their fair values due to their relatively short-term nature or the underlying terms are consistent with market terms. It is the management’s opinion that we are not exposed to any significant currency or credit risks arising from these financial instruments.
Fair value measurements
We follow the guidelines in ASC Topic 820 “Fair Value Measurements and Disclosures”. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
F-8
We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. All financial instruments approximate their fair value.
| Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. |
|---|
| Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities |
| Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. |
Convertible Notes with Fixed Rate Conversion Options
We may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. We record the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the note date with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”.
Advertising and promotion costs
We follow ASC 720 “Advertising Costs” and expenses costs as incurred.
Stock-based compensation
We follow the guideline under ASC 718, “Stock Compensation”. The standard provides that for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, which requires that all share-based payments to both employees and directors be recognized in the income statement based on their fair values. For non-employees stock-based compensation, We apply ASC 505 Equity-Based Payments to Non-employees. This standard provides that all stock-based compensation related to non-employees be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be most reliably be measured or determinable.
Comprehensive income
ASC Topic 220, “ComprehensiveIncome”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
F-9
Loss per share
Net Loss Per Share
Basic loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in our earnings (loss). Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution. As of December 31, 2022 and 2021, no options were outstanding and 246,173,016 and 192,573,017 warrants were outstanding and exercisable, respectively. Additionally, as of December 31, 2022 and 2021, the outstanding principal balance, including accrued interest of the third-party convertible debt, totaled $22,154,828 and $17,365,033, respectively, and was convertible into 1,148,500,170 and 866,192,064 shares of Common Stock, respectively. We issued shares of Preferred Stock that may be converted into our Common Stock. Of the outstanding shares of Preferred Stock as of December 31, 2022 and 2021, as applicable, Series A Preferred Stock was convertible into 318,056,580 shares of Common Stock. Series D Preferred Stock was convertible into 155,000,000 shares of Common Stock, Series E-1 Preferred Stock was convertible into 1,152,500,000 shares of Common Stock and Series H Preferred Stock was convertible into 39,895,000 shares of Common Stock. The total potentially dilutive shares calculated are 3,060,124,766 and 2,724,216,661 as of December 31, 2022 and 2021, respectively. It should be noted that contractually the limitations on the third-party notes (and the related warrants) limit the number of shares converted into either 4.99% or 9.99% of the then outstanding shares. As of December 31, 2022, and 2021, potentially dilutive securities consisted of the following:
Schedule of Potentially Dilutive Securities
| December 31,<br><br> <br>2022 | December 30,<br><br> <br>2021 | |||
|---|---|---|---|---|
| Warrants | 246,173,016 | 192,573,017 | ||
| Convertible Preferred Stock | 1,665,451,580 | 1,665,451,580 | ||
| Convertible debt | 1,148,500,170 | 866,192,064 | ||
| Total | 3,060,124,766 | 2,724,216,661 |
Business Combinations
In accordance with ASC 805-10, “Business Combinations”, we account for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that we hold in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in our results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.
Credit losses
In June 2016, the FASB issued ASU 326, “Financial Instruments – Credit Losses”. The ASU sets forth a “current expected credit loss” (CECL) model which requires us to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. We are currently assessing the impact of the adoption of this ASU on its financial statements.
Related Party Transactions
We follow FASB ASC subtopic 850-10, “Related Party Transactions”, for the identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related parties include: a) our affiliates; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) our principal owners; e) our management; f) other parties with which we may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
F-10
Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Discontinued operations
Discontinued operations are components of an entity that either have been disposed or abandoned or is classified as held for sale. Additionally, in order to qualify as a discontinued operation, the disposal or abandonment must represent a strategic shift that has or will have a major effect on an entity’s operations and financial results.
Income taxes
We follow the guideline under ASC Topic 740 Income Taxes. “Accounting for Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Due to the uncertainty regarding our future profitability, the future tax benefits of its losses have been fully reserved.
Recently Issued Accounting Pronouncements
We adopt new pronouncements relating to generally accepted accounting principles applicable to us as they are issued, which may be in advance of their effective date.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this new guidance will have on its financial statements
We do not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 4 Notes Receivable
Schedule of Notes Receivable
| December 31, <br>2022 | December 31, <br>2021 | |||
|---|---|---|---|---|
| Secured note – Top Dog Productions Inc. | $ | — | $ | 468,750 |
| Convertible note – ZA Group Inc. | — | 250,000 | ||
| Advances in escrow and prepaid expenses | — | 24,042 | ||
| Accrued interest | — | 6,811 | ||
| $ | — | $ | 749,603 |
F-11
On September 9, 2021, we received a secured
promissory note with Top Dog Productions Inc. We agreed to lend an aggregate principal sum of up to $2,000,000 that accrues at a rate of 5% per annum. As of December 31, 2022, we advanced $527,624 and accrued $26,510 in interest receivable. Based on management’s assessment of the collectability of the principal and interest, we recognized an allowance for the entire amount and included the charge in bad debt expense for the year ended December 31, 2022.
On November 15, 2021, we received a $250,000
convertible promissory note with ZA Group Inc. for the sale of our wholly owned subsidiary, CZJ License Inc. The note accrues at a rate of 5% per annum. The principal and accrued interest of the note receivable will be due and payable on November 5, 2023. At any time after 180 days following the date of the note receivable, we may convert all or any part of the outstanding and unpaid amount of the note into fully paid and non-assessable shares of common stock of ZA Group Inc. at a fixed conversion price of $0.005 per share. As of December 31, 2022, based on management’s assessments of the collectability of the principal and $14,145 in accrued interest receivable and the value of ZA Group, Inc. common stock, we recognized an allowance for the $64,145 principal and interest and included the charge in bad debt expense for the year ended December 31, 2022.
Note 5 Intangible Assets
Our intangible assets primarily consist
of our domain names and access to a third-party streaming platform for our BCTV business, which are considered indefinite-lived intangible assets that are not amortized, but instead are tested at least annually for impairment. Based on management’s assessment of the lack of revenue to date and the prospects for future revenues using the intangible assets, we fully impaired the assets and recognized an impairment charge of $197,427 in the year ended December 31, 2022.
Note 6 Goodwill
Due to a sustained decline in the market
capitalization of our Common Stock during the fourth quarter of 2021, we performed an interim goodwill impairment test. Management considered that, along with other possible factors affecting the assessment of our operations for the purposes of performing a goodwill impairment assessment, including management assumptions about expected future revenue forecasts and discount rates, changes in the overall economy, trends in the stock price, estimated control premium, other operating conditions, and the effect of changes in estimates and assumptions that could materially affect the determination of fair value and goodwill. As a result of the significant decline in the current market capitalization despite any of the other positive factors contemplated and relatively little change in our ongoing business operations, the outcome of this goodwill impairment test resulted in a charge for the impairment of goodwill of $4,224,962 recorded in the consolidated financial statements for the year ended December 31, 2021.
Note 7 Accounts Payable and AccruedLiabilities
Accounts payable and accrued liabilities as of December 31, 2022 and December 31, 2021 are summarized below:
Schedule of Accounts Payable and Accrued Liabilities
| 2022 | 2021 | |||
|---|---|---|---|---|
| Accounts payable | $ | 371,987 | $ | 232,491 |
| Accrued expenses | 174,078 | 35,000 | ||
| Accrued interest | 195,334 | 15,033 | ||
| Total | $ | 741,399 | $ | 283,024 |
F-12
Note 8 Derivative Liability
We incur a derivative liability when we issue warrants in connection with the sale of notes payable. Management has determined that the daily closing price of our Common Stock is not a reliable factor for determining the value of the warrants and corresponding derivative liability on the basis that (i) the average daily volume of our Common Stock traded is approximately $1,000, (ii) for approximately two months during 2022 and as of the date of this Annual Report on form 10-K, our Common Stock is listed on the OTC Expert Market that limits visibility of our Common Stock to investors, and (iii) the share price is exceptionally volatile in its thinly traded status. Valuation methods such at Black-Scholes rely on daily closing prices and their volatility. As a better representation of value, management is using a share price of $0.018 per share to determine the derivative liability from the issuance of such warrants, which was the per share price used in connection with the issuance of 255,555,556 shares of Common Stock issued upon conversion of the Series G Preferred Stock on November 2, 2021.
For the years ended December 31, 2022 and 2021, our derivative liability was as follows:
Schedule of Derivative Liability
| 2022 | 2021 | |||
|---|---|---|---|---|
| Balance at January 1 | $ | 3,464,529 | $ | — |
| Liability for Warrants issued | 964,800 | 3,464,529 | ||
| Balance at December 31 | $ | 4,429,329 | $ | 3,464,529 |
In the years ended December 31, 2022
and 2021, we issued warrants to purchase up to 53,600,000 and 192,573,016 shares of Common Stock, respectively.
Note 9 Securities Exchange Agreements
SovRyn Holdings, Inc
We entered into a securities exchange agreement
on February 16, 2021 with Sovryn to acquire 100% of the shares of Sovryn in exchange for (i) Jeffrey Canouse, our CEO at the time, transferring 100 shares of our Series B Preferred Stock to a designee of Sovryn and (ii) 1,000 shares of Series E Preferred Stock. Upon the effectiveness of an amendment to our Articles of Incorporation to increase our authorized common stock from 500,000,000 shares to 6,000,000,000 shares, all shares of Series E Preferred Stock issued to the shareholders were exchanged for 1,152,500 shares of our Series E-1 Preferred Stock and 1,091,388,889 shares of our Common Stock. The Series E Preferred Stock votes on an as-converted basis with our Common Stock prior to their conversion. The Series E Preferred Stock represented approximately 59% of the fully diluted shares of our Common Stock immediately after such shares were issued. The valuation for the Preferred Series E shares was determined to be $4,225,062 based on the market value of our shares we exchanged at the date the transaction. The transaction was recorded as an asset purchase and we recorded goodwill of $4,224,962, which was based on the market value of such shares exchanged at the date of the transaction.
Note 10 Promissory Notes
On December 28, 2021, we issued a $500,000 promissory note that bears interest at 12% per annum and matures on March 31, 2023. In connection with such issuance, we issued 500,000 warrants that expire on December 31, 2023 and may be converted in shares of our Common Stock on or after June 26, 2022 at a price of $0.025 per share. We estimate the value such warrant to be approximately $9,000, based on a value of $0.018 per share of our Common Stock as of December 28, 2021.The promissory note is subordinate to the Notes we issued to the Investors. As of December 31, 2022 and 2021, $500,000 in note principal is outstanding. We have not yet repaid the noteholder and are in default.
On January 14, 2022, we issued an unsecured $150,000 note payable with $15,000 in fees payable upon its April 5, 2022 maturity date, which we treated as deferred financing fees and amortize over the term of the note. The obligation is subordinate to the Notes we issued to the Investors. As of December 31, 2022, $120,000 in note principal is outstanding. We have not yet repaid the noteholder and are in default.
F-13
On January 14, 2022, we issued an unsecured $150,000 note payable with $15,000 in fees payable upon its April 5, 2022 maturity date, which we treated as deferred financing fees and amortized over the term of the note. The obligation is subordinate to the Notes we issued to the Investors. As of December 31, 2022, $135,000 in note principal is outstanding. We have not yet repaid the noteholder and are in default.
On April 27, 2022, we issued a $125,000 unsecured note payable that has a $12,500 original issue discount and matures on December 31, 2022. In connection with such issuance, we issued the noteholder a warrant to purchase up to 2,500,000 shares of our Common Stock at $0.025 per share that is exercisable starting September 15, 2022 and until April 15, 2024. We estimate the total value of such warrants to be $45,000, based on a $0.018 price per share of our Common Stock that we treat as a debt discount and amortize over the term of the note. As of December 31, 2022, $125,000 in note principal is outstanding. We have not yet repaid the noteholder and are in default.
Note 11 Convertible Notes Payable
Our convertible notes payable, all of which are liabilities as of the years ended December 31, 2022 and 2021, are as follows:
Schedule of Convertible Notes Payable
| December 31, 2022 | December 31, 2021 | ||||
|---|---|---|---|---|---|
| Series 1 | (a) | $ | 1,050,000 | $ | 850,000 |
| Series 2 | (b) | 250,000 | — | ||
| Series 3 | (c) | 208,000 | — | ||
| Series 4 | (d) | 550,000 | — | ||
| Series 5 | (e) | 192,500 | — | ||
| Series 6 | (f) | 55,000 | — | ||
| Principal outstanding total | 2,305,500 | 850,000 | |||
| Less discount | 426,094 | — | |||
| Principal outstanding, net | $ | 1,879,406 | $ | 850,000 | |
| (a) | Series 1:<br><br> <br><br><br> <br>We issued a<br> total of $1,050,000<br> in subordinated convertible notes that bear interest at 6%<br> per annum, mature on December<br> 31, 2022 and may be converted at the noteholder’s option at any time into shares of our Common Stock at<br> a fixed price of $0.021<br> per share. We have not yet repaid the noteholders and are in default. | ||||
| --- | --- | ||||
| (b) | Series 2:<br><br> <br><br><br> <br>On January 6, 2022, we issued to one of<br> our shareholders a $250,000 unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection<br> with such issuance, we issued the noteholder a warrant to purchase up to 6,250,000 shares of our Common Stock at $0.021 per share<br> at any time starting July 1, 2022 and ending July 1, 2024. We estimate the value of the warrant to be $112,500, based on a $0.018<br> price per share of our Common Stock that is treated as a debt discount to be amortized over the term of the note. We have not yet<br> repaid the noteholder and are in default. | ||||
| --- | --- |
F-14
| On January 14, 2022, we issued to one of<br> our shareholders a $25,000 unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection<br> with such issuance, we issued the noteholder a warrant to purchase up to 600,000 shares of our Common Stock at $0.021 per share<br> at any time starting July 1, 2022 and ending July 1, 2024. We estimate the value of the warrant to be $10,800, based on a $0.018<br> price per share of our Common Stock that we treated as a debt discount to be amortized over the term of the note. In May 2022,<br> we repaid the note.<br><br> <br><br><br> <br>On February 17, 2022, we issued a $50,000<br> unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection with such issuance, we<br> issued the noteholder a warrant to purchase up to 1,250,000 shares of our Common Stock at $0.021 per share at any time starting<br> July 1, 2022, and ending July 1, 2024. We estimate the value of the warrant to be $22,500, based on a $0.018 price per share of<br> our Common Stock that we treat as a debt discount that we amortized over the term of the note. In April 2022, we repaid the note. | |
|---|---|
| (c) | Series 3:<br><br> <br><br><br> <br>On February 15, 2022, we issued two $137,500<br> unsecured convertible notes payable bearing an 11.25% interest rate per annum that mature on February 23, 2023 and have a $15,000<br> original issue discount. In connection with such issuances, we issued the noteholders warrants to purchase up to 2,500,000 shares<br> of our Common Stock at $0.10 per share that are exercisable at any time until February 11, 2027. We estimate the total value of<br> the warrants to be $90,000, based on a $0.018 price per share of our Common Stock that we treat as a debt discount and amortize<br> over the terms of the notes along with the deferred financing fees. The notes’ principal and interest may be converted into<br> our Common Stock at $0.02 per share. On October 25, 2022, the noteholder converted $67,000 and $13,004 of note principal and interest, respectively. We have not yet repaid the noteholders their outstanding principal and interest and are in default. |
| --- | --- |
| (d) | Series 4:<br><br> <br><br><br> <br>On May 5, 2022, we issued a shareholder<br> a convertible subordinate note totaling $110,000 that accrues interest at 12% per annum and matures on May 5, 2023. The note may<br> be converted into shares of our Common Stock at $0.02 per share. In connection with such issuance, we issued the noteholder a warrant<br> to purchase up to 5,000,000 shares of our Common Stock at $0.02 per share. We have not yet repaid the noteholders and are in default.<br><br> <br><br><br> <br>On June 24, 2022, we issued a convertible<br> subordinate note totaling $110,000 that accrues interest at 12% per annum and matures on May 5, 2023. The note may be converted<br> into shares of our Common Stock at $0.02 per share. In connection with such issuance, we issued the noteholder a warrant to purchase<br> up to 5,000,000 shares of our Common Stock at $0.02 per share. We have not yet repaid the noteholders and are in default. |
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| (e) | Series 5:<br><br> <br><br><br> <br>On May 5, 2022, we issued an $82,500 note<br> payable that has a $7,500 original issue discount, matures on May 5, 2023 and bears interest at 12% per annum. In connection with<br> such issuance, we issued the noteholder a warrant to purchase up to 3,750,000 shares of our Common Stock at $0.02 per share that<br> is exercisable upon issuance until May 5, 2029. We estimate the total value of the warrants to be $67,500, based on a $0.018 price<br> per share of our Common Stock that we treat as a debt discount and amortize over the term of the note. As of December 31, 2022,<br> $82,500 in note principal is outstanding. We have not yet repaid the noteholders and are in default.<br><br> <br><br><br> <br>On May 5, 2022, we issued a $110,000 note<br> payable that has a $10,000 original issue discount and matures on May 5, 2023 and bears interest at 12% per annum. In connection<br> with such issuance, we issued the noteholder a warrant to purchase up to 5,000,000 shares of our Common Stock at $0.02 per share<br> that is exercisable upon issuance until May 5, 2029. We estimate the total value of the warrants to be $90,000, based on a $0.018<br> price per share of our Common Stock that we treat as a debt discount and amortize over the term of the note. As of December 31,<br> 2022, $110,000 in note principal is outstanding. We have not yet repaid the noteholders and are in default.<br><br> <br><br><br> <br>On October 14, 2022, we issued a $110,000<br> note payable that has a $10,0000 original issue discount and matures on October 14, 2023 and bears interest at 12% per annum. In<br> connection with such issuance, we issued the noteholder a warrant to purchase up to 5,000,000 shares of our Common Stock at $0.02<br> per share that is exercisable upon issuance until May 5, 2029. We estimate the total value of the warrants to be $90,000, based<br> on a $0.018 price per share of our Common Stock that we treat as a debt discount and amortize over the term of the note. As of<br> December 31, 2022, $110,000 in note principal is outstanding. We have not yet repaid the noteholders and are in default. |
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F-15
| On December 2, 2022, we issued a $220,000 note payable that<br> has a $20,000 original issue discount and matures on October 14, 2023 and bears interest at 12% per annum. In connection with such<br> issuance, we issued the noteholder a warrant to purchase up to 10,000,000 shares of our Common Stock at $0.02 per share that is<br> exercisable upon issuance until May 5, 2029. We estimate the total value of the warrants to be $180,000, based on a $0.018 price<br> per share of our Common Stock that we treat as a debt discount and amortize over the term of the note. As of December 31, 2022,<br> $220,000 in note principal is outstanding. We have not yet repaid the noteholder and are in default. | |
|---|---|
| (f) | Series 6:<br><br> <br><br><br> <br>On September 16, 2022, we issued a $55,000 note payable<br>that has a $5,000 original issue discount and matures on September 16, 2023 and bears interest at 12% per annum. The note may<br>be converted into shares of our Common Stock at the lesser of $0.001 per share or at a 50% discount to the lowest closing price<br>of our Common Stock within the past twenty days prior to a conversion. As of December 31, 2022, $55,000 in note principal is outstanding. We have not yet repaid the noteholders and are in default. |
On February 17, 2022, we issued a $50,000 unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection with the note sale, we issued the noteholder a Warrant to purchase 1,250,000 shares of our Common Stock at $0.021 per share at any time starting July 1, 2022 and ending July 1, 2024. We estimate the value of the Warrant to be $22,500, based on a $0.018 price per share of our Common Stock that we treat as a debt discount that we amortized over the term of the note. In April 2022, we repaid the note.
Note 12 Senior Secured Notes
| On February 17, 2021, we entered<br> into a securities purchase agreement with funds affiliated with Arena Investors, LP (the<br> “Investors”) pursuant to which it issued two convertible notes having an aggregate principal<br> amount of $16,500,000<br> for an aggregate purchase price of $15,000,000<br> (collectively, the “Notes”). The Notes are secured by a blanket lien on all of the Company’s assets and<br> the shares of our Common Stock and Preferred Stock (the “Pledged Assets”) held by Philip<br> Falcone, FFO1 2021 Irrevocable Trust, FFO2 2021 Irrevocable Trust and Korr Value LP (the<br> “Pledgers”), which shares may be voted by the Investors in the event of default.<br><br> <br><br><br> <br>In connection with the issuance of the<br> Notes, we issued to the Investors warrants to purchase an aggregate of 192,073,017 shares of our Common Stock (collectively, the<br> “Warrants”) and 1,000 shares of Series F Preferred Stock that convert into 192,073,017 shares of our Common Stock (the<br> “Series F Preferred Stock”). Such warrants and Series F Preferred Stock were each valued at $864,000 based on a $0.0045<br> price per share of our Common Stock and treated as a debt discount this is amortized over the term of the Notes. |
|---|
The Notes have a term of thirty-six months and mature on February 17, 2024, unless earlier converted. The Notes accrue interest at a rate of 11% per annum, subject to increase to 20% per annum upon default. Interest is payable in cash on a quarterly basis beginning on March 31, 2021. Notwithstanding the above, at our election, any interest payable on an applicable payment date may be paid in registered shares of our Common Stock in an amount equal (A) the amount of the interest payment due on such date, divided by (B) an amount equal to 80% of the average volume-weighted average price of our Common Stock for the five (5) days immediately preceding the date of conversion. At December 31, 2022 and December 31, 2021 accrued and unpaid interest was $3,300,000 and $453,750, respectively.
F-16
On September 24, 2021, the Company
and the Investors amended the Notes and related closing documents, by executing the Limited Waiver and First Amendment the closing documents. Such amendment also waived specified events of default. The Notes were henceforth convertible at any time, at the holder’s option, into shares of our Common Stock at a price of $0.02 per share, subject to an event of default adjustment. Notwithstanding the foregoing, at any time during the continuance of any event of default, the conversion price in effect equals the alternate conversion price provided in the Notes. If at any time the conversion price as determined for any conversion would be less than the par share value of the Common Stock, then at the sole discretion of the Holder, such conversion price equals such par value for such conversion and the conversion amount for such conversion may be increased to include Additional Principal (defined as such additional amount to be added to the principal amount of the Note to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the conversion price not been adjusted by the holder thereof to the par value price, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The conversion price was also subject to adjustment due to certain events, including stock dividends, stock splits and in connection with our issuance of our Common Stock or common stock equivalents at an effective price per share lower than the conversion price then in effect. We did not have a right to redeem the Notes.
As part of such purchase agreement
with the Investors, we issued warrants to purchase up to 192,073,017 shares of Common Stock. On September 24, 2021, we and the Investors amended the warrants such that each warrant became exercisable for a period of five (5) years from the date of issuance at an initial exercise price equal to $0.025 per share, adjusted to $0.020 per share when interest is paid late, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and recapitalizations. The Investors could exercise the warrants on a cashless exercise basis.
The Series F Preferred Stock has no voting rights and converts into 4.9% of our issued and outstanding shares of our Common Stock on a fully diluted basis upon the date on which stockholder approval for such issuance is obtained. The Series F Preferred Stock was subsequently converted and 192,073,017 shares of Common Stock, which were issued on October 11, 2021.
On October 27, 2022, the Agent for the Investors notified us that certain events of default have occurred and were continuing under the Investor Notes. On November 21, 2022, we, the Investors and the Agent entered into a Forbearance Agreement, pursuant to which, among other things, we acknowledged the outstanding principal balances of the Investor Notes, that we have an obligation for interest, including default interest, fees and expenses in connection with the Investor Notes, that we have no rights of offset, defenses, claims or counterclaims with respect to our obligations and pursuant to a side letter, dated as of November 21, 2022, we agreed to achieve certain milestones by the dates as set forth therein. The Forbearance Agreement expired on December 30, 2022.
As of December 31, 2022 and 2021, the outstanding liability for our Senior Secured Notes is as follows:
Schedule of senior secured Notes
| 2022 | 2021 | |||
|---|---|---|---|---|
| Principal | $ | 16,500,000 | $ | 16,500,000 |
| Less discount | 1,900,760 | 3,580,608 | ||
| Principal, net of discount | $ | 14,599,240 | $ | 12,919,392 |
As of December 31, 2022 and 2021,
accrued interest payable on such senior secured Notes is $3,300,000 and $453,750, respectively, with interest accruing at a default rate of 20% per annum in 2022 and at 11% per annum in 2021.
F-17
Note 13 Related Party
We entered into a consulting agreement
with Zenna Consulting Group, Inc. (“Zenna Consulting”), a corporation affiliated with Warren Zenna, who served as a Board member at such time, to provide oversight of marketing and communications services. The agreement commenced March 1, 2021 and ended on July 31, 2021. We paid Zenna Consulting $0 and $57,000 fees in the years ended December 31, 2022 and 2021, respectively. On March 1, 2022, we issued a warrant to Mr. Zenna to purchase up to 500,000 shares of our Common Stock at $0.025 per share at any time beginning September 1, 2022 and ending September 1, 2026. We estimate the value such warrant to be approximately $9,000, based on the $0.018 market price per share of our Common Stock on March 1, 2022.
On April 7, 2021, we issued 1,500,000 shares
of our Common Stock to Mr. Canouse in exchange for transferring 100 shares of our Series B Preferred Stock to the FFO1 2021 Irrevocable Trust, an entity controlled by Mr. Falcone, then our CEO and Chairman of our Board of Directors. The shares were valued at $1,500. Such shares of Series B Preferred Stock provide the holder thereof with voting power equivalent to the number of votes equal to 51% of the total voting power of each class of stock outstanding. FFO1 2021 Irrevocable Trust also holds 461,000 Preferred Series E-1 shares and FFO2 2021 Irrevocable Trust holds 461,000 Preferred Series E-1 shares. Lisa Falcone, the wife of Mr. Falcone, is the trustee of the FFO2 2021 Irrevocable Trust and Ms. Falcone has shared voting and dispositive power. The shares of our Preferred Stock held by the FFO1 2021 Irrevocable Trust and the FFO2 2021 Irrevocable Trust are included in the Pledged Assets.
Effective January 1, 2022, we entered
into a management consulting agreement with GreenRock LLC, a company controlled by Philip Falcone, for a period of one year ending December 31, 2022, under which we provided monthly remuneration of $35,000, plus expenses in connection with his duties, responsibilities and performance as chief executive officer. In February 2021, our subsidiary, Sovryn Holdings Inc., entered into consulting agreement with GreenRock LLC to provide us with chief executive officer services. In the years ended December 31, 2022 and 2021, we paid GreenRock LLC $420,000 and $315,000 in fees, respectively. Mr. Falcone is the managing member of GreenRock LLC and is our former Chief Executive Officer. We paid GreenRock LLC bonuses of $505,972 for the year ended December 31, 2022.
Note 14 Mezzanine Equity
We account for certain of our Preferred Stock in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity. Based on this guidance, preferred stock that is conditionally redeemable is classified as temporary or “mezzanine” equity. Accordingly, the various Series of our Preferred Stock, which is subject to conditional redemption, is presented at redemption value as mezzanine equity outside of the stockholders’ equity section of the consolidated balance sheets.
Preferred Shares
Series A Preferred Stock
There are 100,000 designated and authorized
shares of Series A Preferred Stock, subject to a 9.99% conversion limitation and anti-dilution rights for 24 months from time of issuance. Holders of Series A Preferred Stock are entitled to receive, when and as declared, dividends equal to 3% per annum on the stated value, payable in additional shares of Series A Preferred Stock. Holders of Series A Preferred Stock have the right to vote on any matter submitted to our shareholders for vote, on an as-converted basis. Each share of Series A Preferred Stock may be convertible into 3,420 shares of Common Stock, or as adjusted to equal the conversion ratio multiplied by a fraction, the numerator of which is the number of shares outstanding on a fully diluted basis after the issuance of the dilution shares, and the denominator is 360,000,000.
On July 17, 2020, we issued 92,999 Series A Preferred Stock at a value of $343,094, with the acquisition cost derived using the $0.04 market price on that date of $0.04 multiplied by 95% of the number of our issued and outstanding shares at the time (18,057,565) and multiplied by 50% of that value.
F-18
On February 16, 2021, we cancelled all
of the outstanding shares of Series A Preferred Stock shares. In exchange, the holders of such shares received one-year option agreements to purchase shares of our wholly owned subsidiary at the time, CZJ License, Inc. at $10 per share for up to 300,000 shares. The option agreement expired without being exercised.
Series C Preferred Stock
There are 10,000 designated and authorized shares of Series C Preferred Stock, containing a 9.99% conversion limitation. Holders of Series C Preferred Stock are entitled to receive, when and as declared, dividends equal to 2% per annum on the stated value, payable in additional shares of Series C Preferred Stock. So long as any shares of Series C Preferred Stock remain outstanding, without the consent of the holders of 80% of the shares of Series C Preferred Stock then outstanding, we may not redeem, repurchase or otherwise acquire directly or indirectly any securities deemed junior to such Series C Preferred Stock (“Junior Securities”) nor may we directly or indirectly pay or declare or make any distribution upon, nor may any distribution be made in respect of, any Junior Securities, nor may any monies be set aside for or applied to the purchase or redemption of any Junior Securities. Each holder of the Series C Preferred Stock has the right to vote on any matter submitted to our shareholders for a vote, on an as converted basis. Each share of Series C Preferred Stock may be convertible into 100 shares of our Common Stock. As at December 31, 2022, no shares of Series C Preferred Stock are outstanding.
Series D Preferred Stock
There are 230,000 designated and authorized
shares of Series D Preferred Stock, subject to a 4.99% conversion limitation, which may be increased to a maximum of 9.99% by a holder by written notice to us. There is a stated value of $3.32 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series D are issued. Series D are ranked as pari passu with the Series E Preferred Stock and the Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock and have no voting rights. Each share of Series D Preferred Stock may be converted into 1,000 common shares.
On February 16, 2021, we settled $1,028,000
in note payables, convertible notes payable and accrued interest for 230,000 shares of our Series D Preferred Stock, of which 75,000 shares of Series D Preferred Stock were converted into 75,000,000 shares of our Common Stock and 155,000 Series D Preferred shares remain unconverted and outstanding.
Series E Preferred Stock
There are 1,000 designated and authorized
shares of Series E Preferred Stock having a stated value of $1,000 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series E are issued. Series E are ranked pari passu with the Series D Preferred Stock and Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock. It has voting rights equal to the number of shares of Common Stock into which the Series E Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that holders of shares Series E Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding Series E Preferred Stock, constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of shares of Series E Preferred Stock are entitled to vote on matters with holders of shares of Common Stock, voting together as one class, each share of Series E Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series E Preferred Stock are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series E Preferred Stock are outstanding, we may not, without the affirmative vote of the holders of all the then outstanding shares of Series E Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock or alter or amend the Series E certificate of designations (the “Series E Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
On September 16, 2021, the conversion rate for each share of Series E Preferred Stock was amended to equal (i)(a) 56.60% multiplied by, (b) the Fully-Diluted shares as of the Approval Date (each as defined in the Series E Certificate), divided by (ii) the total number of shares of Series E Preferred Stock, (iii) rounded to the nearest thousandth. The total number of Fully-Diluted Shares is set as of, and cannot change after the Approval Date. Based on the current fully-diluted shares outstanding, this equated to 2,243,888,889 shares of Common Stock. Fully-Diluted means the aggregate of (A) the total number of shares of Common Stock outstanding as of such date, (B) the number of shares of Common Stock (including all such Common Stock equivalents) into which all Convertible Securities outstanding as of such date could be converted or exercised, and (C) the number of shares of Common Stock (including all such Common Stock equivalents) issuable upon exercise of all options outstanding as of such date of exercise, divided by 0.4340.
F-19
On February 16, 2021, we issued 1,000
shares of Series E Preferred Stock to acquire Sovryn that we valued at $4,225,062 based on a value of 100% of the per share price of Common Stock at the time.
On September 16, 2021, the holders of our
Series E Preferred Stock entered into an exchange agreement with us whereby on October 11, 2021, the 1,000 Series E Preferred shares were exchanged for 1,152,500 Series E-1 Preferred shares and 1,091,388,889 shares of Common Stock. We valued the exchange at the same $4,225,062 value as was assigned to the 1,000 shares of Series E Preferred Stock. As at December 31, 2021, no shares of Series E Preferred Stock are outstanding.
Series E-1 Preferred Stock
There are 1,152,500 designated and authorized
shares of Series E-1 Preferred Stock, which have a stated value of $0.87 per share. Shares of Series E-1 Preferred Stock are pari passu with the Series D Preferred Stock and Series F Preferred Stock and are senior in dividend rights and liquidation preference to our Common Stock and all other Common Stock Equivalents. It has votes equal to the number of shares of common stock into which the Series E-1 Preferred Stock would be convertible on the record date for the vote or consent of stockholders, and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. It has votes equal to the number of shares of common stock into which the Series E-1 Preferred Stock would be convertible on the record date for the vote or consent of stockholders, and shall otherwise have voting rights and powers equal to the voting rights and powers of Common Stock. To the extent that holders of shares of Series E-1 Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding Series E-1 Preferred Stock constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of Series E-1 Preferred Stock are entitled to vote on matters with holders of shares of Common Stock and vote together as one class, each share of Series E-1 Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series E-1 Preferred Stock are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series E-1 Preferred Stock are outstanding, we cannot, without the affirmative vote of the Holders of all the then outstanding shares of Series E-1 Preferred Stock, (a) alter or change adversely, the powers, preferences or rights given to the Series E-1 Preferred Stock or alter or amend the Series E-1 certificate of designations (the “Series E-1 Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing. On October 11, 2021, the Series E-1 shares were issued. At December 31, 2022, 1,152,500 shares of Series E-1 Preferred Stock remain outstanding.
Each share of Series E-1 Preferred
Stock may be converted into 1,000 shares of Common Stock.
Series F Preferred Stock
There are 1,000 designated and authorized shares of Series F Preferred Stock, which have a stated value
of $1.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series F are issued. Shares of Series F Preferred Stock are pari passu with the Series D Preferred Stock and Series F Preferred Stock and senior in dividend rights and liquidation preference to our Common Stock and all other Common Stock Equivalents. It has voting rights equal to the number of shares of common stock into which the Series F Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. It has votes equal to the number of shares of common stock into which the Series F Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that holders of shares of Series F Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding Series F Preferred Stock constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of shares of Series F Preferred Stock are entitled to vote on matters with holders of shares of Common Stock, voting together as one class, each share of Series F Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series F Preferred Stock are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series F Preferred Stock are outstanding, we cannot, without the affirmative vote of the holders of all the then outstanding shares of Series F Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series F Preferred Stock or alter or amend the Series F certificate of designations (the “Series F Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
F-20
On February 17, 2021, we issued to
the Investors 1,000 shares of Series F Preferred Stock that convert into 192,073,017 shares of Common Stock, which we valued at $864,000, based on the underlying value of shares our Common Stock that were $0.0045 per share at the time.
On September 16, 2021, the conversion rate for each share of Series F Preferred Stock was amended to equal (i)(a) 4.84% multiplied by, (b) the Fully-Diluted shares as of the Approval Date (each as defined in the Series F Certificate), divided by (ii) the total number of shares of Series F Preferred Stock, (iii) rounded to the nearest thousandths place. The total number of Fully-Diluted Shares is set as of, and can not change after the Approval Date. Based on the full-diluted shares outstanding, this equated to 192,073,017 shares of Common Stock on the Approval Date. Fully-Diluted means the aggregate of (A) the total number of shares of Common Stock outstanding as of such date, (B) the number of shares of Common Stock (including all such Common Stock equivalents) into which all Convertible Securities outstanding as of such date could be converted or exercised, and (C) the number of shares of Common Stock (including all such Common Stock equivalents) issuable upon exercise of all options outstanding as of such date of exercise, divided by 0.9516.
On October 11, 2021, the 1,000 shares of
Series F Preferred Stock were converted into 192,073,017 shares of Common Stock.
As at December 31, 2022, no shares of Series F Preferred Stock are outstanding.
Series G Preferred Stock
On August 20, 2021, the certificate of
designation for the Series G Preferred Stock was amended. There are now 4,600 designated and authorized Series G Preferred Stock, subject to a 4.99% conversion limitation, which may be increased to a maximum of 9.9% by a holder by written notice to us. The Series G Preferred Stock has a stated value of $1,000 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series G Preferred Stock are issued. The Series G Preferred Stock is ranked as a as a series of junior Preferred Stock. It has voting rights equal to the number of shares of common stock into which the Series G Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that holders of shares of Series G Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding Series G Preferred Stock constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of shares of Series G Preferred Stock are entitled to vote on matters with holders of shares of Common Stock, voting together as one class, each share of Series G Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series G are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series G Preferred Stock are outstanding, we cannot, without the affirmative vote of the holders of all the then outstanding shares of Series G Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock or alter or amend the Series G certificate of designations (the “Series G Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
On September 16, 2021, the conversion rate for each share of Series G Preferred Stock was amended to equal (i)(a) 6.45% multiplied by, (b) the Fully-Diluted shares as of the Approval Date (each as defined in the Series G Certificate, divided by (ii) the total number of shares of Series G Preferred Stock, (iii) rounded to the nearest thousandths place. The total number of Fully-Diluted Shares is set as of, and does not change after the Approval Date. Based on the current fully-diluted shares outstanding, this equated to 255,555,556 shares of common stock on the Approval Date. Fully-Diluted means the aggregate of (A) the total number of shares of Common Stock outstanding as of such date, (B) the number of shares of Common Stock (including all such Common Stock equivalents) into which all Convertible Securities outstanding as of such date could be converted or exercised, and (C) the number of shares of Common Stock (including all such Common Stock equivalents) issuable upon exercise of all options outstanding as of such date of exercise, divided by 0.9355.
F-21
We received $4,600,000
in subscriptions for 4,600 of shares Series G Preferred Stock that we valued at $1,000 per share based on the cash price. On November 2, 2021, all the 4,600 shares of Series G Preferred Stock were converted into 255,555,556 shares of our Common Stock. At December 31, 2022, no shares of Series G Preferred Stock are outstanding.
Series H Preferred Stock
On November 5, 2021, we designated 39,895 shares of Series H Preferred Stock, which have a stated value of $1.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series H are issued. Shares of Series H Preferred Stock have no voting rights and are senior in dividend rights and liquidation preference to our Common Stock and all other Common Stock Equivalents. Each share of Series H Preferred Stock may be converted into 1,000 shares of Common Stock, subject to a maximum ownership limit of 9.99%.
On November 11, 2021, pursuant to an
exchange agreement that we entered into with the Investors, 39,895,000 of our shares of Common Stock held by the Investors were exchanged for 39,895 shares of our Series H Preferred Stock and we cancelled the 39,895,000 shares. We valued the 39,895,000 shares and 39,895 shares of Series H Preferred Stock at $3,989,500. At December 31, 2022, 39,895 shares of Series H Preferred Stock remain outstanding.
Note 15 Shareholders’ Equity
Preferred Stock
As of December 31, 2022 and 2021, we are
authorized to issue 50,000,000 shares of preferred stock, with designations, voting, and other rights and preferences to be determined by our Board of Directors, of which 48,617,400 remain available for designation and issuance.
Series B Preferred Stock
There are 100 designated and authorized shares of Series B Preferred Stock. Holders of Series B Preferred Stock have the right to vote on all shareholder matters equal to 51% of the total voting power of each class of stock outstanding. Holders of shares of Series B Preferred are entitled to such 51% voting rights regardless of the number of voting shares issued by the company at any time.
On July 17, 2020, 100 Series B Preferred Stock were issued to acquire the Casa Zeta-Jones Brand License Agreement (the “License Agreement”) from Luxurie Legs, LLC, a limited liability company organized pursuant to the laws of the State of Delaware (“LUXURIE”), pursuant to which, at the effective time, LUXURIE transferred all of its right, title and interest in the License Agreement to Madison in exchange for a controlling interest in Madison represented by newly issued preferred stock. Although the Series B Preferred Stock is entitled to 51% voting rights as described above, the stock has no dividend rate nor conversion feature.
On February 17, 2021, the 100 shares Series
B Preferred Stock were transferred from Mr. Canouse (our former director and CEO), to the FFO1 2021 Irrevocable Trust, a company Mr. Falcone (our director and CEO) is the trustee and has the voting and dispositive power. The 100 shares of Series B Preferred are included in the Pledged Assets.
At December 31, 2022 and 2021, there were
100 and 100 Series B Preferred shares outstanding, respectively.
Common Stock
On October 25, 2022, we issued 4,000,216
shares of Common Stock to a Series 3 note holder in conversion of $80,004 of note principal and interest.
On August 14, 2021, our shareholders approved
an increase in the authorized number of Common Stock to 6,000,000,000, from 500,000,000, which became effective the same day. As of December 31, 2022 and 2021, there were 1,603,095,243 shares outstanding, respectively.
F-22
The following Common Stock transactions occurred during the year ended December 31, 2021. No issuances of Common Stock occurred in 2022:
On April 7, 2021, we issued 1,500,000 shares
of our Common Stock to Mr. Canouse in exchange for transferring his 100 shares of our Series B Preferred Stock to the FFO1 2021 Irrevocable Trust, which Mr. Falcone is the trustee and has the voting and dispositive power. The shares were valued at $1,500.
On October 11, 2021, we issued 1,091,388,889
shares of our Common Stock to holders of Series E-1 Preferred Stock in accordance with the Exchange Agreement.
On October 11, 2021, holders of Series
F Preferred Stock converted their 1,000 shares into 192,073,017 shares of our Common Stock.
On November 2, 2021, holders of Series
G Preferred Stock converted their 4,600 shares into 255,555,556 shares of Common Stock.
On November 11, 2021, 39,895,000 shares
of Common Stock were cancelled and returned to treasury in exchange for 39,895 shares of Series H Preferred Stock.
On November 24, 2021, a holder with 75,000
shares of Series D Preferred Stock converted such shares into 75,000,000 shares of Common Stock.
Warrants
On February 17, 2021, we issued warrants to purchase up to 192,073,017 shares of Common Stock to Arena that are exercisable for a five-year period from the date of issuance and, based on an amendment made on September 24, 2021, such warrants may be converted into Common Stock at $0.02 per share, subject to a maximum ownership limit of 9.99%. The exercise price is subject to adjustment due to stock dividends, stock splits and recapitalizations and other events. We valued such warrants at $864,000 based on a value of $0.0045 per share for our Common Stock at the time.
On December 28, 2021, we issued a promissory
note payable and issued warrants to purchase up to 500,000 shares of Common Stock. Each such warrant is exercisable at $0.025 per share and expires on December 31, 2023. We valued such warrants at $9,000 based on a value of $0.018 per share for our Common Stock at the time.
Such warrants issued are loan incentives. The value was allocated to the warrants based on fair value on the date of the grant as determined using the Black-Scholes option pricing model. At December 31, 2022 and 2021, the Warrant transactions are summarized below:
| Number of Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Weighted- Average Grant-Date Fair Value | Aggregate Intrinsic Value | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Outstanding and exercisable at December 31, 2020 | — | $ | — | — | — | $ | — | |||
| Issued | 192,573,017 | 0.020 | 4.13 | 872,588 | 3,464,529 | |||||
| Exercised | — | — | — | — | — | |||||
| Outstanding and exercisable at December 31, 2021 | 192,573,017 | $ | 0.020 | 4.13 | 872,588 | $ | 3,464,529 |
F-23
For the year ended December 31, 2022, a summary of our warrant activity is as follows:
| Number of<br> Warrants | Weighted-<br> Average<br> Exercise<br> Price | Weighted-<br> Average<br> Remaining<br> Contractual<br> Term<br> (Years) | Weighted-<br> Average Grant-<br> Date Fair Value | Aggregate<br> Intrinsic<br> Value | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Outstanding and exercisable at January 1, 2022 | 192,573,017 | $ | 0.020 | 4.13 | $ | 872,588 | $ | 3,464,529 | ||
| — | ||||||||||
| Issued | 53,600,000 | $ | 0.024 | 4.83 | 102,001 | $ | 964,800 | |||
| Exercised | — | — | — | — | — | |||||
| Expired | — | — | — | — | — | |||||
| Outstanding and exercisable at December 31, 2022 | 246,173,016 | $ | 0.021 | 3. 69 | $ | 399,783 | $ | 4,431,114 |
Note 16 Discontinued Operations
In the fourth quarter of 2022, management at that time determined that Sovryn’s television broadcast business was not an efficient use of our resources to develop and launch BCTV, our core business, and management sought to exit Sovryn’s business and pay down Madison’s senior debt associated with acquiring Sovryn’s assets and creating its business. As a result, Sovryn is recognized as a discontinued operation in the accompanying financial statements. The previous year’s assets, liabilities and expenses have been similarly classified for comparative purposes. The following is a summary of Sovryn for the years ended December 31, 2022 and 2021:
Schedule of Previous Year Assets Liabilities and Expenses
| December 31, 2022 | December 31, 2021 | |||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Current assets | $ | 126,331 | $ | 942,713 | ||
| Property, equipment and right-of-use assets | 1,440,937 | 2,887,328 | ||||
| Intangible assets | 10,159,063 | 12,029,646 | ||||
| Total Assets | 11,726,331 | 15,859,687 | ||||
| Liabilities | ||||||
| Accounts payable and accrued liabilities | 1,118,174 | 508,779 | ||||
| Lease liability obligations | 1,464,728 | 1,468,495 | ||||
| Total Liabilities | 2,582,902 | 21,977,274 | ||||
| Revenues | 1,920,612 | 1,243,655 | ||||
| Selling, general and administrative | (509,868 | ) | (531,899 | ) | ||
| Television operation | (344,260 | ) | (267,193 | ) | ||
| Amortization | (323,484 | ) | (180,210 | ) | ||
| Professional fees | (1,178,043 | ) | (1,652,095 | ) | ||
| Interest expense | 175,695 | (292,704 | ) | |||
| Loss on asset disposals | (52,668 | ) | (1,737,847 | ) | ||
| Impairment loss | (3,008,013 | ) | — | |||
| Loss from discontinued operations | $ | (3,671,408 | ) | $ | (3,418,293 | ) |
F-24
On February 16, 2021, we cancelled all
of the outstanding shares of Series A Preferred Stock and offered their holders option agreements to purchase up to 300,000 shares of CZJ License, Inc., our wholly owned subsidiary at the time, at an option price of $10 per share. The option agreements are exercisable for a period of one year from the date of issuance and were not exercised.
On November 15, 2021, we entered into a purchase and sale agreement with ZA Group Inc. to sell CZJ License Inc. for $250,000. At the closing of such transaction, ZA Group Inc. delivered a convertible promissory note with a principal amount equal to the purchase price. The interest rate on the note was 5% per annum and matures on November 5, 2023. The note may be converted, from time to time, after 180 days from the issuance date of the note into common stock of ZA Group Inc, at a fixed conversion price of $0.005 per share, subject to a beneficiary ownership limitation of not more than 4.99% of the outstanding shares of common stock of ZA Group Inc.
At November 15, 2021, CZJ License Inc.’s accounts were eliminated from the consolidated financial statements. All expenses incurred by CZJ License Inc. up to November 15, 2021 have been disclosed as discontinued operations. The previous year’s assets, liabilities and expenses have been similarly classified for comparative purposes.
Schedule of Previous Year Assets Liabilities and Expenses
| December 31, <br><br>2022 | December 31, 2021 | |||
|---|---|---|---|---|
| Assets | $ | — | $ | — |
| Liabilities | $ | — | $ | — |
| Expenses | ||||
| Amortization | — | 74,760 | ||
| Selling, general and administrative | — | 190,857 | ||
| Professional fees | — | 213,500 | ||
| Loss from discontinued operations | $ | — | $ | 479,117 |
Note 18 Income Taxes
Income tax recovery differs from that which would be expected from applying the effective tax rates to the net income (loss) as follows:
Schedule of Income Tax Expense
| December 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Net loss for the year | $ | (13,139,810 | ) | $ | (14,262,579 | ) |
| Statutory and effective tax rates | 21.0 | % | 21.0 | % | ||
| Income taxes expenses (recovery) at the effective rate | $ | (2,759,360 | ) | $ | (2,995,142 | ) |
| Effect of change in tax rates | — | — | ||||
| Permanent differences | — | — | ||||
| Valuation allowance | 2,759,360 | 2,995,142 | ||||
| Income tax expense and income tax liability | $ | — | $ | — |
As at December 31, 2021 the tax effect of the temporary timing differences that give rise to significant components of deferred income tax asset are noted below. A valuation allowance has been recorded as management believes it is more likely than not that the deferred income tax asset will not be realized.
Schedule of Deferred Income Tax Asset
| December 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Tax loss carried forward | $ | — | $ | — | ||
| Deferred tax assets | $ | 2,759,360 | $ | 2,995,142 | ||
| Valuation allowance | (2,759,360 | ) | (2,995,142 | ) | ||
| Deferred taxes recognized | $ | — | $ | — |
Tax losses of approximately $25 million will expire in 2039 and 2040.
F-25
Note 19 Subsequent Events
On January 10, 2023, we issued two unsecured convertible subordinate notes totaling $220,000 that accrue interest at 12% per annum and mature in January 10, 2024 and have a $20,000 total original issue discount. The notes may be converted into shares of our Common Stock at $0.02 per share, subject to a beneficial ownership limitation of 4.99%. In connection with one of the notes sold, we issued the noteholder a warrant to purchase up to 40,000,000 shares of our Common Stock at $0.02 per share starting January 10, 2023 and ending January 10, 2030.
On January 28, 2023, the agent (the “Agent”) for the Investors delivered a notice to us (the “Acceleration Notice”) stating that the Agent and the Investors (a) elected to cause the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof, to become immediately due and payable in cash, (b) intended to commence legal action to collect any or all of the amounts due under the Notes, and (c) sought the appointment of a receiver or trustee as a means of realizing proceeds on their collateral.
On February 1, 2023, we entered into a
Partial Strict Foreclosure Agreement with the Investors pursuant to which we transferred ownership of our Federal Communications Commission licenses and other broadcast television assets to a third party entity controlled by the Investors. In consideration therefor, the Investors agreed to reduce the indebtedness under the Notes by $11,600,000.
On February 3, 2023, we entered into a securities purchase agreement with a third party lender pursuant to which we borrowed $88,760 and issued a promissory note that accrues interest a 12% per annum and is repayable in 10 monthly installments starting March 15, 2023.
On September 21, 2023, the Agent for the Investors delivered a notice to us that the Agent has exercised the Investors’ rights to vote the Pledged Interests and to exercise the Pledgees’ rights, powers and privileges, to pass certain resolutions and to amend our bylaws then in effect to, among other things, (i) remove the board of directors of the Company (the “Board of Directors”) and all officers of the Company, and (ii) reduce the number of the Board of Directors from three to one director. As a result of the Agent delivering such notice and exercising its rights to vote the Pledged Interests, a change of control of the Company occurred.
On the two-year anniversary of the October
11, 2021 issuance of the Series E-1 shares, the shares were to be automatically converted into 1,152,500,000 shares of our Common Stock, however we did not process the conversion and have not to date.
On November 6, 2023, the shareholders of the Company removed Philip Falcone and Warren Zenna as our directors and appointed Thomas Amon as the sole member of our board of directors. Mr. Amon removed all Company officers and appointed himself as the Company’s President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer, Principal Executive Officer and Principal Accounting Officer.
On November 10, 2023, Philip Falcone, individually and on behalf of Madison and other named defendants, filed a Confession of Judgment affirming that a promissory note (the “Z4 Note”) had been issued by the Company, dated December 28, 2021, by Z4 MGMT LLC (“Z4”), which was guaranteed by each of FFO1 and FFO2. The Z4 Note was initially payable on February 15, 2022, and had an original principal balance of $500,000 with an interest rate of 12% per annum. The Z4 Note’s expiration date was extended to July 5, 2022, then further extended to March 31, 2023, and as of October 1, 2023, the revised principal balance, along with interest accrued, totaled $581,304. On such date, Z4 filed an Affidavit of Default affirming that the Z4 Note was in default and requesting a judgment in the amount of $581,304 against the Company, FFO1, FFO2, and Philip Falcone personally, in favor of Z4. On December 5, 2023, a judgement in favor Z4 Management in the sum of $581,304 was rendered against us, Philip Falcone, FFO1 and FFO2.
Presently,
we are default on all of promissory and convertible notes payable (See Notes 11 and 12), which have $3.5 million in aggregate principal outstanding plus accrued interest, penalties and fees.
F-26
Item 9. Changes in and Disagreementswith Accountants on Accounting and Financial Disclosure.
There are no disagreements with our accountants on accounting and financial disclosure. Our independent registered public accounting firm since March 28, 2022, is BF Borgers CPA PC, 5400 W Cedar Ave, Lakewood, CO 80226.
From January 31, 2009 to March 27, 2022, our independent registered public accounting firm was K. R. Margetson Ltd, Chartered Professional Accountant (“KRM”), 331 East 5^th^ Street, North Vancouver, BC V7L 1M1, Canada. Our Board of Directors dismissed KRM on March 28, 2022. During the fiscal years ended December 31, 2020 and December 31, 2019, respectively, and the subsequent interim period through February 11, 2022, there were no disagreements between KRM and us on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KRM, would have caused KRM to make reference to the subject matter of the disagreement in their reports on our consolidated financial statements for such years.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
In connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by the sole member of our Board of Directors and our Chief Executive Officer of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, our management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the SEC rules and forms and that such information was accumulated or communicated to management to allow timely decisions regarding required disclosure. In particular, we identified material weaknesses in internal control over financial reporting, as discussed below.
Management’s Report on InternalControls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our internal control framework over financial reporting is a process designed under the supervision of our Chief Executive Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“US GAAP”). Internal control over financial reporting includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|---|---|
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
25
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on criteria established in InternalControl–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The matters involving internal controls and procedures that management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and no outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified and communicated to management in connection with the preparation and audit of our financial statements as of December 31, 2022, and the preparation of our 2023 quarterly financial statements.
As a result of the material weakness in internal control over financial reporting described above, management has concluded that, as of December 31, 2022, our internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and no outside directors on our Board of Directors caused and continues to cause an ineffective oversight in the establishment and monitoring of the required internal controls over financial reporting.
We are committed to improving our financial organization. As part of this commitment and when funds are available, we will create a position to segregate duties consistent with control objectives and will increase its personnel resources and technical accounting expertise within the accounting function by: (i) appointing additional outside directors to its board of directors who will also be appointed to our audit committee, resulting in a fully functioning audit committee that will undertake the oversight in the establishment and monitoring of required internal controls over financial reporting; and (ii) preparing and implementing sufficient written policies and checklists that will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of additional outside directors, who will also be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses: (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support our internal controls if personnel turn-over issues within the department occur. This, coupled with the appointment of additional outside directors, is designed to greatly decrease any control and procedure issues we may encounter in the future.
26
Management will continue to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Our independent auditors have not issued an attestation report on management’s assessment of our internal control over financial reporting. As a result, this Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We are not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Controls
There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the year ended December 31, 2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
On October 14, 2022, we issued a $110,000 note with a $10,000 original issue discount, which matured on October 14, 2023 and bore interest at 12% per annum. In connection with such issuance, we issued the noteholder a warrant to purchase up to 5,000,000 shares of our Common Stock at $0.02 per share, which is exercisable upon issuance until May 5, 2029. As of December 31, 2022, $110,000 in principal under such note was outstanding.
On October 27, 2022, the Agent for the Investors notified us that certain events of default have occurred and are continuing under the Investors’ Notes. On November 21, 2022, we, the Investors and the Agent entered into a Forbearance Agreement, pursuant to which, among other things, we acknowledged the outstanding principal balances of the Investor Notes, that we have an obligation for interest, including default interest, fees and expenses in connection with the Investor Notes, that we have no rights of offset, defenses, claims or counterclaims with respect to our obligations and pursuant to a side letter, dated as of November 21, 2022, we agreed to achieve certain milestones by the dates as set forth therein. The Forbearance Agreement expired on December 30, 2022.
| On September 16, 2022, we issued a $55,000 convertible note with a $5,000 original issue discount, which matured on September 16, 2023 and bore interest at 12% per annum. The note may be converted into shares of our Common Stock at the lesser of $0.001 per share or at a 50% discount to the lowest closing price of our Common Stock within the past twenty days prior to a conversion. As of December 31, 2022, $55,000 in principal under such note was outstanding. |
|---|
| On December 2, 2022, we issued a $220,000<br> note with a $20,000 original issue discount, which matured on October 14, 2023 and bore interest at 12% per annum. In connection<br> with such issuance, we issued the noteholder a warrant to purchase up to 10,000,000 shares of our Common Stock at $0.02 per share,<br> which is exercisable upon issuance until May 5, 2029. As of December 31, 2022, $220,000 in principal under such note was outstanding. |
During the fourth quarter ended December 31, 2022, events of default were triggered due to non-payment of outstanding promissory notes resulting in approximately $3.5 million, including accrued interest, default interest and late fees, becoming due and payable to such holders. Additionally, during such period, Sovryn triggered an event of default under a television station asset lease due to nonpayment, resulting in the lessor having the right to lease the television station asset to a third party and hold Sovryn liable for any deficiency. The FCC license used to operate the television station was subsequently foreclosed upon by the Investors and Sovryn no longer operates the television station.
Item 9C. Disclosure Regarding ForeignJurisdictions that Prevent Inspections.
Not applicable.
27
PART III
Item 10. Directors, Executive Officers,and Corporate Governance.
(a) Identify Directors and ExecutiveOfficers
Mr. Amon, currently the sole member of the Board of Directors, holds office until (i) the next annual meeting of the stockholders, (ii) his successor has been duly elected and qualified, or (iii) his resignation.
As of the date of this Annual Report, Madison’s management team consists solely of Mr. Amon, who serves as the Company’s President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director. Mr. Amon was appointed to such positions in connection with the Change of Control on November 6, 2023
Mr. Amon, age 76, is a corporate and M&A specialist with over 40 years’ experience representing small and medium sized companies and investment funds. Over the past five years, Mr. Amon has operated a law practice, the Law Office of Thomas Amon, until June 1, 2023 when he began working at Praetor Legal Services. From July 2020 until July 31, 2023, Mr. Amon served on the board of Everything Blockchain, Inc. For the past 15 years, Mr. Amon has also served as President of Spoleto Corporation. Mr. Amon also serves as a board member of a number of charitable institutions located in New York City and New England. Mr. Amon is a securities lawyer by trade and is licensed to practice in the State of New York. He graduated from Harvard College received his J.D. from the University of Virginia School of Law. The Company believes that Mr. Amon’s legal expertise in corporate and mergers and acquisitions matters for small and medium sized public and private companies and his role as a licensed practicing lawyer provide him with the requisite qualifications and skills to serve as a member of the Board of Directors.
(b) Identify Significant Employees
Other than Mr. Amon, we have no significant employees as of the date of this Annual Report.
(c) Family Relationships
There are no family relationships among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
(d) Involvement in Certain Legal Proceedings
To the best of our knowledge, and except as set forth below, none of our current directors or executive officers has, during the past ten years:
| ● | Been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
|---|---|
| ● | Had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation, or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
| --- | --- |
| ● | Been subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| --- | --- |
| ● | Been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| --- | --- |
| ● | Been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| --- | --- |
| ● | Been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
| --- | --- |
Except as may be set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Certain Legal Proceedings involving Mr. Falcone
On September 16, 2013, the United States District Court for the Southern District of New York entered a final Judgment (the “Final Judgment”) approving a settlement between the SEC and Harbinger Capital, Harbinger Capital Partners Special Situations GP, LLC, Harbinger Capital Partners Offshore Manager, L.L.C., and Philip A. Falcone (collectively, the “HCP Parties”), in connection with two civil actions previously filed against the HCP Parties by the SEC. One civil action alleged that Harbinger Capital Partners Special Situations GP, LLC, Harbinger Capital Partners Offshore Manager, L.L.C., and Mr. Falcone violated the anti-fraud provisions of the federal securities laws by engaging in market manipulation in connection with the trading of the debt securities of a particular issuer from 2006 to 2008. The other civil action alleged that Harbinger Capital and Mr. Falcone violated the anti-fraud provisions of the federal securities laws in connection with a loan made by Harbinger Capital Partners Special Situations Fund, L.P. to Mr. Falcone in October 2009 and in connection with the circumstances and disclosure regarding alleged preferential treatment of, and agreements with, certain fund investors.
