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Chase Manhattan Bank | GameSpy Industries, Inc | GoldenTree High Yield Master Fund II, Ltd | GoldenTree High Yield Master Fund, Ltd | GoldenTree Master Fund II, Ltd | Goldman Sachs & Co | IGN Acquisition Corp | IGN Entertainment, Inc | JP Morgan Chase & Co | US Bank National Association. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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Exhibit 10.16
IGN Entertainment, Inc. ,
The Purchasers Listed on the Signature Pages Hereto ,
and
US
Bank National Association,
$22,500,000 Principal
Amount
PURCHASE AGREEMENT
Dated March 3, 2004
TABLE OF CONTENTS
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NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (“ Agreement ”), dated as of March 3, 2004, is among IGN Entertainment, Inc., a Delaware corporation (the “ Company ”), the purchasers listed on the signature pages hereto (collectively, the “ Purchasers ”) and US Bank National Association, as collateral agent (the “ Collateral Agent ”).
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of December 3, 2003, by and among, the Company, IGN Acquisition Corp. (“ Merger Subsidiary ”), GameSpy Industries, Inc., a California corporation (“ GameSpy ”), and certain shareholders of GameSpy, Merger Subsidiary, a wholly owned subsidiary of the Company, will merge with and into GameSpy (the “ Merger ”) and the holders of shares of capital stock of GameSpy will receive cash in consideration for such merger;
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the date hereof (the “ Securities Purchase Agreement ”), among the Company and the purchasers named therein, the Company has issued $20.0 million in aggregate principal amount of its Senior Subordinated Notes due March 3, 2010, 56,298 shares of its Series B Preferred Stock, and warrants to purchase 56,298 shares of its Common Stock;
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the date hereof (the “ Series A Preferred Stock Purchase Agreement ”), among the Company and the purchasers named therein, the Company has issued 4,999,392 shares of its Series A Preferred Stock;
WHEREAS, on the Closing Date, the Company desires to sell to the Purchasers, and the Purchasers, severally and not jointly, desire to purchase from the Company, an aggregate of $22.5 million in aggregate principal amount of the Company’s Senior Secured Notes due March 31, 2009, subject to the terms and conditions and for the consideration provided herein; and
WHEREAS, the proceeds from the sale of the Notes, the Senior Subordinated Notes, the Series A Preferred Stock, and the Series B Preferred Stock shall be contributed by the Company to Merger Subsidiary, and Merger Subsidiary shall apply such proceeds to finance a portion of the Merger, including related fees and expenses;
NOW THEREFORE, in consideration of the foregoing and the covenants, agreements, representations and warranties contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto hereby agree as follows:
ARTICLE I Section 1.1 Issue of NotesOn or before the Closing (as defined herein), the Company will have authorized the issuance of $22.5 million in aggregate principal amount of the Notes to the Purchasers. The Notes will be issued in the form attached hereto as Exhibit A . The Notes will be Guaranteed by all current and future Domestic Subsidiaries of the Company in accordance with this Agreement.
Capitalized terms used herein without definition shall have the meanings assigned to them in Article XI .
The obligations of each Purchaser under this Agreement are several and not joint obligations, and each Purchaser will have no obligation or liability to any Person for the performance or non-performance by any other Purchasers hereunder.
Section 1.2 Sale and Purchase of the Notes; the ClosingIn reliance upon each Purchaser’s representations made in Section 1.3 and subject to the terms and conditions set forth in the Note Documents, the Company hereby agrees to issue and sell to each Purchaser the Notes set forth below its name on the signature pages hereto for the Note Purchase Price. In reliance upon the representations and warranties of the Company contained in the Note Documents, and subject to the terms and conditions set forth herein and therein, each Purchaser hereby agrees (severally and not jointly) to purchase such Notes from the Company. !
The sale and purchase of the Notes to be purchased by the Purchasers will take place at a closing (the “ Closing ”) at 10:00 a.m. New York City time on March 3, 2004, at the offices of Goodwin Procter LLP, 53 State Street, Boston, MA 02109 or at such other time and place as is mutually agreed to by the Company and the Purchasers (the “ Closing Date ”). At the Closing, the Company will deliver to each Purchaser the Notes to be purchased by it (in such permitted denomination or denominations and registered in its name or the name of such nominee or nominees as such Purchaser may request) against payment of the purchase price of the Notes by intra-bank or federal funds wire transfer of immediately available funds to such bank accounts as the Company designates.
