Item
1.01 Entry into a Material Definitive Agreement
On
January 10, 2017, Marathon Patent Group, Inc. (the “Company”) and certain of its subsidiaries (each a “Subsidiary”
and collectively with the Issuer, the “Company”) entered into an amended and restated revenue sharing and securities
purchase agreement (the “ARRSSPA”) with DBD Credit Funding, LLC (“DBD”), an affiliate of Fortress Credit
Corp.(“Fortress”), under which the Company and DBD amended and restated the Revenue Sharing and Securities Purchase
Agreement dated January 29, 2015 (the “Original Agreement”) pursuant to which (i) Fortress purchased $20,000,000 in
promissory notes, of which $15,549,409 is currently outstanding (less $4,500,000 that is currently held in a cash collateral account),
(ii) an interest in the Company’s revenues from certain activities and warrants to purchase 100,000 shares of the Company’s
common stock.
The
ARRSSPA amends and restates the Original Agreement to provide for (i) the sale by the Company of a $4,500,000 promissory note
(the “New Note”) and (ii) the insurance of additional warrants to purchase 187,500 shares of common stock (the “New
Warrant”). Pursuant to the ARRSSPA, Fortress acquired an increased revenue stream right to certain revenues generated by
the Company through monetization of our patent portfolio (“Monetization Revenues”). The ARRSSPA increases the revenue
stream basis to $1,225,000. The ARRSSPA provides for the potential issuance of up to $7,500,000 of additional notes (the “Additional
Notes”), of which not more than $3,750,000 shall be made prior to June 30, 2017 and of which not more than $3,750,000 shall
be made available during the period following June 30, 2017 and on or prior to December 31, 2017 and not more than two such issuances
shall occur under the ARRSSPA.
The
unpaid principal amount of the New Note (including any PIK Interest, as defined below) shall bear cash interest at a rate equal
to LIBOR plus 9.75% per annum; provided that upon and during the continuance of an Event of Default (as defined in the Purchase
Agreement), the interest rate shall increase by an additional 2% per annum. Interest on the Initial Note shall be paid on the
last business day of each calendar month (the “Interest Payment Date”), commencing January 31, 2017. Interest shall
be paid in cash except that 2.75% per annum of the interest due on each Interest Payment Date shall be paid-in-kind, by increasing
the principal amount of the Notes by the amount of such interest, effective as of the applicable Interest Payment Date (“PIK
Interest”). PIK Interest shall be treated as added principal of the New Note for all purposes, including interest accrual
and the calculation of any prepayment premium. The Company paid a structuring fee of 2.0% of the New Note and would pay a 2.0%
fee upon the issuance of any Additional Notes. The proceeds of the New Note and any Additional Notes may be used for working capital
purposes, portfolio acquisitions, growth capital and other general corporate purposes.
The
Purchase Agreement contains certain customary events of default, and also contains certain covenants including a requirement that
the Company maintain minimum liquidity of $1,250,000 in unrestricted cash and cash equivalents.
The
terms of the Warrant provide that from July 10, 2017 until January 10 2022, the Warrant may be exercised for cash or on a cashless
basis. Exercisability of the Warrant is limited if, upon exercise, the holder would beneficially own more than 4.99% of the Issuer’s
Common Stock.
Pursuant
to the ARSSPA, as security for the payment and performance in full of the Secured Obligations (as defined in the Security Agreement
entered in favor of the Note purchasers (the “Security Agreement”) the Company and certain subsidiaries executed and
delivered in favor of the purchasers a Security Agreement and a Patent Security Agreement, including a pledge of the Company’s
interests in certain of its subsidiaries. As further set forth in the Security Agreement, repayment of the Note Obligations (as
defined in the Notes) is secured by a first priority lien and security interest in all of the assets of the Company, subject to
certain permitted liens. Certain subsidiaries of the Company also executed guarantees in favor of the purchasers (each, a “Guaranty”),
guaranteeing the Note Obligations.
The
foregoing is a summary description of the terms and conditions of the ARSSPA, Notes, Warrant, Security Agreement, Patent Security
Agreement, Patent License Agreement, and other agreements entered in connection with the Purchase Agreement (collectively, “Transaction
Documents”), does not purport to be complete and is qualified in their entirety by reference to the form of transaction
documents filed as exhibits hereto.