GAME GameSquare Holdings Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 13, 2024

 

GameSquare Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware		001-39389		99-1946435
(State or other Jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

6775 Cowboys Way, Ste. 1335 Frisco, Texas, USA		75034
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (216) 464-6400

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		GAME		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

On November 13, 2024, GameSquare Holdings, Inc., a Delaware corporation (the “Company” or “GameSquare”), FaZe Media Holdings, LLC, a Delaware corporation an indirectly wholly owned subsidiary of GameSquare (“GameSquare SPV” and together with GameSquare, the “GameSquare Parties”), Faze Media, Inc., a Delaware corporation (“Faze Media”), and Gigamoon Media LLC, a Delaware limited liability company (“Gigamoon”, and together with Faze Media, the “Faze Parties”), entered into a Note Purchase Agreement (the “Purchase Agreement”), pursuant to which the GameSquare Parties agreed to issue, jointly and severally, in two separate closings: (i) a senior secured promissory note in the principal amount of $3,250,000 to Faze Media (the “Promissory Note”) and (ii) a senior secured convertible promissory note in the principal amount of $10,000,000 to Gigamoon (the “Convertible Note” and together with the Promissory Note, the “Notes”).

 

The Promissory Note was issued as of November 13, 2024 (the “Initial Closing”) and bears an interest rate of 7.5% per annum, which automatically shall be increased to 10.0% in the event of an event of default. The Promissory Note matures and all principal and accrued interest thereon becomes due and payable as of the earliest of: (i) November 13, 2029, (ii) the acceleration of the Promissory Note in an event of default, and (iii) the date of the holder of the Promissory Note’s demand, solely to the extent made after December 15, 2024, at a time when the Second Closing (as defined below) (such date, the “Promissory Maturity Date”). The GameSquare Parties may prepay in whole or in part, at any time, the unpaid principal amount of the Promissory Note without any penalty. Upon the occurrence of the Second Closing (as defined below), the Promissory Note provides for the mandatory repayment of the entire principal balance of the Promissory Note, together with all accrued and unpaid interest thereon, with such repayment to be made with the proceeds received by the GameSquare Parties at the Second Closing.

 

Pursuant to the terms of the Purchase Agreement and the Notes, on or about December 15, 2024, and contingent on certain closing conditions set forth in therein, the GameSquare Parties agreed to issue the Convertible Note to Gigamoon in exchange for gross proceeds of $10,000,000. As discussed above, upon the completion of the Second Closing and the issuance of the Convertible Note, the Promissory Note shall become automatically and immediately due, and the GameSquare Parties have agreed to use a portion of the proceeds of the Second Closing to repay all amounts outstanding and due under the Promissory Note.

 

The Convertible Note will bear an interest rate of 7.5% per annum, which automatically shall be increased to 10.0% in the event of an event of default. The Convertible Note shall have a maturity date of five years from the issuance of the Convertible Note, unless earlier accelerated upon the occurrence of an event of default upon the election of the holder of the Convertible Note (the “Convertible Maturity Date”). Interest shall accrue as of the issuance date of Convertible Note and shall be payable by the GameSquare Parties on (i) each anniversary of such issuance date, and (ii) the earlier of (x) the Convertible Maturity Date and (y) the conversion or exchange of the Convertible Note pursuant to the terms thereof. The GameSquare Parties shall pay all interest payments payable under the Convertible Note by issuing to the holder shares of Common Stock of GameSquare (“Common Stock”) equal to the quotient of (A) the aggregate amount of any accrued and unpaid interest as of such payment date, and (B) the applicable Conversion Price.

 

At the option of the holder, at any time on or after December 31, 2025, or upon an event of default or certain change of control events, the Convertible Note either (i) be converted into such number of shares of Common Stock (the “Conversion Shares”) equal to the outstanding principal amount plus all accrued and unpaid interest at a conversion price equal to $2.50 per share, subject to adjustments as set forth therein (the “Conversion Price”), or (ii) be exchanged for the 5,725,000 shares of Series A-1 Preferred Stock of FaZe Media held by GameSquare SPV (the “FaZe Media Shares”). The Conversion Price is subject to antidilution protection and certain exceptions upon any subsequent transaction at a price lower than the Conversion Price then in effect and standard adjustments in the event of stock dividends, stock splits, combinations or similar events. The Convertible Note may not be repaid by any GameSquare Party without the prior written consent of the holder.

 

In the event the Convertible Note is exchanged for the FaZe Media Shares, the GameSquare Parties and the FaZe Parties agree that, in addition to the transfer to the holder all of the GameSquare Parties’ right, title and interest in and to the FaZe Media Shares, GameSquare and FaZe Media will enter into an amendment to that certain trademark and license agreement, dated as of May 15, 2024, to, among other things, grant GameSquare a perpetual license to certain licensed marks set forth therein.

 

 

The Convertible Note may not be converted and shares of Common Stock may not be issued under the Convertible Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding Common Stock. In addition to the beneficial ownership limitations in the Convertible Note, the sum of the number of shares of Common Stock that may be issued under the Convertible Note is limited to 19.99% of the outstanding Common Stock (the “Exchange Cap”), unless stockholder approval (“Stockholder Approval”) is obtained by the Company to issue more than the Exchange Cap.

 

The Purchase Agreement contains certain representations and warranties, covenants and indemnities customary for similar transactions.

 

The gross proceeds to the Company from the Initial Closing before expenses were $3,250,000.00. The Company intends to use the net proceeds from the Initial Closing to repay certain existing obligations and for working capital and general corporate purposes.

 

The offer and sale of the Convertible Note pursuant to the Purchase Agreement will be made pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D promulgated thereunder. Such offer and sale will be made only to “accredited investors” under Rule 501 of Regulation D promulgated under the Securities Act, and without any form of general solicitation and with full access to any information requested by such investors regarding the Company or the securities offered and issued in the issuance.

 

This report does not constitute an offer to sell or the solicitation of an offer to buy the securities in the described offering, nor shall there be any offer, solicitation or sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

The foregoing descriptions of the Purchase Agreement, the Promissory Note and Convertible Note are not complete and are qualified in their entirety by reference to the full text of such documents, which are filed as Exhibits 10.1, 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 3.02. Unregistered Sales of Equity Securities.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 7.01. Regulation FD Disclosure.

 

On November 14, 2024, the Company issued a press release announcing the entry into the Purchase Agreement completion of the Initial Closing and the related transactions discussed in Item 1.01 of this Current Report on Form 8-K. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filings. This Current Report on Form 8-K will not be deemed an admission as to the materiality of any information of the information contained in this Item 7.01, including Exhibit 99.1.

 

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit Number		Description
10.1*		Note Purchase Agreement, dated November 13, 2024
4.1		Form of Promissory Note
4.2		Form of Convertible Note
99.1		Press Release, dated November 14, 2024.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

*	Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	GAMESQUARE HOLDINGS, INC.
Date: November 15, 2024	By:	/s/ Justin Kenna
	Name:	Justin Kenna
	Title:	Chief Executive Officer and Director

 

 

Exhibit 10.1

 

NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT (“Agreement”) is made as of November 13, 2024, by and among GameSquare Holdings, Inc., a Delaware corporation (“GameSquare”), FaZe Media Holdings, LLC, a Delaware limited liability company and wholly-owned subsidiary of GameSquare (“GameSquare SPV” and, together with GameSquare, collectively, the “GameSquare Parties” and each a “GameSquare Party”), FaZe Media, Inc., a Delaware corporation (“FaZe Media”), and Gigamoon Media, LLC, a Delaware limited liability company (“Kalish Investor” and, together with FaZe Media, collectively, the “FaZe Media Parties” and each a “FaZe Media Party”). Each of GameSquare, GameSquare SPV, FaZe Media and Kalish Investor may be referred to in this Agreement individually as a “Party”; and they shall be referred to herein, collectively, as the “Parties”. Capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to them in Section 1 below.

 

RECITALS

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the GameSquare Parties desire to issue and sell to the FaZe Media Parties, and FaZe Media Parties severally desire to purchase from the GameSquare Parties, securities of the GameSquare Parties as more fully described in this Agreement.

 

WHEREAS, Kalish Investor currently beneficially owns approximately 40.0% of the total outstanding voting capital stock of FaZe Media.

 

WHEREAS, GameSquare SPV currently beneficially owns 5,725,000 shares of Series A-1 Preferred Stock, representing approximately 25.5% of the total outstanding voting capital stock of FaZe Media.

 

WHEREAS, on the terms and subject to the conditions set forth herein, at the Initial Closing, FaZe Media desires to purchase from the GameSquare Parties, and the GameSquare Parties wish to sell and issue to FaZe Media, a senior secured promissory note, in substantially the form attached hereto as Exhibit A, in the original principal amount of $3,250,000 (the “Promissory Note”).

 

WHEREAS, on the terms and subject to the conditions set forth herein, at the Second Closing, Kalish Investor wishes to purchase from the GameSquare Parties, and the GameSquare Parties wish to sell and issue to Kalish Investor, a senior secured convertible promissory note, in substantially the form attached hereto as Exhibit B, in the original principal amount of $10,000,000 (the “Convertible Note”).

 

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 Parties agree as follows:

 

1. Definitions.

 

(a) “Affiliate” shall mean 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 under the Securities Act.

 

(b) “Board of Directors” shall mean the board of directors, board of managers or other governing body of each of the GameSquare Parties or, if such GameSquare Party does not have such a board of directors, board of managers or other governing body and is owned or managed by a single entity, the Board of Directors of such entity, or, in either case, any committee thereof duly authorized to act on behalf of such Board of Directors.

 

 

(c) “Closing” shall mean the Initial Closing or the Second Closing, as applicable.

 

(d) “Closing Date” shall mean the Initial Closing Date or the Second Closing Date, as applicable.

 

(e) “Collateral” shall mean the “Collateral” as defined in the Promissory Note or the Convertible Note, as the context requires.

 

(f) “Commission” shall mean the U.S. Securities and Exchange Commission.

 

(g) “Common Stock” shall mean GameSquare’s common stock, par value $0.0001 per share.

 

(h) “Common Stock Equivalents” shall mean any securities of GameSquare, 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 or security that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(i) “Conversion Shares” shall mean shares of Common Stock issued, or issuable, pursuant to the terms of the Convertible Note.

 

(j) “Direction Letter” shall mean that certain Direction Letter of even date herewith delivered to the FaZe Media Parties by the GameSquare Parties.

 

(k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(l) “FaZe Media Shares” shall have the meaning ascribed to such term in the Convertible Note.

 

(m) “GAAP” shall have the meaning ascribed to such term in Section 4.8.

 

(n) “Initial Closing” shall mean the closing of the transactions set forth in Section 3.1.

 

(o) “Initial Closing Consideration” shall have the meaning ascribed to such term in Section 3.1.

 

(p) “Initial Closing Date” shall mean November 13, 2024, or such other date mutually agreed upon by the Parties.

 

(q) “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 4.15.

 

(r) “Lien” shall mean a lien (statutory or otherwise), charge, security interest, pledge, hypothecation, assignment (by way of security or otherwise), encumbrance, right of first refusal, preemptive right, restriction on transfer, irrevocably proxy, voting agreement, voting trust arrangement or other restriction or preferential arrangement in the nature of a security interest of any kind whatsoever.

 

 

(s) “Master Services Agreement” shall mean that certain Master Services Agreement, dated as of May 15, 2024, by and between FaZe Media and GameSquare.

 

(t) “Material Adverse Effect” shall have the meaning assigned to such term in Section 4.1.

 

(u) “Maturity Date” shall have the meaning ascribed to such term in the Convertible Note.

 

(v) “Notes” shall mean the Promissory Note and the Convertible Note, collectively.

 

(w) “Person” shall mean 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.

 

(x) “Required Approvals” shall have the meaning ascribed to such term in Section 4.5.

 

(y) “Rule 144” shall mean Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

(z) “SEC Reports” shall have the meaning ascribed to such term in Section 4.8.

 

(aa) “Second Closing” shall mean the closing of the purchase and sale of the Convertible Note and the transactions pursuant Section 3.3.

 

(bb) “Second Closing Consideration” shall have the meaning ascribed to such term in Section 3.3.

 

(cc) “Second Closing Date” shall mean December 15, 2024, or such other date mutually agreed upon by the Parties.

 

(dd) “Securities” shall have the meaning ascribed to such term in Section 5.1(b).

 

(ee) “Series A-1 Preferred Stock” shall mean Series A-1 Preferred Stock of FaZe Media, par value $0.0001 per share.

 

(ff) “Subsidiary” shall mean any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by GameSquare or one or more of the other Subsidiaries of GameSquare or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by GameSquare or one or more Subsidiaries of GameSquare or a combination thereof. For purposes hereof, GameSquare shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if GameSquare, directly or indirectly, shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner or such limited liability company, partnership, association, or other business entity.

 

 

(gg) “Trading Day” shall mean a day on which the principal Trading Market on which the Common Stock is listed is open for the transaction of business.

 

(hh) “Trading Market” shall mean 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 AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTC Markets, Inc., or the OTC Bulletin Board (or any successors to any of the foregoing).

 

(ii) “Transaction Documents” shall mean this Agreement, the Notes issued pursuant to this 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.

 

(jj) “Transfer” (including, with correlative meaning, the term “Transferred”) shall mean any transfer, sale, conveyance, pledge, assignment, encumbrance or other transfer or disposition of any capital stock, equity interests or voting or economic interests of any Person to any other Person, whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise.

 

2. Issuance of the Notes.

 

2.1 Subject to the terms and conditions of this Agreement, at the Initial Closing, FaZe Media hereby agrees to purchase, and each of the GameSquare Parties agrees, jointly and severally, to issue and sell to FaZe Media, the Promissory Note in exchange for the Initial Closing Consideration, as set forth in Section 3.1 below.

 

2.2 Subject to the terms and conditions of this Agreement, at the Second Closing, Kalish Investor hereby agrees to purchase, and each of the GameSquare Parties agrees, jointly and severally, to issue and sell to Kalish Investor, the Convertible Note in exchange for the Second Closing Consideration, as set forth in Section 3.3 below.

 

2.3 The closing of the transactions contemplated under this Agreement shall take place via the electronic exchange of documents as of the applicable Closing Date, or at such time and place as otherwise mutually agreed upon.

 

3. Closings.

 

3.1 Initial Closing. Subject to the terms and conditions hereof and the satisfaction of the conditions set forth in Section 7, on the Initial Closing Date, the GameSquare Parties shall jointly and severally issue to FaZe Media the Promissory Note in the principal amount of $3,250,000, and, in consideration of the issuance of the Promissory Note, FaZe Media shall pay, or cause to be paid, an aggregate amount equal to $3,250,000 (the “Initial Closing Consideration”) on behalf of the GameSquare Parties in accordance with the terms of the Direction Letter.

 

3.2 Use of Proceeds. The GameSquare Parties agree and covenant that they shall use the proceeds from the issuance of the Promissory Note in accordance with Section 2 of the Direction Letter.

 

 

3.3 Second Closing. Subject to the terms and conditions hereof and the satisfaction of the conditions set forth in Section 7, on or prior to the Second Closing Date, the GameSquare Parties shall jointly and severally issue to Kalish Investor the Convertible Note in the original principal amount of $10,000,000, and, in consideration thereof, Kalish Investor shall pay, or cause to be paid, an aggregate amount equal to $10,000,000 (the “Second Closing Consideration”) on behalf of the GameSquare Parties in accordance with the terms of the Direction Letter.

 

4. Representations and Warranties of the GameSquare Parties. In connection with the transactions provided for herein, each of the GameSquare Parties hereby jointly and severally represents and warrants to the FaZe Media Parties, as of the date hereof and as of each Closing Date (or as of the date set forth below, as applicable), that:

 

4.1 Organization and Qualification. Each of the GameSquare Parties, and each of their respective Subsidiaries, has been duly formed, is validly existing and in good standing under the laws of the jurisdiction in which they are formed and has the requisite power and authority to own its properties and to carry on its business as now being conducted. Each of the GameSquare Parties, and each of their respective Subsidiaries, is duly qualified to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of the Transaction Documents, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the GameSquare Parties and their respective Subsidiaries, taken as a whole, or (iii) a material adverse effect on the GameSquare Parties’ ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).

 

4.2 Authorization. The GameSquare Parties have the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the GameSquare Parties and the consummation by them of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the GameSquare Parties and no further action is required by the GameSquare Parties, the Board of Directors or GameSquare’s stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the GameSquare Parties and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the GameSquare Parties enforceable against the GameSquare Parties 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 and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

4.3 Valid Title. GameSquare SPV is the sole owner of record of and beneficially owns the FaZe Media Shares. As of the applicable Closing, GameSquare SPV has good and valid title to the FaZe Media Shares and, except as set forth in the Stockholders’ Agreement, dated as of May 15, 2024, by and among FaZe Media and the stockholders signatory thereto (the “Stockholders’ Agreement”), GameSquare SPV owns the FaZe Media Shares free and clear of any Liens. As of the applicable Closing, GameSquare SPV has good and marketable title to the FaZe Media Shares and upon conversion of the Convertible Note, Kalish Investor will acquire good and valid title to the FaZe Media Shares, free and clear of all Liens other than those set forth in the Stockholders’ Agreement.

 

 

4.4 No Conflicts. The execution, delivery and performance by the GameSquare Parties of the Transaction Documents and the consummation by it of the transactions contemplated hereby to which it is a party do not and will not (i) conflict with or violate any provision of the GameSquare Parties’ or any of their respective Subsidiaries’ certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the GameSquare Parties or any their respective Subsidiaries, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a GameSquare Party’s or any of their respective Subsidiaries’ debt or otherwise) or other understanding to which the GameSquare Parties or any of their respective Subsidiaries is a party or by which any property or asset of the GameSquare Parties or any their respective Subsidiaries is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the GameSquare Parties or their respective Subsidiaries is subject (including federal and state securities laws and regulations), or by which any property or asset of the GameSquare Parties or their respective Subsidiaries is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

4.5 Filings, Consents and Approvals. The GameSquare Parties are not 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 GameSquare Parties of the Transaction Documents, other than: (i) the filing of a Report on Form 8-K describing the material terms of the transactions contemplated hereby, (ii) the filing of Form D with the Commission, (iii) such filings as are or may be required to be made with the Trading Market in connection with the issuance of the Notes and/or the Conversion Shares, (iv) such filings as are required to be made under applicable state securities laws and (v) those that have been made or obtained prior to the date of this Agreement (collectively, the “Required Approvals”).

 

4.6 Authorization of the Conversion Shares. The Conversion Shares to be issued and delivered upon conversion of the Convertible Note will be duly and validly issued, fully paid and nonassessable and, based in part upon the representations and warranties of FaZe Media in this Agreement, will be issued in compliance with all applicable federal and state securities laws. GameSquare has authorized sufficient shares of Common Stock to allow for conversion of the Convertible Note as described therein.

 

4.7 Capitalization. The capitalization of GameSquare is as described in GameSquare’s most recent periodic reports filed with the Commission. GameSquare has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under GameSquare’s stock option plans, the issuance of shares of Common Stock to employees pursuant to GameSquare’s employee stock purchase plans, pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act and issuances of equity securities for equity compensation purposes, approved by the Board of Directors, in the ordinary course of business or otherwise disclosed by GameSquare in its SEC Reports. FaZe Clan Inc., a Delaware corporation (“FaZe Clan”), is the sole member of GameSquare SPV and GameSquare is the sole stockholder of FaZe Clan. Except as described in GameSquare’s most recent periodic report filed with the Commission or as a result of the purchase and sale of the Notes, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which GameSquare or any of its Subsidiaries is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents, other than issuances of equity securities for equity compensation purposes, approved by the Board of Directors, in the ordinary course of business or otherwise disclosed by GameSquare in its SEC Reports. The issuance and sale of the Notes will not obligate GameSquare to issue shares of Common Stock or other securities to any Person (other than FaZe Media) and will not result in a right of any holder of GameSquare securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the GameSquare Parties are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Notes. Except as disclosed in the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the GameSquare Parties’ capital stock to which the GameSquare Parties are a party or, to the knowledge of the GameSquare Parties, between or among any of the GameSquare Parties’ stockholders or members, as applicable.

 

 

4.8 SEC Reports; Financial Statements. GameSquare has filed all reports, schedules, forms, statements and other documents required to be filed by GameSquare under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the GameSquare was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of GameSquare included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“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 GameSquare Parties and their consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

4.9 Absence of Certain Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the GameSquare Parties have not declared or paid any dividends, (iii) the GameSquare Parties have not sold any material assets, individually or in the aggregate, outside of the ordinary course of business, and (iv) the GameSquare Parties have not made any material capital expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the GameSquare Parties nor any of their respective Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor do the GameSquare Parties or any of their respective Subsidiaries have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings.

 

4.10 Litigation. Except as set forth in the SEC Reports, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the GameSquare Parties, the Common Stock or any of the GameSquare Parties’ Subsidiaries (i) seeking to enjoin the consummation of the transactions contemplated by this Agreement, (ii) in which the amount of damages claimed is $100,000 or more or (iii) wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect.

 

 

4.11 Labor Relations. Neither the GameSquare Parties nor any of their respective Subsidiaries is involved in any labor dispute nor, to the knowledge of the GameSquare Parties or any of its Subsidiaries, is any such dispute threatened, in each case which is reasonably likely to cause a Material Adverse Effect.

 

4.12 Compliance. Neither the GameSquare Parties nor any their respective Subsidiaries: (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 GameSquare Parties or any their respective Subsidiaries under), nor has the GameSquare Parties or any their respective Subsidiaries 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 governmental body 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 applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

4.13 Regulatory Permits. The GameSquare Parties and their respective Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to own their respective businesses, and neither the GameSquare Parties nor any such Subsidiary has received any written notice of proceedings relating to the revocation or modification of any such certificate, authorization or permits.

 

4.14 Title. The GameSquare Parties (or their respective Subsidiaries) has indefeasible fee simple or leasehold title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the GameSquare Parties or as set forth in the SEC Reports. Any real property and facilities held under lease by the GameSquare Parties and their respective Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the GameSquare Parties and their respective Subsidiaries.