Section 1.3 Purchaser’s Representations and Warranties(a) Each Purchaser represents that it is purchasing the Notes to be purchased by it solely for its own account and not as nominee or agent for any other Person and not with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States of America or any state thereof, without prejudice, however, to each Purchaser’s right at all times to sell or otherwise dispose of all or any part of such Notes pursuant to a registration statement under the Securities Act or pursuant to an exemption from the registration requirements of the Securities
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Act, and subject, nevertheless, to the disposition of each Purchaser’s property being at all times within its control.Each Purchaser further represents that it:
(i) is knowledgeable, sophisticated and experienced in business and financial matters;(ii) has previously invested in securities similar to the Notes and fully understand the limitations on transfer described in Section 1.3(b) and the restrictions on sales and other dispositions in the Note Documents;(iii) is able to bear the economic risk of its investment in the Notes and is currently able to afford the complete loss of such investment;(iv) is an “accredited investor” as defined in Regulation D promulgated under the Securities Act;(v) understands that:(A) the Notes have not been registered under the Securities Act and are being issued by the Company in transactions exempt from the registration requirements of the Securities Act; and(B) the Notes may not be offered or sold except pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from registration under the Securities Act; and(C) the exemption from registration afforded by Rule 144 (the provisions of which are known to such Purchaser) promulgated under the Securities Act depends on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts.Each Purchaser acknowledges that it has conducted its own analysis of the Company’s financial condition and other foregoing factors in determining to make an investment in the Notes. Additionally, each Purchaser acknowledges that it is a resident of the State of New York for purposes of the application of state securities laws to its purchase of the Notes.
(b) If any Purchaser desires to sell or otherwise dispose of all or any part of the Notes (other than to a Permitted Transferee or pursuant to Rule 144 or Rule 144A or an effective registration statement under the Securities Act), if requested by the Company, it will deliver to the Company an opinion of counsel, reasonably satisfactory in form and substance to the Company, that an exemption from registration under the Securities Act is available. Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Notes (and all securities issued in exchange therefor or substitution thereof) shall bear the following legend:
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER MAY NOT OFFER, SELL, TRANSFER, ASSIGN, PLEDGE, HYPOTHECATE, OR OTHERWISE DISPOSE OF OR ENCUMBER THE SECURITIES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND (B) IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAW. THE ISSUER OF THESE SECURITIES MAY REQUEST AN OPINION OF LEGAL COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE ISSUER THAT ANY SUCH OFFER, SALE, TRANSFER, ASSIGNMENT, PLEDGE, HYPOTHECATION, OR OTHER DISPOSITION OR ENCUMBRANCE IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.”
Section 1.4 Outside Closing DateIf at the Closing any of the conditions to the Closing specified in this Agreement shall not have been fulfilled to each Purchaser’s reasonable satisfaction or if the Closing fails to occur on or before April 30, 2004, each Purchaser will, at its election and notwithstanding anything to the contrary in this Agreement, be relieved of all further obligations under this Agreement without thereby waiving any rights it may have by reason of such nonfulfillment or failure. Nothing in this Section 1.4 will operate to relieve the Company from any of its obligations hereunder.
