Item 1.01. Entry into Material Definitive Agreements
On December 28, 2017, QuoteMedia, Inc. (the “Company”) entered into a Debt Exchange Agreement, by and among the Company, Bravenet Web Services, Inc. (“Bravenet”), and Harrison Avenue Holdings Ltd. (“Harrison”), pursuant to which, among other things, Bravenet and Harrison agreed to exchange an aggregate of $3,192,116 of indebtedness of the Company held by Bravenet and Harrison in exchange for (a) 127,685 shares of a newly created class of preferred stock designated as Series A Redeemable Convertible Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”), and (b) warrants to purchase up to 4,000,000 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) at an exercise price equal to $0.10 per share (the “Debt Exchange Common Stock Warrants”). David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of the Company, a member of the Company’s board of directors, is a control person of Bravenet and Harrison. On December 28, 2017, the Company also entered into a Debt Forgiveness Agreement, by and among the Company, Bravenet, and Harrison, pursuant to which, among other things, Bravenet and Harrison agreed to forgive an aggregate of $1,157,752 of indebtedness of the Company held by Bravenet and Harrison in exchange for $1.00.
On December 28, 2017, the Company also entered into a Compensation Agreement with David M. Shworan, pursuant to which, among other things, the Company will issue to Shworan (a) a warrant to purchase up to 1,250 shares of Series A Preferred Stock at an exercise price equal to $1.00 per share (the “Preferred Stock Warrant”), (b) a warrant to purchase up to 382,243 shares of Series A Preferred Stock at an exercise price equal to $1.00 per share (the “Liquidity Preferred Stock Warrant”), and (c) a warrant to purchase up to 4,000,000 shares of Common Stock at an exercise price equal to $0.10 per share (which warrant has specific performance vesting thresholds) (the “Common Stock Warrant”). In addition, provided that Mr. Shworan is employed by or otherwise providing services to the Company or its subsidiaries on each of January 1, 2018 and 2019, the Company will at that time issue to Mr. Shworan a warrant to purchase up to 15,000 shares of Series A Preferred Stock at an exercise price equal to $1.00 per share. Finally, provided that Mr. Shworan is employed by or otherwise providing services to the Company or its subsidiaries on January 1, 2020, the Company shall pay Mr. Shworan a base salary at the annual rate of $350,000 during the term of his employment or service with the Company and its subsidiaries.
The foregoing description of the Debt Exchange Agreement, Debt Exchange Common Stock Warrants, Debt Forgiveness Agreement, Compensation Agreement, Preferred Stock Warrant, Liquidity Preferred Stock Warrant, and Common Stock Warrant and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Debt Exchange Agreement, Debt Exchange Common Stock Warrants, Debt Forgiveness Agreement, Compensation Agreement, Preferred Stock Warrant, Liquidity Preferred Stock Warrant, and Common Stock Warrant, which are attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8, respectively.
The Series A Preferred Stock carries no dividend rights and has a redemption, exchange and liquidation value of $25 per share. The Series A Preferred Stock is convertible into Common Stock at any time following the date the closing price of a share of Common Stock on a securities exchange or actively traded over-the-counter market has exceeded $0.30 for ninety (90) consecutive trading days, into shares of Common Stock at the rate of 83.33 shares of Common Stock for one share of Series A Preferred Stock.
The foregoing description of the Series A Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the complete text of the Certificate of Designation of Series A Redeemable Convertible Preferred Stock, which is attached hereto as Exhibit 3.1.