The Final Judgment barred and enjoined Mr. Falcone for a period of five years (after which he may seek to have the bar and injunction lifted) from acting as or being an associated person of any “broker,” “dealer,” “investment adviser,” “municipal securities dealer,” “municipal adviser,” “transfer agent,” or “nationally recognized statistical rating organization.” During the period of the bar, Mr. Falcone may remain associated with Harbinger Capital and certain other Harbinger Capital-related entities; provided that, during such time, Mr. Falcone’s association will be limited as set forth in the Final Judgment. The HCP Parties must take all actions reasonably necessary to expeditiously satisfy all redemption requests of investors in the Harbinger Capital-related funds, which may include the orderly disposition of Harbinger Capital-related fund assets. In addition, during the bar period, the HCP Parties and certain Harbinger Capital-related entities may not raise new capital or make capital calls from existing investors. The Final Judgment required the HCP Parties to pay disgorgement, prejudgment interest, and civil penalties totaling approximately $18 million. In addition, certain of the activities of the HCP Parties at the Harbinger Capital-related funds were subject to the oversight of an independent monitor for two years.
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Additionally, on October 7, 2013, HRG, Fidelity & Guaranty Life (f/k/a, Harbinger F&G, LLC, “FGL”), a subsidiary of HRG Group, Inc. (f/k/a Harbinger Group Inc., an entity in which Mr. Falcone use to serve as CEO and a director, “HRG”), Fidelity & Guaranty Life Insurance Company of New York (“FGL NY Insurance”), a subsidiary of FGL, and Mr. Falcone delivered a commitment (the “NYDFS Commitment”) to the New York State Department of Financial Services (“NYDFS”) pursuant to which Mr. Falcone agreed for a period of up to seven years that he will not, directly or indirectly, individually or through any person or entity, exercise control (within the meaning of New York Insurance Law Section 1501(a)(2)) over FGL NY Insurance or any other New York-licensed insurer. In connection with the NYDFS Commitment, neither Mr. Falcone nor any employee of Harbinger Capital, may (i) serve as a director or officer of FGL or (ii) be involved in making investment decisions for FGL’s portfolio of assets or any funds withheld account supporting credit for reinsurance for FGL. The NYDFS Commitment provides that: (i) Mr. Falcone may continue to own any direct or indirect interest in HRG and serve as an officer or director of HRG and (ii) HRG may continue to own any direct or indirect interest in FGL NY Insurance and any other New York-licensed insurer. Any other activities related solely to FGL (other than FGL NY Insurance) are not prohibited and HRG executives may continue to serve on FGL’s board of directors. In addition, in connection with its re-domestication to Iowa, on October 7, 2013, Fidelity & Guaranty Life Insurance Company (“FGL Insurance”), a subsidiary of FGL, agreed to the conditions set by the Iowa Insurance Commissioner that neither Mr. Falcone nor any employees of Harbinger Capital may serve as an officer or director of FGL Insurance or FGL (but FGL Insurance may request that the Iowa Insurance Division lift this restriction after five years) and neither Mr. Falcone nor Harbinger Capital will be involved in making investment decisions for FGL Insurance or any funds withheld account that supports credit for reinsurance for FGL Insurance for five years. Our Insurance Company is not licensed to operate in New York State, and does not currently operate in New York State; therefore, the ban does not apply to our Insurance Company.
In addition, Mr. Falcone is a named defendant in litigation in connection with certain personal financial matters. We understand that Mr. Falcone continues to vigorously pursue his defense in connection with these matters.
On November 6, 2023, in connection with the Change of Control, the shareholders of the Company removed Mr. Falcone and Warren Zenna as our directors and appointed Thomas Amon as the sole member of the Board of Directors. Mr. Amon removed all Company officers and appointed himself as the Company’s President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer.
(e) Compliance with Section 16(a) ofthe Exchange Act.
Section 16(a) of the Exchange Act requires directors, executive officers and 10% or greater shareholders of us to file with the SEC initial reports of ownership (Form 3) and reports of changes in ownership of our equity securities (Form 4 and Form 5) and to provide copies of all such Forms as filed to us. Based solely on our review of copies of the reports filed with the SEC and the written representations of our directors and executive officers, we believe that all reporting requirements for the year ended December 31, 2022 were complied with by each person who at any time during the year ended December 31, 2022 was a director or an executive officer of the Company, or held more than 10% of our Common Stock, except for the following: one Form 4 not filed by Warren Zenna reporting one transaction and four Form 4s not filed by Korr Value LP reporting four transactions.
(f) Code of Ethics
We adopted a code of ethics that applies to all of our executive officers and employees, including our Chief Executive Officer and Chief Financial Officer. See Exhibit 14 of this Annual Report for a copy of such code of ethics. Management believes our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
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(g) Nomination Procedure for Directors
We do not have a standing nominating committee; recommendations for candidates to stand for election as directors are made by the Board of Directors. We have not adopted a policy that permits shareholders to recommend candidates for election as directors or a process for shareholders to send communications to the Board of Directors.
(h) Audit Committee
We do not have a separately designated standing audit committee. Rather, our sole director currently performs the required functions of an audit committee. See “Item 12. (c) Director independence” below for more information on independence.
Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditor and any outside advisors engaged by the audit committee.
As of December 31, 2022, we did not have a written audit committee charter or similar document.
(i) Audit Committee Financial Expert
We have no financial expert. Management believes the cost related to retaining a financial expert at this time is prohibitive and has determined that the cost of hiring a financial expert to act as a director and to be a member of an audit committee or otherwise perform audit committee functions outweighs the benefits of having a financial expert.
(j) Insider Trading Policy
We intend to have our Board of Directors adopt an insider trading policy to promote compliance with federal and state securities laws that prohibit certain persons who are aware of material nonpublic information about a company from (i) trading in securities of that company, or (ii) providing material nonpublic information to other persons who may trade on the basis of that information.
We have not yet adopted an insider trading policy because we have just recently reshaped our Board of Directors that would advise on such policies in connection with the Change of Control.
30
Item 11. Executive Compensation.
Madison has paid the following compensation to its named executive officers during its fiscal years ended December 31, 2022 and 2021.
summary
compensation table
| (a) Name and principal position | (b) <br><br>Year | (c)<br><br>Salary<br><br>($) | (d)<br><br>Bonus<br><br>($) | (e) <br><br>Stock<br><br>Awards<br><br>($) | (f)<br><br>Option<br><br>Awards<br><br>($) | (g)<br><br>Non-<br><br>Equity<br><br>Incentive<br><br>Plan <br><br>($) | (h)<br><br>Non-qualified<br><br>Deferred<br><br>Compensation<br><br>Earnings <br><br>($) | (i) <br><br>All other<br><br>compensation<br><br>($) | (j) <br><br>Total <br><br>($) <br><br>(1)(2) |
|---|---|---|---|---|---|---|---|---|---|
| Philip A. Falcone,<br><br> <br>Former Chief Executive Officer | 2022 | nil | nil | nil | nil | nil | nil | nil | nil |
| 2021 | nil | nil | nil | nil | nil | nil | nil | nil | |
| Henry Turner,<br><br> <br>Former Chief Technology Officer and Former Chief Operating Officer | 2022 | 98,077 | nil | nil | nil | nil | nil | nil | 98,077 |
| 2021 | 98,077 | nil | nil | nil | nil | nil | nil | 98,077 | |
| Jeffrey Canouse, Former<br><br> <br>Chief Executive Officer, Former Chief Compliance Officer and Former Director | 2022 | nil | nil | nil | nil | nil | nil | 49,200 | 49,200 |
| 2021 | nil | nil | nil | nil | nil | nil | 49,200 | 49,200 | |
| (1) | On February 15, 2021, we entered into a Consultant Agreement with GreenRock LLC, to retain Mr. Falcone, its Managing Member, to serve as a consultant to us and advise on all matters typically considered and decided upon by executive management and our board of directors, and additionally to serve as Chairman of the Board of Directors and Chief Executive Officer. We compensated GreenRock LLC $925,972 and $315,000 for its services provided in 2022 and 2021, respectively. | ||||||||
| --- | --- |
We have structured our compensation with the following objectives in mind:
| ● | offer competitive compensation to attract and retain highly qualified leaders to guide and govern; |
|---|---|
| ● | recognize the substantial investment of time and expertise necessary for the employees to discharge<br>their duties; and |
| --- | --- |
| ● | ensure that compensation is easy to understand and is regarded positively by our shareholders and<br>employees. |
| --- | --- |
Our executive compensation framework is designed to continue to align and promote the alignment of pay and performance to the benefit of our shareholders.
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Since our inception, no stock options, stock appreciation rights, or long-term incentive plans have been granted, exercised or repriced.
Currently, there are no arrangements between us and any of its directors whereby such directors are compensated for any services provided as directors.
There are no employment agreements between us and any named executive officer, and there are no employment agreements or other compensating plans or arrangements with regard to any named executive officer which provide for specific compensation in the event of resignation, retirement, other termination of employment or from a change of control or from a change in a named executive officer’s responsibilities following a change in control.
Director Compensation for Fiscal Year Ended 2022
During the year ended December 31, 2022, our non-employee director, Warren Zenna, was not paid any compensation in connection with his services to the Board of Directors. For compensation paid to our other directors, Phil Falcone and Jeffrey Canouse, during the year ended December 31, 2022, see the Summary Compensation table in this Item 11 above.
Item 12. Security Ownership of CertainBeneficial Holders and Management and Related Stockholder Matters.
The following table sets forth, as of January 23, 2024, information regarding beneficial ownership of our capital stock by:
| ● | each person, or group of affiliated persons, known by us to beneficially own more than 5% of our<br>outstanding voting securities; |
|---|---|
| ● | each of our named executive officers; |
| --- | --- |
| ● | each of our directors; and |
| --- | --- |
| ● | all of our named executive officers and directors as a group. |
| --- | --- |
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including securities that are exercisable for shares of Common Stock, Series B Preferred Stock or Series E-1 Preferred Stock within sixty (60) days of January 23, 2024. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the holders named in the table below have sole voting and investment power with respect to all shares of Common Stock, Series B Preferred Stock or Series E-1 Preferred Stock shown that they beneficially own, subject to community property laws where applicable.
For purposes of computing the percentage of outstanding shares of our Common Stock, Series B Preferred Stock and Series E-1 Preferred Stock held by each holder or group of holders named above, any shares of Common Stock, Series B Preferred Stock or Series E-1 Preferred Stock that such holder or holders have the right to acquire within sixty (60) days of January 23, 2024 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other holder. The inclusion herein of any shares of Common Stock, Series B Preferred Stock or Series E-1 Preferred Stock listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise identified, the address of each beneficial owner listed in the table below is c/o Madison Technologies Inc., 2500 Westchester Avenue, Purchase, New York 10577.
| Shares Beneficially Owned | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Common Stock | Series B<br> Preferred Stock | Series E-1<br> Preferred Stock | % Total Voting | |||||||||||||||||
| Name of Beneficial Owner | Shares | %^(1)^ | Shares | %^(2)^ | Shares | %^(3)^ | Power^(4)^ | |||||||||||||
| 5% Stockholders: | ||||||||||||||||||||
| Arena Investors, LP ^(5)^ | 2,347,661,906 | ^(3)^ | 85.2 | % | 100 | 100 | % | 1,152,500 | ) | 100 | % | 90.2 | % | |||||||
| Directors and Executive Officers: | ||||||||||||||||||||
| Thomas Amon, Chief Executive Officer, Chief Financial Officer and Sole Director^(6)^ | — | — | — | — | — | — | ||||||||||||||
| Philip Falcone, Former Chief Executive Officer and Former Director^(7)^ | — | — | — | — | — | — | — | |||||||||||||
| Henry Turner, Former Chief Technology Officer and Former Chief Operating Officer^(8)^ | — | — | — | — | — | — | — | |||||||||||||
| Jeffrey Canouse, Former Chief Compliance Officer | 7,677,000 | * | — | — | — | — | * | |||||||||||||
| Directors and Executive Officers as a Group (4 persons) | * | — | — | — | * | |||||||||||||||
| * | Less than 1% | |||||||||||||||||||
| --- | --- |
(1) Based on 1,603,095,243 shares of Common Stock issued and outstanding as of January 23, 2024.
(2) The 100 shares of Series B Preferred Stock are not convertible, however such shares enable the holder thereof to cast a number of votes equal to 51% of all voting shares of each class of the Company’s capital stock, including but not limited to, the shares of Common Stock and of the Series E-1 Preferred Stock.
(3) Each share of Series E-1 Preferred Stock converts into 1,000 shares of Common Stock and votes with the shares of Common Stock on an as-converted to Common Stock basis. Although conversions of such shares of Series E-1 Preferred Stock have not yet occurred, the Series E-1 Certificate requires the shares of Series E-1 Preferred Stock to automatically convert two years from the date of their initial issuance, which occurred in September 2021. Accordingly, such shares of Series E-1 Preferred Stock are considered converted for purposes of the number of shares of Common Stock owned and percentage ownership.
(4) Percentage of total voting power represents voting power with respect to all shares of Common Stock, Series B Preferred Stock and Series E-1 Preferred Stock.
(5) Arena Investors, LP’s (“Arena”) beneficial ownership consists of (i) 102,416,140 shares of Common Stock beneficially owned by Arena Special Opportunities Partners I, LP (“Arena Partners”), a fund for which Arena acts as investment manager and whose securities Arena has sole voting control and investment discretion over; (ii) 49,761,877 shares of Common Stock beneficially owned by Arena Special Opportunities Fund, LP (“Arena Opportunities”), a fund for which Arena acts as investment manager and whose securities Arena has sole voting control and investment discretion over; (iii) an aggregate of 1,042,983,889 shares of Common Stock, which Arena obtained voting and investment control in connection with the Change of Control and the acquisition of the Pledged Interests, of which (x) 388,150,556 shares had previously been deemed beneficially owned by FFO1 and Mr. Falcone prior to the Change of Control, (y) 436,555,556 shares had previously been deemed beneficially owned by FFO2 and Mr. Falcone prior to the Change of Control and (z) 218,277,777 shares had previously been deemed beneficially owned by Korr Value LP and Kenneth Orr (collectively, “Korr”) prior to the Change of Control; (iv) 100 shares of Series B Preferred Stock beneficially owned by Portents Holdings, LLC (“Portents”), a fund for which Arena acts as investment manager and whose securities Arena has sole voting control and investment discretion over, which shares were deemed beneficially owned by FFO1 and Mr. Falcone prior to the Change of Control and were included in the Pledged Interests; (v) an aggregate of 1,152,500 shares of Series E-1 Preferred Stock held by Portents, which shares were deemed beneficially owned by each of FFO1, FFO2, Mr. Falcone and Korr prior to the Change of Control and were included in the Pledged Interests. Such beneficial ownership excludes (i) a Common Stock purchase warrant exercisable for up to 129,265,140.441 shares of Common Stock held by Arena Partners, and (ii) a Common Stock purchase warrant exercisable for up to 62,807,875.559 shares of Common Stock held by Arena Opportunities, which warrants contain 4.99% beneficial ownership limitations preventing their exercise by the holders thereof as a result of the number of shares beneficially owned by Arena.
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Item 13. Certain Relationships and RelatedTransactions, and Director Independence.
(a) Transactions with Related Persons
Effective January 1, 2022, we entered into a management consulting agreement with GreenRock LLC, a company controlled by Mr. Falcone, for a period of one year ending December 31, 2022, pursuant to which we provided monthly remuneration of $35,000, plus expenses in connection with his duties, responsibilities and performance as our chief executive officer. In February 2021, Sovryn entered into a consulting agreement with GreenRock LLC to provide us with chief executive officer services. In the years ended December 31, 2022 and 2021, we paid GreenRock LLC $420,000 and $315,000 in fees, respectively. Mr. Falcone is the managing member of GreenRock LLC and is our former Chief Executive Officer. We paid GreenRock LLC bonuses of $505,972 for the year ended December 31, 2022.
Apart from the above, since the beginning of the year ended December 31, 2022, no director, executive officer, security holder, or any immediate family of such director, executive officer, or security holder has had any direct or indirect material interest in any transaction or currently proposed transaction, which we were or are to be a participant, that exceeded the lesser of (1) $120,000 or (2) one percent of the average of our total assets at year-end for the last three completed fiscal years.
(c) Director independence
Mr. Amon is the sole member of our Board of Directors. Pursuant to Item 407(a)(1)(ii) of Regulation S-K of the Securities Act, our Board of Directors has adopted the definition of “independent director” as set forth in Rule 4200(a)(15) of the rules of The Nasdaq Stock Market LLC. In summary, an “independent director” means a person other than an executive officer or employee of Madison or any other individual having a relationship which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and includes any director who accepted any compensation from us in excess of $200,000 during any period of twelve consecutive months with the three past fiscal years. The ownership of our stock will not preclude a director from being independent.
In applying this definition, our Board of Directors has determined that Mr. Amon does not qualify as an “independent director” pursuant to such Rule 4200(a)(15).
As of the date of this Annual Report, we did not maintain a separately designated audit, compensation or nominating committee. We intend to adopt this definition of independence for the members of our audit committee once formed.
Item 14. Principal Accounting Fees andServices
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and for the review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
December 31, 2022 - $71,500 – BF Borgers CPA PC
December 31, 2021 - $35,000 – BF Borgers CPA PC
No such fees were billed to K. R. Margetson Ltd. for the years ended December 31, 2022 and December 31, 2021.
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
December 31, 2022 and December 31, 2021 - $nil – BF Borgers CPA PC
No such fees were billed to K. R. Margetson Ltd. for the years ended December 31, 2022 and December 31, 2021.
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
December 31, 2022 and December 31, 2021 - $nil – BF Borgers CPA PC
No such fees were billed to K. R. Margetson Ltd. for the years ended December 31, 2022 and December 31, 2021.
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) of this Item 14 was:
December 31, 2022 and December 31, 2021 - $nil – BF Borgers CPA PC
No such fees were billed to K. R. Margetson Ltd. for the years ended December 31, 2022 and December 31, 2021.
33
(5) In lieu of an Audit Committee, our sole director pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services.
(6) The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was nil %.
Audit Committee Pre-Approval of Auditand Permissible Non-Audit Services of Independent Auditors
Given the fact that we currently have only one director, as well as our limited financial resources and operational state, our sole director must serve in the role of an audit committee. Our sole director pre-approves all audit and permissible non-audit services. These services may include audit services, audit-related services, tax services and other services. Our sole director approves these services on a case-by-case basis.
Item 15. Exhibits, Financial StatementSchedules.
(a). Financial Statements
Our consolidated financial statements have been included in Item 8 above.
(b). Financial Statement Schedules
All schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions or are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted from this Item 15.
(c). Exhibits
All exhibits required to be filed with this Annual Report are listed below and have been filed with this Annual Report or incorporated by reference herein.
34
35
36
| 101.DEF | XBRL Taxonomy Definition<br> Linkbase |
|---|---|
| 101.LAB | XBRL Taxonomy Label<br> Linkbase |
| 101.PRE | XBRL Taxonomy Presentation<br> Linkbase |
| 104 | Cover Page Interactive<br> Cover Page Data (formatted as inline XBRL and contained in Exhibit 101) |
* Filed herewith
In accordance with SEC Release 33-8238, the certifications furnished in Exhibit 32 hereto are deemed to be furnished with this Annual Report and will not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
Item 16. Form 10-K Summary
None.
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Signatures
In accordance with the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, Madison Technologies Inc. has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Madison Technologies Inc. | ||
|---|---|---|
| Date: January 25, 2024 | By: | /s/ Thomas Amon |
| Name: Thomas Amon | ||
| Title: Chief Executive Officer and Chief Financial Officer<br><br> <br>(Principal Executive Officer and Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Madison Technologies Inc. and in the capacities and on the dates indicated.
| Date: January 25, 2024 | By: | /s/ Thomas Amon |
|---|---|---|
| Name: Thomas Amon | ||
| Title: Chief Executive Officer, Chief Financial Officer, and<br> Sole Director<br><br> <br>(Principal Executive Officer<br> and Principal Financial Officer) |
38
Exhibit 3.1(i)(f)
| Filed<br> in the Office of<br><br> <br>/s/<br> Barbara K. Cegavske | Business<br> Number | |
|---|---|---|
| C13957-1998 | ||
| Filing<br> Number | ||
| 20211758237 | ||
| BARBARA K. CEGAVSKE<br><br> Secretary of State<br><br> 202 North Carson Street<br><br> Carson City, Nevada 89701-4201<br><br> (775) 684-5708<br><br> Website: www.nvsos.gov | Secretary<br> of State<br><br> <br>State<br> Of Nevada | Filed<br> On |
| 9/16/2021 2:20:00 PM | ||
| Number<br> of Pages | ||
| 3 | ||
| Profit Corporation: | ||
| --- | ||
| Certificate of Amendment (PURSUANT TO NRS 78.380 &<br> 78.385/78.390) | ||
| Certificate to Accompany Restated Articles or Amended and | ||
| Restated Articles (PURSUANT TO NRS 78.403) | ||
| Officer’s Statement (PURSUANT TO NRS 80.030) |
TYPEOR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT
| 1. Entity information: | Name<br> of entity as on file with the Nevada Secretary of State: | ||
|---|---|---|---|
| Madison<br> Technologies, Inc. | |||
| Entity<br> or Nevada Business Identification Number (NVID): | NV19981253355 | ||
| 2. Restated or | ☐ Certificate to Accompany Restated Articles or Amended<br> and Restated Articles | ||
| --- | --- | ||
| Amended and Restated Articles: | ☐ <br> Restated Articles - No amendments; articles are restated only and are signed by an officer of the corporation who has<br> been authorized to execute the certificate by resolution of the | ||
| (Select<br> one) | board<br> of directors adopted on: | ||
| (If<br> amending and | The<br> certificate correctly sets forth the text of the articles or certificate as amended to the date of the certificate. | ||
| restating<br> only, complete | ☐ <br> Amended and Restated Articles | ||
| section<br> 1, 2, 3, 5 and 6) | *<br> Restated or Amended and Restated Articles must be included with this filing type. | ||
| 3. Type of Amendment Filing Being Completed: (Select only one box)<br><br> <br><br> (If amending, complete<br><br> section 1, 3, 5 and 6.) | ☐ Certificate<br> of Amendment to Articles of Incorporation (Pursuant to NRS 78.380 - Before Issuance of Stock)<br><br> <br><br><br> <br><br><br> <br>The<br> undersigned declare that they constitute at least two-thirds of the following:<br><br><br><br><br><br><br>(Check<br>only one box) ☐ incorporators ☐ board<br>of directors<br><br><br><br><br><br><br><br><br><br>The<br>undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued | ||
| --- | --- | ||
| ☒ Certificate<br> of Amendment to Articles of Incorporation (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) | |||
| --- | --- | ||
| The<br> vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power,<br> or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required<br> by the provisions | |||
| of<br> the articles of incorporation* have voted in favor of the amendment is: | 92.5% | ||
| ☐ Officer’s<br> Statement (foreign qualified entities only) - | |||
| --- | --- | --- | |
| Name<br> in home state, if using a modified name in Nevada: | |||
| Jurisdiction<br> of formation: | |||
| Changes<br> to takes the following effect: | |||
| ☐ The entity name has been amended. | ☐ Dissolution | ||
| ☐ The purpose of the entity has been amended. | ☐ Merger | ||
| ☐ The authorized shares have been amended. | ☐ Conversion | ||
| ☐ Other:<br>(specify changes) | |||
| *<br> Officer’s Statement must be submitted with either a certified copy of or a certificate evidencing the filing of any document, amendatory<br> or otherwise, relating to the original articles in the place of the corporations creation. | |||
| This<br> form must be accompanied by appropriate fees. | Page<br> 1 of 2 | ||
| --- | --- | ||
| Revised:<br> 1/1/2019 | |||
| BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov | |||
| --- | |||
| Profit Corporation: | |||
| --- | |||
| Certificate of Amendment (PURSUANT TO NRS 78.380 &<br> 78.385/78.390) | |||
| Certificate to Accompany Restated Articles or Amended and | |||
| Restated Articles (PURSUANT TO NRS 78.403) | |||
| Officer’s Statement (PURSUANT TO NRS 80.030) | |||
| 4. Effective Date and Time: | Date: | Time: | |
| --- | --- | --- | |
| (Optional) | (must<br> not be later than 90 days after the certificate is filed) | ||
| 5. Information Being Changed: (Domestic corporations only) | Changes<br> to takes the following effect: | ||
| --- | --- | ||
| ☐ The<br> entity name has been amended. | |||
| ☐ The<br> registered agent has been changed. (attach Certificate of Acceptance from new registered agent) | |||
| ☐ The<br> purpose of the entity has been amended. | |||
| ☒ The<br> authorized shares have been amended. | |||
| ☐ The<br> directors, managers or general partners have been amended. | |||
| ☐ IRS<br> tax language has been added. | |||
| ☐ Articles<br> have been added. | |||
| ☐ Articles<br> have been deleted. | |||
| ☐ Other. | |||
| The<br> articles have been amended as follows: (provide article numbers, if available) | |||
| Article<br> Fourth is hereby amended and restated as set forth in Exhibit A. | |||
| (attach<br> additional page(s) if necessary) | |||
| 6. Signature: | X | /s/ Philip Falcone | Chief Executive<br>Officer |
| --- | --- | --- | --- |
| (Required) | Signature<br> of Officer or Authorized Signer | Title | |
| X | |||
| Signature<br> of Officer or Authorized Signer | Title | ||
| *<br> If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding<br> shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of<br> shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or<br> restrictions on the voting power thereof. | |||
| Please include any required or optional information in space below: | |||
| --- | |||
| (attach<br> additional page(s) if necessary) | |||
| This<br> form must be accompanied by appropriate fees. | Page<br> 2 of 2<br><br> Revised: 1/1/2019 | ||
| --- | --- |
EXHIBIT A
ARTICLE FOURTH: The total number of shares of common stock which the Corporation is authorized to issue is 6,000,000,000, at a par value of $0.001 per share, and the total number of shares of preferred stock which the Corporation is authorized to issue is 50,000,000, at a par value of $0.001 per share. The Corporation no longer has any authorized capital stock with no par value. Said shares may be designated and issued by the Corporation from time to time for such consideration as may be fixed by the Board of Directors.
Exhibit3.1(i)(s)
| Filed<br>in the Office of<br><br> <br>/s/ Barbara K. Cegavske | Business<br> Number | |
|---|---|---|
| C13957-1998 | ||
| Filing<br> Number | ||
| 20211882096 | ||
| BARBARA K. CEGAVSKE<br><br> Secretary of State<br><br> 202 North Carson Street<br><br> Carson City, Nevada 89701-4201<br><br> (775) 684-5708<br><br> Website: www.nvsos.gov | Secretary<br> of State<br><br> <br>State<br> Of Nevada | Filed<br> On |
| 11/9/2021 9:45:00 AM | ||
| Number<br> of Pages | ||
| 13 | ||
| Certificate, Amendment or Withdrawal of Designation | ||
| --- | ||
| NRS 78.1955, 78.1955(6) | ||
| ☒ Certificate of Designation | ||
| ☐ Certificate of Amendment to Designation - Before Issuance of Class or Series | ||
| ☐ Certificate of Amendment to Designation - After Issuance of Class or Series | ||
| ☐ Certificate of Withdrawal of Certificate of Designation |
TYPEOR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT
| 1. Entity Information: | Name<br> of entity: | |||||
|---|---|---|---|---|---|---|
| Madison Technologies, Inc. | ||||||
| Entity<br> or Nevada Business Identification Number (NVID): | NV19981253355 | |||||
| 2. Effective date and time: | For<br> Certificate of Designation or | Date: | Time: | |||
| --- | --- | --- | --- | --- | --- | --- |
| **** | Amendment<br> to Designation Only | |||||
| **** | (Optional): | (must not<br>be later than 90 days after the certificate is filed) | ||||
| 3. Class or series of stock: (Certificate of Designation only) | The<br> class or series of stock being designated within this filing: | |||||
| Series H Preferred Stock | ||||||
| 4. Information for amendment of class or series of stock: | The<br> original class or series of stock being amended within this filing: | |||||
| 5. Amendment of class or series of stock: | ☐ Certificate<br>of Amendment to Designation- Before Issuance of Class or Series<br><br> <br>As<br>of the date of this certificate no shares of the class or series of stock have been issued. | |||||
| ☐ Certificate<br>of Amendment to Designation- After Issuance of Class or Series<br><br> <br>The<br>amendment has been approved by the vote of stockholders holding shares in the corporation entitling them to exercise a majority<br>of the voting power, or such greater proportion of the voting power as may be required by the articles of Incorporation or the<br>certificate of designation. | ||||||
| 6.Resolution:<br><br> <br>Certificate<br> of Designation and Amendment to Designation only)<br><br> <br>**** | By<br> resolution of the board of directors pursuant to a provision in the articles of incorporation this certificate establishes<br> OR amends the following regarding the voting powers, designations, preferences, limitations, restrictions and relative rights<br> of the following class or series of stock.* | |||||
| See Exhibit A attached hereto. | ||||||
| 7. Withdrawal: | Designation<br>being Withdrawn: | Date<br>of <br><br>Designation: | ||||
| --- | --- | --- | ||||
| No<br> shares of the class or series of stock being withdrawn are outstanding. | ||||||
| The<br> resolution of the board of directors authorizing the withdrawal of the certificate of designation establishing the class or<br> series of stock: * | ||||||
| 8. Signature: (Required) | X | /s/ Philip<br> Falcone | Date: | 11/8/21 | ||
| --- | --- | --- | --- | --- | ||
| Signature<br> of Officer | ||||||
| *<br> Attach additional page(s) if necessary | Page<br> 1 of 1 | |||||
| --- | --- | |||||
| This<br> form must be accompanied by appropriate fees. | Revised:<br> 1/1/2019 |
MADISON TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES H CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 78.1955 OF THE
NEVADA REVISED STATUTES
The undersigned, Philip Falcone, does hereby certify that:
1. He is the Chief Executive Officer of Madison Technologies, Inc., a Nevada corporation (the “Corporation").
2. The Corporation is authorized to issue 50,000,000 shares of preferred stock, 1,382,600 of which have been issued.
3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors"):
That pursuant to the authority expressly conferred upon the Board of Directors of the Corporation by the Corporation’s Articles of Incorporation, as amended, the Board of Directors on November 4, 2021, adopted the following resolution determining it desirable and in the best interests of the Corporation and its shareholders for the Corporation to create a series of 39,895 shares of preferred stock designated as “Series H Convertible Preferred Stock”, none of which shares have been issued.
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
Section1. 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(e).
"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 its 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.
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"Conversion Date” shall have the meaning set forth in Section 6(a).
"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.
"Exchange Agreement” means the Exchange Agreement, dated as the date hereof, among the Corporation, Arena Special Opportunities Fund, LP and Arena Special Opportunities Partners I, LP, as amended, modified or supplemented from time to time in accordance with its terms.
"Fundamental Transaction” shall have the meaning set forth in Section 7(e).
"GAAP" means United States generally accepted accounting principles.
"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 or pari passu to the Preferred Stock in dividend rights or liquidation preference.
"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.
"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).
"Stated Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
"Successor Entity” shall have the meaning set forth in Section 7(e).
"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 any successors to any of the foregoing).
Section2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series H Convertible Preferred Stock (the “Preferred Stock") and the number of shares so designated shall be up to 39,895 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (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 $1.00, subject to increase set forth in Section 3 below (the “Stated Value").
Section3. Dividends. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7*,* 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 actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
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Section4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then-outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that materially adversely affects any rights of the Holders, (c) increase the number of authorized shares of Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
Section5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation"), the Holders shall (i) first be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to $0.01 for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities and (ii) then be entitled to receive out of the assets, whether capital or surplus, of the Corporation the same amount that a holder of Common Stock would receive if the Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
Section6. Conversion.
(a) Conversions at Option of Holder. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into one thousand (1,000) shares of Common Stock (the “Conversion Ratio") (subject to the limitations set forth in Section 6(d)). 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. 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. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To e fleet 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) [Reserved]
(c) Mechanics of Conversion
(i) Delivery of Conversion Shares 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) the number of Conversion Shares being acquired upon the conversion of the Preferred Stock, which Conversion Shares shall be free of restrictive legends and trading restrictions and (B) a bank check in the amount of accrued and unpaid dividends. The Corporation shall deliver the Conversion Shares electronically through the Depository Trust Company or another established clearing corporation performing similar functions.
(ii) Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares 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 Conversion Shares, 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 Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.
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(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 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 100% 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. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6 (c)(i) on the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $ 1,000 of Conversion Shares subject to such conversion, $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after the first Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the 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 Conversion Shares 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 Conversion Shares 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 Conversion Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
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(v) Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times 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. The Corporation covenants that ail shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
(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 round up to the next whole share.
(vii) Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this 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 Conversion Shares, 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 Conversion Shares 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 Conversion Shares 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 and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
(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 (such Persons, “Attribution Parties")) 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 and Attribution Parties 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 Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including, without limitation, any other Common Stock Equivalents)]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 or Attribution Parties. 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 Attribution Parties) 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 Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. 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 Corporation’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request (which may be via email) 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 or Attribution Parties 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.
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Section7. Certain Adjustments.
(a) Stock Dividends and Stock Splits. If the Corporation, at any time while this 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, this 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 Ratio 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) RESERVED.
(c) 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 of 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).
(d) Pro Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation shall declare or make 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 this 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 this 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).
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(e) Fundamental Transaction. If, at any time while this 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 50% 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 50% 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 this 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 this 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 this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Preferred Stock). For purposes of any such conversion, the determination of the Conversion Ratio 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 Ratio 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 this 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 in accordance with the provisions of this Section 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 this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this 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 this Preferred Stock (without regard to any limitations on the conversion of this 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 this 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 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 with the same effect as if such Successor Entity had been named as the Corporation herein.
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(f) 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.
(g) Notice to the Holders.
(i) Adjustment to Conversion Ratio. Whenever the Conversion Ratio is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Ratio 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 this 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 its 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.
Section8. Miscellaneous.
(a) Noncircumvention. The Corporation hereby covenants and agrees that the Corporation will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision of this Certificate of Designations, the Corporation (a) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any Preferred Stock above the Conversion Rate then in effect and (b) shall take all such actions as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Preferred Stock.
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(b) 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 450 Park Avenue, New York, NY 10017; Attention: Philip Falcone; email: pfalcone@go.tv or such e-mail address, facsimile number or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 8. 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. 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.
(c) 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 and accrued dividends, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
(d) 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.
(e) Governing Law; Exclusive Jurisdiction. This Certificate of Designation shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Certificate of Designation shall be governed by, the internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Nevada or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Nevada. Except as otherwise required by this Certificate of Designation, the Corporation hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York County, New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude any Holder from bringing suit or taking other legal action against the Corporation in any other jurisdiction to collect on the Corporation’s obligations to such Holder, Io realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of such Holder. The Corporation hereby irrevocably waives any right it may have to, and agrees not to request, a jury trial for the adjudication of any dispute hereunder or in connection with or arising out of this Certificate of Designation or any transaction contemplated hereby.
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(f) 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.
(g) Severability. If any provision of this Certificate of Designations is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Certificate of Designations so long as this Certificate of Designations as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
(h) 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.
(i) 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.
(j) Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued pursuant to the Exchange 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 H Convertible Preferred Stock.
(k) Form of Security. The Preferred Stock shall be issued as book-entry securities directly registered in the Holder’s name on the Corporation’s books and records or, if requested by any Holder of the Preferred Stock, such Holder’s shares may be issued in certificated form.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Preferred Stock of Madison Technologies, Inc. to be signed by its Chief Executive Officer on this 8th day of November, 2021.
| /s/<br> Philip Falcone | |
|---|---|
| Name: | Philip Falcone |
| Title: | Chief Executive Officer |
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ANNEXA
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 H Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of Madison Technologies, 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. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.
Conversion calculations:
| Date<br> to Effect Conversion: |
|---|
| Number<br> of shares of Preferred Stock owned prior to Conversion: |
| --- |
| Number<br> of shares of Preferred Stock to be Converted: |
| --- |
| Number<br> of shares of Common Stock to be Issued: |
| --- |
| Applicable<br> Conversion Ratio: |
| --- |
| Number<br> of shares of Preferred Stock subsequent to Conversion: |
| --- |
| Address<br> for Delivery: |
| --- |
or
| DWAC<br> Instructions: |
|---|
| Broker<br> no; |
| --- |
| Account<br> no: |
[HOLDER]
| By: |
|---|
| Name: |
| Title: |
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Exhibit 3.1(ii)
AMENDED AND RESTATED BYLAWS
OF
MADISONTECHNOLOGIES, INC.,
a Nevada Corporation
ARTICLEI
CORPORATE OFFICES
Section 1.1 Principal Office. The principal office of Madison Technologies, Inc., a Nevada corporation (the “Corporation”), shall be at such location within or without the State of Nevada as may be determined from time to time by resolution of the board of directors of the Corporation (the “Board of Directors”).
Section 1.2 Other Offices. Other offices and places of business either within or without the State of Nevada may be established from time to time by resolution of the Board of Directors or as the business of the Corporation may require. The Corporation’s resident agent and such agent’s address in the State of Nevada shall be as determined by the Board of Directors from time to time.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meetings. The annual meeting of the stockholders of the Corporation will be held wholly or partially by means of remote communication or at such place, within or without the State of Nevada, on such date and at such time as may be determined by the Board of Directors, the Corporation’s President, Chief Executive Officer or Chief Financial Officer, or the chairman of the Board of Directors (the “Chairman”) and as will be designated in the notice of said meeting. The Board of Directors may, in its sole discretion, determine that a meeting will not be held at any place, but may instead be held solely by means of remote communication in accordance with Nevada Revised Statutes of the State of Nevada (“NRS”) 78.320(4) and any applicable part of NRS Chapter 78 (the “ACT”). The Board of Directors, the Corporation’s President, Chief Executive Officer or Chief Financial Officer, or the Chairman may postpone, reschedule or cancel any previously scheduled annual meeting of stockholders of the Corporation (“stockholders”). At each annual meeting of the stockholders, the stockholders will elect the directors from the nominees for director, to succeed those directors whose terms expire at such meeting and will transact such other business, in each case as may be properly brought before the meeting in accordance with these Bylaws (as defined below), the NRS and applicable rules and regulations.
Section 2.2 Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by applicable law or by the articles of incorporation of the Corporation, as may be amended, restated, modified or supplemented in the future from time to time (the “Articles of Incorporation”), may only be held wholly or partially by means of remote communication or at any place, within or without the State of Nevada, and may only be called by the Board of Directors, the Corporation’s President, Chief Executive Officer or Chief Financial Officer, or the Chairman. Business transacted at any special meeting of stockholders will be limited to matters relating to the purpose or purposes stated in the notice of meeting. Those persons with the power to call a special meeting in accordance with this Section 2.2 of this Article II also have the power and authority to postpone, reschedule or cancel any previously scheduled special meeting of stockholders.
Section 2.3 Notice and Purpose of Meetings. Except as otherwise provided by applicable law, the Articles of Incorporation or these amended and restated bylaws of the Corporation, as may be amended, restated, modified or supplemented in the future from time to time (“Bylaws”), written or printed notice of the meeting of the stockholders stating the place, day and hour of the meeting and, in case of a special meeting, stating the purpose or purposes for which the meeting is called, and in case of a meeting held by remote communication stating such means, will be delivered not less than ten nor more than 60 calendar days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice will be effective if given by a form of electronic transmission consented to (in a manner consistent with the ACT) by the stockholder to whom the notice is given. If notice is given by mail, such notice will be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. If notice is given by electronic transmission, such notice will be deemed given at the time specified in NRS 78.370.
Section 2.4 Adjournments. Any meeting of stockholders, whether an annual or special meeting, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 2.5 Quorum. Except as otherwise provided by applicable law, the Articles of Incorporation or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having one-third of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 2.4 of these Bylaws until a quorum shall attend. Shares of the Corporation’s own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.
Section 2.6 Organization. Meetings of stockholders shall be presided over by the Chairman, if any, or in such person’s absence by the Vice Chairman of the Board of Directors, if any, or in such person’s absence by the Corporation’s President or Chief Executive Officer, or in such person’s absence by the Corporation’s Chief Financial Officer or a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at such a meeting, The Secretary of the Corporation (the “Secretary”) shall act as secretary of such meeting, but in such person’s absence the chairman of such meeting may appoint any person to act as secretary of such meeting. The chairman of a meeting of stockholders shall announce at such meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote.
Section 2.7 Voting; Proxies. Except as otherwise provided by the Articles of Incorporation, or in any effective certificate of designation of preferred stock of the Corporation filed by the Corporation with the Secretary of State of the State of Nevada, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such holder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such holder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by applicable law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect such directors. All other matters or questions shall, unless otherwise provided by applicable law, the Articles of Incorporation or these Bylaws, be decided by the majority of all of the votes cast by the holders of shares of stock entitled to vote thereon.
Section 2.8 Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by applicable law not be more than sixty nor less than ten days before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day an which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by applicable law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (3) the record date for determining stockholder for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 2.10 Action By Written Consent of Stockholders; Removal of Directors. Unless otherwise restricted by the Articles of Incorporation or applicable law, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of a majority of the outstanding stock of the Corporation entitled to vote thereon and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Nevada, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of minutes of stockholders are recorded. Subject to compliance with NRS 78.335, any amendment or modification thereof, or any successor statute thereto concerning removal of directors, one or more directors or the entire board may be removed in accordance with the provisions of this Section 2.10.
Section 2.11 Conduct of Meetings. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof, and (v) limitations on the time allowed to questions or comments by participants.
Section 2.12 Meetings Through Electronic Communications. Unless otherwise required by applicable law or the Articles of Incorporation, stockholders may participate in a meeting of the stockholders by any means of electronic communications, videoconferencing, teleconferencing or other available technology permitted under the NRS (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other) and utilized by the Corporation. If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a stockholder and (b) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 2.12 constitutes presence in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 Number; Qualifications. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors of the Corporation need not be stockholders.
Section 3.2 Election; Resignation; Vacancies. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect directors, each of whom shall hold office for a term ending on the date of the next annual meeting of the stockholders (or special meeting of stockholders called and held for such a purpose) following such director’s appointment or election to the Board of Directors, or until such director’s successor is duly elected and qualified. Any director may resign at any time upon written notice to the Corporation. Any newly created directorship or any vacancy occurring in the Board of Directors may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office (as set forth in this Section 3.2) of the director whom such director has replaced or until such director’s successor is duly elected and qualified.
Section 3.3 Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Nevada and at such times as the Board of Directors may from time to time determine, and if so determined, notices thereof need not be given.
Section 3.4 Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Nevada whenever called by the President, Chief Executive Officer, Chief Financial Officer, any Vice President, the Secretary, or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting.
Section 3.5 Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.5 shall constitute presence in person at such meeting. If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a member of the Board of Directors and (b) provide each such member a reasonable opportunity to participate in the meeting and to vote on matters at a meeting of the Board of Directors, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings.
Section 3.6 Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Except in cases in which the Articles of Incorporation or these Bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
Section 3.7 Organization. Meetings of the Board of Directors shall be presided over by the Chairman, if any, or in such person’s absence by the Vice Chairman of the Board of Directors, if any, or in such person’s absence by the President or Chief Executive Officer, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of such a meeting, but in such person’s absence the chairman of such meeting may appoint any person to act as secretary of such meeting.
Section 3.8 Informal Action by Directors. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.
ARTICLE IV
COMMITTEES
Section 4.1 Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by applicable law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal, if any, of the Corporation to be affixed to all papers which may require it.
Section 4.2 Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article III of these Bylaws.
ARTICLE V
OFFICERS
Section 5.1 Executive Officers; Election; Qualifications; Term of Office: Resignation; Removal; Vacancies. The Board of Directors shall elect a President, Treasurer and Secretary, and it may, if it so determines, choose a Chairman and a Vice Chairman of the Board of Directors from among its members. The Board of Directors may also choose a Chief Executive Officer, Chief Financial Officer, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, or such other officers as the Board of Directors shall determine. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding such person’s election, and until such person’s successor is elected and qualified or until such person’s earlier resignation or removal. Any such officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any such officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices of the Corporation may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal, or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting of the Board of Directors.
Section 5.2 Powers and Duties of Executive Officers. The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed in a resolution by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent, or employee of the Corporation to give security for the faithful performance of such person’s duties.
ARTICLE VI
STOCK
Section 6.1 Shares of Stock. The shares of capital stock of the Corporation shall be represented by a certificate or may be uncertificated, as determined from time to time by the Board of Directors without stockholder approval. Notwithstanding the adoption of uncertificated shares of capital stock of the Corporation, every holder of capital stock of the Corporation theretofore represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate for shares of capital stock of the Corporation signed by, or in the name of the Corporation by, (a) the Chairman, the Chief Executive Officer or the President, and (b) the Chief Financial Officer, Treasurer or the Secretary, certifying the number of shares owned by such stockholder in the Corporation.
Section 6.2 Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
Section 6.3 Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 6.4 Transfers. Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these Bylaws. Transfers of stock shall be made only on the books of the Corporation, and in the case of certificated shares of stock, only by the person named in the certificate or by such person’s attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; or, in the case of uncertificated shares of stock, upon receipt of proper transfer instructions from the registered holder of the shares or by such person’s attorney lawfully constituted in writing, and upon payment of all necessary transfer taxes and compliance with appropriate procedures for transferring shares in uncertificated form; provided, however, that such surrender and endorsement, compliance or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. With respect to certificated shares of stock, every certificate exchanged, returned or surrendered to the Corporation shall be marked “Cancelled,” with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.
Section 6.5 Regulations. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with applicable law or these Bylaws, concerning the issue, transfer and registration of certificates for shares or uncertificated shares of the stock of the Corporation.
Section 6.6 Dividend Record Date. Subject to compliance with NRS 78.288 and 78.300, and the Articles of Incorporation and any effective certificate of designation of preferred stock of the Corporation, in order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days’ prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 6.7 Record Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by applicable law.
Section 6.8 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors.
Section 6.9 Consideration for Shares. The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the Corporation including, without limitation, cash, services performed or other securities of the Corporation. When the Corporation receives the consideration for which the Board of Directors authorized the issuance of shares, such shares shall be fully paid and non-assessable (if non-assessable stock) and the stockholders shall not be liable to the Corporation or to its creditors in respect thereof.
Section 6.10 Dividends. Dividends upon the capital stock of the Corporation, subject to the requirements of the NRS and the provisions of the Articles of Incorporation and any effective certificate of designation of preferred stock of the Corporation, if any, may be declared by the Board of Directors at any regular or special meeting of the Board of Directors (or any action by written consent in lieu thereof in accordance with Section 3.8 hereof), and may be paid in cash or in property other than shares. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.
Section 7.2 Seal. The Corporation may, but is not required to, adopt a corporate seal. Any such seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.
Section 7.3 Waiver of Notice of Meetings of Stockholders, Directors and Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any annual, regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.
Section 7.4 Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contact or transaction, or solely because such person or persons votes are counted for such purpose, if: (1) the material facts as to such person’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to such person’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
Section 7.5 Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time.
Section 7.6 Amendment of Bylaws. These Bylaws may be altered or repealed and new Bylaws made, by the Board of Directors, but the stockholders may make additional Bylaws and may alter and repeal any Bylaws whether adopted by them or otherwise.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE
Section 8.1 Indemnification.
(a) To the fullest extent permitted by the NRS as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for breach of fiduciary duty as a director.
(b) Without limitation of any right conferred by paragraph (a) of this Section 8.1, each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity while serving as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the NRS, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee’s heirs, testators, intestates, executors and administrators; provided, however, except as provided in Section 8.1(c) with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) initiated by such indemnitee was authorized by the Board of Directors. The right to indemnification conferred in this Article VIII shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the NRS requires, an advancement of expenses incurred by an indemnitee in his capacity as a director or officer shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.
(c) If a claim under Section 8.1(b) is not paid in full by the Corporation with sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of any undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard of conduct set forth in the NRS. Neither the failure of the Corporation (including the Board of Directors, independent legal counsel, or the stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the NRS, nor an actual determination by the Corporation (including the Board of Directors, independent legal counsel or the stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the Corporation.
(d) The rights to indemnification and to the advancement of expenses conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Certificate, agreement, vote of stockholders or disinterested directors or otherwise.
Section 8.2 Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or any person who is or was serving at the request of the Corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the NRS.
Dated: November 6, 2023
/s/ Thomas Amon
Name: Thomas Amon
Title: President
[Signature Page to Amended and Restated Bylaws — Madison Technologies, Inc.]
Exhibit4.3
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Issue Date: 12/28/21
Par Value: $1,000
$500,000
MadisonTechnologies, Inc.
$1,150,000 principal amount
12%SUBORDINATED NOTES
DUE 02/15/22
THIS SUBORDINATED DEBENTURE is one of a series of duly authorized and validly issued Debentures of Madison Technologies, Inc., a Nevada corporation, (the “Company”), having its principal place of business at 34 East 51^st^St., 4^th^floor, New York, NY 10022, designated as part of its Subordinated Debenture Series issued previously and due 12/31/22 (the debenture series, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).
FOR VALUE RECEIVED, the Company promises to pay to Z4 Mgmt. LLC or it’s registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $500,000 on 02/15/22 (the “Maturity Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions:
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Section
- Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, the following terms shall have the following meanings:
“Bankruptcy Event” means any of the following events: (a) the Company thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company thereof, (b) there is commenced against the Company any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company thereof makes a general assignment for the benefit of creditors, (f) the Company thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” means any day except any Saturday, any Sunday, any day which shall be 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.
“Event of Default” shall have the meaning set forth in Section 3
“Mandatory Default Amount” means the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.
“New York Courts” shall have the meaning set forth in Section 3b
“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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Section 1. Interest and Prepayment
a) Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 12% per annum, payable on the Maturity Date.
b) Priority. This Debenture is subordinated in right of payment to all senior indebtedness of the Company, to banks or similar financial institutions (the “Senior Creditor”) whether existing on the date hereof or hereafter arising (the “Senior Debt”). The Company hereby agrees, and by accepting this Debenture the Lender hereby acknowledges and agrees, that so long as any Senior Debt remains outstanding, (i) upon notice from representative of the Senior Debt to the Company and the Lender that an Event of Default, or any event which the giving of notice or the passage of time or both would constitute an Event of Default, has occurred under the terms of the Senior Debt (a “Default Notice”), the Company shall not make, and the Lender shall not receive or retain, any payment made under this Debenture and, (ii) if any payment is made in violation of this paragraph, the Lender shall promptly deliver the same to Senior Creditor in the form received, with any endorsement or assignment necessary for the transfer of such payment from the Lender to Senior Creditor, to be either (in Senior Creditor’s sole discretion) held as cash collateral securing the Senior Debt or applied in reduction of the Senior Debt and, until so delivered, the Lender shall hold such payment in trust as the property of Senior Creditor. Nothing in this paragraph shall preclude or prohibit the Lender from receiving and retaining any payment hereunder unless and until the Lender has received a Default Notice (which shall be effective until waived in writing by the Senior Creditor) or from converting this Debenture or any amounts due hereunder into shares of Equity Securities of the Company.
c) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”).
d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.
e) Prepayment. Except as otherwise set forth in this Debenture, the Company may prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder at any time.
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Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
b) Investment Representations. This Debenture may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.
Section 2. Events of Default.
a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 5 Trading Days;
ii. the Company shall be subject to a Bankruptcy Event;
iii. the Company shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $500,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; or
iv. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $500,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.
b) Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company.
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Section 3. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 9(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, electronic mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile or electronic number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder. 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 specified on the signature page prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature page between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
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Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company.
b) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture 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 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 Debenture 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 Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, 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.
c) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture 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 Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver by the Company or the Holder must be in writing.
d) Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture 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. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
6
e) 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.
f) Headings. The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.
| MADISON TECHNOLOGIES, INC. | ||
|---|---|---|
| **** | By: | /s/ Philip A. Falcone |
| **** | Name: | Philip A. Falcone |
| **** | Title: | CEO and Chairman |
| Facsimile/Email for delivery of Notices: | ||
| SCHOHEN@SHEPPARDMULLIN.COM | ||
| **** | Purchaser: | /s/ Thomas Zazarino |
| **** | Name: | Z4 Mgmt. LLC |
| **** | Address: | |
| SS/EIN: |
7
Exhibit4.4
NEITHERTHE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLEHAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOTBE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIESUNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), INA GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE144A UNDER SAID ACT.
| Right<br> to Purchase shares of Common Stock of MADISON<br> TECHNOLOGIES INC. (subject to adjustment as provided<br> herein) |
|---|
No. _
Issue Date:February 2022
COMMONSTOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, **** a Delaware limited partnership, or its registered assigns, is entitled to purchase from MADISON TECHNOLOGIES INC., a Nevada corporation (the “Company”), at any time or from time to time during the period specified in Paragraph 2 hereof, fully paid and nonassessable shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), at an exercise price per share equal to $0.10 (the “Exercise Price”). The term “Warrant Shares,” as used herein, refers to the shares of Common Stock purchasable hereunder. The Warrant Shares and the Exercise Price are subject to adjustment as provided in Paragraph 5 hereof. The term “Warrants” means this Warrant and the other warrants issued pursuant to that certain Secured Advance Agreement, dated the date hereof, by and among the Company and the Buyer (the “Agreement”).
This Warrant is subject to the following terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the “Exercise Agreement”), to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder’s designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. In addition to all other available remedies at law or in equity, if the Company fails to deliver certificates for the Warrant Shares within three (3) business days after this Warrant is exercised, then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal to 2% of the number of Warrant Shares that the holder is entitled to multiplied by the Market Price (as hereinafter defined) for each day that the Company fails to deliver certificates for the Warrant Shares.
2. Period of Exercise. This Warrant is exercisable at any time or from time to time on or after the date on which this Warrant is issued and delivered pursuant to the terms of the Agreement and before 6:00 p.m., New York, New York time on the fifth (5th) anniversary of the date of issuance (the “Exercise Period”).
3. Certain Agreements of the Company. The Company hereby covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all the Company’s assets.
4. Market Price. Market Price of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:
(a) If the Company’s Common Stock is traded on an exchange or is quoted on the NASDAQ or the New York Stock Exchange, then the average of the lowest closing bid price for the Common Stock during the ten (10) trading day period ending one trading day prior to the Determination Date;
(b) If the Company’s Common Stock is not traded on an exchange or on the NASDAQ or the New York Stock Exchange, but is traded on the OTC Bulletin Board or in the over-the-counter market or Pink Sheets, then the lowest closing bid price for the Common Stock during the ten (10) trading day period ending one trading day prior to the Determination Date;
(c) Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree, or in the absence of such an agreement, by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided; or
(d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.
5. Anti-dilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Paragraph 5.
In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock. Except as otherwise provided in Paragraphs 5(c) and 5(e) hereof, if and whenever on or after the date of issuance of this Warrant, the Company issues or sells, or in accordance with Paragraph 5(b) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Market Price on the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price will be reduced to a price determined by multiplying the Exercise Price in effect immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal to the sum of (x) the number of shares of Common Stock actually outstanding immediately prior to the Dilutive Issuance, plus (y) the quotient of the aggregate consideration, calculated as set forth in Paragraph 5(b) hereof, received by the Company upon such Dilutive Issuance divided by the Market Price in effect immediately prior to the Dilutive Issuance, and (ii) the denominator of which is the total number of shares of Common Stock Deemed Outstanding (as defined below) immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Paragraph 5(a) hereof, the following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Market Price on the date of issuance or grant of such Options, then the maximum total number of shares of Common Stock issuable upon the exercise of all such Options will, as of the date of the issuance or grant of such Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Market Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the conversion or exchange of any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. If, in any case, the total number of shares of Common Stock issuable upon exercise of any Option or upon conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued in connection with any acquisition, merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined in good faith by the Board of Directors of the Company.
(vi) Exceptions to Adjustments of Exercise. No adjustment to the Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities granted, issued and outstanding on the date of issuance of this Warrant; (ii) upon the grant or exercise of any stock or options which may hereafter be granted or exercised to officers, directors, employees, consultants, vendors and other service providers of the Company, so long as the issuance of such stock or options is approved by a majority of the independent members of the Board of Directors of the Company or a majority of the members of a committee of independent directors established for such purpose; or (iii) upon the exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Paragraph 5, the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger, or Sale. In case of any consolidation of the Company with, or merger of the Company into any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Paragraph 5 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Paragraph 5 and the obligations to deliver to the holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire.
(f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (including cash) to holders of Common Stock as a partial liquidating dividend, by way of return of capital or otherwise, then, after the date of record for determining shareholders entitled to such distribution, but prior to the date of distribution, the holder of this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets which would have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such distribution.
(g) Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the holder of this Warrant, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the Chief Financial Officer of the Company.
(h) No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise.
(i) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (including dividends or distributions payable in cash out of retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all its assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least 30 days prior to the record date or the date on which the Company’s books are closed in respect thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
(j) Certain Events. If any event occurs of the type contemplated by the adjustment provisions of this Paragraph 5 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Paragraph 5(g) hereof, and the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant so that the rights of the holder shall be neither enhanced nor diminished by such event.
(k) Certain Definitions.
(i) “Common Stock Deemed Outstanding” shall mean the number of shares of Common Stock actually outstanding (not including shares of Common Stock held in the treasury of the Company), plus (x) pursuant to Paragraph 5(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon the exercise of Options, as of the date of such issuance or grant of such Options, if any, and (y) pursuant to Paragraph 5(b)(ii) hereof, the maximum total number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities, as of the date of issuance of such Convertible Securities, if any.
(ii) “Common Stock,” for purposes of this Paragraph 5, includes the Common Stock and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only shares of Common Stock in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Paragraph 5(e) hereof, the stock or other securities or property provided for in such Paragraph.
6. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant.
7. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
8. Transfer, Exchange, and Replacement of Warrant.
(a) This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Paragraph 8(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Paragraph 8(f) hereof and to the applicable provisions of the Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Paragraph 8(e) below, for new Warrants of like tenor representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Paragraph 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the holder or transferees) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Paragraph 8.
(e) Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act of 1933, as amended (the “Securities Act”) and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel, which opinion and counsel are acceptable to the Company, to the effect that such exercise, transfer, or exchange may be made without registration under said Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an “accredited investor” shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. The first holder of this Warrant, by taking and holding the same, represents to the Company that such holder is acquiring this Warrant for investment and not with a view to the distribution thereof.
9. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
MADISON TECHNOLOGIES INC.
450 Park Avenue, 30th Floor
New York, NY 10022
Attn: Philip A. Falcone, Chief Executive Officer
pfalcone@go.tv
If to the Holder:
10. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of Nevada or in the federal courts located in the state of Nevada. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document 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.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained in this Warrant, this Warrant may be exercised by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder’s intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current Market Price per share of the Common Stock and the Exercise Price, and the denominator of which shall be the then current Market Price per share of Common Stock. For example, if the holder is exercising 100,000 Warrants with a per Warrant exercise price of $0.75 per share through a cashless exercise when the Common Stock’s current Market Price per share is $2.00 per share, then upon such Cashless Exercise the holder will receive 62,500 shares of Common Stock.
(d) Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Warrant will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Warrant, that the holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Warrant and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.
