SETTLEMENT AGREEMENT AND RELEASE
Exhibit 10.17
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (this “Release”) is made and entered into as of May 2, 2022 (the “Effective Date”), between Midwestern Interactive, LLC (“Shareholder”), Signing Day Sports, LLC, an Arizona limited liability company (“SDS LLC”), Signing Day Sports Baseball, LLC, an Arizona limited liability company (“SDSB LLC”), Signing Day Sports Football, LLC, an Arizona limited liability company (“SDSF LLC”) and Signing Day Sports, Inc., a Delaware corporation (“SDS Inc.”, and, together with SDS LLC, SDSB LLC, and SDSF LLC, “SDS”). SDS and Shareholder are sometimes hereinafter referred to as each, a “Party,” and collectively, the “Parties.”
RECITALS
A. SDS LLC was formed on January 21, 2019 in the State of Arizona and commenced operations at that time. Xxxxxx Xxxx (“Xxxx”), the founder of SDS LLC, agreed and contracted to fulfill certain obligations to Shareholder, including, but not limited to, granting a profits interest that was intended to be a membership interest in SDS LLC as well as a percentage of future profits from the operations or sale of SDS LLC, in exchange for Shareholder’s contribution of $250,000 in-kind investment, pursuant to the terms of that certain Contribution and Profit-Sharing Agreement between Xxxx and Shareholder dated August, 23, 2019, attached hereto as Exhibit A (the “Contribution and Profit-Sharing Agreement”).
B. SDS LLC intended to do a public offering, and determined that the best corporate form to do so would be as a Delaware corporation, which would require SDS LLC to redomesticate to Delaware as a Delaware limited liability company, and for that same Delaware limited liability company to convert to a Delaware corporation (these actions collectively to be known as the “Conversion”).
C. On June 5, 2020, a Certificate of Formation for Signing Day Sports, LLC, a Delaware limited liability company (“SDS LLC – DE”), and a Certificate of Conversion of SDS LLC into SDS LLC – DE were filed with the Delaware Secretary of State with the intention of completing the first part of the Conversion process, but the appropriate Arizona statutory requirements and filings with the Arizona Corporation Commission to complete the conversion of SDS LLC into SDS LLC – DE were not properly taken at that time, and therefore SDS LLC is still an active entity registered with the Arizona Corporation Commission.
D. SDS LLC formed SDSF LLC on September 29, 2020, and SDSB LLC on November 25, 2020, in the State of Arizona, as wholly-owned subsidiaries of SDS LLC.
E. On September 9, 2021, on the understanding and belief that the Conversion of SDS LLC to SDS LLC – DE had properly taken place, a Certificate of Incorporation for SDS Inc. and a Certificate of Conversion of SDS LLC – DE to SDS Inc. were filed with the Delaware Secretary of State with the intention of completing the second part of the Conversion process. Since that date, SDS, Inc. has been operating under the understanding and belief that the Conversion was effective.
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F. In order to proceed with a financing or equity transaction, including a public offering, the Board of Directors of SDS Inc. and the Members of SDS LLC deem it advisable that SDS LLC, SDSF LLC, and SDSB LLC be merged with and into SDS Inc., in order to consolidate all membership interests and assets of SDS LLC, SDSF LLC, and SDSB LLC with SDS Inc. in accordance with the intention behind the Conversion actions described above, and, as part of which merger process, the Board of Directors and the Members will ratify all the prior actions taken with the intention of effecting the Conversion (collectively, the “Corrective Merger Actions”);
G. In order to facilitate any subsequent financing or equity transaction of SDS Inc., the Parties have approved the Corrective Merger Actions and confirmed the current ownership of all outstanding shares of common stock of SDS Inc. and now seek to release and waive any claims that SDS or any Shareholder may have to with respect to any aspect of the Corrective Merger Actions, including, without limitation, their resulting ownership in SDS, Inc.