Section 1.5 Interest(a) The Company shall pay interest on the principal amount of the Notes (measured on the date immediately preceding the date such interest payment is due) at a variable rate that will be reset quarterly commencing March 31, 2004, from the date of this Agreement until maturity. The interest rate for any period beginning from and including a LIBOR Reset Date to but excluding the next LIBOR Reset Date will be equal to the 3-Month LIBOR Rate plus the Applicable Spread per annum. The initial interest rate for the Notes for the period from and including the Closing Date to but excluding the first LIBOR Reset Date will be calculated using 3-Month LIBOR as determined by the Company on the second London Banking Day preceding the Closing Date.(b) The Company will determine, and notify to the Holders its determination of, 3-Month LIBOR on the second London Banking Day preceding the related LIBOR Reset Date (the “ LIBOR Determination Date ”). The initial LIBOR Determination Date for the initial interest period will be the second London Banking Day preceding the Closing Date.(c) The Company will pay interest quarterly in arrears on each March 31, June 30, September 30, and December 31 of each year (each, an “ Interest Payment Date ”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Closing Date, at the rate in effect for such period; provided that if there is no existing Default in the payment of interest, and if a Note is authenticated between a record date referred to in the Note and the next succeeding Interest Payment Date, interest shall
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accrue from such next succeeding Interest Payment Date. Interest will be computed on the basis of a 360 day year and actual days elapsed in each relevant interest period.(d) So long as any Event of Default shall have occurred and be continuing, the unpaid principal amount of each Note and, to the extent not paid when due, each other amount payable hereunder and under the Notes (provided that the Company shall have received notice that such other amount is payable), shall bear interest (including post-petition interest in any proceeding under any Bankruptcy Law) at a rate per annum equal to 2% in excess of the rate then in effect.(e) Notwithstanding anything to the contrary set forth in this Agreement and the Notes, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the “ Maximum Lawful Rate ”), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided , that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, the Company shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by the Holders is equal to the total interest which would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in this Agreement and the Notes, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply. In the event that a court determines that the Holders have received interest hereunder in excess of the Maximum Lawful Rate, the amount of such excess interest shall be applied against (i) any accrued and unpaid interest on the Notes, (ii) the principal amount and premium, if any, then outstanding under the Notes, and (iii) any such excess interest payments remaining with the Holders after such application shall be refunded to the Company. In no event shall the total interest received by any Holder pursuant to the terms hereof exceed the amount which such Holder could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.Section 1.6 ExpensesWhether or not any of the Notes are sold, the Company agrees:
(i) to pay or reimburse each Holder and the Collateral Agent for their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Note Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including (A) the reasonable fees and disbursements and other charges of one counsel to the Holders (plus any local counsel) and one counsel to the Collateral Agent
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(plus any local counsel), (B) all reasonable out-of-pocket expenses incurred by each Holder and the Collateral Agent and or their respective general partners, if applicable, in connection with the transactions contemplated by this Agreement and the other documents referred to herein, including travel and lodging expenses and (C) all costs incurred in connection with its review of the Company’s business and operations;(ii) to pay or reimburse each Holder and the Collateral Agent for all of their respective costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Note Documents and any other documents prepared in connection herewith or therewith, including the fees and disbursements of counsel (including the allocated fees and disbursements and other charges of in-house counsel) to each Holder and of counsel to the Collateral Agent;(iii) to pay, indemnify, or reimburse each Holder and the Collateral Agent for, and hold each Holder and the Collateral Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Note Documents and any such other documents, and;(iv) to pay all other reasonable out-of-pocket expenses, including reasonable fees and expenses of one counsel (plus any local counsel), incurred by the Company in connection with the transactions contemplated by this Agreement; and(v) to pay such fees of the Collateral Agent as are agreed from time to time and the reasonable out-of-pocket expenses of the Collateral Agent.Section 1.7 IndemnificationIn addition to any and all obligations to indemnify each Purchaser pursuant to the Note Documents, each Note Party (collectively, the “ Indemnifying Parties ”) hereby agrees, jointly and severally, without limitation as to time, to indemnify each Purchaser and its Agents and Affiliates, including its officers, directors, employees, advisors and representatives (collectively, the “ Indemnified Parties ”), against, and hold such Purchaser and them harmless from, all losses, claims, damages, liabilities and related expenses (including the expenses of preparation and attorneys’ fees and disbursements) (collectively, the “ Losses ”) incurred by such Purchaser or them and arising out of or in connection with the Note Documents or the transactions contemplated hereby or thereby (or any other document or instrument executed herewith or pursuant hereto or thereto), whether or not the transactions contemplated by this Agreement are consummated and whether or not any Indemnified Party is a formal party to any claim, litigation, investigation or proceeding, except to the extent, and only to the extent, that any Losses directly
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result from action on the part of any Indemnified Party which is finally judicially determined to arise primarily from such Indemnified Party’s either gross negligence or willful misconduct. The Indemnifying Parties agree to reimburse any Indemnified Party promptly for all such Losses as they are incurred by such Indemnified Party. No Indemnified Party will be liable for:
(i) any Losses arising from the use by unauthorized Persons of Information or other materials sent through electronic, telecommunications or other information transmissions systems that are intercepted by such Persons;(ii) any special, indirect, consequential or punitive damages arising out of or in connection with the Note Documents or the transactions contemplated hereby or thereby (or any other document or instrument executed herewith or pursuant hereto or thereto); or(iii) any other Losses except to the extent, and only to the extent, that any Losses directly result from action or failure to act on the part of any Indemnified Party which is finally judicially determined to arise primarily from such Indemnified Party’s either gross negligence or willful misconduct.The obligations of the Indemnifying Parties to each Indemnified Party hereunder shall be separate obligations, and the Indemnifying Parties’ liability to any such Indemnified Party hereunder shall not be extinguished solely because any other Indemnified Party is not entitled to indemnity hereunder. The obligations of the Indemnifying Parties under this Section 1.6 shall survive the payment or prepayment of the Notes at maturity, upon acceleration, redemption or otherwise, any transfer of Notes by any Purchaser and the termination of the Note Documents.