MADISONTECHNOLOGIES INC.
| By: | |
|---|---|
| Philip<br>A. Falcone | |
| Chief<br>Executive Officer |
Exhibit4.5
NEITHERTHE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLEHAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOTBE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIESUNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), INA GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAYBE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
THEISSUE PRICE OF THIS NOTE IS $
THEORIGINAL ISSUE DISCOUNT IS $
| Principal Amount: | Issue Date: February 2022 |
|---|---|
| Purchase Price: |
CONVERTIBLEPROMISSORY NOTE
FORVALUE RECEIVED, MADISON TECHNOLOGIES INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ****, a Delaware limited partnership, or registered assigns (the “Holder”) the sum of $ together with any interest as set forth herein, on February 2023 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eleven and one quarter percent (11.25%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLEI. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding amount of this Note to convert all or any part of the outstanding and unpaid amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.
1.2 Conversion Price. The Conversion Price shall equal the Fixed Conversion Price (as defined herein)(subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Fixed Conversion Price” shall mean $0.02.
1.3 Authorized Shares. At all times when this Note is issued and outstanding, the Borrower covenants that it will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved two times the number of shares that is actually issuable upon full conversion of any outstanding notes of the Borrower in favor of the Holder, respectively, based on the Conversion Price of each of the notes in effect from time to time (initially 13750000 shares of common stock shall be reserved with respect to this Note)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.
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If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.
| 1.4 | Method<br> of Conversion. |
|---|
(a) Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.
(c) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
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(d) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.
(e) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock; or if the failure to deliver is not the result of the willful and purposeful actions of the Borrower. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.
1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).
Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
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| 1.6 | Effect<br> of Certain Events. |
|---|
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
1.7 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”) or as otherwise agreed to between the Borrower and the Holder, the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which shall direction to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”).
| Prepayment Period | Prepayment Percentage |
|---|---|
| The<br> period beginning on the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date. | 115% |
After the expiration of the Prepayment Periods set forth above, the Borrower may submit an Optional Prepayment Notice to the Holder. Upon receipt by the Holder of the Optional Prepayment Notice post Prepayment Periods, the prepayment shall be subject to the Holder’s and the Borrower’s agreement with respect to the applicable Prepayment Percentage.
Notwithstanding anything contained herein to the contrary, the Holder’s conversion rights herein shall not be affected in any way until the Note is fully paid (funds received by the Holder) pursuant to an Optional Prepayment Notice.
ARTICLEII. CERTAIN COVENANTS
2.1 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.
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ARTICLEIII. EVENTS OF DEFAULT
If any of the following events of default (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.
3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.
3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
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3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.7 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.
3.8 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.11 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.12 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.13 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Amount (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.
ARTICLEIV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Most Favored Nation. During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. “Exempt Issuance” means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
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4.3 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
MADISON TECHNOLOGIES INC.
450 Park Avenue, 30th Floor
New York, NY 10022
Attn: Philip A. Falcone, Chief Executive Officer
Email: pfalcone@go.tv
If to the Holder:
4.4 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
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4.5 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.
4.6 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
4.7 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Nevada or in the federal courts located in the State of Nevada. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note 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 Note 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.
4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.
4.9 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.10 Further Assurances. The Borrower 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 the Holder 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 including but not limited to the conversion of this Note into shares of common stock whether by Rule 144 or a court approved settlement of this Note into shares of common stock pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended.
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on February , 2022
| MADISON TECHNOLOGIES INC. | |
|---|---|
| By: | |
| Philip<br> A. Falcone | |
| Chief<br> Executive Officer |
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EXHIBITA -- NOTICE OF CONVERSION
The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of MADISON TECHNOLOGIES INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of February 11, 2022 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
| [ ] | The<br> Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice<br> of Conversion to the account of the undersigned or its nominee with DTC through its Deposit<br> Withdrawal Agent Commission system (“DWAC Transfer”). |
|---|
Name of DTC Prime Broker:
Account Number:
| [ ] | The<br> undersigned hereby requests that the Borrower issue a certificate or certificates for<br> the number of shares of Common Stock set forth below (which numbers are based on the<br> Holder’s calculation attached hereto) in the name(s) specified immediately below<br> or, if additional space is necessary, on an attachment hereto: |
|---|---|
| Date<br> of conversion: | |
| --- | --- |
| Applicable<br> Conversion Price: | $ |
| Number<br> of shares of common stock to be issued pursuant to conversion of the Notes: | |
| Amount<br> of Principal Balance due remaining under the Note after this conversion: | |
| TRILLIUM<br> PARTNERS L.P. | |
| By: | |
| Name: Steve<br> Hicks | |
| Title: Manager<br> of the Limited Partner | |
| Date: |
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Exhibit4.6
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
MADISONTECHNOLOGIES, INC.
MARCH1, 2022
Warrant Shares: 500,000
Initial Exercise Date: 9/01/22
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, Warren Zenna, or it’s assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after 9/01/22 (the “Initial Exercise Date”) and on or prior to the close of business at 5:00 p.m. (New York City time) on 9/01/26 (the “Termination Date) but not thereafter, to subscribe for and purchase from Madison Technologies, Inc. (the “Company”), 500,000 shares, subject to adjustment hereunder, the “Warrant Shares”,. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b)
Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth below:
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by electronic (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (“Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within two (2) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant,acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the WarrantShares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amountstated on the face hereof.
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b) Exercise Price. The exercise price per share of the Common Stock under this “Warrant” shall be $.025.
c) Subject to Adjustment hereunder (the “Exercise Price”).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. Subject to the requirements of applicable law, the Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earlier of (i) the earlier of (A) three (3) Trading Days after the delivery to the Company of the Notice of Exercise and (B) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (ii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) three (3) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after the first Business Day after the Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
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ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker 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 the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, 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 Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company 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 Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
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vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), 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 the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company 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 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the 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 Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61^st^ day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained 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 this Warrant.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(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. Notwithstanding the foregoing, the provisions of this Section shall not apply to the Reverse Stock Split.
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b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company 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 exercise of this Warrant (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 this Warrant is outstanding, if the Company shall declare or make 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 this Warrant, 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 exercise of this Warrant (without regard to any limitations on exercise 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).
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d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, 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 Company 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 50% or more of the outstanding Common Stock, (iv) the Company, 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 Company, 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 or group of Persons whereby such other Person or group acquires more than 50% 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 exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, 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 this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise 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 Company shall apportion the Exercise 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 exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (not to be unreasonably withheld, conditioned or delayed) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable 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 exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise 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 exercise price being for the purpose of protecting the economic value of this Warrant 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 Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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e) Calculations. All calculations under this Section 3 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 3, 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 treasury shares, if any) issued and outstanding.
f) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock 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 Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 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 in this Warrant constitutes, or contains, material, nonpublic information regarding the Company or any of the Subsidiaries, the Company shall simultaneously publicly disseminate such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
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b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of the Purchase Agreement.
e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity and/or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, after the consummation of the Reverse Stock Split, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
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Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
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k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(SignaturePage Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| Madison<br> Technologies, Inc. | |
|---|---|
| By: | /s/ Philip A. Falcone |
| Name: | Philip A. Falcone |
| Title: | Chairman/CEO |
| Holder: | /s/ Warren Zenna |
| --- | --- |
| Name: | Warren Zenna |
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NOTICEOF EXERCISE
TO: MADISON TECHNOLOGIES, INC.
(1) The undersigned hereby elects to purchase ______ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of lawful money of the United States.
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: __________________________________________________________________________________________
Signatureof Authorized Signatory of Investing Entity: ____________________________________________________________________
Name of Authorized Signatory: ______________________________________________________________________________________
Title of Authorized Signatory: _______________________________________________________________________________________
Date: ___________________________________________________________________________________________________________
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ASSIGNMENT FORM
(Toassign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | |
|---|---|
| (Please Print) | |
| Address: | |
| (Please Print) | |
| Phone Number: | |
| Email Address: | |
| Dated: _______________ __, ______ | |
| Holder’s Signature: | |
| Holder’s Address: |
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Exhibit 4.7
DESCRIPTION OF THE REGISTRANT’SSECURITIES
REGISTERED PURSUANT TO SECTION 12 OFTHE
SECURITIES EXCHANGE ACT OF 1934
As of the date of the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2022, Madison Technologies Inc. (“the Company”) had one class of security registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), its common stock, par value $0.001 per share (the “Common Stock”).
Description of Common Stock
The following description of the Common Stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to the Company’s articles of incorporation, as amended (the “Articles of Incorporation”) and the Company’s amended and restated bylaws (the “Bylaws”), each of which is incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.3 is a part. The Company encourages you to read its Articles of Incorporation, Bylaws, and the applicable provisions of the Nevada Revised Statutes for additional information.
Authorized Shares of Capital Stock
As of December 31, 2022, the Company’s authorized shares of capital stock consist of 6,000,000,000 shares of Common Stock and 50,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”), of which 100,000, 100, 10,000, 230,000, 1,000, 1,152,500, 1,000, 4,600 and 39,895 shares of Preferred Stock have been designated as Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock, respectively. As of December 31, 2022, there were 1,599,095,027 shares of Common Stock issued and outstanding, 100 shares of Series B Preferred Stock issued and outstanding, 155,000 Series D Preferred Stock issued and outstanding, 1,152,500 shares of Series E-1 Preferred Stock issued and outstanding, and 39,895 shares of Series H Preferred Stock issued and outstanding, with no other shares of Preferred Stock issued and outstanding.
Voting Rights
Holders of the Common Stock are entitled to one vote per share on all matters voted on by the Company’s shareholders, including the election of directors. The Articles of Incorporation and Bylaws do not provide for cumulative voting in the election of directors.
Dividend Rights
Holders of the Common Stock are entitled, subject to the rights, privileges, restrictions and conditions attaching to any other class of shares ranking in priority to the Common Stock, to receive any dividend declared by the Company’s board of directors.
Liquidation Rights
If the Company is voluntarily or involuntarily liquidated, dissolved or wound-up, the holders of Common Stock will be entitled to receive, after distribution in full of the preferential amounts, if any, all of the remaining assets available for distribution ratably in proportion to the number of shares of Common Stock held by them, subject to any rights of the holders of Preferred Stock.
Preemptive Rights
Owners of our Common Stock have no preemptive rights. We may sell shares of our Common Stock to third parties without first offering such shares to current stockholders.
Redemption Rights
We do not have the right to buy back shares of our Common Stock except in extraordinary transactions, such as mergers and court approved bankruptcy reorganizations. Owners of our Common Stock do not ordinarily have the right to require us to buy their Common Stock. We do not have a sinking fund to provide assets for any buy back.
Conversion Rights
Shares of our Common Stock cannot be converted into any other kind of stock except in extraordinary transactions, such as mergers and court approved bankruptcy reorganizations.
Nonassessibility
All outstanding shares of our Common Stock are fully paid and nonassessable.
Description of Preferred Stock
Series A Preferred Stock
Holders of Series A Preferred Stock are entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, dividends at a rate of three percent (3%) per annum. Each share of Series A Preferred Stock is convertible, at the option of the Holder, into 3,420 shares of Common Stock, subject to anti-dilution adjustment if the Company has more than 360,000,000 shares outstanding on a fully diluted basis. Each Holder is entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s Series A Preferred Stock would be convertible on the record date for the vote or consent of stockholders. At the time of creation, the Series A Preferred Stock ranked senior with respect to all other equity securities upon the liquidation, dissolution and winding up of the Company, subject to the rights of the preferred stock described herein. At no time may any holder convert into common stock if such conversion would cause the holder to beneficially own more than 9.9% of the Common Stock.
Series B Preferred Stock
The Series B Preferred Stock are not entitled to any dividends (unless specifically declared by our Board of Directors), but will participate on an as-converted-to-common-stock basis in any dividends to the holders of our common stock. The Series B Preferred Stock ranks pari passu with the Common Stock. Each share of Series B Preferred Stock has the right to vote together with the holders of the Common Stock, as a single class, upon all matters submitted to holders of Common Stock for a vote. The shares of Series B preferred Stock will carry a number of votes equal to 51% of all voting shares of every class, including 51% of all of the issued and outstanding shares of common stock on the date of any shareholder vote. The Series B Preferred Stock does not have any redemption rights or any conversion rights.
Series C Preferred Stock
Holders of Series C Preferred Stock are entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, dividends at a rate of two percent (2%) per annum. Each share of Series A Preferred Stock is convertible, at the option of the Holder, into 100 shares of Common Stock. Each Holder is entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s Series A Preferred Stock would be convertible on the record date for the vote or consent of stockholders. The Series C Preferred Stock ranks senior with respect to all other equity securities except the Series A Preferred Stock upon the liquidation, dissolution and winding up of the Company, subject to the rights of other series of preferred stock described herein. At no time may any holder convert into common stock if such conversion would cause the holder to beneficially own more than 9.9% of the Company’s common stock.
Series D Preferred Stock
The Series D Preferred Stock has a 4.99% conversion limitation, which may be increased to a maximum of 9.99% by a holder by written notice to us. The Series D Preferred Stock has a stated value of $3.32 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series D are issued. Series D are ranked pari passu with the Series E and Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock and have no voting rights. Each share of Series D Preferred Stock may be converted into 1,000 shares of Common Stock.
Series E Preferred Stock
There Series E Preferred Stock has a stated value of $1,000 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the shares of Series E Preferred Stock are issued. The Series E Preferred Stock are ranked pari passu with the Series D Preferred Stock and the Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock. It has voting rights equal to the number of shares of common stock into which the shares of Series E Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that holders of shares of Series E Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding Series E Preferred Stock, constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of Series E Preferred Stock are entitled to vote on matters with holders of shares of Common Stock, voting together as one class, each share of Series E Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of shares of Series E Preferred Stock are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series E Preferred Stock are outstanding, we may not, without the affirmative vote of the holders of all the then outstanding shares of Series E Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock or alter or amend the Series E certificate of designations (the “Series E Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
On September 16, 2021, the conversion rate for each share of Series E Preferred Stock was amended to equal (i)(a) 56.60% multiplied by, (b) the Fully-Diluted shares as of the Approval Date (each as defined in the Series E Certificate), divided by (ii) the total number of shares of Series E, (iii) rounded to the nearest thousandths place. The total number of Fully-Diluted Shares is set as of, and cannot change after the Approval Date. Based on the current fully-diluted shares outstanding, this equated to 2,243,888,889 shares of Common Stock. Fully-Diluted means the aggregate of (A) the total number of shares of Common Stock outstanding as of such date, (B) the number of shares of Common Stock (including all such Common Stock equivalents) into which all Convertible Securities outstanding as of such date could be converted or exercised, and (C) the number of shares of Common Stock (including all such Common Stock equivalents) issuable upon exercise of all options outstanding as of such date of exercise, divided by 0.4340.
Series E-1 Preferred Stock
The Series E-1 Preferred Stock has a stated value of $0.87 per share. Each share of Series E-1 Preferred Stock may be converted into 1,000 shares of Common Stock. Shares of Series E-1 Preferred Stock are pari passu with the Series D Preferred Stock and Series F Preferred Stock and senior in dividend rights and liquidation preference to our Common Stock. It has votes equal to the number of shares of common stock into which the Series E-1 Preferred Stock would be convertible on the record date for the vote or consent of stockholders, and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. It has votes equal to the number of shares of common stock into which the Series E-1 Preferred Stock would be convertible on the record date for the vote or consent of stockholders, and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that holders of shares Series E-1 Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding shares of Series E-1 Preferred Stock, constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of shares of Series E-1 Preferred Stock are entitled to vote on matters with holders of shares of Common Stock and vote together as one class, each share of Series E-1 Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series E-1 Preferred Stock are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series E-1 Preferred Stock are outstanding, we cannot, without the affirmative vote of the Holders of all the then outstanding shares of Series E-1 Preferred Stock, (a) alter or change adversely, the powers, preferences or rights given to the Series E-1 Preferred Stock or alter or amend the Series E-1 certificate of designations, (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
Series F Preferred Stock
The Series F Preferred Stock has a stated value of $1.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series F are issued. Shares of Series F Preferred Stock are pari passu with the Series E-1 Preferred Stock and Series D Preferred Stock and senior in dividend rights and liquidation preference to our Common Stock and all other Common Stock Equivalents. It has voting rights equal to the number of shares of common stock into which the Series F Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. It has votes equal to the number of shares of common stock into which the Series F Preferred Stock would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that holders of the shares of Series F Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding shares of Series F Preferred Stock constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of Series F Preferred Stock are entitled to vote on matters with holders of shares of Common Stock, voting together as one class, each share of Series F Preferred Stock entitles the Holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series F Preferred Stock are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series F Preferred Stock are outstanding, we can not, without the affirmative vote of the Holders of all the then outstanding shares of Series F Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series F Preferred Stock or alter or amend the Series F Certificate of designations (the “Series F Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
On September 16, 2021, the conversion rate for each share of Series F Preferred Stock was amended to equal (i)(a) 4.84% multiplied by, (b) the Fully-Diluted shares as of the Approval Date (each as defined in the Series F Certificate, divided by (ii) the total number of shares of Series F Preferred Stock, (iii) rounded to the nearest thousandths place. The total number of Fully-Diluted Shares is set as of, and can not change after the Approval Date. Based on the full-diluted shares outstanding, this equated to 192,073,017 shares of Common Stock on the Approval Date. Fully-Diluted means the aggregate of (A) the total number of shares of Common Stock outstanding as of such date, (B) the number of shares of Common Stock (including all such Common Stock equivalents) into which all Convertible Securities outstanding as of such date could be converted or exercised, and (C) the number of shares of Common Stock (including all such Common Stock equivalents) issuable upon exercise of all options outstanding as of such date of exercise, divided by 0.9516.
Series G Preferred Stock
The Series G Preferred Stock has a 4.99% conversion limitation, which may be increased to a maximum of 9.9% by a holder by written notice to us. There is a stated value of $1,000 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the shares of Series G Preferred Stock are issued. The Series G Preferred Stock is ranked as a junior series of Preferred Stock. It has voting rights equal to the number of shares of common stock into which the Series G would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that the Series G Preferred Stock voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of a majority of the shares of the outstanding shares of Series G Preferred Stock constitutes the approval of such action by both the class or the series as applicable. To the extent that holders of Series G Preferred Stock are entitled to vote on matters with holders of shares of Common Stock, voting together as one class, each share of Series G Preferred Stock entitles the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible using the record date as of which the conversion rate is calculated. Holders of Series G are entitled to written notice of all stockholder meetings or written consents with respect to which they would be entitled by vote. As long as any shares of Series G Preferred Stock are outstanding, we cannot, without the affirmative vote of the Holders of all the then outstanding shares of Series G Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock or alter or amend the Series G certificate of designations (the “Series G Certificate”), (b) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of a holder, or (c) enter into any agreement with respect to any of the foregoing.
On September 16, 2021, the conversion rate for each share of Series G Preferred Stock was amended to equal (i)(a) 6.45% multiplied by, (b) the Fully-Diluted shares as of the Approval Date (each as defined in the Series G Certificate), divided by (ii) the total number of shares of Series G, (iii) rounded to the nearest thousandths place. The total number of Fully-Diluted Shares is set as of, and cannot change after the Approval Date. Based on the current fully-diluted shares outstanding, this equated to 255,555,556 shares of Common Stock on the Approval Date. Fully-Diluted means the aggregate of (A) the total number of shares of Common Stock outstanding as of such date, (B) the number of shares of Common Stock (including all such Common Stock equivalents) into which all Convertible Securities outstanding as of such date could be converted or exercised, and (C) the number of shares of Common Stock (including all such Common Stock equivalents) issuable upon exercise of all options outstanding as of such date of exercise, divided by 0.9355.
Series H Preferred Stock
The Series H Preferred Stock has a stated value of $1.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series H Preferred Stock are issued. Shares of Series H Preferred Stock have no voting rights and are senior in dividend rights and liquidation preference to our Common Stock and all other Common Stock Equivalents. Each share of Series H Preferred Stock may be converted into 1,000 shares of Common Stock, subject to a beneficial ownership limitation of 9.99%.
Applicable Anti-Takeover Law
Set forth below is a summary of the provisions of the Articles of Incorporation and Bylaws that could have the effect of delaying or preventing a change in control of the Company. The following description is only a summary, and it is qualified by reference to the Articles of Incorporation, Bylaws and relevant provisions of the Nevada Revised Statutes.
Board ofDirectors Vacancies
The Bylaws provide that the number of directors constituting the Company’s board of directors may be set only by the board of directors.
Special Meeting of Shareholders
The Bylaws provide that special meetings of its shareholders may be called by the president of the Company, the board of directors, the Chief Executive Officer, the Chief Financial Officer, and the Chairman of the board of directors.
Authorizedbut Unissued Shares of Capital Stock
The Company’s authorized but unissued shares of Common Stock and Preferred Stock are available for future issuance without shareholder approval and may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock and Preferred Stock could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise.
Our Articles of Incorporation are silent as to cumulative voting rights in the election of our directors. Nevada law requires the existence of cumulative voting rights to be provided for by a corporation's articles of incorporation. In the event that a few stockholders end up owning a significant portion of our issued and outstanding common stock, the lack of cumulative voting would make it more difficult for other stockholders to replace our Board of Directors or for a third party to obtain control of us by replacing our Board of Directors. Our Articles of Incorporation and Bylaws do not contain any explicit provisions that would have an effect of delaying, deferring or preventing a change in control of us.
Nevada Law
Nevada law contains a provision governing “acquisition of controlling interest.” This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires “control shares” whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: 20 to 33-1/3%; 33-1/3 to 50%; or more than 50%.
A “control share acquisition” is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The stockholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the articles of incorporation or bylaws of the corporation. Our Articles of Incorporation and Bylaws do not exempt our Common Stock from the control share acquisition act.
The control share acquisition act is applicable only to shares of “Issuing Corporations” as defined by the Nevada law. An Issuing Corporation is a Nevada corporation which (i) has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada, and (ii) does business in Nevada directly or through an affiliated corporation.
At this time, we do not believe we have 100 stockholders of record resident of Nevada and we do not conduct business in Nevada directly. Therefore, the provisions of the control share acquisition act are believed not to apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of us, regardless of whether such acquisition may be in the interest of our stockholders.
The Nevada “Combination with Interested Stockholders Statute” may also have an effect of delaying or making it more difficult to effect a change in control of us. This statute prevents an “interested stockholder” and a resident domestic Nevada corporation from entering into a “combination,” unless certain conditions are met. The statute defines “combination” to include any merger or consolidation with an “interested stockholder,” or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an “interested stockholder” having (i) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (ii) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, or (iii) representing 10% or more of the earning power or net income of the corporation.
An “interested stockholder” means the beneficial owner of 10% or more of the voting shares of a resident domestic corporation, or an affiliate or associate thereof. A corporation affected by the statute may not engage in a “combination” within three years after the interested stockholder acquires its shares unless the combination or purchase is approved by the board of directors before the interested stockholder acquired such shares. If approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the board of directors or a majority of the voting power held by disinterested stockholders, or if the consideration to be paid by the interested stockholder is at least equal to the highest of (i) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which he became an interested stockholder, whichever is higher, (ii) the market value per common share on the date of announcement of the combination or the date the interested stockholder acquired the shares, whichever is higher, or (iii) if higher for the holders of preferred stock, the highest liquidation value of the preferred stock.
Transfer Agent and Registrar
The Company’s transfer agent and registrar is Pacific Stock Transfer Company, whose address is 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119.
Listing
The Common Stock is quoted on the Experts Market tier of the over-the-counter market operated by OTC Markets, Inc under the symbol “MDEX.”
Exhibit 10.14
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the “Agreement”) is made as of the 8th day of November 2021, by and between Madison Technologies, Inc., a Nevada corporation (the “Company”), and such persons listed on Schedule I who have executed a signature page to this Agreement (each, an “Investor”).
WHEREAS, each Investor has previously acquired various securities from the Company in the form of common stock of the Company, par value $0.001 per share (the “Common Stock”), in such amounts as set forth on Schedule I (the “Exchanged Securities”).
WHEREAS, the Company has authorized a new series of Convertible Preferred Stock of the Company designated as Series H Convertible Preferred Stock, $0.001 par value (the “Series H”), the terms of which are set forth in the Certificate of Designations for such Series H Preferred Stock (the “Certificate of Designation”) in the form attached hereto as Exhibit A.
WHEREAS, subject to the satisfaction of the conditions set forth herein, the Company and each Investor desire to enter into a transaction wherein the Company shall issue such aggregate number of shares of Series H in exchange for each of the Exchanged Securities as set forth on Schedule I (collectively, the “New Securities”).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Exchange. The closing of the Exchange (the “Closing”) will occur on or before November 5, 2021 (or such later date as the parties hereto may agree) following the satisfaction or waiver of the conditions set forth herein (such date, the “Closing Date”). On the Closing Date, subject to the terms and conditions of this Agreement, each Investor shall, and the Company shall, pursuant to Section 3(a)(9) of the Securities Act of 1933 (the “Securities Act”), exchange the Exchanged Securities for the New Securities. At the Closing, the following transactions shall occur (such transactions in this Section 1, the “Exchange”):
1.1. Delivery of New Securities. On the Closing Date, the Company shall issue the New Securities to each Investor (or its designees); provided that such Investor has complied with its obligations in this Section 1. The New Securities shall be issued as book-entry securities directly registered in each Investor’s name on the Company’s books and records, or, if requested by such Investor, such Investor’s New Securities may be issued in certificated form. On the Closing Date, each Investor shall be deemed for all corporate purposes to have become the holder of record of the New Securities and shall have the right to convert the Series H, irrespective of the date the Company delivers the certificate (if any) evidencing the Series H to such Investor.
1.2. No Rights Following Exchange. Upon receipt of the New Securities in accordance with Section 1.1, each Investor’s rights under the Exchanged Securities shall be extinguished (including, without limitation, the rights to receive, as applicable, any principal, premium, make-whole amount, accrued and unpaid interest, dividends or other payment thereon or any other shares of Common Stock with respect thereto (whether upon in connection with a fundamental transaction, event of default or otherwise)). In consideration for the issuance of the New Securities, each Investor hereby irrevocably waives any obligations of the Company under the Exchanged Securities or any purchase agreement, security agreement, pledge agreement, warrant, guarantee or any other document executed in connection with the issuance of the Exchanged Securities (but solely in respect of the Exchanged Securities (and not any other securities or indebtedness covered thereby). Notwithstanding the foregoing, the Registration Rights Agreement, dated as of February 17, 2021, by and among the Company and the purchasers from time to time party thereto, as amended or otherwise modified from time to time, shall apply to the Series H as if the Series H were the Commitment Shares, and to the Common Stock of the Company received by the Investors upon conversion of the Series H, as if such Common Stock were the Commitment Conversion Shares.
1.3. Further Assurances. The Company and each Investor shall execute and/or deliver such other documents and agreements as are customary and reasonably necessary to effectuate the Exchange and the Company and/or any Investor (or their respective designees) are authorized to file any documents which it deems necessary or required to effectuate the transactions contemplated by this Agreement, including any document to be filed with the Nevada Secretary of State.
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1.4. Representations and Warranties True at Closing. It shall be a condition to the obligation of each Investor on the one hand and Company on the other hand, to consummate the Exchange contemplated hereunder that the other party’s representations and warranties contained herein are true and correct on the Closing Date with the same effect as though made on such date, unless waived in writing by the party to whom such representations and warranties are made.
1.5. Deliveries. At or before the Closing, each Investor shall (i) be deemed to have delivered or caused to be delivered to the Company, the Exchanged Securities held by such Investor free and clear of all liens, encumbrances, security interests, options or other purchase rights, equities, charges, claims, pledges, defects of title or other restrictions of any kind (other than federal and state securities laws) (ii) deliver the executed Agreement and other items (if any) required to effectuate the Exchange.
2. Representations and Warranties of the Company. The Company hereby represents and warrants to each Investor that:
2.1. Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect (as defined below) on its business or properties. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, liabilities, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, if any, individually or taken as a whole, or on the transactions contemplated hereby or on the Exchange (as defined below) or by the agreements and instruments to be entered into (or entered into) in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under this Agreement or the Exchange.
2.2. Authorization. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the other Exchange and the performance of all obligations of the Company hereunder and thereunder, and the authorization of the Exchange, the issuance (and reservation for issuance) of the Series H have been taken on or prior to the date hereof. The Certificate of Designations has been validly filed with the Secretary of State of Nevada and, as of the date hereof and the Closing Date, remains in full force and effect.
2.3. Valid Issuance of the Series H. The Series H shares when issued and delivered in accordance with the terms of this Agreement, for the consideration expressed herein, and the Common Stock when issued in accordance with the terms of the Certificate of Designations, for the consideration expressed therein, will be duly and validly issued, fully paid and non-assessable. The Company shall reserve from its duly authorized capital stock not less than 100% of the maximum number of shares of Common Stock issuable upon conversion of each Investor’s Series H.
2.4. Consents; Waivers. No consent, waiver, approval or authority of any nature, or other formal action, by any individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof (each, a “Person”), not already obtained, is required in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions provided for herein and therein.
2.5. Validity; Enforcement; No Conflicts. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Company and shall constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the Company 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 the Company is a party or by which it is bound, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities or “Blue Sky” laws) applicable to the Company, except in the case of clause (ii) above, for such conflicts, defaults or rights which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
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3. Representations and Warranties of the Investors. Each Investor hereby represents, warrants and covenants that:
3.1. Authorization. Such Investor has full power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby and has taken all action necessary to authorize the execution and delivery of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby.
3.2. Exchange Only. Such Investor is a current holder of Exchanged Securities and has not provided any consideration to the Company for the Series H received in the Exchange other than the Exchanged Securities. Such Investor understands that the New Securities issued in the Exchange may not be offered for sale, sold, assigned or transferred unless (a) subsequently registered thereunder, (b) pursuant to Rule 144, or (c) pursuant to another exemption from registration under the Securities Act, including but not limited to Section 3(a)(9) thereunder.
3.3. No Governmental Review. Such Investor 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 Series H or the fairness or suitability of the investment in the New Securities nor have such authorities passed upon or endorsed the merits of the offering of the New Securities.
3.4. Validity; Enforcement; No Conflicts. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Investor and shall constitute the legal, valid and binding obligations of such Investor enforceable against such Investor in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
3.5. Ownership of Exchanged Securities. Such Investor owns and holds, beneficially and of record, the entire right, title, and interest in and to the Exchanged Securities free and clear of all rights and liens (other than pledges or security interests (a) arising by operation of applicable securities laws and (b) that such Investor may have created in favor of a prime broker under and in accordance with its prime brokerage agreement with such broker). Such Investor has full power and authority to transfer and dispose of the Exchanged Securities to the Company free and clear of any right or lien.
4. Miscellaneous
4.1. Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
4.2. Governing Law; Exclusive Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state or federal courts sitting in New York County, New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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4.3. Notices. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by FedEx or similar overnight next business day delivery, or by email followed by overnight next business day delivery, to the address as provided for on the signature page to this Agreement.
4.4. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and each Investor.
4.5. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
4.6. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
4.7. Survival. Sections 2 and 3 of this Agreement shall survive the Closing and delivery of the New Securities.
[SIGNATURES ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date provided above.
| COMPANY: | ||
|---|---|---|
| MADISON<br> TECHNOLOGIES, INC. | ||
| By: | /s/<br> Philip Falcone | |
| Name: | Philip<br> Falcone | |
| Title: | Chief<br> Executive Officer | |
| Address<br> for Notices: | ||
| 450<br> Park Avenue, 30th Floor<br><br> <br>New<br> York, NY 10022 |
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| INVESTORS: | |
|---|---|
| ARENA SPECIAL OPPORTUNITIES FUND, LP | |
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
| Address<br> for Notices: | |
| ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP | |
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
| Address for Notices: |
Signature Page to Exchange Agreement
Schedule I
| Investors | Exchanged Securities | New Securities |
|---|---|---|
| ARENA<br> SPECIAL OPPORTUNITIES FUND, LP | 13,046,000<br> shares of common stock of the Company, par value $0.001 per share | 13,046<br> shares of Series H Preferred Stock |
| ARENA<br> SPECIAL OPPORTUNITIES PARTNERS I, LP | 26,849,000<br> shares of common stock of the Company, par value $0.001 per share | 26,849<br> shares of Series H Preferred Stock |
EXHIBIT A
Certificate of Designations
[See attached]
Exhibit 10.15
SECURITIESPURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of February , 2021, by and among Madison Technologies, Inc., a Nevada corporation (the “Company”) and the purchasers from time to time party hereto as “Purchasers” (together with their respective successors and assigns, each, a “Purchaser” and collectively, the “Purchasers”).
RECITALS
A. 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 (as defined below), and/or Rule 506(b) of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission under the Securities Act.
B. Each of the Purchasers, wishes to purchase, and the Company wishes to sell at closing, upon the terms and conditions stated in this Agreement, the Securities (as defined herein), all in the amounts and for the price set forth on Schedule 1 hereto.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company, the Purchasers and the Agent hereby agrees as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. In addition to terms defined elsewhere in this Agreement or in any supplement, amendment or exhibit hereto, when used herein, the following terms shall have the following meanings:
(a) “Action” has the meaning specified for such term in Section 3.1(z).
(b) “Additional Financing” means any incurrence of Indebtedness or issuance of convertible securities incurred or entered into by the Company or any of its Affiliates or through special purpose vehicle or joint venture structures, but excluding financing in the form of common equity investments in the Company or any of its Affiliates. For the avoidance of doubt, it is understood and agreed that the term “Additional Financing” shall not include the Notes or any other financing provided by the Purchasers in connection with the Transaction Documents.
(c) “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, including, among others, executive officers, directors, large stockholders, subsidiaries, parent entities and sister companies.
(d) “Agent” has the meaning specified for such term in the Security Agreement.
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(e) “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.
(f) “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 the parties’ obligations hereunder have been satisfied or waived, including (i) each Purchaser’s obligation to pay the Purchase Price as described in Section 2.5, and (ii) the Company’s obligations to deliver the Securities.
(g) “Closing Fee” means a cash fee in the aggregate amount of $660,000 payable by the Company to the Purchasers on the Closing Date (or such later date as the Purchasers may otherwise agree) (which amount shall be in addition to the original issue discount applicable to the Notes).
(h) “Collateral” shall have the meaning ascribed to such term as set forth in the Security Agreement.
(i) “Commitment Shares” means shares of the Company’s Series F Convertible Preferred Stock (convertible into 192,073,017 shares of the Company’s Common Stock) to be issued to the Purchasers at Closing.
(j) “Commitment Conversion Shares” means all shares of Common Stock issuable upon conversion of any of the Commitment Shares.
(k) “Common Stock” means (i) the Company’s common stock, par value $0.001 per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(l) “Common Stock Equivalents” means any securities of the Company 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.
(m) “Communications Act” shall mean the Communications Act of 1934, as amended, and any similar or successor federal statute.
(n) “Communications Laws” shall mean the Communications Act and the FCC Regulations, as each may be in effect from time to time.
(o) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
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(p) “Control Agreement” means, with respect to any deposit account, any securities account, commodity account, securities entitlement or commodity contract, an agreement, in form and substance satisfactory to Agent, among Agent, the financial institution or other Person at which such account is maintained or with which such entitlement or contract is carried and the Company or the Subsidiary maintaining such account, effective to grant “control” (as defined under the applicable UCC) over such account to Agent.
(q) “Conversion Date” has the meaning set forth in the Notes; provided, that no Conversion Date shall occur prior to the date on which the Shareholder Approval is received.
(r) “Conversion Shares” means all shares of Common Stock issuable upon conversion of any portion of any Note (including, at any Purchaser’s election pursuant to the conditions set forth in the Notes, accrued and unpaid interest thereon), but solely to the extent and subject to any conditions set forth in the Notes.
(s) “Dollar(s)” and “$” means lawful money of the United States.
(t) “Effective Date” means the date that the initial Registration Statement filed by the Company pursuant to the Registration Rights Agreement is first declared effective by the Commission.
(u) “Event of Default” shall have the meaning set forth in the Notes.
(v) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(w) “Exchange Agreement” means the Share Exchange Agreement, dated as of the date hereof, by and among Madison Technologies, Inc., a Nevada corporation, as buyer, Sovryn Holdings, Inc., a Delaware corporation, as the “Company” and the shareholders of the Company identified on Exhibit A attached thereto.
(x) “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Company in consideration of services to the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, and (c) securities issued pursuant to the Subsequent Equity Financing, so long as such issuance is based on an enterprise valuation of not less than $45,000,000.
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(y) “FCC” shall mean the Federal Communications Commission and any successor or substitute governmental commission, agency, department, board or authority performing functions similar to those performed by the Federal Communications Commission on the Closing Date.
(z) “FCC License” shall mean any license required under the Communications Laws.
(aa) “FCC Enforcement Provisions” shall have the meaning set forth for such term in the Security Agreement.
(bb) “FCC Regulations” shall mean all rules, regulations, written policies, orders and decisions of the FCC under the Communications Act.
(cc) “Funding Account” means a deposit account in the name of Agent into which $14,500,000 of the Purchase Price shall be deposited on the Closing Date.
(dd) “Funding Release” has the meaning specified for such term in Section 2.5.
(ee) “Funding Release Date” means any date on which any funds are released from the Funding Account pursuant to Section 2.5.
(ff) “Funding Release Request” means a Funding Release Request, in form and substance reasonably satisfactory to Agent, from Company to Agent, requesting that funds on deposit in the Funding Account be released to Company following the satisfaction of the conditions precedent contained in Sections 2.5.
(gg) “GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.
(hh) “Indebtedness” means, with respect to any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (but excluding trade payables incurred in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or the purchaser under such agreement in the event of default are limited to repossession or sale of such property), (e) all capital lease obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit, surety bond or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any capital stock of such Person, (h) all obligations for any earn-out consideration, (i) the liquidation value of preferred capital stock of such Person, (j) all guarantee obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (i) above, (k) all obligations of the kind referred to in clauses (a) through (i) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any lien on property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation and all obligations of such Person in respect of hedge agreements; and (l) all Contingent Obligations in respect to indebtedness or obligations of any Person of the kind referred to in clauses (a)-(k) above. The Indebtedness of any Person shall include, without duplication, the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
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(ii) “Individual Guarantor” means each of Philip Falcone, Kenneth Orr, FFO 1 2021 Irrevocable Trust, FFO 2 2021 Irrevocable Trust and KORR Value LP.
(jj) “Individual Guaranty Agreement” means the Limited Guaranty Agreement, dated as of the Closing Date, made by each Individual Guarantor in favor of the Agent for the benefit of the Purchasers, in form and substance reasonably satisfactory to the Agent.
(kk) “Individual Pledge Agreement” means the Limited Guarantor Pledge Agreement, made by each Individual Guarantor in favor of the Agent for the benefit of the Purchasers, in form and substance reasonably satisfactory to the Agent.
(ll) “Investment” means any investment (including, without limitation, any loan or advance) in or to any Person, whether payment therefor is made in cash or capital stock or other equity interests or otherwise, and whether such Investment is by acquisition of capital stock or other equity interests or Indebtedness, or by loan, advance, transfer of property out of the ordinary course of business, capital contribution, equity or profit sharing interest, extension of credit on terms other than those normal in the ordinary course of business or otherwise.
(mm) “Joint Sales Agreement” shall mean an agreement for the sale of commercial or advertising time or any similar arrangement pursuant to which a Person (other than the Person holding the FCC License for the applicable television broadcast station or an Affiliate of such Person) obtains the right to (i) sell at least a majority of the time for commercial spot announcements, and/or resell to advertisers such time on, (ii) provide the sales staff for the sale of the advertising time or the collection of accounts receivable with respect to commercial advertisements broadcast on, (iii) set the rates for advertising on and/or (iv) provide the advertising material for broadcast on, such television broadcast station.
(nn) “Liens” or “liens” means a lien, mortgage, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, or other clouds on title.
(oo) “Liabilities” means all direct or indirect liabilities, Indebtedness and obligations of any kind of Company to the Agent and/or the Purchasers, howsoever created, arising or evidenced, whether now existing or hereafter arising (including those acquired by assignment), absolute or contingent, due or to become due, primary or secondary, joint or several, whether existing or arising through discount, overdraft, purchase, direct loan, participation, operation of law, or otherwise, including, but not limited to, pursuant to the Notes, this Agreement and/or any of the other Transaction Documents, all accrued but unpaid interest on the Notes, the principal, any letter of credit, any standby letter of credit, and/or outside attorneys’ and paralegals’ fees or charges relating to the preparation of the Transaction Documents and the enforcement of the Agent’s and/or the Purchasers’ rights, remedies and powers under this Agreement, the Notes, the Warrants and/or the other Transaction Documents.
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(pp) “License” shall mean any license, authorization, permit, consent, franchise, ordinance, registration, certificate, agreement or other right filed with, granted by, or entered into by a federal, state or local governmental authority which permits or authorizes the acquisition, construction or operation of a television station or any part of a television station or which is required for the acquisition, ownership or operation of any Station, including, without limitation, the FCC Licenses.
(qq) “License Sub” shall mean each Subsidiary of the Company which has no assets other than FCC Licenses and no liabilities.
(rr) “Local Marketing Agreement” shall mean a local marketing arrangement, time brokerage agreement, management agreement or similar arrangement pursuant to which a Person (other than the Person holding the FCC License for the applicable television broadcast station or an Affiliate of such Person) obtains the right, subject to customary preemption rights and other limitations, to exhibit programming and sell advertising time during more than fifteen percent (15%) of the air time per week of such television broadcast station.
(ss) “Material Adverse Effect” means a material adverse effect on (a) the business, assets, property, operations, or condition (financial or otherwise) of any Obligor, (b) the validity or enforceability of this Agreement or any of the other Transaction Documents, (c) the rights or remedies of the Agent or any Purchaser hereunder or thereunder, or (d) the ability of any Obligor to perform its obligations under any Transaction Document.
(tt) “Note” means all of the Original Issue Discount Senior Secured Convertible Promissory Notes due on the third anniversary of the Closing Date that are owned by the Purchasers, which, subject to the terms and conditions set forth in this Agreement, shall be purchased from the Company pursuant to this Agreement, and any and all Note(s) issued in exchange, transfer or replacement of the Note(s), in each case, in form and substance satisfactory to the Agent.
(uu) “NRJ Acquisition Agreement” means that certain Asset Purchase Agreement, dated as of the Closing Date, by and among Sovryn Holdings, Inc., as buyer, and NRJ TV III CA Opco, LLC and NRJ TV III CA License Co., LLC, as sellers.
(vv) “Obligor” means the Company, each of its Subsidiaries and each Individual Guarantor.
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(ww) “Operating Agreement” shall mean any agreement in respect of a Sharing Arrangement, network affiliation agreement, programming agreement, franchise agreement, lease or other agreement of the Company or any of its Subsidiaries relating to the operation of a Station.
(xx) “Ownership Reports” shall mean, with respect to any Station, the reports and certifications filed with the FCC pursuant to 47 C.F.R. §73.3615, or any comparable reports filed pursuant to any successor regulation thereto.
(yy) “Permitted Indebtedness” means (i) the indebtedness evidenced by the Notes, (ii) any indebtedness of the Company outstanding as of the date of this Agreement that is listed on Schedule 3.1(n), and (iii) purchase money indebtedness incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets in the ordinary course of business in an aggregate principal amount outstanding at any time not to exceed $1,000,000.
(zz) “Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) Liens incurred in connection with Permitted Indebtedness permitted under clause (iii) of the definition thereof; provided that such Liens (i) attach only to the property so acquired and (ii) secure only the Indebtedness that was incurred to acquire such property; (d) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature that are not past due, in each case in the ordinary course of business, but excluding any contract for the payment of money; and (f) any Liens in favor of the Agent.
(aaa) “Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal or otherwise including, without limitation, any instrumentality, division, agency, body or department thereof).
(bbb) “Principal Market” means the principal Trading Market on which the Common Stock is listed or quoted for trading on the date in question.
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(ccc) “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.
(ddd) “Purchase Price” shall have the meaning as set forth on Schedule 1 next to the heading “Purchase Price,” in United States Dollars.
(eee) “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, by and between the Company and the Purchasers as hereinafter amended and/or supplemented altogether with all exhibits, schedules and annexes to such Registration Rights Agreement, in each case, in form and substance satisfactory to the Agent.
(fff) “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Conversion Shares, the Warrant Shares and the Commitment Conversion Shares, each as provided for in the Registration Rights Agreement.
(ggg) “SEC” or “Commission” means the United States Securities and Exchange Commission.
(hhh) “Securities” means the Notes, the Warrants and the Commitment Shares purchased pursuant to this Agreement, all Conversion Shares, all Warrant Shares, all Commitment Conversion Shares and any securities of the Company issued to the Purchasers in replacement, substitution and/or in connection with any exchange, conversion and/or any other transaction involving all or any of such securities of the Company.
(iii) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(jjj) “Security Agreement” means the Security Agreement, dated on or about the date hereof, by and among the Company, the Subsidiaries of the Company, and the Agent, as hereinafter amended and/or supplemented altogether with all exhibits, schedules and annexes to such Security Agreement, pursuant to which the Liabilities are secured by the Collateral, in form and substance satisfactory to the Agent.
(kkk) “Series F Preferred Stock” means the Company’s Series F convertible preferred stock, par value $0.001 per share.
(lll) “Shared Services Agreement” shall mean a shared services arrangement or other similar arrangement pursuant to which two Persons (who are not Affiliates of each other) owning separate television broadcast stations agree to share the costs of certain services and procurements which they individually require in connection with the ownership and operation of one television broadcast station, whether through the form of joint or cooperative buying arrangements or the performance of certain functions relating to the operation of one television broadcast station by employees of the owner and operator of the other television broadcast station, including, but not limited to, the co-location of the studio, non-managerial administrative and/or master control and technical facilities of such television broadcast station and/or the sharing of maintenance, security and other services relating to such facilities.
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(mmm) “Shareholder Approval” shall mean the approval of an amendment to the Company’s Articles of Incorporation to increase the number of shares of Common Stock authorized thereunder from 500,000,000 to 6,000,000,000 by a majority of the votes entitled to be cast thereon, whether presented at a special or annual meeting of shareholders of the Company and the subsequent filing of such amendment with the Secretary of State of the State of Nevada.
(nnn) “Sharing Arrangement” shall mean any Station Servicing Arrangement or Station Sharing Arrangement.
(ooo) “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).
(ppp) “SMRH” means Sheppard, Mullin, Richter & Hampton LLP, with offices located at 30 Rockefeller Plaza, 39^th^Floor, New York, New York 10112.
(qqq) “Station” shall mean, collectively (a) each of the television stations to be acquired pursuant to the NRJ Acquisition Agreement, and (b) any other television station acquired after the Closing Date by the Company or any of its Subsidiaries in accordance with the terms of this Agreement and the other Transaction Documents.
(rrr) “Station Servicing Arrangement” shall mean any arrangement or transaction evidenced by any Joint Sales Agreement, Local Marketing Agreement, Shared Services Agreement or similar agreement or instrument under which the Company or any of its Subsidiaries provides services or obtains the right to provide programming to, or sells advertising availabilities on, a television broadcast station of another Person (other than the Company or any of its Subsidiaries).
(sss) “Station Sharing Arrangement” shall mean any arrangement or transaction evidenced by any Joint Sales Agreement, Local Marketing Agreement, Shared Services Agreement or similar agreement or instrument under which a Person, other than the Company or any of its Subsidiaries, provides services or obtains the right to provide programming to, or sells advertising availabilities on, a Station.
(ttt) “Subsequent Equity Financing” shall have the meaning ascribed to such term in Section 4.20.
(uuu) “Subsequent Equity Financing Closing” shall have the meaning ascribed to such term in Section 4.20.
(vvv) “Subsequent Equity Financing Deadline Date” shall have the meaning ascribed to such term in Section 4.20.
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(www) “Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. All of the Company’s Subsidiaries are set forth on Schedule 3.1(a) hereto.
(xxx) “Subsidiary Guaranty Agreement” means each Guaranty Agreement, between a Subsidiary and the Agent, as amended, restated, supplemented or otherwise modified from time to time, in form and substance satisfactory to the Agent.
(yyy) “Trading Day” means a day on which the principal Trading Market is open for trading.
(zzz) “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, any market or quotation service of the OTC Markets Group (including the OTCQX, the OTCQB, the Pink Open Market or any successors to any of the foregoing).
(aaaa) “Transaction Documents” means, collectively, this Agreement, the Notes, the Registration Rights Agreement, the Warrants, the Security Agreement, each Subsidiary Guaranty Agreement, the Individual Guaranty Agreement, the Individual Pledge Agreement and all financing statements (or comparable documents now or hereafter filed in accordance with the UCC or other comparable or similar laws, rules or regulations) in favor of the Agent perfecting all Liens the Agent has on the Collateral (which security interests and Liens of the Agent shall be senior to all Indebtedness of the Company and its Subsidiaries), any Control Agreement, and such other documents, instruments, certificates, supplements, amendments, exhibits and schedules required and/or attached pursuant to this Agreement and/or any of the above documents, and/or any other document and/or instrument related to the above agreements, documents and/or instruments, and the transactions hereunder and/or thereunder and/or any other agreement, documents or instruments required or contemplated hereunder or thereunder, whether now existing or at any time hereafter arising.
(bbbb) “Transfer Agent” means Pacific Stock Transfer Co., the current transfer agent of the Company, with a mailing address of 6725 Via Austi Parkway, Suite 300, Las Vegas, NV 89119 and a phone number of 800-785-7782, and any successor transfer agent of the Company.
(cccc) “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to the Agent’s Liens on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.
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(dddd) “Underlying Shares” means all Conversion Shares, all Warrant Shares and all Commitment Conversion Shares.
(eeee) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
(ffff) “Warrant Shares” has the meaning assigned to such term in the Warrants.
(gggg) “Warrants” means those certain Common Stock Purchase Warrants, issued by the Company to the Purchasers on the Closing Date and any and all Warrant(s) issued in exchange, transfer or replacement of the Warrant(s), in each case, in form and substance satisfactory to the Agent.
1.2 Other Definitional Provisions.
(a) Use of Defined Terms. Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Transaction Documents or any certificate or other document made or delivered pursuant hereto or thereto.
(b) Accounting Terms. As used herein and in the other Transaction Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Company not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP (provided that all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts referred to herein shall be made without giving effect to (i) any election under Accounting Standards Codification 825-10-25 (previously referred to as Statement of Financial Accounting Standards 159) (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Company at “fair value”, as defined therein, and (ii) any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof).
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(c) Construction. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule and exhibit references are to this Agreement unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(d) UCC Terms. Terms used in this Agreement that are defined in the UCC shall, unless the context indicates otherwise or are otherwise defined in this Agreement, have the meanings provided for by the UCC.
ARTICLE 2
PURCHASE AND SALE
2.1 Closing. On the Closing Date, time being of the essence, subject to the occurrence of the conditions set forth in Section 2.3, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and each Purchaser severally, but not jointly or jointly and severally, agrees to purchase, the Securities in such amounts as indicated next to its name on Schedule 1 hereto. Each Purchaser shall deliver, via wire transfer, immediately available funds equal to the Purchase Price for its Securities as set forth in Section 2.5 hereof, and the Company shall deliver to each Purchaser the Note, the Warrant and the Commitment Shares specified opposite its name on Schedule 1 on the Closing Date, and the Company and the Purchasers shall deliver the other items set forth in Section 2.2 deliverable on the Closing Date. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the closing shall occur at the offices of SMRH or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Agent and the Purchasers the following:
(i) this Agreement duly executed by the Company;
(ii) a Security Agreement providing the Agent (for the benefit of the Purchasers) with a lien on all of the assets of the Company and its Subsidiaries, duly executed by the Company and its Subsidiaries;
(iii) a Note registered in the name of each Purchaser with such principal amount as set forth on Schedule 1, duly executed by the Company;
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(iv) the Commitment Shares, registered in the name of each Purchaser as set forth on Schedule 1;
(v) a Warrant, registered in the name of each Purchaser as set forth on Schedule 1, duly executed by the Company;
(vi) the Registration Rights Agreement duly executed by the Company;
(vii) the Individual Guaranty Agreement, duly executed by the Individual Guarantors;
(viii) the Individual Pledge Agreement, duly executed by the Individual Guarantors;
(ix) UCC financing statements with respect to each Obligor;
(x) a certificate, in the form acceptable to the Purchasers and their counsel, executed by the secretary of the Company dated as of the Closing Date, as to (i) the resolutions as adopted by the Company’s board of directors relating to the transactions contemplated by this Agreement in a form acceptable to the Purchasers, (ii) Certificate of Incorporation or other similar organizational document of the Company, (iii) the Bylaws or other similar organizational document of the Company, (iv) the NRJ Acquisition Agreement and each of the documents executed in connection therewith (along with a certification that such documents are in full force and effect), and (v) the Exchange Agreement, each as in effect on the Closing Date;
(xi) a certificate for each Subsidiary of the Company, in the form acceptable to the Purchasers and their counsel, executed by the secretary of such Subsidiary dated as of the Closing Date, as to (i) the resolutions as adopted by the Subsidiary’s board of directors or other governing body relating to the transactions contemplated by this Agreement in a form acceptable to the Purchasers, (ii) Certificate of Incorporation or other similar organizational document of such Subsidiary, and (iii) the Bylaws or other similar organizational document of such Subsidiary, each as in effect on the Closing Date;
(xiii) a certificate, duly executed by the Chief Executive Officer of the Company, dated as of the Closing Date, confirming compliance with Section 2.3(b)(i) and (ii) below and as to such other matters as may be reasonably requested by the Purchasers and their counsel in the form acceptable to the Purchasers;
(xiii) certificates evidencing the good standing of the Company and each Company Subsidiary in such entity’s jurisdiction of incorporation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within five (5) days of the Closing Date;
(xiv) an opinion of counsel to the Company and its Subsidiaries, in such form as reasonably acceptable to the Purchasers;
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(xv) a Subsidiary Guaranty Agreement for each Subsidiary of the Company;
(xvi) the Closing Fee (payable in cash or by set-off from the Purchase Price), unless deferred by the Purchasers; and
(xvii) such other documents, instruments, opinions or certificates relating to the transactions contemplated by this Agreement as the Purchasers or their counsel may reasonably request.
(b) On or prior to the Closing, each Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) the portion of the Purchase Price specified opposite its name on Schedule 1 hereto, by wire transfer; provided, that it is understood and agreed that the Purchase Price shall be delivered as set forth in Section 2.5 hereof;
(iii) the Security Agreement duly executed by such Purchaser and the Agent; and
(iv) the Registration Rights Agreement duly executed by such Purchaser.
2.3 Conditions to Purchase the Securities. Subject to the terms and conditions of this Agreement, on the Closing Date, each Purchaser, severally, but not jointly or jointly and severally, will purchase from the Company the Securities in the amounts and for the Purchase Price as set forth opposite its name on Schedule 1, provided the following:
(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 (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Purchasers 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 Purchasers required to be performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company and its Subsidiaries, taken as a whole, since the Balance Sheet Date; and
(v) no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or other federal, state, local or other governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.
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(b) The obligations of each Purchaser hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the date of the Closing 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 shall have been performed in all material respects;
(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 and its Subsidiaries, taken as a whole, since the Balance Sheet Date;
(v) the Company shall have obtained all governmental, regulatory and third party consents and approvals, if any, necessary for the entry into the Transaction Documents and the sale of the Securities;
(vi) the NRJ Acquisition Agreement, the Exchange Agreement and each of the documents required to be executed in connection therewith shall have been executed and delivered by each of the parties thereto; and
(vii) no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or other federal, state, local or other governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.
2.4 Purchase Price and Payment of the Purchase Price for the Securities. The Purchase Price for the Securities to be purchased by each Purchaser at the Closing shall be as set forth opposite its name on Schedule 1 and shall be paid at the Closing by the Purchasers by wire transfer of immediately available funds against delivery of the Securities; provided, that it is understood and agreed that (a) $2,000,000 of the Purchase Price shall be delivered to the Company on the Closing Date for application to the Deposit and the Option Fee (each as defined in the NRJ Acquisition Agreement), and (b) $14,500,000 shall be funded to the Funding Account for release (i) to the Company to fund acquisitions by the Company and/or its Subsidiaries that are approved by the Purchasers and (ii) to the Purchasers to pay original issue discount on the Notes, the Closing Fee and Purchaser’s Expenses incurred on or prior to the Closing Date (which release, in the case of this clause (ii) shall not occur later than the NRJ Acquisition Closing Date and shall not be subject to the release procedures described above). Notwithstanding the foregoing, the entire amount of the Purchase Price shall be deemed to have been delivered to the Company on the Closing Date (and interest shall accrue on the full amount of the Purchase Price commencing on the Closing Date).
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2.5 Funding Account.
(a) Releases from Funding Account. The obligation of the Purchasers to direct the Agent to release any funds from the Funding Account on any proposed Funding Release Date (each, a “Funding Release”) is subject to the fulfillment, in a manner reasonably satisfactory to the Purchasers, of each of the following conditions precedent:
(i) Funding Release Request. The Purchasers shall have received at least 5 Trading Days prior to the proposed Funding Release Date, a fully-completed Funding Release Request (together with all attachments thereto), executed by the Company, together with such other documents and certificates that the Agent or the Purchasers may request.
(ii) Specific Conditions. In the case of any Funding Release being made (A) as a result of the consummation of the acquisition contemplated by the NRJ Acquisition Agreement, the Agent shall have received evidence that the NRJ Acquisition Closing Date has occurred in accordance with the terms of the NRJ Acquisition Agreement and applicable law (without any amendment or waiver of the terms of the NRJ Acquisition Agreement (including, without limitation, any waiver of the conditions precedent to closing)) or (B) for any other reason, the Agent and the Purchasers shall have such other information and documents as they have requested, which shall include, for the avoidance of doubt, evidence that the Purchasers have consented to the proposed use of proceeds on such Funding Release Date. For the avoidance of doubt, it is understood and agreed that the maximum amount of funds to be released on the Funding Release Date described in clause (A) above shall not exceed $8,000,000, and the maximum amount of funds to be released on any other Funding Release Date shall be the amount approved by the Purchasers for such Funding Release Date.
(iii) No Default, Etc. No Default, Event of Default or event that has had or could reasonably be expected to have, a Material Adverse Event, shall have occurred and be continuing on the Funding Release Date, or would result from the making of the Funding Release.
(iv) Representations and Warranties. All of the representations and warranties contained in this Agreement and in each other Transaction Document and certificate delivered to Agent or any Purchaser shall be true and correct in all material respects (without duplication of materiality qualifiers contained therein) on and as of the Funding Release Date with the same force and effect as if such representations and warranties had been made on and as of such date (other than any representation or warranty that specifically refers to an earlier date, in which case such representation or warranty was true and correct in all material respects (without duplication of materiality qualifiers contained therein) as of such earlier date).
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(v) Additional Documentation. Agent and Purchasers shall have received such additional agreements, certificates, documents, approvals, or opinions as Agent, Purchasers and/or their legal counsel may reasonably request.
(b) Grant of Security Interest in Funding Account. As security for the due and punctual payment in full of the Liabilities, the Company hereby assigns to the Agent and grants to the Agent, a first and prior Lien upon all of its rights, title and interest in and to the Funding Account, all cash, documents, instruments and securities from time to time held therein, and all rights pertaining to investments of funds in the Funding Account and all products and proceeds of any of the foregoing. All cash, documents, instruments and securities from time to time on deposit in the Funding Account, and all rights pertaining to investments of funds in the Funding Account shall immediately and without any need for any further action on the part of any Person become subject to the Lien set forth in this Section 2.5, be deemed Collateral for all purposes under the Transaction Documents and be subject to the provisions of the Transaction Documents. The Funding Account shall be under the sole dominion and control of the Agent.
(c) Funding Account Generally.
(i) Upon the occurrence and during the continuance of an Event of Default under this Agreement, the Agent may, in addition to any and all other rights and remedies available to the Agent and the Purchasers hereunder and under the other Transaction Documents, apply any sums then present in the Funding Account to the payment of the Indebtedness in any order in its sole discretion.