H. In order to make sure that there is a clear understanding between the Parties regarding the capitalization of SDS Inc., the Parties also seek to release and waive any claims that any Shareholder may have against any other Shareholder.
AGREEMENT
Accordingly, in consideration of the mutual promises, covenants, and agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby acknowledge, understand, covenant, and agree as follows:
| 1. | Current Ownership of Shareholder: |
| a. | SDS and Shareholder hereby agree that, as of the date hereof, (i) the only outstanding shares of capital stock of SDS Inc. that Shareholder owns are as set forth on the capitalization table attached as Exhibit B to this Release (the “Capitalization Table”), (ii) such shares were issued to Shareholder pursuant to the Contribution and Profit-Sharing Agreement, and (iii) as a result of the issuance of such shares, Shareholder’s rights under the Contribution and Profit-Sharing Agreement are hereby terminated and the Contribution and Profit-Sharing Agreement is of no further force or effect. |
| b. | Except as set forth on the Capitalization Table, Shareholder represents and warrants that there are no outstanding convertible securities, options, warrants, calls, rights, commitments or other agreements or arrangements that provide for the issuance of any shares of capital stock of SDS Inc. or any other security convertible into or exchangeable for shares of capital stock of SDS Inc. to Shareholder. |
| c. | Shareholder represents that it is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and acknowledges the issuance of the shares to Shareholder was made in reliance on a private placement exemption to “accredited investors” within the meaning of Section 501(a) of Regulation D under the Securities Act or similar exemptions under state law and Shareholder further acknowledges that he/she acquired any shares issued to them solely for investment purposes, for their own account and not for the account or benefit of any other person, and not with a view towards the distribution or dissemination thereof. |
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| 2. | Shareholder Release and Discharge; Covenant Not to Sue. |
| a. | Except for obligations of SDS arising under this Release, Shareholder, on its own behalf and on behalf of Shareholder’s spouse, and his/her heirs, executors, personal representatives, beneficiaries, successors, assigns, parents, subsidiaries, divisions, related parties, predecessors, and affiliates, and each of its and their present and former owners, members, managers, stockholders, officers, directors, employees, agents, attorneys, representatives, successors, beneficiaries, related parties, and affiliates (collectively, “Representatives”), does hereby irrevocably, unconditionally, voluntarily, knowingly, fully, finally, and completely forever release and discharge SDS, its parents, subsidiaries, divisions, related parties, successors, assigns, predecessors, and affiliates, and each of its and their present and former owners, members, managers, stockholders, officers, directors, employees, agents, attorneys, representatives, successors, beneficiaries, heirs and assigns, including, without limitation, those shareholders listed on the Exhibit B Capitalization Table, individually and collectively (the “Released Parties”), from, against and with respect to any and all actions, accounts, agreements, causes of action, complaints, charges, claims, covenants, contracts, costs, damages, demands, debts, defenses, duties, expenses, executions, fees, injuries, interest, judgments, liabilities, losses, obligations, penalties, promises, reimbursements, remedies, suits, sums of money, and torts, of whatever kind or character, whether in law, equity or otherwise, direct or indirect, fixed or contingent, foreseeable or unforeseeable, liquidated or unliquidated, known or unknown, matured or unmatured, absolute or contingent, determined or determinable, that Shareholder or Shareholder’s Representatives ever had, now have, or may hereafter have or acquire against the Released Parties that arise out of or in any way relate, directly or indirectly, to any matter, cause or thing, act or failure to act whatsoever occurring at any time on or prior to the date of this Release relating to SDS, including without limitation, the Contribution and Profit-Sharing Agreement, Shareholder’s direct or indirect ownership of shares of SDS’s capital stock, or Shareholder’s direct or indirect ownership of membership interests of SDS LLC, SDS LLC-DE, SDSF LLC, or SDSB LLC, as applicable, any representations made to Shareholder by any managing member, member, officer, director, manager, or other Representative of SDS, and/or the ownership, operation, business, affairs, management, or financial condition of SDS (collectively, a “Claim”), provided, however, that nothing in this Release is intended to release any rights that any Party or Shareholder may have under the terms of that certain Simple Agreement for Future Equity and/or Convertible Note, as applicable. Further, Shareholder and Shareholder’s Representatives hereby irrevocably, unconditionally, voluntarily, knowingly, fully, finally, and completely forever release and waive their rights to any Claim, distributions, payments, or other amounts that they believe should have been paid or are owed to them by SDS LLC, SDS LLC-DE, SDSF LLC, SDSB LLC, or SDS Inc. |
