PROPOSAL 1: ISSUANCE OF ADDITIONAL CLASS A SHARES
The Company is seeking shareholder approval of the potential issuance of Class A Shares in excess of 19.9% of the number of outstanding shares of common stock of the Company, as such outstanding shares are calculated as of June 24,30, 2022, without taking into consideration the number of Class A Shares issuable upon conversion of the May 2021 SG Broadcasting Promissory Note (as defined below).
Background
On November 25, 2019, SG Broadcasting contributed to the Company $6,250,000, in exchange for which
the Company issued to SG Broadcasting a promissory note (the “Original SG Broadcasting Promissory Note”). On February 28, 2020, the Company replaced the Original SG Broadcasting Promissory Note with an amended and restated promissory note (the “Amended and Restated SG Broadcasting Promissory Note”), increasing the potential aggregate outstanding principal amount thereunder to $10,250,000, together with interest thereon calculated in accordance therewith. On March 27, 2020, the Company replaced the Amended and Restated SG Broadcasting Promissory Note with a further amended and restated promissory note (the “Second Amended and Restated SG Broadcasting Promissory Note”), further increasing the potential aggregate outstanding principal amount thereunder to $20,000,000, together with interest thereon calculated in accordance therewith. The entire $20,000,000 principal amount borrowable under the Second Amended and Restated SG Broadcasting Promissory Note is outstanding as of June 24,30, 2022, together with accrued but unpaid interest of $4,814,598.91.$4,855,372.48.
On September 30, 2020, SG Broadcasting loaned an additional $250,000 to the Company pursuant to an additional promissory note (the “Second SG Promissory Note”). The entire $250,000 principal amount borrowable under the Second SG Promissory Note is outstanding as of June 24,30, 2022, together with accrued but unpaid interest of $47,468.24.
$47,949.64. On May 19, 2021, the Company issued to SG Broadcasting an additional promissory note (the “May 2021 SG Broadcasting Promissory Note” and, collectively with the Second Amended and Restated SG Promissory Note and the Second SG Promissory Note, the “SG Broadcasting Notes”). Up to $7,000,000 may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note. Of such amount, $4,000,000 in original principal amount is outstanding as of June 24,30, 2022, together with accrued but unpaid interest of $483,799.02.$491,564.14.
The SG Broadcasting Notes carry interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% on November 25, 2021 and additional annual increases of 1.0% following each successive anniversary thereafter. The May 2021 SG
Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in kind through maturity. Subject to prior shareholder approval of the issuance of the shares, the May 2021 SG Broadcasting Promissory Note is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.
The SG Broadcasting Notes carry interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.00%, and an additional increase of 1.00% on November 25, 2021 and additional annual increases of 1.0% following each successive anniversary thereafter. The SG Broadcasting Notes have a maturity date of six (6) months after the fifth (5th) anniversary of execution of the Original SG Promissory Note. Additionally, the SG Broadcasting Notes are payable in interest in kind through maturity. The SG
Broadcasting Notes are convertible into Class A Shares at the option of SG Broadcasting at a strike price equal to the thirty (30) day volume weighted average price of the Class A Shares on the date of conversion.
Each of the SG Broadcasting Notes contains a limitation on conversion of the outstanding principal and any accrued but unpaid interest thereunder into Class A Shares, such that the maximum number of Class A Shares to be issued in connection with the conversion of the Second SG Promissory Note shall not, without the prior approval of the shareholders of the Company, (i) exceed a number of shares equal to 19.9% of the outstanding shares of common stock of the Company immediately prior to the date of issuance of such note, without taking into consideration the number of Class A Shares issuable upon conversion of such note, (ii) exceed a number of shares that would evidence voting power greater than 19.9% of the combined voting power of the outstanding voting securities of the Company immediately prior to the date of issuance of such note, without taking into consideration the number of Class A Shares issuable upon conversion of such note, or (iii) otherwise exceed such number of shares of capital stock of the Company that would violate applicable listing rules of Nasdaq, in each of subsections (i) through (iii), only to the extent required by applicable Nasdaq rules and guidance (the “Share Cap”). In the event the number of Class A