In case any action shall be brought against any Indemnified Party with respect to which indemnity may be sought against any of the Indemnifying Parties hereunder, such Indemnified Party shall promptly notify the Company in writing and the Company shall, if it desires, assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party and payment of all reasonable fees and expenses. The failure to so notify the Company shall not affect any obligation any of the Indemnifying Parties may have to any Indemnified Party under this Agreement or otherwise. Each Indemnified Party and each group of Indemnified Parties under common control (a “ Affiliated Group ”) shall have the right to employ separate counsel in such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party or Affiliated Group, as applicable, unless:
(i) the Indemnifying Parties have agreed in writing to pay such expenses;(ii) the Indemnifying Parties have failed to assume the defense and employ counsel; or(iii) the named parties to any such action (including any impleaded parties) include any Indemnified Party and any Indemnifying Party, and such Indemnified Party shall have been advised by outside counsel that there
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may be one or more legal defenses available to it which are inconsistent with or additional to those available to the Indemnifying Party;
provided that, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel in the circumstances described in clauses (i), (ii) or (iii) above, the Company shall not have the right to assume the defense of such action or proceeding; provided , however , that the Indemnifying Parties shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be responsible hereunder for the fees and expenses of more than one such firm of separate counsel (in addition to any necessary local counsel), which counsel shall be designated by such Indemnified Party. The Indemnifying Parties shall not be liable for any settlement of any such action effected without the written consent of the Company (which shall not be unreasonably withheld). The Indemnifying Parties agree that they will not, without the Indemnified Party’s prior consent, which shall not be unreasonably withheld, settle or compromise any pending or threatened claim, action or suit in respect of which indemnification or contribution may be sought hereunder unless the foregoing contains an unconditional release of the Indemnified Parties from all liability and obligation arising therefrom.
Section 1.8 ContributionIf the indemnification provided for in Section 1.7 is unavailable to any Indemnified Party in respect of any Losses referred to therein, then the Indemnifying Parties, in lieu of indemnifying such Persons, shall have a joint and several obligation to contribute to the amount paid or payable by such Persons as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Parties, on the one hand, and the Indemnified Parties, on the other hand, in connection with the actions which resulted in such Losses as well as any other relevant equitable considerations. The amount paid or payable by any such Person as a result of the Losses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such Person in connection with any investigation, lawsuit or legal or administrative action or proceeding.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 1.8 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
Section 1.9 Register of Notes; etc.(a) The Company will maintain a register for the Notes in which it will provide for the registration and transfer of the Notes. The name and address of each Holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and Holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary.