| b. | In order to make sure there is a clear understanding regarding the capitalization of SDS Inc., each Party hereto irrevocably, unconditionally, voluntarily, knowingly, fully, finally, and completely forever releases and waives any Claims that they may have with respect to ownership interests in SDS LLC, SDS LLC – DE, SDSF LLC, SDSB LLC, or SDS Inc., whether past, present, future, or contingent, and affirms that he, she, or it does not own any interests in SDS Inc. beyond that set forth on the Capitalization Table. |
| c. | Shareholder, for Shareholder and for any of its Representatives, irrevocably covenants that neither it nor any of its Representatives will, directly or indirectly, sue, commence any proceeding against, or make any demand upon any Released Party in respect of any of the matters released and discharged pursuant to Section 2(a) above. |
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3. Attorneys’ Fees and Costs. Each Party shall bear its own attorneys’ fees and costs arising from the claims and incurred in the negotiation and execution of this Release.
4. Indemnification. This Release may be pleaded by any of the Released Parties as a full and complete defense and may be used as the basis for an injunction against any action at law or equity instituted or maintained against any of them in violation hereof. If any Claim is brought or maintained by Shareholder or his/her Representatives against any Released Party in violation of this Release, then Shareholder will be responsible to indemnify, defend and hold the Released Party harmless for all claims, costs and expenses (including without limitation reasonable attorneys’ fees and costs) incurred by the Released Party in defending same.
5. Complete Release. Shareholder hereby represents and warrants to each Released Party that there are no additional Persons affiliated with Shareholder that are necessary to effectuate the release and extinguishment contemplated herein. Shareholder hereby represents, warrants, and agrees that he/she has not heretofore assigned, subrogated or transferred, or purported to assign, subrogate, or transfer to any Person whatsoever any Claim hereinabove released. Shareholder hereby represents, warrants, and agrees to indemnify, defend, and hold harmless each Released Party from any such assignment, subrogation, or transfer of Claims.
6. Confidentiality. The Parties agree that the terms, provisions, and existence of this Release shall remain confidential and shall not be disclosed to any third party (other than each Party’s employees, but only as necessary to further the performance of such employee’s job), except as may be mutually agreed to by the Parties in writing or as required by law. Notwithstanding the above, it shall be permissible for the Parties to disclose the terms of the Release to any necessary financial, legal, accounting, or tax advisers for the limited purpose of receiving such advice, so long as such advisers respect and maintain the confidentiality of this Release. It shall also be permissible for a Party to disclose the terms, provisions, and existence of this Release to a court in connection with enforcement of this Release. SDS may disclose the terms of the Release if required in connection with any future capital financing or investment transaction by SDS, including without limitation, the issuance of common stock, preferred stock, convertible stock, debt, convertible debentures, convertible debt, debt with warrants or any other securities convertible into common stock, or any form of debt instrument involving any form of equity participation.
7. No Disparagement. Shareholder shall refrain from all conduct, verbal or otherwise, that disparages or damages the reputation, goodwill, or standing in the community of SDS or any other Released Parties. Notwithstanding the foregoing, nothing in this Release shall preclude Shareholder from communicating or testifying truthfully (a) to the extent required or protected by law, (b) to any federal, state, provincial or local governmental agency, or (c) in response to a subpoena to testify issued by a court of competent jurisdiction.