 

4.15 Intellectual Property Rights. The GameSquare Parties and their respective Subsidiaries have, or have 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 necessary or material for use in connection with their respective businesses as described in the SEC Reports (collectively, the “Intellectual Property Rights”). Neither the GameSquare Parties nor any of their respective Subsidiaries has received a notice (written or otherwise) that any of the Intellectual Property Rights used by the GameSquare Parties or any of their respective Subsidiaries violates or infringes upon the rights of any Person. All such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The GameSquare Parties and their respective Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

4.16 Insurance. The GameSquare Parties and their respective Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the GameSquare Parties believe are prudent and customary in the businesses in which the GameSquare Parties and their respective Subsidiaries are engaged. Neither the GameSquare Parties nor any of their respective Subsidiaries has any reason to believe that it 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 without a significant increase in cost.

 

4.17 Internal Accounting Controls. GameSquare maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences, and management is not aware of any material weaknesses that are not disclosed in the SEC Reports as and when required.

 

4.18 Finder’s Fees. No brokerage or finder’s fees or commissions are or will be payable by the GameSquare Parties 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.

 

4.19 Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and GameSquare has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has GameSquare received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the SEC Reports, GameSquare 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 GameSquare is not in compliance with the listing or maintenance requirements of such Trading Market. Except as disclosed in the SEC Reports, GameSquare is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

4.20 Tax Status. The GameSquare Parties and each of their respective Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the GameSquare Parties have no knowledge of a tax deficiency which has been asserted or threatened against the GameSquare Parties or any of their respective Subsidiaries.

 

4.21 Foreign Corrupt Practices. Neither the GameSquare Parties, nor to the knowledge of the GameSquare Parties, any agent or other person acting on behalf of the GameSquare Parties, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the GameSquare Parties (or made by any person acting on its behalf of which the GameSquare Parties are aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

4.22 Acknowledgment Regarding FaZe Media’s Purchase of Securities. The GameSquare Parties acknowledge and agree that FaZe Media is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The GameSquare Parties further acknowledges that FaZe Media is not acting as a financial advisor of the GameSquare Parties (or in any similar capacity) with respect to the Transaction Documents. The GameSquare Parties further represents to FaZe Media that the GameSquare Parties’ decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the GameSquare Parties and their representatives.

 

 

4.23 Solvency. Immediately prior to and after giving effect to the issuance of each Note hereunder and the use of the proceeds thereof, with respect to GameSquare Parties, (a) the fair value of their assets, on a consolidated basis, is greater than the amount of their liabilities (including disputed, contingent and unliquidated liabilities), on a consolidated basis, as such value is established and liabilities evaluated for purposes of Section 101(32) of the U.S. Bankruptcy Code and, in the alternative, for purposes of any similar state laws applicable to such person, (b) the present fair saleable value of their assets, on a consolidated basis, is not less than the amount that will be required to pay the probable liability on their debts, on a consolidated basis, as they become absolute and matured, (c) the GameSquare Parties, taken as a whole, are able to realize upon their consolidated assets and pay their consolidated debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business, (d) the GameSquare Parties, taken as a whole, do not intend to, and do not believe that they will, incur debts or liabilities beyond their ability to pay such debts and liabilities as they mature, and (e) the GameSquare Parties, taken as a whole, are not engaged in business or a transaction, and are not about to engage in business or a transaction, for which its property would constitute unreasonably small capital.

 

4.24 Disclosure.

 

(a) Agreement and Other Documents. The Transaction Documents, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading.

 

(b) Material Adverse Effect. To the knowledge of the GameSquare Parties, and except as disclosed in the SEC Reports filed on or prior to the date hereof, there is no fact which either GameSquare Party has not disclosed to the FaZe Media Parties in writing which could reasonably be expected to have a Material Adverse Effect.

 

5. Representations, Warranties and Additional Agreements of the FaZe Media Parties.

 

5.1 Representations and Warranties of the FaZe Media Parties. In connection with the transactions provided for herein, each of the FaZe Media Parties, severally but not jointly, hereby represents and warrants to GameSquare solely on behalf of itself that:

 

(a) Authorization. This Agreement constitutes such FaZe Media Party’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights and (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. Such FaZe Media Party represents that it has full power and authority to enter into this Agreement.

 

(b) Purchase Entirely for Own Account. Such FaZe Media Party acknowledges that this Agreement is made with such FaZe Media Party in reliance upon its representations to the GameSquare Parties that the Notes and the Conversion Shares (collectively, the “Securities”), as applicable, will be acquired for investment for such FaZe Media Party’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such FaZe Media Party has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, such FaZe Media Party further represents that such FaZe Media Party, does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Securities.

 

 

(c) Disclosure of Information. Such FaZe Media Party acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. Such FaZe Media Party further represents that it has had an opportunity to ask questions and receive answers from GameSquare regarding the terms and conditions of the offering of the Securities.

 

(d) Investment Experience. Such FaZe Media Party is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. Such FaZe Media Party also represents it has not been organized solely for the purpose of acquiring the Securities.

 

(e) Accredited Investor. Such FaZe Media Party understands the term “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act as presently in effect and represents and warrants to the GameSquare Parties that such FaZe Media Party is an “accredited investor” for purposes of acquiring the Securities being acquired by it hereunder.

 

(f) Knowledge and Experience. Such FaZe Media Party is a sophisticated investor with sufficient knowledge and experience in investing in transactions of this type to properly evaluate the risks and merits of its purchase of the applicable Notes. Such FaZe Media Party has determined based on its own respective independent review and such professional advice as it deems appropriate that its purchase of the Promissory Note or the Convertible Note, as applicable, and participation in the transactions contemplated by this Agreement are a fit, proper and suitable investment for such FaZe Media Party, notwithstanding the substantial risks inherent in investing in or holding the Promissory Note or the Convertible Note, as applicable.

 

(g) Restricted Securities. Such FaZe Media Party understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the GameSquare Parties in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. Such FaZe Media Party represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect (“Rule 144”), and understands the resale limitations imposed thereby and by the Securities Act.

 

5.2 Bad Actor Representations and Covenants. Such FaZe Media Party has not taken any of the actions set forth in, and is not subject to, the disqualification provisions of Rule 506(d)(1) of the Securities Act.

 

6. Covenants.

 

6.1 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 (in which case no opinions of counsel shall be required), to the GameSquare Parties or to an Affiliate of any FaZe Media Party, GameSquare may require, at GameSquare’s expense, the transferor thereof to provide to GameSquare an opinion of counsel selected by the transferor and reasonably acceptable to GameSquare, the form and substance of which opinion shall be satisfactory to GameSquare, 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 such FaZe Media Party under this Agreement.

 

 

(b) The FaZe Media Parties agree to the imprinting, so long as is required by this Section 6.1, of a legend on the Securities in the following form:

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE] [HAS][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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL IN A FORM ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

6.2 Reservation of Shares. Prior to the Second Closing, and for so long as the Convertible Note remains outstanding, GameSquare shall reserve from its authorized but unissued shares of its capital stock for issuance and delivery upon the conversion of the Convertible Notes, such number of Conversion Shares required by the terms of the Convertible Note, and, to the extent necessary, shall take all steps necessary to amend its certificate of incorporation to provide sufficient authorized number of Conversion Shares issuable upon the conversion of the Convertible Note.

 

6.3 Transfers. GameSquare SPV shall not, and GameSquare shall cause GameSquare SPV not to, Transfer all or any portion of the FaZe Media Shares to any Person.

 

6.4 Required Approvals. The GameSquare Parties shall use their commercially reasonable efforts to, as promptly as reasonably practicable, (i) make, or cause to be made, all filings and submissions required under any law applicable to the GameSquare Parties or any of their respective Subsidiaries in connection with the transactions contemplated by the Transaction Documents; and (ii) obtain, or cause to be obtained, all Required Approvals, orders and approvals from all governmental authorities that may be or become necessary for their execution and delivery of this Agreement and the performance of their obligations pursuant to this Agreement and the other Transaction Documents. The GameSquare Parties shall not willfully take any action with the intent of impairing, impeding or materially delaying, the receipt of any required consents, authorizations, orders or approvals.

 

6.5 Securities Law Disclosure; Publicity. (i) No later than 9:30 am (EDT) on the fourth Trading Day after the date hereof, GameSquare shall issue a Current Report on Form 8-K (the “Current Report”) disclosing the material terms of the transactions contemplated hereby, and including the Transaction Documents required to be included in such Current Report as exhibits thereto. GameSquare represents to the FaZe Media Parties that, as of the issuance of the first such Current Report, GameSquare shall have publicly disclosed all material, non-public information delivered to such FaZe Media Party, if any, as of such time by GameSquare, or any of its respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. GameSquare shall afford each FaZe Media Party and such FaZe Media Party’s counsel with a reasonable opportunity to review and comment upon, shall consult with them on the form and substance of, and shall give due consideration to all such comments from them on, any press release, Commission filing or any other public disclosure made by or on behalf of GameSquare relating to such FaZe Media Party, the Transaction Documents and/or the transactions contemplated by any Transaction Document, prior to the issuance, filing or public disclosure thereof, and GameSquare shall not issue, file or publicly disclose any such information to which such FaZe Media Party shall reasonably object, unless required by law. For the avoidance of doubt, GameSquare shall not be required to submit for review any such disclosure contained in periodic reports filed with the Commission under the Exchange Act if it shall have previously provided the same disclosure for review in connection with a previous filing.

 

 

6.6 Master Services Agreement Amendment. The Parties agree and acknowledge it is their intention that, on or prior to the Maturity Date, FaZe Media shall no longer require the services provided by GameSquare under the Master Services Agreement. The Parties agree to cooperate with one another and to each use their reasonable best efforts to, prior to the Maturity Date, finalize and execute an amendment to the Master Services Agreement, as deemed reasonably necessary by the Parties to reflect such change in services provided thereunder.

 

7. Closing Conditions.

 

7.1 Closing Conditions of the FaZe Media Parties. The several obligations of FaZe Media under Section 3.1 and the Kalish Investor under Section 3.3, as applicable, are subject to the fulfilment, on or before the applicable Closing, of the following conditions applicable thereto, unless otherwise waived in writing in accordance with Section 8.8:

 

(a) For each Closing:

 

(i) the representations and warranties of the GameSquare Parties contained in Section 4 shall be true and correct in all material respects on and as of the applicable Closing Date as if made (or given) on and as of such date (except where such representation and warranty speaks of a specific date, in which case such representation and warranty shall be true and correct as of such date);

 

(ii) each of the GameSquare Parties shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the GameSquare Parties in all respects on or before the applicable Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein;

 

(iii) there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the GameSquare Parties, the Common Stock or any of the GameSquare Parties’ Subsidiaries (A) seeking to enjoin the consummation of the transactions contemplated by this Agreement, (B) in which the amount of damages claimed is $100,000 or more or (C) wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect.

 

(iv) no condition, occurrence, state of facts or event constituting a Material Adverse Effect shall have occurred and be continuing; and

 

 

(v) no Event of Default (as defined in the applicable Note) shall have occurred or be continuing.

 

(b) The GameSquare Parties shall have delivered, or caused to be delivered:

 

(i) at or prior to the Initial Closing, to each of the FaZe Media Parties, this Agreement and each other Transaction Document to be executed and delivered as of the Initial Closing Date, duly executed by the GameSquare Parties party thereto;

 

(ii) at or prior to each Closing, to the applicable FaZe Media Party:

 

(A) a certificate, executed on behalf of each of the GameSquare Parties by GameSquare’s Chief Executive Officer or its Chief Financial Officer, dated as of the applicable Closing Date, certifying that the conditions specified in Section 7.1(a) have been fulfilled as of the applicable Closing Date;

 

(B) (1) resolutions of the Board of Directors of each GameSquare Party authorizing the execution, delivery and performance of the Transaction Documents to which it is a party, certified by an appropriate officer; (2) copies of the certificate or articles of incorporation or formation (or similar charter document) and the bylaws or operating agreement (or similar governing document) of each GameSquare Party certified by an appropriate officer and, if applicable, by the relevant authority of the jurisdiction of organization of such GameSquare Party; and (3) a good standing certificate as of a recent date for each GameSquare Party from its jurisdiction of organization;

 

(C) UCC, judgment, federal and state tax Lien searches pursuant to the terms of the applicable Note, which searches shall verify that the applicable FaZe Media Party will have a first priority security interest in the Collateral, and UCC termination statements (or similar documents) for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements (or equivalent filings) disclosed in such searches;

 

(iii) in the case of the Initial Closing, to FaZe Media:

 

(A) the Promissory Note, duly executed by the GameSquare Parties;

 

(B) all Uniform Commercial Code financing statements and other documents, filings and actions required by the Promissory Note or reasonably requested by FaZe Media to be filed, executed, delivered, registered, recorded or taken in order to create in favor of FaZe Media a first priority and exclusive perfected security interest in the Collateral, shall have been (or, contemporaneously with the Initial Closing, shall be) properly filed, executed, delivered, registered, recorded and/or taken; and

 

(C) all other documents, information and reports required under any provision of this Agreement, the Promissory Note or any other Transaction Document or requested by FaZe Media to be executed and/or delivered by the GameSquare Parties;

 

 

(iv) in the case of the Second Closing, to the Kalish Investor:

 

(A) the Convertible Note, duly executed by the GameSquare Parties;

 

(B) a payoff letter with respect to the payment of any and all amounts due under the Promissory Note, together with UCC-3 terminations and other release documentation necessary to terminate FaZe Media’s interests in the Collateral, in each case, in a form reasonably acceptable to Kalish Investor;

 

(C) all Uniform Commercial Code financing statements and other documents, filings and actions required by the Convertible Note or reasonably requested by the Kalish Investor to be filed, executed, delivered, registered, recorded or taken in order to create in favor of the Kalish Investor a first priority and exclusive perfected security interest in the Collateral, shall have been (or, contemporaneously with the Second Closing, shall be) properly filed, executed, delivered, registered, recorded and/or taken;

 

(D) all other documents, information and reports required under any provision of this Agreement, the Convertible Note or any other Transaction Document or requested by the Kalish Investor to be executed and/or delivered by the GameSquare Parties.

 

(c) In the case of the Second Closing, the transactions contemplated herein with respect to the Initial Closing shall have been consummated in accordance with the terms and provisions hereof.

 

7.2 Closing Conditions of the GameSquare Parties. The obligations of the GameSquare Parties to each FaZe Media Parties Section 3.1 and Section 3.3 of this Agreement, as applicable, are subject to the fulfillment or waiver on or before the applicable Closing of each of the following conditions, unless otherwise waived:

 

(a) The representations and warranties of each of the FaZe Media Parties contained in Section 5 shall be true and correct in all material respects on and as of the applicable Closing Date as if made (or given) on and as of such date (except where such representation and warranty speaks of a specific date, in which case such representation and warranty shall be true and correct as of such date).

 

(b) Each of the FaZe Media Parties shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by such FaZe Media Party in all respects on or before the applicable Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

 

(c) In the case of the Initial Closing, GameSquare shall have received the Initial Closing Consideration from FaZe Media as set forth in Section 3.1.

 

(d) In the case of the Second Closing,

 

(i) GameSquare shall have received the Second Closing Consideration from Kalish Investor as set forth in Section 3.3; and

 

 

(ii) the transactions contemplated herein with respect to the Initial Closing shall have been consummated in accordance with the terms and provisions hereof.

 

8. Miscellaneous.

 

8.1 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 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; provided, however, that the Parties agree that Kalish Investor shall be a third-party beneficiary under this Agreement with regards to the rights of FaZe Media under this Agreement, and shall be entitled to enforce any such rights of FaZe Media under this Agreement on behalf of FaZe Media.

 

8.2 Governing Law. The Transaction Documents shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware.

 

8.3 Counterparts; Delivery. This Agreement may be executed by electronic signature and in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument. Counterparts may be delivered by facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

8.4 Rules of Construction. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein or in any other Transaction Document shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, amended and restated, supplemented or otherwise modified, extended, refinanced or replaced (subject to any restrictions or qualifications on such amendments, restatements, amendment and restatements, supplements or modifications, extensions, refinancings or replacements set forth herein or in any Transaction Document), (b) any reference to any law in any Transaction Document shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such law, (c) any reference herein or in any Transaction Document to any Person shall be construed to include such Person’s successors and permitted assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, when used in any Transaction Document, shall be construed to refer to such Transaction Document in its entirety and not to any particular provision hereof or hereof, (e) all references herein or in any Transaction Document to Sections, clauses, paragraphs, Exhibits and Schedules shall be construed to refer to Sections, clauses and paragraphs of, and Exhibits and Schedules to, such Transaction Document, (f) in the computation of periods of time in any Transaction Document from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” mean “to but excluding” and the word “through” means “to and including” and (g) the words “asset” and “property”, when used in any Transaction Document, shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

 

8.5 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the Party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective Parties at the following addresses (or at such other addresses as shall be specified by notice given in accordance with this Section 8.5):

 

If to the GameSquare Parties:

 

GameSquare Holdings, Inc.

6775 Cowboys Way, Suite 1335

Frisco, TX 75034

Attention: Justin Kenna, CEO

Email: justin@gamesquare.com

 

with a copy (which shall not constitute notice or such other communication) to:

 

BakerHostetler LLP

1900 Avenue of the Starts, Suite 2700

Los Angeles, CA 90067

Attention: Alan A. Lanis, Jr.

Email: jrlanis@bakerlaw.com

 

If to FaZe Media:

 

FaZe Media, Inc.

45 Leicester Street

Brookline, MA 02445

Attention: Matthew Kalish, Secretary

Email: mkalish1029@gmail.com

 

with a copy (which shall not constitute notice or such other communication) to:

 

Pillsbury Winthrop Shaw Pittman LLP

31 W 52nd Street

New York, NY 10019

Attention: Stephen B. Amdur

Email: stephen.amdur@pillsburylaw.com

 

If to Kalish Investor:

 

Gigamoon Media, LLC

45 Leicester Street

Brookline, MA 02445

Attention: Matthew Kalish, Manager

Email: mkalish1029@gmail.com

 

 

with a copy (which shall not constitute notice or such other communication) to:

 

Pillsbury Winthrop Shaw Pittman LLP

31 W 52nd Street

New York, NY 10019

Attention: Stephen B. Amdur

Email: stephen.amdur@pillsburylaw.com

 

8.6 Finder’s Fee. Each Party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Party, jointly but not severally, agrees to indemnify and to hold harmless each other Party from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which any such Party or any of its respective officers, partners, employees or representatives is responsible.

 

8.7 Expenses. Each Party hereto shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.

 

8.8 Entire Agreement; Amendments and Waivers. This Agreement, the Notes and the other documents expressly delivered pursuant hereto constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof. Nonetheless, any term of this Agreement or the Notes may be amended and the observance of any term of this Agreement or the Notes may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of each of the Parties. Any waiver or amendment effected in accordance with this Section shall be binding upon each Party to this Agreement and any holder of any Note purchased under this Agreement at the time outstanding and each future holder of all such Note.

 

8.9 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.

 

8.10 Acknowledgement. In order to avoid doubt, it is acknowledged that Kalish Investor shall be entitled to the benefit of all adjustments in the number of shares of Common Stock issuable upon conversion of the Convertible Note or as a result of any splits, recapitalizations, combinations or other similar transaction affecting the Conversion Shares that occur prior to the conversion of the Convertible Note.

 

8.11 Further Assurances. The Parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

8.12 Waiver of Jury Trial. TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALING OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY HERETO HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT EITHER PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER PARTY HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

8.13 Survival. The representations, warranties, covenants and agreements made herein shall survive the closing of the transactions contemplated hereby.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

 

	GAMESQUARE
	GAMESQUARE HOLDINGS INC.
	By:
	Name:	Justin Kenna
	Title:	Chief Executive Officer

 

	GAMESQUARE SPV
	FAZE MEDIA HOLDINGS, LLC
	By:
	Name:	Justin Kenna
	Title:	President

 

	FAZE MEDIA PARTIES:
	FAZE MEDIA, INC.
	By:
	Name:	Matthew Kalish
	Title:	Secretary

 

	KALISH INVESTOR
	GIGAMOON MEDIA, LLC
	By:
	Name:	Matthew Kalish
	Title:	Manager

 

[Signature Page to Note Purchase Agreement]

 

 

EXHIBIT A

 

Form of Promissory Note

 

[Provided Separately]

 

 

EXHIBIT B

 

Form of Convertible Note

 

[Provided Separately]

 

 

 

Exhibit 4.1

 

This SENIOR secured Promissory Note (this “Note”) has not been registered under the Securities Act of 1933, as amended (the “Act”), and may not be sold, transferred or otherwise disposed of unless a registration statement under the Act with respect to this Note has become effective or unless the Holder (as defined below) establishes to the satisfaction of the COMPANY (as defined below) that an exemption from such registration is available.

 

GAMESQUARE HOLDINGS, INC.

 

FAZE MEDIA HOLDINGS, LLC

 

SENIOR secured Promissory note

 

$3,250,000.00

November 13, 2024 (the “Issuance Date”)

 

FOR VALUE RECEIVED, each of GameSquare Holdings, Inc., a Delaware corporation (“GameSquare”), and FaZe Media Holdings, LLC, a Delaware limited liability company (“GameSquare SPV” and, together with GameSquare, collectively, the “GameSquare Parties”), hereby promises, jointly and severally, to pay to an account designated in writing by FaZe Media, Inc., a Delaware corporation (“FaZe Media”), or its successors or registered assigns (the “Holder”), in lawful money of the United States of America, in immediately available funds to such account, the principal amount of $3,250,000.00 (the “Principal”), together with interest thereon pursuant to the terms set forth herein.

 

This Senior Secured Promissory Note (together with any note or other instrument issued in substitution or replacement hereof, or exchange hereof, as the same or any such other note or instrument may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms set forth herein, this “Note”) is being issued in pursuant to Section 3.1 of that certain Note Purchase Agreement, dated as of November 13, 2024, by and among GameSquare, GameSquare SPV, FaZe Media and Gigamoon Media, LLC (the “Purchase Agreement”).