(ii) Any interest on the amounts on deposit in the Funding Account shall be added to or become a part of the funds on deposit in such Funding Account for all purposes of the Transaction Documents. The Company shall be responsible for payment of any federal, state or local income or other tax applicable to such interest.
(iii) The Company shall not further pledge, assign or grant any security interest in the Funding Account or the income or proceeds thereof or permit any Lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC financing statements, except those naming Agent as the secured party, to be filed with respect thereto.
(iv) Neither the Agent nor any Purchaser shall be liable for any loss sustained on any funds on deposit in the Funding Account.
(v) Any amount remaining in the Funding Account after all Liabilities have been indefeasibly paid in full, shall be returned to the Company.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES; OTHER ITEMS
3.1 Representation and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules 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 Disclosure Schedules (but in no event shall qualify any indemnity obligation of the Company hereunder), the Company represents and warrants to the Agent and the Purchasers on the Closing Date and on each date on which the representations and warranties are required to be made or remade (unless as of a specific date set forth below) as follows:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company and the locations thereof are set forth on Schedule 3.1(a). 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 or other interests 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. Schedule 3.1(a) sets forth, as of the Closing Date, the jurisdiction of organization and the location of the Company’s and its subsidiaries’ executive offices and other places of business.
(b) Organization, Etc. The Company and each of the Subsidiaries is duly organized, validly existing and in good standing under the laws of the state of their respective organization and are duly qualified and in good standing or has applied for qualification as a foreign corporation authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.
(c) Authorization: No Conflict. The execution, delivery and performance of the Transaction Documents and the transactions contemplated thereby by the Company and its Subsidiaries (including, but not limited to, (x) the sale and issuance of the Securities for the Purchase Price, (y) subject to the receipt of Shareholder Approval, the reservation for issuance of the Conversion Shares required to be reserved pursuant to the terms of the Notes, the reservation for issuance of the Warrant Shares required to be reserved pursuant to the terms of the Warrants, and the reservation for issuance of the Commitment Conversion Shares required to be reserved pursuant to the terms of the Certificate of Designation regarding the Commitment Shares, and (z) subject to the receipt of Shareholder Approval, the issuance of the Warrant Shares, the Conversion Shares and the Commitment Conversion Shares) (i) are within the corporate powers of the Company and its Subsidiaries, (ii) have been duly authorized by all necessary action by or on behalf of the Company and its Subsidiaries (and/or their respective stockholders to the extent required by law), (iii) have received all necessary and/or required governmental, regulatory and other approvals and consents (if any shall be required), (iv) do not and shall not contravene or conflict in any material respect with any provision of, or require any consents under (1) any law, rule, regulation or ordinance, (2) the Company’s or any Subsidiary’s organizational documents; and/or (3) 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, and (v) other than the Liens granted to the Agent for the benefit of the Purchasers pursuant to the Transaction Documents, do not result in, or require, the creation or imposition of any Lien and/or encumbrance on any of the Company’s or any Subsidiary’s properties or revenues pursuant to any law, rule, regulation or ordinance or otherwise.
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(d) Validity and Binding Nature. The Transaction Documents to which the Company or any of its Subsidiaries is a party are the legal, valid and binding obligations of the Company and/or such Subsidiary, enforceable against the Company and/or such Subsidiary in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws of general application affecting the rights and remedies of creditors and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(e) 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 Permitted Liens. 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.
(f) 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 securities, corporate law, taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(g) Taxes. 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.
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(h) Licenses and Permits. The Company and each of its Subsidiaries possesses all certificates, authorizations, consents, approvals, orders, Licenses and permits issued by the appropriate federal, state or foreign regulatory authorities (collectively, the “Permits”), necessary to conduct its business as now conducted. All of such Permits are valid and in full force and effect. There is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or investigation that individually or in the aggregate would reasonably be expected to lead to the revocation, modification, termination, suspension or any other impairment of the rights of the holder of any such Permit.
(i) Investment Company. The Company is not (i) an “investment company” or a company “controlled”, whether directly or indirectly, by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended; or (ii) engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System).
(j) Absence of Defaults and Conflicts. Neither the Company nor any of its Subsidiaries is (i) in violation of its charter, by-laws or similar incorporation or organizational documents or (ii) in violation or default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or such Subsidiary is a party or by which it may be bound, or to which any of the property or assets of the Company is subject (collectively, “Agreements and Instruments”). The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in this Agreement and the other Transaction Documents, and compliance by the Company and its Subsidiaries with its obligations under this Agreement and the other Transaction Documents, do not and will not, whether with or without the giving of notice or passage of time or both, (w) conflict with or result in a breach of any of the terms and provisions of, or constitute a default or Repayment Event (as defined below) under, (x) result in the creation or imposition of any lien, charge or encumbrance (other than Permitted Liens) upon any property or assets of the Company or any Subsidiary pursuant to, the Agreements and Instruments, (y) result in any violation of the provisions of the charter, by-laws or similar organizational documents of the Company or any Subsidiary, or (z) result in any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company, any of its Subsidiaries or any of their respective assets, properties or operations, except in the case of this clause (z) for such conflicts, violations, breaches or defaults which would not reasonably be expected to result in a Material Adverse Effect. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness that is material to the operations or financial results of the Company (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company.
(k) Foreign Corrupt Practices Act. Neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any of its affiliates, directors, officers, employees, agents or other person acting on behalf of the Company or any of its Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a material violation by such person of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and its Subsidiaries, and, to the Company’s knowledge, its affiliates have conducted their businesses in material compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
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(l) Rule 506(d) Bad Actor Disqualification Representations and Covenants.
(i) No Disqualification Events. Neither the Company, nor any of its predecessors, affiliates, any manager, executive officer, other officer of the Company or any Subsidiary participating in the offering, any beneficial owner (as that term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity as of the date of this Agreement and on the Closing Date (each, a “Company Covered Person” and, together, “Company Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine (A) the identity of each person that is a Company Covered Person; and (B) whether any Company Covered Person is subject to a Disqualification Event. The Company has complied with its disclosure obligations under Rule 506(e).
(ii) Other Covered Persons. The Company is not aware of any person (other than any Company Covered Person) who has been or will be paid (directly or indirectly) remuneration in connection with the purchase and sale of the Notes, the Warrants and the Commitment Shares who is subject to a Disqualification Event (each, an “Other Covered Person”).
(iii) Reasonable Notification Procedures. With respect to each Company Covered Person, the Company has established procedures reasonably designed to ensure that the Company receives notice from each such Company Covered Person of (A) any Disqualification Event relating to that Company Covered Person, and (B) any event that would, with the passage of time, become a Disqualification Event relating to that Company Covered Person; in each case occurring up to and including the Closing Date.
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(iv) Notice of Disqualification Events. The Company will notify each Purchaser immediately in writing upon becoming aware of (A) any Disqualification Event relating to any Company Covered Person and (B) any event that would, with the passage of time, become a Disqualification Event relating to any Company Covered Person and/or Other Covered Person.
(m) Accuracy of Information, etc. No statement or information contained in this Agreement, any other Transaction Document or any other document, certificate or statement furnished to the Agent or any Purchaser by or on behalf of any Obligor in writing for use in connection with the transactions contemplated by this Agreement and/or the other Transaction Documents contained, as of the date such statement, information, document or certificate was made or furnished, as the case may be, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein, taken as a whole, not materially misleading. There is no fact known to the Company or any of its Subsidiaries that would reasonably be expected to materially affect any Obligor that has not been expressly disclosed herein, in the other Transaction Documents, or in any other documents, certificates and written statements furnished to the Agent or any Purchaser for use in connection with the transactions contemplated hereby and by the other Transaction Documents.
(n) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(n) sets 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. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
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(o) Transactions With Affiliates and Employees. 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 or from 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 $120,000 per year, other than for: (i) without limiting the provisions of Section 7(j) of the Note, payment of salary or consulting fees for services rendered (so long as (i) no such amounts are paid from internally generated funds and not more than $1,000,000 of such amounts are paid from proceeds of the issuance of the Securities (with all additional amounts being paid with proceeds of equity issuances) and (ii) such salaries and consulting fees are on customary terms for companies of a similar size and stage of development), (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.
(p) Intellectual Property. The Company and each of its Subsidiaries has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described on Schedule 3.1(p) that are material to the conduct of its business (collectively, the “Intellectual Property Rights”). Neither the Company nor any of its Subsidiaries has received a notice (written or otherwise) that any material Intellectual Property Right has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned. Neither the Company nor any of its Subsidiaries has received, since the Balance Sheet Date, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and each of its Subsidiaries has taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual property.
(q) USA Patriot Act. The Company and each of its Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the USA Patriot Act (Title III of Pub. L. 107-56, signed into law on October 26, 2001) (the “Act”). No part of the proceeds of the Notes will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
(r) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, joint venture employee or affiliate of the Company or any Subsidiary is currently, or in the past 5 years, has been subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
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(s) Filings, Consents and Approvals. Neither the Company nor any of its Subsidiaries is 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 the Registration Rights Agreement and the declaration of effectiveness by the SEC of the Registration Statement, (ii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Conversion Shares, the Commitment Conversion Shares and the Warrant Shares for trading thereon in the time and manner required thereby, (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws and (iv) following the consummation of the transactions contemplated by the NRJ Acquisition, the filing with the FCC of a copy of certain of the Transaction Documents as required by Section 73.3613 of the FCC’s regulations (collectively, the “Required Approvals”).
(t) Authorization; Enforcement. All corporate action on the part of the Company and its Subsidiaries, and their respective officers, directors and stockholders necessary for the authorization, execution and delivery of the Transaction Documents and the performance of all obligations of the Company and its Subsidiaries under the Transaction Documents and have been taken on or prior to the date hereof. Each of the Transaction Documents has been duly executed by the Company and its Subsidiaries and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company and its Subsidiaries enforceable against the Company and its Subsidiaries in accordance with its terms, except: (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by general equitable principles regardless of whether such enforcement is considered in a proceeding in equity or at law, (iii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iv) insofar as indemnification and contribution provisions may be limited by applicable law.
(u) Valid Issuance of Securities. Each Note has been duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and all restrictions on transfer other than those expressly imposed by the federal securities laws and vest in the Purchasers full and sole title and power to the Note purchased hereby by such Purchaser, free and clear of all Liens, and restrictions on transfer other than those imposed by the federal securities laws. All Conversion Shares, when issued pursuant to conversion of the Notes, all Warrant Shares, when issued pursuant to exercise of the Warrants, and all Commitment Conversion Shares, when issued pursuant to this Agreement, will be duly and validly issued, fully paid and nonassessable, will be free and clear of all Liens and vest in the holder full and sole title and power to such securities. As of the date of the receipt of Shareholder Approval, the Company has reserved from its duly authorized unissued Common Stock, (i) the Required Minimum (as defined in the Notes), which Required Minimum shall be continuously determined by the Company to ensure that the Required Minimum is in reserve with the Transfer Agent at all times and (ii) a sufficient number of shares of Common Stock to provide for the issuance of the Warrant Shares upon the exercise of the Warrants, which number shall be continuously determined by the Company to ensure that such number is in reserve with the Transfer Agent at all times.
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(v) Offering. The offer and sale of the Notes, the Warrants, the Commitment Shares, the Conversion Shares and the Warrant Shares, when issued pursuant to this Agreement (or the Notes or the Warrants, as applicable), as contemplated by this Agreement, are exempt from the registration requirements of the Securities Act, and the qualification or registration requirements of state securities laws or other applicable blue sky laws. Neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemptions.
(w) Capitalization and Voting Rights. The capitalization of the Company is as set forth on Schedule 3.1(w), which Schedule 3.1(w) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The authorized capital stock of the Company and all securities of the Company issued and outstanding are set forth on Schedule 3.1(w) as of the dates reflected therein. All of the outstanding shares of Common Stock and other securities of the Company have been duly authorized and validly issued, and are fully paid and nonassessable. Except as set forth on Schedule 3.1(w), 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 set forth on Schedule 3.1(w), there are no agreements or arrangements under which the Company is obligated to register the sale of any of the Company’s securities under the Securities Act. Except as set forth on Schedule 3.1(w), no shares of Common Stock and/or other securities of the Company are entitled to preemptive rights and there are no outstanding debt securities and no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock and/or other securities of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of capital stock of the Company other than those issued or granted in the ordinary course of business pursuant to the Company’s equity incentive and/or compensatory plans or arrangements. Except for customary transfer restrictions contained in agreements entered into by the Company to sell restricted securities and/or as set forth on Schedule 3.1(w), the Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock and/or other securities of the Company. Except as set forth on Schedule 3.1(w), the offer and sale of all capital stock, convertible or exchangeable securities, rights, warrants, options and/or any other securities of the Company, when any such securities of the Company were issued, complied in all material respects with all applicable federal and state securities laws, and no current and/or prior holder of any securities of the Company has any right of rescission or damages or any “put” or similar right with respect thereto. Except as set forth on Schedule 3.1(w), there are no securities or instruments of the Company containing anti-dilution or similar provisions that will be triggered by the issuance and/or sale of the Securities and/or the consummation of the transactions described herein or in any of the other Transaction Documents.
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(x) Shell Company Status; Financial Statements. The Company has been an issuer subject to Rule 144(i) under the Securities Act. The unaudited financial statements of the Company as of September 30, 2020 is included in Schedule 3.1(x) hereto. The financial statements of the Company included on Schedule 3.1(x) have been prepared in accordance with GAAP, 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 and for the dates thereof and the results of operations and cash flows for the periods then ended, subject to normal, immaterial, year-end audit adjustments. For purposes of this Section 3.1, September 30, 2020 is referred to as the “Balance Sheet Date”.
(y) Material Changes; Undisclosed Events, Liabilities or Developments. Since the Balance Sheet Date: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to be materially adverse to the Company or any of its Subsidiaries, (ii) neither the Company nor any of its Subsidiaries has 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, (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission (if the Company is an issuer required to file periodic reports under the Exchange Act), and (C) liabilities in respect of the NRJ Acquisition Agreement, (iii) neither the Company nor any of its Subsidiaries has altered its method of accounting, (iv) neither the Company nor any of its Subsidiaries has 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, other than pursuant to the Exchange Agreement and (v) neither the Company nor any of its Subsidiaries has issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans, other than pursuant to the Exchange Agreement. Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(y), 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 at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.
(z) 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”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor 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. 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, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. 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.
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(aa) 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 any Purchaser or its respective agents or counsel with any information that constitutes material, non-public information. The Company understands that the Purchasers may rely on the Transaction Documents, the information included therein, including, but not limited to, the foregoing representation in purchasing the Securities. All of the disclosure furnished by or on behalf of the Company to the Purchasers in the Transaction Documents regarding, among other matters relating to the Company, its business and the transactions contemplated in the Transaction Documents, is true and correct in all material respects as of the date made and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser has made or shall make any representations or warranties with respect to the transactions contemplated in the Transaction Documents other than those specifically set forth in Section 3.2 hereof.
(bb) No Integrated Offering. Assuming the accuracy of the 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 behalf 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 the issuance and/or sale of the Securities to be integrated with prior offerings of securities by the Company for purposes of (i) the Securities Act that would require the registration of any such Securities and/or any other securities of the Company under the Securities Act, or that would invalidate the exemptions from registration relied upon by the Company, or (ii) any stockholder-approval provisions of any Trading Market on which any of the securities of the Company are listed, eligible for quotation and/or designated.
(cc) Insurance. The Company and each of its Subsidiaries is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the business in which it is engaged; neither the Company nor any of its Subsidiaries has been refused any coverage sought or applied for; and the Company does not have any reason to believe that it or any of its Subsidiaries 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.
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(dd) 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 Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.
(ee) Registration Rights. No Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.
(ff) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or any of its Subsidiaries, which could 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 U.S. 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 could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(gg) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion of the Notes, the number of Warrant Shares issuable upon exercise of the Warrants, and the number of Commitment Conversion Shares issuable upon exercise of the Commitment Shares, in each case, pursuant to the terms thereof, will increase in certain circumstances. The Company further acknowledges that its obligations to issue (i) Conversion Shares pursuant to the terms of the Notes in accordance with this Agreement and the Notes, (ii) Warrant Shares pursuant to the terms of the Warrants in accordance with this Agreement and the Warrants, and (iii) Commitment Conversion Shares pursuant to the terms of the Commitment Shares in accordance with this Agreement and the Certificate of Designation relating to the Commitment Shares, is absolute and unconditional regardless of the dilutive effect that any such issuances may have on the percentage ownership interests of other stockholders of the Company.
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(hh) Application of Takeover Protections; Rights Agreement. The Company and its 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 provisions under the Company’s certificate of incorporation, as amended, or the laws of the jurisdiction of its formation that are or could become applicable to any Purchaser as a result of the transactions contemplated by this Agreement and/or the other Transaction Documents, including, without limitation, the Company’s issuance of the Securities and each Purchaser’s ownership of the Securities. The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.
(ii) Manipulation of Price. 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, or that could reasonably be expected to cause or 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 Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.
(jj) DTC Eligible. The Common Stock is DTC eligible and DTC has not placed a “freeze” or a “chill” on the Common Stock and the Company has no reason to believe that DTC has any intention to make the Common Stock not DTC eligible, or place a “freeze” or “chill” on the Common Stock. No federal or state regulatory authority has indicated that it will prohibit the listing of the Company’s securities based upon its prior business in the cannabis or cannabis-related markets nor will any Purchaser be prohibited from depositing, clearing or settling the Securities, including through the DTC or otherwise, on account of the Company’s prior business in the cannabis or cannabis-related markets.
(kk) 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 Common Stock is eligible for quotation on the Principal Market and the Company has no reason to believe that the Principal Market has any intention of delisting or no longer quoting the Common Stock from the Principal Market. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market. All Commitment Shares, Commitment Conversion Shares and Warrant Shares have been approved, if so required, for listing or quotation on the Trading Market, subject only to notice of issuance.
(ll) No General Solicitation. Neither the Company, nor any of its affiliates, nor, to the knowledge of the Company, any Person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.
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(mm) Acknowledgment Regarding Each Purchaser’s Purchase of Securities. The Company acknowledges and agrees that each Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the other Transaction Documents and the transactions contemplated hereby and thereby and that no Purchaser is (i) an officer or director of the Company, (ii) an Affiliate of the Company or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Exchange Act). The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by any Purchaser or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Purchaser’s purchase of the Securities. The Company further represents to each Purchaser that the decision of the Company and its Subsidiaries to enter into the Transaction Documents has been based solely on the independent evaluation by the Company, its Subsidiaries and their respective representatives.
(nn) Off-Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off-balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed.
(oo) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any of its Subsidiaries 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. No Purchaser shall have any 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.
(pp) Anti-Money Laundering, Anti-Bribery and Anti-Corruption; Sanctions.
(i) Neither the Company nor, any of its Subsidiaries or Affiliates or any director or officer of any of them is an individual or entity currently, or has not in the past 5 years been, subject to any Sanctions or is on any Sanctions List.
(ii) Each of the Company, any of its Subsidiaries and Affiliates and their respective directors, officers, employees and, to the knowledge of the Company, agents and any other person or entity acting on behalf of the Company, has complied with the Money Laundering, Anti-Corruption and Anti-Bribery Laws, in each case as applicable to them, and no action, suit or proceeding by or before any court or any arbitrator or any governmental agency, authority or body involving the Company and any of its Subsidiaries or their respective directors or officers and, to the knowledge of the Company, the employees, agents, or representatives of each of them, is pending or threatened with respect to Money Laundering, Anti- Corruption and Anti-Bribery Laws.
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(iii) Neither the Company nor any of its Subsidiaries nor their respective directors or officers, nor, to the knowledge of the Company, the employees or agents of any of them has:
| A. | used<br> any corporate funds (nor will it use any proceeds from the Notes) for any unlawful contribution,<br> gift, entertainment or unlawful expense relating to political activity; |
|---|---|
| B. | taken<br> any action in furtherance of an unlawful offer, payment, promise to pay, or authorization<br> or approval of the payment or giving of money, property, gifts or (anything else of value,<br> directly or indirectly, to any “government official” (including any officer<br> or employee of a government or government owned or controlled entity or of a public international<br> organization, or any person acting in an official capacity for or on behalf of any of<br> the foregoing, or any political party or party official or candidate for public office)<br> or made any other bribe, rebate, payoff, influence payment or kickback intended to improperly<br> influence official action or secure an improper advantage; |
| --- | --- |
| C. | nor<br> will it use any proceeds from the Notes in furtherance of any such unlawful payment or<br> violation of Sanctions or Money Laundering, Anti-Corruption and Anti-Bribery Laws. |
| --- | --- |
(iv) The Company and each Subsidiary will promote and ensure compliance with Money Laundering, Anti-Corruption and Anti-Bribery Laws in all jurisdictions where they operate and with the representations and warranties contained herein.
(v) As used in this Section 3.1(pp):
| A. | “Money<br> Laundering, Anti-Corruption and Anti-Bribery Laws” means money laundering and<br> anti- corruption statutes of all jurisdictions (including, the Foreign Corrupt Practices<br> Act of 1977, the OECD Convention on Bribery of Foreign Public Officials in International<br> Business Transactions, and any similar national or local law or regulation in the United<br> Kingdom or elsewhere where the Company and each other Subsidiary conducts business),<br> the rules and regulations thereunder and any related or similar rules, regulations or<br> guidelines, issued, administered or enforced by any governmental agency or any such jurisdiction. |
|---|---|
| B. | “Sanctions”<br> means any laws or regulations or restrictive measures relating to economic or financial<br> sanctions or trade embargoes imposed, administered or enforced from time to time by a<br> Sanctions Authority. |
| --- | --- |
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| C. | “Sanctions<br> Authority” means (i) the United Nations Security Council; (ii) the United States<br> government; (iii) the European Union; (iv) the United Kingdom government; (v) the respective<br> governmental institutions and agencies of any of the foregoing, including without limitation,<br> OFAC, the United States Department of State and Department of Commerce, and Her Majesty’s<br> Treasury; and (vi) any other governmental institution or agency with responsibility for<br> imposing, administering or enforcing Sanctions with jurisdiction over the Company or<br> any of its subsidiaries (together, “Sanctions Authorities”). |
|---|---|
| D. | “Sanctions<br> List” means the Specially Designated Nationals and Blocked Persons List maintained<br> by OFAC, the Denied Persons List maintained by the U.S. Department of Commerce, the Consolidated<br> List of Financial Sanctions Targets maintained by Her Majesty’s Treasury, or any other<br> list issued or maintained by any Sanctions Authority of persons subject to Sanctions<br> (including investment or related restrictions), each as amended, supplemented or substituted<br> from time to time. |
| --- | --- |
(qq) Environmental Laws. The Company and its Subsidiaries, to the best of the Company’s knowledge, (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(rr) Seniority. As of the Closing Date, (i) all Indebtedness is subordinated to the Notes, and (ii) no Indebtedness or other claim against the Company is senior to or pari passu with the Notes in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).
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(ss) Licenses; Operating Agreements.
(i) As of the NRJ Acquisition Closing Date and at all times thereafter, each of the Company and its Subsidiaries has all requisite power and authority, Operating Agreements and Licenses to own and operate its properties and to carry on its businesses as now conducted and as proposed to be conducted. Schedule 3.1(ss) correctly identifies the call letters and designated market area of each Station and sets forth all of the material Sharing Arrangements, network affiliation agreements, programming agreements, franchise agreements and Licenses of the Company and its Subsidiaries with respect to such Station and correctly sets forth the termination date, if any, of each such Sharing Arrangement, network affiliation agreement, programming agreement, franchise agreement and License. True, correct and complete copies of each Operating Agreement and License set forth in Schedule 3.1(ss) has been made available to the Agent. Each material Operating Agreement and License was duly and validly issued pursuant to procedures which comply in all material respects with all requirements of applicable law, including the Communications Laws. As of the NRJ Acquisition Closing Date and at all times thereafter, the Company and its Subsidiaries have the right to use all Licenses required in the ordinary course of business for all Stations, and each such License is in full force and effect. Each of the Company and its Subsidiaries has taken all actions and performed all of its obligations that are necessary to maintain all Licenses without adverse modification or impairment. No event has occurred which (A) has resulted in, or after notice or lapse of time or both would reasonably be expected to result in, revocation, suspension, adverse modification, non-renewal, impairment, restriction or termination of or any order of forfeiture with respect to, any License or (B) materially and adversely affects or could reasonably be expected in the future to materially and adversely affect the rights of the Company or any of its Subsidiaries thereunder. Commencing on the date that is 30 days after the NRJ Acquisition Closing Date, each FCC License is held by a License Sub. None of the FCC Licenses requires that any present stockholder, director, officer or employee of the Company or any of its Subsidiaries remain a stockholder or employee of such Person, or that any transfer of control of such Person must be approved by any public or governmental body other than the FCC.
(ii) Neither the Company nor any of its Subsidiaries is a party to or has knowledge of any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relating to the radio or television industries generally) which could in any manner materially threaten or adversely affect the validity or continued effectiveness of the Licenses of any such Person. Neither the Company nor any of its Subsidiaries has any reason to believe that any Licenses listed and described in Schedule 3.1(ss) will not be renewed in the ordinary course. Each of the Company and its Subsidiaries, as applicable, (A) has duly filed in a timely manner all material filings, reports, applications, documents, instruments and information required to be filed by it under the Communication Act or pursuant to FCC Regulations or requests of any regulatory body having jurisdiction over any of its Licenses, (B) has submitted to the FCC on a timely basis all required equal employment opportunity reports, and (C) is in compliance with the Communications Laws, including all FCC Regulations relating to the broadcast of television signals, all FCC Regulations concerning the limits on the duration of advertising in children’s programming and the record keeping obligations relating to such advertising, the Children’s Television Act and all FCC Regulations promulgated thereunder and all equal employment opportunity-related FCC Regulations. The Company and its Subsidiaries maintain appropriate public files at the Stations and at its chief executive office in a manner that complies in all material respects with all FCC Regulations.
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(iii) The Ownership Reports filed by the Company and its Subsidiaries with the FCC are true, correct and complete in all material respects and there have been no material changes in the ownership of the Company or any Subsidiary of the Company since the filing of such Ownership Reports other than as described in information filed with the FCC.
3.2 Representation and Warranties of the Purchasers. Each Purchaser, severally and not jointly, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is either an individual or 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 the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such 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.
(b) Own Account. Such Purchaser understands that 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 in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to an effective registration statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
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(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is an “accredited investor” as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. Such 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 so evaluated the merits and risks of such investment. Such 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.
(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, 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.
(f) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) 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 Securities and the merits and risks of investing in the Securities; (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.
(g) Certain Transactions and Confidentiality. Such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such 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. Notwithstanding the foregoing, if such Purchaser is a multi-managed investment vehicle, whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. 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).
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The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such 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 4
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) 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 4.1(b), the Company may require the transferor thereof to provide to 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.
(b) Each Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD 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. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
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The Company acknowledges and agrees that each Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At such Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are then registered for resale on a registration statement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.
(c) Certificates evidencing the Commitment Shares, the Commitment Conversion Shares and/or the Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) when they have been sold while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such the Commitment Conversion Shares, Conversion Shares and/or Warrant Shares pursuant to Rule 144, (iii) if such Commitment Conversion Shares, Conversion Shares and/or Warrant Shares are eligible for sale under Rule 144 and a sale or transfer will be taking place prior to the Company’s next periodic report becomes due under the Exchange Act or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date or at such time as such legend is no longer required under this Section 4.1(c) if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by any Purchaser. If any portion of any Note is converted or any portion of any Warrant is exercised at a time when there is an effective registration statement to cover any sale of the Underlying Shares, or if such Commitment Conversion Shares, Conversion Shares and/or Warrant Shares have been sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Commitment Conversion Shares, Conversion Shares and/or Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Commitment Conversion Shares, Conversion Shares and/or Warrant Shares and without volume or manner-of-sale restrictions provided the conditions of Rule 144(i)(2) have been satisfied and a sale of such shares will be taking place prior to the Company’s next annual or quarterly report becoming due under its reporting obligations under the Exchange Act or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Commitment Conversion Shares, Conversion Shares and/or Warrant Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than the earlier of (i) three (3) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Purchaser to the Company or the Transfer Agent of certificate(s) representing the Commitment Conversion Shares, Conversion Shares and/or Warrant Shares, as applicable, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Commitment Conversion Shares, Conversion Shares and/or Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the applicable Purchaser by crediting the account of such Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing the Commitment Conversion Shares, Conversion Shares and/or Warrant Shares, as applicable, issued with a restrictive legend.
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(d) In addition to each Purchaser’s other available remedies, the Company shall pay to each Purchaser, in cash, the greater of (i) as partial liquidated damages and not as a penalty, for each $1,000 of Commitment Conversion Shares, Conversion Shares and/or Warrant Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend and (ii) if the Company fails to (x) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends or (y) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of Commitment Conversion Shares, Conversion Shares or Warrant Shares, as applicable, that the Company was required to deliver to such Purchaser by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Commitment Conversion Shares, Conversion Shares or Warrant Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).
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4.2 Furnishing of Information. Beginning on the Closing Date, the Company shall use commercially reasonable efforts to comply with the Pink Basic Disclosure Guidelines which set forth the disclosure obligations that make up the “Alternative Reporting Standard” for OTC Pink companies as such obligations are published by the OTC Markets Group, Inc. In addition, the Company shall file a Registration Statement on Form 8-A as soon as practicable, but in no event no later than five (5) Trading Days, after the effective date of first registration statement filed by the Company that is declared effective by the SEC which registers securities held by a Purchaser or any of its Affiliates. If after the date hereof the Company becomes subject to the rules and regulations of the Exchange Act and as long as any Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to each Purchaser and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities, including without limitation, under Rule 144. In addition, the Company shall file with Commission current “Form 10 information”, as defined in Rule 144(i)(3), as soon as practicable after the date the Company becomes subject to the rules and regulations of the Exchange Act, reflecting its status as an entity that is no longer an issuer described in Rule 144(i)(1)(i). The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act, including without limitation, within the requirements of the exemption provided by Rule 144.
4.3 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 Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities 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.
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4.4 Securities Laws Disclosure; Publicity. The Company shall by 9:00am on the 2^nd^ Trading Day after the date of this Agreement, issue a press release disclosing the material terms of the transactions contemplated hereby, which press release shall have been approved by the Purchasers prior to its release (which approval shall not unreasonably be withheld or delayed). From and after the issuance of such press release, the Company represents to each Purchaser that it shall have publicly disclosed all material, non-public information delivered to any 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. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any Purchaser or any of its Affiliates on the other hand, shall terminate. The Company and the Purchasers shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of the Purchasers, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not, without the prior written consent of each Purchaser, (a) use the name of any Purchaser, “Arena Investors LP,” “Arena” or any other derivative thereof (each, a “Trade Name”) in any press releases or other public disclosures (including in any filing with the Commission or any regulatory agency or Trading Market), offering documents, sales materials, brochures or similar publicity or promotional materials, or for promotional purposes, whether orally or in writing, except (x) as required by federal securities law and the rules and regulations promulgated thereunder in connection with the filing of final Transaction Documents, any disclosure required pursuant to any reports required to be filed by the Company pursuant to the Exchange Act after the date hereof or the Registration Statement with the Commission, (y) to the extent such disclosure is required by law or Trading Market regulations, including the “Alternative Reporting Standard” required by OTC Markets, in which case the Company shall provide each Purchaser with prior notice of such disclosure permitted under this clause (y), or (z) as required under Nevada General Corporation Law or (b) represent that an investment in the Company or any product or any service provided by the Company has been approved or endorsed by any Purchaser. Following any such written consent, which shall not be unreasonably withheld or delayed, the Company shall provide each Purchaser with a copy of such written or other materials using the Trade Name if requested by any Purchaser. Each Purchaser shall be deemed to have provided prior written consent of the disclosure of such Purchaser’s name to other stockholders and investors in the Company, and to potential investors in the Company (that to the extent such information has not already been publicly disclosed, have been informed of the confidential nature thereof) that in the course of their due diligence require disclosure of the identity of the existing investors in the Company.
4.5 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents.
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4.6 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any of its Subsidiaries, nor any other Person acting on behalf of any of the foregoing will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to any Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that such Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K or if not subject to the reporting requirements under the Commission, file a press release. 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. Subject to the terms and conditions set forth on Schedule 4.7 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder (i) to pay the Deposit and Option Fee under the NRJ Acquisition Agreement, (ii) to fund the consideration for the NRJ Acquisition Agreement upon the consummation of the acquisition contemplated thereby, and (iii) for other acquisitions and purposes approved in writing by the Purchasers. Without limiting the foregoing, the Company shall not use any such proceeds: (a) for the satisfaction of any portion of the Company’s debt, (b) for the redemption of any of its preferred stock, Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA, OFAC regulations or Money Laundering, Anti-Corruption and Anti-Bribery Laws. Notwithstanding the foregoing, the Company may receive permission to use such funds to the extent expressly agreed to in advance, in writing (including electronic mail) by the Purchasers. Notwithstanding anything to the contrary in the Transaction Documents or otherwise, neither the Company nor its Subsidiaries may use any portion of the Purchase Price or any other proceeds from the Purchasers or any of their respective Affiliates to pay any liquidated damages, penalties, fees or other amounts due and payable to any Purchaser or its Affiliates under the Transaction Documents or otherwise without the express advance written consent of the Purchasers (including at the election of the Purchasers, in the case of an Event of Default under any Note, to repay the Company’s obligations under any Note, including the outstanding principal amount of any Note, accrued but unpaid interest, liquidated damages and/or other amounts owing in respect thereof through the date of acceleration using the proceeds in the Funding Account). For the avoidance of doubt, the net proceeds from the Sale of the Securities hereunder shall be distributed as set forth in Section 2.5 hereof on the Closing Date, and amounts deposited in the Funding Account on the Closing Date shall be further distributed to the Company as set forth in Section 2.5 hereof.
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4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold the Agent, each Purchaser and their respective directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls any Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in any registration statement filed by the Company, any prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Purchaser Party furnished in writing to the Company by such Purchaser Party expressly for use therein, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder in connection therewith. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to such Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (x) the employment thereof has been specifically authorized by the Company in writing, (y) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (z) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (1) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (2) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.8 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock equal to the Required Minimum (as defined in the Notes) for the purpose of enabling the Company to issue the Conversion Shares and any other shares that may be issuable pursuant to the Notes. If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date
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4.10 Listing of Common Stock. The Company hereby agrees to use reasonable best efforts to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Commitment Conversion Shares, Conversion Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Commitment Conversion Shares, Conversion Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market (including in accordance with Section 4.23), it will then include in such application all of the Commitment Conversion Shares, Conversion Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Commitment Conversion Shares, Conversion Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on such Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.11 Certain Transactions and Confidentiality. Each Purchaser covenants, severally, but not jointly or jointly and severally, 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 4.4. Each Purchaser covenants, severally, but not jointly or jointly and severally, 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 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes 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, (ii) no Purchaser shall 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 4.4, (iii) no Purchaser has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling Securities which have been issued under the terms of this Agreement, any Note, any Warrant or any other Transaction Document, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (iv) no Purchaser shall be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction, (v) any Purchaser may engage in hedging activities, other than Short Sales at various times during the period that the Securities are outstanding, and (vi) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company or its Subsidiaries after the issuance of the initial press release. Except as contemplated above, Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
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4.12 Conversion and Exercise Procedures. The form of Notice of Conversion in the Notes sets forth the totality of the procedures required of the Purchasers in order to convert the Notes, the form of Delivery Notice in the Certificate of Designation regarding the Commitment Shares sets forth the totality of the procedures required of the Purchasers in order to convert the Commitment Shares and the form of Notice of Exercise in the Warrants sets forth the totality of the procedures required of the Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of any Purchaser to convert the Notes or the Commitment Shares or exercise the Warrants. Without limiting the preceding sentences, no ink-original Notice of Conversion, Notice of Exercise or Delivery Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form, Notice of Exercise form or Delivery Notice form be required in order to covert the Notes or the Commitment Shares or exercise the Warrants. The Company shall honor conversions of the Notes and the Commitment Shares and exercises of the Warrants, and shall deliver the Conversion Shares, Commitment Conversion Shares and the Warrant Shares, as applicable, in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.13 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities with the Commission as required under Regulation D, and with the applicable securities regulators in the states in which the Securities were sold, and to provide copies thereof, promptly upon request of any Purchaser. The Company shall take such further action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the 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.
4.14 Maintenance of Property. So long as any Note remains outstanding, the Company shall use its commercially reasonable efforts to keep, and cause each of its Subsidiaries to keep, all of their respective properties, which are necessary or useful to the conduct of their business, in good working order and condition, ordinary wear and tear excepted.
4.15 Preservation of Corporate Existence. So long as any Note remains outstanding, the Company shall, and shall cause each of its Subsidiaries to, preserve and maintain their respective corporate existences, rights, privileges and franchises in their respective jurisdictions of incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary in view of their respective businesses and operations and where the failure to qualify or remain qualified would reasonably be expected to have a Material Adverse Effect.
4.16 DTC Program. At all times that the Securities are outstanding, the Company will employ as the transfer agent for the Common Stock, the Commitment Shares, the Commitment Conversion Shares, the Conversion Shares and the Warrant Shares a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common Stock (including the Commitment Shares, the Commitment Conversion Shares, the Conversion Shares and the Warrant Shares) to be transferable pursuant to such program.
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4.17 Subsequent Equity Sales. So long as any Note remains outstanding, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction which is not Permitted Indebtedness and in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price. The foregoing restrictions shall not include any agreement for an at-the-market offering. Each Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
4.18 Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Transfer Agent in a form acceptable to the Purchasers (the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares via DWAC or otherwise to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of the Purchasers and/or their respective nominee(s), for the Underlying Shares in such amounts as specified from time to time by the Purchasers to the Company upon conversion of the Notes and/or exercise of the Warrants and for the Commitment Shares. The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section will be given by the Company to its Transfer Agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. In the event that such sale, assignment or transfer involves Commitment Conversion Shares, Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to such buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 4.1. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that each Purchaser shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent from and after the Applicable Date. Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company. “Applicable Date” means the first date on which all of the Commitment Shares and Underlying Shares are eligible to be resold by the Purchasers pursuant to Rule 144 or an effective registration statement is in effect.
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4.19 Public Information. At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at such time that all of the Securities, may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to the Purchasers’ other available remedies, the Company shall pay to each Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Purchase Price of each Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30^th^) day (prorated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which the Purchasers shall be entitled pursuant to this Section 4.19 are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3^rd^) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. If an Event (as defined in the Registration Rights Agreement) is occurring at the time of a Public Information Failure, and the Company is (x) then obligated to pay, and (y) timely pays the Purchasers partial liquidated damages under Section 2(d) of the Registration Rights Agreement for the period occurring simultaneous with the applicable Public Information Failure (such payments, the “Simultaneous Registration Rights Partial Liquidated Damages”) and (z) has timely paid the Purchasers all previously accrued partial liquidated damages under Section 2(d) of the Registration Rights Agreement, the Company may deduct the amounts paid in connection with such Simultaneous Registration Rights Partial Liquidated Damages from such Public Information Failure Payments due for such simultaneous Public Information Failure. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit any Purchaser’s right to pursue actual damages for the Public Information Failure, and each Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
4.20 Subsequent Equity Financing. Within thirty (30) calendar days of the Closing Date (the “Subsequent Equity Financing Deadline Date”), the Company shall sell in one or more closings shares of preferred stock (which may be convertible into shares of Common Stock) on terms reasonably acceptable to the Purchasers (the “Subsequent Equity Financing”) for aggregate gross proceeds equal to or exceeding $3,000,000 (“Subsequent Equity Financing Closing”), which Subsequent Equity Financing shall not be subject to the issuance of any warrants or similar equity securities. To the extent the Subsequent Equity Financing Subsequent Closing does not occur on or prior to the Subsequent Equity Financing Deadline Date, then, in addition to the Agent’s and each Purchaser’s other available remedies, an amount in cash, as partial liquidated damages and not as a penalty, shall be payable by the Company to the Purchasers equal to $60,000 on the day of the Subsequent Equity Financing Deadline Date and on every thirtieth (30^th^) day (prorated for periods totaling less than thirty days) thereafter until the Subsequent Equity Financing Closing occurs; provided, the amount set forth above shall increase by $30,000 on every thirtieth (30^th^) day after the Subsequent Equity Financing Deadline Date if such closing(s) for the Subsequent Equity Financing have not taken place. The payments to which the Purchasers shall be entitled pursuant to this Section 4.20 are referred to herein as “Subsequent Equity Financing Failure Payments.” Subsequent Equity Financing Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Subsequent Equity Financing Failure Payments are incurred and (ii) the third (3^rd^) Business Day after the event or failure giving rise to the Subsequent Equity Financing Failure Payments is cured. The Company acknowledges and agrees that if the Subsequent Equity Financing Closing does not occur by the Subsequent Equity Financing Deadline Date, it shall be an Event of Default (as defined in the Notes) under the Notes, notwithstanding the payment of the Subsequent Equity Financing Failure Payments.
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4.21 Litigation and Other Notices. For as long as any Note remains outstanding, the Company shall promptly, to the extent not prohibited by law, give each Purchaser notice in writing of:
(a) within three Trading Days following the knowledge by the Company thereof, any Action before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) affecting the Company, any Subsidiary, any director and/or officer including but not limited to, any Action involving a claim of violation of or liability under federal or state securities laws, a claim of breach of fiduciary duty or any investigation by a governmental or administrative agency or regulatory authority (federal, state county, local or foreign);
(b) within three Trading Days following the occurrence thereof, any Default or Event of Default or event that has had or could reasonably be expected to have a Material Adverse Effect;
(c) upon the consummation of any acquisition or investment by the Company or any of its Subsidiaries and as and at the end of each fiscal year, a restatement of Schedule 3.1(ss) hereto with respect to the following items: (i) the call letters and designated market area of each Station, (ii) all of the network affiliation agreements for the primary channel of such Station, (iii) the FCC Licenses of the Company and its Subsidiaries with respect to such Stations and (iv) the termination date, if any, of each such network affiliation agreement and FCC License;
(d) promptly upon their becoming available, copies of (i) all press releases and other statements made available generally by the Company or any of its Subsidiaries to the public concerning material developments in the business of the Company or any of its Subsidiaries, (ii) any material non-routine correspondence or official notices received by the Company, or any of its Subsidiaries from the FCC or other communications regulatory authority, and (iii) all material information filed by the Company or any of its Subsidiaries with the FCC; and
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(e) within three Trading Days following receipt of notice thereof (i) any forfeiture, non-renewal, cancellation, termination, revocation, suspension, impairment or material modification of any material License held by the Company or any of its Subsidiaries, or any notice of default or forfeiture with respect to any such License, (ii) any complaint or other matter filed with or communicated to the FCC or other Governmental Authority of which the Company and any of its Subsidiaries has knowledge which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (iii) any lapse, termination or relinquishment of any material License held by the Company or any of its Subsidiaries, or any refusal by any Governmental Authority or agency (including the FCC) to renew or extend any such License.
Any such information provided to any Purchaser shall comply with the requirements of Section 4.6 above.
4.22 Access to Records. The Company shall and shall cause each of its Subsidiaries to provide the Agent and each Purchaser and/or any of their respective duly authorized representatives, attorneys or accountants access to any and all bank records at the premises of the Company or such Subsidiary where such records are kept, such access being afforded without charge, but only during normal business hours. Any such information provided to the Agent or any Purchaser shall comply with the requirements of Section 4.6 above.
4.23 OTC Markets; National Securities Exchange.
(a) Except as otherwise provided in clause (b) below, the Company shall take all necessary and appropriate actions to ensure that its shares of Common Stock remain listed and quoted on the OTCQB or OTCQX at all times.
(b) As soon as reasonably practicable after the Company meets the qualitative and quantitative listing standards for listing on a national securities exchange, the Company shall use reasonable best efforts to take all necessary and appropriate actions to list its shares of Common Stock for trading on such national securities exchange.
4.24 Post-Closing Actions. The Company shall and shall cause each of its relevant Subsidiaries to execute and deliver the documents and complete the tasks set forth in this Section as soon as reasonably practicable and in each case no later than the time limit specified in this Section or such longer time as the Purchasers may agree in their sole discretion:
(a) Not later than ten (10) calendar days after the Closing Date, the Company shall deliver to the Agent (i) original certificates representing the equity interests required to be pledged under the Security Agreement and the Individual Pledge Agreement, in each case, accompanied by appropriate transfer powers, duly executed in blank;
(b) Not later than thirty (30) calendar days after the Closing Date, the Company and each of its Subsidiaries shall deliver to the Agent, in form and substance reasonably satisfactory to Agent, Control Agreements, in form and substance satisfactory to the Agent, with respect to each of its deposit accounts and securities accounts;
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(c) Not later than the NRJ Acquisition Closing Date, copies of insurance certificates describing all insurance policies maintained by the Company and its Subsidiaries (which shall include liability insurance and property insurance in amounts and otherwise on terms reasonably satisfactory to Agent), together with mortgagee, lender loss payable and additional insured endorsements in favor of Agent; and
(d) Any Person acquired by the Company or any of its Subsidiaries, or that otherwise becomes a direct or indirect Subsidiary of the Company, on or after the date of this Agreement shall enter into a Subsidiary Guaranty Agreement and be joined to the Security Agreement as a debtor not later than one (1) calendar day after the consummation of such acquisition by the Company or such Subsidiary or the date the Person otherwise becomes a Subsidiary of the Company or such Subsidiary.
4.25 Future Financings. Except for Permitted Indebtedness and for so long as Liabilities are outstanding, neither the Company, nor any of its Subsidiaries, shall enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness. Despite the foregoing prohibition and for so long as Liabilities are outstanding, if at any time the Company or any of its Subsidiaries issues or incurs any Indebtedness other than Permitted Indebtedness, in addition to the Agent’s and the Purchasers’ other available remedies, the Company shall pay to the Purchasers, in cash, as partial liquidated damages and not as a penalty, on each date of any such issuance or incurrence of Indebtedness, $30,000. Any such Indebtedness shall be expressly subordinated to the Notes, and the holders of such Indebtedness shall not be granted any registration rights, nor shall the Company register, or cause to be registered, with the SEC or any state securities commission the notes or other debt instruments representing such Indebtedness or any equity securities issuable in connection with such Indebtedness. In addition, the Company shall not grant any registration rights in connection with the Subsequent Equity Financing, nor shall the Company register, or cause to be registered, with the SEC or any state securities commission any equity securities issuable in connection with the Subsequent Equity Financing.
4.26 License Subs. At the time of any acquisition or investment permitted hereunder and under the Notes, the Company shall cause each of the FCC Licenses being acquired by the Company or any of its Subsidiaries to be transferred to one or more License Subs, each of which License Subs shall have as its sole asset or assets the FCC Licenses of the Company or any of its Subsidiaries and a management agreement with the Company and such of its Subsidiaries subject to such FCC License or FCC Licenses, such that from and after such applicable date neither the Company nor its Subsidiaries (other than License Subs) shall hold any FCC Licenses other than through one or more duly created and existing License Subs. The Company shall not permit the License Subs to have any business activities, operations, assets, Indebtedness, Contingent Obligations or Liens (other than holding FCC Licenses, being a party to network affiliation agreements and owning the equity interests of other License Subs, and its obligations under the Transaction Documents). Promptly after the transfer of the FCC Licenses to the License Subs, the Company shall, upon the request of the Agent, provide to the Agent copies of any required consents to such transfer from the FCC and any other governmental authority which such consents shall be in full force and effect and not subject to any pending reversal or cancellation.
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4.27 Maintenance of Network Affiliations; Operating Agreements. The Company will, and will cause each of its Subsidiaries to, maintain one or more network affiliations with networks reasonably satisfactory to the Agent at all times for each Station except where the failure to maintain such network affiliation could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company will, and will cause each of its Subsidiaries to comply with any and all Operating Agreements except where the failure to so comply could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
4.28 Ownership Reports. The Company will file Ownership Reports for any Station acquired after the Closing Date (reflecting such acquisition by the Company or its Subsidiaries) with the FCC within the time frames required under applicable law, including the Communications Laws.
4.29 Licenses and Operating Agreements. The Company will cause each of the representations and warranties contained in Section 3.1(ss) to be true and correct at all times.
4.30 Company as Holding Company. Notwithstanding anything to the contrary contained herein or in the other Transaction Documents, the Company will have (a) no assets (other than deposit accounts and the ownership of its Subsidiaries), (b) no liabilities (other than under the Transaction Documents) and (c) no business operations (other than the ownership of its Subsidiaries and activities required to maintain its status as a public company).
4.31 Negative Covenants. The Company shall company and cause its Subsidiaries to comply with the negative covenants contained in Section 7 of the Note.
4.32 Right of First Refusal.
(a) The Company, on behalf of itself and each of its Subsidiaries, hereby grants to the Purchasers a right of first refusal to provide any Additional Financing to be sought by the Company and/or any of its Subsidiaries or other Affiliates (directly or indirectly, including through special purpose vehicles or joint ventures) (each, an “Offeror” and collectively, the “Offerors”), subject to the following terms and conditions (the “Right of First Refusal”). Such Right of First Refusal shall expire upon the earlier of (i) the date on which the Purchasers have provided $50,000,000 of Additional Financing to the Offerors, and (ii) the date that is twelve months following the Closing Date.
(b) Without derogating from any other provision under this Agreement, from and after the Closing Date, prior to the consummation of any Additional Financing with other lenders and finance providers, each Offeror shall notify each Purchaser of its intention to obtain such Additional Financing. In connection therewith, such Offeror shall deliver to each Purchaser a written notice setting forth all of the terms and conditions of any such Additional Financing proposed to be entered into, along with a binding commitment letter from the lender or finance provider that has agreed to provide such Additional Financing to such Offeror (the “Financing Notice”).
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(c) If a Purchaser wishes to exercise the Right of First Refusal, such Purchaser must provide notice of its election to provide such Additional Financing upon the same terms and provisions in the Financing Notice (the “ROFR Election Notice”), within five (5) Business Days of its receipt of the Financing Notice. Upon receipt of the ROFR Election Notice by an Offeror, such Offeror and such Purchaser shall negotiate in good faith and enter into definitive agreements with respect to the Additional Financing in the ROFR Election Notice and consummate such transaction within sixty (60) days of receipt of the ROFR Notice by Offeror.
(d) If (i) no Purchaser elects to exercise the Right of First Refusal or (ii) no Purchaser provides its response to the Financing Notice within such five (5) Business Day period, the Purchasers shall be deemed to have waived their Right of First Refusal for the subject Additional Financing, but not any Right of First Refusal for future Additional Financing. If the Right of First Refusal is deemed waived pursuant to this Section 4.32, the Offeror shall have the right to negotiate and consummate the Additional Financing described in the Financing Notice with the lender specified in the Financing Notice on terms not more favorable than the terms described in the Financing Notice, to be consummated within sixty (60) days from the date of such waiver or deemed waiver by the Purchasers, otherwise such Additional Financing shall again be subject to the Right of First Refusal set forth in this Section 4.32.
(e) The Company will not, and will not permit any of its Subsidiaries or other Affiliates to, agree, directly or indirectly, to any restriction with any person or entity which limits the Right of First Refusal.
(f) The provisions of this Section 4.32 shall survive any termination or expiration of this Agreement.
ARTICLE 5
MISCELLANEOUS
5.1 Fees and Expenses. Except as expressly set forth below and in the Transaction Documents to the contrary, each party shall pay the reasonable, documented 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 (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by any Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to any Purchaser. Notwithstanding the foregoing, the Company agrees to pay all direct and indirect costs and expenses of the Agent and the Purchasers related to the negotiation, due diligence, preparation, closing, and all other items regarding or related to this Agreement and the other Transaction Documents and all of the transactions contemplated herein and/or therein, including, but not limited to, the legal fees and expenses of the Agent’s and the Purchasers’ legal counsel (collectively, the “Purchaser’s Expenses”), all of which will be deducted and paid on Closing Date.
5.2 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.
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5.3 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 or email attachment at the facsimile number or email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or email attachment at the facsimile number or email address as set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (c) the second (2^nd^) Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
5.4 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 Purchasers 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 any party to exercise any right hereunder in any manner impair the exercise of any such right. Any amendment effected in accordance with accordance with this Section 5.4 shall be binding upon the Purchasers and holders of Securities and the Company and its Subsidiaries.
5.5 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 Purchasers. Each Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities in compliance with the Transaction Documents, 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 “Purchasers,” and provided further that (i) such transferee is an “accredited investor” within the meaning of Rule 501 under the Securities Act and (ii) such transferee is not a direct competitor of the Company or any Subsidiary.
5.6 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
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5.7 Governing Law; Exclusive Jurisdiction. 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, Borough of Manhattan 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 Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such 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 any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company elsewhere in this Agreement, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding.
5.8 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities at Closing.
5.9 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. 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.
5.10 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, as long as the essential terms and conditions of the Notes for each party remain valid, binding, and enforceable. The parties 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.
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5.11 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 Agent or any 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 Agent and/or the Purchasers 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; provided, however, that, in the case of a rescission of a conversion of a Note, the applicable Purchasers shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Purchasers of the aggregate exercise price paid to the Company for such shares.
5.12 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.13 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Agent, the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.14 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or the Agent or any 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 from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, any of its Subsidiaries, 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.
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5.15 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by the Agent or any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Purchasers with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by the Purchasers to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Purchasers’ election.
5.16 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
5.17 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
5.18 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.
5.19 WAIVEROF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIESEACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLYAND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(SignaturePages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| MADISON TECHNOLOGIES, INC. |
|---|
| By: |
| Name: Philip<br> Falcone |
| Title:<br> CEO |
| Address<br> for Notice: |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASERS FOLLOWS]
Signature Pageto Securities Purchase Agreement
PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| ARENA SPECIAL OPPORTUNITIES FUND, LP |
|---|
| By: |
| Name: Lawrence Cutler |
| Title:<br> Authorized Signatory |
| ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP |
| --- |
| By: |
| Name: Lawrence<br> Cutler |
| Title:<br> Authorized Signatory |
| Address<br> for Notice to Purchasers: |
| Address<br> for Delivery of Securities to Purchaser (if not same as address for notice): |
SignaturePage to Securities Purchase Agreement
Schedule1
PurchasePrice; Securities Purchased
| Name<br>of Purchaser | Purchase<br>Price | Aggregate<br>Principal Amount of Notes being Purchased | Number<br> of Common Shares into which Commitment Shares are Convertible (subject to adjustment) | Number<br> of Common Shares into which Warrants are Exercisable (subject to adjustment) |
|---|---|---|---|---|
| Arena<br>Special<br><br> <br>Opportunities<br>Fund, LP | ||||
| Arena<br>Special<br><br> <br>Opportunities<br>Partner I, LP | ||||
| TOTAL | **** | **** | **** | **** |
MADISON TECHNOLOGIES, INC.
DISCLOSURE SCHEDULES
This disclosure schedule (this “Disclosure Schedule”) delivered by Madison Technologies, Inc., a Delaware corporation (the “Company,” “we,” “us,” or “our,”) has been prepared in connection with the Securities Purchase Agreement (the “Agreement”) dated as of February 17, 2021 by and among the Company and the purchasers signatory thereto. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.
This Disclosure Schedule sets forth items, the disclosure of which are necessary or appropriate either in response to an express disclosure requirement contained in a provision of the Agreement or as an exception to one or more of the Company’s representations or warranties contained in the Agreement. Any information set forth in one section of this Disclosure Schedule will be deemed to apply to all other sections or subsections of the Agreement to the extent that such disclosure is applicable to such other section(s) or subsection(s) on its face without additional investigation.
Headings inserted in the sections or subsections of this Disclosure Schedule are for convenience of reference only and shall not have the effect of amending or changing the express terms of the sections or subsections as set forth in the Agreement. Unless otherwise expressly specified, all references to “dollars” or “$” means United States Dollars.
The mere inclusion of any item in any section or subsection of this Disclosure Schedule as an exception to any representation or warranty or otherwise shall not be deemed to constitute an admission by the Company including that such item was required to be disclosed, or to otherwise imply (i) that any such item has had or would reasonably be expected to have a Material Adverse Effect or otherwise represent an exception or material fact, event or circumstance for the purposes of the Agreement, (ii) that such item is or was material under federal or state securities laws, (iii) that such item is or was outside the Company’s course of business, or (iv) that such item meets or exceeds a monetary or other threshold specified for disclosure in the Agreement. Notwithstanding the foregoing, no disclosure included in any section of the this Disclosure Schedule will contravene or vary the text of the representations and warranties set forth in the Agreement. Nothing in the this Disclosure Schedule shall constitute an admission of any liability or obligation of the Company or any other party to any third party or shall confer or give to any third party any remedy, claim, liability, reimbursement, cause of action, or other right.
-1-
Schedule3.1(a)Subsidiaries
-2-
Schedule3.1(n)
Rule 506(d) Bad Actor Disqualification Representations and Covenants
-3-
Schedule3.1(n) Outstanding Indebtedness
-4-
Schedule3.1(p)
Intellectual Property
-5-
Schedule3.1(w) Capitalization
-6-
Schedule3.1(x)
ShellCompany Status; Financial Statements
-7-
Schedule3.1(y)
MaterialChanges; Undisclosed Events, Liabilities or Developments
-8-
Schedule3.1(ss) Licenses; Operating Agreements
-9-
Schedule4.7
Use of Proceeds
-10-
Exhibit 10.18
MADISONTECHNOLOGIES, INC.
CONSULTANTAGREEMENT
THIS CONSULTANT AGREEMENT (“Agreement”) is made and entered into as of the Effective Date on the Signature Page hereof, by and between Madison Technologies, Inc., a Nevada corporation (the “Company”), and GreenRock LLC, a Wyoming limited liability company (“Consultant”).
BACKGROUND
A. The Company would like to confirm the current terms and conditions of the Consultant who has been providing certain consulting services since on or about February 15, 2021 and continues to do so to date.
B. The Consultant is agreeable to having provided and to providing such consulting services to the Company on the terms and conditions set out in this Agreement;
NOW, THEREFORE, IN CONSIDERATION OF the matters described above and of the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged and irrevocably deemed sufficient, the Company and the Consultant (individually, the “Party” and collectively the “Parties” to this Agreement) agree as follows:
1. Services.
A. The Company has retained the Consultant as an independent contractor as of January 1, 2022, to serve as a consultant to the Company advising on all matters typically considered and decided upon by executive management and the Company’s board of directors, and additionally will serve as Chairman of the Board of Directors and Chief Executive Officer, (collectively, the “Services”) and hereby confirms such retention from and after the date hereof , and Consultant accepts such engagement and is willing to continue to perform such Services, in each case on terms set forth more fully herein, until the earlier of December 31, 2022 or the completion of a fully executed Employment Contract.
B. The Company hereby confirms the continued engagement of Consultant to provide the Services, upon the terms and subject to the conditions set forth in this Agreement, and Consultant accepts said engagement upon said terms and conditions.
C. Consultant shall (i) perform Consultant’s duties and obligations under this Agreement with good faith and integrity, (ii) serve as a Chairman and CEO to the Company in accordance with the terms of this Agreement.
D. The sole decision-maker for Consultant, and provider of the Services on behalf of Consultant, shall be Philip A. Falcone.
2. Fees,Expenses and Equity.
A. ConsultingFees
(i) GoForward Fees*.* Consultant shall be paid by the Company, as an independent contractor, payable to GreenRock llc.
(1) On the date hereof, the sum of $5,000, representing the monthly fee due to Consultant from the Company.
(ii) Timingof Payment of Consulting Fees. All monthly fees due to Consultant shall be due on the first business day of each calendar month and paid within 5 business days.