8. Acknowledgment and Interpretation. Shareholder acknowledges and agrees that (a) SDS has advised Shareholder in this writing of Shareholder’s right to consult with an attorney prior to signing this Release; (b) Shareholder has carefully read and fully understands all of the provisions of this Release; and (c) Shareholder is entering into this Release (including the releases set forth herein) knowingly, freely and voluntarily in exchange for good and valuable consideration. This Release has been negotiated by and between Shareholder and the Released Parties; any legal or equitable principles that might require the construction of this Release or any provision hereof against the party drafting this Release will therefore not apply in any construction or interpretation of this Release, and the provisions of this Release will instead be interpreted in a reasonable manner to effect the intentions of the parties and beneficiaries hereto and of this Release. The section headings contained in this Release are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Release.
9. Entire Agreement; Successors. This Release constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes any other prior or contemporaneous agreements (oral or written) between the Parties relating to the subject matter hereof, and shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, successors, and permitted assigns.
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10. Newly Discovered Facts Or Claims. Shareholder is aware that it may hereafter discover claims or facts in addition to or different from those it now knows or believes to be true with respect to the matters released herein. Nevertheless, it is Shareholder’s intention to fully, finally, and forever settle and release all such matters, and all Claims relative thereto, that now exist, heretofore have existed, or arise in the future between Shareholder or Shareholder’s Representatives, on the one hand, and any Released Party, on the other hand. In furtherance of such intention, the releases given herein will remain in effect as full and complete releases of all such matters notwithstanding the discovery or existence of any additional or different claims or facts related thereto. In furtherance of this intention, Shareholder hereby acknowledges that he/she has read and is familiar with California Civil Code Section 1542, which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
To the extent that the provisions of California Civil Code Section 1542, as well as the provisions of any and all comparable or similar statutes or principles of law of California or any other state or federal jurisdiction might be deemed applicable, they are hereby expressly waived by Shareholder with the full knowledge and understanding of the consequences and effects of this waiver. This Release shall be, and remain, in effect despite the discovery or existence of any new or additional fact, or any fact different from that which Shareholder now knows or believes to be true. Notwithstanding the foregoing, nothing in this Release shall be construed as, or constitute, a release of any Party’s rights to enforce the terms of this Release.
11. Severability. Any term or provision of this Release that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.
12. Amendments. This Release shall not be amended or modified except upon mutual written agreement between the Parties.
13. Governing Law. This Release shall be governed by, and construed and enforced in accordance with, the domestic laws of the State of Delaware, without giving effect to any conflict of law principle or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
14. Counterparts. This Release may be executed in multiple counterparts and by facsimile or other electronic transmission, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed this Release effective as of the date first above written.
| SHAREHOLDER: | ||
| Midwestern Interactive, LLC | ||
| /s/ Xxxxxxx Xxxxxxx | ||
| Xxxxxxx Xxxxxxx | ||
| Signing Day Sports, LLC, an Arizona limited liability company | ||
| By: | /s/ Xxxx Xxxxxx | |
| Name: | Xxxx Xxxxxx | |
| Its: | Chief Executive Officer | |
| Signing Day Sports, Inc., a Delaware corporation | ||
| By: | /s/ Xxxx Xxxxxx | |
| Name: | Xxxx Xxxxxx | |
| Its: | Chief Executive Officer | |
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EXHIBIT A
Contribution and Profit-Sharing Agreement
(see attached)
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CONTRIBUTION AND PROFIT-SHARING AGREEMENT
This Agreement is entered into by, and between, the undersigned parties on this 23rd day of August 2019.
RECITALS:
WHEREAS, Xxxxxx Xxxx has presented Midwestern Interactive, LLC, hereby known as MWI, with a business opportunity. Xxxxxx is a Member/Manager of Signing Day Sports, LLC. Signing Day Sports, LLC specializes in technology, software and expertise for team recruiting across multiple sports. Signing Day Sports, LLC is an Arizona LLC that was formed in January of 2019. The Arizona entity ID# is 1941784.