 

1. Defined Terms.

 

(a) Terms Defined in Purchase Agreement; Rules of Construction. Capitalized terms used but not defined herein shall have the meaning set forth in the Purchase Agreement. The rules of construction set forth in Section 8.4 of the Purchase Agreement shall apply to this Note as if specifically incorporated herein, mutatis mutandis.

 

(b) UCC Defined Terms. Terms defined in the UCC that are not otherwise defined in this Note or the Purchase Agreement are used herein as defined in Article 8 or Article 9 of the UCC, as the context may require (and all uncapitalized terms that are defined in the UCC shall have the meaning set forth in the UCC, as applicable).

 

 

(c) Certain Definitions. Capitalized terms used herein and not defined or covered by Section 1(a) and Section 1(b) above shall have the following meaning:

 

(i) “Additional FaZe Media Property” means (i) any securities, cash, dividends, options, Instruments, distributions, Investment Property, Financial Assets, Securities, Equity Interests, stock options, Commodity Contracts, notes, debentures, bonds, promissory notes or other evidences of indebtedness and all other Proceeds or property (including, without limitation, any stock dividend and any distribution in connection with a stock split), and any other right or property, contractual or otherwise (including all voting rights and all rights as and to become a member or partner thereof (if applicable)), in each case, which the GameSquare Parties shall from time to time receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for, or in exchange for the FaZe Media Shares, and any securities or other ownership interests, any right to receive securities or other ownership interests and any right to receive earnings, money, distributions or other property in respect of the FaZe Media Shares in which the GameSquare Parties now have or hereafter acquire any right, issued by an issuer of such securities or such other ownership interests, including all securities or other ownership interests convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any such securities or other ownership interests, the certificates or other instruments representing any of the foregoing and any interest of the GameSquare Parties in the entries on the books of any securities intermediary or commodity intermediary pertaining thereto, and (ii) in the event of any consolidation or merger involving FaZe Media or other issuer of any Equity Interests described in the foregoing clause (i) and in which FaZe Media or such issuer is not the surviving entity, all Equity Interests of the successor entity formed by or resulting from such consolidation or merger.

 

(ii) “Business Day” has the meaning ascribed thereto in Section 3(a).

 

(iii) “Collateral” has the meaning ascribed thereto in Section 6(a).

 

(iv) “Default Rate” has the meaning ascribed thereto in Section 2(b).

 

(v) “Disposition” means any transaction, or series of related transactions, pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers, leases, licenses (as licensor) or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person. “Dispose” shall have a meaning correlative thereto.

 

(vi) “Equity Interests” means (i) all shares of capital stock (whether denominated as common stock or preferred stock), shares (of whatever class) in the capital of a company, equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting and (ii) all securities convertible into or exchangeable for any of the foregoing and all warrants, options or other rights to purchase, subscribe for or otherwise acquire any of the foregoing, whether or not presently convertible, exchangeable or exercisable.

 

(vii) “Event of Default” has the meaning ascribed thereto in Section 4.

 

(viii) “FaZe Media Shares” means the 5,725,000 shares of Series A-1 Preferred Stock of FaZe Media held by GameSquare SPV as of the Issuance Date.

 

 

(ix) “Interest Payment Date” has the meaning ascribed thereto in Section 2(a).

 

(x) “Maturity Date” has the meaning ascribed thereto in Section 3(a).

 

(xi) “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

(xii) “Pledged Interest” means (i) the FaZe Media Shares and all certificates (if any) representing the same and (ii) all Additional FaZe Media Property.

 

(xiii) “Pledged Issuers” means, collectively, (i) FaZe Media, as the issuer of the FaZe Media Shares, and (ii) any other issuer of Equity Interests constituting Collateral.

 

(xiv) “Pledged Shares” means the FaZe Media Shares and any other Collateral comprising Equity Interests.

 

(xv) “Proceeds” has the meaning assigned in Article 9 of the UCC and, in any event, shall also include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Holder or any GameSquare Party from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any GameSquare Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (iii) any and all Stock Rights and (iv) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

 

(xvi) “Secured Obligations” has the meaning ascribed thereto in Section 6(a).

 

(xvii) “Security Agreement” means Section 6 of this Note and any defined term used therein (solely in respect of the use of such defined term in Section 6) and the provisions of Section 1, Section 15, Section 16, Section 19 and Section 20 (solely in respect of the interpretation of, or in relation to, Section 6).

 

(xviii) “Stock Rights” means any securities, dividends, instruments or other distributions and any other right or property which the GameSquare Parties shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for, or in exchange for any securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral and any securities or other ownership interests, any right to receive securities or other ownership interests and any right to receive earnings, money, distributions or other property in respect of the Collateral in which the GameSquare Parties now have or hereafter acquire any right, issued by an issuer of such securities or such other ownership interests, including all securities or other ownership interests convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any such securities or other ownership interests, the certificates or other instruments representing any of the foregoing and any interest of the GameSquare Parties in the entries on the books of any securities intermediary or commodity intermediary pertaining thereto.

 

 

(xix) “Subsidiary” means any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by GameSquare or one or more of the other Subsidiaries of GameSquare or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by GameSquare or one or more Subsidiaries of GameSquare or a combination thereof. For purposes hereof, GameSquare shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if GameSquare, directly or indirectly, shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner or such limited liability company, partnership, association, or other business entity.

 

(xx) “Transaction Document” means this Note, the Security Agreement, the Purchase Agreement and the Notes issued pursuant to the Purchase Agreement, and such other documents, instruments, certificates, supplements, amendments, exhibits and schedules required and/or attached pursuant to the Purchase 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.

 

(xxi) “UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of Delaware; provided that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Holder’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of Delaware, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

 

2. Interest.

 

(a) This Note shall bear simple interest at an annual rate of 7.5%. Interest shall commence accruing on the outstanding Principal of this Note as of the Issuance Date and shall be payable by the GameSquare Parties on the Maturity Date (the “Interest Payment Date”); provided that (i) interest accrued pursuant to Section 2(b) shall be payable in cash on demand and (ii) in the event of any prepayment pursuant to Section 3(c), accrued interest on the principal amount prepaid shall be payable on the date of such prepayment. Interest shall be computed on the basis of a 365-day year for the actual number of days elapsed but in no event shall the rate of interest exceed the maximum rate, if any, allowable under applicable law.

 

 

(b) The GameSquare Parties shall pay interest (after as well as before entry of judgment thereon) on the outstanding Principal amount of this Note and all other Secured Obligations (including any past due interest) then outstanding at an interest rate per annum at all times equal to 10.00% (the “Default Rate”) automatically upon the occurrence of any Event of Default to the fullest extent permitted by applicable law. All such interest accruing under this Section 2(b) upon and following the occurrence of an Event of Default shall be due and payable in cash on demand by the Holder, provided, that, notwithstanding anything to the contrary in the foregoing, any such amounts shall payable under this Section 2(b) shall be not be payable prior to the earlier of (i) the Second Closing (as defined in the Purchase Agreement) and (ii) January 15, 2025. The imposition of the Default Rate is in addition to, and not in lieu of, Holder’s exercise of any rights and remedies hereunder or under applicable law, and any fees and expenses of any agents or attorneys which the Holder may employ. In addition, the Default Rate reflects the increased credit risk to the Holder of carrying an obligation that is in default. Each of the GameSquare Parties agrees that the imposition of the Default Rate is a reasonable forecast of just compensation for anticipated and actual harm incurred by the Holder, and that the actual harm incurred by the Holder cannot be estimated with certainty and without difficulty.

 

3. Payment.

 

(a) Maturity Date. All principal and interest sums due under this Note shall be due and payable as of the earliest of (i) November 13, 2029, (ii) the acceleration of this Note pursuant to Section 5 and (iii) the date of Holder’s demand, solely to the extent made after December 15, 2024, at a time when the Second Closing has not occurred as a result of the failure of the GameSquare Parties (or either of them) to satisfy (or secure the waiver of) any of the conditions precedent set forth in Section 7 of the Purchase Agreement (such earlier date, the “Maturity Date”), without any further demand for payment, presentment for payment, protest, notice of payment, notice of dishonor, notice of nonpayment, notice of acceleration of maturity or other notice of any kind, all of which are hereby waived by the GameSquare Parties. Notwithstanding anything contained herein to the contrary, in the event that any payment is due on a date that is not a Business Day (as defined below), then the payment shall be due on the first Business Day following such date. For purposes of this Note, the term “Business Day” means any day other than a Saturday, a Sunday or any other day on which the Federal Reserve Bank of New York is closed.

 

(b) Payments Generally. All payments (including permitted prepayments) to be made by the GameSquare Parties on account of principal, interest, fees and other amounts payable on or in respect of the this Note or the Secured Obligations evidenced hereby shall be made without setoff, defense or counterclaim or withholding on account of taxes, levies, duties or any other deduction whatsoever. The GameSquare Parties shall make all such payments to an account specified by the Holder to the GameSquare Parties, in lawful money of the United States of America and in immediately available and freely transferable funds, no later than 5:00 p.m. (New York, NY, time) on the date due. Any payment which is received by the Holder later than 5:00 p.m. (New York, NY, time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. If any day on which a payment is due pursuant to the terms of this Note is not a Business Day, such payment shall be due on the next Business Day following, and interest payable hereunder to the Holder shall be adjusted accordingly. All payments received by the Holder with respect to the Secured Obligations will be applied first to interest and the balance to Principal.

 

(c) Prepayments.

 

(i) Optional. The GameSquare Parties shall have the right at any time and from time to time to prepay, in whole or in part, without premium or penalty, the unpaid principal amount of this Note.

 

 

(ii) Mandatory. Upon the occurrence of the Second Closing, the GameSquare Parties shall prepay (or cause to be prepaid) the entire principal balance of this Note, together with all accrued and unpaid interest thereon, and all other amounts outstanding under this Note, with the proceeds of the Second Closing Consideration.

 

4. Event of Default. The GameSquare Parties shall be in default under this Note upon the occurrence of any of the following events of default (each, an “Event of Default”):

 

(a) the failure to pay when due (i) any outstanding principal on this Note or (ii) any of the GameSquare Parties’ other indebtedness, or any interest or premium thereon, and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness;

 

(b) any representation, warranty or statement made or furnished by or on behalf of any GameSquare Party in or in connection with any Transaction Document shall be false, incorrect, incomplete or misleading in any material respect on the date made or furnished; or

 

(c) any liquidation, dissolution or winding up of either of the GameSquare Parties; or

 

(d) either of the GameSquare Parties shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its or any of its creditors, (iii) be dissolved or liquidated or (iv) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief concerning itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or

 

(e) proceedings for the appointment of a receiver, trustee, liquidator or custodian of either of the GameSquare Parties or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief concerning either of the GameSquare Parties or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within 60 days of commencement; or

 

(f) any (i) merger or consolidation of any GameSquare Party or any Subsidiary thereof with or into another Person, or (ii) sale by the GameSquare Parties or any Subsidiary of the GameSquare Parties of all or substantially all of the assets of the GameSquare Parties in one or a series of related transactions; or

 

(g) (i) any GameSquare Party shall default in the performance of or compliance with any term contained in Section 6, or (ii) any GameSquare Party shall default in the performance of or compliance with any other term (not otherwise specified in this Section 4) or any of the other Transaction Documents and such failure shall remain unremedied for ten (10) days after the earlier of the date an officer of such GameSquare Party has knowledge of such failure and the date of written notice of such default shall have been given by the Holder to such GameSquare Party.

 

 

5. Remedies. Upon the occurrence of any Event of Default, all Secured Obligations then outstanding shall immediately and automatically bear interest at the Default Rate in accordance with Section 2(b), and, at the option and upon the declaration of the Holder and upon written notice to the GameSquare Parties (which election and notice shall not be required in the case of an Event of Default under Section 4(d) and Section 4(e)), the Holder may (i) declare the Principal amount of this Note then outstanding to be accelerated and due and payable, whereupon all of the Principal amount of this Note, all accrued but unpaid interest thereon, and all fees and all other amounts payable under this Note and the other Transaction Documents with respect thereto, and all other Secured Obligations outstanding under this Note and the other Transaction Documents shall accelerate and become due and payable immediately in cash in accordance with Section 3(a) and Section 3(b), all without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the GameSquare Parties, and (ii) exercise any and all of its other rights and remedies under applicable law, hereunder and under the other Transaction Documents; provided, however, that upon the occurrence of any Event of Default described in Section 4(d) and Section 4(e), (x) the entire outstanding Principal balance of this Note, together with all accrued and unpaid interest thereon, all fees and other amounts payable under this Note and the other Transaction Documents and all other Secured Obligations shall immediately and automatically become due and payable in cash and bear interest at the Default Rate in accordance with Section 2(b), all without notice and without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the GameSquare Parties.

 

6. Security.

 

(a) Grant of Security Interest. To secure the payment and performance in full of all of the indebtedness, obligations, liabilities and undertakings of the GameSquare Parties to the Holder, of any kind or description, individually or collectively, whether direct or indirect, joint or several, absolute or contingent, due or to become due, voluntary or involuntary, now existing or hereafter arising (including all interest, fees (including attorneys’ fees), costs and expenses that the GameSquare Parties are hereby or otherwise required to pay and perform pursuant to this Note, the Purchase Agreement, the other Transaction Documents, by law or otherwise accruing before and after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to any GameSquare Party, whether or not a claim for post-petition interest, fees or expenses is allowed in such proceeding), irrespective of whether for the payment of money, under or in respect of this Note, the Purchase Agreement or the other Transaction Documents, including instruments or agreements executed and delivered pursuant hereto or thereto or in connection herewith or therewith (collectively, the “Secured Obligations”), each of the GameSquare Parties hereby pledges to the Holder, and hereby collaterally assigns, mortgages, transfers, hypothecates and grants to the Holder a continuing security interest in, all of such GameSquare Party’s right, title and interest in, to and under all of the following property and assets, wherever located, whether such GameSquare Party now has or hereafter acquires an ownership or other interest or power to transfer (all of which are collectively referred to as the “Collateral”):

 

(i) the Pledged Interests;

 

(ii) all other property that may be delivered to and held by the Holder pursuant to the terms of this Section 6;

 

(iii) all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities and other property referred to in clauses (i) and (ii) above;

 

(iv) all rights and privileges of such GameSquare Party with respect to the securities and other property referred to in clauses (i), (ii) and (iii) above; and

 

 

(v) all Proceeds of any of the foregoing and all books and records relating thereto.

 

TO HAVE AND TO HOLD the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Holder and his successors and assigns, forever, subject, however, to the terms, covenants and conditions hereinafter set forth.

 

(b) Priority of Security Interest. The GameSquare Parties represent and warrant to the Holder and covenant that the security interest granted herein is, and until the cancellation of this Note pursuant to Section 14 shall at all times continue to be, a first priority perfected security interest in the Collateral.

 

(c) Perfection of Security Interest and Further Assurances.

 

(i) Each GameSquare Party hereby agrees that (A) such GameSquare Party shall deliver to the Holder (or its representative) all security certificates evidencing the FaZe Media Shares (if any) held by such GameSquare Party as of the Issuance Date, and (B) if any GameSquare Party shall receive, by virtue of such GameSquare Party being or having been an owner of any Pledged Interests or any other Collateral consisting of any (1) Equity Interest certificate (including, without limitation, any certificate representing an Equity Interest dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), (2) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, or (3) dividends, distributions, cash, Instruments, Investment Property and other Proceeds or property, including in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, such GameSquare Party shall receive such Equity Interest certificate, Instrument, option, right, payment or distribution in trust for the benefit of the Holder, shall segregate it from such GameSquare Party’s other property and shall promptly (and in any event within fifteen (15) Business Days) deliver the same to the Holder (or his representative), in the exact form received, to be held as Collateral, in each case, together with (I) duly executed instruments of assignment or transfer in blank, and (II) with respect to the FaZe Media Shares and any other Pledged Interests constituting Equity Interests, a duly executed irrevocable proxy coupled with an interest, in substantially the form of Exhibit A hereto, and a duly acknowledged Issuer Acknowledgment from each Pledged Issuer, substantially in the form of Exhibit B hereto, or otherwise in form and substance satisfactory to the Holder, all in form and substance reasonably satisfactory to the Holder. If any Collateral consist of Uncertificated Securities, unless the immediately following sentence is applicable thereto, the applicable GameSquare Party shall cause (x) the Holder (or its designated custodian or nominee) to become the registered holder thereof, or (y) each issuer of such securities to agree that it will comply with instructions originated by the Holder with respect to such securities without further consent by such GameSquare Party. If any Collateral consists of security entitlements, such GameSquare Party shall (x) transfer such security entitlements to the Holder (or its custodian, nominee or other designee), or (y) cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Holder without further consent by such GameSquare Party.

 

 

(ii) To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Holder may deem necessary or advisable to accomplish the purposes of this Security Agreement, each GameSquare Party hereby (A) authorizes the Holder (or its designee) at any time, and from time to time, to file one or more financing or continuation statements and amendments thereto, relating to the Collateral (including, without limitation, any such financing statements that (1) describe the Collateral, and (2) contain any other information required by Part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment), and (B) ratifies such authorization to the extent that the Holder has filed any such financing statements, continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by applicable law.

 

(iii) At any time and from time to time, at the expense of the GameSquare Parties, the GameSquare Parties will promptly execute and deliver all further instruments and documents, obtain such agreements from third parties and take all further action that may be necessary or desirable, or that the Holder may reasonably request, in order to create or maintain the validity, perfection or priority of, and protect any security interest, granted or purported to be granted hereby, or to enable the Holder to exercise and enforce its rights and remedies hereunder or under any other agreement with respect to any Collateral. The GameSquare Parties hereby authorize the Holder to file or record any document necessary to perfect, continue, amend or terminate its security interest in the Collateral, including any financing statements (including amendments) authorized to be filed under the UCC or the Uniform Commercial Code of any other jurisdiction, without signature of the GameSquare Parties where permitted by law, including the filing of a financing statement describing the Collateral as the FaZe Media Shares, including all related Stock Rights and all governance, management, control, voting and approval rights and interests and other similar rights and interests, or words of similar effect. The GameSquare Parties also hereby ratify any previously filed documents or recordings regarding the Collateral, including any and all previously filed financing statements.

 

(d) Voting Rights and Distributions.

 

(i) Unless an Event of Default has occurred and is continuing, each GameSquare Party will be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof for any purpose not prohibited by the terms of this Note or the other Transaction Documents. Upon the occurrence and during the continuation of an Event of Default: (i) all rights of each GameSquare Party to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to the immediately preceding sentence shall cease, and all such rights shall thereupon become vested in the Holder, which shall thereupon have the sole right to exercise such voting and other consensual rights; and (ii) without limiting the generality of the foregoing, the Holder may at its option exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Shares or any other Collateral as if it were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Shares or any other Collateral upon the merger, consolidation, reorganization, recapitalization or other adjustment of any Pledged Shares or other Collateral, or upon the exercise by any Pledged Shares or other Collateral of any right, privilege or option pertaining to any Pledged Shares or other Collateral, and, in connection therewith, to deposit and deliver any and all of the Pledged Shares or other Collateral with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as the Holder may determine. In order to permit the Holder to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto upon the occurrence and during the continuation of an Event of Default, each GameSquare Party will promptly execute and deliver (or cause to be executed and delivered) to the Holder all such proxies and other instruments as the Holder may from time to time reasonably request.

 

 

(ii) If, at any time prior to the payment in full of this Note, any GameSquare Party shall receive any dividend, interest or other distribution paid in respect of the FaZe Media Shares or any other Pledged Interest, whether resulting from a subdivision, combination or reclassification of the outstanding Pledged Interests or other Collateral, or received in exchange therefor, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which the issuer thereof may be a party or otherwise, such dividend, interest or other distribution shall be and become part of the Collateral, and, if received by a GameSquare Party, shall be received in trust for the benefit of the Holder, shall be segregated from other funds and property of such GameSquare Party, and shall be forthwith paid over to the Holder in accordance with the terms of Section 6(c)(i) as Collateral in the exact form received with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Holder as Collateral and as further collateral security for the Secured Obligations. In order to permit the Holder to receive all dividends and other distributions which it may be entitled to receive hereunder, each GameSquare Party will promptly execute and deliver (or cause to be executed and delivered) to the Holder all such proxies, dividend payment orders, and other instruments as the Holder may from time to time reasonably request.

 

(e) Holder Appointed Attorney-in-Fact. Each GameSquare Party hereby appoints the Holder its attorney-in-fact and proxy, with full power and authority in the place and stead of such GameSquare Party and in the name of such GameSquare Party, or otherwise, from time to time in the Holder’s discretion to take any action and to execute any instrument consistent with the terms of this Security Agreement and the other Transaction Documents that the Holder may deem necessary or advisable to accomplish the purposes hereof (but the Holder shall not be obligated to and shall have no liability to such GameSquare Party or any third party for failure to so do or take action), including, without limitation, (i) to receive, indorse and collect all instruments made payable to such GameSquare Party representing any dividend, interest payment or other distribution in respect of the FaZe Media Shares or other Collateral and to give full discharge for the same, and (ii) to vote the FaZe Media Shares and any and all other Collateral constituting Investment Property owned or held by such GameSquare Party or standing in its name and to do all things which such GameSquare Party might do if present and acting himself, including such rights set forth in Section 6(d) hereof or elsewhere herein (including, without limitation, rights of sale). The proxy and powers granted by such GameSquare Party pursuant to this Section 6(e) are IRREVOCABLE and coupled with an interest (including but not limited to this Note and the Purchase Agreement) and are given to secure the Secured Obligations. Notwithstanding any provision of this Section 6(e) to the contrary, the Holder agrees that it will not exercise any rights under the power of attorney or the irrevocable proxy provided for in this Section 6(e) unless an Event of Default has occurred and is continuing. Each GameSquare Party hereby ratifies all that any such attorney lawfully (in accordance with applicable law) does or causes to be done by virtue of that authority.

 

(f) Holder may Perform. Upon prior written notice to the applicable GameSquare Party in accordance with Section 8.5 of the Purchase Agreement, if the GameSquare Party fails to perform or comply with any of its agreements contained in this Security Agreement or any other Transaction Document, the Holder, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement, at the sole cost and expense of the applicable GameSquare Party.