B. Expenses. The Company shall pay Consultant’s reasonable expenses incurred by Consultant in connection with Consultant’s duties and responsibilities and the performance of the Services hereunder, including without limitation long-distance travel costs (transportation, lodging and meals) and local entertainment costs, including any out of pocket health care related expenses so long as Consultant is not a participant in the Company provided healthcare plan or Consultants own plan ;
C. EquityMatters.
(i) Performance Grants will be determined by the management team and approved by the Compensation Committee.
3. Covenants.
A. Confidentiality.
(i) Definition.“Confidential Information” means any information that relates to the actual or anticipated business or research and development of the Company, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Company’s products or services and markets therefor, customer lists and customers (including, but not limited to, customers of the Company on whom Consultant called or with whom Consultant became acquainted during the term of this Agreement, excluding, however, customers, individuals, parties, entities, etc., that Consultant had prior knowledge of or relationship with prior to start date of this Agreement), software, developments, inventions, processes, formulas, technology, designs, drawing, engineering, hardware configuration information, marketing, finances or other business information. Confidential Information does not include information that (i) is otherwise known to Consultant at the time of disclosure to Consultant by the Company, (ii) has become publicly known and made generally available through no wrongful act of Consultant and/or (iii) is disclosed by as required by applicable law or regulation, or valid order of a court, regulatory commission, or similar body.
(ii) Non-Useand Non-Disclosure. Consultant acknowledges, understands and agrees that this Agreement creates a relationship of confidence and trust between Consultant and the Company with respect to Confidential Information. Consultant will not, during the term of this Agreement and for a period of 12 months thereafter, use the Confidential Information for any purpose whatsoever other than the performance of the Services on behalf of the Company or disclose the Confidential Information to any third party. It is understood that said Confidential Information shall remain the sole property of the Company. Consultant further agrees to take all reasonable precautions to prevent any unauthorized disclosure of such Confidential Information. Without the Company’s prior written approval, Consultant will not directly or indirectly disclose to anyone any Confidential Information (except as may be reasonably necessary in the ordinary course of Consultant performing the Services).
(iii) OtherConfidential Information*.* Consultant agrees that Consultant will not, during the term of this Agreement, improperly use or disclose any proprietary information or trade secrets of any former or current employer or other person or entity with which Consultant has an agreement or duty to keep in confidence information acquired by Consultant, if any, and that Consultant will not bring onto the premises of the Company any unpublished document or proprietary information belonging to such employer, person or entity unless consented to in writing by such employer, person or entity;
(iv) ThirdParty Confidential Information. Consultant recognizes that the Company has or may have received and in the future will or may receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Consultant agrees that, with respect to each such third party for which it has been informed in writing about such confidential treatment, Consultant owes the Company and such third parties, during the term of this Agreement and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out the Services for the Company consistent with the Company’s agreement with such third party, subject in each case to any confidentiality exceptions set forth in Section 3(A) above or in the confidentiality agreement between the Company and such third party;
(v) Returnof Materials. Upon the termination of this Agreement, or upon Company’s earlier request, Consultant will deliver to the Company all of the Company’s property or Confidential Information that Consultant may have in Consultant’s possession or control.
(vi) ***Other.***Consultant acknowledges that the Consultant’s covenants herein regarding confidentiality is provided by Consultant on behalf of itself and its partners, associates, employees, affiliates, family members, subsidiaries, parent companies, nominees and representatives (collectively, “Authorized Recipients”). Consultant acknowledges that such Consultant will occupy, by this Agreement, a position of trust and confidence with the Company and or will have access to confidential and proprietary information and assets of the Company however obtained, created, or otherwise by the Company. This Agreement shall protect the Company in accordance with its terms before, during and after Consultant works for the Company, in accordance with its terms. Consultant shall be responsible for any unauthorized use or disclosure of Confidential Information by any of its Authorized Recipients. Consultant acknowledges that (a) the business of the Company relating to the use and operation of its Confidential Information and other assets by the Company is not just local in scope, (b) the Company’s business is or may become nationwide or even worldwide, (c) the provisions of this Agreement are reasonable and necessary to protect and preserve the Company’s interests in and right to the use and operation of the Company’s business; and (d) the Company could be irreparably damaged if Consultant were to breach this Section 3
B. Non-Compete. As further an inducement for Company to enter into this Agreement and the consideration to be paid under this Agreement, the Consultant agrees that during the term of this Agreement and for a period of 12 months after termination of this Agreement by the Consultant or the company, whichever is earlier, Consultant will not directly or indirectly, engage or invest in, own, manage, operate, finance, control, consult, advise, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, or render services or advice or other aid to, or guarantee any obligation of, any person or entity (“Competitor”) engaged in or planning to become engaged in, the same business of the Company as exists now or is in planning stages now and or as of termination, located or plan to be located, anywhere in the area of the Company offices, or any geographic area domestic or international, it has interests, imminent expansion plans, or significant activities in (collectively, the “Territory.”). Notwithstanding the foregoing, (x) Consultant, however, may purchase or otherwise acquire up to (but not more than) three percent of any class of securities of any enterprise even if a Competitor (but without otherwise participating in the activities of such enterprise) if such securities are publicly listed or listed on any national or regional securities exchange and (y) [let’s discuss the right language around this per our discussion prior]
C. Non-Solicit. Consultant agrees also not to, directly or indirectly, in each case only with respect to which reference persons Consultant has had meaningful interaction during the term of this Agreement, (A) induce or attempt to induce any such employee or contractor of Company to leave the employ or relationship with or of the Company, (B) employ, or otherwise engage as an employee, contractor, or otherwise, any such employee or contractor of the Company, or (C) induce or attempt to induce any such customer, supplier, licensee, or other person to cease doing business with the Company. Consultant agrees that this Section 3(C) is reasonable with respect to its duration, geographical area, and scope and otherwise.
D. Notwithstanding the foregoing, the covenants of Consultant under this Section 3 shall only be enforceable by the Company to the extent that the Company has timely paid/granted Consultant in full all amounts due and owing to Consultant under this Agreement. For the avoidance of doubt, and notwithstanding anything to the contrary contained herein, if this Agreement is terminated at a time when the Company has not timely paid or granted/issued to Consultant all amounts due to Consultant under this Agreement, the covenants is this Section 3 shall terminate effective as of the date of the termination of this Agreement.
4. Ownershipof Company Rights.
A. Assignment. Consultant agrees that all copyrightable material, notes, records, drawings, designs, inventions, improvements, developments, discoveries, strategies, business plans, marketing ideas or plans, and trade secrets (collectively, “Inventions”) conceived, made or discovered by Consultant, during this Agreement, solely or in collaboration with others, during the period of this Agreement which relate specifically to the Company, and or the business of the Company and the Services being provided hereunder by Consultant, are the sole property of the Company. Consultant further agrees to assign (or cause to be assigned) and does hereby assign fully to the Company all Inventions including any copyrights, patents, rights and other intellectual property rights relating to the Company.
B. Further Assurances. If reasonably needed from the Consultant by request of the Company, the Consultant agrees to assist Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in Section 4(A) above, by cooperation and the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to apply for and obtain and or protect such rights.
C. Pre-Existing Materials*.* Consultant agrees that if in the course of performing the Services, Consultant incorporates into any Invention developed hereunder any invention, improvement, development, concept, discovery or other proprietary information owned by Consultant or in which Consultant has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, modify, use and sell such item as part of or in connection with such Invention now and after this Agreement. Consultant also shall not incorporate any invention, improvement, development, concept, discovery or other proprietary information owned by any third party into any Invention without Company’s prior written permission.
D. Attorney in Fact*.* Consultant agrees that if the Company is unable because of Consultant’s unavailability, dissolution, mental or physical incapacity, or for any other reason, to secure Consultant’s signature to apply for or to pursue any of the above, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney in fact, to act for and in Consultant’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts for the Company for no additional consideration other than this Agreement.
5. Conflicting Obligations. Consultant certifies that Consultant has no outstanding agreement or obligation that is in conflict with any of the provisions of this Agreement, or that would preclude Consultant from complying with the provisions hereof, and further certifies that Consultant will not enter into any such conflicting agreement during the term of this Agreement or after, if not permitted, per this Agreement.
6. Survival. Upon any termination of this Agreement, all rights and duties of the Parties toward each other shall cease except this section and Section(s) (Confidentiality), (Ownership of Company Rights), (Independent Contractor), (Conflicting Obligations) (Indemnification), and (Misc.) shall survive termination of this Agreement in accordance with their terms as well as any other provisions herein as noted as surviving.
7. Assignment. Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by either Party without the express written consent of the other Party.
8. Independent Contractor. It is the express intention of the parties that Consultant is an independent contractor. Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company, but Consultant shall perform the Services hereunder as an independent contractor. Consultant agrees to use his own (or reimburse the Company for) tools and materials necessary to personally accomplish this contract, such as pens, computers, notebooks, and such, and shall incur all expenses associated with performance, except as expressly agreed otherwise by the Company.
9. Indemnification. The Company shall be indemnified by Consultant with respect to activities in connection with his Services hereunder to the fullest extent provided by law. The Company shall indemnify Consultant with respect to compliant activities in connection with his Services hereunder to the fullest extent permitted by law. Indemnification shall apply to disputes, claims, losses, and related attorney fees, all as relates to third parties.
10. Governing Law; Jurisdiction. The parties hereby expressly consent to the exclusive personal jurisdiction of the state and federal courts located in or as pertains to New York City, New York for any lawsuit arising from or relating to this Agreement. This Agreement shall be governed by the laws of the State of Nevada, without regard to the conflicts of law provisions of any jurisdiction.
11. Notices. Any notice or other communication required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed given (i) if delivered personally or by commercial messenger or courier service, (ii) when sent by confirmed facsimile, (iii) when sent by electronic mail, or (iv) if mailed by U.S. registered or certified mail (return receipt requested), to the Party at the Party’s address written below or at such other address as the Party may have previously specified by like notice.
12. Miscelaneous.
A. Gender. Wherever the context shall require, all words herein in the masculine gender shall be deemed to include the feminine or neuter gender, all singular words shall include the plural, and all plural shall include the singular.
B. Severability. If any provision hereof is deemed unenforceable by a court of competent jurisdiction, the remainder of this Agreement, and the application of such provision in other circumstances shall not be affected thereby.
C. Further Cooperation. From and after the date of this Agreement, each of the Parties hereto agrees to execute whatever additional reasonable documentation or instruments as are necessary to carry out the intent and purposes of this Agreement or to comply with law.
D. Waiver. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the waiving party. The failure of any party at any time to insist upon strict performance of any condition, promise, agreement or understanding set forth herein, shall not be construed as a waiver or relinquishment of any other condition, promise, agreement or understanding set forth herein or of the right to insist upon strict performance of such waived condition, promise, agreement or understanding at any other time.
E. Expenses. Except as otherwise provided herein, each Party hereto shall bear all expenses incurred by each such party in connection with this Agreement and in the consummation of the transactions contemplated hereby and in preparation thereof.
F. Amendment. This Agreement may only be amended or modified at any time, and from time to time, in writing, executed by the Parties hereto.
G. Captions. Captions herein are for the convenience of the Parties and shall not affect the interpretation of this Agreement.
I. Counterpart Execution. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Execution and delivery of this Agreement by exchange of electronic copies bearing the signature of a Party hereto shall constitute a valid and binding execution and delivery of this Agreement by such Party. Such electronic copies shall constitute enforceable original documents.
J. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the Parties on the subject matter hereof and supersedes all prior agreements and understandings.
[signaturepage follows]
The parties hereto have executed this Agreement as of the Effective Date below.
Effective Date: January 1, 2022
COMPANY:
MADISONTECHNOLOGIES, INC.
By: /s/ Warren Zenna
Name: Warren Zenna
Address: 450 Park Avenue, 30th Floor
New York, NY 10022
Email:
CONSULTANT:
GreenRockLLC
By: /s/ Philip A. Falcone
Name: Philip A. Falcone
Title: Managing Member
Address:
Email:
EXHIBITA
SERVICES
| 1. | Contacts.<br> Consultant’s principal Company contact is Philip Falcone. Company’s principal<br> Consultant contact is Charlie Walk. |
|---|---|
| 2. | Title. Consultant may be referred to as a “Consultant” to the Company. |
| --- | --- |
| 3. | Services. Consultant will advise the Company on any reasonable matters requested by the CEO.<br> The Services shall include initially advising and working with the Company in the following<br> areas and initiatives: |
| --- | --- |
Creation and Development of Content for Distribution on Company OTA Platform and related:
Corporate Marketing Related Development
Corporate Marketing Strategy
Marketing and Communications
Product and Growth
A-1
Exhibit 10.19
| Zenna Consulting Group<br><br> www.zennaconsulting.com<br><br> 917-701-0130 |
|---|
March 3, 2021
ConsultingProposal
ZennaConsulting Group / Sovryn Holdings
**Term:**1 year – Beginning March 1, - May 30, 2021, extending through to December 31, 2021 upon mutual agreement of both Sovryn Holdings and Zenna Holdings. Sovryn Holdings will be responsible for out of pocket expenses prior to March 1, 2021.
| ● | Responsibilities/ Deliverables: |
|---|
WarrenZenna to act as fractional Chief MarCom / Strategy Lead
Pursuant to the engagement outlined in this agreement as being intended as a launching pad toward a full-time role for Warren Zenna, where the terms and compensation will be amended to reflect that change.
Areasof Focus:
| 1. | Oversiteof Marketing / Communications: |
|---|
Warren will actively lead and execute all strategic and tactical aspects of industry, trade, consumer direct and enterprise marketing and communications related to the launch of Sovryn.tv. Areas of activity and oversight will include:
| ● | Awarenessand Demand: ZCG will leverage current industry network relationships and industry reputation to represent Sovryn in the US<br>market to drive awareness and demand of Sovryn Broadcast platform. |
|---|---|
| ● | SalesOrganization Development: ZCG will leverage industry network and third- party resources to oversee / manage the development<br>of a sales strategy and when appropriate - a supporting sales organization. |
| --- | --- |
| ● | Marketing/ Positioning: ZCG will apply their marketing expertise to support the optimal positioning and GTM strategies for the new<br>platform – and help optimize its fit among various segments: partners, agencies, brand verticals and industries, stakeholders. |
| --- | --- |
| ● | MarketIntelligence: ZCG will leverage their current industry network relationships to help better understand and determine market<br>needs through feedback and intelligence to support optimal product development and feature sets of Sovryn’s broadcast platform. |
| --- | --- |
| ● | Creation<br>and Development of Core Assets: |
| --- | --- |
| ○ | Sovryn<br>Websites: Consumer / Activation |
| --- | --- |
| ○ | Sovryn<br>Apps |
| --- | --- |
| ○ | Marketing<br>and Media Collateral |
| --- | --- |
| ○ | Investor<br>Pitch communications |
| --- | --- |
| ○ | Partner<br>Communications |
| --- | --- |
| ○ | Sales<br>messaging and collateral |
| --- | --- |
| ● | Public<br>Relations and Media/Trade related message deployment / amplification |
| --- | --- |
| ● | Target<br>Market Research and Segmentation |
| --- | --- |
| ● | Go-To-Market<br>Strategy and Planning |
| --- | --- |
| ● | |
| --- | |
| warren@zennaconsulting.com | |
| --- | |
| Zenna Consulting Group<br><br> www.zennaconsulting.com<br><br> 917-701-0130 | |
| --- | |
| 2. | ProductManagement / Sovryn Hardware Solution Development |
| --- | --- |
Responsibilities
Warren will partner with the Triple Ring team to maintain a 360 perspective for each product line:
| ● | Develop,<br>implement and own the process for Lifecycle Management for both Hardware and related software components of the Sovryn hardware<br>product. |
|---|---|
| ● | Drive<br>product strategy and develop KPI’s for how we measure success and customer satisfaction for a product over time. |
| --- | --- |
| ● | Pair<br>insights with business expertise and strategic thinking, to develop, prioritize and manage the hardware and consumables roadmap. |
| --- | --- |
| ● | Keep<br>the organization informed about product performance and offer data-driven insights about what improved products or product lines<br>will have a meaningful impact in the market as well as to the business. |
| --- | --- |
| ● | Communicate<br>research and insights that provide the hardware team with recommendations on what will make for a successful product. |
| --- | --- |
| ● | Manage<br>expectations with leadership and create organization-wide alignment for hardware priorities, features and product releases. |
| --- | --- |
| ● | Help<br>drive and establish product requirements for new product initiatives that fit with the broader product strategy. |
| --- | --- |
| ● | Design<br>research and Insights teams to be the voice of the customer and to advocate for solutions based on research and qualitative feedback<br>that address user’s needs, aspirations and pain points. |
| --- | --- |
| ● | Product<br>Marketing to conduct market analysis, identify target markets or white spaces, conduct competitive analysis and develop value<br>propositions that fit with the broader portfolio strategy. |
| --- | --- |
| ● | Quality<br>and Customer Insights to assess impact of most common returns and help prioritize quality improvements against other product related<br>improvements. |
| --- | --- |
| ● | Work<br>with the broader hardware team to help drive R&D and interweave cutting-edge technology into product roadmaps. |
| --- | --- |
Fees
| ● | Sovryn<br>will pay a Monthly Retainer of $15,000 to ZGC for the above deliverables and activities from the date beginning March 1- May 30,<br>2021 |
|---|---|
| ● | ZCG<br>and Sovryn will establish weekly status communication protocols to ensure accountability and transparency of all activities and<br>results. |
| --- | --- |
PaymentTerms and Protocol:
Sovryn shall pay ZCG the retainer monthly installments of $15,000 in cash or in kind with cases of Bit-O-Honey candy equivalent to $15,000. via electronic transfer.
| warren@zennaconsulting.com |
|---|
| Zenna Consulting Group<br><br> www.zennaconsulting.com<br><br> 917-701-0130 |
| --- |
Acceptance:
Should both parties agree to the above, please sign here to execute.
| ___________PHILIP A. FALCONE______________ | /s/ PHILIP A. FALCONE |
|---|---|
| /s/ Warren Zenna | |
| --- | --- |
| Philip Falcone | Warren Zenna |
| Sovryn Holdings, Inc. | Zenna Consulting Group |
| Date<br> 03/02/21 | 3/3/2021 |
| warren@zennaconsulting.com | |
| --- |
Exhibit 10.20
EXECUTIONVERSION
PARTIALSTRICT FORECLOSURE AGREEMENT
This PARTIAL STRICT FORECLOSURE AGREEMENT (this “ Agreement”) is made and entered into as of the 1st day of February, 2023 by and among MADISON TECHNOLOGIES, INC., a Nevada corporation (the “Company”), SOVRYN HOLDINGS, INC., a Delaware corporation (“Sovryn,” and together with the Company, each a “Debtor,” and collectively, the “Debtors”), Philip Falcone (“Falcone”), FFO 1 TRUST (“FFO-1”), FFO 2 TRUST (“FFO-2”) KORR VALUE, LP (“KORR”, and together with the Company, Sovryn, Falcone, FFO-1 and FFO-2, each an “Obligor” and collectively, the “Obligors”), STATION BREAK HOLDINGS, LLC, a Delaware limited liability corporation (together with its successors and assigns, designees, or subsidiaries, the “Ultimate Parent “), the several financial institutions from time to time party to the Purchase Agreement referred to below, as purchasers and holders (each a “Secured Party” and collectively, the “Secured Parties”) and ARENA INVESTORS, L.P., as agent for the Secured Parties (in such capacity, together with its successors and permitted assigns in such capacity, the “Agent”). The Company, Sovryn, Falcone, FFO-1, FFO-2, KORR, Ultimate Parent, each Secured Party and the Agent may hereinafter be referred to individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, the Company and the Secured Parties have entered into that certain Securities Purchase Agreement, dated as of February 17, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”), pursuant to which the Secured Parties have extended credit to the Company as evidenced by certain Senior Secured Convertible Promissory Notes (as defined in the Purchase Agreement) issued by the Company to the Secured Parties (together with any notes issued in exchange therefor or replacement thereof or any additional investment made by the Secured Parties and as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Notes”);
WHEREAS, the Company, Sovryn, and the Agent have entered into that certain Security Agreement, dated as of February 17, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”),^1^pursuant to which as an inducement for the Secured Parties to extend the loans as evidenced by the Notes and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor unconditionally and irrevocably pledged, granted and hypothecated to the Agent for the benefit of the Secured Parties a perfected, first priority security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”);
WHEREAS, Sovryn and the Agent have entered into that certain Guaranty, dated as of February 17, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Guaranty”), pursuant to which Sovryn (together with any other Subsidiaries of the Company that are or become party to the Guaranty, each a “Guarantor,” and collectively, the “Guarantors”) each guaranteed the payment and performance of the Obligations;
^1^ Capitalized terms used herein that are not otherwise defined herein shall have the meaning ascribed to them in the Security Agreement.
1
EXECUTIONVERSION
WHEREAS, the Company, through its wholly owned subsidiary Sovryn, used the proceeds of the Notes to, among other things, acquire KNLA-CD and KNET-CD, both Class A digital television stations in Los Angeles, California, KVVV-LD, a digital low power television station in Houston, Texas, and KYMU-LD, a digital low power television station in Seattle, Washington (the “Stations”);
WHEREAS, on or about October 27, 2022, the Agent notified the Debtors that certain Events of Default have occurred and are continuing under the Transaction Documents;
WHEREAS, the Obligors have acknowledged and agreed that Events of Default under (and as defined in) the Transaction Documents have occurred and are continuing as of the date hereof, including, without limitation, the Company’s failure under Section 6(a)(i)(B) of the Notes to pay the cash interest payment due on October 1, 2022, by October 10, 2022, pursuant to Section 2(a)(i) of the Notes;
WHEREAS, as a result of these Events of Default (the “Existing Events of Default”), the Obligors entered into a forbearance agreement (the “Forbearance Agreement”), dated as of November 21, 2022, with the Agent and Secured Parties;
WHEREAS, under the Forbearance Agreement, each Obligor, among other things, acknowledged and agreed that (i) as of November 21, 2022, after giving effect to the terms of the Forbearance Agreement, the aggregate principal amount of Notes outstanding is not less than $16,500,000 (the “Current Outstanding Amount”), (ii) the Current Outstanding Amount does not include any accrued and unpaid interest, fees, expenses or other amounts constituting Obligations or other amounts which are chargeable or otherwise reimbursable under the Transaction Documents as set forth with more particularity in the Forbearance Agreement, including, without limitation, Default Rate Interest on the Current Outstanding Amount, (iii) no Obligor has any rights of offset, defenses, claims or counterclaims with respect to the Current Outstanding Amount or any of the other Obligations, and each of the Obligors is jointly and severally obligated with respect thereto, in each case, in accordance with the terms of the applicable Transaction Documents (including the Forbearance Agreement), and (iv) pursuant to a side letter, dated as of November 21, 2022 (the “Milestone Side Letter”), the Obligors agreed to achieve certain milestones by the dates as set forth in the Milestone Side Letter (subject to extension by the Agent in its sole and absolute discretion);
WHEREAS, the Forbearance Agreement expired on December 30, 2022;
WHEREAS, in relation to those Existing Events of Default, and subject to approval by the Federal Communications Commission (the “FCC “) of the required applications to assign the FCC licenses of the Stations (the “FCC Licenses”) to Ultimate Parent (or its designee), the Agent and the Secured Parties have and continue to have (contemporaneously with the consummation of the transactions set forth in this Agreement) the right to exercise all applicable rights and remedies against the Obligors under and in relation to the Transaction Documents, the Uniform Commercial Code as in effect in the State of New York (the “NYUCC”) and other applicable law;
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WHEREAS, the Obligors have acknowledged (i) their current obligation to repay all Obligations under the Transaction Documents, and (ii) that the Agent, for the benefit of the Secured Parties (as defined in the Security Agreement), has the current right under the Security Agreement at any time in its sole discretion (subject to approval by the FCC of the required applications to assign the FCC Licenses to Ultimate Parent), to take ownership, possession and control of the Collateral, free and clear of all right, title, interest or claim thereto or therein of the Obligors or any other Person claiming through them (but subject to any Permitted Liens);
WHEREAS, the Parties, along with the Obligors, have entered into that certain Restructuring Agreement, dated as of the date hereof (the “ Restructuring Agreement”), pursuant to which, among other things, the Parties thereto and the other parties signatory thereto have agreed to consummate the Restructuring Transactions (as defined therein) pursuant to certain Restructuring Transaction Documents (as defined therein), including this Agreement;
WHEREAS, the Obligors have considered and evaluated other strategic and financial alternatives, including a sale of Sovryn’s equity or assets through a foreclosure or otherwise, and have determined in good faith that the Restructuring Transactions contemplated by this Agreement and the other Restructuring Transaction Documents are in the best interests of the Obligors and their stakeholders;
WHEREAS, Sovryn and Ultimate Parent have agreed to prepare their respective portions of, and shall jointly file with the FCC, such application or applications (collectively, the “FCC Application “) as may be necessary to obtain the FCC’s consent to the assignment of the FCC Licenses to Ultimate Parent (or its designee);
WHEREAS, in connection with the closing of the Restructuring Transactions and upon approval by the FCC of the FCC Application, the Secured Parties will contribute (the “Contribution”) to Ultimate Parent, a portion of the Secured Parties’ rights and obligations under the outstanding Notes (such contributed amounts, the “Assigned Obligations”), which Ultimate Parent is using to purchase all of Sovryn’s possession, right, title and interest in and to and under all Collateral associated with the Stations and any and all commercial tort claims, including, without limitation, Sovryn’s claim against WANN-CD, an Atlanta station, in connection with a breach of contract to recoup a $200,000 deposit that is held by WANN, and all proceeds thereof together with all other documents and instruments executed in connection therewith, but excluding: (a) all liabilities associated with such Collateral unless expressly assumed by Ultimate Parent, (b) any assets identified by the Ultimate Parent within 90 days after the execution of this Agreement (the “Excluded Assets”), and (c) the Pledged Securities, which, for the avoidance of doubt, shall remain Collateral of the Agent under the Security Agreement (collectively, the “Transferred Collateral”) free and clear of all liens, claims, interests, and encumbrances and Ultimate Parent has agreed, upon approval of the FCC Application, to accept the transfer of the Transferred Collateral in exchange for the partial satisfaction of existing Obligations in an amount equal to that set forth for each Station set forth on Schedule 1 hereto (the “Purchase Price “), all in accordance with and subject to the provisions set forth more fully below, and that such transfer and satisfaction are intended to comprise a partial strict foreclosure for purposes of Section 9-620(c) of the NYUCC, provided, that, an aggregate principal amount of the outstanding Obligations equal to the Remaining Obligations (as defined below) shall remain due and outstanding under the Transaction Documents; and
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WHEREAS, the effectiveness of this Agreement and the other Transaction Documents is conditioned on, among other things, the execution and delivery of this Agreement by all of the Parties hereto.
AGREEMENT
NOW, THEREFORE in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Recitals Incorporated. The recitals and prefatory phrases and paragraphs set forth above are hereby incorporated in full and made a part of this Agreement.
2. Definitions; Rules of Construction. Defined terms may be used in the singular or the plural, as the context requires. The words “include,” “includes” and “including” are deemed to be followed by the phrase “without limitation.” Unless the context in which it is used otherwise clearly requires, the word “or” has the inclusive meaning represented by the phrase “and/or.” References to Sections and Exhibits are to Sections and Exhibits of this Agreement unless otherwise expressly provided. All incorporations by reference of provisions from other agreements are incorporated as if such provisions were fully set forth into this Agreement and include all necessary definitions and related provisions from those other agreements. Unless the context in which it is used otherwise clearly requires, all references to days, weeks and months mean calendar days, weeks, and months.
3. Existing Indebtedness. As of the date hereof, the amount necessary to satisfy the payment in full of the Notes and all other unpaid Obligations under the Transaction Documents, inclusive of all principal, interest at the default rate, and expenses (including, without limitation, legal fees and expenses for counsel to the Agent and Lenders), is not less than $18,900,000.00.
4. Acknowledgement of Default. Each Obligor acknowledges and agrees that (a) each of the Events of Default identified on Annex I hereto (each, an “Existing Event of Default” and collectively, the “Existing Events of Default”) constitutes an Event of Default that has occurred. As a result of such continuing Existing Event of Default, subject to prior FCC consent with respect to the FCC Licenses, the Agent has rights under (i) Section 9-610 of the NYUCC to sell and transfer to any Person for value in a public or private sale, all of the Debtors’ right, title and interest in and to any or all of the Transferred Collateral and (ii) Section 9-620 of the NYUCC to accept the Transferred Collateral in partial satisfaction of the Obligations and pursuant to Section 8(a) of the Security Agreement.
5. No Obligations by Agent and Secured Parties. As a result of the occurrence and continuance of the Existing Events of Default under the Transaction Documents, the Agent and Secured Parties have no obligation to make additional loans or otherwise extend or continue to extend credit or any other financial accommodations to the Company under the Transaction Documents or otherwise and have the right to exercise any and all of their rights and remedies under the Transaction Documents, the NYUCC and other applicable Law. Each Obligor acknowledges and agrees that the Agent and Secured Parties have fully performed all undertakings owed to the Debtors and the Agent and Secured Parties do not waive, diminish, or limit any term or condition contained in the Transaction Documents.
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6. Acknowledgement of Obligations and Liens by Obligors. Each Obligor hereby ratifies, confirms, reaffirms and acknowledges that: (a) that the Obligations constitute valid indebtedness and obligations owing by the Obligors pursuant to the Transaction Documents to the Agent and Secured Parties as of the date hereof; and (b) the continuing validity and effectiveness of (i) the Notes and each of the other Transaction Documents and all of the terms thereof, including, without limitation, the Company’s promise and obligation to repay the Notes and the other Obligations and Sovryn’s obligations under the Guaranty, (ii) the Liens granted by the Obligors to the Agent for the benefit of the Secured Parties in the Collateral pursuant to the Transaction Documents, which such Obligor acknowledges and agrees are valid, enforceable and duly perfected first priority Liens on the Collateral, and (iii) all other rights and remedies of the Agent and Secured Parties arising under the Transaction Documents and applicable Law. Each Obligor agrees that upon consummation of the Partial Strict Foreclosure and the other Restructuring Transactions it does not and shall not dispute the validity, priority, enforceability or extent of Ultimate Parent’s liens and security interests in the Transferred Collateral, nor Ultimate Parent’s entitlement to the immediate possession of the Transferred Collateral, or the Agent’s liens and security interests in the Remaining Obligations, in any judicial, administrative or other proceeding. Ultimate Parent and Agent each hereby represents and warrants for the benefit of the Obligors that Ultimate Parent is duly appointed to act as holder of the Assigned Obligations on behalf of the Agent and the Secured Parties and has the legal right to accept the Transferred Collateral in full and complete satisfaction of the Assigned Obligations.
7. Transfer of the Collateral. Pursuant to Section 9-620 et seq. of the NYUCC, immediately upon the satisfaction of the conditions precedent set forth in Section 16 hereof (the “Closing Date”), without any other action by any Party, Sovryn hereby voluntarily conveys to Ultimate Parent any and all of its legal, equitable and beneficial right, title and interest in and to all of the Transferred Collateral in exchange for the partial satisfaction of its existing Obligations under the Transaction Documents in an amount equal to the Purchase Price; provided, that the Purchase Price shall not include the amount of the Obligations in excess of the Purchase Price, including, without limitation, any accrued and unpaid interest, fees, expenses or other amounts constituting Obligations or other amounts which are chargeable or otherwise reimbursable under the Transaction Documents (the “Remaining Obligations”) and each of the Obligors is and shall hereafter remain jointly and severally obligated with respect thereto, in each case, in accordance with the terms of the applicable Transaction Documents, which will remain outstanding under the Transaction Documents immediately after giving effect to the Closing Date. To evidence the irrevocable conveyance, assignment and transfer of the ownership and any and all of its legal, equitable and beneficial right, title and interest in and to all of the Transferred Collateral to the Ultimate Parent, Sovryn has executed and delivered to the Ultimate Parent (or its designee) an assignment in the form attached hereto as Exhibit A (the “Assignment”). The Obligors shall not knowingly take any action inconsistent with Ultimate Parent’s absolute ownership, possession, control, and quiet enjoyment of all Transferred Collateral as provided under this Agreement. If any of the Obligors shall become aware that any Obligor has taken any action inconsistent with the absolute ownership, possession, control, and quiet enjoyment of the Transferred Collateral by Ultimate Parent as provided under this Agreement, then the Obligors shall promptly end such action and take remedial actions, if any, required to correct such action. The transactions contemplated herein are being effected as part of an integrated transaction.
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8. FCC Licenses. Within twenty (20) business days after the date of this Agreement (or such later date as is acceptable to Ultimate Parent in its sole discretion), Sovryn and Ultimate Parent shall prepare their respective portions of, and shall jointly file with the FCC, the FCC Application to obtain the FCC’s consent to the assignment of the FCC Licenses to Ultimate Parent (or its designee). Sovryn shall be deemed to have authorized its signature in the assignor’s certification of such FCC Application and shall cooperate in all respects in the preparation of the assignor’s sections of such FCC Application (including but not limited to providing all information necessary to complete such sections). In the event that Sovryn or the Company fails to cooperate as required by the preceding sentence, Ultimate Parent may complete such sections to the best of its ability, based on publicly available information, and Sovryn shall be deemed to have certified the accuracy of the assignor’s sections of the FCC Application as so completed by Ultimate Parent. Within one (1) business day after the execution of this Agreement, the Company shall provide to Agent all information deemed necessary or desirable by Agent to facilitate the electronic filing of the FCC Application via the FCC Media Bureau’s Licensing and Management System (“LMS”) or other FCC filing system, including but not limited to Sovryn’s FCC Registration Number (“FRN”) and associated password. The Company and Sovryn shall use their best efforts to cooperate in the prosecution of the FCC Application to a final and unappealable grant. Neither the Company nor Sovryn shall take any action to impede or frustrate the final and unappealable grant by the FCC of the FCC Application (including but not limited to the filing of any petition to deny or informal objection against the FCC Application, the filing of any request for dismissal of the FCC Application, and the filing of any petition for reconsideration, application for review, or notice of appeal of the FCC staff’s grant of the FCC Application pursuant to delegated authority), and neither the Company nor Sovryn shall solicit or encourage any third person or entity to take any such action. Upon the FCC’s initial grant of the FCC Application (which may include a grant by FCC staff pursuant to delegated authority), the FCC Licenses shall, in the Agent’s discretion, be deemed assigned from Sovryn to Ultimate Parent (or its designee) without the necessity of further action by the Parties.
9. Acceptance of the Transferred Collateral as Partial Satisfaction. Upon the Closing Date, pursuant to Section 9-620 et seq. of the NYUCC, Ultimate Parent shall accept the transfer from Sovryn of all of Sovryn’s possession, right, title, and interest in and to the Transferred Collateral as herein provided, in exchange for the partial satisfaction of the Obligations of the Obligors under the Transaction Documents in accordance with the terms of this Agreement, and the other consideration provided herein (consummation of such acceptance in satisfaction of such Obligations, the “Partial Strict Foreclosure”). Ultimate Parent and Agent each represent and warrant that the Secured Parties have consented without any objection of any kind or nature to the acceptance of the Transferred Collateral by Ultimate Parent in accordance with the terms of this Agreement. This Agreement shall also constitute the Obligors’ post-default waiver and renunciation of all of their rights under Section 9-611, Section 9-620, and Section 9-621 of Article 9, subdivision 6, of the NYUCC. The Obligors acknowledge that the credit to be received for the Transferred Collateral, together with the other consideration and concessions granted hereunder, is fair and reasonable.
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10. Tax Matters.
a. Cooperation. Each Party agrees to (and shall cause each of its Affiliates to) cooperate fully, as and to the extent reasonably requested by any other Party to this Agreement (or any of Affiliate of any such Party), in connection with the preparation and filing of tax returns and any audit, litigation, or other proceeding relating to taxes. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information that are reasonably relevant to the preparation of any such tax return or to any such audit, litigation, or other proceeding.
b. Purchase Price Allocation. No later than ninety (90) days following the Closing Date, Ultimate Parent shall prepare and deliver to the Company a statement which shall provide for the allocation of the Sale Price among the assets of Sovryn (the “Asset Allocation Statement”) for the Company’s review, comment, and approval (not to be unreasonably withheld, conditioned, or delayed). The Asset Allocation Statement shall be prepared in accordance with the provisions of Section 1060 of the Code and the Treasury Regulations promulgated thereunder and shall be consistent with the principles set forth on Exhibit B. Each Party shall (and shall cause each of its Affiliates to) prepare and file all tax returns and otherwise act in a manner consistent with the final Asset Allocation Statement unless otherwise required pursuant to a final “determination” within the meaning of Section 1313 of the Internal Revenue Code of 1986, as amended.
c. Transfer Taxes. Any and all transfer, documentary, sales, use, stamp, registration, value added, excise, duty, mortgage recording, and other similar taxes, and all conveyance, recording, and other similar charges or fees, arising with respect to the consummation of the transactions contemplated by this Agreement shall be borne by the Ultimate Parent, and the Ultimate Parent shall be responsible for preparing and filing any tax returns and other documentation required to be filed with respect to any such taxes, charges, or fees.
Adequacy of Notice; Waivers. Each of the Obligors consents to the acceptance of the Transferred Collateral by the Ultimate Parent in each case subject to and in accordance with the terms hereof. Each of the Obligors expressly: (a) waives (i) any requirement for receipt of post-default notice and a proposal by the Agent, any Secured Party, or the Ultimate Parent to accept the Transferred Collateral in partial satisfaction of the Obligations of the Obligors, in each case in compliance with Sections 9-620 and 9-621 of the NYUCC and any right to notification of sale, transfer, conveyance, or surrender of the Transferred Collateral pursuant to Sections 9-620 and 9-621 of the NYUCC or otherwise, and (ii) any remedies, rights, defenses, or actions the Obligors might have as a result of failure to have received such notice; (b) waives the right to redeem the Transferred Collateral under Section 9-623 of the Uniform Commercial Code or otherwise; (c) waives any right to object to the sale, transfer, conveyance, or surrender of the Transferred Collateral pursuant to Section 9-620 of the NYUCC or otherwise; (d) waives any obligation of Agent, any Secured Party, or the Ultimate Parent to dispose of the Transferred Collateral; (e) waives any other right, whether legal or equitable, which the Obligors may possess in and relating to the Transferred Collateral; and (f) agrees that the transactions contemplated herein are in good faith and are commercially reasonable. Each of the Obligors acknowledges and agrees that the acknowledgements, consents, and waivers set forth in this Section 11 and elsewhere in this Agreement constitute material consideration for the agreement of Agent, the Secured Parties, and the Ultimate Parent to execute and deliver this Agreement.
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12. Representations, Warranties, Covenants and Further Acknowledgments. Each of the Obligors hereby represents, warrants, covenants, and acknowledges to Agent and Ultimate Parent that as of the date of this Agreement:
a. it knowingly and freely has entered into this Agreement without any duress, coercion or undue influence exerted by or on behalf of Ultimate Parent or any affiliate of the Agent or Ultimate Parent, and it has other business and legal options available to it;
b. this Agreement has been duly authorized, executed, and delivered by each of the Obligors and constitutes a legal, valid, and binding agreement and obligation of each such Party;
c. other than the filing and FCC grant of the FCC Application, the execution, delivery, and performance by it of this Agreement does not and will not require any filing or registration with, consent, or authorization or approval of, or notice to, or other action with or by, any court, legislature, agency, board, bureau, commission, instrumentality of any legislative, administrative or regulatory body (in each case whether federal, state, local, foreign or domestic or any agreement);
d. with regard to each business organization, it is duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation. It has full corporate power and authority to execute and deliver this Agreement and, subject to approval by the FCC of the FCC Application, to perform its obligations hereunder and to consummate the transactions contemplated hereby, including without limitation to own, hold, sell and transfer (pursuant to this Agreement) the Transferred Collateral;
e. it does not and will not dispute that the Agent and Lenders are presently entitled to exercise enforcement rights and remedies under the Transaction Documents as herein contemplated;
f. it agrees that it does not and shall not dispute the validity, priority, enforceability or extent of the Agent’s and Secured Parties’ Liens and Security Interests in the Transferred Collateral, nor the Agent’s and Secured Parties’ entitlement to the immediate possession of the Transferred Collateral on the dates contemplated hereunder, in any judicial, administrative or other proceeding;
g. it is not acting on any representation, understanding, or agreement not expressly set forth in this Agreement;
h. Sovryn is not party to any agreement with GreenRock, LLC and that certain management consulting agreement, dated as of January 1, 2022, by and among Sovryn and GreenRock LLC has been terminated and Sovryn has no obligations thereunder or under any other agreement with GreenRock LLC or any entity owned by Falcone;
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i. there is no cash and/or cash equivalents of the Debtors, other than the cash and/or cash equivalents in the accounts (and in the amounts) set forth on Schedule 2, which list of accounts and balances is correct and complete;
j. Sovryn has used commercially reasonable efforts to provide the Ultimate Parent with copies of all books and records of Sovryn related to the Transferred Collateral and the Debtors have not sold, transferred, conveyed, assigned, pledged, hypothecated or granted any interest of any kind in or to the Transferred Collateral and holds title thereto free and clear of all liens, claims, and encumbrances (other than those arising under the Transaction Documents);
k. the Transaction Documents, as amended by this Agreement, are valid and binding upon each of the Obligors and are enforceable against each of the Obligors in accordance with their respective terms;
l. there are no offsets, claims, counterclaims, cross-claims, or defenses with respect to the Obligations;
m. other than with respect to the approval by the FCC of the FCC Application, to the Obligors’ knowledge after commercially reasonable inquiry, the execution, delivery, and performance by each of the Obligors of this Agreement do not require any material consent of any other Person that has not been obtained and do not and will not constitute a violation of any material laws, agreements, or understandings to which any of the Obligors is a party or by which any of the Obligors is bound;
n. all representations and warranties in the Transaction Documents are true and correct in all material respects to the Obligors’ knowledge after commercially reasonable inquiry except to the extent that (i) any of them speak to a different specific date or (ii) the facts on which any of them were based have been changed by transactions contemplated or permitted by the Purchase Agreement;
o. no bankruptcy, insolvency or similar proceeding has been filed by or against any of the Obligors;
p. no injunction, writ, restraining order, or other order of any nature restricting or prohibiting, directly or indirectly, the consummation of the Partial Strict Foreclosure has been issued by any court or other governmental authority;
q. the Company has delivered to Agent a certificate executed by the secretary or assistant secretary of the Company dated as of the Closing Date attaching a copy of resolutions of its board of directors approving and authorizing the execution, delivery and performance of the Restructuring Transaction Documents to which it is a party, certified as of the date of the Closing Date by its secretary, an assistant secretary or a responsible officer as being in full force and effect without modification or amendment; and
r. the Company has complied with all rules and regulations including disclosure regulations in a timely fashion with the Securities and Exchange Commission.
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13. Authority. Each of the Obligors represents and warrants to Agent and Ultimate Parent, and each of Agent and Ultimate Parent represents and warrants to each Obligor, as of the date hereof that: (a) with regard to each business organization, the execution, delivery and performance by it of this Agreement do not and will not contravene: (i) its organizational documents; and (ii) subject to approval by the FCC of the FCC Application, any law, judgment, award, rule, regulation, order, decree, writ or injunction of any court, legislature, agency, board, bureau, commission, instrumentality of any legislative, administrative or regulatory body (in each case whether federal, state, local, foreign or domestic) by which such Party is bound; (b) it has full corporate and organizational power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby, including without limitation (pursuant to this Agreement and upon approval by the FCC of the FCC Applications) (i) (in the case of the Company) to sell and transfer the Transferred Collateral and (ii) (in the case of Ultimate Parent) to accept the transfer (pursuant to this Agreement) of the Transferred Collateral; (c) the execution and delivery of this Agreement has been duly authorized by all requisite corporate and limited liability company action and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); and (d) there has been not been any written objection to the Partial Strict Foreclosure within the period contemplated by Section 9-620 of the NYUCC.
14. Covenant of Further Assurances. The Debtors covenant and agree that from and after the execution and delivery of this Agreement, they shall, from time to time, use commercially reasonable efforts to execute, deliver and file any and all documents and instruments, or take such further action, using commercially reasonable efforts, as may be reasonably requested by Ultimate Parent to implement the terms of this Agreement. Each of the Obligors further covenants to provide reasonable access to all books and records related to the Transferred Collateral for purposes of effectuating the agreements contained herein.
15. Limited Effect of Agreement. Notwithstanding anything herein to the contrary, the Transaction Documents are, shall continue to be, and shall remain in full force and effect except as expressly provided herein and in the Transaction Documents and, for the avoidance of doubt, shall not be deemed to be modified in any respect as a result of this Agreement and the transfer of the Transferred Collateral hereunder, except as otherwise expressly set forth herein and in the Transaction Documents. Except as expressly provided herein, this Agreement shall not be deemed or otherwise construed: (a) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of the Transaction Documents; (b) to prejudice any right that the Agent and Secured Parties now have or may have in the future under or in connection with the Transaction Documents, as such documents may be amended, restated or otherwise modified from time to time; (c) to be a commitment or any other undertaking or expression of any willingness to engage in any further discussion with the Company or Sovryn or any other Person with respect to any waiver, amendment, modification or any other change to the Transaction Documents or any rights or remedies arising in favor of the Agent and Secured Parties under or with respect to any of them; or (d) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of any other agreement by and between the Obligors, on the one hand, and the Agent, on the other hand (other than the reduction of the monetary obligations owed under the Transaction Documents as provided in Section 7 herein). Neither the requirements of good faith and fair dealing nor any other theory, concept or argument shall require the Agent to impart upon the Company or Sovryn any further or greater benefits, to suffer any prejudice or impairment of any kind whatsoever, or to tolerate any noncompliance with this Agreement or the Transaction Documents, because the Agent has bargained for and given valuable consideration for this Agreement, the Transaction Documents and the documents evidencing and/or securing the Notes and their creation of express, explicit and objective limits of what benefits the Agent is willing to provide to the Company and Sovryn and what, in return, the Company and Sovryn are required to provide to the Agent. This Agreement, the Transaction Documents, and the other instruments evidencing and/or securing the Obligations provide a clear statement of the Agent’s requirements and obligations and creates an agreed upon standard of performance upon which the Agent is entitled to rely in exercising and enforcing its remedies thereunder.
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16. Conditions Precedent.
a. The consummation of the Partial Strict Foreclosure shall be subject to the full and timely satisfaction of all of the following conditions precedent; provided, that, the foregoing conditions precedent set forth at Sections 16(a)(i)–(iv) may be waived by the Agent and Secured Parties in their sole discretion:
i. the Agent shall have received the fully executed Assignment in accordance with Section 7 hereof;
ii. to the extent not waived in writing by any Person entitled to make an objection pursuant to Section 9-620 of the NYUCC to the Partial Strict Foreclosure the expiration of twenty (20) days following the date of notice during which period the Agent shall not have received any written objection to the Partial Strict Foreclosure from any Person entitled to make such objection pursuant to Section 9-620 of the NYUCC;
iii. no bankruptcy, insolvency or similar proceeding shall have been filed by or against either of the Debtors;
iv. Sovryn and Ultimate Parent (or its designee) shall execute and deliver a Local Marketing Agreement that shall provide for Ultimate Parent (or its designee) to program substantially all airtime on the Stations and receive substantially all revenue derived therefrom (the “Local Marketing Agreement”);
v. [Reserved];
vi. [Reserved];
vii. the Debtors shall provide the Unanimous Written Consent of the Board of Directors of Sovryn Holdings, Inc., pursuant to which Falcone and Warren Zenna (the “Existing Board Members”) shall (i) approve the Restructuring Transactions, (ii) appoint Dennis Davis as the Chief Restructuring Officer (“CRO”) and the independent Director (the “Independent Director”) of Sovryn; (iii) each Existing Board Member other than the Independent Director shall resign from the board of Sovryn; and (iv) each of the Existing Board Members and each other officer of Sovryn, but other than the CRO, shall resign as officers of Sovryn (in such capacity, the “ Officers”). The Existing Board Members and Officers hereby represent and warrant that, as of the Effective Date, the organizational documents of Sovryn do not prohibit the resignation of the Officers and the Existing Board Members other than the Independent Director and CRO;
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viii. Sovryn shall provide proof to the Ultimate Parent that Dennis Davis, in his capacity as CRO has been added as an authorized signatory and user with complete access and control over the existing bank account(s) at PNC Bank that are in Sovryn’s name, and that the other existing authorized signatory or signatories have been removed from the PNC Bank Sovryn account(s), and that no amounts payable to the Company shall be paid from the PNC Bank Sovryn account(s);
ix. the FCC (or its staff pursuant to delegated authority) shall have approved the FCC Application by initial grant;
x. all of the conditions set forth in Section 2.01 of the Restructuring Agreement have been satisfied; and
xi. no injunction, writ, restraining order, or other order of any nature restricting or prohibiting, directly or indirectly, the consummation of the Partial Strict Foreclosure shall have been issued by any court or other governmental authority prior to the Closing Date.
If, on or after December 31, 2023 (the “Outside Date “), any of the foregoing conditions precedent have not been fully or timely satisfied or waived as determined by the Agent in its sole discretion, then the Partial Strict Foreclosure shall not be deemed to have been consummated or effective, and this Agreement may, upon the Agent’s written notice to the Debtors, be deemed to have been automatically revoked, cancelled and terminated without any further action by any party; provided, that, the Agent may elect to extend the Outside Date in its sole discretion by ninety (90) days upon three (3) business days’ written notice to the Debtors.
17. Revival of Obligations. Notwithstanding any other provision of this Agreement, if the transfer of the Transferred Collateral, or any part thereof, is subsequently invalidated, declared to be fraudulent or preferential, set aside, avoided, and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause pursuant to a final, non-appealable order of a court of competent jurisdiction, then the security interests and liens related thereto, together with all defenses, claims, counterclaims, rights and remedies, both legal and equitable, that the Company or any Obligor or any other Person has or may have under applicable law, shall be revived and continued in full force and effect as if such transfer of the Transferred Collateral had not been received by Ultimate Parent from Sovryn.
18. Waiver. No failure or delay on the part of any Party in the exercise of any power, right or privilege hereunder or under any of the other Transaction Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power, or privilege.
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19. Confidentiality and Non-Disparagement. The Parties expressly reaffirm that each of them has carefully reviewed and will adhere to and comply with all of the confidentiality and non-disparagement obligations set forth in the Transaction Documents, to which they continue to be bound in all respects.
20. Public Announcements. Each of the Parties hereto agrees that neither it nor any of its Affiliates will, without the written approval of the other parties hereto, issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated by this Agreement, except as may be required by applicable law or by the rules of any national securities exchange or stock market, in which case the Party hereto required to make such release or announcement shall allow the other Parties hereto reasonable time to comment on such release or announcement in advance of such issuance; provided, that, each of the Parties hereto may make internal announcements to their respective equity holders, directors, managers, officers and employees regarding the transactions contemplated by this Agreement.
21. Specific Performance. Each Party acknowledges and agrees that the other Parties would be damaged irreparably in the event any provision of this Agreement is not performed in accordance with its specific terms or otherwise breached, so that, in addition to any other remedy that a Party may have under law or equity, a Party may be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and for specific performance of this Agreement and the terms and provisions hereof, without the necessity of posting any bond or other undertaking in connection therewith.
22. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York, without reference to the conflicts or choice of law principles thereof.
23. Consent to Jurisdiction. Each of the Parties hereby irrevocably consents to the non-exclusive personal jurisdiction of the state and federal courts located in the County of New York (Manhattan), New York, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, any rights or obligations hereunder, or the performance of such rights and obligations. Each of the Parties hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by another Party in connection with this Agreement, any rights or obligations hereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in the applicable Transaction Document. Nothing in this Section 23 shall affect the right of the Parties to serve legal process in any other manner permitted by applicable law or affect the right of the Agent to bring any action or proceeding against any of the Obligors or any of their respective properties in the courts of any other jurisdictions.
24. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
13
EXECUTIONVERSION
25. No Consequential Damages. No Party hereto, nor any agent or attorney of any such Party, shall be liable to any other Party or any other Person on any theory of liability for any special, indirect, consequential or punitive damages.
26. Headings. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.
27. Entire Agreement. This Agreement, the Restructuring Transaction Documents, and the Transaction Documents express the entire understanding of the Parties with respect to the transactions contemplated hereby. There are no oral agreements among the Parties with respect to the subject matter of this Agreement, the Restructuring Transaction Documents, or the other Transaction Documents.
28. No Third-Party Beneficiaries; Amendments. This Agreement does not and shall not be construed to confer any rights or remedies upon any Person other than the Parties to this Agreement and their respective successors and permitted assigns. This Agreement may not be amended except in writing executed by each of the affected Parties hereto.
29. Successors and Assigns. This Agreement shall: (a) be binding on the Agent, the Obligors, and their respective legal representatives, successors and permitted assigns (including any trustee appointed in any case under chapter 7 or chapter 11 of the Bankruptcy Code); and (b) inure to the benefit of the Agent, the Obligors, and their respective legal representatives, successors and permitted assigns. The Agent or Ultimate Parent at any time or from time to time may assign or otherwise transfer any or all of its rights and/or obligations under this Agreement to one or more entities formed for the purpose of receiving the Transferred Collateral provided that any such assignee or transferee has the ability, and assumes the obligation, to perform under this Agreement.
30. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction so as to best give effect to the intent of the Parties under this Agreement.
31. Good Faith and Construction. Each Party hereto acknowledges that each of them has had the opportunity to retain legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any Party. The Parties have participated jointly in the negotiation and drafting of this Agreement and the other Transaction Documents. In the event an ambiguity or question of intent or interpretation arises under any provision of this Agreement or any of the other Transaction Documents, such provision shall be construed as if drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement or any other Transaction Documents.
14
EXECUTIONVERSION
32. Counterparts. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by the Party against whom enforcement is sought.
NOTHINGCONTAINED IN THIS AGREEMENT, OR ANY INSTRUMENT OR DOCUMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, IS INTENDED TO CREATE ORCONVEY OR GIVE RISE TO ANY LIABILITY, CLAIM OR OBLIGATION OF UPON ANY PERSON OR ENTITY (OTHER THAN THE PARTIES HERETO IN ACCORDANCEWITH THE STRICT TERMS HEREOF) INCLUDING WITHOUT LIMITATION ANY OF THE OFFICERS, DIRECTORS, MANAGERS, MEMBERS, EMPLOYEES, AGENTSAFFILIATES, PARENTS, CONSULTANTS, AUDITORS ACCOUNTANTS OR ATTORNEYS OF ANY OF THE PARTIES HERETO.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
15
INWITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
| MADISON TECHNOLOGIES, INC. | |
|---|---|
| By: | /s/<br> Philip Falcone |
| Name: | Philip Falcone |
| Title: | Chief Executive<br> Officer |
| SOVRYN HOLDINGS, INC. | |
| By: | /s/ Philip Falcone |
| Name: | Philip Falcone |
| Title: | CEO and Secretary |
| /s/ Philip Falcone | |
| Name: | Philip Falcone |
| FFO 1 TRUST | |
| /s/ Philip Falcone | |
| Name: | Philip Falcone |
| Title: | Trustee |
| FFO 2 TRUST | |
| /s/ Lisa Marie Falcone | |
| Name: | Lisa Marie Falcone |
| Title: | Trustee |
| KORR VALUE, LP | |
| /s/ Kenneth Orr | |
| Name: | Kenneth Orr |
| Title: | President |
[Signature Page to Partial Strict Foreclosure Agreement]
| STATION BREAK HOLDINGS, LLC | |
|---|---|
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
| STATION BREAK OPERATING, LLC | |
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
[Signature Page to Partial Strict Foreclosure Agreement]
| ARENA INVESTORS, L.P., as Agent | |
|---|---|
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
| ARENA SPECIAL OPPORTUNITIES FUND, LP, as a Secured Party | |
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
| ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP, as a Secured Party | |
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
[Signature Page to Partial Strict Foreclosure Agreement]
ANNEXI
Existing Events of Default
Schedule1
Station Purchase Price Allocations
Schedule2
ExhibitA
Form of Assignment Agreement
[See attached]
EXHIBITB
Purchase Price Allocation Principles
Exhibit 10.21
EXECUTION VERSION
RESTRUCTURINGAGREEMENT
by and among
MADISON TECHNOLOGIES, INC.
and
SOVRYN HOLDINGS, INC.
and
the undersigned SECURED PARTIES
and
ARENA INVESTORS, L.P.
(asagent for the undersigned Secured Parties)
Dated as of February 1, 2023
TABLE OF CONTENTS
| Page | ||
|---|---|---|
| ARTICLE I DEFINITIONS | 6 | |
| Section 1.01 | Recitals Incorporated | 6 |
| Section 1.02 | Terms | 6 |
| ARTICLE II RESTRUCTURING<br> TRANSACTIONS | 7 | |
| Section 2.01 | Restructuring Transactions | 7 |
| Section 2.02 | Transferred Collateral | 10 |
| ARTICLE III REPRESENTATIONS<br> AND WARRANTIES | 10 | |
| Section 3.01 | Representations and Warranties of All Parties | 10 |
| ARTICLE IV MISCELLANEOUS | 11 | |
| Section 4.01 | Governing Law; Jury Trial | 11 |
| Section 4.02 | Amendments and Waivers | 12 |
| Section 4.03 | Counterparts | 12 |
| Section 4.04 | Captions | 12 |
| Section 4.05 | Survival of Representations and Warranties and Covenants | 12 |
| Section 4.06 | Parties in Interest | 12 |
| Schedules | ||
| --- | --- | --- |
| Schedule 1 | - | Outstanding Existing Note Obligations |
| Schedule 2 | - | Contributed Debt Allocations |
| Schedule 3 | - | New Equity Allocations |
| Exhibits | ||
| --- | --- | |
| Exhibit A | Partial Strict Foreclosure Agreement | |
| Exhibit B | CRO Agreement | |
| Exhibit C | Local Marketing Agreement |
2
RESTRUCTURINGAGREEMENT
This RESTRUCTURING AGREEMENT (this “Agreement”), dated as of February 1, 2023, is made by and among MADISON TECHNOLOGIES, INC., a Nevada corporation (the “Company”), SOVRYN HOLDINGS, INC., a Delaware corporation (“Sovryn,” and together with the Company, each a “Debtor,” and collectively, the “Debtors”), STATION BREAK HOLDINGS, LLC, a Delaware limited liability corporation (together with its successors and assigns, designees, or subsidiaries, the “Ultimate Parent”), the several financial institutions from time to time party to the Purchase Agreement referred to below, as purchasers and holders (each a “Secured Party” and collectively, the “Secured Parties”), and ARENA INVESTORS, L.P., as agent for the Secured Parties (in such capacity, together with its successors and permitted assigns in such capacity, the “Agent”). The Company, Sovryn, Ultimate Parent, the Secured Parties, and the Agent may hereinafter be referred to individually as a “Party” and collectively as the “Parties.” All capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Purchase Agreement.