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(b) Upon surrender for registration of transfer of any Note, the Company, at its expense, will execute and deliver, in the name of the designated transferee or transferees, one or more new Note certificates of the same type, and of a like aggregate principal amount.(c) Note certificates may be exchanged at the option of any Holder thereof for Note certificates of a like aggregate principal amount. Whenever any Note certificates are so surrendered for exchange, the Company, at its expense, will execute and deliver the Note certificates that the Holder making the exchange is entitled to receive.(d) All Note certificates issued upon any registration of transfer or exchange of such Note will be the legal and valid obligations of the Company, evidencing the same interests, and entitled to the same benefits, as the Notes surrendered upon such registration of transfer or exchange.(e) Every Note certificate presented or surrendered for registration of transfer or exchange will (if so required by the Company) be duly endorsed or will be accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the Holder thereof or its attorney duly authorized in writing.Section 1.10 Further ActionDuring the period from the date hereof to the Closing Date, the Company will use all commercially reasonable efforts to cause its representations and warranties contained in Article IV hereof to be true as of the Closing Date, after giving effect to the transactions contemplated by this Agreement, as if made on and as of such date.
Section 1.11 Taxes(a) All payments made by the Company under this Agreement or any other Note Document shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Collateral Agent or any Holder as a result of a present or former connection between the Collateral Agent or such Holder and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Collateral Agent’s or such Holder’s having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Note Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“ Non-Excluded Taxes ”) or any Other Taxes are required to be withheld from any amounts payable to the Collateral Agent or any Holder hereunder, the amounts so payable to the Collateral Agent or such Holder shall be increased to the extent necessary to yield to the Collateral Agent or such Holder (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement; provided , however , that the Company or any Guarantor shall not be required to increase any such amounts payable to the Collateral Agent or any Holder with respect to any Non-Excluded Taxes (i) that are attributable to such Holder’s failure to comply with the
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requirements of paragraph (d) or (e) of this Section 1.11 in the case of any Non-U.S. Holder, that are United States withholding taxes imposed on amounts payable to the Collateral Agent or such Holder at the time the Collateral Agent or such Holder becomes a party to this Agreement, except to the extent that the Collateral Agent’s or such Holder’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Company with respect to such Non-Excluded Taxes pursuant to this Section 1.11(a) . The Company or the applicable Guarantor shall make any required withholding and pay the full amount withheld to the relevant tax authority or other Governmental Authority in accordance with applicable Requirements of Law.(b) In addition, the Company shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Company, as promptly as possible thereafter the Company shall send to the Collateral Agent for the account of the Collateral Agent or relevant Holder, as the case may be, a certified copy of an original official receipt received by the Company showing payment thereof. If the Company fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Collateral Agent the required receipts or other required documentary evidence, the Company shall indemnify the Collateral Agent and the Holders for any incremental taxes, interest or penalties that may become payable by the Collateral Agent or any Holder as a result of any such failure. The agreements in this Section 1.11 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.(d) Each Holder that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or any estate or trust that is subject to federal income taxation regardless of the source of its income (a “ Non-U.S. Holder ”) shall deliver to the Company two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Holder claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest” a statement substantially in the form of Exhibit B to the effect that such Holder is eligible for a complete exemption from withholding of U.S. taxes under Section 871(h) or 881(c) of the Code and a Form W-8BEN, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Holder claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Company under this Agreement and the other Note Documents. Such forms shall be delivered by each Non-U.S. Holder on or before the date it becomes a party to this Agreement. In addition, each Non-U.S. Holder shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Holder. Each Non-U.S. Holder shall promptly notify the Company at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Company (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Holder shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Holder is not legally able to deliver.
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(e) A Holder that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Holder is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Holder, at the time or times prescribed by applicable law or reasonably requested by the Holder, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Holder is legally entitled to complete, execute and deliver such documentation and in such Holder’s reasonable judgment such completion, execution or submission would not materially prejudice the legal position of such Holder.Each Purchaser’s obligation to purchase and pay for the Notes shall be subject to the satisfaction of each of the following conditions on or before the Closing Date:
Section 2.1 Representations and Warranties True; No Event of DefaultThe representations and warranties of the Company contained in Article IV shall be true at and as of the Closing Date (unless related to a specific date, in which case it shall be true as of such specific date), after giving effect to the transactions contemplated by this Agreement to occur on that date, as if made on and as of that date.
Section 2.2 Compliance with this AgreementThe Company shall have performed and complied in all material respects with all agreements, covenants and conditions contained in the Note Documents or any other document contemplated hereby or thereby to be performed or complied with by the Company on or before the Closing Date. Neither the Company nor any of its Subsidiaries shall have entered into any transaction since the date of this Agreement that would have been prohibited by any section hereof had such section applied since such date. !