 

 

(g) Irrevocable. All powers, proxies, authorizations, and agencies contained in this Security Agreement are coupled with an interest and are given to secure the Secured Obligations and are irrevocable until the Note is indefeasibly paid in full and terminated and the security interests created hereby are released.

 

(h) Remedies Upon an Event of Default.

 

(i) Generally. If an Event of Default has occurred and is continuing, the Holder may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the UCC or other applicable law (whether or not the UCC applies to the affected Collateral), and also may (i) take control of the Collateral, including, without limitation, transfer into Holder’s name or into the name of its nominee or nominees (to the extent the Holder has not theretofore done so) and thereafter receive, for the benefit of the Holder, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, and (ii) without notice (subject to the immediately succeeding sentence) Dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Holder’s offices, at any exchange or broker’s board or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Holder may reasonably deem commercially reasonable. The Holder may be the purchaser of any or all of the Collateral at any such sale and the Holder will be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Holder at such sale. Each purchaser at any such sale will hold the property sold absolutely free from any claim or right on the part of each GameSquare Party, and each GameSquare Party hereby waives (to the extent permitted by law) all rights of redemption, stay, and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each GameSquare Party agrees that, to the extent notice of Disposition of the Collateral shall be required by law, at least ten (10) days’ prior notice to such GameSquare Party of the time and place of any public sale or the time after which any private Disposition of the Collateral is to be made shall constitute reasonable notification. The Holder shall not be obligated to make any Disposition of Collateral regardless of notice of sale having been given. The Holder may adjourn any public or private Disposition from time to time by announcement prior to or at the time and place fixed therefor, and such Disposition may, without further notice, be made at the time and place to which it was so adjourned. Each GameSquare Party hereby waives any claims against the Holder arising by reason of the fact that the price at which the Collateral may have been sold at a private Disposition was less than the price which might have been obtained at a public Disposition or was less than the aggregate amount of the obligations owing under this Note, even if Holder accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that such GameSquare Party may have to require that all or any part of the Collateral be marshaled upon any Disposition (public or private) thereof. The Holder shall not be required to marshal any collateral security for, or other assurances of payment of, the outstanding Secured Obligations, and all of Holder’s rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising.

 

 

(ii) Pledged Interests. Each GameSquare Party recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Holder may be compelled, with respect to any sale of all or any part of the Collateral conducted without prior registration or qualification of such Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each GameSquare Party acknowledges that any such private placement may be at prices and on terms less favorable than those obtainable through a sale without such restrictions (including an offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, such GameSquare Party agrees that any such private placement will not be deemed, in and of itself, to be commercially unreasonable and that the Holder will have no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer of the Collateral to register it for a form of sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.

 

(iii) Cash; Deficiency. Any cash held by the Holder (or his agent or designee) as Collateral and all cash proceeds received by the Holder in respect of any Disposition of or collection from, or other realization upon, all or any part of the Collateral after the occurrence and during the continuance of an Event of Default shall be applied by the Holder against the Secured Obligations in accordance with the terms of this Note. Any surplus of such cash or cash proceeds held by the Holder and remaining after the date on which all of the Secured Obligations have been paid in full shall be paid over to the GameSquare Parties. In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Holder is legally entitled, the GameSquare Parties shall be jointly and severally liable for the deficiency.

 

(iv) Waivers. To the extent it may lawfully do so, each GameSquare Party absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Holder, any valuation, stay, appraisal, extension, moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise. Except as otherwise specifically provided herein, each GameSquare Party hereby waives presentment, demand, protest, any notice (to the maximum extent permitted by applicable law) of any kind or all other requirements as to the time, place and terms of sale in connection with this Agreement or any Collateral.

 

(v) Continuing Security Interest. This Security Agreement will create a continuing security interest in the Collateral and will (i) remain in full force and effect until the payment in full in cash of the Secured Obligations, (ii) be binding upon each GameSquare Party and its successors and assigns, and (iii) inure to the benefit of the Holder and his successors, transferees, and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the provisions of this Note, each assignee of this Note will become vested with all the benefits in respect thereof granted to the Holder herein.

 

 

(vi) Disposition of Collateral. Without the prior written consent of the Holder, no GameSquare Party shall, directly or indirectly, (i) grant, pledge, assign or otherwise provide a Lien on any of the Collateral (other than the Lien in favor of the Holder hereunder), (ii) provide any Person (other than the Holder), or allow any Person (other than the Holder) to obtain, “control” (within the meaning of the UCC) of any of the Collateral or (iii) convey, transfer, lease or otherwise Dispose of (whether in one transaction or in a series of transactions) any of the Collateral.

 

(vii) Termination of Security Interest. Upon the indefeasible payment in full of the Secured Obligations in accordance with the terms of this Note, (i) all liens in the Collateral granted by the GameSquare Parties in favor of the Holder under, or pursuant to, this Note shall automatically be terminated and released without any further action by any person or entity and all rights therein shall revert to the GameSquare Parties and (ii) the Holder will, at the GameSquare Parties’ sole cost and expense, release its liens in the Collateral and execute and deliver to the GameSquare Parties such documents reasonably requested by the GameSquare Parties to evidence such release.

 

7. Representations and Warranties. The GameSquare Parties hereby represent and warrant to the Holder that: (a) GameSquare is a corporation, duly organized, validly existing and in good standing under the laws of Delaware and GameSquare SPV is a limited liability company, duly organized, validly existing and in good standing under the laws of Delaware; (b) the GameSquare Parties have all requisite power, authority and capacity to enter into and perform its obligations (including pledging the Collateral) under this Note and to consummate the transactions contemplated herein; (c) this Note has been duly executed and delivered by the GameSquare Parties pursuant to all necessary authorization and is the legal, valid and binding obligation of the GameSquare Parties, enforceable against the GameSquare Parties in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally; (d) no further action on the part of the GameSquare Parties is or will be required in connection with the transactions contemplated by this Note; (e) no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the borrowing of the funds pursuant to this Note and the pledge by the GameSquare Parties of the Collateral pursuant to this Note or for the execution and delivery of this Note by the GameSquare Parties or the performance by the GameSquare Parties of their obligations thereunder; (f) the execution and delivery of this Note by the GameSquare Parties and the performance by the GameSquare Parties of their obligations hereunder will not violate any provision of any applicable law or regulation or any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to the GameSquare Parties or any of its property or assets, the organizational or governing documents of the GameSquare Parties or any agreement or instrument to which the GameSquare Parties are party or by which they or their property or assets are bound; (g) the principal place of business of the GameSquare Parties is the address set forth below the GameSquare Parties’ signature on the signature pages hereto; (h) the GameSquare Parties own or have good and marketable title to the Collateral and no other person or entity has or can make any claim of ownership of any kind in the Collateral; (i) the GameSquare Parties have the full power, authority and legal right to grant the security interest in the Collateral hereunder; (j) the Collateral is free from any and all claims, encumbrances, rights of set-off or any other security interest or lien of any kind, except for the security interest in favor of the Holder created hereunder; and (k) this Note creates in favor of the Holder a valid security interest in the Collateral, securing payment of the Secured Obligations, and such security interest is first priority.

 

8. Reissuance of this Note.

 

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to GameSquare, whereupon the GameSquare Parties will forthwith issue and deliver upon the order of the Holder a new Note, registered in the name of the registered transferee or assignee, representing the outstanding Principal being transferred by the Holder (along with any accrued and unpaid interest thereof).

 

 

(b) Lost, Stolen or Mutilated Note. Upon receipt by GameSquare of evidence reasonably satisfactory to GameSquare of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to GameSquare in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the GameSquare Parties shall execute and deliver to the Holder a new Note representing the outstanding Principal.

 

(c) Issuance of New Notes. Whenever the GameSquare Parties are required to issue a new Note pursuant to the terms hereof, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding, (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid interest from the Issuance Date.

 

9. Joint and Several Liability. The entire Principal amount of this Note shall be deemed to be jointly funded to and received by each of the GameSquare Parties. Each of the GameSquare Parties shall be jointly and severally liable under this Note for all Secured Obligations, regardless of the manner or amount in which proceeds hereof are used, allocated, shared or disbursed by or among the GameSquare Parties, or the manner in which the Holder accounts for its extension of credit hereunder on its books and records. The Secured Obligations of each of the GameSquare Parties under this Agreement shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity or enforceability, avoidance, or subordination of the Secured Obligations of any GameSquare Party or of any promissory note or other document evidencing all or any part of the Secured Obligations of any GameSquare Parties, (ii) the absence of any attempt to collect the Secured Obligations from any GameSquare Party, or any other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance, or granting of any indulgence by the Holder with respect to any provision of any instrument evidencing the Secured Obligations of any GameSquare Party, or any part thereof, or any other agreement executed as of the Issuance Date or thereafter executed by any GameSquare Party and delivered to the Holder, (iv) the failure by the Holder to take any steps to perfect and maintain its security interest in, or to preserve its rights to, the Collateral of any GameSquare Party, (v) the Holder’s election, in any proceeding instituted under the U.S. Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy Code, (vi) any borrowing or grant of a security interest by any GameSquare Party, as debtor-in-possession under Section 364 of the U.S. Bankruptcy Code, (vii) the disallowance of all or any portion of the Holder’s claim(s) for the repayment of the Secured Obligations of any GameSquare Party under Section 502 of the U.S. Bankruptcy Code, (viii) any other bankruptcy, insolvency, restructuring or reorganization proceedings under all applicable debtor relief laws or (ix) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any GameSquare Party (in each case, other than the defense of repayment in full of the Secured Obligations). With respect to any Secured Obligations of any GameSquare Party arising as a result of their joint and several liability hereunder with respect to any extensions of credit made to one or the other hereunder, each of the GameSquare Parties waives, until the Secured Obligations shall have been paid in full any right to enforce any right of subrogation or any remedy which the Holder had as of the Issuance Date or may have thereafter against one or the other, any endorser or any guarantor of all or any part of the Secured Obligations, and any benefit of, and any right to participate in, any security or collateral given to the Holder to secure payment of the Secured Obligations or any other liability of the other GameSquare Party to the Holder. Upon any Event of Default, the Holder may proceed directly and at once, without notice, against any of the GameSquare Parties to collect and recover the full amount, or any portion of the Secured Obligations, without first proceeding against one or the other or any other Person, or against any security or Collateral for the Secured Obligations. Each of the GameSquare Parties consents and agrees that the Holder shall be under no obligation to marshal any assets in favor of any GameSquare Party or against or in payment of any or all of the Secured Obligations.

 

 

10. Covenants. The GameSquare Parties will defend the Collateral against all claims and demands made by any persons or entities claiming either the Collateral or any interest in it.

 

11. Secured Party Rights. Any and all rights of the Holder provided by this Note are in addition to any and all rights available to the Holder by law and shall be cumulative and may be exercised simultaneously. No delay, omission or failure on the part of the Holder to exercise or enforce any of its rights or remedies, either granted under this Note or by law, shall constitute an estoppel or waiver of such right or remedy or any other right or remedy. If the GameSquare Parties fail to perform any obligation contained in this Note, the Holder may (but is not required to) perform, or cause performance of, such obligation, and the expenses of the Holder incurred in connection therewith shall be payable by the GameSquare Parties. The GameSquare Parties hereby appoint the Holder the GameSquare Parties’ attorney-in-fact, with full authority in the place and stead of the GameSquare Parties and in the name of the GameSquare Parties or otherwise, from time to time during the continuance of an Event of Default in the Holder’s discretion to take any action and to execute any instrument which the Holder may deem necessary or advisable to accomplish the purposes of this Note (but the Holder shall not be obligated to, and shall have no liability to the GameSquare Parties or any third party for failure to, do so or take action). The foregoing appointment is coupled with an interest and is irrevocable prior to the cancellation of this Note pursuant to Section 14. The GameSquare Parties hereby ratify all that said attorneys shall lawfully do or cause to be done by virtue hereof.

 

12. Successors and Assigns. This Note shall bind the GameSquare Parties and their successors and permitted assigns, and the benefits of this Note shall inure to the benefit of the Holder and its successors and permitted assigns. This Note, and the rights and obligations hereunder, may not be assigned or delegated (in whole or in part) by the GameSquare Parties without the prior written consent of the Holder. All references herein to the “GameSquare Parties” and the “Holder” shall be deemed to apply to the GameSquare Parties and the Holder, respectively, and to their respective successors and permitted assigns.

 

13. Interest Rate Limitation. Nothing contained in this Note or any transaction related to this Note shall be construed or so operate as to require the GameSquare Parties to pay interest at a greater rate than is now lawful or in such case to contract for, or to make any payment, or to do any act contrary to applicable law. Should any interest or other charges paid by the GameSquare Parties, or parties liable for the payment of this Note, in connection with the indebtedness evidenced by this Note or any other document delivered in connection with this Note, result in the computation or earning of interest in excess of the maximum legal rate of interest that is legally permitted under applicable law, then any and all such excess shall be, and the same hereby is, waived by the Holder, and any and all such excess shall be automatically credited against and in reduction of the balance due under this Note, and the portion of said excess that exceeds the balance due under this Note shall be paid by the Holder to the GameSquare Parties.

 

14. Cancellation. After all principal and all other amounts at any time owed on this Note have been indefeasibly paid in full, this Note shall be promptly surrendered to the GameSquare Parties for cancellation and shall result in the cancellation of this Note pursuant to this Section 14.

 

 

15. Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at the following addresses (or at such other addresses as shall be specified by notice given in accordance with this Section 15):

 

If to the GameSquare Parties:

 

GameSquare Holdings, Inc.
6775 Cowboys Way, Suite 1335
Frisco, TX 75034
Attention: Justin Kenna, CEO
Email: justin@gamesquare.com

 

with a copy (which shall not constitute notice or such other communication) to:

 

BakerHostetler LLP
1900 Avenue of the Starts, Suite 2700
Los Angeles, CA 90067
Attention: Alan A. Lanis, Jr.
Email: jrlanis@bakerlaw.com

 

If to Holder:

 

Gigamoon Media, LLC
45 Leicester Street
Brookline, MA 02445
Attention: Matthew Kalish, Manager
Email: mkalish1029@gmail.com

 

with a copy (which shall not constitute notice or such other communication) to:

 

Pillsbury Winthrop Shaw Pittman LLP
31 W 52nd Street
New York, NY 10019
Attention: Stephen B. Amdur
Email: stephen.amdur@pillsburylaw.com

 

16. Waiver of Notice; Security Interest Absolute. The GameSquare Parties hereby waive presentment, demand for payment, protest, notice of dishonor, notice of protest or nonpayment, notice of acceleration of maturity and diligence in connection with the enforcement of this Note or the taking of any action to collect sums owing hereunder. All rights of the Holder and liens and security interests hereunder, and all Secured Obligations of the GameSquare Parties hereunder, are absolute and unconditional.

 

17. Modification and Waiver. No supplement, modification or amendment of this Note will be binding unless executed in writing by the GameSquare Parties and the Holder. No waiver of any of the provisions of this Note will be deemed to be or will constitute a continuing waiver. No waiver will be binding unless executed in writing by the party making the waiver.

 

18. Construction. The GameSquare Parties and the Holder have participated jointly in the negotiation and drafting of this Note. If an ambiguity or question of intent or interpretation arises, then this Note will be construed as drafted jointly by the GameSquare Parties and the Holder and no presumption or burden of proof will arise favoring or disfavoring either party by virtue of the authorship of any of the provisions of this Note.

 

 

19. Governing Law and Severability. The provisions of this Note shall be construed according to the internal substantive laws of the State of Delaware without regard to conflicts of law principles. If any provision of this Note is in conflict with any statute or rule of law of the State of Delaware or is otherwise unenforceable for any reason whatsoever, then such provision shall be ineffective to the extent of such invalidity and shall be deemed separable from and shall not invalidate any other provision of this Note.

 

20. Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Note or the transactions contemplated hereby.

 

21. Counterparts; Electronic Signatures; Delivery. This Note may be executed in separate counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Execution and delivery of this Note by electronic signature (whether digital or encrypted), facsimile or other electronic transmission (including documents in Adobe PDF format, via DocuSign or other similar method) will authenticate this writing and constitute the execution and delivery of a counterpart to this Note with the same force and effect as a manual signature, and any such counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes. This Note and any additional information incidental hereto may be maintained as electronic records.

 

22. No Oral Agreements. Each of the Holder and the GameSquare Parties acknowledge that neither it, nor any agent or attorney of any such party, has made any promise, representation or warranty whatsoever, express or implied, to the other party hereto not contained in this Note, to induce the GameSquare Parties to execute this Note.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the GameSquare Parties and the Holder have duly executed this Note, or have caused this Note to be duly executed, as of the date first written above.

 

	GAMESQUARE:
	GAMESQUARE HOLDINGS, INC.
	By:
	Name:	Justin Kenna
	Title:	Chief Executive Officer
	Address:
		6775 Cowboys Way, Suite 1335
		Frisco, TX 75034
		Attention: Justin Kenna, CEO
		Email: justin@gamesquare.com
	with a copy to:
		BakerHostetler LLP
		1900 Avenue of the Starts, Suite 2700
		Los Angeles, CA 90067
		Attention: Alan A. Lanis, Jr.
		Email: jrlanis@bakerlaw.com

 

[Signature Page to Promissory Note]

 

 

IN WITNESS WHEREOF, the GameSquare Parties and the Holder have duly executed this Note, or have caused this Note to be duly executed, as of the date first written above.

 

	GAMESQUARE SPV:
	FAZE MEDIA HOLDINGS, LCC
	By:
	Name:	Justin Kenna
	Title:	President
	Address:
		6775 Cowboys Way, Suite 1335
		Frisco, TX 75034
		Attention: Justin Kenna, CEO
		Email: justin@gamesquare.com
	with a copy to:
		BakerHostetler LLP
		1900 Avenue of the Starts, Suite 2700
		Los Angeles, CA 90067
		Attention: Alan A. Lanis, Jr.
		Email: jrlanis@bakerlaw.com

 

[Signature Page to Promissory Note]

 

 

IN WITNESS WHEREOF, the GameSquare Parties and the Holder have duly executed this Note, or have caused this Note to be duly executed, as of the date first written above.

 

	HOLDER:
	FAZE MEDIA, INC.
	By:
	Name:	Matthew Kalish
	Title:	Secretary
	Address:
		45 Leicester Street
		Brookline, MA -2445
		Attention: Matthew Kalish, Secretary
		Email: mkalish1029@gmail.com
	with a copy to:
		Pillsbury Winthrop Shaw Pittman LLP
		31 W 52nd Street
		New York, NY 10019
		Attention: Stephen B. Amdur
		Email: stephen.amdur@pillsburylaw.com

 

[Signature Page to Promissory Note]

 

 

EXHIBIT A

TO

Senior Secured Promissory Note

FORM OF Irrevocable Proxy

 

(Interests of [_______] (the “Issuer”))

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [_____________] a [_______________] (the “Grantor”), hereby irrevocably (to the fullest extent permitted by law) appoints and constitutes FAZE MEDIA, INC., a Delaware limited liability company, and its successors and registered assigns, in its capacity as the Holder (as defined in the Note referred to below) (in such capacity, the “Proxy Holder”) under the Senior Secured Promissory Note, dated as of November 13, 2024 (as amended, restated, supplemented or otherwise modified from time to time, the “Note”; capitalized terms used herein and not defined herein will have the meanings assigned thereto in the Note), to which each of the Proxy Holder, the Grantor, and [__________] is a party, the attorney-in-fact (in accordance with the terms of Section 5(e) of the Note) and proxy of the Grantor with full power of substitution and resubstitution, to the full extent of the Grantor’s rights with respect to all of the Equity Interests owned by the Issuer constituting Collateral (the “Interests”), exercisable in accordance with the Security Agreement and the terms hereof. Upon the execution hereof, all prior proxies given by the Grantor with respect to any of the Interests are hereby revoked, and no subsequent proxies will be given with respect to any of the Interests until the Note is indefeasibly paid in full. This proxy is irrevocable, is coupled with an interest, and is granted pursuant to Section 6(c) of the Note for the benefit of Proxy Holder in consideration of the indebtedness represented by the Note.

 

The Proxy Holder is hereby empowered and may exercise this Irrevocable Proxy to vote the Interests at any and all times after the occurrence of an Event of Default, including, but not limited to, at any meeting of the shareholders of the Issuer, however called, and at any adjournment thereof, or in any written action by consent of the shareholders of the Issuer. This Irrevocable Proxy shall remain in effect with respect to the Interests until the Note is indefeasibly paid in full, and will continue to be effective or automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by Proxy Holder as a preference, fraudulent conveyance, or otherwise under any bankruptcy, insolvency, or similar law, all as though such payment had not been made (provided, that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Proxy Holder in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations), notwithstanding any time limitations set forth in the [operating agreement/by-laws] and other organization documents of the Issuer or the [Limited Liability Company Act/Corporations Act] of the State of [__________].

 

Any obligation of the Grantor hereunder shall be binding upon the heirs, successors, and assigns of the Grantor (including, without limitation, any transferee of any of the Interests).

 

The remainder of this page is intentionally left blank.

 

 

IN WITNESS WHEREOF, the Grantor has executed this Irrevocable Proxy as of this __ day of _______, 20__.

 

	[__________]
	By:
	Name:
	Title:

 

 

EXHIBIT B

TO

Senior Secured Promissory Note

FORM OF Issuer Acknowledgment

 

To:	[ISSUER NAME]
	[__________]
	Attn: [__________]

 

RE:	Issuer Acknowledgement and Control Agreement

 

To whom it may concern:

 

This Issuer Acknowledgement and Control Agreement serves to notify you that, pursuant to that certain Senior Secured Promissory Note, dated as of [__], 2024 (as amended, restated, supplemented or otherwise modified from time to time, the “Note”), made by GAMESQUARE HOLDINGS, INC., a Delaware corporation (“GameSquare”), and FAZE MEDIA HOLDINGS, LLC, a Delaware limited liability company (“GameSquare SPV”), in favor of FAZE MEDIA, INC., a Delaware limited liability company (together with its successors and registered assigns, the “Holder”), GameSquare SPV (the “Owner”) has granted a security interest to the Holder in the following equity interests (the “Securities”) issued by [__________], a [__________] (the “Issuer” or “you”):

 

Class of Equity Interests		Par Value		Certificate Number (if applicable)		Number of Shares of Equity Interests

 

1. You are hereby notified of the Holder’s security interest, including the provision that the Securities, including all securities, dividends, stock splits, instruments or other distributions and any other right or property or proceeds payable or distributable in respect of the Securities, are not to be paid to anyone other than to Holder until and unless you receive further written notice from the Holder. The aforementioned security interest will remain in full force and effect until the Holder notifies you in writing to the contrary. In addition, you are hereby instructed to comply with instructions originated by the Holder without further consent by the Owner. Please acknowledge receipt of this notice by signing and returning the control agreement and acknowledgment attached as Annex I hereto to the Holder.