WHEREAS, the Company and the several financial institutions (each a “Secured Party,” and collectively, the “Secured Parties”) from time to time party thereto have entered into that certain Securities Purchase Agreement, dated as of February 17, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”), pursuant to which the Secured Parties have extended credit to the Company as evidenced by certain Senior Secured Convertible Promissory Notes (as defined in the Purchase Agreement) issued by the Company to the Secured Parties (together with any notes issued in exchange therefor or replacement thereof or any additional investment made by the Secured Parties and as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Notes”);
WHEREAS, the Company, Sovryn, and the Agent have entered into that certain Security Agreement, dated as of February 17, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”),^1^pursuant to which as an inducement for the Secured Parties to extend the loans as evidenced by the Notes and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor unconditionally and irrevocably pledged, granted and hypothecated to the Agent for the benefit of the Secured Parties a perfected, first priority security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”);
WHEREAS, Sovryn and the Agent have entered into that certain Guaranty, dated as of February 17, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Guaranty”), pursuant to which Sovryn (together with any other Subsidiaries of the Company that are or become party to the Guaranty, each a “Guarantor,” and collectively, the “Guarantors”) each guaranteed the payment and performance of the Obligations;
| ^1^ | Capitalized<br> terms used herein that are not otherwise defined herein shall have the meaning ascribed<br> to them in the Security Agreement. |
|---|
3
WHEREAS, the Company, through its wholly owned subsidiary Sovryn, used the proceeds of the Notes to, among other things, acquire KNLA-CD and KNET-CD, both Class A digital television stations in Los Angeles, California, KVVV-LD, a digital low power television station in Houston, Texas, and KYMU-LD, a digital low power television station in Seattle, Washington (the “Stations”);
WHEREAS, on or about October 27, 2022, the Agent notified the Debtors that certain Events of Default have occurred and are continuing under the Transaction Documents;
WHEREAS, the Debtors have acknowledged and agreed that Events of Default under (and as defined in) the Transaction Documents have occurred and are continuing as of the date hereof, including, without limitation, the Company’s failure under Section 6(a)(i)(B) of the Notes to pay the cash interest payment due on October 1, 2022, by October 10, 2022, pursuant to Section 2(a)(i) of the Notes;
WHEREAS, as a result of these Events of Default (the “Existing Events of Default”), the Debtors entered into a forbearance agreement (the “Forbearance Agreement”), dated as of November 21, 2022, with the Agent and Secured Parties;
WHEREAS, under the Forbearance Agreement, each Obligor, among other things, acknowledged and agreed that (i) as of November 21, 2022, after giving effect to the terms of the Forbearance Agreement, the aggregate principal amount of Notes outstanding is not less than $16,500,000 (the “Current Outstanding Amount”), (ii) the Current Outstanding Amount does not include any accrued and unpaid interest, fees, expenses or other amounts constituting Obligations or other amounts which are chargeable or otherwise reimbursable under the Transaction Documents as set forth with more particularity in the Forbearance Agreement, including, without limitation, Default Rate Interest on the Current Outstanding Amount, (iii) no Obligor has any rights of offset, defenses, claims or counterclaims with respect to the Current Outstanding Amount or any of the other Obligations, and each of the Obligors is jointly and severally obligated with respect thereto, in each case, in accordance with the terms of the applicable Transaction Documents (including the Forbearance Agreement), and (iv) pursuant to a side letter, dated as of November 21, 2022 (the “Milestone Side Letter”), the Obligors agreed to achieve certain milestones by the dates as set forth in the Milestone Side Letter (subject to extension by the Agent in its sole and absolute discretion);
WHEREAS, the Forbearance Agreement expired on December 30, 2022;
WHEREAS, in relation to those Existing Events of Default, and subject to approval by the Federal Communications Commission (the “FCC”) of the required applications to assign the FCC licenses of the Stations (the “FCC Licenses”) to Ultimate Parent (or its designee), the Agent and the Secured Parties have and continue to have (contemporaneously with the consummation of the transactions set forth in the Partial Strict Foreclosure Agreement (as defined below)) the right to exercise all applicable rights and remedies against the Obligors under and in relation to the Transaction Documents, the Uniform Commercial Code as in effect in the State of New York (the “NYUCC”) and other applicable law;
4
WHEREAS, the Obligors have acknowledged (i) their current obligation to repay all Obligations under the Transaction Documents, and (ii) that the Agent, for the benefit of the Secured Parties (as defined in the Security Agreement), has the current right under the Security Agreement at any time in its sole discretion (subject to approval by the FCC of the required applications to assign the FCC Licenses), to take ownership, possession and control of the Collateral, free and clear of all right, title, interest or claim thereto or therein of the Obligors or any other Person claiming through them (but subject to any Permitted Liens);
WHEREAS, in connection with the Restructuring Transactions, Station Break Operating, LLC (together with any designee, collectively, “Operating”), a direct wholly-owned subsidiary of Station Break Holdings, LLC, has been formed to hold the Transferred Collateral, subject to Ultimate Parent’s right to designate a different entity for such purpose;
WHEREAS, pursuant to the Partial Strict Foreclosure Agreement, Sovryn and Ultimate Parent have agreed to prepare their respective portions of, and shall jointly file with the FCC, such application or applications (collectively, the “FCC Application”) as may be necessary to obtain the FCC’s consent to the assignment of the FCC Licenses to Ultimate Parent (or its designee);
WHEREAS, in connection with the closing of the Restructuring Transactions and upon approval by the FCC of the FCC Application, the Secured Parties will contribute (the “Contribution”) to Ultimate Parent, a portion of the Secured Parties’ rights and obligations under the outstanding Notes (such contributed amounts, the “Assigned Obligations”), which Ultimate Parent is using to purchase all of Sovryn’s possession, right, title and interest in and to and under all Collateral associated with the Stations and any and all commercial tort claims, including, without limitation, Sovryn’s claim against WANN-CD, an Atlanta station, in connection with a breach of contract to recoup a $200,000 deposit that is held by WANN, and all proceeds thereof together with all other documents and instruments executed in connection therewith, but excluding: (a) all liabilities associated with such Collateral unless expressly assumed by Ultimate Parent, (b) any assets identified by the Ultimate Parent within 90 days after the execution of this Agreement (the “Excluded Assets”), and (c) the Pledged Securities, which, for the avoidance of doubt, shall remain Collateral of the Agent under the Security Agreement (collectively, the “Transferred Collateral”) free and clear of all liens, claims, interests, and encumbrances and Ultimate Parent has agreed, upon approval of the FCC Application, to accept the transfer of the Transferred Collateral in exchange for the partial satisfaction of existing Obligations in an amount equal to that set forth for each Station set forth on Schedule 1 to the Partial Strict Foreclosure Agreement (the “Purchase Price”), all in accordance with and subject to the provisions set forth more fully below, and that such transfer and satisfaction are intended to comprise a partial strict foreclosure for purposes of Section 9-620(c) of the NYUCC, provided, that, an aggregate principal amount of the outstanding Obligations equal to the Remaining Obligations (as defined below) shall remain due and outstanding under the Transaction Documents; and
WHEREAS, following the closing of the Transferred Collateral to Ultimate Parent (or its designee), the issued and outstanding equity interests of Ultimate Parent in will be as set forth on Schedule 3 hereto; and
WHEREAS, in connection with the transactions contemplated by this Agreement (as described more fully in Article II hereof, the “Restructuring Transactions”), following the closing of the Transferred Collateral to Ultimate Parent (or its designee), the Notes (the “Existing Notes”) will be amended and restated (the “New Notes”) such that the Secured Parties thereunder shall have Liens on the Collateral in the amounts set forth in the New Notes; and
5
WHEREAS, the effectiveness of this Agreement and the other Transaction Documents is conditioned on, among other things, the execution and delivery of this Agreement by all of the Parties hereto.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Recitals Incorporated. The recitals and prefatory phrases and paragraphs set forth above are hereby incorporated in full and made a part of this Agreement.
Section 1.02 Terms. The following terms used in this Agreement shall have the following meanings:
“Action” means any claim, action, petition, demands, suit, investigation, arbitration or other proceeding or inquiry, whether civil or criminal, at law or in equity, against or by any third party or before any local, state, federal, national, supra-national or foreign governmental or regulatory agency or authority or subdivision thereof.
“Affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.
“Agreement” has the meaning set forth in the preamble.
“Closing” has the meaning set forth in the recitals.
“ClosingDate” has the meaning set forth in Section 2.01(k).
“Contributed Debt” has the meaning set forth in Section 2.01(l).
“CRO Agreement” has the meaning set forth in Section 2.01(b).
“Existing Board Members” means Phillip Falcone and Warren Zenna.
“Forbearance Agreement” has the meaning set forth in the recitals.
“Liens” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).
6
“Obligations” means any liabilities or obligations (whether direct or indirect, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due).
“LocalMarketing Agreement” has the meaning set forth in Section 2.01(e).
“Losses” means any judgments, payments, settlements, awards, fines, penalties, losses, taxes, compensation, damages, charges, Obligations, interest, costs or expenses (including the reasonable out-of-pocket costs and expenses of attorneys, accountants and other professional advisors, and other reasonable costs and expenses of any Action, including enforcement).
“MaterialAdverse Effect” has the meaning set forth in Section 3.01(d).
“PartialStrict Foreclosure Agreement” has the meaning set forth in Section 2.01(a).
“Parties” has the meaning set forth in the preamble.
“Person” or “person” means and includes an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a government
“RestructuringTransactions” has the meaning set forth in Section 2.01.
“RestructuringTransaction Documents” means this Agreement, each of the agreements set forth in Section 2.01 and each of the other documents, certificates and instruments contemplated hereby or thereby, including the “Transaction Documents” (as defined in the Purchase Agreement).
“TransferredCollateral” has the meaning set forth in the preamble.
ARTICLE II
RESTRUCTURING TRANSACTIONS
Section 2.01 Restructuring Transactions. The Restructuring Transactions shall include the following transactions and Restructuring Transaction Documents:
(a) on or before Noon (EST) on March 3, 2023, the execution and delivery of the Partial Strict Foreclosure Agreement, a copy of which is attached hereto as Exhibit A;
(b) on or before Noon (EST) on March 3, 2023, the execution and delivery of the CRO Agreement, a copy of which is attached hereto as Exhibit B;
(c) on or before Noon (EST) on March 3, 2023, the execution and delivery of the Unanimous Written Consent of the Board of Directors of Sovryn Holdings, Inc., pursuant to which the Existing Board Members shall (i) approve the Restructuring Transactions, and (ii) appoint Dennis Davis as the Chief Restructuring Officer (“CRO”) and the independent Director (the “Independent Director”) of Sovryn. The Existing Board Members and Officers hereby agree that, as of the Effective Date, the organizational documents of Borrower do not prohibit the resignation of the Officers and the Existing Board Members other than the Independent Director and CRO;
7
(d) on or before Noon (EST) on March 3, 2023, each Existing Board Member other than the Independent Director shall resign from the board or similar governing body of Sovryn, and each of the Existing Board Members and each other officer of Sovryn, including, without limitation, Henry Turner, but other than the CRO, shall resign as officers of Sovryn (in such capacity, the “Officers”);
(e) on or before Noon (EST) on March 3, 2023, Sovryn and Ultimate Parent (or its designee) shall execute and deliver a Local Marketing Agreement that shall provide for Ultimate Parent (or its designee) to program substantially all airtime on the Stations and receive substantially all revenue derived therefrom (the “Local Marketing Agreement”), a copy of which is attached hereto as Exhibit C;
| (f) | [Reserved]; |
|---|---|
| (g) | [Reserved]; |
| --- | --- |
| (h) | [Reserved]; |
| --- | --- |
| (i) | [Reserved]; |
| --- | --- |
(j) on or before Noon (EST) on March 3, 2023, Sovryn shall provide proof to the Ultimate Parent that the CRO has been added as an authorized signatory and user with complete access and control over the existing bank account(s) at PNC Bank that are in Sovryn’s name, and that the other existing authorized signatory or signatories have been removed from the PNC Bank Sovryn account(s), and that no amounts payable to the Company shall be paid from the PNC Bank Sovryn account(s);
(k) pursuant to Section 7 of the Partial Strict Foreclosure Agreement, immediately after the satisfaction of the conditions precedent set forth in Section 16 thereof (the “Closing Date”), Sovryn will voluntarily execute and deliver to the Ultimate Parent an assignment, substantially in the form attached hereto as Exhibit A (the “Assignment”), which will evidence the irrevocable conveyance, assignment and transfer of the ownership and any and all of its legal, equitable and beneficial right, title and interest in and to all of the Transferred Collateral to the Ultimate Parent in exchange for the partial satisfaction of its existing obligations under the Transaction Documents in an amount equal to the Purchase Price;
(l) the execution and delivery of the contribution and exchange agreement, among Ultimate Parent, Operating, and the Secured Parties, which shall govern each Secured Party’s contribution to Ultimate Parent, of certain of the obligations held by such Secured Party set forth on Schedule 2 hereto (which represent such Secured Party’s pro rata share of the entire principal amount of the outstanding Notes, exclusive of accrued interest and accrued fees thereon (such obligations contributed to Ultimate Parent, the “Contributed Debt”) which Ultimate Parent will use to purchase all of the Debtors’ possession, right, title and interest in the Transferred Collateral pursuant to the Partial Strict Foreclosure Agreement; provided, that such Contributed Debt shall not include the amount of the Obligations in excess of the Contributed Debt, including, without limitation, any accrued and unpaid interest, fees, expenses or other amounts constituting Obligations or other amounts which are chargeable or otherwise reimbursable under the Transaction Documents (the “Remaining Obligations”), and each of the Obligors is and shall hereafter remain jointly and severally obligated with respect thereto, in each case, in accordance with the terms of the applicable Transaction Documents, which will remain outstanding under the Transaction Documents immediately after giving effect to the Closing Date (as defined in the Partial Strict Foreclosure Agreement), and in exchange therefor, Ultimate Parent will issue to such Secured Party the number of Class A Units of Ultimate Parent (the “Class A Units”), set forth opposite such Secured Party’s name on Schedule 3 hereto;
8
(m) on the Closing Date, immediately after the contribution of the Contributed Debt and issuance of the Class A Units to the Secured Parties described in clause (l) above, Sovryn will transfer the Transferred Collateral to Ultimate Parent in exchange for the cancellation of an amount equal to the Contributed Debt, and Ultimate Parent will immediately contribute the Transferred Collateral to Operating in exchange for all of the membership interest of Operating;
(n) on the Closing Date, the Secured Parties and the Company shall execute and enter into the New Notes in an amount equal to the Remaining Obligations outstanding;
(o) within twenty (20) business days after the date of this Agreement (or such later date as is acceptable to Ultimate Parent in its sole discretion), Sovryn and Ultimate Parent shall prepare their respective portions of, and shall jointly file with the FCC, the FCC Application to obtain the FCC’s consent to the assignment of the FCC Licenses to Ultimate Parent (or its designee). Sovryn shall be deemed to have authorized its signature in the assignor’s certification of such FCC Application and shall cooperate in all respects in the preparation of the assignor’s sections of such FCC Application (including but not limited to providing all information necessary to complete such sections). In the event that Sovryn or the Company fails to cooperate as required by the preceding sentence, Ultimate Parent may complete such sections to the best of its ability, based on publicly available information, and Sovryn shall be deemed to have certified the accuracy of the assignor’s sections of the FCC Application as so completed by Ultimate Parent. Within one (1) business day after the execution of this Agreement, the Company shall provide to Agent all information deemed necessary or desirable by Agent to facilitate the electronic filing of the FCC Application via the FCC Media Bureau’s Licensing and Management System (“LMS”) or other FCC filing system, including but not limited to Sovryn’s FCC Registration Number (“FRN”) and associated password. The Company and Sovryn shall use their best efforts to cooperate in the prosecution of the FCC Application to a final and unappealable grant. Neither the Company nor Sovryn shall take any action to impede or frustrate the final and unappealable grant by the FCC of the FCC Application (including but not limited to the filing of any petition to deny or informal objection against the FCC Application, the filing of any request for dismissal of the FCC Application, and the filing of any petition for reconsideration, application for review, or notice of appeal of the FCC staff’s grant of the FCC Application pursuant to delegated authority), and neither the Company nor Sovryn shall solicit or encourage any third person or entity to take any such action. Upon the FCC’s initial grant of the FCC Application (which may include a grant by FCC staff pursuant to delegated authority), the FCC Licenses shall, in the Agent’s discretion, be deemed assigned from Sovryn to Ultimate Parent (or its designee) without the necessity of further action by the Parties;
9
(p) [Reserved];
(q) [Reserved];
(r) [Reserved];
(s) the payment of fees and expenses by the Company related to the foregoing (including, without limitation, all fees and expenses payable to (i) Winston & Strawn LLP, (ii) the Agent and the Secured Parties, and (iii) Wiley Rein LLP); and
(t) the consummation of any other transactions contemplated or required by any of the foregoing.
Section 2.02 Transferred Collateral. The Company shall, and shall cause any and all of its direct and indirect Subsidiaries from and after the Closing Date, subject to the provisions of the Partial Strict Foreclosure Agreement and the other Transactions Documents, to not knowingly take any action inconsistent with the absolute ownership, possession, control, and quiet enjoyment of all Transferred Collateral by Ultimate Parent as provided under the Partial Strict Foreclosure Agreement. If the Company shall become aware that any of its direct and indirect Subsidiaries in existence from and after the Closing Date have taken any action inconsistent with the absolute ownership, possession, control, and quiet enjoyment of all Transferred Collateral by Ultimate Parent as provided under the Partial Strict Foreclosure Agreement, then the Company shall cause such Subsidiary to promptly end such action and take remedial actions, if any, required to correct such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of All Parties. In order to induce the Parties to enter into this Agreement and carry out the Restructuring Transactions, each Party, severally and not jointly, and only as to itself (and its respective designees), represents and warrants, as of the date of this Agreement, as follows:
(a) Organization, Power, and Authority*.* Such Party, if not a natural person, is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation or incorporation, with full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(b) Sovryn. Sovryn has no Subsidiaries and there are no other existing members of the board of directors of Sovryn other than the Existing Board Members, and no other existing officers of Sovryn, other than the Officers. Additionally, there are no other management agreements or other agreements with Existing Board Members, insiders, or any shareholder of the Debtors.
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(c) Authorization of Agreements*.* This Agreement has been duly and validly authorized by all necessary action and has been duly and validly executed and delivered by such Party and constitutes (assuming due and valid execution by the other Parties) the valid and binding obligation of such Party, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and to general principles of equity regardless of whether considered in a proceeding in equity or at law.
(d) Non-Contravention. Subject to the filing and FCC grant of the FCC Application, the execution and the delivery of this Agreement will not (i) if not a natural person, result in any breach of such Party’s organizational documents, (ii) result in any breach of the terms or provisions of, or constitute a default under, any indenture or other agreement or instrument by which it or its property is bound, except in each case as would not reasonably be expected to have a material adverse effect on (A) the business, assets, operations or financial condition of such Party or (B) the performance of the obligations of such Party under this Agreement (with respect to the relevant Party, a “Material Adverse Effect”), (iii) result in any violation of any applicable constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which such Party is subject, except as would not reasonably be expected to have a Material Adverse Effect with respect to such Party, (iv) assuming the accuracy of the representations and warranties of the other Parties set forth herein, result in any obligation of any Party to file any notice or other filing with, or to obtain any consent, registration, approval, permit or authorization of or from any, governmental or regulatory authority of the United States, any state thereof or any foreign jurisdiction (other than those made or obtained), except for those the failure to make or obtain which would not reasonably be expected to have a Material Adverse Effect with respect to such Party, or (v) require any consent or other action by any Person under, constitute a default under (with due notice or lapse of time or both), or give rise to any right of termination, cancellation or acceleration of any right or obligation of such Party or to a loss of any benefit to which such Party is entitled under any provision of any agreement or other instrument binding upon such Party or any of its assets or properties, except where the failure to obtain such consent or other action, or such default or right of termination, cancellation or acceleration, or loss of benefit would not reasonably be expected to have a Material Adverse Effect with respect to such Party.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Governing Law; Jury Trial. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE PARTIES PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THE RESTRUCTURING TRANSACTIONS.
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Section 4.02 Amendments and Waivers. This Agreement may not be modified or amended except by a written instrument signed by an authorized representative of each Party affected by such modification or amendment and referring specifically to this Agreement. No waiver of any breach or default hereunder shall be considered valid unless in writing and signed by the Party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach of the same or similar nature.
Section 4.03 Counterparts. For the convenience of the Parties, this Agreement may be executed and delivered (including by facsimile or electronic transmission) in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. No party hereto shall raise the use of a facsimile machine or other electronic transmission to deliver a signature or the fact that any signature was transmitted or communicated through the use of a facsimile machine or other electronic transmission as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.
Section 4.04 Captions. The Article, Section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof.
Section 4.05 Survival of Representations and Warranties and Covenants. All representations and warranties made herein shall survive the Closing, and all covenants and agreements set forth herein to be performed at or prior to the Closing shall not survive and shall expire upon the Closing, and all covenants to be performed after the Closing shall expire in accordance with their terms.
Section 4.06 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party and its successors and permitted assigns and, except as provided in the immediately following sentence of this Section 4.06, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
| MADISON TECHNOLOGIES, INC. | ||
|---|---|---|
| By: | /s/ Philip Falcone | |
| Name: | Philip Falcone | |
| Title: | Chief Executive Officer | |
| SOVRYN HOLDINGS, INC. | ||
| By: | /s/ Philip Falcone | |
| Name: | Philip Falcone | |
| Title: | CEO and Secretary | |
| /s/ Philip Falcone | ||
| Name: | Philip Falcone |
[Signature Page to Restructuring Agreement]
| STATION BREAK HOLDINGS, LLC | ||
|---|---|---|
| By: | /s/ Lawrence Cutler | |
| Name: | Lawrence Cutler | |
| Title: | Authorized Signatory |
[Signature Page to Restructuring Agreement]
| ARENAINVESTORS, L.P., as Agent | ||
|---|---|---|
| By: | /s/ Lawrence Cutler | |
| Name: | Lawrence Cutler | |
| Title: | Authorized Signatory | |
| ARENA SPECIAL OPPORTUNITIES FUND, LP, as a Secured Party | ||
| By: | /s/ Lawrence Cutler | |
| Name: | Lawrence Cutler | |
| Title: | Authorized Signatory | |
| ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP, as a Secured Party | ||
| By: | /s/ Lawrence Cutler | |
| Name: | Lawrence Cutler | |
| Title: | Authorized Signatory |
[Signature Page to Restructuring Agreement]
SCHEDULE 1
OutstandingNote Obligations
| Secured Party | Outstanding Obligations | PercentageAllocation |
|---|---|---|
| ArenaSpecial Opportunities Fund, LP | Not<br> less than<br><br> $6,180,300.00 | 32.7% |
| ArenaSpecial Opportunities Partners I, LP | Not<br> less than<br><br> $12,719,700.00 | 67.3% |
| Total | Not<br> less than<br><br> $18,900,000.00 | 100.0% |
SCHEDULE 2
ContributedDebt Allocations
| SecuredParty | ContributedDebt |
|---|---|
| Arena<br> Special Opportunities Fund, LP | $3,793,200.00 |
| Arena<br> Special Opportunities Partners I, LP | $7,806,800.00 |
| Total | $11,600,000.00 |
SCHEDULE 3
NewEquity Allocations
| Name of Member | Units | % |
|---|---|---|
| Arena<br> Special Opportunities Fund, LP | 32.7 | 32.7 |
| Arena<br> Special Opportunities Partners I, LP | 67.3 | 67.3 |
Exhibit 10.22
EXECUTION VERSION
LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (“Agreement”) is made and entered into as of this 1st day of February, 2023 (the “Effective Date”), by and among SOVRYN HOLDINGS, INC., a Delaware corporation (the “Licensee”) and STATION BREAK OPERATING, LLC, a Delaware limited liability company (the “Broker”). For purposes of this Agreement, Licensee and Broker each may be referred to individually as a “Party,” and together as the “Parties.”
W I T N E S S E T H
**WHEREAS,**Licensee holds the over-the-air television broadcast licenses and other authorizations (collectively, the “FCC Licenses”) issued by the Federal Communications Commission (“FCC”) used and useful for the operation of the following television stations (each a “Station” and collectively the “Stations”):
KNLA-CD, Los Angeles, California (FCC Facility ID #167309)
KNET-CD, Los Angeles, California (FCC Facility ID #3167)
KVVV-LD, Houston, Texas (FCC Facility ID #6690)
KYMU-LD, Seattle, Washington (FCC Facility ID #182983)
WHEREAS, pursuant to that certain Partial Strict Foreclosure Agreement of even date herewith by and among Licensee, Madison Technologies, Inc. (“Parent”), Philip Falcone, FFO 1 Trust, FFO 2 Trust, KORR Value, LP, Broker, Station Break Holdings, LLC (“Holdings”), and Arena Investors, L.P. (the “Partial Strict Foreclosure Agreement”), Parent has agreed to transfer, convey, assign and surrender to Holdings or its designee all of the Parent’s possession, right, title and interest in and to all of Licensee’s assets in exchange for the partial satisfaction of certain existing loan obligations of Parent and Licensee, subject to the FCC’s prior approval of the assignment of the FCC Licenses to Holdings or its designee;
WHEREAS, pending the consummation of the transactions contemplated by the Partial Strict Foreclosure Agreement, Licensee continues to operate the Stations;
WHEREAS, Licensee has broadcast time available for sale on the Stations and desires that Broker provide programming to fill such time that is responsive to the needs, interests, issues and desires of the Stations’ communities of license and service areas; and
WHEREAS, Broker desires to purchase time on the Stations to present its programming on the Stations and to sell advertising time for inclusion in said programming, and is willing to purchase that broadcast time, subject to the limitations set forth herein.
NOW,THEREFORE, for and in consideration of the mutual covenants herein contained, the sufficiency of which are acknowledged, the parties hereto have agreed and do agree as follows:
1. Term. Commencing on the date first written above and continuing thereafter until such time as this Agreement terminates as provided in Section 8 below (such period, the “Term”), Licensee shall make its broadcasting transmission and other facilities (including auxiliary broadcast, earth station, microwave and other ancillary facilities licensed under the FCC Licenses) available to Broker and to broadcast on the Stations, or cause to be broadcast on the Stations, such programming, commercial advertising, promotional announcements, public service announcements and other program related material as may be designated by Broker from time to time (collectively, the “Brokered Programming”), including, without limitation, (a) any programs, shows and other content provided by and/or available to Licensee under its respective network affiliation agreements, film and program barter agreements, sports rights agreements, news rights or service agreements, syndication agreements and other programming related contracts in effect on the Effective Date of this Agreement (and as may be amended from time to time, with Licensee’s reasonable consent, consistent with the terms of this Agreement), to the extent designated by Broker (“Licensee Program Contracts”), provided, however, that Broker shall comply with all requirements in such Licensee Program Contracts, and (b) as may be acquired and supplied to the Stations by Broker (the “Broker Supplied Programming”) (in each case subject to Licensee’s control as provided elsewhere in this Agreement). Regardless of any language herein to the contrary, Broker shall not modify or terminate any Licensee Program Contracts without Licensee’s prior reasonable consent, which consent shall not be unreasonably withheld, delayed, conditioned, or denied.
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2. Consideration. As consideration for the rights granted to it under this Agreement, including, without limitation, the airtime made available hereunder as well as the use of the Licensee’s assets, Broker shall make payments to or for the benefit of the Licensee, as set forth in Attachment I to this Agreement.
3. Station Facilities.
(a) Program Time. Throughout the Term, Licensee shall make available to Broker the broadcast transmission facilities of the Stations, and shall cause to be broadcast using such facilities, the Brokered Programming. Licensee’s broadcast transmission facilities shall be made available to Broker by Licensee for the maximum time authorized by the FCC up to one hundred sixty-eight (168) hours per week per Station, Sunday through Saturday, except for downtime occasioned by routine maintenance. Licensee shall cooperate fully in making the facilities of the Stations available to Broker and in broadcasting the Brokered Programming as provided in this Section 3(a). Broker shall make available to Licensee a sufficient amount of Brokered Programming to enable the Stations to meet their respective minimum hours of operation required under the rules and regulations of the FCC and the policies adopted pursuant to such rules and regulations (the “FCC Rules”). Without limiting the foregoing and for avoidance of doubt, Broker shall be entitled to use all of the Stations’ digital transmission capacity. Broker’s use of the digital broadcast transmission facilities of the Stations, and its broadcast of Brokered Programming over such facilities, shall be in compliance with, and not be in derogation of, Licensee’s obligations under the FCC Licenses.
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(b) Useof Station Facilities and Personnel. To facilitate delivery of programming by Broker to Licensee hereunder, Licensee hereby grants to Broker the right, for the Term of this Agreement, to use all of the Licensee’s respective assets, including, without limitation, all of the Licensee’s respective rights, title and interest under Licensee Program Contracts, the Stations’ studios (the “Studios”) and transmission sites (the “Sites”) and the equipment owned or leased by Licensee located therein or thereon (the “Broadcast Equipment”) for the purpose of airing the Brokered Programming on the Stations pursuant to this Agreement. In addition, Broker shall have, and Licensee hereby grants to Broker, a right to (i) enter upon, occupy and use all real and personal property owned, leased or licensed to the Licensee and the Stations, including any property on which the Studios and the Sites are located, for purposes of producing, inserting, clearing, and airing the Brokered Programming, and for performing such billing, collections, treasury and other cash management functions that Broker may wish to perform in connection with this Agreement, and (ii) utilize Licensee’s employees, contractors and consultants in the performance of Broker’s obligations under this Agreement, subject in all respects to Licensee’s ultimate control over such persons and the provisions set forth in Sections 5(a) and 5(b)(i). In the event that it exercises the right to enter upon any property owned or leased to Licensee to use the Studios or the Sites, Broker shall maintain the Broadcast Equipment, Studios, Sites and other Station facilities in good working order, free and clear of liens, claims or encumbrances of any third party claiming by, through or under Broker, other than any permitted liens allowed pursuant to the Licensee’s existing financing documents. Alternatively, Broker may originate its programs for broadcast on the Stations from Broker’s own studio(s) or other locations, in which case Broker shall be responsible, at its sole expense, for the delivery of such programming to the Stations; provided, that, such election by Broker shall not reduce Licensee’s right to compensation and reimbursement in regard to Licensee’s maintenance and operation of the Stations’ Studios, Sites, Broadcast Equipment and transmission facilities during the Term as provided in Attachment I. Licensee shall be permitted, upon thirty (30) days’ prior written notice to Broker, to change the location of the Studios or the Sites.
(c) Maintenance; Interruption of Normal Operations. During the Term, Licensee shall (1) maintain all of the Stations’ FCC Licenses in full force and effect, (2) maintain the operating power of the Stations at the maximum levels authorized by the FCC for the Stations, and (3) repair and maintain Licensee’s studio and transmission facilities and equipment in good operating condition. Licensee shall use commercially reasonable efforts to provide at least forty-eight (48) hours’ notice to Broker in advance of any maintenance work affecting the operation of any Station, which shall be undertaken at such hours and on such terms as to cause the least disruption to Broker’s operations. If any Station suffers any loss or damage of any nature to its transmission facilities which results in the interruption of service or the inability of such Station to operate with its maximum authorized facilities, the Party first learning of such loss or damage shall notify the other Party as soon as possible and Licensee shall at its own expense, with Broker’s assistance, as soon as possible, undertake such repairs as are necessary to restore full-time operation of such Station with its maximum authorized facilities, after the occurrence of any such loss or damage. If Licensee is unable to complete such repairs within a reasonable time as determined by Broker, then Broker may undertake such repairs, subject to Licensee’s supervision.
(d) Force Majeure. Any failure or impairment of facilities or any delay or interruption in the broadcast of programs, or failure at any time to furnish facilities, in whole or in part, for broadcast, due to a cause beyond the control of Licensee, shall not constitute a breach of this Agreement. Broker and Licensee shall exercise commercially reasonable efforts to remedy any such conditions affecting compliance with their obligations under this Agreement.
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4. Station Programming Policies.
(a) Compliance with Law. Broker agrees and covenants that all programming, advertising spots, promotional material and announcements that it provides for broadcast on the Stations shall comply in all material respects with: (i) all applicable federal, state and local laws, rules and regulations, including the Communications Act of 1934, as amended (the “Act”), the FCC Rules, and the rules and regulations of the Federal Trade Commission (“FTC”); and (ii) all subsequent changes to the FCC Rules, the Act and the FTC rules and regulations. Broker acknowledges that Licensee has not urged, counseled, or advised the use of any unfair business practice. If Licensee determines in good faith that a program supplied by Broker does not comply with the law or serve the public interest, Licensee may, upon prior written notice to Broker (to the extent time permits such notice), suspend or cancel such program. Licensee shall use reasonable efforts to provide such written notice to Broker prior to the suspension or cancellation of such program. Licensee shall have no liability to Broker for suspending or canceling programming pursuant to this Section 4(a), and Broker shall have no liability to Licensee if any programming is suspended or cancelled pursuant to this Section 4(a).
(b) Broker Compliance with Intellectual Property Rights. Broker represents and warrants to Licensee that Broker has full authority to broadcast the Broker Supplied Programming, and that Broker shall not broadcast any such material in violation of the Copyright Act or that otherwise violates any intellectual property or other rights of others, including but not limited to the rights of privacy and publicity. The right to use the programming and to authorize its use in any manner shall be and remain vested in Broker.
(c) Sales. Broker shall have the right to collect and retain (i) all revenues of the Stations (including without limitation all barter revenue, all revenue pursuant to the Stations’ retransmission consent agreements (if any), and all revenue from the Stations’ websites (if any)) earned but uncollected during the sixty (60) days immediately preceding the commencement of the Term, and (ii) thereafter, all revenues of the Stations (including without limitation all barter revenue, all revenue pursuant to the Stations’ retransmission consent agreements, if any, and all revenue from the Stations’ websites, if any). During the Term, Broker shall not terminate or alter any of the Stations’ or Licensee’s existing relationships, contractual or otherwise, with their national, regional and/or local ad rep/sales firms, or substitute in whole or in part any other ad rep firm for marketing or promotion of any Station’s advertising inventory; provided, that, in the event that the Broker wishes to recommend the termination or alteration of any of such existing relationships, contractual or otherwise, or the substitution in whole or in part of any other ad rep firm for marketing or promotion of any Station’s advertising inventory, then Licensee agrees to meet (either in person or telephonically) with Broker within three (3) Business Days of Broker’s meeting request to discuss in good faith such recommendation.
(d) Payola. Broker agrees that it will not accept any consideration, compensation, gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, material, supplies or other merchandise, services or labor (collectively “Consideration”) for the inclusion of any matter as part of the programming or commercial matter supplied by Broker to Licensee for broadcast on the Stations, whether or not pursuant to written contracts or agreements between Broker and merchants or advertisers, unless the party making or accepting such Consideration is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Act and FCC requirements.
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(e) Cooperation on Programming. Broker, with Licensee’s cooperation and assistance, shall ensure that programming is broadcast which is responsive to the needs and interests of the Stations’ communities of license and service areas (and which may be different from programming currently broadcast by the Stations). Broker shall, upon reasonable request, provide Licensee with information concerning such of Broker’s programs as are responsive to community issues so as to assist Licensee in the satisfaction of its public service programming obligations. Broker shall also provide Licensee such other information necessary to enable Licensee to prepare records and reports required by the FCC or other local, state, or federal government entities, including the quarterly issues/programs lists and children’s television reports required by the FCC. Broker shall promptly provide Licensee with any complaints or comments received regarding any programming broadcast on the Stations.
(f) Station Identification and EAS. Broker shall cooperate with Licensee to ensure compliance with the applicable FCC Rules regarding the broadcast of hourly station identification announcements and required Emergency Alert System (“EAS”) tests.
(g) Political Advertising. Any qualified political candidate for federal office shall have access to the Stations under this Agreement in accordance with the applicable FCC Rules. In addition, Broker, with Licensee’s cooperation and assistance, shall ensure the Stations’ compliance with all other FCC Rules regarding political broadcasting. Licensee shall promptly supply to Broker upon request, and Broker shall promptly supply to Licensee upon request, such information, including all inquiries concerning the broadcast of political advertising, as may be necessary to comply with the FCC Rules, including the lowest unit rate, equal opportunities, reasonable access, political file and related requirements of the Act, the FCC Rules and federal election laws. In the event that Broker fails to satisfy the political broadcasting requirements under the Act, the FCC Rules and any other applicable federal election laws and such failure inhibits Licensee in its compliance with the FCC Rules regarding political broadcasting, then to the extent reasonably necessary to assure such compliance, Broker shall either provide rebates to political advertisers or release broadcast time and/or advertising availabilities to Licensee at no cost to Licensee.
(h) Licensee Control of Programming. Licensee shall maintain such rights to suspend or preempt programming as provided in Sections 4(a) and 6(a) herein.
(i) Intellectual Property. Licensee hereby grants to Broker, during the Term, a license (including the right to sublicense to affiliates of Broker) to utilize the call signs, slogans, and all other intellectual property used by the Stations, but only to the extent such intellectual property rights are owned by, or licensed to and assignable by or sublicensed to another party by, Licensee. Licensee agrees to make commercially reasonable best efforts during the Term to assist Broker in gaining ownership of, or the right to use, any other intellectual property used by the Stations on the Effective Date.
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5. Responsibility for Employees and Expenses.
(a) Employees. Licensee shall maintain such personnel and facilities as shall be necessary to enable Licensee to perform its obligations as Licensee pursuant to this Agreement and as FCC licensee of the Stations in accordance with the FCC Rules.
(b) (i) Subject to the receipt of any Shortfall Reimbursement and the provisions of this Section 5, Licensee shall employ and be responsible for the salaries, commissions, taxes, insurance, and all other related costs of all personnel of Licensee involved in the operation of the Stations and the production and broadcast of the Stations’ programming and will be responsible for the salaries, taxes, benefits, insurance, and related costs for all such employees. A list of the employees, their salaries and related labor costs subject to this Section 5(b) is set forth on Schedule 5(b) hereto.
(ii) Broker shall employ and be responsible for the salaries, commissions, taxes, insurance and all other related costs of all personnel and property hired or acquired by Broker during the term of this Agreement. Whenever on the Stations’ premises, Broker’s personnel shall be subject to the supervision and the direction of Licensee.
(iii) On and after the date that occurs sixty (60) days after the Effective Date, the Broker shall have the right to offer employment to any of Licensee’s employees. To the extent that an individual is not offered and/or does not accept an offer of employment with Broker (“Non-Broker Employees”), he or she shall (A) remain an employee of Licensee, (B) except as provided in Sections 1 and 2(c) of Attachment 1, Broker shall have no obligations with respect to such Non-Broker Employee, and (C) Licensee shall promptly take such action to ensure that the Non-Broker Employee has no continuing role with respect to the operations of any Station, except to the extent that Licensee determines is reasonably necessary under the FCC Rules. Once Broker has determined which employees to whom Broker intends to offer employment, then Broker shall notify Licensee of the names of such Licensee employees.
(c) Expenses and Liabilities.
(i) Subject to the provisions set forth in Attachment I hereto, Licensee shall be responsible for the timely payment of all fees, costs and other expenses associated with the day-to-day operation of the Stations, including, without limitation, all (A) corporate overhead, maintenance, repair and replacement expenses and capital expenditures and costs to and for the Stations’ transmission facilities, equipment, Studios and Broadcast Equipment, in the ordinary course; (B) mortgage and/or lease payments, taxes and insurance relating to real property owned or leased by Licensee, if any; (C) any federal, state and local taxes levied upon the Stations and Licensee in connection with the operation of the Stations, including employee payroll taxes; (D) electric, telecommunications and other utility payments; (E) casualty and liability insurance for all Station facilities; (F) all FCC regulatory and filing fees and assessments; (G) legal and accounting and other professional fees and expenses relating to the Stations’ operations, maintenance of the Stations’ federal, state and local licenses and permits, and compliance with federal, state and local requirements; (H) and the fees of Licensee’s consulting engineer.
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(ii) Subject to the provisions set forth in Attachment I hereto, and except as otherwise provided in this Agreement, Broker shall be responsible for all liabilities, debts and obligations arising from the acquisition of Broker Supplied Programming, including, without limitation, accounts payable, barter agreements and unaired advertisements; provided, that, such responsibility shall be limited to costs specifically arising from the acquisition and broadcast of such programming, and not operational expenses. Broker shall pay or reimburse Licensees for all telephone calls associated with program production and listener responses, for the fees to ASCAP, BMI and SESAC related to the Broker Supplied Programming, and for any other copyright fees attributable to the Broker Supplied Programming broadcast on the Stations pursuant to this Agreement. Broker shall make any arrangements necessary and be solely responsible for the cost of delivering the Broker Supplied Programming to the Stations.
6. Operation of Stations. Notwithstanding any other provision of this Agreement, Licensee shall have full authority and power over the operation of the Stations during the Term of this Agreement as more specifically set forth below.
(a) Licensee Control of Station Operations. Licensee shall retain control over the policies, programming and operations of the Stations, including, without limitation: (i) the right to suspend or cancel programming or advertisements pursuant to Section 4(a) herein, (ii) the right to preempt any programs not in the public interest or in order to broadcast a program deemed by Licensee to be of greater national, regional or local interest (provided that Licensee shall exercise such right only to the extent necessary to carry out its obligations as FCC licensee, and shall not exercise such right in an arbitrary manner or for the commercial advantage of Licensee or others), and (iii) the right to take any other actions necessary for compliance with federal, state and local laws, the Act and the rules, regulations and policies of other federal government entities. Licensee will use its best efforts to give Broker reasonable notice in writing of its intention to preempt Brokered Programming. Licensee also shall retain the right to break into Brokered Programming without prior notice in case of an emergency, provided that all revenues for advertising time airing during such emergency programming shall be remitted to Broker. In the event that the broadcast of Brokered Programming on the Stations is preempted, suspended, cancelled or otherwise disrupted, other than pursuant to Sections 3(d) and 4(a) or this Section 6(a) (in which case Licensee shall have no liability to Broker), then the payments by Broker of all amounts due hereunder shall be prorated by Station on a daily basis and Broker shall not be obligated to make payments for those days and for those Stations on which Brokered Programming was preempted, suspended, cancelled or disrupted.
(b) LicenseeResponsibility for FCC Compliance. Licensee shall at all times be solely responsible for compliance with all applicable FCC Rules, including those relating to public service programming, maintenance of political and public inspection files, station records and the Stations’ logs, the preparation of issues/programs lists, and for retaining and supervising one or more chief operators, as that term is defined by the FCC, to ensure compliance with the FCC Rules governing the technical operation of the Stations. Broker shall maintain all necessary records to permit Licensee to meet its obligations under this paragraph and shall otherwise fully cooperate with Licensee regarding Licensee’s responsibilities hereunder. Except as required to comply with FCC Rules and policies, including those regarding the maintenance of the public inspection file as applicable (which shall at all times remain the responsibility of Licensee), Licensee shall not be required to receive or handle messages in connection with programs broadcast on the Stations. During the Term, Licensee shall, with Broker’s cooperation and assistance, file all reports, applications, notices, responses, and other papers with the FCC and any other federal, state, or local regulatory agency or authority relating to the FCC Licenses and the operation of the Stations; provided, that, if Licensee fails to timely file such reports, applications, notices, responses, and other papers, then Broker, with Licensee’s supervision and assistance, may file such reports for Licensee.
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(c) Depiction of Licensee. Broker agrees that, during the Term of this Agreement, it shall not represent itself to be the FCC licensee of any Station to any party.
(d) Contracts. Subject to Section 1 above, Broker may elect to assume any or all of Licensee’s rights, obligations and commitments under Licensee’s existing programming, cash advertising, trade/barter and vendor or supplier agreements (“Licensee’s Contracts”) to the extent permitted by FCC Rules and other applicable Law. In the event that commercial advertising time to be run after the Effective Date was prepaid (in cash or goods) to Licensee under any Licensee’s Contracts that Broker elects to assume, Broker shall be entitled to reimbursement for the value of such commercial advertising time. In the event that Broker wishes to recommend the termination or alteration of any Licensee’s Contracts, then Licensee agrees to discuss in good faith such recommendation. Neither Broker nor Licensee will enter into any third-party contracts, leases or agreements that would conflict with this Agreement or result in a material breach of this Agreement.
7. Default.
(a) Events of Default by Broker. The following shall, after the expiration of the applicable cure periods, constitute Events of Default by Broker:
(i) Broker’s failure to timely pay pursuant to subsection 3 of Attachment I hereto the undisputed portion of any Shortfall Reimbursement (as that term is defined in Attachment I hereto) or any obligations required to be met by the Broker hereunder;
(ii) the default by Broker in the material observance or performance of any material covenant, condition or agreement contained herein;
(iii) if Broker (A) shall make a general assignment for the benefit of creditors, or (B) file or have filed against it a petition for bankruptcy, reorganization or an arrangement for the benefit of creditors, or for the appointment of a receiver, trustee or creditor representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days; or
(iv) if any material representation or warranty herein made by Broker, or in any certificate or document furnished by Broker to Licensee pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made or furnished.
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(b) Events of Default by Licensee. The following shall, after the expiration of the applicable cure periods, constitute Events of Default by Licensee:
(i) if the broadcast of Brokered Programming on the Stations is preempted, suspended, cancelled or otherwise disrupted through actions of Licensee, other than pursuant to Sections 3(d), 4(a), or 6(a);
(ii) if Broker is prevented from exercising its rights pursuant to Section 3(b) to use the Studios, Sites or Broadcast Equipment;
(iii) the default by Licensee in the observance or performance of any covenant, condition or agreement contained herein;
(iv) if any material representation or warranty herein made by Licensee, or in any certificate or document furnished by Licensee to Broker pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made or furnished.
(c) CurePeriods. An Event of Default shall not be deemed to have occurred until the date that occurs five (5) business days after the date upon which the non-defaulting Party has provided the defaulting Party with written notice specifying the event or events that if not cured within such five-business day period, would constitute an Event of Default and specifying the action necessary to cure the default within such period. This period may be extended for a reasonable period of time by an agreement between the Parties.
8. Termination. This Agreement shall terminate (a) upon the assignment of the FCC Licenses for the Stations to the Broker or its designee, (b) with respect to any Station or Stations, upon the closing of a sale of such Station or Stations to a third party (a “Third-Party Sale”), (c) upon any expiration or termination of the Partial Strict Foreclosure Agreement, or (d) otherwise pursuant to the terms of this Agreement.
(a) Termination Upon Default. Upon the occurrence of an Event of Default, the non-defaulting Party may terminate this Agreement, provided, that, it is not also in material default hereunder. Notwithstanding the foregoing, or any provision of this Agreement, any termination of this Agreement: (i) shall not constitute an election of remedies with regard to such default or such termination; and (ii) shall not affect, or limit, the ability of the non-defaulting Party to avail itself of any and all remedies which otherwise would have been available to it, at law or in equity.
(b) TerminationUpon Certain Events. This Agreement may be terminated in Broker’s sole discretion if the application for assignment of the FCC Licenses for the Stations to the Broker or its designee (the “FCC Application”) is dismissed or denied by the FCC by an order that is no longer subject to any stay, reconsideration, review or appeal, including such action by the FCC on its own motion. Notwithstanding the foregoing, however, any exercise by Broker or its designee pursuant to the Partial Strict Foreclosure Agreement of its right, if any, to seek specific performance to purchase the Stations shall not constitute a termination of this Agreement.
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(c) Termination Upon Order of Governmental Authority. Subject to the termination rights provided herein, if this Agreement is challenged at the FCC, Licensee and Broker shall jointly defend the Agreement and the parties’ performance thereunder throughout all FCC proceedings, with the intention that the Parties share approximately equally the cost of defense. If portions of this Agreement do not receive the approval of the FCC, then the Parties shall reform the Agreement as necessary to satisfy the FCC’s concerns. If the Parties are unable despite good faith negotiation for a period of thirty (30) days to reform the Agreement as necessary to satisfy such concerns, Broker may terminate this Agreement by giving thirty (30) days’ prior written notice to Licensee.
(d) Reserved.
9. Mutual Representations, Warranties and Covenants. Licensee and Broker represent that they are legally qualified, empowered and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or other obligation to which either party is subject or by which it is bound. Without limiting the foregoing:
(a) Broker certifies that this Agreement complies with the FCC Rules regarding ownership of broadcasting stations, 47 C.F.R. §73.3555; and
(b) Licensee certifies that it maintains ultimate control of the Stations’ facilities, including control over the Stations’ finances, personnel, and programming.
10. Notices. All notices, demands, or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given or made when (a) delivered personally to the recipient, (b) sent to the recipient by electronic mail (in which case, it will be effective upon receipt of confirmation of good transmission, including, but not limited to, any response to such electronic mail), or (c) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid), and in the cases of clauses (a) and (c) above, will be accompanied by email within one (1) business day of the day notice is given. Such notices, demands and other communications will be sent to the parties at the addresses indicated below, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party:
If to Licensee, to:
Sovryn Holdings, Inc.
450 Park Avenue, 30^th^ Floor
New York, New York 10022
Attention: Phil Falcone
Telephone: 917-566-8988
Email: pfalcone@go.tv
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if to Broker, to:
| with a copy to (which<br>shall not constitute notice): |
|---|
| -<br>and - |
11. Modification and Waiver. No modification of any provision of this Agreement shall in any event be effective unless it is in writing and signed by all Parties, and then such modification shall be effective only in the specific instance and for the purpose for which given. The Effective Date may be changed upon written agreement by the Parties hereto.
12. Construction. This Agreement shall be construed in accordance with the Act, the laws of the State of Delaware and the FCC Rules. This Agreement shall not be interpreted or construed more strictly against any one Party by reason of any rule of interpretation or construction under which a document is to be construed more strictly against the drafting Party.
13. Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. Notwithstanding any other provision of this Agreement to the contrary, Broker shall have the right at its sole discretion (without Licensee’s consent) to assign this Agreement and all of its rights and obligations hereunder to any other entity that is a direct or indirect parent or subsidiary of the Broker or an affiliated company under common ownership or control with the Broker.
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14. Counterpart Signatures. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. A facsimile or PDF of a signature will be given the same binding effect as if the signature were original. This Agreement shall be effective as of the date first above written.
15. Amendments. No alteration, modification or change of this Agreement shall be valid unless it is in writing executed by the Parties hereto.
16. No Partnership or Joint Venture Created. Nothing in this Agreement shall be construed to make Licensee and Broker partners or joint venturers or to afford any rights to any third party other than as expressly provided herein.
17. Severability. Subject to the provisions hereof, in the event any provision contained in this Agreement is held to be invalid, illegal or unenforceable, such holding shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been contained herein.
18. Governing Law. This Agreement shall be construed, performed and enforced in accordance with, and governed by, the laws of the State of New York (without giving effect to the principles of conflicts of laws thereof), except to the extent that the laws of such State are superseded by other applicable federal law.
19. Public Announcement. Licensee shall place a copy of this Agreement in the public files of the Stations to the extent required by the FCC Rules, and the parties acknowledge that this Agreement shall be filed with the FCC Application. As to any other announcements or press releases, no party hereto shall, and each party hereto shall direct and use reasonable efforts to cause its representatives and agents to not, directly or indirectly, issue any press release or make any public announcement, comment or statement with respect to, or otherwise divulge or disclose the existence of, this Agreement, or the transactions contemplated hereby or the terms, conditions or other aspects of such transactions without prior approval of the other Parties hereto (which shall not be unreasonably withheld or delayed), except as and to the extent that such party shall be obligated by law, rule or regulation, in which case the other Party hereto shall be so advised and the Parties hereto shall use commercially reasonable efforts to cause a mutually agreeable release or announcement to be issued.
20. Further Assurances. At the request and the sole expense of the requesting Party, Licensee or Broker, as applicable, shall execute and deliver, or cause to be executed and delivered, such documents as Licensee or Broker, as applicable, or their respective counsel may reasonably request to effectuate the purposes of this Agreement.
21. Successors and Assigns. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the Parties hereto.
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22. Indemnificationby Broker. Broker shall indemnify and hold harmless Licensee against all claims, causes of action, damages, liability, costs and expenses (including reasonable attorney’s fees and expenses) arising from Broker’s use of the Stations’ facilities and equipment, the broadcast of Brokered Programming on the Stations’ transmission facilities (unless such programming was provided under Licensee Program Contracts or was broadcast at the direction of Licensee), and from any failure by Broker to comply with its obligations under this Agreement, including without limitation for libel, slander, unfair competition or trade practices, infringement of trademarks, service marks, trade names or program titles, violation of rights of privacy, infringement of copyrights and other proprietary rights, and violation of FCC or other regulatory or legal requirements, whether caused by the action or inaction of Broker, other than on account of Licensee’s gross negligence or willful misconduct.
{Signature Page to Follow}
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INWITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first above written.
| LICENSEE: | ||
|---|---|---|
| SOVRYN HOLDINGS, INC. | ||
| By: | /s/ Phillip Falcone | |
| Name: | Phillip Falcone | |
| Title: | CEO and Secretary | |
| BROKER: | ||
| --- | --- | --- |
| STATION<br> BREAK OPERATING, LLC | ||
| By: | /s/ Lawrence Cutler | |
| Name: | Lawrence Cutler | |
| Title: |
[Signature Page to Local Marketing Agreement]
ATTACHMENTI
Compensation and Reimbursement Schedule
1. Expense Reimbursement. During the Term, Licensee shall pay all of its expenses in connection with its operation of the Stations in the ordinary course (the “Station Expenses”). From the Effective Date through the end of the calendar month in which the Effective Date occurs, and for each calendar month thereafter for the remainder of the Term (prorated as set forth below), a designated representative of Licensee shall deliver to Broker within ten (10) days following the end of each such month a statement (“Expense Statement”) setting forth in commercially reasonable detail the Station Expenses that Licensee paid during such month, together with such supporting documentation as Broker may reasonably request. If the Station Expenses exceed the cash received by the Stations (“Station Revenue”) during such calendar month, then the Broker shall pay the difference between the Station Expenses and the Station Revenue upon receipt of an Expense Statement (such payment, a “Shortfall Reimbursement”) pursuant to the payment terms set forth in Subsection 3 below. Any Station Expense that straddles the Term and any period beginning or ending before or after the Term that is not clearly allocable to periods before or after the Term shall be prorated between Licensee and Broker on the basis of the number of days elapsed. For purposes of clarity and avoidance of doubt, the Parties understand and agree that the Station Expenses in the ordinary course shall include, but are not limited to, the following:
(a) all monthly costs incurred by Licensee in connection with the operation of the Stations, and maintenance of the Stations’ licenses, permits and authorizations in force, during the Term of this Agreement;
(b) all lease payments for the leased Real Property and all other costs incident thereto;
(c) all utility costs (telephone, electricity, water, etc.) relating to the Stations;
(d) all delivery and postal services,
(e) all legal, accounting, and other professional fees and expenses,
(f) all fees and expenses of Licensee Program Contracts and Licensee’s Contracts (to the extent not assumed by Broker), music licensing fees, insurance, security, equipment and vehicle expenses;
(g) all real estate and personal property taxes, if any, relating to the Stations’ transmitter sites, transmission equipment, real property owned by Licensee and studio Equipment;
(h) all FCC regulatory fees and filing fees with respect to applications or other filings relating to the Stations, excluding any filing fees or other expenses arising out of the transactions contemplated by the Partial Strict Foreclosure Agreement;
(i) all costs, expenses and capital costs and expenditures associated with the maintenance and operation of the Stations and the Station premises and including, without limitation, those costs and expenses of Licensee referred to in, or to be incurred by Licensee in connection with their obligations under, Section 3, 4, 5 and 6 of this Agreement;
(j) all costs for engineering support for the Stations;
(k) all usual and ordinary expenses of operation of the Stations incurred by Licensee consistent with past practices, except as affected by operation under this Agreement; and
(l) all employee costs and expenses (including salaries, bonuses, overtime, severance, extended disability, maternity and other leave, travel and entertainment charges, taxes, insurance, and all other related costs of personnel employed by Licensee during such month (on a pro rated basis) necessary for the operation of the Stations from and after the date of the Agreement in compliance with the FCC’s rules and regulations).
Notwithstanding anything herein to the contrary, Broker shall have the right to perform and/or contract for the performance of or pay directly all Station Expenses identified in clauses (i)-(j) above to the extent permitted by applicable Law.
2. Non-Station Expenses. Anything to the contrary contained herein or in this Agreement notwithstanding, the Station Expenses shall not include, and Broker shall not be responsible for or be required to reimburse Licensee for any of the following:
(m) Licensee’s income and similar taxes based on or measured by Licensee’s net income;
(n) interest on and principal of loans and/or indebtedness and other fees, charges, costs and expenses relating to loans and/or indebtedness;
(o) any compensation provided to any Non-Broker Employee (other than Severance Costs required under applicable law or as may be otherwise agreed to by the Parties in writing);
(p) any costs, fees or expenses in connection with or arising out of this Agreement and/or the Partial Strict Foreclosure Agreement and/or the other Restructuring Transactions (as defined in the Partial Strict Foreclosure Agreement) and/or the negotiation, administration, interpretation or closing of this Agreement and/or the Partial Strict Foreclosure Agreement and/or the other Restructuring Transactions (as defined in the Partial Strict Foreclosure Agreement) and/or the transactions contemplated hereby and thereby, including, without limitation, any legal, accounting or other professional costs, fees or expenses associated with any of the foregoing; and.
(q) any unpaid costs, fees, expenses or obligations of Licensee as of the Effective Date of this Agreement.
3. Payment Terms. Broker shall pay any Shortfall Reimbursement to Licensee within twenty (20) days after receipt by Broker of an Expense Statement. Payments of all amounts due hereunder for any partial month shall be prorated on a daily basis. Should this Agreement terminate upon the assignment of the Stations to Broker or its designee pursuant to the Partial Strict Foreclosure Agreement, then the final payments hereunder shall be made on the Closing Date. Licensee agrees to provide Broker with an itemized calculation of any Shortfall Reimbursement, which calculation shall be subject to Broker’s review.
4. Reimbursement Cap. Notwithstanding anything to the contrary contained in this Attachment I, in no event shall a Shortfall Reimbursement in any given calendar month exceed the total cash actually collected by the Broker from its programming and use of the Stations in such month (such amount, the “Reimbursement Cap”). Licensee shall be afforded reasonable access to all records regarding Broker’s performance under this Agreement, including the total cash collected throughout the Term. Licensee shall be afforded reasonable access to all records necessary to establish the total cash collected during the Term for purposes of determining the accuracy of an asserted Reimbursement Cap. In the event of a dispute regarding any Shortfall Reimbursement owed to the Licensee during or at the termination of this Agreement, the Parties agree to act in good faith to negotiate a resolution of the disputed issue that is reasonably satisfactory to both Parties.
Schedule 5(b)
Employees
Exhibit10.23
SECURITYAGREEMENT
This SECURITY AGREEMENT, dated as of February 17, 2021 (this “Agreement”), is by and among Madison Technologies, Inc., a Nevada corporation (the “Company”), the Subsidiaries of the Company set forth on the signature pages hereto or that become party hereto following the date hereof (such subsidiaries, the “Subsidiaries” and, together with the Company, the “Debtors”), the Secured Parties (as defined below) and Arena Investors, LP as agent for the Secured Parties (as defined below) (in such capacity, together with its successors and assigns in such capacity, the “Agent”).
WI T N E S S E T H:
WHEREAS, the Company has issued to the Purchasers Original Issue Discount Senior Secured Convertible Promissory Notes issued as of the date hereof and due thirty-six (36) months following their issuance, in the aggregate principal amount of $16,500,000 (the “Notes”);
WHEREAS, pursuant to the Securities Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with its terms, the “Purchase Agreement”), the Purchasers have severally agreed to extend loans to the Company evidenced by the Notes;
WHEREAS, in order to induce the Purchasers to extend the loans evidenced by the Notes to the Company, each Debtor has agreed to grant to the Agent, for the benefit of the Secured Parties, a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Notes; and
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC. In addition to the terms defined elsewhere in this Agreement, capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.