Section 2.3 GameSpy AcquisitionAll of the Acquisition Documents shall have been completed on terms reasonably satisfactory to each Purchaser including those pertaining to representations, warranties, indemnification rights, and any tax elections by the Company in connection with the GameSpy Acquisition. Fully executed copies of all of the Acquisition Documents shall have been delivered to each Purchaser simultaneously with the Closing. The GameSpy Acquisition shall be consummated concurrently with the Closing and on the terms contemplated by the Acquisition Documents, and all conditions precedent to such consummation shall have been satisfied or, with each Purchaser’s consent, waived. The Company shall have received $35.0 million of aggregate cash proceeds from the sale of Senior Subordinated Notes, Series A Preferred Stock, and Series B Preferred Stock on the Closing Date. The purchase price for GameSpy shall not exceed $54.6 million, and the aggregate fees and closing costs payable by the Company and its Subsidiaries in connection with the GameSpy Acquisition and the related financing transactions (including the transactions contemplated by this Agreement) shall not exceed $3,468,435.
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Section 2.4 Compliance Certificates(a) Officer’s Certificate . Each Purchaser and the Collateral Agent shall have received a certificate dated the Closing Date and signed by each of (i) the Chief Executive Officer of the Company and (ii) the Chief Financial Officer or Controller of the Company, certifying that the conditions set forth in Sections 2.1 , 2.2, 2.3, 2.7, 2.8(b) , 2.9 , 2.11 and 2.19 have been satisfied on and as of such date and further certifying as to such other matters as any Purchaser may request in the exercise of its reasonable discretion.(b) Secretary’s Certificate . Each Purchaser and the Collateral Agent shall have received a certificate, dated the Closing Date and signed by the Secretary of the Company and each Guarantor (other than Two Cents, Inc.), certifying as to (i) the board resolutions and Charter Documents attached thereto, (ii) the incumbency of the Company’s or Guarantors, as applicable, officers executing the Note Documents, and (iii) all other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Note Documents.Section 2.5 Opinion of CounselEach Purchaser and the Collateral Agent shall have received opinions, dated the Closing Date and addressed to it, from Goodwin Procter LLP, counsel for the Company and Merger Subsidiary, and Fenwick & West LLP, counsel for GameSpy, each in form and substance reasonably satisfactory to such Purchaser, as to the matters set forth on Exhibit C .
Section 2.6 Issuance of the NotesPursuant to Section 1.2 , the Company shall have issued and delivered $22.5 million in aggregate principal amount of Notes to the Purchasers.
Section 2.7 Sources and Uses of FundsSchedule 2.7 sets forth a statement of the sources and uses of funds from (a) the sale of Notes pursuant to this Agreement, (b) the sale of Senior Subordinated Notes and Series B Preferred Stock pursuant to the Securities Purchase Agreement, (c) the sale of and Series A Preferred Stock pursuant to the Series A Preferred Stock Purchase Agreement, and (d) the other transactions being undertaken by the Company concurrently herewith including the GameSpy Acquisition.
Section 2.8 Financial Statements(a) The Company shall have delivered to each Purchaser (i) audited financial statements for the Company and GameSpy for fiscal year 2003, and (ii) internal consolidated financial statements of the Company and GameSpy for (A) each fiscal quarter occurring in fiscal year 2001, and (B) each month since January 1, 2002, and each such internal financial statement must be satisfactory to each of the Purchasers. The Company shall have delivered to each Purchaser (i) a pro forma consolidated balance sheet of the Company and its Subsidiaries as of January 31, 2004, prepared in accordance with Regulation S-X, that gives pro forma effect to the GameSpy Acquisition and the transactions contemplated by this Agreement as if they had occurred on such date, and (ii) a pro forma consolidated income statement and pro forma
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consolidated statement of cash flows of the Company and its Subsidiaries for the twelve months ending January 31, 2004, prepared in accordance with Regulation S-X, that gives pro forma effect to the GameSpy Acquisition and the transactions contemplated by this Agreement as if they had occurred on February 1, 2003.(b) On a combined basis after giving effect to the GameSpy Acquisition and the transactions contemplated by this Agreement as if they had occurred on February 1, 2003, (i) the Consolidated EBITDA of the Company and its Subsidiaries for the twelve months ending December 31, 2003, shall be at least $5.6 million and (ii) the consolidated revenue of the Company and its Subsidiaries for the twelve months ending December 31, 2003, shall be at least $36.5 million. On a combined basis after giving effect to the GameSpy Acquisition and the transactions contemplated by this Agreement as if they had occurred on December 31, 2003, the total Funded Indebtedness (excluding accounts payable and accrued expenses) of the Company and its Subsidiaries as of such date shall not exceed $42.5 million.Section 2.9 Assets and LiabilitiesSince December 31, 2003, there shall have been (a) no material increase in the liabilities, contingent or otherwise, of the Company and GameSpy taken as a whole (other than in the ordinary course of business consistent with past practice), and (b) no material decrease in the assets of the Company and GameSpy taken as a whole.