 

This notice is dated [__________], 20[__].

 

OWNER:			HOLDER:
[_____________________]			FAZE MEDIA, INC.
By:			By:
Name:			Name:
Title:			Title:

 

The remainder of this page is intentionally left blank.

 

 

Annex I to
Issuer Acknowledgement and Control Agreement

 

Control Agreement and Acknowledgement of Pledge and Security Interest

 

Reference is made to the Issuer Acknowledgment and Control Agreement (the “Acknowledgment”) to which this Annex I is attached. Capitalized terms used but not defined herein have the meanings assigned thereto in the Acknowledgment.

 

The undersigned, [__________], a [__________] (the “Issuer” or “we”), acknowledges receipt of the Acknowledgment and notice of the Holder’s security interest in the Securities described therein.

 

To the best of our knowledge, and except for the Holder’s security interest or as noted below, and as of the date hereof, (a) the Securities are identified on our books and records, by book-entry or otherwise, as being owned by the Owner; (b) we have identified on our books and records the Securities as being pledged to the Holder; (c) we have not confirmed any interest in the Securities to any persons other than to the Owner and the Holder; (d) our records do not indicate any adverse claims concerning the Securities nor do they indicate any person, other than Owner and the Holder, as having any interest in the Securities; and (e) we have not created, nor have we received notice of any liens, claims or encumbrances with respect to the Securities, except to the Holder.

 

We hereby agree (i) to mark our records, by book-entry or otherwise, to indicate the pledge of, and the Holder’s security interest in, the Securities, (ii) not to effect any transfer of the Owner’s interest in any of the Securities without the Holder’s prior written consent; (iii) unless we should we receive further written instructions from the Holder, to distribute all dividends, distributions, and other proceeds relating to the Securities (whether in cash, securities or other property) to the Holder, and (iv) we will comply with all written instructions originated by the Holder concerning the Securities without further consent by the Owner.

 

	ISSUER
	[__________]
	By:
	Name:
	Title:

 

 

 

Exhibit 4.2

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE 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 IN A FORM ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

GAMESQUARE HOLDINGS, INC.

 

FAZE MEDIA HOLDINGS, LLC

 

Senior Secured Convertible Promissory Note

 

Original Principal Amount: $10,000,000.00

Issuance Date: [●], 2024

 

FOR VALUE RECEIVED, each of GAMESQUARE HOLDINGS, INC., a Delaware corporation (“GameSquare”), and FAZE MEDIA HOLDINGS, LLC, a Delaware limited liability company (“GameSquare SPV” and, together with GameSquare, collectively, the “GameSquare Parties”), hereby promises, jointly and severally, to pay to the order of GIGAMOON MEDIA, LLC, a Delaware limited liability company, or its successors or registered assigns (the “Holder”), on the Maturity Date (as hereinafter defined), the original principal sum of TEN MILLION AND 00/100 DOLLARS ($10,000,000.00) (the “Principal”), together with interest thereon as set forth below, from the date set out above as the Issuance Date (the “Issuance Date”), unless earlier repaid, converted or exchanged pursuant to the terms and conditions set forth below.

 

This Senior Secured Convertible Promissory Note (together with any note or other instrument issued in substitution or replacement hereof, or exchange hereof, as the same or any such other note or instrument may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms set forth herein, this “Note”) is being issued pursuant to Section 3.3 of that certain Note Purchase Agreement, dated as of November 13, 2024 (the “Purchase Agreement”), by and among GameSquare, GameSquare SPV, Gigamoon Media, LLC, and FaZe Media, Inc., a Delaware corporation (“FaZe Media”).

 

1. GENERAL TERMS

 

(a) Definitions.

 

(i) Terms Defined in Purchase Agreement; Rules of Construction. Capitalized terms used but not defined herein shall have the meaning set forth in the Purchase Agreement. The rules of construction set forth in Section 8.4 of the Purchase Agreement shall apply to this Note as if specifically incorporated herein, mutatis mutandis.

 

 

(ii) UCC Defined Terms. Terms defined in the UCC that are not otherwise defined in this Note or the Purchase Agreement are used herein as defined in Article 8 or Article 9 of the UCC, as the context may require (and all uncapitalized terms that are defined in the UCC shall have the meaning set forth in the UCC, as applicable).

 

(iii) Definitions of Certain Other Terms Used Herein. Capitalized terms used herein and not defined or covered by Section 1(a)(i) or Section 1(a)(ii) above shall have the meanings ascribed to them in Section 15 below.

 

(b) Prepayments.

 

(i) Optional. This Note may not be prepaid by any GameSquare Party, in whole or in part, at any time without the prior written consent of the Holder.

 

(ii) Mandatory. To the extent the Holder makes a Change in Control Payment Election, the GameSquare Parties shall prepay the entire Principal balance of this Note then outstanding, together with all accrued and unpaid interest thereon, and any other amounts then outstanding or Secured Obligations then owed pursuant to the terms of this Note contemporaneously with the consummation of the applicable Change in Control.

 

(c) Maturity Date. On the Maturity Date, the entire Principal balance of this Note then outstanding, together with all accrued and unpaid interest thereon, and any other amounts then outstanding or Secured Obligations then owed pursuant to the terms of this Note (collectively, the “Amount Due”) shall be due and payable in full in, at the option of the GameSquare Parties, cash or in shares of Common Stock, calculated in accordance with Section 3(a)(i), without any demand for payment, presentment for payment, protest, notice of payment, notice of dishonor, notice of nonpayment, notice of acceleration of maturity or other notice of any kind, all of which are hereby waived by the GameSquare Parties.

 

(d) Payments Generally. All payments (including permitted prepayments) to be made by the GameSquare Parties on account of principal, interest, fees and other amounts payable on or in respect of the this Note or the Secured Obligations evidenced hereby shall be made without setoff, defense or counterclaim or withholding on account of taxes, levies, duties or any other deduction whatsoever. To the extent this Note expressly requires or permits any payment to be made in cash, the GameSquare Parties shall make all such payments to an account specified by the Holder to the GameSquare Parties, in lawful money of the United States of America and in immediately available and freely transferable funds, no later than 5:00 p.m. (New York, NY, time) on the date due. Any payment which is received by the Holder later than 5:00 p.m. (New York, NY, time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. If any day on which a payment is due pursuant to the terms of this Note is not a Business Day, such payment shall be due on the next Business Day following, and interest payable hereunder to the Holder shall be adjusted accordingly. All payments received by the Holder with respect to the Secured Obligations will be applied first to interest and the balance to Principal.

 

2. INTEREST

 

(a) Interest. The outstanding Principal of this Note shall bear simple interest at an annual rate of 7.5%. Interest shall commence accruing on the outstanding Principal of this Note as of the Issuance Date and shall be payable by the GameSquare Parties on (i) each anniversary of the Issuance Date and (ii) the earlier of (x) the Maturity Date and (y) the date of conversion or exchange as provided in Section 3 hereof (such earlier date, the “Interest Payment Date”); provided that (I) interest accrued pursuant to Section 2(c) shall be payable in cash on demand and (II) in the event of any prepayment permitted by Section 1(b)(i) or any prepayment required by Section 1(b)(ii), accrued interest on the principal amount prepaid shall be payable in cash on the date of such prepayment. Interest shall be computed on the basis of a 365-day year for the actual number of days elapsed but in no event shall the rate of interest exceed the maximum rate, if any, allowable under applicable law.

 

 

(b) Interest Shares. Notwithstanding anything to the contrary contained herein, the GameSquare Parties shall pay all interest payable pursuant to Section 2(a) (other than amounts described in the proviso thereto) by issuing to Holder shares of Common Stock (the “Interest Shares”) in the amounts and upon the terms set forth in this Section 2(b). The number of Interest Shares issuable pursuant to this Section 2(b) shall be determined by dividing (x) the aggregate amount of any accrued and unpaid interest under this Note as of the Interest Payment Date, and (y) the Conversion Price. The Interest Shares shall be issuable as of the Interest Payment Date. GameSquare shall not issue any fraction of a share of Common Stock upon any conversion. All calculations under this Section 2(b) shall be rounded to the nearest $0.0001. If the issuance would result in the issuance of a fraction of a share of Common Stock, GameSquare shall round such fraction of a share of Common Stock up to the nearest whole share.

 

(c) Adjustment to Conversion Price. Solely for purposes of the payment of Interest Shares hereunder, the Conversion Price shall be subject to adjustment from time to time as provided in this Section 2(c) (in each case, after taking into consideration any prior adjustments pursuant to this Section 2(c)).

 

(i) Adjustment to Conversion Price Upon Issuance of Common Stock. Except as provided in Section 2(c)(ii) and except in the case of an event described in either Section 2(c)(iv) or Section 2(c)(v)], if GameSquare shall, at any time or from time to time after the Issuance Date, issue or sell, or in accordance with Section 2(c)(iii) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Conversion Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Conversion Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to a Conversion Price equal to the lowest price per share at which any such share of Common Stock has been issued or sold (or is deemed to have been issued or sold); provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then GameSquare shall be deemed to have received an aggregate of $0.01 of consideration for all such shares so issued or deemed to be issued.

 

(ii) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Conversion Price with respect to any issuance or sale (or deemed issuance or sale in accordance with Section 2(c)(iii)) by GameSquare after the Issuance Date of shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends, and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of GameSquare in connection with their service as directors of GameSquare, their employment by GameSquare, or their retention as consultants by GameSquare, in each case authorized by the Board or Directors of GameSquare and issued pursuant to GameSquare’s equity incentive plans (an “Excluded Issuance”).

 

(iii) Effect of Certain Events on Adjustment to Conversion Price. For purposes of determining the adjusted Conversion Price under Section 2(c)(i), the following shall be applicable:

 

 

(1) Issuance of Options. If GameSquare shall, at any time or from time to time after the Issuance Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the lowest price per share (determined as provided in this paragraph and in Section 2(c)(iii)(4)) for which any one share of Common Stock is issuable upon the exercise of any such Option or upon the conversion or exchange of any Convertible Security issuable upon the exercise of any such Option is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Options, then such share of Common Stock issuable upon the exercise of such Option or upon conversion or exchange of such Convertible Security issuable upon the exercise of such Option shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Conversion Price under Section 2(c)(i)), at a price per share equal to such lowest price per share. For purposes of this Section 2(c)(iii)(1), the lowest price per share for which any one share of Common Stock is issuable upon the exercise of any such Option or upon the conversion or exchange of any Convertible Security issuable upon the exercise of any such Option shall be equal to the sum (which sum shall constitute the applicable consideration received for purposes of Section 2(c)(i)) of the lowest amounts of consideration, if any, received or receivable by GameSquare as consideration with respect to any one share of Common Stock upon each of (A) the granting or sale of the Option, plus (B) the exercise of the Option, plus (C) in the case of an Option which relates to Convertible Securities, the issuance or sale of the Convertible Security and the conversion or exchange of the Convertible Security. Except as otherwise provided in Section 2(c)(iii)(3), no further adjustment of the Conversion Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon the exercise of such Options.

 

(2) Issuance of Convertible Securities. If GameSquare shall, at any time or from time to time after the Issuance Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the lowest price per share (determined as provided in this paragraph and in Section 2(c)(iii)(4)) for which one share of Common Stock is issuable upon the conversion or exchange of any such Convertible Securities is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then such share of Common Stock issuable upon conversion or exchange of such Convertible Security shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Conversion Price under Section 2(c)(i)), at a price per share equal to such lowest price per share. For purposes of this Section 2(c)(iii)(2), the lowest price per share for which any one share of Common Stock is issuable upon the conversion or exchange of any such Convertible Security shall be equal to the sum (which sum shall constitute the applicable consideration received for purposes of Section 2(c)(i)) of the lowest amounts of consideration, if any, received or receivable by GameSquare as consideration with respect to any one share of Common Stock upon each of (A) the granting or sale of the Convertible Security, plus (B) the conversion or exchange of the Convertible Security. Except as otherwise provided in Section 2(c)(iii)(3), no further adjustment of the Conversion Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities or by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Conversion Price have been made pursuant to the other provisions of this Section 2(c)(iii).

 

 

(3) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the lowest amounts of consideration, if any, received or receivable by GameSquare as consideration with respect to any one share of Common Stock upon the granting or sale of any Options or Convertible Securities referred to in Section 2(c)(iii)(1) or Section 2(c)(iii)(2), (B) the lowest amounts of additional consideration, if any, payable to GameSquare with respect to any one share of Common Stock upon exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 2(c)(iii)(1) or Section 2(c)(iii)(2), (C) the rate at which Convertible Securities referred to in Section 2(c)(iii)(1) or Section 2(c)(iii)(2) are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 2(c)(iii)(1) or any Convertible Securities referred to in Section 2(c)(iii)(2) (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Conversion Price pursuant to this Section 2(c)) the Conversion Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Conversion Price which would have been in effect at such time pursuant to the provisions of this Section 2(c) had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate, or maximum number of shares, as the case may be, at the time initially granted, issued, or sold, but only if as a result of such adjustment or readjustment the Conversion Price then in effect is reduced.

 

(4) Calculation of Consideration Received. If GameSquare shall, at any time or from time to time after the Issuance Date, issue or sell, or is deemed to have issued or sold in accordance with Section 2(c)(iii), any shares of Common Stock, Options, or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the gross amount received by GameSquare therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by GameSquare shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by GameSquare shall be the market price (as reflected on any securities exchange, quotation system or association, or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of GameSquare, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be $0.01; or (D) to the owners of the non-surviving entity in connection with any merger in which GameSquare is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options, or Convertible Securities, as the case may be, issued to such owners. The fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board of Directors of GameSquare and the Holder.

 

(5) Record Date. For purposes of any adjustment to the Conversion Price in accordance with this Section 2(c), in case GameSquare shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options, or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options, or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

 

(6) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of GameSquare or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among GameSquare and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 2(c).

 

 

(7) Other Dividends and Distributions. Subject to the provisions of this Section 2(c)(iii), if GameSquare shall, at any time or from time to time after the Issuance Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of GameSquare (other than a dividend or distribution of shares of Common Stock, Options, or Convertible Securities in respect of outstanding shares of Common Stock), cash, or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon conversion of this Note pursuant to Section 3(a)(i), in addition to the number of shares of Common Stock receivable thereupon, the kind and amount of securities of GameSquare, cash, or other property which the Holder would have been entitled to receive had this Note been exercised in full into shares of Common Stock on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities, cash, or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 2(c) with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash, or other property in an amount equal to the amount of such securities, cash, or other property as the Holder would have received if this Note had been exercised in full into shares of Common Stock on the date of such event.

 

(iv) Adjustment to Conversion Price Upon Dividend, Subdivision or Combination of Common Stock. If GameSquare shall, at any time or from time to time after the Issuance Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of GameSquare payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization, or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to any such dividend, distribution, or subdivision shall be proportionately reduced. If GameSquare at any time combines (by combination, reverse stock split, or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. Any adjustment under this Section 2(c)(iv) shall become effective at the close of business on the date the dividend, subdivision, or combination becomes effective.

 

(v) Adjustment to Conversion Price Upon Reorganization, Reclassification, Consolidation, or Merger. In the event of any (i) capital reorganization of GameSquare, (ii) reclassification of the stock of GameSquare (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up, or combination of shares), (iii) consolidation or merger of GameSquare with or into another Person, (iv) sale of all or substantially all of GameSquare’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 2(c)(iv)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities, or assets with respect to or in exchange for Common Stock, this Note shall, subject to Section 6(g), immediately after such reorganization, reclassification, consolidation, merger, sale, or similar transaction, remain outstanding and shall thereafter, be appropriately adjusted (in form and substance satisfactory to the Holder) with respect to the Holder’s rights under this Note to insure that the provisions of Section 3(c) shall thereafter be applicable, as nearly as possible, to this Note in relation to any shares of stock, securities, or assets thereafter payable under this Note (including, in the case of any consolidation, merger, sale, or similar transaction in which the successor or purchasing Person is other than GameSquare, an immediate adjustment in the Conversion Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale, or similar transaction, if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger, sale, or similar transaction). The provisions of this Section 2(c)(v) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, or similar transactions. Subject to Section 6(g), GameSquare shall not effect any such reorganization, reclassification, consolidation, merger, sale, or similar transaction unless, prior to the consummation thereof, the successor Person (if other than GameSquare) resulting from such reorganization, reclassification, consolidation, merger, sale, or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Note and satisfactory to the Holder, the obligation to pay to the Holder such shares of stock, securities, or assets which, in accordance with the foregoing provisions, such Holder is entitled to receive.

 

 

(vi) Certain Events. If any event of the type contemplated by the provisions of this Section 2(c) but not expressly provided for by such provisions (including the granting of stock appreciation rights, phantom stock rights, or other rights with equity features) occurs, then the Board of Directors of GameSquare shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 2(c); provided, that no such adjustment pursuant to this Section 2(c)(vi) shall increase the Conversion Price as otherwise determined pursuant to this Section 2(c).

 

(vii) Certificate as to Adjustment.

 

(1) As promptly as reasonably practicable following any adjustment of the Conversion Price, but in any event not later than 5 Business Days thereafter, GameSquare shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

 

(2) As promptly as reasonably practicable following the receipt by GameSquare of a written request by the Holder, but in any event not later than 5 Business Days thereafter, GameSquare shall furnish to the Holder a certificate of an executive officer certifying the Conversion Price then in effect.

 

(viii) Notices. In the event:

 

(1) that GameSquare shall take a record of the holders of its Common Stock for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(2) of any capital reorganization of GameSquare, any reclassification of the Common Stock, any consolidation or merger of GameSquare with or into another Person, or any sale of all or substantially all of GameSquare’s assets to another Person; or

 

(3) of the voluntary or involuntary dissolution, liquidation, or winding-up of GameSquare;

 

then, and in each such case, GameSquare shall send or cause to be sent to the Holder at least 5 Business Days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent, or other right or action, and a description of such dividend, distribution, or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of GameSquare shall close or a record shall be taken with respect to which holders of record of Common Stock shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, and the amount per share and character of such exchange applicable to this Note and the Interest Shares.

 

 

(d) Default Rate. The GameSquare Parties shall pay interest (after as well as before entry of judgment thereon) on the outstanding Principal amount of this Note and all other Secured Obligations (including any past due interest) then outstanding at an interest rate per annum at all times equal to 10.00% (the “Default Rate”) automatically upon the occurrence of any Event of Default to the fullest extent permitted by applicable law. All such interest accruing under this Section 2(c) upon and following the occurrence of an Event of Default shall be due and payable in cash on demand by the Holder. The imposition of the Default Rate is in addition to, and not in lieu of, Holder’s exercise of any rights and remedies hereunder or under applicable law, and any fees and expenses of any agents or attorneys which the Holder may employ. In addition, the Default Rate reflects the increased credit risk to the Holder of carrying an obligation that is in default. Each of the GameSquare Parties agrees that the imposition of the Default Rate is a reasonable forecast of just compensation for anticipated and actual harm incurred by the Holder, and that the actual harm incurred by the Holder cannot be estimated with certainty and without difficulty.

 

(e) Exchange Regulations. GameSquare shall not issue any shares of Common Stock upon the conversion of this Note if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise or conversion or otherwise pursuant to the terms of the Note without breaching the Company’s obligations under the rules or regulations of the Primary Market (the number of shares which may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply in the event that the GameSquare (A) obtains the approval of its stockholders as required by the applicable rules of the Primary Market for issuances of shares of Common Stock in excess of the Exchange Cap or (B) obtains a written opinion from outside counsel to GameSquare that such approval is not required, which opinion shall be reasonably satisfactory to the Holder. Until such approval or such written opinion is obtained, no Holder shall be issued in the aggregate, upon conversion or exercise (as the case may be) of the Note or otherwise pursuant to the terms of the Note, shares of Common Stock in an amount greater than the Exchange Cap as of the Issuance Date.

 

3. CONVERSION; EXCHANGE.

 

(a) Optional Conversion or Exchange. If the Note remains outstanding (x) on or after December 31, 2025, (y) upon the occurrence of an Event of Default, or (z) upon the receipt of a Change in Control Notice, the Holder may, at any time thereafter prior to the Election Deadline, elect by written notice to the GameSquare Companies to:

 

(i) convert the Note into Common Stock, in which case the Note shall automatically be converted on the Conversion Date into an amount of shares of Common Stock equal to the Conversion Amount as of the Conversion Date divided by the Conversion Price; or

 

(ii) exchange the Note for the FaZe Media Shares, in which case the Note shall automatically be exchanged on the Conversion Date in accordance with Section 3(c).

 

As a result of a conversion or exchange pursuant to this Section 3(a), the outstanding Principal amount of this Note, and all accrued but unpaid interest thereon, shall be deemed paid in full.

 

(b) Notice of Election to Convert or Exchange. At any time after December 31, 2025, or upon the occurrence of an Event of Default or prospective consummation of a Change of Control, and prior to 5:00 p.m. on the date that is three Trading Days prior to the Maturity Date (the “Election Deadline”), the Holder may, by written notice to the GameSquare Parties, elect that, on the date specified in such notice (which must be prior to the Maturity Date) or the date of the consummation of a Change of Control (as applicable, the “Conversion Date”), (i) the Note be converted into shares of Common Stock, in which case the Note shall automatically be converted to Common Stock on the Conversion Date pursuant to Section 3(a)(i), or (ii) exchanged for the FaZe Media Shares, in which case the Note shall automatically be exchanged for the FaZe Media Shares (and any Additional FaZe Media Property) on the Conversion Date pursuant to Section 3(a)(ii) and Section 3(c).