(a) “Collateral” means the collateral in which the Agent is granted a security interest for the benefit of the Secured Parties by this Agreement and which shall comprise all the assets of the Debtors, including, without limitation, the following personal property of the Debtors, whether presently owned or existing or hereafter acquired or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities (as defined below):
(i) All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items used and useful in connection with any Debtor’s businesses and all improvements thereto; and (B) all inventory;
(ii) All contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests, stock or other securities, rights under any of the Organizational Documents, agreements related to the Pledged Securities, licenses, distribution and other agreements, computer software (whether “off-the-shelf”, licensed from any third party or developed by any Debtor), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and rights, goodwill, Intellectual Property and income tax refunds;
(iii) All accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each account, including any right of stoppage in transit;
| (iv) | All<br> documents, letter-of-credit rights, instruments and chattel paper; |
|---|---|
| (v) | All<br> commercial tort claims; |
| --- | --- |
| (vi) | All<br> deposit accounts and all cash (whether or not deposited in such deposit accounts); |
| --- | --- |
| (vii) | All<br> investment property; |
| --- | --- |
| (viii) | All<br> supporting obligations; |
| --- | --- |
| (ix) | All<br> files, records, books of account, business papers, and computer programs; |
| --- | --- |
(x) all FCC Licenses, including, without limitation, the right to receive monies, proceeds, or other consideration in connection with the sale, assignment, transfer, or other disposition of any FCC Licenses, the proceeds from the sale of any FCC Licenses or any goodwill or other intangible rights or benefits associated therewith, including without limitation all right of each Debtor to (A) transfer, assign or otherwise dispose of its rights, title and interests, if any, under or in respect of such FCC Licenses, (B) exercise any rights, demands and remedies against the lessor, licensor or other parties thereto, and (C) all rights of such Debtor to receive proceeds of any insurance, indemnities, warranties, guaranties or claims for damages in connection therewith; provided, however that such security interest does not include at any time any FCC License to the extent (but only to the extent) that at such time the Agent may not validly possess a security interest directly in the FCC License pursuant to applicable federal law, including the Communications Laws, as in effect at such time, but such security interest does include at all times all proceeds of the FCC Licenses, and the right to receive all monies, consideration, economic value and proceeds (the “Economic Value of the FCC Licenses”) derived from or in connection with the sale, assignment, transfer, or other disposition of the FCC Licenses (it being understood and agreed that the right to receive the Economic Value of the FCC Licenses shall be deemed a Lien held by the Agent that attaches upon execution of this Agreement); and
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(xi) the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(x) above.
Without limiting the generality of the foregoing, the “Collateral” shall include all investment property and general intangibles respecting ownership and/or other equity interests in each Subsidiary, including, without limitation, the shares of capital stock and the other equity interests listed on Schedule G hereto (as the same may be modified from time to time pursuant to the terms hereof), and any other shares of capital stock and/or other equity interests of any other direct or indirect subsidiary of any Debtor obtained in the future, and, in each case, all certificates representing such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights arising under or in connection with the Pledged Securities, including, but not limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided, however, that, to the extent permitted by applicable law, this Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset; provided, further, that the FCC Licenses shall not be subject to this provision, but instead shall be subject to the provisions contained in Section 1(a)(x) above.
(b) “Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.
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(c) “Necessary Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and such other instruments or documents as the Agent (as that term is defined below) may reasonably request.
(d) “Obligations” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor to the Secured Parties under this Agreement, the Notes, the other Transaction Documents and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Notes and the loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtors from time to time under or in connection with this Agreement, the Notes and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Debtor.
(f) “Organizational Documents” means, with respect to any Debtor, the documents by which such Debtor was organized (such as articles of incorporation, certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).
| (g) | “Pledged<br> Securities” shall have the meaning ascribed to such term in Section 4(g). |
|---|---|
| (h) | “Purchase<br> Agreement” shall have the meaning given to such term in the preamble. |
| --- | --- |
(i) “Secured Parties” means the Agent, the Purchasers from time to time party to the Purchase Agreement, any other holders of a Note and their respective, endorsees, transferees and assigns.
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2. Grantof Security Interest in Collateral. As an inducement for the Purchasers to extend the loans as evidenced by the Notes and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Agent for the benefit of the Secured Parties a perfected, first priority security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”).
3. Deliveryof Certain Collateral. Contemporaneously or prior to the execution of this Agreement, each Debtor shall deliver or cause to be delivered to the Agent (a) any and all certificates and other instruments representing or evidencing the Pledged Securities (if any), and (b) any and all certificates and other instruments or documents representing any of the other Collateral, in each case, together with all Necessary Endorsements. The Debtors are, contemporaneously with the execution hereof, delivering to Agent, or have previously delivered to Agent, a true and correct copy of each Organizational Document governing any of the Pledged Securities. Notwithstanding anything contained herein, prior to any Event of Default, each Debtor shall have the right vote any Pledged Securities and receive dividends therefrom.
4. Representations,Warranties, Covenants and Agreements of the Debtors. Except as set forth under the corresponding Section of the disclosure schedules delivered to the Secured Parties concurrently herewith (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof, each Debtor represents and warrants to, and covenants and agrees with, the Agent for the benefit of the Secured Parties as follows:
(a) The Debtors have no place of business or offices where their respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A attached hereto. Except as specifically set forth on Schedule A, each Debtor is the record owner of the real property where such Collateral is located, and there exist no mortgages or other liens on any such real property except for Permitted Liens as set forth on Schedule A. Except as disclosed on Schedule A, none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.
(b) Except for Permitted Liens and as set forth on Schedule B attached hereto, the Debtors are the sole owners of the Collateral, free and clear of any liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the Security Interests. Except as set forth on Schedule C attached hereto, there is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Agent for the benefit of the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral. Except as set forth on Schedule C attached hereto and except pursuant to this Agreement, as long as this Agreement shall be in effect, the Debtors shall not execute and shall not knowingly permit to be on file in any such office or agency any other financing statement or other document or instrument (except to the extent filed or recorded in favor of the Agent for the benefit of the Secured Parties pursuant to the terms of this Agreement).
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(c) No written claim has been received that any Collateral or any Debtor’s use of any Collateral violates the rights of any third party. There has been no adverse decision to any Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of any Debtor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.
(d) Each Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at the locations set forth on Schedule A attached hereto and may not relocate such books of account and records or tangible Collateral unless it delivers to the Secured Parties at least thirty (30) days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interests to create in favor of the Agent for the benefit of the Secured Parties a valid, perfected and continuing perfected first priority lien in the Collateral (to the extent such Collateral can be perfected by the filing of a UCC financing statement).
(e) This Agreement creates in favor of the Agent for the benefit of the Secured Parties a valid first priority security interest in the Collateral, subject only to Permitted Liens, securing the payment and performance of the Obligations. Upon making the filings described in the immediately following paragraph, all security interests created hereunder in any Collateral which may be perfected by filing UCC financing statements shall have been duly perfected. Except for (i) the recordation of the Intellectual Property Security Agreement (as defined in Section 4(dd) hereof) with respect to copyrights and copyright applications referred to in paragraph (z) in the United States Copyright Office, (ii) the recordation of the Intellectual Property Security Agreement (as defined in Section 4(dd) hereof) with respect to patents and trademarks of the Debtors referred to in paragraph (bb) in the United States Patent and Trademark Office, and (iii) the delivery of the certificates and other instruments provided in Section 3, no action is necessary to create, perfect or protect the security interests created hereunder. Without limiting the generality of the foregoing, except for the foregoing, no consent of any third parties and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (x) the execution, delivery and performance of this Agreement, (y) the creation or perfection of the Security Interests created hereunder in the Collateral (to the extent such Collateral can be perfected by the filing of a UCC financing statement) or (z) the enforcement of the rights of the Agent and the Secured Parties hereunder.
(f) Each Debtor hereby authorizes the Agent to file one or more financing statements under the UCC, with respect to the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.
(g) The capital stock and other equity interests listed on Schedule G hereto (including all uncertificated equity interests consisting of capital stock of any corporation as well as partnership or limited liability company interests of any other entity) (the “Pledged Securities”) represent all of the capital stock and other equity interests of the Debtors, and represent all capital stock and other equity interests owned, directly or indirectly, by the Company. All of the Pledged Securities are validly issued, fully paid and nonassessable, and the Company is the legal and beneficial owner of the Pledged Securities, free and clear of any lien, security interest or other encumbrance except for the security interests created by this Agreement and other Permitted Liens.
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(h) Except for Permitted Liens, each Debtor shall at all times maintain the liens and Security Interests provided for hereunder as valid and perfected, first priority (to the extent that such liens and Security Interests can be perfected by the filing of a UCC financing statement) liens and security interests in the Collateral in favor of the Agent for the benefit of the Secured Parties until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 14 hereof. Each Debtor hereby agrees to defend the same against the claims of any and all persons and entities. Each Debtor shall safeguard and protect all Collateral for the account of the Secured Parties. At the request of the Agent, each Debtor will deliver to the Agent on behalf of the Secured Parties at any time or from time to time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Agent and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by the Agent to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality of the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interests hereunder, and each Debtor shall obtain and furnish to the Agent from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority of the Security Interests hereunder. In addition to the foregoing, each Debtor shall promptly execute and deliver to the Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Agent’s security interest in the Collateral, including, without limitation, if applicable, the execution and delivery of a separate security agreement with respect to each Debtor’s Intellectual Property (“Intellectual Property Security Agreement”) in which the Agent has been granted a security interest hereunder for the benefit of the Secured Parties, substantially in a form reasonably acceptable to the Agent, which Intellectual Property Security Agreement, other than as stated therein, shall be subject to all of the terms and conditions hereof.
(i) No Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for Permitted Liens or non-exclusive licenses granted by a Debtor in its ordinary course of business, sales of inventory by a Debtor in its ordinary course of business and the replacement of worn-out or obsolete equipment by a Debtor in its ordinary course of business) without the prior written consent of the Agent.
(j) Each Debtor shall keep and preserve its equipment, inventory and other tangible Collateral in good condition, repair and order (other than ordinary use wear and tear) and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.
(k) Each Debtor shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof. Each Debtor shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Agent, that (a) the Agent will be named as lender loss payee and additional insured under each such insurance policy; (b) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective as to the Agent for at least thirty (30) days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (c) the Agent will have the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice from the insurer of such default. If no Event of Default (as defined in the Notes) exists and if the proceeds arising out of any claim. Loss payments received by any Debtor after an Event of Default occurs and is continuing or in excess of $100,000 for any occurrence or series of related occurrences, upon approval by Agent, which approval shall not be unreasonably withheld, delayed, denied or conditioned, loss payments in each instance will be applied by the applicable Debtor to the repair and/or replacement of property with respect to which the loss was incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the extent not so applied, shall be paid to the Agent on behalf of the Secured Parties.
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(l) Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Parties, in sufficient detail, of any material adverse change in the Collateral, and of the occurrence of any event that would have a material adverse effect on the value of the Collateral or on the Agent’s security interest for the benefit of the Secured Parties, therein.
(m) Upon reasonable prior notice (so long as no Event of Default has occurred or continuing, which in either such event, no prior notice is required), each Debtor shall permit the Agent and its representatives and agents to inspect the Collateral during normal business hours and to make copies of records pertaining to the Collateral as may be reasonably requested by the Agent from time to time.
(n) Each Debtor shall promptly notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any material portion of the Collateral and of any other information received by such Debtor that may materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.
(o) All information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of any Debtor with respect to the Collateral is accurate and complete in all material respects as of the date furnished.
(p) The Debtors shall at all times preserve and keep in full force and effect their respective valid existence and good standing and any rights and franchises material to its business. No Debtor will change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any new fictitious name unless it provides at least thirty (30) days’ prior written notice to the Agent of such change and, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
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(q) Except in the ordinary course of business, no Debtor may consign any of its inventory or sell any of its inventory on bill-and-hold, sale-or-return, sale-on-approval, or other conditional terms of sale without the consent of the Agent, which shall not be unreasonably withheld, delayed, denied, or conditioned.
(r) No Debtor may relocate its chief executive office to a new location without providing thirty (30) days’ prior written notification thereof to the Agent and so long as, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
(s) Each Debtor was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in Schedule D attached hereto, which Schedule D sets forth each Debtor’s organizational identification number or, if any Debtor does not have one, states that one does not exist.
(t) (i) The actual name of each Debtor is the name set forth in Schedule D attached hereto; (ii) no Debtor has any trade names except as set forth on Schedule E attached hereto; (iii) no Debtor has used any name other than that stated in the preamble hereto or as set forth on Schedule E for the preceding five (5) years; and (iv) no entity has merged into any Debtor or been acquired by any Debtor within the past five years except as set forth on Schedule E.
(u) Each Debtor, in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of Agent regarding the Pledged Securities consistent with the terms of this Agreement without the further consent of any Debtor as contemplated by Section 8-106 (or any successor section) of the UCC. Further, each Debtor agrees that it shall not enter into a similar agreement (or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or entity.
(v) Each Debtor shall cause each subsidiary of such Debtor to immediately become a party hereto (an “Additional Debtor”), by executing and delivering an Additional Debtor Joinder in substantially the form of Annex A attached hereto and comply with the provisions hereof applicable to the Debtors. Concurrently therewith, the Additional Debtor shall deliver replacement schedules for, or supplements to all other Disclosure Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall supersede, or supplements shall modify, the Disclosure Schedules then in effect. The Additional Debtor shall also deliver such authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements and other information and documentation as the Agent may reasonably request. Upon delivery of the foregoing to the Agent, the Additional Debtor shall be and become a party to this Agreement with the same rights and obligations as the Debtors, for all purposes hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed to have made the representations, warranties and covenants set forth herein as of the date of execution and delivery of such Additional Debtor Joinder, and all references herein to the “Debtors” shall be deemed to include each Additional Debtor.
(w) Each Debtor shall vote the Pledged Securities to comply with the covenants and agreements set forth herein and in the Notes.
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(x) Each Debtor shall register the pledge of the applicable Pledged Securities on the books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities to register the pledge of the applicable Pledged Securities in the name of the Agent for the benefit of the Secured Parties on the books of such issuer. Further, except with respect to certificated securities delivered to the Agent, the applicable Debtor shall deliver to Agent an acknowledgement of pledge (which, where appropriate, shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed by the issuer of the applicable Pledged Securities, which acknowledgement shall confirm that: (a) it has registered the pledge on its books and records; and (b) at any time directed by Agent during the continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged Securities into the name of any designee of Agent, will take such steps as may be necessary to effect the transfer, and will comply with all other instructions of Agent regarding such Pledged Securities without the further consent of the applicable Debtor.
(y) In the event that, upon an occurrence of an Event of Default, Agent shall sell all or any of the Pledged Securities to another party or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver to Agent or the Transferee, as the case may be, the articles of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures, agreements, evidences of indebtedness, books of account, financial records and all other Organizational Documents and records of the Debtors and their direct and indirect subsidiaries (but not including any items subject to the attorney-client privilege related to this Agreement or any of the transactions hereunder); (ii) use its best efforts to obtain resignations of the persons then serving as officers and directors of the Debtors and their direct and indirect subsidiaries, if so requested; and (iii) use its best efforts to obtain any approvals that are required by any governmental or regulatory body in order to permit the sale of the Pledged Securities to the Transferee or the purchase or retention of the Pledged Securities by Agent and allow the Transferee or Agent to continue the business of the Debtors and their direct and indirect subsidiaries.
(z) Without limiting the generality of the other obligations of the Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the United States Copyright Office all of its material copyrights, (ii) following an Event of Default, upon the written request of the Agent, cause the security interest contemplated hereby with respect to all Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office to be duly recorded at the applicable office, and (iii) give the Agent notice whenever it acquires (whether absolutely or by license) or creates any additional material Intellectual Property.
(aa) Each Debtor will from time to time, at the joint and several expense of the Debtors, promptly execute and deliver all such further instruments and documents, and take all such further action as may be necessary or desirable, or as the Agent may reasonably request, in order to perfect (to the extent such security interest can be perfected by the filing of a UCC financing statement) and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties to exercise and enforce their rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.
(bb) Schedule F attached hereto lists all of the patents, patent applications, trademarks, trademark applications, registered copyrights, and domain names owned by any of the Debtors as of the date hereof. Schedule F lists all material licenses in favor of any Debtor for the use of any patents, trademarks, copyrights and domain names as of the date hereof. All material patents and trademarks of the Debtors have been duly recorded at the United States Patent and Trademark Office and all material copyrights of the Debtors have been duly recorded at the United States Copyright Office.
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(cc) Each Debtor shall promptly execute and deliver to the Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Agent’s security interest in the Collateral.
(dd) Each Debtor will not transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive licenses granted by a Debtor in its ordinary course of business and sales of inventory by a Debtor in its ordinary course of business) without the prior written consent of the Agent.
5. Effectof Pledge on Certain Rights. If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership interests (regardless of class, designation, preference or rights) that may be converted into voting equity or ownership interests upon the occurrence of certain events (including, without limitation, upon the transfer of all or any of the other stock or assets of the issuer), it is agreed by Debtors that the pledge of such equity or ownership interests pursuant to this Agreement or the enforcement of any of Agent’s rights hereunder shall not be deemed to be the type of event which would trigger such conversion rights notwithstanding any provisions in the Organizational Documents or agreements to which any Debtor is subject or to which any Debtor is party.
| 6. | Defaults.<br> The following events shall be “Events of Default”: |
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| (a) | The<br> occurrence of an Event of Default (as defined in the Notes) under the Notes; |
| --- | --- |
(b) Any representation or warranty of any Debtor in this Agreement shall prove to have been incorrect in any material respect when made;
(c) The failure by any Debtor to observe or perform any of its obligations hereunder for fifteen (15) days after delivery to such Debtor of notice of such failure by or on behalf of a Secured Party unless such default is capable of cure but cannot be cured within such time frame and such Debtor is using best efforts to cure same in a timely fashion; or
(d) If any material provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority having jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability thereof, or any Debtor shall deny that any Debtor has any liability or obligation purported to be created under this Agreement.
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| 7. | Duty to Hold in Trust. |
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(a) Upon the occurrence and during the continuance of any Event of Default, each Debtor shall upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interests, whether payable pursuant to the Notes or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Agent, pro-rata in proportion to their respective then-currently outstanding principal amount of Notes for application to the satisfaction of the Obligations (and if any Notes is not outstanding, pro-rata in proportion to the initial purchases of the remaining Notes).
(b) If any Debtor shall become entitled to receive or shall receive any material securities or other property (including, without limitation, shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants, rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of such Debtor or any of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), such Debtor agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to deliver any and all certificates or instruments evidencing the same to Agent on or before the close of business on the fifth (5^th^) business day following the receipt thereof by such Debtor, in the exact form received together with the Necessary Endorsements, to be held by Agent subject to the terms of this Agreement as Collateral.
| 8. | Rights and Remedies Upon Default. |
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(a) Upon the occurrence and during the continuance of any Event of Default, the Agent (for the benefit of the Secured Parties) shall have the right to exercise all of the remedies conferred hereunder and under the Notes, and the Secured Parties shall have all the rights and remedies of a secured party under the UCC. Without limitation, the Agent, for the benefit of the Secured Parties, shall have the following rights and powers:
(i) The Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and each Debtor shall assemble the Collateral and make it available to the Agent at places which the Agent shall reasonably select, whether at such Debtor’s premises or elsewhere, and make available to the Agent, without rent, all of such Debtor’s respective premises and facilities for the purpose of the Agent taking possession of, removing or putting the Collateral in saleable or disposable form.
(ii) Upon written notice to the Debtors by Agent, all rights of each Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of each Debtor to receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease. Upon such written notice, Agent shall have the right to receive, for the benefit of the Secured Parties, any interest, cash dividends or other payments on the Collateral and, at the option of Agent, to exercise in such Agent’s discretion all voting rights pertaining thereto. Without limiting the generality of the foregoing, Agent shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or any Debtor or any of its direct or indirect subsidiaries.
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(iii) The Agent shall have the right to operate the business of each Debtor using the Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Agent may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to any Debtor or right of redemption of a Debtor, which are hereby expressly waived. Upon each such sale, lease, assignment or other transfer of Collateral, the Agent, for the benefit of the Secured Parties, may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of any Debtor, which are hereby waived and released.
(iv) The Agent shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or accounts to make payments directly to the Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights against such account debtors and obligors.
(v) The Agent, for the benefit of the Secured Parties, may (but is not obligated to) direct any financial intermediary or any other person or entity holding any investment property to transfer the same to the Agent, on behalf of the Secured Parties, or its designee.
(vi) The Agent may (but is not obligated to) transfer any or all Intellectual Property registered in the name of any Debtor at the United States Patent and Trademark Office and/or Copyright Office into the name of the Agent for the benefit of the Secured Parties or any designee or any purchaser of any Collateral.
(b) The Agent shall comply with any applicable law in connection with a disposition of Collateral and such compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Agent may sell the Collateral without giving any warranties and may specifically disclaim such warranties. If the Agent sells any of the Collateral on credit, the Debtors will only be credited with payments actually made by the purchaser. In addition, each Debtor waives (except as shall be required by applicable statute and cannot be waived) any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Agent’s rights and remedies hereunder, including, without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further exercise rights and remedies under this Section 8 or elsewhere provided by agreement or applicable law, each Debtor hereby grants to the Agent, for the benefit of the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, license or sublicense following an Event of Default, any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.
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9. Applicationsof Proceeds. Upon the occurrence and during the continuance of any Event of Default, the proceeds of any sale, lease or other disposition by the Agent of the Collateral hereunder or from payments made to the Agent on account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Agent in enforcing the Secured Parties’ rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding principal amounts of Notes at the time of any such determination), and to the payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or other disposition of all of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, the Debtors will be liable for the deficiency, together with interest thereon, at the rate of 20% per annum or the lesser amount permitted by applicable law (the “Default Rate”), and the reasonable fees of any attorneys employed by the Secured Parties to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all claims, damages and demands against the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross negligence or willful misconduct of the Secured Parties as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.
10. SecuritiesLaw Provision. Each Debtor recognizes that Agent may be limited in its ability to effect a sale to the public of all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as amended, or other federal or state securities laws (collectively, the “Securities Laws”), and may be compelled to resort to one or more sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof. Each Debtor agrees that sales so made may be at prices and on terms less favorable than if the Pledged Securities were sold to the public, and that Agent has no obligation to delay the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to the public under the Securities Laws. Each Debtor shall cooperate with Agent in its attempt to satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by Agent) applicable to the sale of the Pledged Securities by Agent.
11. Costsand Expenses. Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Agent. The Debtors shall also pay all other claims and charges which in the reasonable opinion of the Agent is reasonably likely to prejudice, imperil or otherwise affect the Collateral or the Security Interests therein. The Debtors will also, upon demand, pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Agent, for the benefit of the Secured Parties, may incur in connection with the creation, perfection, protection, satisfaction, foreclosure, collection or enforcement of the Security Interest and the preparation, administration, continuance, amendment or enforcement of this Agreement and pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Agent, for the benefit of the Secured Parties, and the Secured Parties may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties under the Notes or the other Transaction Documents.
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12. Responsibilityfor Collateral. The Debtors assume all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason. Without limiting the generality of the foregoing and except as required by applicable law, (a) neither the Agent nor any other Secured Party (i) has any duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by such Debtor thereunder. Neither the Agent nor any other Secured Party shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Agent or any other Secured Party of any payment relating to any of the Collateral, nor shall the Agent or any other Secured Party be obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Agent or any other Secured Party in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Agent or to which the Agent or any other Secured Party may be entitled at any time or times.
13. SecurityInterests Absolute. All rights of the Secured Parties and all obligations of each Debtor hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Notes or any agreement entered into in connection with the foregoing, or any portion hereof or thereof, against any other Debtor or Guarantor; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Notes, any other Transaction Document or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to a Debtor, or a discharge of all or any part of the Security Interests granted hereby. Until the Obligations shall have been paid and performed in full (other than contingent obligations for which no claim has been made), the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations. Each Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. Each Debtor waives all right to require the Secured Parties to proceed against any other person or entity or to apply any Collateral which the Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy. Each Debtor waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.
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14. Termof Agreement. This Agreement and the Security Interests shall terminate on the date on which all payments under the Notes have been indefeasibly paid in full and all other Obligations (other than contingent obligations for which no claim has been made) have been paid or discharged; provided, however, that all indemnities of the Debtors contained in this Agreement (including, without limitation, Annex B hereto) shall survive and remain operative and in full force and effect regardless of the termination of this Agreement.
| 15. | Power of Attorney; Further Assurances. |
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(a) Each Debtor authorizes the Agent, and does hereby make, constitute and appoint the Agent and its officers, agents, successors or assigns with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent or such Debtor, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts, money orders or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Agent; (ii) to sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the Agent, and at the expense of the Debtors, at any time, or from time to time, to execute and deliver any and all documents and instruments and to do all acts and things which the Agent deems necessary to protect, preserve and realize upon the Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Notes all as fully and effectually as the Debtors might or could do; and each Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding. The designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents or other documents or agreements to which any Debtor is subject or to which any Debtor is a party. Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default, the Agent (on behalf of the Secured Parties) is specifically authorized to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office.
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(b) Each Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact, with full authority in the place and instead of such Debtor and in the name of such Debtor, from time to time in the Agent’s discretion, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including the filing, in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of such Debtor where permitted by law, which financing statements may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like import, and ratifies all such actions taken by the Agent. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.
16. Notices. All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the Purchase Agreement.
17. OtherSecurity. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.
18. Appointmentof Agent. The Secured Parties hereby appoint Arena Investors LP to act as their agent (“Agent”) for purposes of exercising any and all rights and remedies of the Secured Parties hereunder and under the other Transaction Documents. Such appointment shall continue until revoked in writing by the Secured Parties, at which time the Secured Parties shall appoint a new Agent. The Agent shall have the rights, responsibilities and immunities set forth in Annex B hereto.
| 19. | Communications Law Provisions. |
|---|
(a) Notwithstanding any other provision of this Agreement or any other Transaction Document, the Collateral shall not include at any time any FCC Licenses held by Debtors to the extent (but only to the extent) that at such time Agent may not validly possess a security interest therein pursuant to the Communications Laws, as in effect at such time, but such security interest does include, to the maximum extent permitted by law all rights incident or appurtenant to all FCC Licenses and the right to receive all proceeds derived from or in connection with the sale, assignment or transfer of the FCC Licenses, as set forth in Section1(a)(x).
(b) Notwithstanding any other provision of this Agreement or any other Transaction Document, any foreclosure on, sale, transfer or other disposition of, or the exercise of any rights to vote or consent with respect to the FCC Licenses or any of the Collateral as provided herein or any other action taken or to be taken by Agent hereunder shall be in compliance with the Communications Laws, and to the extent required thereby, subject to the prior approval of the FCC. In determining whether an approval of the FCC is required in connection with any action taken under this Agreement, Agent shall be entitled to rely on the advice of FCC or regulatory counsel experienced in giving such advice selected by Agent.
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(c) It is the intention of the parties hereto that the Liens in favor of Agent on the FCC Licenses and the other Collateral shall in all relevant aspects be subject to and governed by the Communications Laws and that nothing in this Agreement shall be construed to diminish the control exercised by the Debtor except in accordance with the provisions of such Communications Laws. Each Debtor agrees that upon the written request from time to time by Agent it will (i) actively pursue obtaining any governmental, regulatory or third party consents, approvals or authorizations referred to in this Section 19, including, upon any written request of Agent following the occurrence of and during the continuance of an Event of Default, the preparation, signing and filing with (or causing to be prepared, signed and filed with) the FCC or any other governmental authority, the assignor’s, transferor’s or controlling person’s portion of any application or other request for consent, approval or authorization necessary or appropriate under the Communications Laws (A) to assign or transfer control of any FCC License, (B) to transfer control of any Debtor or Subsidiary of Debtor and/or (C) to transfer or assign any of the Collateral or assets of any Debtor or Subsidiary of Debtor, which is required to be signed by any Debtor or Subsidiary of a Debtor, (ii) cooperate fully with any trustee or receiver referred to below, the successful bidders at any foreclosure sale, and the Agent, including, without limitation, sharing any FCC registration numbers, account numbers and passwords for the FCC’s CDBS System as any such Person may request, (iii) pending the receipt of any FCC or any governmental authority approval, not do anything to delay, hinder, interfere or obstruct the exercise of the Agent’s rights or remedies hereunder in obtaining such approvals and (iv) to the extent permitted by law, irrevocably constitutes and appoints (for itself and the Subsidiaries) the Agent and any agent or officer thereof (which appointment is coupled with an interest) as its true and lawful attorney-in-fact with full irrevocable power and authority and in the place and stead of such Debtor (or the applicable Subsidiary) and in the name of such Debtor (or the applicable Subsidiary) or in its own name, from time to time in its discretion after the occurrence and during the continuance of an Event of Default and in connection with the foregoing, for the purpose of executing on behalf and in the name of such Debtor (or the applicable Subsidiary) any and all of the above-referenced instruments and to take any and all appropriate action in furtherance of the foregoing.
(d) Notwithstanding any other provision of this Agreement or any provision of any other Transaction Document to the contrary, following the occurrence and during the continuance of an Event of Default, the voting rights with respect to any Collateral that consists of equity securities in any Debtor that holds an FCC License, or that, directly or indirectly through one or more subsidiaries, controls an entity that holds an FCC License, shall, to the extent required by provisions of the Communications Laws, remain with the party or parties previously approved by the FCC to hold such voting rights to the Collateral. There shall be either a public or private arm’s length sale of such equity securities, and, to the extent required by provisions of the Communications Laws, the successful bidder for, or purchaser of, such equity securities at such sale shall neither acquire nor exercise any rights with respect to such equity securities until such time as the FCC shall have granted its consent to such acquisition or exercise.
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(e) To enforce the provisions of this Section 19, the Agent is empowered to seek from the FCC or any other governmental authority, to the extent required, consent to or approval of any involuntary transfer of control of any entity whose Collateral is subject to this Agreement for the purpose of seeking a bona fide purchaser to whom control will ultimately be transferred. Each Debtor hereby (i) agrees to consent to any such involuntary transfer of control upon the written request of the Agent after and during the continuance of an Event of Default, and (ii) without limiting any rights of the Agent under this Agreement, authorizes the Agent to nominate a trustee or receiver to assume, upon receipt of all necessary judicial, FCC or other governmental authority consents or approvals, control of or ownership of any or all of the FCC Licenses, related property and other licenses, certificates, approvals and permits and other Collateral, in order to effectuate the transactions contemplated in this Section 19. Such trustee or receiver shall have all the rights and powers as provided to it by applicable law or court order, or to the Agent under this Agreement and the other Transaction Documents, including the rights to seek from the FCC an involuntary assignment of any such FCC License and other assets for the purpose of seeking a bona fide purchaser to whom control will ultimately be assigned, subject to prior FCC consent. Each Debtor shall cooperate fully in obtaining the consent of the FCC and the approval or consent of each other governmental authority required to effectuate the foregoing.
(f) Each Debtor hereby acknowledges and agrees that the FCC Licenses and related assets are unique assets and that a violation of such Debtor’s covenant to cooperate with respect to any regulatory consents would result in irreparable harm to the Agent for which monetary damages are not readily ascertainable. Each Debtor further agrees that, because of the unique nature of its undertakings in this Section 19, the same may be specifically enforced, and it hereby waives, and agrees to waive, any claim or defense that the Agent would have an adequate remedy at law for the breach of such undertakings.
(g) Without limiting the obligations of any Debtor hereunder in any respect, each Debtor further agrees that if such Debtor, upon or after the occurrence of an Event of Default, should fail or refuse for any reason whatsoever, without limitation, to execute any application necessary or appropriate to obtain any governmental consent necessary or appropriate for the exercise of any right of the Agent hereunder, such Debtor agrees that such application may be executed on such Debtor’s behalf by the clerk of the court or other representative of any court or other forum of competent jurisdiction without notice to such Debtor, pursuant to an order of such court or forum.
(h) The parties agree that, in the event of changes in law or governmental policy occurring after the date hereof that affect in any manner the Agent’s or any Purchaser’s rights of access to, or use or sale of, the Licenses, the related assets or Collateral, or the procedures necessary to enable the Agent or any of the other Secured Parties to obtain such rights of access, use or sale, the Agent and Debtors shall amend this Agreement and the other Transaction Documents in such manner as the Agent shall reasonably request, in order to provide the Agent and the Purchasers such rights to the greatest extent possible consistent with then applicable law and governmental policy.
(i) For the avoidance of any doubt, in the event of any conflict between any provision of this Section 19 and any other provision of this Agreement or any provision of any other Transaction Document, the provisions of this Section 19 shall control. The provisions of this Section 19 are hereinafter referred to as the “FCC Enforcement Provisions”.
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| 20. | Miscellaneous. |
|---|
(a) No course of dealing between the Debtors and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder or under the Notes or the other Transaction Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby, by the Notes, by and other Transaction Document or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement, together with the exhibits and schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement and the exhibits and schedules hereto. 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 Debtors and the Agent, or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.
(d) 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.
(e) 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 any party to exercise any right hereunder in any manner impair the exercise of any such right.
(f) This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company and the Subsidiaries may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Agent (other than by merger). Any Secured Party may assign any or all of its rights under this Agreement to any Person (as defined in the Purchase Agreement) to whom such Secured Party assigns or transfers any Obligations, provided such transferee agrees in writing to be bound, with respect to the transferred Obligations, by the provisions of this Agreement that apply to the “Secured Parties.”
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(g) Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.
(h) Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, all questions concerning the construction, validity, enforcement and interpretation of this Agreement 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. Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Notes (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, Borough of Manhattan. Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. 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 Agreement or the transactions contemplated hereby.
(i) This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for the obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor agrees to indemnify, pay and hold harmless the Agent and the other Secured Parties and their respective assignees and affiliates and their respective officers, directors, employees, agents, consultants, auditors, and attorneys of any of them (collectively, “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Purchaser Indemnitee shall be designated a party thereto) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction; provided that the Debtors shall not be obligated to indemnify the Indemnitees, or have any liability, in excess of the aggregate Purchase Price (as defined in the Purchase Agreement). This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the Notes, the Purchase Agreement or any other agreement, instrument or other document executed or delivered in connection herewith or therewith.
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(l) Nothing in this Agreement shall be construed to subject Agent or any other Secured Party to liability as a partner in any Debtor or any if its direct or indirect subsidiaries that is a partnership or as a member in any Debtor or any of its direct or indirect subsidiaries that is a limited liability company, nor shall Agent or any other Secured Party be deemed to have assumed any obligations under any partnership agreement or limited liability company agreement, as applicable, of any such Debtor or any of its direct or indirect subsidiaries or otherwise, unless and until any such Secured Party exercises its right to be substituted for such Debtor as a partner or member, as applicable, pursuant hereto.
(m) To the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent, approval or action of any partner or member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or compliance with any provisions of any of the Organizational Documents, the Debtors hereby represent that all such consents and approvals have been obtained.
[SIGNATURE PAGE OF DEBTORS FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the day and year first above written.
| DEBTORS: | |
|---|---|
| MADISON TECHNOLOGIES, INC. | |
| By: | /s/<br> Philip Falcone |
| Name: | Philip Falcone |
| Title: | CEO |
| SOVRYN HOLDINGS, INC. | |
| --- | --- |
| By: | /s/<br> Philip Falcone |
| Name: | Philip Falcone |
| Title: | CEO |
| AGENT: | |
| --- | --- |
| ARENA INVESTORS LP | |
| By: | /s/<br> Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
SignaturePage to Security Agreement
[SIGNATURE PAGE OF HOLDERS TO SECURITY AGREEMENT]
| ARENA SPECIAL OPPORTUNITIES FUND, LP | |
|---|---|
| By: | /s/<br> Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
| ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP | |
| --- | --- |
| By: | /s/<br> Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
SignaturePage to Security Agreement
ANNEXA
to
SECURITYAGREEMENT
FORMOF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of February 17, 2021, made by Madison Technologies, Inc., a Nevada corporation and its Subsidiaries party thereto from time to time, as Debtors to and in favor of the Secured Parties identified therein (the “Security Agreement”).
Reference is made to the Security Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that, upon delivery of this Additional Debtor Joinder to the Secured Parties referred to above, the undersigned shall (a) be an Additional Debtor under the Security Agreement, (b) have all the rights and obligations of the Debtors under the Security Agreement as fully and to the same extent as if the undersigned was an original signatory thereto and (c) be deemed to have made the representations and warranties set forth therein as of the date of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are supplemental and/or replacement Disclosure Schedules to the Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Secured Parties, and the Secured Parties may rely on the matters set forth herein on or after the date hereof. This Joinder shall not be modified, amended or terminated without the prior written consent of the Secured Parties.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the name and on behalf of the undersigned.
[Nameof Additional Debtor]
| By: | |
|---|---|
| Name: | |
| Title: | |
| Address: | |
| Dated: |
ANNEXB
to
SECURITYAGREEMENT
THEAGENT
1. Appointment. The Secured Parties (all capitalized terms used herein and not otherwise defined shall have the respective meanings provided in the Security Agreement to which this Annex B is attached (the “Agreement”)), by their acceptance of the benefits of the Agreement, hereby designate Arena Investors LP (“Agent”) as the Agent to act as specified herein and in the Agreement. Each Secured Party shall be deemed irrevocably to authorize the Agent to take such action on its behalf under the provisions of the Agreement and any other Transaction Document (as such term is defined in the Purchase Agreement) and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through its agents or employees.
2. Natureof Duties*.* The Agent shall have no duties or responsibilities except those expressly set forth in the Agreement. Neither the Agent nor any of its partners, members, shareholders, officers, directors, employees or agents shall be liable for any action taken or omitted by it as such under the Agreement or hereunder or in connection herewith or therewith, be responsible for the consequence of any oversight or error of judgment or answerable for any loss, unless caused solely by its or their gross negligence or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of the Agreement or any other Transaction Document a fiduciary relationship in respect of any Debtor or any Secured Party; and nothing in the Agreement or any other Transaction Document (as defined in the Purchase Agreement), expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of the Agreement or any other Transaction Document except as expressly set forth herein and therein.
3. Lackof Reliance on the Agent. Independently and without reliance upon the Agent, each Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Company and its subsidiaries in connection with such Secured Party’s investment in the Debtors, the creation and continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Company and its subsidiaries, and of the value of the Collateral from time to time, and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit, market or other information with respect thereto, whether coming into its possession before any Obligations are incurred or at any time or times thereafter. The Agent shall not be responsible to the Debtors or any Secured Party for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith, or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectability, priority or sufficiency of the Agreement or any other Transaction Document, or for the financial condition of the Debtors or the value of any of the Collateral, or be required to make any inquiry concerning either the performance or observanceof any of the terms, provisions or conditions of the Agreement or any other Transaction Document, or the financial condition of the Debtors, or the value of any of the Collateral, or the existence or possible existence of any default or Event of Default under the Agreement, the Notes or any of the other Transaction Documents.
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4. CertainRights of the Agent. The Agent shall have the right to take any action with respect to the Collateral, on behalf of all of the Secured Parties. To the extent practical, the Agent shall request instructions from the Secured Parties with respect to any material act or action (including failure to act) in connection with the Agreement or any other Transaction Document, and shall be entitled to act or refrain from acting in accordance with the instructions of the Secured Party; if such instructions are not provided despite the Agent’s request therefor, the Agent shall be entitled to refrain from such act or taking such action, and if such action is taken, shall be entitled to appropriate indemnification from the Secured Parties in respect of actions to be taken by the Agent; and the Agent shall not incur liability to any person or entity by reason of so refraining. Without limiting the foregoing, (a) no Secured Party shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the terms of the Agreement or any other Transaction Document, and the Debtors shall have no right to question or challenge the authority of, or the instructions given to, the Agent pursuant to the foregoing and (b) the Agent shall not be required to take any action that the Agent believes (i) could reasonably be expected to expose it to personal liability or (ii) is contrary to this Agreement, the Transaction Documents or applicable law.
5. Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, statement, certificate, telex, teletype or facsimile message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and the other Transaction Documents and its duties thereunder, upon advice of counsel selected by it and upon all other matters pertaining to this Agreement and the other Transaction Documents and its duties thereunder, upon advice of other experts selected by it. Anything to the contrary notwithstanding, the Agent shall have no obligation whatsoever to any Secured Party to assure that the Collateral exists or is owned by the Debtors or is cared for, protected or insured or that the liens granted pursuant to the Agreement have been properly or sufficiently or lawfully created, perfected, or enforced or are entitled to any particular priority.
6. Indemnification*.*To the extent that the Agent is not reimbursed and indemnified by the Debtors, the Secured Parties will jointly and severally reimburse and indemnify the Agent, in proportion to their initially purchased respective principal amounts of Notes, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in performing its duties hereunder or under the Agreement or any other Transaction Document, or in any way relating to or arising out of the Agreement or any other Transaction Document except for those determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction to have resulted solely from the Agent’s own gross negligence or willful misconduct. Prior to taking any action hereunder as Agent, the Agent may require each Secured Party to deposit with it sufficient sums as it determines in good faith is necessary to protect the Agent for costs and expenses associated with taking such action.
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| 7. | Resignation by the Agent.** |
|---|
(a) The Agent may resign from the performance of all its functions and duties under the Agreement and the other Transaction Documents at any time by giving 30 days’ prior written notice (as provided in the Agreement) to the Debtors and the Secured Parties. Such resignation shall take effect upon the appointment of a successor Agent pursuant to clauses (b) and (c) below.
(b) Upon any such notice of resignation, the Secured Parties shall appoint a successor Agent hereunder.
(c) If a successor Agent shall not have been so appointed within said thirty (30)-day period, the Agent shall then appoint a successor Agent who shall serve as Agent until such time, if any, as the Secured Parties appoint a successor Agent as provided above. If a successor Agent has not been appointed within such thirty (30)-day period, the Agent may petition any court of competent jurisdiction or may interplead the Debtors and the Secured Parties in a proceeding for the appointment of a successor Agent, and all fees, including, but not limited to, extraordinary fees associated with the filing of interpleader and expenses associated therewith, shall be payable by the Debtors on demand.
8. Rightswith respect to Collateral*.* Each Secured Party agrees with all other Secured Parties and the Agent (i) that it shall not, and shall not attempt to, exercise any rights with respect to its security interest in the Collateral, whether pursuant to any other agreement or otherwise (other than pursuant to this Agreement), or take or institute any action against the Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder (other than any such action arising from the breach of this Agreement) and (ii) that such Secured Party has no other rights with respect to the Collateral other than as set forth in this Agreement and the other Transaction Documents. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations under the Agreement. After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of the Agreement including this Annex B shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.
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ScheduleA
CollateralLocations
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ScheduleB
Encumbranceson Collateral
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ScheduleC
Consentsand Authorizations
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ScheduleD
DebtorInformation
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ScheduleE
Namesand Acquisitions
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ScheduleF
DebtorIntellectual Property
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ScheduleG
PledgedSecurities
The securities owned by the Company are as follows:
| Entity<br> Name | Capital Stock |
|---|---|
| Sovryn Holdings, Inc. | 100% |
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Exhibit10.24
LIMITEDGUARANTY AGREEMENT
This LIMITED GUARANTY AGREEMENT, dated as of February 17, 2021 (together with all amendments, if any, from time to time hereto, this “Guaranty”) is made by (a) Philip Falcone, an individual with a principal residence located at (“Falcone”), (b) Kenneth Orr, an individual with a principal residence located at (“Orr”), (c) FFO 1 2021 Irrevocable Trust (“FFO-1”), (d) (c) FFO 2 2021 Irrevocable Trust (“FFO-2”) and (e) KORR Value, LP (“KORR”, and together with Falcone, Orr, FFO-1 and FFO-2, and each of their respective heirs, executors, administrators, representatives, successors and assigns, each, a “Limited Guarantor”, and collectively, the “Limited Guarantors”) in favor of ARENA INVESTORS, L.P., in its capacity as agent under the Purchase Agreement referred to below (in such capacity, together with its successors and permitted assigns in such capacity, the “Agent”).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of the date hereof (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified (the “Purchase Agreement”), by and among Madison Technologies, Inc., a Nevada corporation (the “Company”) and the purchasers from time to time party thereto (each a “Purchaser” and, collectively, the “Purchasers”), the Purchasers have agreed to purchase Notes, Warrants and Common Stock from the Company;
WHEREAS, in order to induce the Purchasers to enter into the Transaction Documents, and to purchase Notes, Warrants and Common Stock from the Company as set forth in the Transaction Documents, each Limited Guarantor has agreed to guaranty the Liabilities of Company and the other Obligors; and
WHEREAS, as a result of their respective relationships with the Company, each Limited Guarantor will receive substantial benefits from the financial accommodations provided by the Purchasers to Company.
NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
| 1. | Definitions and Construction |
|---|
1.1. Definitions. As used in this Guaranty, the following terms shall have the following definitions:
“Agent” has the meaning set forth in the preamble to this Guaranty.
“Company” has the meaning set forth in the preamble to this Guaranty.
“Guarantied Obligations” has the meaning set forth in Section 2.1.
“Guaranty” means this Limited Guaranty Agreement.
“LimitedGuarantor” has the meaning set forth in the preamble to this Guaranty.
“Purchase Agreement” has the meaning set forth in the recitals to this Guaranty.
“Purchaser” has the meaning set forth in the recitals to this Guaranty.
1.2. Construction. Capitalized terms used but not otherwise defined herein (including in the preamble and recitals hereof) that are defined in the Purchase Agreement shall have the meanings given to them in the Purchase Agreement. Unless otherwise defined herein or in the Purchase Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. The rules of interpretation specified in the Purchase Agreement shall be applicable to this Guaranty. All references to “payment in full of Guarantied Obligations” or words of similar import mean the payment in full of all Liabilities in cash, the termination of any commitment of the Purchasers to extend credit and the termination of any obligation of the Purchasers to release funds from the Funding Account. All references in this Guaranty to Sections are references to Sections of this Guaranty unless otherwise specified. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the “Agent” shall be a reference to Agent, for the benefit of the Secured Parties.
| 2. | Agreement to Guaranty Obligations |
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| 2.1. | Guaranty; Limitation on Recourse. |
| --- | --- |
(a) Subject to the limitations in Section 2.1(d), in recognition of the direct and indirect benefits to be received by each Limited Guarantor in connection with the financial accommodations provided by Agent and Purchasers to Company, each Limited Guarantor hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, the full and prompt payment when due, whether upon maturity, acceleration, or otherwise, of each and all of the following (collectively, the “GuarantiedObligations”): (i) the Liabilities now or hereafter existing, whether for principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), fees, expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), or otherwise, (ii) any and all expenses (including reasonable counsel fees and expenses) incurred by Agent and/or the Purchasers in enforcing any rights under any Transaction Document and (iii) the amount of any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses incurred by the Company and/or any of its Subsidiaries arising out of or relating to any matter that would have been the subject of liability insurance if the Company and its Subsidiaries had been covered by a customary liability insurance policy (other than matters that occur during any period when the Company and its Subsidiaries are covered by a customary liability insurance policy). Without limiting the generality of the foregoing, Guarantied Obligations shall include all amounts that constitute part of the Guarantied Obligations and would be owed by any Obligor to the Agent or any Purchaser but for the fact that they are unenforceable or not allowable, including due to the existence of a bankruptcy, reorganization, other Insolvency Proceeding or similar proceeding involving any Obligor or any other Person.
(b) If any or all of the Guarantied Obligations becomes due and payable, each Limited Guarantor, unconditionally and irrevocably, and without the need for demand, protest, or any other notice or formality, promises to pay such indebtedness to Agent or any Purchaser, together with any and all expenses that may be incurred by Agent or any Purchaser in demanding, enforcing, or collecting any Guarantied Obligations. If claim is ever made upon Agent or any Purchaser for repayment or recovery of any amount or amounts received in payment of or on account of any or all of the Guarantied Obligations and Agent or any Purchaser repays all or part of said amount by reason of (i) any judgment, decree, or order of any court or administrative body having jurisdiction over such payee or any of its property, or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including any Obligor), then and in each such event, each Limited Guarantor agrees that any such judgment, decree, order, settlement, or compromise shall be binding upon such Limited Guarantor, notwithstanding any revocation (or purported revocation) of this Guaranty or other instrument evidencing any liability of such Limited Guarantor and such Limited Guarantor shall be and remain liable to such payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee.
(c) Each Limited Guarantor unconditionally and irrevocably guarantees the payment of any and all of the Guarantied Obligations to Agent and each Purchaser, whether or not due or payable by any Obligor upon the occurrence of any of the events specified in Section 6(a)(viii) of the Notes, and irrevocably and unconditionally promises to pay such indebtedness to Agent, without the requirement of demand, protest, or any other notice or other formality, in lawful money of the United States.
(d) Notwithstanding anything to the contrary contained herein, the maximum liability of (i) Falcone under this Guaranty shall be limited to (A) the principal amount of $1,000,000, plus interest thereon at the Default Rate set forth in the Notes, plus (B) all costs and expenses incurred by the Agent and the Purchasers (including attorneys’ fees) in connection with the enforcement of this Guaranty against Falcone through the date of payment in full by Falcone of Falcone’s obligations hereunder, plus (C) the Pledged Collateral of Falcone (as defined in the Limited Guarantor Pledge Agreement), plus (D) the amount of any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses incurred by the Company and/or any of its Subsidiaries and/or any Purchaser Party arising out of or relating to any matter that would have been the subject of liability insurance if the Company and its Subsidiaries had been covered by a customary liability insurance policy at the time such matter occurred, (ii) Orr under this Guaranty shall be limited to (A) the principal amount of $ 250,000, plus interest thereon at the Default Rate set forth in the Notes, plus (B) all costs and expenses incurred by the Agent and the Purchasers (including attorneys’ fees) in connection with the enforcement of this Guaranty against Orr through the date of payment in full by Orr of Orr’s obligations hereunder, (iii) FFO-1 under this Guaranty shall be limited to the Pledged Collateral of FFO-1 (as defined in the Limited Guarantor Pledge Agreement); (iv) FFO-2 under this Guaranty shall be limited to the Pledged Collateral of FFO-2 (as defined in the Limited Guarantor Pledge Agreement), and (v) KORR under this Guaranty shall be limited to the Pledged Collateral of KORR (as defined in the Limited Guarantor Pledge Agreement) provided, that (1) the liabilities under clauses (i)(A), (i)(B), (ii)(A) and (ii)(B) above shall terminate on the earlier to occur of (x) the date of the consummation of the transactions contemplated by the NJR Acquisition Agreement (without amendment or waiver of the conditions precedent contained therein), and (y) the date on which the Deposit and the Option Fee are returned to the Company and deposited into the Funding Account, and (2) the liabilities under clause (i)(D) above shall terminate on the date on which the Company delivers to the Agent insurance certificates evidencing that it has obtained liability insurance coverage that is reasonably satisfactory to the Purchasers. The provisions of this Section 2.1(d) shall not (i) impair the validity of the Liabilities, or (ii) affect or impair the security interest granted under the Limited Guarantor Pledge Agreement or the right of the Agent or any Purchaser to enforce the security interest granted under the Limited Guarantor Pledge Agreement against any Limited Guarantor or any other security interest granted to Agent under any Transaction Document against the Company or any of its Subsidiaries.
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| 2.2. | Absolute and Unconditional Guaranty. |
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(a) The liability of each Limited Guarantor hereunder is primary, absolute, and unconditional, and is independent of any security for or other guaranty of the Guarantied Obligations, and the liability of each Limited Guarantor hereunder shall not be affected or impaired by (i) any payment on, or in reduction of, any such other guaranty or undertaking, (ii) any dissolution, termination, or increase, decrease, or change in personnel by any Obligor or any other Person, (iii) any payment made to Agent or any Purchaser on account of the Guarantied Obligations which Agent or any Purchaser repays to Company or any other Person pursuant to any court order in any Insolvency Proceeding (or any settlement or compromise of any claim made in such a proceeding relating to such payment), and each Limited Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, (iv) any action or inaction by Agent or any Purchaser, or (v) any invalidity, irregularity, avoidability, or unenforceability of all or any part of the Guarantied Obligations or of any security therefor.
(b) This Guaranty includes all present and future Guarantied Obligations including any under transactions continuing, compromising, extending, increasing, modifying, releasing, or renewing any Guarantied Obligations, changing the interest rate, payment terms, or other terms and conditions thereof, or creating new or additional Guarantied Obligations after prior Guarantied Obligations have been satisfied in whole or in part.
2.3. Guaranty of Payment; Independent Obligations. The guaranty by each Limited Guarantor hereunder is a guaranty of payment and not of collection. The obligations of each Limited Guarantor under this Guaranty are independent of the Guarantied Obligations of any other Person, and a separate action or actions may be brought and prosecuted against one or more Persons to enforce such obligations, whether or not any action is brought against any other Person and whether or not any other Person is joined in any such action or actions. Each Limited Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement hereof.
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| 3. | Waivers, Authorizations and Acknowledgements |
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| 3.1. | Waivers. |
| --- | --- |
(a) Each Limited Guarantor waives any right (except as shall be required by applicable statute and cannot be waived) to require Agent or any Purchaser to (i) proceed against any other Person, (ii) proceed against or exhaust any security held from any other Person, (iii) protect, secure, perfect, or insure any Lien on any property subject thereto or exhaust any right to take any action against any other Person or any property subject to a Lien, or (iv) pursue any other remedy in Agent’s or any Purchaser’s power. Each Limited Guarantor waives any defense based on or arising out of any defense of any other Person, other than payment of the Guarantied Obligations to the extent of such payment, based on or arising out of the disability of any other Person, or the validity, legality, or unenforceability of any Guarantied Obligations or any part thereof from any cause, or the cessation from any cause of the liability of such Limited Guarantor other than payment of the Guarantied Obligations to the extent of such payment. Agent may foreclose upon any Collateral held by Agent by one or more judicial or nonjudicial sales or other dispositions, whether or not every aspect of any such sale is commercially reasonable or otherwise fails to comply with applicable law or may exercise any other right or remedy Agent or any Purchaser may have against any Limited Guarantor or any other Person, or any security, in each case, without affecting or impairing in any way the liability of any Limited Guarantor hereunder except to the extent the Guarantied Obligations have been paid.
(b) Each Limited Guarantor waives all presentments, demands for performance, protests and notices, including notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation, or incurring of new or additional Guarantied Obligations or other financial accommodations. Each Limited Guarantor waives notice of any Event of Default under any Transaction Document. Each Limited Guarantor assumes all responsibility for being and keeping himself informed of each Obligor’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Guarantied Obligations and the nature, scope, and extent of the risks which such Limited Guarantor assumes and incurs hereunder, and agrees that neither Agent nor any Purchaser shall not have any duty to advise any Limited Guarantor of information known to it regarding such circumstances or risks.
(c) To the fullest extent permitted by applicable law, each Limited Guarantor hereby waives: (i) any right to assert against Agent or any Purchaser any defense (legal or equitable), set-off, counterclaim, or claim which any Limited Guarantor may now or at any time hereafter have against any Obligor or any other Person liable to Agent or any Purchaser, (ii) any defense (legal or equitable), set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guarantied Obligations or any security therefor, (iii) any right or defense arising by reason of any claim or defense based upon an election of remedies by Agent, including any defense based upon an impairment or elimination of any Limited Guarantor’s rights of subrogation, reimbursement, contribution, or indemnity against any Obligor or any other Person, and (iv) the benefit of any statute of limitations affecting any Limited Guarantor’s liability hereunder or the enforcement thereof. Any payment or other act or circumstance which shall defer or delay, or otherwise toll, the operation of any statute of limitations applicable to any Guarantied Obligations or as to any Limited Guarantor shall similarly operate to defer or delay, or otherwise toll, the operation of such statute of limitations applicable to such Limited Guarantor’s liability hereunder.
3.2. Waivers of Defenses. Each Limited Guarantor guarantees that the Guarantied Obligations will be paid strictly in accordance with the terms of the Transaction Documents, regardless of any law, regulation, or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Agent or any Purchaser with respect thereto. The liability of each Limited Guarantor under this Guaranty shall be absolute and unconditional irrespective of, and each Limited Guarantor hereby irrevocably waives any defense it may now or hereafter have in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Transaction Document or any agreement or instrument relating thereto;
(b) any change in the time, manner, or place of payment of, or in any other term of, all or any Guarantied Obligations, or any other amendment or waiver of or any consent to departure from any Transaction Document, including any increase in the Guarantied Obligations resulting from the extension of additional credit;
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(c) any taking, exchange, release, or non-perfection of any Lien on any Collateral, or any taking, release, amendment, waiver of, or consent to departure from any other guaranty, for any Guarantied Obligations;
(d) the existence of any claim, set -off, defense, or other right that any Limited Guarantor may have at any time against any Person, including Agent or any Purchaser;
(e) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guarantied Obligations or any security therefor;
(f) any right or defense arising by reason of any claim or defense based upon an election of remedies by Agent including any defense based upon an impairment or elimination of any Limited Guarantor’s rights of subrogation, reimbursement, contribution, or indemnity of any Limited Guarantor against any Obligor or any other Person;
(g) any change, restructuring, or termination of the corporate, limited liability company, or partnership structure or existence of any other Person; or
(h) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any other Person.
| 3.3. | Consents to Amendments, Etc. |
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(a) Each Limited Guarantor authorizes Agent and each Purchaser, without notice or demand, and without affecting or impairing its liability hereunder, from time to time to:
(i) change the manner, place, or terms of payment of, or change or extend the time of payment of, renew, increase, accelerate, or alter: (A) any Guarantied Obligations (including any increase or decrease in the principal amount thereof or the rate of interest or fees thereon); or (B) any security therefor or any liability incurred directly or indirectly in respect thereof, and this Guaranty shall apply to the Guarantied Obligations as so changed, extended, renewed, or altered;
(ii) take and hold security for the payment of the Guarantied Obligations and sell, exchange, release, impair, surrender, realize upon, collect, settle, or otherwise deal with in any manner and in any order any property at any time pledged or mortgaged to secure any Guarantied Obligations (including any of the obligations of any Limited Guarantor under this Guaranty) incurred directly or indirectly in respect thereof or hereof, or any offset on account thereof;
(iii) exercise or refrain from exercising any rights against any Obligor or any other Person;
(iv) release or substitute any one or more endorsers, guarantors, Obligor, or other Persons;
(v) settle or compromise any Guarantied Obligations, any security therefor, or any liability (including any of those of any Limited Guarantor under this Guaranty) incurred directly or indirectly in respect thereof or hereof, or subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of any Limited Guarantor to any other Person;
(vi) apply any sums by whomever paid or however realized to any liability or liabilities of any Limited Guarantor to the Obligations regardless of what liability or liabilities of any Limited Guarantor remain unpaid;
(vii) consent to or waive any breach of, or any act, omission, or default under, any Transaction Document, or any of the instruments or agreements referred to herein or therein, or otherwise amend, modify, or supplement any Transaction Document or any of such other instruments or agreements; or
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(viii) take any other action that could, under otherwise applicable principles of law, give rise to a legal or equitable discharge of any Limited Guarantor from all or part of its liabilities under this Guaranty.
(b) It is not necessary for Agent or any Purchaser to inquire into the capacity or powers of any Limited Guarantor, and any Guarantied Obligations made or created in reliance upon the professed exercise of such powers shall be guarantied hereunder.
3.4. Subrogation; Subordination. No Limited Guarantor will exercise any rights that he may now or hereafter acquire against any Obligor or any other Person that arise from the existence, payment, performance or enforcement of any Limited Guarantor’s obligations under this Guaranty, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Agent or any Purchaser against any Obligor or any other Person or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from any Obligor or any other Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until payment in full of the Guarantied Obligations. If any amount shall be paid to any Limited Guarantor in violation of the immediately preceding sentence, such amount shall be held in trust for the benefit of Agent and the Purchasers, and shall promptly be paid to Agent to be credited and applied to the Guarantied Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Purchase Agreement, or to be held as Collateral for any Guarantied Obligations or other amounts payable under this Guaranty thereafter arising. Notwithstanding anything to the contrary contained in this Guaranty, no Limited Guarantor may exercise any rights of subrogation, contribution, indemnity, reimbursement or other similar rights against, and may not proceed or seek recourse against or with respect to any property or asset of, any other Person, including after payment in full of the Guarantied Obligations, if all or any portion of the Guarantied Obligations have been satisfied in connection with an exercise of remedies in respect of the Equity Interests of such other Person whether pursuant to this Guaranty or otherwise.