WHEREAS, MWI is interested in participating in the receipt of future profits from this business.
WHEREAS, Xxxxxx Xxxx has agreed that, in exchange for their contribution of $250,000 accumulative in kind investment based on a 20% reduction in billable hourly rate from $125 per hour to $100 per hour to Xxxxxx Xxxx and Signing Day Sports, MWI will receive 1% membership interest in Signing Day Sports, LLC. If profits a e shared before the accumulation reaches $250,000 of the in kind investment MWI will apply the profits shared towards the remainder of the $250,000 in kind investment. If Signing Day Sports, LLC is sold and the profits shared are less than the remaining amount MWI has the option to terminate this agreement.
WHEREAS, Xxxxxx agrees to pay to MWI 1% of all profits from the operations of Signing Day Sports, LLC and/or the sale of Signing Day Sports, LLC.
WHEREAS, Xxxxxx Xxxx believes that Signing Day Sports, LLC will be more attractive to a potential buyer, like Microsoft, and it will be easier to get a deal with a potential buyer if there are fewer parties listed as Members of the Company, MWI has agreed to this Contribution and Profit Sharing Agreement instead of showing their 1% membership in the formation documents of Signing Day Sports, LLC.
WHEREAS, Xxxxxx agrees that for all intents and purposes, MWI will be considered to hold a 1% membership interest in Signing Day Sports, LLC.
WHEREAS, the undersigned individuals desire to enter into this Agreement to memorialize the terms and conditions of their agreement with respect to the profit sharing in the above referenced business endeavor.
TERMS OF AGREEMENT
PARTIES TO THE AGREEMENT. Xxxxxx Xxxx, whose address is 0000 X. Xxxxx Xxxxxx, Xxxx, Xxxxxxx 00000 and MWI, whose address is 000 X Xxxxxx, Xxx., Xxxxxx, Xxxxxxxx 00000 are the parties to this agreement.
PROFIT SHARING. Xxxxxx Xxxx has potential profits of millions of dollars in the above referenced business venture. Xxxxxx has agreed to pay MWI 1% of all profits from Signing Day Sports, LLC. This applies to 1% of all profits from the sale of the business as well as 1% of all profits from the operations of the business.
Xxxxxx Xxxx
| 0000 X. Xxxxx Xxxxxx | |
| Mesa, Arizona 85205 | |
| Email: Xxxxxx.xxxx@xxxxx.xxx |
If to Midwestern Interactive, LLC
000 X Xxxxxx
Xxx,
Joplin, Missouri, 64801
Email: xx@xxxxxxxxxxxxxxx.xxx OR xx@xxxxxxxxxxxxxxx.xxx
AGREEMENT. This Agreement represents the Parties’ entire understanding regarding the subject matter herein. There are no representations, promises, warranties, covenants, or undertakings between the Parties other than those expressly set forth in this Agreement.
BINDING EFFECT. This Agreement shall bind and inure to the benefit of the Parties and their successors and assigns.
ARBITRATION. Any controversy or dispute arising out of or relating to this Agreement shall be settled solely and exclusively by arbitration.
(Signatures on following page)
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first above written.