 

 

(c) FaZe Media Shares Exchange. If the Holder has made an election in accordance with Section 3(a)(ii), then, on the Conversion Date, the Holder shall surrender this Note to GameSquare (on behalf of the GameSquare Parties) and, in exchange:

 

(i) each of the GameSquare Parties shall transfer, and shall be deemed to have transferred, to the Holder all of its right, title and interest in and to (A) the FaZe Media Shares and (B) all Additional FaZe Media Property received by, or on behalf or for the benefit of, any GameSquare Party after the Issuance Date, in each case, free and clear of any and all Liens other than the A-1 Call Right (as defined in the Game-Banks Purchase Agreement) (the “FaZe Media Transfer”); provided that, for the avoidance of doubt, no other rights or obligations of GameSquare SPV under the Game-Banks Purchase Agreement shall be assigned or transferred to the Holder;

 

(ii) each of the GameSquare Parties shall, and shall cause its Subsidiaries (if applicable) to, take, or cause to be taken, all appropriate actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law or as requested by the Holder to consummate and make effective the FaZe Media Transfer, including executing and delivering such further documents and instruments and obtaining from governmental authorities and other Persons all consents, approvals, authorizations, qualifications and orders as are necessary for the consummation thereof, including, without limitation, (A) identifying on its books and records the FaZe Media Transfer, (B) using commercially reasonable efforts to cause the FaZe Media Shares and any Additional FaZe Media Property to be registered in the name of the Holder or its designee, including by instructing FaZe Media or the applicable issuer of any other Equity Interests to register the FaZe Media Transfer on its books and records, by book-entry, on Carta, or otherwise, (C) conveying to the Holder all proceeds, cash, securities, dividends, instruments or other distributions and any other right or property evidencing, constituting or otherwise comprising the FaZe Media Shares and/or any Additional FaZe Media Property received by any GameSquare Party after the Issuance Date, (D) executing and/or delivering any instruments, and (E) executing and delivering any instruments or documents necessary to release any and all Liens, if any, on the FaZe Media Shares or any Additional FaZe Media Property so transferred, other than the A-1 Call Right (as defined in the Game-Banks Purchase Agreement);

 

(iii) the Holder may exercise any and all rights privileges or options pertaining to the FaZe Media Shares or any Additional FaZe Media Property in its possession as the absolute owner thereof; and

 

(iv) GameSquare and FaZe Media shall amend and restate the License Agreement upon the terms and in the form set forth in Exhibit A hereto.

 

(d) Fractional Securities. GameSquare shall not issue any fraction of a share of Common Stock upon any conversion pursuant to Section 3(a)(i). All calculations under this Section 3 shall be rounded to the nearest $0.0001. If the issuance pursuant to Section 3(a)(i) would result in the issuance of a fraction of a share of Common Stock, GameSquare shall round such fraction of a share of Common Stock up to the nearest whole share.

 

4. EVENTS OF DEFAULT.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it 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) shall have occurred:

 

(i) any representation, warranty or statement made or furnished by or on behalf of any GameSquare Party in or in connection with any Transaction Document shall be false, incorrect, incomplete or misleading in any material respect on the date made or furnished; or

 

 

(ii) default in the payment of Principal of the Note or accrued interest thereon when due and the GameSquare Parties’ failure to cure such default within ten (10) days of written notice thereof; or

 

(iii) (A) default in the issuance of the Conversion Shares pursuant to Section 3(a)(i) or the delivery of the FaZe Media Shares pursuant to Section 3(a)(ii), as applicable, at the Conversion Date, (B) any GameSquare Party shall default in the performance of or compliance with any term contained in Section 5 or Section 6 of this Note, or (C) any GameSquare Party shall default in the performance of or compliance with any other term (not otherwise specified in this Section 4(a)) or any of the other Transaction Documents and such failure shall remain unremedied for ten (10) days after the earlier of the date an officer of such GameSquare Party has knowledge of such failure and the date of written notice of such default shall have been given by the Holder to such GameSquare Party; or

 

(iv) any liquidation, dissolution, or winding up of either of the GameSquare Parties, whether voluntary or involuntary; or

 

(v) the institution by either of the GameSquare Parties of proceedings to be adjudicated as bankrupt or insolvent, or the consent by either of the GameSquare Parties to institution of bankruptcy or insolvency proceedings against such GameSquare Party under any federal or state law, or the consent by either of the GameSquare Parties to or acquiescence in the filing of any petition relating thereto, or the appointment of a receiver, liquidator, assignee, trustee or other similar official of a GameSquare Party, or of any substantial part of its property, or the making by either of the GameSquare Parties of an assignment, for the benefit of creditors, or the admission by either of the GameSquare Parties in writing of its inability to pay its debts generally as such debts become due; or

 

(vi) commencement of proceedings against either of the GameSquare Parties seeking any bankruptcy, insolvency, liquidation, dissolution or similar relief under any present or future statute, law or regulations which proceedings shall not have been dismissed or stayed within sixty (60) days of commencement thereof, or the setting aside of any such stay of any such proceedings, or the appointment without the consent or acquiescence of the equity holders of either of the GameSquare Parties of any trustee, receiver or liquidator of either of the GameSquare Parties or of all or any substantial portion of the properties of either of the GameSquare Parties which appointment shall not have been vacated within sixty (60) days thereof; or

 

(vii) at any time after the execution and delivery thereof, (A) the grants of Collateral made in the Security Agreement shall, at any time, cease to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by any GameSquare Party, (B) any Transaction Document shall cease to be in full force and effect or shall be declared null and void, or the Holder shall not have or shall cease to have a valid and perfected Lien (with the priority set forth in this Note) in any Collateral purported to be covered thereby, in each case for any reason other than the failure of the Holder to take any action within its control, or (C) any GameSquare Party shall contest the validity or enforceability of any Transaction Document in writing or deny in writing that it has any further liability under any Transaction Document.

 

 

(b) Upon the occurrence of any Event of Default, all Secured Obligations then outstanding shall immediately and automatically bear interest at the Default Rate in accordance with Section 2(c), and, at the option and upon the declaration of the Holder and upon written notice to the GameSquare Parties (which election and notice shall not be required in the case of an Event of Default under Section 4(a)(v) and Section 4(a)(vi)), the Holder may (i) declare the Principal amount of this Note then outstanding to be accelerated and due and payable, whereupon all of the Principal amount of this Note, all accrued but unpaid interest thereon, and all fees and all other amounts payable under this Note and the other Transaction Documents with respect thereto, and all other Secured Obligations outstanding under this Note and the other Transaction Documents shall accelerate and become due and payable immediately in cash in accordance with Section 1(c) and Section 1(d), all without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the GameSquare Parties, (ii) make an election to convert or exchange this Note in accordance with Section 3, and (iii) exercise any and all of its other rights and remedies under applicable law, hereunder and under the other Transaction Documents; provided, however, that upon the occurrence of any Event of Default described in Section 4(a)(v) and Section 4(a)(vi), (x) the entire outstanding Principal balance of this Note, together with all accrued and unpaid interest thereon, all fees and other amounts payable under this Note and the other Transaction Documents and all other Secured Obligations shall immediately and automatically become due and payable in cash and bear interest at the Default Rate in accordance with Section 2(c), all without notice and without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the GameSquare Parties.

 

5. SECURITY

 

(a) Grant of Security Interest. To secure the payment and performance in full of all of the indebtedness, obligations, liabilities and undertakings of the GameSquare Parties to the Holder, of any kind or description, individually or collectively, whether direct or indirect, joint or several, absolute or contingent, due or to become due, voluntary or involuntary, now existing or hereafter arising (including all interest, fees (including attorneys’ fees), costs and expenses that the GameSquare Parties are hereby or otherwise required to pay and perform pursuant to this Note, the Purchase Agreement, the other Transaction Documents, by law or otherwise accruing before and after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to any GameSquare Party, whether or not a claim for post-petition interest, fees or expenses is allowed in such proceeding), irrespective of whether for the payment of money, under or in respect of this Note, the Purchase Agreement or the other Transaction Documents, including instruments or agreements executed and delivered pursuant hereto or thereto or in connection herewith or therewith (collectively, the “Secured Obligations”), each of the GameSquare Parties hereby pledges to the Holder, and hereby collaterally assigns, mortgages, transfers, hypothecates and grants to the Holder a continuing security interest in, all of such GameSquare Party’s right, title and interest in, to and under all of the following property and assets, wherever located, whether such GameSquare Party now has or hereafter acquires an ownership or other interest or power to transfer (all of which are collectively referred to as the “Collateral”):

 

(i) the Pledged Interests;

 

(ii) all other property that may be delivered to and held by the Holder pursuant to the terms of this Section 5;

 

(iii) all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities and other property referred to in clauses (i) and (ii) above;

 

(iv) all rights and privileges of such GameSquare Party with respect to the securities and other property referred to in clauses (i), (ii) and (iii) above; and

 

 

(v) all Proceeds of any of the foregoing and all books and records relating thereto.

 

TO HAVE AND TO HOLD the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Holder and his successors and assigns, forever, subject, however, to the terms, covenants and conditions hereinafter set forth.

 

(b) Priority of Security Interest. The GameSquare Parties represent and warrant to the Holder and covenant that the security interest granted herein is, and until the cancellation of this Note shall at all times continue to be, a first priority perfected security interest in the Collateral.

 

(c) Perfection of Security Interest and Further Assurances.

 

(i) Each GameSquare Party hereby agrees that (A) such GameSquare Party shall deliver to the Holder (or its representative) all security certificates evidencing the FaZe Media Shares (if any) held by such GameSquare Party as of the Issuance Date, and (B) if any GameSquare Party shall receive, by virtue of such GameSquare Party being or having been an owner of any Pledged Interests or any other Collateral consisting of any (1) Equity Interest certificate (including, without limitation, any certificate representing an Equity Interest dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), (2) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, or (3) dividends, distributions, cash, Instruments, Investment Property and other Proceeds or property, including in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, such GameSquare Party shall receive such Equity Interest certificate, Instrument, option, right, payment or distribution in trust for the benefit of the Holder, shall segregate it from such GameSquare Party’s other property and shall promptly (and in any event within fifteen (15) Business Days) deliver the same to the Holder (or his representative), in the exact form received, to be held as Collateral, in each case, together with (I) duly executed instruments of assignment or transfer in blank, and (II) with respect to the FaZe Media Shares and any other Pledged Interests constituting Equity Interests, a duly executed irrevocable proxy coupled with an interest, in substantially the form of Exhibit B hereto, and a duly acknowledged Issuer Acknowledgment from each Pledged Issuer, substantially in the form of Exhibit C hereto, or otherwise in form and substance satisfactory to the Holder, all in form and substance reasonably satisfactory to the Holder. If any Collateral consist of Uncertificated Securities, unless the immediately following sentence is applicable thereto, the applicable GameSquare Party shall cause (x) the Holder (or its designated custodian or nominee) to become the registered holder thereof, or (y) each issuer of such securities to agree that it will comply with instructions originated by the Holder with respect to such securities without further consent by such GameSquare Party. If any Collateral consists of security entitlements, such GameSquare Party shall (x) transfer such security entitlements to the Holder (or its custodian, nominee or other designee), or (y) cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Holder without further consent by such GameSquare Party.

 

(ii) To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Holder may deem necessary or advisable to accomplish the purposes of this Security Agreement, each GameSquare Party hereby (A) authorizes the Holder (or its designee) at any time, and from time to time, to file one or more financing or continuation statements and amendments thereto, relating to the Collateral (including, without limitation, any such financing statements that (1) describe the Collateral, and (2) contain any other information required by Part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment), and (B) ratifies such authorization to the extent that the Holder has filed any such financing statements, continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by applicable law.

 

 

(iii) At any time and from time to time, at the expense of the GameSquare Parties, the GameSquare Parties will promptly execute and deliver all further instruments and documents, obtain such agreements from third parties and take all further action that may be necessary or desirable, or that the Holder may reasonably request, in order to create or maintain the validity, perfection or priority of, and protect any security interest, granted or purported to be granted hereby, or to enable the Holder to exercise and enforce its rights and remedies hereunder or under any other agreement with respect to any Collateral. The GameSquare Parties hereby authorize the Holder to file or record any document necessary to perfect, continue, amend or terminate its security interest in the Collateral, including any financing statements (including amendments) authorized to be filed under the UCC or the Uniform Commercial Code of any other jurisdiction, without signature of the GameSquare Parties where permitted by law, including the filing of a financing statement describing the Collateral as the FaZe Media Shares, including all related Stock Rights and all governance, management, control, voting and approval rights and interests and other similar rights and interests, or words of similar effect. The GameSquare Parties also hereby ratify any previously filed documents or recordings regarding the Collateral, including any and all previously filed financing statements.

 

(d) Voting Rights and Distributions.

 

(i) Unless an Event of Default has occurred and is continuing, each GameSquare Party will be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof for any purpose not prohibited by the terms of this Note or the other Transaction Documents. Upon the occurrence and during the continuation of an Event of Default: (i) all rights of each GameSquare Party to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to the immediately preceding sentence shall cease, and all such rights shall thereupon become vested in the Holder, which shall thereupon have the sole right to exercise such voting and other consensual rights; and (ii) without limiting the generality of the foregoing, the Holder may at its option exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Shares or any other Collateral as if it were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Shares or any other Collateral upon the merger, consolidation, reorganization, recapitalization or other adjustment of any Pledged Shares or other Collateral, or upon the exercise by any Pledged Shares or other Collateral of any right, privilege or option pertaining to any Pledged Shares or other Collateral, and, in connection therewith, to deposit and deliver any and all of the Pledged Shares or other Collateral with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as the Holder may determine. In order to permit the Holder to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto upon the occurrence and during the continuation of an Event of Default, each GameSquare Party will promptly execute and deliver (or cause to be executed and delivered) to the Holder all such proxies and other instruments as the Holder may from time to time reasonably request.

 

(ii) If, at any time prior to the payment in full of this Note, any GameSquare Party shall receive any dividend, interest or other distribution paid in respect of the FaZe Media Shares or any other Pledged Interest, whether resulting from a subdivision, combination or reclassification of the outstanding Pledged Interests or other Collateral, or received in exchange therefor, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which the issuer thereof may be a party or otherwise, such dividend, interest or other distribution shall be and become part of the Collateral, and, if received by a GameSquare Party, shall be received in trust for the benefit of the Holder, shall be segregated from other funds and property of such GameSquare Party, and shall be forthwith paid over to the Holder in accordance with the terms of Section 5(c)(i) as Collateral in the exact form received with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Holder as Collateral and as further collateral security for the Secured Obligations. In order to permit the Holder to receive all dividends and other distributions which it may be entitled to receive hereunder, each GameSquare Party will promptly execute and deliver (or cause to be executed and delivered) to the Holder all such proxies, dividend payment orders, and other instruments as the Holder may from time to time reasonably request.

 

 

(e) Holder Appointed Attorney-in-Fact. Each GameSquare Party hereby appoints the Holder its attorney-in-fact and proxy, with full power and authority in the place and stead of such GameSquare Party and in the name of such GameSquare Party, or otherwise, from time to time in the Holder’s discretion to take any action and to execute any instrument consistent with the terms of this Security Agreement and the other Transaction Documents that the Holder may deem necessary or advisable to accomplish the purposes hereof (but the Holder shall not be obligated to and shall have no liability to such GameSquare Party or any third party for failure to so do or take action), including, without limitation, (i) to receive, indorse and collect all instruments made payable to such GameSquare Party representing any dividend, interest payment or other distribution in respect of the FaZe Media Shares or other Collateral and to give full discharge for the same, and (ii) to vote the FaZe Media Shares and any and all other Collateral constituting Investment Property owned or held by such GameSquare Party or standing in its name and to do all things which such GameSquare Party might do if present and acting himself, including such rights set forth in Section 5(d) hereof or elsewhere herein (including, without limitation, rights of sale). The proxy and powers granted by such GameSquare Party pursuant to this Section 5(e) are IRREVOCABLE and coupled with an interest (including but not limited to this Note and the Purchase Agreement) and are given to secure the Secured Obligations. Notwithstanding any provision of this Section 5(e) to the contrary, the Holder agrees that it will not exercise any rights under the power of attorney or the irrevocable proxy provided for in this Section 5(e) unless an Event of Default has occurred and is continuing. Each GameSquare Party hereby ratifies all that any such attorney lawfully (in accordance with applicable law) does or causes to be done by virtue of that authority.

 

(f) Holder may Perform. Upon prior written notice to the applicable GameSquare Party in accordance with Section 8.5 of the Purchase Agreement, if the GameSquare Party fails to perform or comply with any of its agreements contained in this Security Agreement or any other Transaction Document, the Holder, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement, at the sole cost and expense of the applicable GameSquare Party.

 

(g) Irrevocable. All powers, proxies, authorizations, and agencies contained in this Security Agreement are coupled with an interest and are given to secure the Secured Obligations and are irrevocable until the Note is indefeasibly paid in full and terminated and the security interests created hereby are released.

 

 

(h) Remedies Upon an Event of Default.

 

(i) Generally. If an Event of Default has occurred and is continuing, the Holder may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the UCC or other applicable law (whether or not the UCC applies to the affected Collateral), and also may (i) take control of the Collateral, including, without limitation, transfer into Holder’s name or into the name of its nominee or nominees (to the extent the Holder has not theretofore done so) and thereafter receive, for the benefit of the Holder, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, and (ii) without notice (subject to the immediately succeeding sentence) Dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Holder’s offices, at any exchange or broker’s board or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Holder may reasonably deem commercially reasonable. The Holder may be the purchaser of any or all of the Collateral at any such sale and the Holder will be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Holder at such sale. Each purchaser at any such sale will hold the property sold absolutely free from any claim or right on the part of each GameSquare Party, and each GameSquare Party hereby waives (to the extent permitted by law) all rights of redemption, stay, and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each GameSquare Party agrees that, to the extent notice of Disposition of the Collateral shall be required by law, at least ten (10) days’ prior notice to such GameSquare Party of the time and place of any public sale or the time after which any private Disposition of the Collateral is to be made shall constitute reasonable notification. The Holder shall not be obligated to make any Disposition of Collateral regardless of notice of sale having been given. The Holder may adjourn any public or private Disposition from time to time by announcement prior to or at the time and place fixed therefor, and such Disposition may, without further notice, be made at the time and place to which it was so adjourned. Each GameSquare Party hereby waives any claims against the Holder arising by reason of the fact that the price at which the Collateral may have been sold at a private Disposition was less than the price which might have been obtained at a public Disposition or was less than the aggregate amount of the obligations owing under this Note, even if Holder accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that such GameSquare Party may have to require that all or any part of the Collateral be marshaled upon any Disposition (public or private) thereof. The Holder shall not be required to marshal any collateral security for, or other assurances of payment of, the outstanding Secured Obligations, and all of Holder’s rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising.

 

(ii) Pledged Interests. Each GameSquare Party recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Holder may be compelled, with respect to any sale of all or any part of the Collateral conducted without prior registration or qualification of such Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each GameSquare Party acknowledges that any such private placement may be at prices and on terms less favorable than those obtainable through a sale without such restrictions (including an offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, such GameSquare Party agrees that any such private placement will not be deemed, in and of itself, to be commercially unreasonable and that the Holder will have no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer of the Collateral to register it for a form of sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.

 

(iii) Cash; Deficiency. Any cash held by the Holder (or his agent or designee) as Collateral and all cash proceeds received by the Holder in respect of any Disposition of or collection from, or other realization upon, all or any part of the Collateral after the occurrence and during the continuance of an Event of Default shall be applied by the Holder against the Secured Obligations in accordance with the terms of this Note. Any surplus of such cash or cash proceeds held by the Holder and remaining after the date on which all of the Secured Obligations have been paid in full shall be paid over to the GameSquare Parties. In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Holder is legally entitled, the GameSquare Parties shall be jointly and severally liable for the deficiency.

 

 

(iv) Waivers. To the extent it may lawfully do so, each GameSquare Party absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Holder, any valuation, stay, appraisal, extension, moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise. Except as otherwise specifically provided herein, each GameSquare Party hereby waives presentment, demand, protest, any notice (to the maximum extent permitted by applicable law) of any kind or all other requirements as to the time, place and terms of sale in connection with this Agreement or any Collateral.

 

(v) Continuing Security Interest. This Security Agreement will create a continuing security interest in the Collateral and will (i) remain in full force and effect until the earlier of the payment in full in cash of the Secured Obligations, or conversion or exchange of the Note in accordance with Section 3, (ii) be binding upon each GameSquare Party and its successors and assigns, and (iii) inure to the benefit of the Holder and his successors, transferees, and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the provisions of this Note, each assignee of this Note will become vested with all the benefits in respect thereof granted to the Holder herein.

 

(i) Disposition of Collateral. Without the prior written consent of the Holder, no GameSquare Party shall, directly or indirectly, (i) grant, pledge, assign or otherwise provide a Lien on any of the Collateral (other than the Lien in favor of the Holder hereunder), (ii) provide any Person (other than the Holder), or allow any Person (other than the Holder) to obtain, “control” (within the meaning of the UCC) of any of the Collateral or (iii) convey, transfer, lease or otherwise Dispose of (whether in one transaction or in a series of transactions) any of the Collateral.

 

(j) Termination of Security Interest. Upon the indefeasible payment in full of the Secured Obligations in accordance with the terms of this Note, (i) all liens in the Collateral granted by the GameSquare Parties in favor of the Holder under, or pursuant to, this Note shall automatically be terminated and released without any further action by any person or entity and all rights therein shall revert to the GameSquare Parties and (ii) the Holder will, at the GameSquare Parties’ sole cost and expense, release its liens in the Collateral and execute and deliver to the GameSquare Parties such documents reasonably requested by the GameSquare Parties to evidence such release.

 

6. OTHER PROVISIONS.

 

(a) All calculations under this Section 6 shall be rounded to the nearest $0.0001 or whole share.