3.5. Revocation. To the maximum extent permitted by law, each Limited Guarantor hereby waives any right to revoke this Guaranty as to future Guarantied Obligations. If such a revocation is effective notwithstanding the foregoing waiver, each Limited Guarantor acknowledges and agrees that no such revocation shall (a) be effective until written notice thereof has been received by Agent, (b) apply to any Guarantied Obligations in existence on the date of receipt by Agent of such written notice (including any subsequent continuation, extension, or renewal thereof, or change in the interest rate, payment terms, or other terms and conditions thereof), and (c) apply to any Guarantied Obligations made or created after such date to the extent made or created pursuant to a legally binding commitment of Agent or any Purchaser in existence on the date of such revocation. No payment by any Limited Guarantor or from any other source prior to the date of Agent’s receipt of written notice of such revocation shall reduce the maximum obligation of any Limited Guarantor hereunder, and any payment by any Limited Guarantor or from any source other than such Limited Guarantor subsequent to the date of such revocation shall first be applied to that portion of the Guarantied Obligations as to which the revocation is effective and which are not, therefore, guarantied hereunder, and to the extent so applied shall not reduce the maximum obligation of such Limited Guarantor hereunder. This Guaranty shall be binding upon each Limited Guarantor, his heirs, representatives, successors and assigns and inure to the benefit of and be enforceable by Agent and its successors, transferees, or assigns.
| 4. | CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER, ETC. |
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4.1. GOVERNING LAW. THE VALIDITY OF THIS GUARANTY, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
4.2. FORUM NON CONVENIENS. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OR ANY PURCHASER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT OR SUCH PURCHASER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH LIMITED GUARANTOR, AGENT AND EACH PURCHASER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
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4.3.WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH LIMITED GUARANTOR, AGENT AND EACH PURCHASER HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A “CLAIM”). EACH LIMITED GUARANTOR, AGENT AND EACH PURCHASER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
4.4.SUBMISSION TO JURISDICTION. EACH LIMITED GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK AND THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY SHALL AFFECT ANY RIGHT THAT AGENT OR ANY PURCHASER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY AGAINST ANY LIMITED GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
4.5.WAIVER OF CLAIMS. NO CLAIM MAY BE MADE BY ANY LIMITED GUARANTOR AGAINST AGENT OR ANY PURCHASER, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTY, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH, AND EACH LIMITED GUARANTOR HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
| 5. | Miscellaneous |
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5.1. Survival. All representations and warranties made by any Limited Guarantor in this Guaranty and in the certificates or other instruments delivered in connection with or pursuant to this Guaranty shall be considered to have been relied upon by Agent and Purchasers and shall survive the execution and delivery of this Guaranty and the making of any loans or other extension of credit, regardless of any investigation made by Agent or any Purchaser or on its behalf and notwithstanding that Agent or any Purchaser may have had notice or knowledge of any Event of Default or incorrect representation or warranty at the time any credit is extended, and shall continue in full force and effect until the payment in full of the Guarantied Obligations.
5.2. Merger, Amendments; Etc. THIS GUARANTY, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this Guaranty, and no consent to any departure by any Limited Guarantor from the terms hereof, shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment of any provision of this Guaranty shall be effective unless the same shall be in writing and signed by Agent and each Limited Guarantor to which such amendment applies. This Guaranty is a Transaction Document.
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5.3. Addresses for Notices. All notices and other communications provided for hereunder shall be given in the form and manner and delivered to Agent at its address specified in the Purchase Agreement, and to each Limited Guarantor at its addresses specified herein, or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties.
5.4. Counterparts. This Guaranty may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed counterpart of this Guaranty by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Guaranty. Any party delivering an executed counterpart of this Guaranty by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Guaranty but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Guaranty.
5.5. Effectiveness; Severability; Section Headings. This Guaranty shall be binding and deemed effective when executed by each Limited Guarantor and Agent. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Guaranty. Any provision of this Guaranty which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. Each provision of this Guaranty shall be severable from every other provision of this Guaranty for the purpose of determining the legal enforceability of any specific provision.
6. Limited Recourse. In no event shall the Agent or any Purchaser have any recourse to any Limited Guarantor or any of his or her properties or assets for any of the Guarantied Obligations in excess of the limits specified for such Limited Guarantor under Section 2.1(d).
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned parties hereto have caused this Guaranty to be executed and delivered as of the day and year first above written.
| LIMITED GUARANTOR: | /s/ Philip Falcone | |
|---|---|---|
| Name: Philip Falcone | ||
| Address for notices: | ||
| LIMITED GUARANTOR: | FFO 1 2021 IRREVOCABLE TRUST | |
| By: | /s/ Philip Falcone | |
| Name: Philip Falcone | ||
| Title: trustee | ||
| Address for notices: | ||
| LIMITED GUARANTOR: | FFO 1 2021 IRREVOCABLE TRUST | |
| By: | Philip Falcone | |
| Name: Philip Falcone | ||
| Title: trustee | ||
| Address for notices: |
SignaturePage to Limited Guaranty Agreement
| LIMITED GUARANTOR: | /s/<br> Kenneth Orr | |
|---|---|---|
| Name: Kenneth Orr | ||
| Address for notices: | ||
| LIMITED GUARANTOR: | KORR VALUE, LP | |
| By: | Kenneth<br> Orr | |
| Name: Kenneth Orr | ||
| Title: KPresident | ||
| Address for notices: |
SignaturePage to Limited Guaranty Agreement
| AGENT: | |
|---|---|
| ARENA INVESTORS, LP, as Agent | |
| By: | /s/ Lawrence Cutler |
| Name: Lawrence Cutler | |
| Title: Authorized Signatory |
SignaturePage to Limited Guaranty Agreement
Exhibit10.25
LIMITEDGUARANTOR PLEDGE AGREEMENT
This LIMITED GUARANTOR PLEDGE AGREEMENT, dated as of February 17, 2021 (together with all amendments, if any, from time to time hereto, this “Guaranty”) is made by (a) Philip Falcone, an individual with a principal residence located at (“Falcone”), (b) FFO 1 2021 Irrevocable Trust (“FFO-1”), (c) FFO 2 2021 Irrevocable Trust (“FFO-2”) and (d) KORR Value, LP (“KORR”, and together with Falcone, FFO-1 and FFO-2, and each of their respective heirs, executors, administrators, representatives, successors and assigns, each, a “Pledgor”, and collectively, the “Pledgors”) in favor of ARENA INVESTORS, L.P., in its capacity as agent under the Purchase Agreement referred to below (in such capacity, together with its successors and permitted assigns in such capacity, the “Agent”).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of the date hereof (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified (the “Purchase Agreement”), by and among Madison Technologies, Inc., a Nevada corporation (the “Company”) and the purchasers from time to time party thereto (each a “Purchaser” and, collectively, the “Purchasers”), the Purchasers have agreed to purchase Notes, Warrants and Common Stock from the Company;
WHEREAS, the Pledgors are the record and beneficial owners of the equity interests of the Pledged Entity listed in Schedule I hereto;
WHEREAS, the Pledgors expect to benefit from the investments made by the Purchasers to the Company under the Transaction Documents;
WHEREAS, in order to induce the Purchasers to enter into the Transaction Documents, and to purchase Notes, Warrants and Common Stock from the Company as set forth in the Transaction Documents, each Limited Guarantor has agreed to guaranty the Liabilities of Company and the other Obligors; and
NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the Purchase Agreement and/or the Notes are used herein as therein defined, and the following shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):
“OrganizationDocument” means the certificate of incorporation and bylaws (or certificate of formation and operating agreement) of the Pledged Entity.
“PledgedCollateral” has the meaning assigned to such term in Section 2 hereof.
“PledgedEntity” means, with respect to each Pledgor listed on Schedule I hereto, the Person listed under the “Pledged Entity” column opposite the name of such Pledgor.
“PledgedInterests” means those equity interests listed on Schedule I hereto.
“SecuredObligations” has the meaning assigned to such term in Section 3 hereof.
“TerminationDate” means the date on which the Secured Obligations are paid in full and the Purchasers have no further commitments to extend credit or obligation to release funds from the Funding Account.
2. Pledge. In order to secure the Secured Obligations (as hereinafter defined) each of the Pledgors hereby grants, pledges and collateral assigns to Agent, for the benefit of the Purchasers, a first priority security interest in all of the following items of property in which it now has or may at any time hereafter acquire an interest or the power to transfer rights therein, and wheresoever located (collectively, the “PledgedCollateral”):
(a) the Pledged Interests and the certificates, if any, representing the Pledged Interests;
(b) all money, securities, security entitlements, investment property, instruments, general intangibles, dividends, distributions, and other property or proceeds at any time and from time to time received, receivable or otherwise distributed or declared in respect of or in exchange for or on conversion of any or all of the Pledged Interests or by its terms exchangeable or exercisable for or convertible into any such Pledged Interest;
(c) any additional equity interests in the Pledged Entity from time to time acquired by any Pledgor in any manner (which equity interests shall be deemed to be part of the Pledged Interests), and the certificates representing such additional equity interests, and all money, securities, security entitlements, investment property, instruments, general intangibles, dividends, distributions, and other property or proceeds at any time and from time to time received, receivable or otherwise distributed or declared in respect of or in exchange for or on conversion of any or all of the equity interests or by its terms exchangeable or exercisable for or convertible into any such equity interests;
(d) all securities accounts to which may at any time be credited any or all of the foregoing or any proceeds thereof and all certificates and instruments representing or evidencing any of the foregoing or any proceeds thereof; and
(e) all proceeds of any of the foregoing.
3. Security for Obligations. This Agreement secures, and the Pledged Interests and the other Pledged Collateral are security for, the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise, and performance of all Liabilities of any kind under or in connection with the Purchase Agreement, the Notes and the other Transaction Documents and all obligations of the Pledgors now or hereafter existing under this Agreement including, without limitation, all fees, costs and expenses whether in connection with collection actions hereunder or otherwise (collectively, the “Secured Obligations”).
4. Delivery of Pledged Collateral.
(a) By not later than the 10 calendar days following the Closing Date, each Pledgor shall have caused any Pledged Entity that is a limited liability company to (i) “opt into” Article 8 of the UCC, (ii) cause the membership interests of such Pledged Entity to be deemed to be “securities” under the UCC and (iii) cause such membership interests to be certificated.
(b) By not later than 10 calendar days following the Closing Date (in the case of Pledged Collateral held by any Pledgor on the Closing Date) or the date that is three (3) Business Days after the date on which any Pledgor obtains any other Pledged Collateral (in the case of Pledged Collateral not held by a Pledgor on the Closing Date), each Pledgor shall deliver all certificates evidencing the Pledged Collateral to be delivered to and held by or on behalf of Agent, for the benefit of the Purchasers, pursuant hereto. All Pledged Collateral shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Agent.
(c) In addition, each Pledgor shall cause the Pledged Entity to acknowledge to the Agent the registration on the books of the Pledged Entity of the pledge and security interest hereby created in the manner required by Section 8-301(b) of the UCC.
5. Consent of Pledgors Regarding Pledged Interests.
(a) Each of the Pledgors hereby consents to the pledge of the Pledged Interests pursuant to the terms of this Agreement and the Organization Documents of the Pledged Entity, and hereby waives the provisions of any of the applicable Organization Documents relating to notice of, or otherwise restricting, transfer or assignment of any of the Pledged Interests pursuant to this Agreement. Without limiting the foregoing, each of the Pledgors acknowledges and agrees that neither the pledge of the Pledged Collateral nor the exercise by the Agent of its rights or remedies hereunder shall trigger any of the provisions of the Organization Documents, and each of the Pledgors consents to such pledge and the exercise of such remedies for all purposes under the Organization Documents.
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(b) Each of the Pledgors further acknowledges, agrees, represents and warrants that the Agent (together with its successors, assigns and transferees), on behalf of the Purchasers, shall be entitled, without regard to conditions for or notice relating to transfer or assignment of any Pledged Interests contained in any of the Organization Documents, to exercise all of the rights of a holder of such equity interests under the Organization Documents of the applicable Pledged Entity upon exercise by the Agent of its remedies in accordance with the terms and conditions of this Agreement and that, notwithstanding any provision to the contrary contained in any of the Organization Documents, nothing in the Organization Documents is intended to restrict or impair the rights of the Agent or any Purchaser under this Agreement or the Transaction Documents (including any full or partial replacement or refinancing of any Transaction Document).
6. Representations and Warranties. Each of the Pledgors, severally and not jointly, represents and warrants to Agent that:
(a) Such Pledgor is, and (as to any substitute or additional Pledged Collateral) shall be, the sole holder of record and the sole beneficial owner of such Pledged Collateral pledged by Pledgor free and clear of any Lien option or other charge or encumbrance thereon or affecting the title thereto, except for any Lien created by this Agreement;
(b) All of the Pledged Collateral pledged by such Pledgor, to the extent applicable, is and shall be genuine, all of the Pledged Interests pledged by such Pledgor have been duly authorized and are validly issued, free and clear of any restrictions on transfer that are binding on such Pledgor (except as specifically set forth in the Organization Documents and waived by the Pledgors hereunder);
(c) Such Pledgor has the right and requisite authority to pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral pledged by such Pledgor to Agent and to grant a security interest therein to the Agent for the benefit of the Purchasers as provided in this Agreement;
(d) Except for such consent as is set forth in this Agreement, no consent, approval, authorization or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the pledge by such Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by such Pledgor, or (ii) for the exercise by Agent of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally, and such Pledgor warrants that the execution, delivery and performance of this Agreement is not in contravention of any applicable law or the terms of any Organization Document of the Pledged Entity, or any indenture, agreement or undertaking to which such Pledgor or the Pledged Entity is a party or is bound;
(e) This Agreement creates a valid Lien on and security interest in favor of the Agent for the benefit of the Purchasers in the Pledged Collateral and the proceeds thereof, securing the payment of the Secured Obligations, subject to no other Lien, which Lien and security interest shall be perfected upon the filing of appropriate financing statements;
(f) This Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable against such Pledgor in accordance with its terms, except the extent enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws relating to or affecting the rights of creditors generally;
(g) The Pledged Interests pledged by such Pledgor constitute the number and percentage of the issued and outstanding equity interests of the Pledged Entity set forth on Schedule I;
(h) All Pledged Interests are certificated. No right, title or interest of Pledgor in any Pledged Entity is represented by a certificate of interest or instrument, except such certificates or instruments, if any, as have been delivered to the Agent and are held in its possession, together with transfer documents as required in this Agreement (and Pledgor covenants and agrees that any such certificates or instruments hereafter received by Pledgor with respect to any of the Pledged Interests will be held in trust for the Agent for the benefit of the Purchasers and promptly delivered to the Agent);
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(i) Such Pledgor has not executed any prior assignment of any of his rights assigned hereby;
(j) No effective financing statement or similar notice covering any of the Pledged Collateral is on file in any recording office, and no other pledge or assignment thereof has been made, except in favor of the Agent for the benefit of the Purchasers;
(k) Such Pledgor has not done anything that would reasonably be expected to prevent the Agent and/or the Purchasers from exercising or enforcing (or limit the Agent’s and/or the Purchasers' exercise or enforcement of) any of the provisions hereof;
(l) The exact legal name and address, type of Person, jurisdiction of residence/chief executive office and social security number/FEIN of such Pledgor are as specified on Schedule II attached hereto, and no Pledgor shall change its name or jurisdiction of residence (in the case of natural persons) or chief executive office (in the case of all other Pledgors), except upon giving not less than thirty (30) days’ prior written notice to the Agent and taking or causing to be taken all such action at such Pledgor’s expense as may be reasonably requested by the Agent to perfect or maintain the perfection of the Lien of the Agent in the Pledged Collateral;
The representations and warranties set forth in this Section 6 shall survive the execution and delivery of this Agreement.
7. Covenants. Each of the Pledgors, severally and not jointly, covenants and agrees that until the Termination Date:
(a) Without the prior written consent of Agent, Pledgor will not sell, assign, transfer, pledge, or otherwise encumber any of its rights in or to the Pledged Collateral, or any unpaid distributions or payments with respect to the Pledged Collateral or grant a Lien in the Pledged Collateral;
(b) Such Pledgor will, at its expense, promptly execute, acknowledge and deliver all such instruments and take all such actions as Agent from time to time may request in order to ensure to Agent and the Purchasers the benefits of the Liens in and to the Pledged Collateral intended to be created by this Agreement, and will cooperate with Agent, at Pledgor’s expense, in obtaining all necessary approvals and making all necessary filings under federal, state, local or foreign law in connection with such Liens or any sale or transfer of the Pledged Collateral, and without limiting the generality of the foregoing, such Pledgor hereby authorizes the Agent to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Agent may from time to time deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the Uniform Commercial Code as in effect in the state in which the applicable Pledgor is “located” for purposes of such Uniform Commercial Code;
(c) Such Pledgor has and will defend the title to the Pledged Collateral and the Liens of Agent in the Pledged Collateral against the claim of any Person and will maintain and preserve such Liens and will maintain the Pledged Collateral pledged by it hereunder free and clear from any Liens or encumbrances, except for Permitted Liens;
(d) Such Pledgor shall not (i) create or suffer to exist any Lien, assignment by operation of law or other charge or encumbrance on, or with respect to, any such Pledged Collateral; (ii) amend or otherwise modify, cancel or terminate any such Collateral; (iii) waive any default or breach with respect to any such Pledged Collateral; or (iv) take or permit to be taken any other action in connection with any such Pledged Collateral which would impair the value of the interest or rights of such Pledgor or of the Agent therein or thereunder;
(e) Such Pledgor shall not exercise any rights under the Organization Documents of the Pledged Entity relating to the Pledged Interests (including any consent, waiver or approval with respect to the Pledged Interests), which would, at the time of such exercise, reasonably be expected to have a material adverse effect on the value of the Pledged Interests, without first consulting with and obtaining the written consent of the Agent;
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(f) Such Pledgor shall register and cause to be registered the interest of the Agent, for the benefit of the Purchasers, in the Pledged Collateral on its own books and records and the registration books of the Pledged Entity;
(g) Such Pledgor will, upon obtaining ownership of any additional equity interests of the Pledged Entity or equity interests otherwise required to be pledged to Agent pursuant to any of the Transaction Documents, which equity interests are not already Pledged Collateral, promptly (and in any event within three (3) Business Days) deliver to Agent a Pledge Amendment, duly executed by such Pledgor, in substantially the form of Schedule III hereto (a “Pledge Amendment”) in respect of any such additional equity interests, pursuant to which Pledgor shall pledge to Agent all of such additional equity interests; such Pledgor hereby authorizes Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Interests listed on any Pledge Amendment delivered to Agent shall for all purposes hereunder be considered Pledged Collateral;
(h) Such Pledgor shall not consent to any amendments or modifications to the Organization Documents of the Pledged Entity that would reasonably be expected to have an adverse effect on the Purchasers, the Agent or the value of any of the Pledged Collateral without the prior written consent of the Agent;
(i) Such Pledgor shall provide the Agent with copies of any and all material notices, communications, or other information received by such Pledgor relating to the Pledged Collateral whether provided under the Organization Documents of the Pledged Entity or otherwise;
(j) Such Pledgor agrees to pay when due all taxes, charges, Liens and assessments against the Pledged Collateral pledged by it hereunder, unless being contested in good faith by appropriate proceedings diligently conducted and provided that all enforcement proceedings in the nature of levy or foreclosure with respect to such Pledged Collateral are effectively stayed; upon the failure of any Pledgor to pay or contest such taxes, charges, Liens or assessments as provided above, the Agent may at its option, may pay or contest any of them (the Agent having the right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments in its reasonable good faith discretion), but in no event shall the Agent have any obligation to make any such payment or contest; all sums so disbursed by the Agent, including reasonable attorneys’ fees, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Pledgor to the Agent and shall be additional Secured Obligations secured by the Pledged Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate;
(k) At no time shall any Pledged Interests pledged by such Pledgor hereunder (i) be held or maintained in the form of a security entitlement or credited to any securities account or (ii) be maintained in the form of uncertificated securities to the extent any such Pledged Interests constitute a “security” (or as to which the Pledged Entity has elected to have treated as a “security”) under Article 8 of the Uniform Commercial Code of the state in which the Pledged Entity is located or of any other jurisdiction whose laws may govern (the “UCC”). With respect to Pledged Interests that are “securities” under the UCC, or as to which the Pledged Entity has elected at any time to have such interests treated as “securities” under the UCC, such Pledged Interests are, and shall at all times be, represented by share certificates, which share certificates, with transfer powers duly executed in blank by the Pledgor, have been or will be delivered to the Agent in accordance with Section 4 hereof.
8. Pledgors’ Rights. As long as no Default or Event of Default shall have occurred and be continuing:
(a) Each Pledgor shall have the right, from time to time, to vote and give consents with respect to the Pledged Collateral, or any part thereof for all purposes not inconsistent with the provisions of this Agreement, the Purchase Agreement, the Notes or any other Transaction Document; provided, however, that no vote shall be cast, and no consent shall be given or action taken, which would have the effect of impairing the position or interest of Agent in respect of the Pledged Collateral or which would authorize, effect or consent to (unless and to the extent expressly permitted by the Purchase Agreement):
(i) the dissolution or liquidation, in whole or in part, of the Pledged Entity;
(ii) the consolidation or merger of the Pledged Entity with any other Person;
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(iii) the sale, disposition or encumbrance of all or substantially all of the assets of the Pledged Entity, except for Liens in favor of Agent;
(iv) any change in the authorized number of equity interests of the Pledged Entity or the issuance of any additional equity interests; or
(v) the alteration of the voting rights with respect to the equity interests of the Pledged Entity; and
(b) (i) Each Pledgor shall be entitled, from time to time, to collect and receive for his or her own use all cash distributions paid in respect of the Pledged Interests owned by such Pledgor to the extent not in violation of the Purchase Agreement or the Notes, other than (A) any non-cash or cash-in-kind distributions paid or payable in respect of any Pledged Collateral, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral and (B) liquidating distributions and dividends; and
(ii) all distributions (other than such distributions as are permitted to be paid to any Pledgor in accordance with clause (i) above) in respect of any of the Pledged Interests, whenever paid or made (including any share, stock or other in-kind dividend or distribution declared on any Pledged Interests, or any partnership units or fractions thereof issued pursuant to any so called “stock split” or “unit-split” involving any of the Pledged Interests, or any distribution of capital made on any Pledged Interests or any partnership units, shares of stock, obligations or other property distributed on or with respect to such Pledged Interests, whether on account of recapitalization, bankruptcy, reorganization, merger or consolidation of the Pledged Entity, or otherwise), shall be delivered to Agent to hold as Pledged Collateral and shall, if received by such Pledgor, be received in trust for the benefit of Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to Agent as Pledged Collateral in the same form as so received (with any necessary indorsement).
9. Defaults and Remedies; Proxy.
(a) Upon the occurrence of an Event of Default and so long as such Event of Default is continuing, upon written notice to the applicable Pledgor, Agent (personally or through an agent), shall be entitled to exercise its rights with respect to the Pledged Collateral, without regard to the existence of any other security or source of payment for the Secured Obligations, and in addition to other rights and remedies provided for herein or otherwise available to it, Agent shall have all of the rights and remedies of a secured party on default under the UCC then in effect in the State of New York. Without limiting the foregoing, Agent (personally or through an agent) is hereby authorized and empowered to transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments representing smaller or larger numbers of shares, to exercise the voting and all other rights as a holder with respect thereto (including the right to replace the members of the board of directors of the Pledged Entity), to collect and receive all cash distributions made thereon, to sell in one or more sales after ten (10) days’ notice of the time and place of any public sale or of the time at which a private sale is to take place (which notice each Pledgor agrees is commercially reasonable) the whole or any part of the Pledged Collateral and to otherwise act with respect to the Pledged Collateral as though Agent was the outright owner thereof. Any sale shall be made at a public or private sale at Agent’s place of business, or at any place to be named in the notice of sale, either for cash or upon credit or for future delivery at such price as Agent may deem fair. If all or any part of the Pledged Collateral is sold on credit or for future delivery, the Pledged Collateral so sold may be retained by the Agent until the purchase price is paid in full. The Agent shall incur no liability in case of the failure of the purchaser to pay for the Pledged Collateral as so sold, or of the failure of the Agent to make any sale of Pledged Collateral after giving notice thereof, and in case of any such failure, such Pledged Collateral may again be sold upon the same notice as in the case of an original sale. Agent may be the purchaser of the whole or any part of the Pledged Collateral so sold and hold the same thereafter in its own right free from any claim of any Pledgor or any right of redemption. Each sale shall be made to the highest bidder, but Agent reserves the right to reject any and all bids at such sale which, in its discretion, it shall deem inadequate. Demands of performance, except as otherwise herein specifically provided for, notices of sale, advertisements and the presence of property at sale are hereby waived and any sale hereunder may be conducted by an auctioneer or any officer or agent of Agent. All cash proceeds received by the Agent in respect of any sale, collection or other enforcement or disposition of Pledged Collateral, shall be applied (after deduction of any expenses or other amounts payable to the Agent pursuant hereto) against the Secured Obligations in such order as the Agent shall elect. EACH PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS AGENT AS THE PROXY AND ATTORNEY-IN-FACT OF PLEDGOR WITH RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE THE PLEDGED INTERESTS, WITH FULL POWER OF SUBSTITUTION TO DO SO. THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN- FACT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE TERMINATION DATE. IN ADDITION TO THE RIGHT TO VOTE THE PLEDGED INTERESTS, THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF THE PLEDGED INTERESTS WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF MEMBERS, CALLING SPECIAL MEETINGS OF MEMBERS AND VOTING AT SUCH MEETINGS) . SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY PLEDGED INTERESTS ON THE RECORD BOOKS OF THE PLEDGED ENTITY) BY ANY PERSON (INCLUDING ANY PLEDGOR OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE OF AN EVENT OF DEFAULT. NOTWITHSTANDING THE FOREGOING, AGENT SHALL NOT HAVE ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.
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(b) If, at the original time or times appointed for the sale of the whole or any part of the Pledged Collateral, the highest bid, if there be but one sale, shall be inadequate to discharge in full all the Secured Obligations, or if the Pledged Collateral be offered for sale in lots, if at any of such sales, the highest bid for the lot offered for sale would indicate to Agent, in its discretion, that the proceeds of the sales of the whole of the Pledged Collateral would be unlikely to be sufficient to discharge all the Secured Obligations, Agent may, on one or more occasions and in its discretion, postpone any of said sales by public announcement at the time of sale or the time of previous postponement of sale, and no other notice of such postponement or postponements of sale need be given, any other notice being hereby waived; provided, however, that any sale or sales made after such postponement shall be after ten (10) days’ notice to the Pledgors.
(c) Each Pledgor recognizes that Agent may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof (and if the Agent deems it advisable to do so in order to comply with any applicable securities laws, to restrict the prospective bidders or purchasers to Persons who will represent and agree, among other things, that they are purchasing Pledged Collateral for their own account for investment, and not with a view to the distribution or resale thereof, or to otherwise restrict such sale in such other manner as the Agent deems advisable to insure such compliance) . Each Pledgor also acknowledges that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue of such sale being private.
(d) Each Pledgor agrees to the maximum extent permitted by applicable law that following the occurrence and during the continuance of an Event of Default he or she will not at any time plead, claim or take the benefit of any appraisal, valuation, stay, extension, moratorium or redemption law now or hereafter in force in order to prevent or delay the enforcement of this Agreement, or the absolute sale of the whole or any part of the Pledged Collateral or the possession thereof by any purchaser at any sale hereunder, and each Pledgor waives the benefit of all such laws to the extent he or she lawfully may do so. Each Pledgor agrees that he or she will not interfere with any right, power and remedy of Agent provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by Agent of any one or more of such rights, powers or remedies.
(e) Each Pledgor further agrees that a breach of any of the covenants contained in this Section 9 will cause irreparable injury to Agent, that Agent shall have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 9 shall be specifically enforceable against such Pledgor, and each of the Pledgors hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that the Secured Obligations are not then due and payable in accordance with the agreements and instruments governing and evidencing such obligations.
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10. Power of Attorney. Upon the occurrence of an Event of Default and so long as such Event of Default is continuing, in addition to the power of attorney granted to the Agent pursuant to Section 9(a) hereof, each Pledgor hereby irrevocably constitutes and appoints the Agent as its the true and lawful attorney-in-fact, with full power of substitution, in the place and stead of such Pledgor and in the name of the Agent or such Pledgor or otherwise, at any time or times, in the discretion of the Agent, to take any action and to execute any instrument or document which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:
(a) To receive, endorse and collect all checks and other order or instruments for the payment of money made payable to such Pledgor representing any dividend or interest payment or other distribution in respect of any or all Pledged Collateral pledged by such Pledgor hereunder and to give full discharge for the same.
(b) To execute endorsements, assignments or other instruments of conveyance or transfer with respect to any or all Pledged Collateral pledged by such Pledgor hereunder or otherwise to enforce the rights of the Agent with respect to any or all Pledged Collateral pledged by such Pledgor hereunder.
(c) To demand, sue for, collect, receive and give acquittance for any moneys due and to become due under or in respect of any or all Pledged Collateral pledged by such Pledgor hereunder.
(d) To file any claims or take any action or institute any proceeding which the Agent may deem necessary or advisable for the collection of any or all Pledged Collateral pledged by such Pledgor hereunder or otherwise to enforce the rights of the Agent with respect thereto.
(e) To exercise any and all rights of such Pledgor under any Organization Documents of the Pledged Entity; provided, however, the Agent shall have no obligation to exercise any such rights.
This power of attorney is coupled with an interest and, to the fullest extent permitted by applicable law, shall not be affected by any subsequent disability or incapacity of such Pledgor. No discretionary right, remedy or power granted to the Agent in this Section or in any other part of this Agreement shall be deemed to impose any obligation whatsoever on the Agent with respect thereto; such rights, remedies and powers being solely for the protection of the Agent.
11. Waiver. No failure or delay on the part of Agent to exercise any such right, power or remedy and no notice or demand which may be given to or made upon any Pledgor by Agent with respect to any such remedies shall operate as a waiver thereof, or limit or impair Agent’s right to take any action or to exercise any power or remedy hereunder, without notice or demand, or prejudice its rights as against any Pledgor in any respect, nor shall any single or partial exercise by the Agent of any right hereunder preclude any other or further exercise thereof, or the exercise of any other right. Each and every right and remedy granted to the Agent hereunder, or under any document delivered hereunder or in connection herewith, or allowed to the Agent in law or in equity, shall be deemed cumulative and may be exercised from time to time either singly or concurrently.
12. Assignment. Agent may assign, indorse or transfer any instrument evidencing all or any part of the Secured Obligations as provided in, and in accordance with, the Purchase Agreement and/or the Notes, and the holder of such instrument shall be entitled to the benefits of this Agreement.
13. Termination. Immediately following the Termination Date, Agent shall deliver to each Pledgor the Pledged Collateral pledged by such Pledgor at the time subject to this Agreement and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof and, except as otherwise provided herein, each Pledgor’s obligations hereunder shall at such time terminate.
14. Lien Absolute. All rights of Agent hereunder, and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Purchase Agreement, the Notes, any other Transaction Document or any other agreement or instrument governing or evidencing any Secured Obligations;
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(b) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Purchase Agreement, the Notes, any other Transaction Document or any other agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other Pledged Collateral or any other Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations;
(d) the insolvency of any Obligor; or
(e) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Pledgor.
15. Waiver by the Pledgors.
(a) Each Pledgor agrees and acknowledges and agrees that such Pledgor, by signing this Agreement, is subjecting the Pledged Collateral pledged by it hereunder to the Lien of the Agent, for the benefit of the Purchasers, for the payment and performance of all Secured Obligations, and each Pledgor hereby expressly waives, to the extent permitted by law: (a) any demand, protest or notice of any action taken by the Agent or the Purchasers (except those required by this Agreement, the Purchase Agreement or the Notes) under this Agreement, the other Transaction Documents, or in connection with any of the Secured Obligations, including notices of the existence, creation or incurring of new or additional Secured Obligations arising either from additional investments in, or extensions of credit to, Company or otherwise, (b) notices that the principal amount, or any portion thereof (and any interest thereon), of any Liability or any of the other Secured Obligations is due; (c) any and all rights under any theory of marshaling or ordering of disposition of Pledged Collateral or other Collateral; (d) any claim that any Pledgor’s obligations under this Agreement or that the Secured Obligations are released, discharged, affected, modified or impaired by any event except payment in full and satisfaction of the Secured Obligations following the Termination Date, including any of the following events: (i) any indulgence of the Agent or the Purchasers or substitution for, exchange, or loss, or release of, all or any portion of the Pledged Collateral or other Collateral, (ii) the extension of the time for payment of any of the Secured Obligations or the waiver, modification or amendment (whether material or otherwise) of any Secured Obligation under the Purchase Agreement, the Notes or any of the other Transaction Documents or the acceptance of partial payments of the Secured Obligations, (iii) the compromise, settlement, release, discharge or termination of any or all of the obligations of any Obligor to the Agent or the Purchasers by operation of law or otherwise except as may result from the payment and full and satisfaction of the Secured Obligations, or (iv) any other defenses based on suretyship or impairment of collateral or rights of subrogation or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor other than payment and satisfaction in full of all of the Secured Obligations; (e) any claim or other right which any Pledgor may now have or hereafter acquire against any other Person that is primarily or contingently liable on the Secured Obligations which arises from the existence or performance of such Pledgor’s obligations under this Agreement, including any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Agent or any Purchaser against any Obligor or any collateral as security therefor, which the Agent or any Purchaser now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, until such time as the Secured Obligations have been fully paid and satisfied; and (f) any right to require the Agent or any Purchaser or any other obligee of the Secured Obligations to (i) proceed against any Person or entity, including without limitation any Obligor, (ii) proceed against or exhaust any Pledged Collateral or other Collateral for the Secured Obligations, or (iii) pursue any other remedy in its power.
(b) No Pledgor shall assert any claim against the Agent or any Purchaser on any theory of liability for consequential, special, indirect or punitive damages.
(c) Each Pledgor authorizes the Agent, each Purchaser and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Transaction Documents from time to time to: (x) take and hold security, other than the Pledged Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Pledged Collateral herein described or any part thereof or any such other security; and (y) apply such Pledged Collateral or other security and direct the order or manner of sale thereof as such Person in its discretion may determine.
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(d) The Agent may at any time deliver (without representation, recourse or warranty) the Pledged Collateral or any part thereof to a Pledgor and the receipt thereof by such Pledgor shall be a complete and full acquittance for the Pledged Collateral so delivered, and the Agent shall thereafter be discharged from any liability or responsibility therefor.
16. Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Pledgor or the Pledged Entity for liquidation or reorganization, should Pledgor or the Pledged Entity become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of any Pledgor’s or the Pledged Entity’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
17. Miscellaneous.
(a) Agent may execute any of its duties hereunder by or through agents or employees and shall be entitled to advice of counsel concerning all matters pertaining to its duties hereunder.
(b) Agent’s actual out-of-pocket expenses, including, without limitation, reasonable counsel fees, incurred by Agent in connection with the administration and enforcement of this Agreement shall be Secured Obligations hereunder, but in no event shall any of the Pledgors be personally liable for such fees and expenses.
(c) Neither Agent, nor any of its respective officers, directors, employees, agents or counsel shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.
(d) The terms, covenants and conditions contained herein shall bind each Pledgor and its successors and assigns and shall inure to the benefit of the Agent and its successors and assigns. No Pledgor shall be permitted to assign this Agreement or any interest herein without the prior written consent of the Agent. Without limiting the generality of the foregoing sentence, each party hereto acknowledges that the Agent and each Purchaser may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Purchase Agreement and/or the Notes (to the extent permitted by the Purchase Agreement and/or the Notes), and to the extent of any such assignment all references herein to the “Agent” or any “Purchaser” shall mean or include, as applicable, such assignee and any other obligees from time to time of the Secured Obligations.
(e) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE,
(f) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
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(g) EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED FOR NOTICES IN SECTION 20 HEREOF OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK.
(h) NOTHING CONTAINED IN SECTIONS (F) OR (G) ABOVE SHALL PRECLUDE THE AGENT OR ANY PURCHASER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN THE COURTS OF ANY JURISDICTION WHERE ANY PLEDGOR’S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED.
(i) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING.
(j) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM.
(k) NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF AGENT AND EACH PLEDGOR.
18. Severability. If for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or effect those portions of this Agreement which are valid.
19. Entire Agreement. This Agreement, together with the Purchase Agreement, the Notes and other Transaction Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof and thereof.
20. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier to the address or telecopier number specified for such Person on the signature page hereof. Any party hereto may change such address or telecopier number for notices and other communications hereunder by notice to each other party hereto. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the notice sent.
21. Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.
22. Counterparts. This Agreement may be executed in any number of counterparts, which shall, collectively and separately, constitute one agreement. Each party hereto hereby adopts as an original executed signature page each signature page hereafter furnished by such party to the Agent (or an agent of the Agent) bearing (with the consent of the Agent) a facsimile signature by or on behalf of such party.
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23. Benefit of the Purchasers. All security interests granted or contemplated hereby shall be for the benefit of the Purchasers, and all proceeds or payments realized from the Pledged Collateral in accordance herewith shall be applied to the Obligations in accordance with the terms of the Purchase Agreement and the Notes.
24. Authorization. Each Pledgor hereby irrevocably authorizes the Agent at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Pledged Collateral (i) as the assets of such Pledgor which are pledged hereunder or words of similar effect, regardless of whether any particular asset comprised in the Pledged Collateral falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment, including whether such Pledgor is an organization, the type of organization and any organization identification number issued to such Pledgor. Each Pledgor agrees to furnish any such information to the Agent promptly upon request. Each Pledgor also ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.
25. No Assumption of Liability By Agent. Each Pledgor agrees that the Pledged Collateral pledged by it hereunder is being pledged to the Agent for the benefit of the Purchasers solely as security for the payment and performance of the Secured Obligations, and that neither the Agent nor any Purchaser, by its acceptance hereof, shall be deemed to have become a partner, member or shareholder of the Pledged Entity or assumed or otherwise become liable for any of the obligations or liabilities of such Pledgor with respect to the Pledged Entity, whether provided for by the terms thereof, arising by operation of law, or otherwise. Each Pledgor hereby acknowledges that it remains liable under the Organization Documents of the Pledged Entity to the same extent as though this Agreement had not been executed. Each Pledgor agrees that neither the Agent nor any Purchaser shall be answerable or accountable to such Pledgor under any circumstances, except for such Person’s own bad faith, willful misconduct, or gross negligence.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.
| PLEDGORS: | |
|---|---|
| /s/ Philip Falcone | |
| PHILIP FALCONE | |
| Notice<br> Information: | |
| FFO 1 2021 IRREVOCABLE TRUST | |
| --- | --- |
| By: | /s/ Philip Falcone |
| Name: Philip<br>Falcone | |
| Title: Trustee | |
| Notice<br> Information: | |
| FFO 2 2021 IRREVOCABLE TRUST | |
| --- | --- |
| By: | /s/ Philip Falcone |
| Name: Philip<br>Falcone | |
| Title: Trustee | |
| Notice<br> Information: |
SignaturePage to Limited Guarantor Pledge Agreement
| PLEDGOR: | |
|---|---|
| KORR VALUE, LP | |
| By: | /s/<br> Kenneth Orr |
| Name: Kenneth Orr | |
| Title: President | |
| Notice<br> Information: | |
| --- |
SignaturePage to Limited Guarantor Pledge Agreement
| AGENT: | |
|---|---|
| ARENA INVESTORS, LP, as Agent | |
| By: | /s/<br> Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
SignaturePage to Limited Guarantor Pledge Agreement
SCHEDULEI
PLEDGEDINTERESTS
| Pledgor<br> Name | Pledgor<br> Address | Pledged<br> Entity | Description<br> of Pledged |
|---|---|---|---|
| Interests | |||
| Philip<br> Falcone | Harbinger<br> Holdings, LLC | 100%<br> of all outstanding | |
| membership<br> interests | |||
| FFO<br> 1 2021 | Madison<br> Technologies, Inc.. | 100<br> Shares of Series B | |
| Irrevocable<br> Trust | Preferred<br> Stock | ||
| FFO<br> 1 2021 | Madison<br> Technologies, Inc.. | 400<br> Shares of Series E | |
| Irrevocable<br> Trust | Preferred<br> Stock | ||
| FFO<br> 2 2021 | Madison<br> Technologies, Inc.. | 400<br> Shares of Series E | |
| Irrevocable<br> Trust | Preferred<br> Stock | ||
| KORR<br> Value, LP | Madison<br> Technologies, Inc.. | 200<br> Shares of Series E | |
| Preferred<br> Stock |
SCHEDULE II
| Name of Pledgor | Type of Person | Principal Residence of Pledgor / Chief Executive Office Address | Social Security Number / FEIN |
|---|---|---|---|
| Philip<br> Falcone | Individual | On<br> file with Agent | |
| FFO<br> 1 2021 | Trust | On<br> file with Agent | |
| Irrevocable<br> Trust | |||
| FFO<br> 2 2021 | Trust | On<br> file with Agent | |
| Irrevocable<br> Trust | |||
| KORR<br> Value, LP | Limited | On<br> file with Agent | |
| Partnership | |||
| Kenneth<br> Orr | Individual | On<br> file with Agent |
SCHEDULEIII
PLEDGEAMENDMENT
This Pledge Amendment, dated [________________] is delivered pursuant to Section 7(g) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 6 of the Pledge Agreement are and continue to be true and correct, both as to the promissory notes, instruments and shares pledged prior to this Pledge Amendment and as to the promissory notes, instruments and shares pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated February 17, 2021 between undersigned, as Pledgor, and the other Pledgors from time to time party thereto, and Arena Investors LP, as Agent, (the “Pledge Agreement”) and that the Pledged Interests listed on this Pledge Amendment shall be and become a part of the Pledged Collateral referred to in said Pledge Agreement and shall secure all Secured Obligations referred to in said Pledge Agreement.
| By: | |||
|---|---|---|---|
| Name: | |||
| Title: | |||
| Name<br> and | Certificate | Percentage of Pledged | |
| --- | --- | --- | --- |
| Address<br> of Pledgor | Pledged<br> Entity | Number(s) | Entity<br> Owned/Pledged |
Exhibit10.26
FIRST AMENDMENT TO
LIMITED GUARANTOR PLEDGE AGREEMENT
THIS FIRST AMENDMENT TO LIMITED GUARANTOR PLEDGE AGREEMENT, dated as of September 24, 2021 (this “First Amendment”), is by and among (a) Philip Falcone, an individual with a principal residence located at 22 East 67th Street, New York, NY 10065 (“Falcone”), (b) FFO 1 Trust (“FFO-1”), (c) FFO 2 Trust (“FFO-2”), (d) KORR Value, LP (“KORR”, and together with Falcone, FFO-1 and FFO-2, and each of their respective heirs, executors, administrators, representatives, successors and assigns, each, a “Pledgor”, and collectively, the “Pledgors”) and (e) Arena Investors, L.P., in its capacity as agent under the Purchase Agreement referred to in the Original Pledge Agreement (as defined below) (in such capacity, together with its successors and permitted assigns in such capacity, the “Agent”).
RECITALS:
A. Reference is made to the Limited Guarantor Pledge Agreement, dated as of February 17, 2021 (the “Original Pledge Agreement” and called together with this First Amendment and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Pledge Agreement”), made by the Pledgors in favor of the Agent.
B. The Pledgors and the Agent have agreed to amend the Original Pledge Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Capitalized terms used but not otherwise defined herein shall have the same meanings given to the in the Original Pledge Agreement.
2. Schedule I to the Original Pledge Agreement is deleted in its entirety and replaced with a new Schedule I attached hereto and incorporated herein by reference. With effect from the date hereof, all references in the Pledge Agreement to Schedule I shall mean and be references to the new Schedule I attached hereto.
3. Each Pledgor hereby confirms the grant to the Agent set forth in the Original Pledge Agreement of, and does hereby grant to the Agent, a security interest in and continuing lien on all of such Pledgor’s right, title and interest in and to all the Pledged Collateral to secure the Liabilities, in each case whether now or hereafter existing or in which such Pledgor now has or hereafter acquires an interest and wherever the same may be located, subject to the terms and conditions of the Pledge Agreement and the other Transaction Documents. Each Pledgor represents and warrants that the attached supplement to Schedule I accurately and completely sets forth all information required to be provided pursuant to the Pledge Agreement, and that Pledged Collateral listed on Schedule I constitutes all of the equity interests of Madison Technologies, Inc. owned by such Pledgor, and each Pledgor hereby agrees that such supplement to Schedule I shall constitute part of Schedule I to the Pledge Agreement.
4. Each reference in the Original Pledge Agreement to (a) “FFO 1 2021 Irrevocable Trust” is hereby amended and restated to read as “FFO I Trust” and (b) “FFO 2 2021 Irrevocable Trust” is hereby amended and restated to read as “FFO 2 Trust”.
5. With effect from the date hereof, all references to the Pledge Agreement shall mean and be references to the Pledge Agreement as amended hereby. Other than as amended hereby, the Original Pledge Agreement shall remain in full force and effect.
6. Each Pledgor hereby ratifies and reaffirms its obligations under the Original Pledge Agreement, as amended hereby, notwithstanding any errors in the names of, or signatories for, FFO I Trust or FFO 2 Trust contained in the Original Pledge Agreement.
7. Each Pledgor agrees to promptly execute such additional documents as are reasonably requested by the Agent to reflect the terms and conditions of this First Amendment and perfect any security interest relating thereto.
8. This First Amendment may be executed in any number of counterparts, which shall, collectively and separately, constitute one agreement. Each party hereto hereby adopts as an original executed signature page each signature page hereafter furnished by such party to the Agent (or an agent of the Agent) bearing (with the consent of the Agent) a facsimile signature by or on behalf of such party.
9. This First Amendment and the Pledge Agreement, as amended hereby, shall be deemed to be contracts made under, and for all purposes construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, this First Amendment to Individual Guarantor Pledge Agreement has been duly executed as of the day and year first above written.
| PLEDGORS: | |
|---|---|
| /s/<br> Philip Falcone | |
| Philip<br> Falcone | |
| FFO 1 TRUST | |
| By: | /s/<br> Philip A. Falcone |
| Name: | Philip A. Falcone |
| Title: | Trustee |
| FFO 2 TRUST | |
| By: | /s/ Lisa<br> Maria Falcone |
| Name: | Lisa Maria Falcone |
| Title: | Trustee |
| KORR<br> VALUE, LP | |
| --- | --- |
| By: Korr Acquisition Group, Inc.,<br> its General Partner | |
| By: | /s/ Kenneth Orr |
| Name: | Kenneth Orr |
| Title: | President |
| AGENT: | |
| ARENA<br> INVESTORS, L.P., as Agent | |
| By: | /s/ Lawrence Cutler |
| Name: | Lawrence Cutler |
| Title: | Authorized Signatory |
SignaturePage to First Amendment to Individual Guarantor Pledge Agreement
SCHEDULEI TO INDIVIDUAL GUARANTOR PLEDGE AGREEMENT
PLEDGEDINTERESTS
Exhibit 10.27
GUARANTYAGREEMENT
THIS GUARANTY AGREEMENT (this “Guaranty”) is entered into as of February 17, 2021 by and among each of the parties identified as a Guarantor on the signature pages hereto (each, a “Guarantor”, and collectively, the “Guarantors”), in favor of the Purchasers from time to time party to the Securities Purchase Agreement (as defined below) (together with their respective successors and assigns, including, any future holder of the Notes (as defined below), the “Holders”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Securities Purchase Agreement (as defined below).
RECITALS
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the date hereof (as amended and in effect from time to time, including any replacement agreement therefor, the “Securities Purchase Agreement”), among the Madison Technologies, Inc., a Nevada corporation (the “Company”) and the Holders, the Holders have extended credit to the Company as evidenced by certain Senior Secured Convertible Notes in the aggregate principal amount of $16,500,000 issued by the Company to the Holders (together with any notes issued in exchange therefor or replacement thereof or any additional investment made by the Holders and as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Senior Notes”); and
WHEREAS, each Guarantor will derive substantial direct and indirect benefit from the provision of the loans evidenced by the Notes.
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. The Guaranty. Each Guarantor hereby guarantees, as a co-obligor and not merely as surety, to the Holders, the prompt payment of all Liabilities (including without limitation principal, premium if any, and interest (including all interest that accrues after the commencement of any proceeding under any applicable bankruptcy, insolvency, reorganization and other similar laws of the Company or any Guarantor (the Company and each Guarantor collectively referred to herein as the “Note Parties” and each individually, a “Note Party”) at the rate provided in the respective Transaction Document, whether or not a claim for post-petition interest is allowed in such proceeding under any applicable bankruptcy, insolvency, reorganization and other similar laws) on the Notes, and all obligations which, but for the automatic stay under 11 U.S.C. Section 362 (or similar successor statute), would become due), whenever arising, in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise in accordance with any Transaction Document) strictly in accordance with the terms thereof (hereinafter, collectively, the “Guaranteed Obligations”). Each Guarantor hereby further agrees that if any of the Guaranteed Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise in accordance with any Transaction Document), such Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise in accordance with any Transaction Document) in accordance with the terms of such extension or renewal. This Guaranty is a guaranty of payment and not of collection. This Guaranty is a continuing guaranty and shall apply to all Guaranteed Obligations whenever arising.
| 2. | Joint<br> and Several Liability. |
|---|
(a) Each of the Guarantors is accepting joint and several liability hereunder in consideration of the financial accommodations to be provided by the Holders under the Transaction Documents, for the mutual benefit, directly and indirectly, of each of the Note Parties and other Guarantors (if any) and in consideration of the undertakings of each of the Guarantors to accept joint and several liability for the obligations of each of the Note Parties.
(b) Each of the Guarantors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-obligor, joint and several liability with the other Guarantors with respect to the payment and performance of all of the Guaranteed Obligations, it being the intention of the parties hereto that all the Guaranteed Obligations shall be the joint and several obligations of the Guarantors without preferences or distinction among them.
(c) If and to the extent that any of the Note Parties or Guarantors shall fail to make any payment with respect to any of the Guaranteed Obligations as and when due or to perform any of the Guaranteed Obligations in accordance with the terms thereof, then in each such event, the other Guarantors will make such payment with respect to, or perform, such Guaranteed Obligation.
3. Obligations Unconditional. The obligations of each of the Guarantors under Section 1 hereof are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Transaction Documents, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guaranty of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor other than payment in full of the Guaranteed Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted) and termination of the Purchase Agreement in accordance with their terms, it being the intent of this Section 3 that the obligations of each Guarantor hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that it shall have no right of subrogation, indemnity, reimbursement or contribution against any Note Party for amounts paid under this Guaranty until the Guaranteed Obligations are paid in full (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted) and the Purchase Agreement has terminated in accordance with its terms. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by applicable law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the Purchase Agreement, the Transaction Documents, or any other agreement or instrument referred to in the Purchase Agreement or the Transaction Documents shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Purchase Agreement, the Transaction Documents, or any other agreement or instrument referred to in the Purchase Agreement or the Transaction Documents shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with, in each case, in accordance with the Transaction Documents; or
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(d) any of the Guaranteed Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor).
4. Reinstatement. The obligations of each Guarantor under this Guaranty shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify each Holder on demand for all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable fees and out-of-pocket expenses of counsel) incurred by any Holder in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.
5. Certain Additional Waivers. With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, to the extent permitted by applicable law, and any requirement that any Holder exhaust any right, power or remedy or proceed against any Person under any of the Purchase Agreement, the Transaction Documents or any other agreement or instrument referred to in the Purchase Agreement or the Transaction Documents, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations.
6. Remedies. Each Guarantor agrees that, to the fullest extent permitted by applicable law, as between such Guarantor and the Holders, the Guaranteed Obligations may be declared to be forthwith due and payable for purposes of Section 1 hereof notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Guaranteed Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Guaranteed Obligations being deemed to have become automatically due and payable), the Guaranteed Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of said Section 1.
7. Limitation on Guaranteed Obligations. Notwithstanding any provision to the contrary contained herein or in any other of the Transaction Documents, the obligations of each Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under applicable law (whether federal or state and including, without limitation, 11 U.S.C. Section 548 (or similar successor statute)), after taking into account, among other things, such Guarantor’s right of contribution and indemnification from each other Guarantor under applicable law.
The Guarantors hereby agree, as among themselves, that if any Guarantor shall become an Excess Funding Company (as defined below), each other Guarantor shall, on demand of such Excess Funding Company (but subject to the next sentence hereof and to subsection (B) below), pay to such Excess Funding Company an amount equal to such Guarantor’s Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, assets, liabilities and debts of such Excess Funding Company) of such Excess Funding Company’s Excess Payment (as defined below). The payment obligation of any Guarantor to any Excess Funding Company under this Section 7 shall be subordinate and subject in right of payment to the prior payment in full of the Guaranteed Obligations of such Guarantor under the other provisions of this Guaranty, and such Excess Funding Company shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such Guaranteed Obligations. For purposes hereof, (i) “Excess Funding Company” means, in respect of any Guaranteed Obligations arising under the other provisions of this Guaranty (hereafter, the “Joint Obligations”), a Guarantor that has paid an amount in excess of its Pro Rata Share of the Joint Obligations; (ii) “Excess Payment” means, in respect of any Joint Obligations, the amount paid by an Excess Funding Company in excess of its Pro Rata Share of such Joint Obligations; and (iii) “Pro Rata Share”, for the purposes of this Section 7, means, for any Guarantor, the ratio (expressed as a percentage) of (A) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (B) the amount by which the aggregate present fair salable value of all assets and other properties of such Guarantor and all of the other Note Parties exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor and the other Note Parties hereunder) of such Guarantor and all of the other Note Parties, all as of the Closing Date (if any Guarantor becomes a party hereto subsequent to the Closing Date, then for the purposes of this Section 7 such subsequent Guarantor shall be deemed to have been a Guarantor as of the Closing Date and the information pertaining to, and only pertaining to, such Guarantor as of the date such Guarantor became a Guarantor shall be deemed true as of the Closing Date).
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| 8. | Representations. |
|---|
(a) Each Guarantor hereby represents and warrants that it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation and in each other jurisdiction in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect.
(b) Each Guarantor further represents and warrants that it has the power and authority to enter into this Guaranty and to perform its obligations and to consummate the transactions contemplated hereby and has by proper action duly authorized the execution and delivery of this Guaranty.
(c) Each Guarantor further represents and warrants that this Guaranty constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance.
(d) Each Guarantor further represents and warrants that it has knowledge of the other Note Parties’ financial condition and affairs and represents and agrees that it will keep so informed while this Guaranty is in force. Each Guarantor agrees that no Holder will have any obligation to investigate the financial condition or affairs of the other Note Parties for the benefit of such Guarantor nor to advise such Guarantor of any fact respecting, or any change in, the financial condition or affairs of the other Note Parties which might come to the knowledge of the Holders at any time, whether or not any Holder knows or believes or has reason to know or believe that any such fact or change is unknown to such Guarantor or might (or does) materially increase the risk of such Guarantor as a guarantor or might (or would) affect the willingness of such Guarantor to continue as a guarantor with respect to the Guaranteed Obligations.
9. Incorporated Provisions. Each Guarantor acknowledges, agrees to, and agrees to perform, as applicable, all of the representations, warranties, covenants, waivers and other provisions pertaining to it as a Guarantor or Subsidiary contained in any Transaction Document.
10. Amendment. This Guaranty may be amended or modified only in a writing executed by the parties hereto.
11. Termination. This Guaranty shall terminate automatically upon the indefeasible payment in full in cash of the Guaranteed Obligations. Upon the sale, transfer, conveyance or other disposition of all of the equity interests of any Guarantor in a transaction permitted pursuant to the Transaction Documents (other than to a Note Party) and the application of the proceeds thereof as provided in the Transaction Documents, such Guarantor shall cease to be a “Guarantor” for purposes of the Transaction Documents and shall be released from its obligations hereunder.
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32. Counterparts. This Guaranty may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Guaranty to produce or account for more than one such counterpart. Facsimile or electronic transmissions of any executed original document and/or retransmission of any executed facsimile or electronic transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm such transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.
13. Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning, construction or interpretation of any provision of this Guaranty.
14. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Notice THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. THE PROVISIONS OF THE PURCHASE AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, WAIVER OF JURY TRIAL AND VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS.
15. Entirety. This Guaranty represents the entire agreement of the parties hereto and thereto, and supersedes all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the transactions contemplated herein.
16. Holder Assigns. This Guaranty is intended for and shall inure to the benefit of each and every person who shall from time to time be or become the owner or holder of (or participant in) any of the Guaranteed Obligations, and each and every reference herein to a “Holder” shall include and refer to each and every successor or assignee of a Holder, as applicable, at any time holding or owning any part of or interest (or participation) in any part of the Guaranteed Obligations. Each Holder shall be entitled to rely upon and be the third party beneficiary of the provisions of this Guaranty and shall be entitled to enforce the terms and provisions hereof to the same extent as if such Holder were directly party hereto. This Guaranty shall be transferable and negotiable by such Persons only with the same force and effect, and to the same extent, that the Guaranteed Obligations are transferable and negotiable, it being understood and stipulated that upon assignment or transfer by any Holder of any of the Guaranteed Obligations the legal holder or owner of said Guaranteed Obligations (or a part thereof or interest therein thus transferred or assigned by a Holder) shall (except as otherwise stipulated by a Holder in its assignment) have and may exercise all of the rights granted to the Holders under this Guaranty to the extent of that part of or interest in the Guaranteed Obligations thus assigned or transferred to said person. Each Guarantor expressly waives notice of transfer or assignment of the Guaranteed Obligations, or any part thereof, or of the rights of the Holders hereunder. Failure to give notice will not affect the liabilities of any Guarantor hereunder.
[Signature Page Follows]
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Each of the parties hereto has caused a counterpart of this Guaranty to be duly executed and delivered as of the date first above written.
| GUARANTORS: | |
|---|---|
| SOVRYN HOLDINGS, INC. | |
| By: | /s/<br> Philip Falcone |
| Name: Philip Falcone | |
| Title: CEO |
[Signature Page to Guaranty Agreement]
Accepted and agreed to as of the date first above written.
HOLDERS:
| ARENA SPECIAL OPPORTUNITIES FUND, LP | |
|---|---|
| By: | /s/<br> Lawrence Cutler |
| Name: Lawrence Cutler | |
| Title: Authorized Signatory | |
| ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP | |
| By: | /s/ Lawrence<br> Cutler |
| Name: Lawrence Cutler | |
| Title: Authorized Signatory |
[SignaturePage to Guaranty Agreement]
Exhibit 21.1
List of Subsidiaries of Madison TechnologiesInc.
| Name | State of Incorporation |
|---|---|
| Blockchain.tv, Inc. | Delaware |
Exhibit 31.1
MadisonTechnologies Inc.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER PURSUANTTOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas Amon, certify that:
I have reviewed this annual report on Form 10-K for the year ending December 31, 2022 of Madison Technologies Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
- I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: January 25, 2024 |
|---|
| /s/ Thomas Amon |
| Thomas Amon<br><br> <br><br><br> <br>Chief Executive Officer and Chief Financial Officer<br><br> <br>(Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVEOFFICER AND
OF PRINCIPAL FINANCIAL OFFICER PURSUANTTO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACTOF 2002
In connection with the Annual Report on Form 10-K of Madison Technologies Inc. (the “Company”) for the year ended December 31, 2022 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Amon, Chief Executive Officer of the Company and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|---|---|
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Thomas Amon | |
| --- | |
| Thomas Amon<br><br> <br><br><br> <br>Chief Executive Officer and Chief Financial Officer<br><br> <br>(Principal Executive Officer and Principal Financial Officer)<br><br> <br><br><br> <br>Date: January 25, 2024 |