| Midwestern Interactive, LLC | ||
| Signature |  |
|
| Date: | 8-23-19 | |
| Xxxxxx Xxxx | ||
| Signature |  |
|
| Date: | 8.23.19 | |
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EXHIBIT B
Capitalization Table
(see attached)
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Signing Day Sports, Inc. Capitalization Table
Does not include stock options*, SAFEs**, or Convertible Notes***
| Name of Shareholder | Percentage | Shares | ||||||
| Xxxxxx Xxxx | 37.58 | % | 14,081,885 | |||||
| Xxxxxx Family Holdings, LLC | 17.48 | % | 6,549,699 | |||||
| Xxxxxxx Xxxxxxx | 1.60 | % | 600,000 | |||||
| Xxxxxxxx Xxxx | 10.24 | % | 3,838,922 | |||||
| Midwestern Interactive, LLC | 1.07 | % | 400,000 | |||||
| Xxx Xxxxx | 5.34 | % | 2,000,000 | |||||
| Bayston Family Limited Partnership | 2.00 | % | 750,000 | |||||
| Xxxxxx Xxxxxxxxx, Trustee of the Xxxxxx X. Xxxxxxxxx Revocable Trust | 3.60 | % | 1,350,000 | |||||
| 35’sNextChapters LLC | 2.00 | % | 750,000 | |||||
| Xxxxxxx Xxxxxx | 0.20 | % | 75,000 | |||||
| Xxxxxxx Xxxxxxxx | 5.11 | % | 1,916,366 | |||||
| Xxxxxxx Xxxxx | 4.85 | % | 1,816,366 | |||||
| Xxxxxxx and Xxxxxx Xxxxxx as Joint Tenants with Rights of Survivorship | 0.24 | % | 89,820 | |||||
| Xxxxx Xxxxxxxxx | 0.08 | % | 29,940 | |||||
| Xxxxx and Xxxx Xxxxx | 1.32 | % | 496,296 | |||||
| Xxxxxxx Xxxxx, Trustee of the Xxxxxxx X. Xxxxx Living Trust | 0.49 | % | 185,185 | |||||
| XxXxxxx X. Xxxxxx | 0.16 | % | 59,880 | |||||
| Xxxx Xxxxxxx and Xxxxxxx Xxxxxxx, Trustees of the Xxxxxxx X. Xxxxxxx Revocable Trust | 0.08 | % | 29,940 | |||||
| Xxxxxxxx Xxxx | 0.10 | % | 37,037 | |||||
| Zone Right, LLC | 6.46 | % | 2,419,162 | |||||
| Total: | 100.00 | % | 37,475,498 | |||||
Potential Additional Dilution Shares:
| *Stock Options Promised | 2,177,355 | |||
| **Estimated SAFE Shares | 5,579,593 | |||
| (see below) -This is for ILLUSTRATION PURPOSES ONLY because actual amount depends on trigger event. | ||||
| ***Estimated Convertible Note Shares | 4,705,224 | |||
| (see below) -This is for ILLUSTRATION PURPOSES ONLY because actual amount depends on trigger event. | ||||
| Total Estimated Shares including Potential Additional Dilution: | 49,937,670 |
| * | Promised Stock Options: The Company has not yet adopted a Stock Option Plan, but has promised to award the following options: (a) 1,500,000 stock options comprising 250,000 common stock options to each of the 6 Directors of the Company (excluding Xxxxxx), (b) an aggregate 667,355 common stock options to the CEO and CFO of the Company and (c) 10,000 common stock options to an ambassador agent of the Company which options are contingent on the Company closing on IPO on or before May 8, 2022. |
| ** | SAFES : The SAFEs are subject to different conversion calculations depending on the event triggering conversion as described in the SAFE (e.g. an equity financing or an automatic conversion at the end of 18 months because no other triggering event has occurred). For illustration purposes, assuming (i) automatic conversion of the SAFEs happened today, (ii) that the convertible notes described below convert into 4,705,224 shares of common stock for a total company capitalization of 44,358,077, and applying a $100,000,000 valuation and a 20% valuation discount, the SAFEs would convert into 5,579,593 shares of common stock of the Company. |
| *** | Convertible Notes: The Convertible Notes are subject to different conversion calculations depending on the event triggering conversion as described in the Notes (e.g., an IPO or other liquidity event). For illustration purposes, assuming the optional conversion right is exercised today, based on the current capitalization and the $50,000,000 assumed valuation specified for an optional conversion in the Notes, there would be 4,705,224 additional shares issued; provided however, that each holder of Notes is subject to a maximum 9.99% ownership of the shares of capital stock of the Company at any one time. This illustration calculation does not account for the 6% interest component. |
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