 

(b) So long as this Note remains outstanding, GameSquare shall have reserved from its duly authorized share capital, and shall have instructed its transfer agent to irrevocably reserve, the maximum number of shares of Common Stock issuable upon conversion of this Note (assuming for purposes hereof that (x) this Note is convertible at the Conversion Price as of the date of determination, (y) any such conversion shall not take into account any limitations on the conversion of the Note set forth herein or therein (the “Required Reserve Amount”)), provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 6(b) be reduced other than pursuant to the conversion of this Note in accordance with their terms, and/or cancellation, or reverse stock split. If at any time while this Note remains outstanding, GameSquare does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy the obligation to reserve for issuance the Required Reserve Amount, GameSquare will promptly take all corporate action necessary to increase its authorized share capital necessary to meet GameSquare’s obligations pursuant to this Note. GameSquare covenants that, upon issuance in accordance with conversion of this Note in accordance with its terms, the shares of Common Stock, when issued, will be validly issued, fully paid and nonassessable.

 

 

(c) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 4 herein for the GameSquare Parties’ failure to deliver certificates or issue book entries representing shares of Common Stock upon conversion or delivering the FaZe Media Shares within the period specified herein and such Holder 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, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(d) Legal Opinions. GameSquare is obligated to cause its legal counsel to deliver legal opinions to GameSquare’s transfer agent in connection with any legend removal upon the expiration of any holding period or other requirement for which the Underlying Shares may bear legends restricting the transfer thereof. To the extent that a legal opinion is not provided (either timely or at all), then, in addition to being an Event of Default hereunder, the GameSquare Parties agree to reimburse the Holder for all reasonable costs incurred by the Holder in connection with any legal opinions paid for by the Holder in connection with sale or transfer of Underlying Shares. The Holder shall notify the GameSquare Parties of any such costs and expenses it incurs that are referred to in this Section from time to time and all amounts owed hereunder shall be paid by the GameSquare Parties with reasonable promptness.

 

(e) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If GameSquare, at any time while this Note is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of GameSquare, then the Conversion 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 before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 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.

 

(f) Whenever the Conversion Price is adjusted pursuant to Section 6(e) hereof, the GameSquare Parties shall promptly provide the Holder with a written notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

 

(g) In case of any (1) merger or consolidation of the GameSquare Parties or any Subsidiary of the GameSquare Parties with or into another Person, or (2) sale by the GameSquare Parties or any Subsidiary of the GameSquare Parties of all or substantially all of the assets of the GameSquare Parties in one or a series of related transactions (a “Change in Control”), the Holder shall have the right to (A) subject to the consummation of such Change in Control, elect to convert this Note into the Conversion Shares or be exchanged for the FaZe Media Shares, as applicable, in accordance with Section 3, immediately prior to the closing of the Change in Control as if the closing of such Change in Control is the Conversion/Exchange Time, (B) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Note with a Principal amount equal to the aggregate Principal amount of this Note then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Note shall have terms identical (including with respect to conversion) to the terms of this Note, and shall be entitled to all of the rights and privileges of the Holder of this Note set forth herein and the agreements pursuant to which this Note was issued or (C) require this Note be prepaid in cash contemporaneously with the closing of the Change in Control in accordance with Section 1(b)(ii) (a “Change in Control Payment Election”). In the case of clause (B), the conversion price applicable for the newly issued shares of capital stock or convertible debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The GameSquare Parties shall notify the Holder at least 10 Business Days prior to the anticipated closing date of a Change in Control of the material terms and conditions of such Change in Control or such earlier date as required to permit the Holder to elect to convert, exchange or receive payment of this Note in connection with such Change in Control in accordance with this paragraph (the “Change in Control Notice”). Provided that the GameSquare Companies provide the Change in Control Notice, the Holder shall notify the GameSquare Companies of its election to convert or exchange the Note or to receive payment in cash not less than five (5) days prior to the consummation of the Change in Control. The terms of any such Change in Control shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

(h) The Holder shall not be required to deliver the original Note in order to effect a conversion or exchange hereunder.

 

7. REISSUANCE OF THIS NOTE.

 

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to GameSquare, whereupon the GameSquare Parties will forthwith issue and deliver upon the order of the Holder a new Note, registered in the name of the registered transferee or assignee, representing the outstanding Principal being transferred by the Holder (along with any accrued and unpaid interest thereof).

 

(b) Lost, Stolen or Mutilated Note. Upon receipt by GameSquare of evidence reasonably satisfactory to GameSquare of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to GameSquare in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the GameSquare Parties shall execute and deliver to the Holder a new Note representing the outstanding Principal.

 

(c) Issuance of New Notes. Whenever the GameSquare Parties are required to issue a new Note pursuant to the terms hereof, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding, (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest from the Issuance Date.

 

 

8. NOTICES. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at the following addresses (or at such other addresses as shall be specified by notice given in accordance with this Section 8):

 

If to the GameSquare Parties:

 

GameSquare Holdings, Inc.

6775 Cowboys Way, Suite 1335

Frisco, TX 75034

Attention: Justin Kenna, CEO

Email: justin@gamesquare.com

 

with a copy (which shall not constitute notice or such other communication) to:

 

BakerHostetler LLP

1900 Avenue of the Starts, Suite 2700

Los Angeles, CA 90067

Attention: Alan A. Lanis, Jr.

Email: jrlanis@bakerlaw.com

 

If to Holder:

 

Gigamoon Media, LLC

45 Leicester Street

Brookline, MA 02445

Attention: Matthew Kalish, Manager

Email: mkalish1029@gmail.com

 

with a copy (which shall not constitute notice or such other communication) to:

 

Pillsbury Winthrop Shaw Pittman LLP

31 W 52nd Street

New York, NY 10019

Attention: Stephen B. Amdur

Email: stephen.amdur@pillsburylaw.com

 

9. NON-CIRCUMVENTION. Except as expressly provided herein, no provision of this Note shall alter or impair the obligations of the GameSquare Parties, which are absolute and unconditional, to pay the Principal of, interest and other charges (if any) on, this Note at the time, place, and rate, and in the currency, herein prescribed. This Note is a direct obligation of the GameSquare Parties. As long as this Note is outstanding, the GameSquare Parties shall not and shall cause their Subsidiaries not to, without the consent of the Holder, (i) amend their certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its shares of Common Stock or other equity securities; (iii) enter into any agreement with respect to any of the foregoing, or (iv) enter into any agreement, arrangement or transaction in or of which the terms thereof would materially restrict, materially delay, conflict with or materially impair the ability of the GameSquare Parties to perform its obligations under the this Note, including, without limitation, the obligation of the GameSquare Parties to make cash payments hereunder.

 

 

10. NO OTHER RIGHTS. This Note shall not entitle the Holder to any of the rights of a stockholder of the GameSquare Parties, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the GameSquare Parties, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

11. CHOICE OF LAW; VENUE; WAIVER OF JURY TRIAL

 

(a) Governing Law. This Note and the rights and obligations of the parties hereunder shall, in all respects, be governed by, and construed in accordance with, the laws (excluding the principles of conflict of laws) of the State of Delaware (the “Governing Jurisdiction”), including all matters of construction, validity and performance.

 

(b) Jurisdiction; Venue; Service.

 

(i) The GameSquare Parties hereby irrevocably consent to the non-exclusive personal jurisdiction of the state courts of the Governing Jurisdiction and, if a basis for federal jurisdiction exists, the non-exclusive personal jurisdiction of any United States District Court for the Governing Jurisdiction.

 

(ii) The GameSquare Parties agree that venue shall be proper in any court of the Governing Jurisdiction selected by the Holder or, if a basis for federal jurisdiction exists, in any United States District Court in the Governing Jurisdiction. The GameSquare Parties waive any right to object to the maintenance of any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any of the state or federal courts of the Governing Jurisdiction on the basis of improper venue or inconvenience of forum.

 

(iii) Any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or tort or otherwise, brought by the GameSquare Parties against the Holder arising out of or based upon this Note or any matter relating to this Note, or any other Transaction Document, or any contemplated transaction, shall be brought in a court only in the Governing Jurisdiction. The GameSquare Parties shall not file any counterclaim against the Holder in any suit, claim, action, litigation or proceeding brought by the Holder against the GameSquare Parties in a jurisdiction outside of the Governing Jurisdiction unless under the rules of the court in which the Holder brought such suit, claim, action, litigation or proceeding the counterclaim is mandatory, and not permissive, and would be considered waived unless filed as a counterclaim in the suit, claim, action, litigation or proceeding instituted by the Holder against the GameSquare Parties. The GameSquare Parties agree that any forum outside the Governing Jurisdiction is an inconvenient forum and that any suit, claim, action, litigation or proceeding brought by the GameSquare Parties against the Holder in any court outside the Governing Jurisdiction should be dismissed or transferred to a court located in the Governing Jurisdiction. Furthermore, the GameSquare Parties irrevocably and unconditionally agree that they will not bring or commence any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Holder arising out of or based upon this Note or any matter relating to this Note, or any other Transaction Document, or any contemplated transaction, in any forum other than the courts of the Governing Jurisdiction sitting in New Castle County, and the United States District Court of the Governing Jurisdiction, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such suit, claim, action, litigation or proceeding may be heard and determined in such state court or, to the fullest extent permitted by applicable law, in such federal court. The GameSquare Parties and the Holder agree that a final judgment in any such suit, claim, action, litigation 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.

 

 

(iv) The GameSquare Parties and the Holder irrevocably consent to the service of process out of any of the aforementioned courts in any such suit, claim, action, litigation or proceeding by the mailing of copies thereof by registered or certified mail postage prepaid, to it at the address provided for notices in this Note, such service to become effective thirty (30) days after the date of mailing.

 

(v) Nothing herein shall affect the right of the Holder to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the GameSquare Parties or any other Person in the Governing Jurisdiction or in any other jurisdiction.

 

(c) THE PARTIES MUTUALLY WAIVE ALL RIGHT TO TRIAL BY JURY OF ALL CLAIMS OF ANY KIND ARISING OUT OF OR BASED UPON THIS NOTE OR ANY MATTER RELATING TO THIS NOTE, OR ANY OTHER TRANSACTION DOCUMENT, OR ANY CONTEMPLATED TRANSACTION. THE PARTIES ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT AND THAT THE PARTIES EACH MAKE THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION WITH COUNSEL OF THEIR RESPECTIVE CHOICE. THE PARTIES AGREE THAT ALL SUCH CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING JURISDICTION, WITHOUT A JURY.

 

12. WAIVERS. Any waiver by the Holder of a breach of any provision of this Note 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 Note. The failure of the Holder to insist upon strict adherence to any term of this Note 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 Note. Any waiver must be in writing.

 

13. SEVERABILITY. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note 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 shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The GameSquare Parties covenant (to the extent that it may lawfully do so) that they 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 GameSquare Parties from paying all or any portion of the Principal of or interest on this Note 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 GameSquare Parties (to the extent it may lawfully do so) hereby expressly waive all benefits or advantage of any such law, and covenant that they will not, by resort to any such law, hinder, delay or impeded 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.

 

 

14. JOINT AND SEVERAL LIABILITY. The entire Principal amount of this Note shall be deemed to be jointly funded to and received by each of the GameSquare Parties. Each of the GameSquare Parties shall be jointly and severally liable under this Note for all Secured Obligations, regardless of the manner or amount in which proceeds hereof are used, allocated, shared or disbursed by or among the GameSquare Parties, or the manner in which the Holder accounts for its extension of credit hereunder on its books and records. The Secured Obligations of each of the GameSquare Parties under this Agreement shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity or enforceability, avoidance, or subordination of the Secured Obligations of any GameSquare Party or of any promissory note or other document evidencing all or any part of the Secured Obligations of any GameSquare Parties, (ii) the absence of any attempt to collect the Secured Obligations from any GameSquare Party, or any other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance, or granting of any indulgence by the Holder with respect to any provision of any instrument evidencing the Secured Obligations of any GameSquare Party, or any part thereof, or any other agreement executed as of the Issuance Date or thereafter executed by any GameSquare Party and delivered to the Holder, (iv) the failure by the Holder to take any steps to perfect and maintain its security interest in, or to preserve its rights to, the Collateral of any GameSquare Party, (v) the Holder’s election, in any proceeding instituted under the U.S. Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy Code, (vi) any borrowing or grant of a security interest by any GameSquare Party, as debtor-in-possession under Section 364 of the U.S. Bankruptcy Code, (vii) the disallowance of all or any portion of the Holder’s claim(s) for the repayment of the Secured Obligations of any GameSquare Party under Section 502 of the U.S. Bankruptcy Code, (viii) any other bankruptcy, insolvency, restructuring or reorganization proceedings under all applicable debtor relief laws or (ix) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any GameSquare Party (in each case, other than the defense of repayment in full of the Secured Obligations). With respect to any Secured Obligations of any GameSquare Party arising as a result of their joint and several liability hereunder with respect to any extensions of credit made to one or the other hereunder, each of the GameSquare Parties waives, until the Secured Obligations shall have been paid in full any right to enforce any right of subrogation or any remedy which the Holder had as of the Issuance Date or may have thereafter against one or the other, any endorser or any guarantor of all or any part of the Secured Obligations, and any benefit of, and any right to participate in, any security or collateral given to the Holder to secure payment of the Secured Obligations or any other liability of the other GameSquare Party to the Holder. Upon any Event of Default, the Holder may proceed directly and at once, without notice, against any of the GameSquare Parties to collect and recover the full amount, or any portion of the Secured Obligations, without first proceeding against one or the other or any other Person, or against any security or Collateral for the Secured Obligations. Each of the GameSquare Parties consents and agrees that the Holder shall be under no obligation to marshal any assets in favor of any GameSquare Party or against or in payment of any or all of the Secured Obligations.

 

15. CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

 

(a) “Additional FaZe Media Property” means (i) any securities, cash, dividends, options, Instruments, distributions, Investment Property, Financial Assets, Securities, Equity Interests, stock options, Commodity Contracts, notes, debentures, bonds, promissory notes or other evidences of indebtedness and all other Proceeds or property (including, without limitation, any stock dividend and any distribution in connection with a stock split), and any other right or property, contractual or otherwise (including all voting rights and all rights as and to become a member or partner thereof (if applicable)), in each case, which the GameSquare Parties shall from time to time receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for, or in exchange for the FaZe Media Shares, and any securities or other ownership interests, any right to receive securities or other ownership interests and any right to receive earnings, money, distributions or other property in respect of the FaZe Media Shares in which the GameSquare Parties now have or hereafter acquire any right, issued by an issuer of such securities or such other ownership interests, including all securities or other ownership interests convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any such securities or other ownership interests, the certificates or other instruments representing any of the foregoing and any interest of the GameSquare Parties in the entries on the books of any securities intermediary or commodity intermediary pertaining thereto, and (ii) in the event of any consolidation or merger involving FaZe Media or other issuer of any Equity Interests described in the foregoing clause (i) and in which FaZe Media or such issuer is not the surviving entity, all Equity Interests of the successor entity formed by or resulting from such consolidation or merger.

 

 

(b) “Amount Due” has the meaning ascribed thereto in Section 1(c).

 

(c) “Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

(d) “Change in Control” has the meaning ascribed thereto in Section 6(g).

 

(e) “Change in Control Notice” has the meaning ascribed thereto in Section 6(g).

 

(f) “Change in Control Payment Election” has the meaning ascribed thereto in Section 6(g).

 

(g) “Collateral” has the meaning ascribed thereto in Section 5(a).

 

(h) “Common Stock” means the common stock, par value $0.0001, of GameSquare.

 

(i) “Conversion Amount” means, as of any date of determination, the entire Principal amount of the Note then outstanding, together with any accrued unpaid interest thereon, and all other Secured Obligations then outstanding.

 

(j) “Conversion Date” has the meaning ascribed thereto in Section 3(b).

 

(k) “Conversion Price” means $2.50 per share or as may be adjusted from time to time for purposes of Section 2(b).

 

(l) “Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

 

(m) “Default Rate” has the meaning ascribed thereto in Section 2(c).

 

(n) “Disposition” means any transaction, or series of related transactions, pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers, leases, licenses (as licensor) or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person. “Dispose” shall have a meaning correlative thereto.

 

(o) “Election Deadline” has the meaning ascribed thereto in Section 3(b).

 

(p) “Equity Interests” means (i) all shares of capital stock (whether denominated as common stock or preferred stock), shares (of whatever class) in the capital of a company, equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting and (ii) all securities convertible into or exchangeable for any of the foregoing and all warrants, options or other rights to purchase, subscribe for or otherwise acquire any of the foregoing, whether or not presently convertible, exchangeable or exercisable.

 

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(r) “Excluded Issuance” has the meaning ascribed thereto in Section 2(c)(ii).

 

 

(s) “FaZe Media” means FaZe Media, Inc., a Delaware corporation.

 

(t) “FaZe Media Shares” means the 5,725,000 shares of Series A-1 Preferred Stock of FaZe Media held by GameSquare SPV as of the Issuance Date.

 

(u) “FaZe Media Transfer” has the meaning ascribed thereto in Section 3(c)(i).

 

(v) “Game-Banks Purchase Agreement” means that certain Secondary Preferred Stock Purchase Agreement, dated as of June 17, 2024, by and among GameSquare SPV, M40A3 LLC, Holder and FaZe Media.

 

(w) “Interest Payment Date” has the meaning ascribed thereto in Section 2(a).

 

(x) “Interest Shares” has the meaning ascribed thereto in Section 2(b).

 

(y) “License Agreement” means that certain Trademark and License Agreement, dated as of May 15, 2024, as amended, by and between FaZe Media and GameSquare.

 

(z) “Limited Proxy” means that certain Limited Proxy and Power of Attorney, dated as of June 17, 2024, by and between GameSquare SPV and M40A3 LLC.

 

(aa) “Maturity Date” means the earlier of (i) the Stated Maturity Date, and (ii) the acceleration of the Secured Obligations pursuant to Section 4(b).

 

(bb) “Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

(cc) “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

(dd) “Pledge Supplement” means a Pledge Supplement, substantially in the form attached hereto as Exhibit B.

 

(ee) “Pledged Interest” means (i) the FaZe Media Shares and all certificates (if any) representing the same and (ii) all Additional FaZe Media Property.

 

(ff) “Pledged Issuers” means, collectively, (i) FaZe Media, as the issuer of the FaZe Media Shares, and (ii) any other issuer of Equity Interests constituting Collateral.

 

(gg) “Pledged Shares” means the FaZe Media Shares and any other Collateral comprising Equity Interests.

 

(hh) “Primary Market” means any of The New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market, and any successor to any of the foregoing markets or exchanges.

 

(ii) “Proceeds” has the meaning assigned in Article 9 of the UCC and, in any event, shall also include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Holder or any GameSquare Party from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any GameSquare Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (iii) any and all Stock Rights and (iv) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

 

 

(jj) “Required Reserve Amount” has the meaning ascribed thereto in Section 6(b).

 

(kk) “Secured Obligations” has the meaning ascribed thereto in Section 5(a).

 

(ll) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(mm) “Security Agreement” means Section 5 of this Note and any defined term used therein (solely in respect of the use of such defined term in Section 5) and the provisions of Section 1(a), Section 8, Section 11, Section 12 and Section 13 (solely in respect of the interpretation of, or in relation to, Section 5).

 

(nn) “Stated Maturity Date” means November 13, 2029.

 

(oo) “Stock Rights” means any securities, dividends, instruments or other distributions and any other right or property which the GameSquare Parties shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for, or in exchange for any securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral and any securities or other ownership interests, any right to receive securities or other ownership interests and any right to receive earnings, money, distributions or other property in respect of the Collateral in which the GameSquare Parties now have or hereafter acquire any right, issued by an issuer of such securities or such other ownership interests, including all securities or other ownership interests convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any such securities or other ownership interests, the certificates or other instruments representing any of the foregoing and any interest of the GameSquare Parties in the entries on the books of any securities intermediary or commodity intermediary pertaining thereto.

 

(pp) “Subsidiary” means any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by GameSquare or one or more of the other Subsidiaries of GameSquare or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by GameSquare or one or more Subsidiaries of GameSquare or a combination thereof. For purposes hereof, GameSquare shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if GameSquare, directly or indirectly, shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner or such limited liability company, partnership, association, or other business entity.

 

(qq) “Trading Day” means a day on which the shares of Common Stock are quoted or traded on a Primary Market on which the Common Stock are then quoted or listed; provided, that in the event that the Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

 

(rr) “Transaction Document” means this Note, the Security Agreement, the Purchase Agreement and the Notes issued pursuant to the Purchase Agreement, and such other documents, instruments, certificates, supplements, amendments, exhibits and schedules required and/or attached pursuant to the Purchase 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.

 

(ss) “UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of Delaware; provided that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Holder’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of Delaware, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

 

(tt) “Underlying Shares” means the Common Stock issuable upon conversion of this Note or as payment of interest in accordance with the terms hereof.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the GameSquare Parties have caused this Convertible Promissory Note to be duly executed by a duly authorized officer as of the date set forth above.

 

	GAMESQUARE:
	GAMESQUARE HOLDINGS INC.
	By:
	Name:	Justin Kenna
	Title:	Chief Executive Officer

 

	GAMESQUARE SPV:
	FAZE MEDIA HOLDINGS, LLC
	By:
	Name:	Justin Kenna
	Title:	President

 

[Signature Page to Convertible Note]

 

 

Acknowledged and Agreed as of [__________], 2024:

 

HOLDER:
GIGAMOON MEDIA, LLC
By:
Name:
Title:

 

[Signature Page to Convertible Note]

 

 

Exhibit A

 

Form of License Agreement

 

(attached)

 

 

EXHIBIT B

TO

Senior Secured Convertible Promissory Note

FORM OF Irrevocable Proxy

 

(Interests of [_______] (the “Issuer”))

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [_____________] a [_______________] (the “Grantor”), hereby irrevocably (to the fullest extent permitted by law) appoints and constitutes GIGAMOON MEDIA, LLC, a Delaware limited liability company, and its successors and registered assigns, in its capacity as the Holder (as defined in the Note referred to below) (in such capacity, the “Proxy Holder”) under the Senior Secured Convertible Promissory Note, dated as of November [__], 2024 (as amended, restated, supplemented or otherwise modified from time to time, the “Note”; capitalized terms used herein and not defined herein will have the meanings assigned thereto in the Note), to which each of the Proxy Holder, the Grantor, and [__________] is a party, the attorney-in-fact (in accordance with the terms of Section 5(e) of the Note) and proxy of the Grantor with full power of substitution and resubstitution, to the full extent of the Grantor’s rights with respect to all of the Equity Interests owned by the Issuer constituting Collateral (the “Interests”), exercisable in accordance with the Security Agreement and the terms hereof. Upon the execution hereof, all prior proxies given by the Grantor with respect to any of the Interests are hereby revoked, and no subsequent proxies will be given with respect to any of the Interests until the Note is indefeasibly paid in full. This proxy is irrevocable, is coupled with an interest, and is granted pursuant to Section 5(c) of the Note for the benefit of Proxy Holder in consideration of the indebtedness represented by the Note.

 

The Proxy Holder is hereby empowered and may exercise this Irrevocable Proxy to vote the Interests at any and all times after the occurrence of an Event of Default, including, but not limited to, at any meeting of the shareholders of the Issuer, however called, and at any adjournment thereof, or in any written action by consent of the shareholders of the Issuer. This Irrevocable Proxy shall remain in effect with respect to the Interests until the Note is indefeasibly paid in full, and will continue to be effective or automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by Proxy Holder as a preference, fraudulent conveyance, or otherwise under any bankruptcy, insolvency, or similar law, all as though such payment had not been made (provided, that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Proxy Holder in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations), notwithstanding any time limitations set forth in the [operating agreement/by-laws] and other organization documents of the Issuer or the [Limited Liability Company Act/Corporations Act] of the State of [__________].

 

Any obligation of the Grantor hereunder shall be binding upon the heirs, successors, and assigns of the Grantor (including, without limitation, any transferee of any of the Interests).

 

The remainder of this page is intentionally left blank.

 

 

IN WITNESS WHEREOF, the Grantor has executed this Irrevocable Proxy as of this __ day of _______, 20__.

 

	[__________]
	By:
	Name:
	Title:

 

 

EXHIBIT C

TO

Senior Secured Convertible Promissory Note

FORM OF Issuer Acknowledgment

 

To:	[ISSUER NAME]
	[__________]
	Attn: [__________]

 

RE:	Issuer Acknowledgement and Control Agreement

 

To whom it may concern:

 

This Issuer Acknowledgement and Control Agreement serves to notify you that, pursuant to that certain Senior Secured Convertible Promissory Note, dated as of [__], 2024 (as amended, restated, supplemented or otherwise modified from time to time, the “Note”), made by GAMESQUARE HOLDINGS, INC., a Delaware corporation (“GameSquare”), and FAZE MEDIA HOLDINGS, LLC, a Delaware limited liability company (“GameSquare SPV”), in favor of GIGAMOON MEDIA, LLC, a Delaware limited liability company (together with its successors and registered assigns, the “Holder”), GameSquare [SPV] (the “Owner”) has granted a security interest to the Holder in the following equity interests (the “Securities”) issued by [__________], a [__________] (the “Issuer” or “you”):

 

 

Class of Equity Interests		Par Value		Certificate Number (if applicable)		Number of Shares of Equity Interests

 

1. You are hereby notified of the Holder’s security interest, including the provision that the Securities, including all securities, dividends, stock splits, instruments or other distributions and any other right or property or proceeds payable or distributable in respect of the Securities, are not to be paid to anyone other than to Holder until and unless you receive further written notice from the Holder. The aforementioned security interest will remain in full force and effect until the Holder notifies you in writing to the contrary. In addition, you are hereby instructed to comply with instructions originated by the Holder without further consent by the Owner. Please acknowledge receipt of this notice by signing and returning the control agreement and acknowledgment attached as Annex I hereto to the Holder.

 

This notice is dated [__________], 20[__].

 

OWNER:			HOLDER:
[_____________________]			GIGAMOON MEDIA, LLC
By:			By:
Name:			Name:
Title:			Title:

 

The remainder of this page is intentionally left blank.

 

 

Annex I to

Issuer Acknowledgement and Control Agreement

 

Control Agreement and Acknowledgement of Pledge and Security Interest

 

Reference is made to the Issuer Acknowledgment and Control Agreement (the “Acknowledgment”) to which this Annex I is attached. Capitalized terms used but not defined herein have the meanings assigned thereto in the Acknowledgment.

 

The undersigned, [__________], a [__________] (the “Issuer” or “we”), acknowledges receipt of the Acknowledgment and notice of the Holder’s security interest in the Securities described therein.

 

To the best of our knowledge, and except for the Holder’s security interest or as noted below, and as of the date hereof, (a) the Securities are identified on our books and records, by book-entry or otherwise, as being owned by the Owner; (b) we have identified on our books and records the Securities as being pledged to the Holder; (c) we have not confirmed any interest in the Securities to any persons other than to the Owner and the Holder; (d) our records do not indicate any adverse claims concerning the Securities nor do they indicate any person, other than Owner and the Holder, as having any interest in the Securities; and (e) we have not created, nor have we received notice of any liens, claims or encumbrances with respect to the Securities, except to the Holder.

 

We hereby agree (i) to mark our records, by book-entry or otherwise, to indicate the pledge of, and the Holder’s security interest in, the Securities, (ii) not to effect any transfer of the Owner’s interest in any of the Securities without the Holder’s prior written consent; (iii) unless we should we receive further written instructions from the Holder, to distribute all dividends, distributions, and other proceeds relating to the Securities (whether in cash, securities or other property) to the Holder, and (iv) we will comply with all written instructions originated by the Holder concerning the Securities without further consent by the Owner.

 

	ISSUER
	[__________]
	By:
	Name:
	Title:

 

 

 

Exhibit 99.1

 

GameSquare Holdings Reports Record 2024 Third Quarter Results

 

Q3 2024 revenue increased 10% YoY vs proforma Q3 23 to a third-quarter record of $26.4 million

 

Q3 2024 adjusted EBITDA loss improves significantly vs YoY proforma Q3 2023 and QoQ Q2 2024 to $2.2 million, demonstrating continued benefits of growth strategies and cost reduction initiatives

 

GameSquare expects 2024 to be a record year with annual proforma revenue between $105 - $110 million

 

November 14, 2024, FRISCO, TX – GameSquare Holdings, Inc. (NASDAQ: GAME), (“GameSquare”, or the “Company”), today announced its financial results for the three and nine-months ended September 30, 2024.

 

Justin Kenna, CEO of GameSquare, stated, “GameSquare delivered strong third quarter financial results that were in line with our pre-announcement, and reflect the strategies underway to drive organic sales growth, complete the integration of our recent acquisitions, and build a profitable organization. On a sequential basis, I am encouraged by the 500 basis-point expansion in gross margin, the 11.1% reduction in operating expenses, and the $3.2 million improvement in Adjusted EBITDA.”

 

“We also continue to pursue strategies aimed at strengthening our balance sheet and this morning we further solidified our balance sheet with a new $10 million convertible note with an entity controlled by Matt Kalish. This new capital, combined with over $11 million of cash on our balance sheet at September 30, 2024, provides us with increased flexibility to pay down our existing equity line facility with funds managed by Yorkville Advisors Global L.P. and take advantage of opportunities to accelerate revenue growth in the fourth quarter and beyond.”

 

“Positive momentum is growing across our business as more brands recognize the value of our next generation media platform. Our interconnected media, creative, and technology capabilities continue to provide brands with best-in-class solutions to connect and engage with youth audiences at scale. We expect to end 2024 with record revenue, a record backlog of committed revenue, a higher number of customers on retainer, and a growing pipeline. As a result, we believe 2025 will be a strong year of growth and significantly improved profitability,” concluded Mr. Kenna.

 

Reported results for the third quarter ended September 30, 2024, compared to September 30, 2023

 

	●	Revenue of $26.4 million, compared to $11.5 million
	●	Gross profit of $5.2 million, compared to $2.5 million
	●	Net loss attributable to GameSquare of $5.5 million, compared to a net loss of $5.1 million
	●	Adjusted EBITDA loss of $2.2 million, compared to a loss of $3.9 million

 

Proforma* results for the third quarter ended September 30, 2024, compared to September 30, 2023

 

(unless otherwise noted)

 

	●	Revenue of $26.4 million, compared to $24.0 million
	●	Gross profit of $5.2 million, compared to $3.4 million
	●	Gross margin of 19.8%, compared to 14.0%
	●	Operating expenses of $8.9 million, or 33.8% of revenue, compared to $13.8 million or 57.4% of revenue last year
	●	Adjusted EBITDA loss of $2.2 million, compared to a loss of $10.4 million last year, and a loss of $5.4 million for the quarter ended June 30, 2024, and $7.9 million for the quarter ended March 31, 2024

 

 

●

Adjusted EBITDA loss was 8.2% of revenue versus 43.4% of revenue last year, a loss of 18.9% of revenue for the quarter ended June 30, 2024, and 33.7% of revenue for the quarter ended March 31, 2024

 

* Proforma financial results includes a full quarter contribution of FaZe Clan in the 2023 period.

 

Reported results for the nine months ended September 30, 2024, compared to September 30, 2023

 

	●	Revenue of $72.7 million, compared to $25.7 million
	●	Gross profit of $12.9 million, compared to $6.6 million
	●	Net loss attributable to GameSquare of $22.4 million, compared to a net loss of $13.5 million
	●	Adjusted EBITDA loss of $11.7 million, compared to a loss of $8.8 million

 

Proforma* results for the nine months ended September 30, 2024, compared to September 30, 2023

 

	●	Revenue of $78.5 million, compared to $71.2 million
	●	Gross profit of $13.2 million, compared to $12.0 million
	●	Operating expenses of $30.5 million, or 38.9% of revenue, compared to $46.7 million or 65.6% of revenue last year
	●	Adjusted EBITDA loss of $15.5 million, compared to a loss of $34.7 million
	●	Adjusted EBITDA loss was 19.7% of revenue, versus 48.8% of revenue last year

 

* Proforma financial results includes a full year-to-date contribution of FaZe Clan in the 2024 period, and includes a full year-to-date contribution of Engine and FaZe Clan in the 2023 period.

 

2024 Annual Guidance

 

	●	Management expects 2024 annual proforma revenue to be between $105 million to $110 million
	●	2024’s annual guidance is based on a proforma basis and includes a full 12 months of contribution from FaZe Clan, which was acquired on March 7, 2024
	●	When comparing the third quarter of 2024 and 2023 results of Faze Clan, the Company has removed approximately $17 million of annualized costs, and expects to remove additional costs during the fourth quarter of 2024
	●	Management anticipates continual quarterly improvements to profitability throughout 2024 supported by sales growth, gross margin improvement, and the benefit of cost saving initiatives

 

Conference Call Details

 

Justin Kenna, CEO, Lou Schwartz, President, and Mike Munoz CFO are scheduled to host a conference call with the investment community. Analysts and interested investors can join the call via the details below:

 

Date: November 14, 2024

Time: 4:30 pm ET

Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=1IFae2yL

 

Corporate Contact

Lou Schwartz, President

Phone: (216) 464-6400

Email: ir@gamesquare.com

 

 

Investor Relations

Andrew Berger

Phone: (216) 464-6400

Email: ir@gamesquare.com

 

Media Relations

Chelsey Northern / The Untold

Phone: (254) 855-4028

Email: pr@gamesquare.com

 

About GameSquare Holdings, Inc.

 

GameSquare’s (NASDAQ: GAME) mission is to revolutionize the way brands and game publishers connect with hard-to-reach Gen Z, Gen Alpha, and Millennial audiences. Our next generation media, entertainment, and technology capabilities drive compelling outcomes for creators and maximize our brand partners’ return on investment. Through our purpose-built platform, we provide award winning marketing and creative services, offer leading data and analytics solutions, and amplify awareness through FaZe Clan, one of the most prominent and influential gaming organizations in the world. With one of the largest gaming media networks in North America, as verified by Comscore, we are reshaping the landscape of digital media and immersive entertainment. GameSquare’s largest investors are Dallas Cowboys owner Jerry Jones and the Goff family.

 

To learn more, visit www.gamesquare.com.

 

Forward-Looking Information

 

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the Company’s and FaZe Media’s future performance, revenue, growth and profitability; and the Company’s and FaZe Media’s ability to execute their business plans. These forward-looking statements are provided only to provide information currently available to us and are not intended to serve as and must not be relied on by any investor as, a guarantee, assurance or definitive statement of fact or probability. Forward-looking statements are necessarily based upon a number of estimates and assumptions which include, but are not limited to: the Company’s and FaZe Media’s ability to grow their business and being able to execute on their business plans, the Company being able to complete and successfully integrate acquisitions, the Company being able to recognize and capitalize on opportunities and the Company continuing to attract qualified personnel to supports its development requirements. These assumptions, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the Company’s ability to achieve its objectives, the Company successfully executing its growth strategy, the ability of the Company to obtain future financings or complete offerings on acceptable terms, failure to leverage the Company’s portfolio across entertainment and media platforms, dependence on the Company’s key personnel and general business, economic, competitive, political and social uncertainties. These risk factors are not intended to represent a complete list of the factors that could affect the Company which are discussed in the Company’s most recent MD&A. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. GameSquare assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

 

 

GameSquare Holdings, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

		September 30, 2024				December 31, 2023
Assets
Cash		$	11,199,013			$	2,945,373
Restricted cash			-				47,465
Accounts receivable, net			25,559,861				16,459,684
Government remittances			1,311,968				1,665,597
Contingent consideration, current			293,445				207,673
Promissory note receivable, current			341,378				-
Prepaid expenses and other current assets			3,046,798				916,740
Total current assets			41,752,463				22,242,532
Investment			2,673,472				2,673,472
Contingent consideration, non-current			-				293,445
Promissory note receivable			8,987,416				-
Property and equipment, net			455,690				2,464,633
Goodwill			22,783,315				16,303,989
Intangible assets, net			21,706,994				18,574,144
Right-of-use assets			2,743,255				2,159,693
Total assets		$	101,102,605			$	64,711,908
Liabilities and Shareholders’ Equity
Accounts payable		$	28,968,243			$	23,493,472
Accrued expenses and other current liabilities			13,232,256				5,289,149
Players liability account			-				47,465
Deferred revenue			2,082,235				1,930,028
Current portion of operating lease liability			741,462				367,487
Line of credit			4,321,038				4,518,571
Convertible debt carried at fair value			8,850,282				-
Warrant liability			20,605				102,284
Arbitration reserve			176,416				428,624
Total current liabilities			58,392,537				36,177,080
Convertible debt carried at fair value			-				8,176,928
Operating lease liability			2,234,377				1,994,961
Total liabilities			60,626,914				46,348,969
Commitments and contingencies (Note 14)
Preferred stock (no par value, unlimited shares authorized, zero shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)			-				-
Common stock (no par value, unlimited shares authorized, 31,586,409 and 12,989,128 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)			-				-
Additional paid-in capital			117,883,238				91,915,169
Accumulated other comprehensive loss			241,106				(132,081	)
Non-controlling interest			18,130,467				-
Accumulated deficit			(95,779,120	)			(73,420,149	)
Total shareholders’ equity			40,475,691				18,362,939
Total liabilities and shareholders’ equity		$	101,102,605			$	64,711,908

 

 

GameSquare Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Revenue		$	26,413,226			$	11,501,446			$	72,728,415			$	25,653,411
Cost of revenue			21,171,114				8,989,706				59,858,943				19,074,708
Gross profit			5,242,112				2,511,740				12,869,472				6,578,703
Operating expenses:
General and administrative			6,180,523				4,734,909				18,233,771				11,605,255
Selling and marketing			2,202,182				1,465,378				6,856,774				3,947,100
Research and development			804,258				439,822				2,370,927				1,100,791
Depreciation and amortization			803,687				571,972				2,513,882				1,295,669
Restructuring charges			382,983				92,334				506,829				386,620
Other operating expenses			1,287,223				688,935				3,375,360				2,186,916
Total operating expenses			11,660,856				7,993,350				33,857,543				20,522,351
Loss from continuing operations			(6,418,744	)			(5,481,610	)			(20,988,071	)			(13,943,648	)
Other income (expense), net:
Interest expense			(54,106	)			(209,237	)			(681,491	)			(354,561	)
Loss on debt extinguishment			(1,032,070	)			-				(1,032,070	)			-
Change in fair value of convertible debt carried at fair value			(98,937	)			86,127				357,822				541,136
Change in fair value of warrant liability			26,482				133,216				79,382				1,844,094
Arbitration settlement reserve			113,583				212,234				252,208				951,878
Other income (expense), net			(478	)			(227,201	)			(4,066,022	)			(189,307	)
Total other income (expense), net			(1,045,526	)			(4,861	)			(5,090,171	)			2,793,240
Loss from continuing operations before income taxes			(7,464,270	)			(5,486,471	)			(26,078,242	)			(11,150,408	)
Income tax benefit			-				11,469				-				16,496
Net loss from continuing operations			(7,464,270	)			(5,475,002	)			(26,078,242	)			(11,133,912	)
Net income (loss) from discontinued operations			(145	)			423,303				1,349,738				(2,347,244	)
Net loss			(7,464,415	)			(5,051,699	)			(24,728,504	)			(13,481,156	)
Net loss attributable to non-controlling interest			1,979,943				-				2,369,533				-
Net loss attributable to attributable to GameSquare Holdings, Inc.		$	(5,484,472	)		$	(5,051,699	)		$	(22,358,971	)		$	(13,481,156	)
Comprehensive loss, net of tax:
Net loss		$	(7,464,415	)		$	(5,051,699	)		$	(24,728,504	)		$	(13,481,156	)
Change in foreign currency translation adjustment			360,004				212,040				373,187				100,687
Comprehensive loss			(7,104,411	)			(4,839,659	)			(24,355,317	)			(13,380,469	)
Comprehensive income attributable to non-controlling interest			1,979,943				-				2,369,533				-
Comprehensive loss		$	(5,124,468	)		$	(4,839,659	)		$	(21,985,784	)		$	(13,380,469	)
Income (loss) per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution:
From continuing operations		$	(0.18	)		$	(0.45	)		$	(0.90	)		$	(1.06	)
From discontinued operations			(0.00	)			0.03				0.05				(0.22	)
Loss per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution		$	(0.18	)		$	(0.42	)		$	(0.85	)		$	(1.28	)
Weighted average common shares outstanding - basic and diluted			31,270,253				12,131,409				26,378,453				10,510,845

 

 

Management’s use of Non-GAAP Measures

 

This release contains certain financial performance measures, including “EBITDA” and “Adjusted EBITDA,” that are not recognized under accounting principles generally accepted in the United States of America (“GAAP”) and do not have a standardized meaning prescribed by GAAP. As a result, these measures may not be comparable to similar measures presented by other companies. For a reconciliation of these measures to the most directly comparable financial information presented in the Financial Statements in accordance with GAAP, see the section entitled “Reconciliation of Non-GAAP Measures” below.

 

We believe EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define “EBITDA” as net income (loss) before (i) depreciation and amortization; (ii) income taxes; and (iii) interest expense.

 

Adjusted EBITDA

 

We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define “Adjusted EBITDA” as EBITDA adjusted to exclude extraordinary items, non-recurring items and other non-cash items, including, but not limited to (i) share based compensation expense, (ii) transaction costs related to merger and acquisition activities, (iii) arbitration settlement reserves and other non-recurring legal settlement expenses, (iv) restructuring costs, primarily comprised of employee severance resulting from integration of acquired businesses, (v) impairment of goodwill and intangible assets, (vi) gains and losses on extinguishment of debt, (vii) change in fair value of assets and liabilities adjusted to fair value on a quarterly basis, (viii) gains and losses from discontinued operations, and (ix) net income (loss) attributable to non-controlling interest.

 

Reconciliation of Non-GAAP Measures

 

A reconciliation of Adjusted EBITDA to the most directly comparable measure determined under US GAAP is set out below.

 

		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Net loss		$	(7,464,415	)		$	(5,051,699	)		$	(24,728,504	)		$	(13,481,156	)
Interest expense			54,106				209,237				681,491				354,561
Income tax benefit			-				(11,469	)			-				(16,496	)
Amortization and depreciation			803,687				571,972				2,513,882				1,295,669
Share-based payments			267,117				405,907				1,288,484				1,288,292
Transaction costs			1,287,223				688,935				3,417,687				2,186,916
Arbitration settlement reserve			(113,583	)			(212,234	)			(252,208	)			(951,878	)
Restructuring costs			382,983				92,334				506,829				386,620
Legal settlement			-				3,381				-				187,105
Loss on extinguishment of debt			1,032,070				-				1,032,070				-
Change in fair value of contingent consideration			-				-				(42,327	)			-
Change in fair value of warrant liability			(26,482	)			(133,216	)			(79,382	)			(1,844,094	)
Change in fair value of convertible debt carried at fair value			98,937				(86,127	)			(357,822	)			(541,136	)
Gain on disposition of subsidiary			-				-				(3,009,891	)			-
Loss on disposition of assets			-				-				3,764,474				-
Loss from discontinued operations			145				(423,303	)			1,660,153				2,347,244
Net loss attributable to non-controlling interest			1,979,943				-				2,369,533				-
Net loss attributable to non-controlling interest (adjustment for NCI share of add backs to Adjusted EBITDA)			(467,632	)			-				(467,632	)			-
Adjusted EBITDA		$	(2,165,901	)		$	(3,946,282	)		$	(11,703,163	)		$	(8,788,353	)

 

 

v3.24.3

Cover	Nov. 13, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 13, 2024
Entity File Number	001-39389
Entity Registrant Name	GameSquare Holdings, Inc.
Entity Central Index Key	0001714562
Entity Tax Identification Number	99-1946435
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	6775 Cowboys Way
Entity Address, Address Line Two	Ste. 1335
Entity Address, City or Town	Frisco
Entity Address, State or Province	TX
Entity Address, Country	US
Entity Address, Postal Zip Code	75034
City Area Code	(216)
Local Phone Number	464-6400
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Trading Symbol	GAME
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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