Section 2.10 Proceedings SatisfactoryAll proceedings taken in connection with the sale of the Notes, the transactions contemplated by the Note Documents, and all documents and papers relating thereto, shall be reasonably satisfactory to each Purchaser. Each Purchaser and its counsel shall have received copies of such documents and papers as such Purchaser or they may reasonably request in connection therewith, or as a basis for the Closing opinions, all in form and substance reasonably satisfactory to each Purchaser.
Section 2.11 Consents and PermitsEach Note Party shall have obtained all consents, approvals and authorizations and sent or made all notices, filings, registrations and qualifications required to be obtained, sent or made in connection with the GameSpy Acquisition and the transactions contemplated by the Note Documents (including the GameSpy Financing Documents), except where the failure to obtain, send, or make the same would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There shall have expired all applicable waiting periods without any action having been taken or threatened by any competent authority that could restrain, prevent or otherwise impose material adverse conditions on the GameSpy Acquisition or any of the other or the transactions contemplated by this Agreement.
Section 2.12 Solvency CertificateEach Purchaser shall have received a solvency certification for each Note Party prepared and executed by the Chief Financial Officer or Controller of the Company in the form attached hereto as Exhibit D .
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Section 2.13 Note DocumentsThe Company and each Guarantor shall have duly executed and delivered and caused their respective Subsidiaries party thereto to duly execute and deliver to such Purchaser:
(i) this Agreement;(ii) one or more Notes in the aggregate amount set forth opposite such Purchaser name on the signature pages hereto; and(iii) the Security Documents.Section 2.14 SecurityThe Security Documents shall have been duly executed and delivered by the respective parties thereto and there shall have been delivered to the Collateral Agent with respect to such Security Documents:
(i) certificates representing all Pledged Securities (as defined in the Security Agreement), together with executed and undated stock powers and/or assignments in blank;(ii) instruments representing all intercompany Indebtedness that would be required to be evidenced by a demand promissory note if incurred after the Closing Date, together with executed and undated instruments of assignment in blank;(iii) certificate of insurance required pursuant to Section 5.3(b) of the Guarantee and Collateral Agreement;(iv) appropriate financing statements or comparable documents of, and executed by, the appropriate entities in proper form for filing under the provisions of the UCC and applicable domestic or local laws, rules or regulations in each of the offices where such filing is necessary or appropriate, in the Collateral Agent’s sole discretion, to grant to the Holders a perfected priority Lien on such Collateral superior to and prior to the rights of all third persons other than the holders of Permitted Liens;(v) UCC, judgment and tax lien search reports listing all effective financing statements or comparable documents which name the Company or any Guarantor as debtor and which are filed in those jurisdictions in which any of such Collateral is located and the jurisdictions in which the Company’s or any Guarantor’s principal place of business is located in the United States, together with copies of such existing financing statements, none of which shall encumber such Collateral covered or intended or purported to be covered by the Security Documents other than Permitted Liens;
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(vi) evidence of the completion of all filings of each such Security Document, including with the United States Patent and Trademark Office and the United States Copyright Office, and delivery, recordation and filing, if necessary, of such other security and other documents, including UCC-3 termination statements with respect to UCC filings that do not constitute Permitted Liens, as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the Liens created, or purported or intended to be created, by such Security Documents; and(vii) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interest created by the Security Documents have been taken.Section 2.15 Payment of Fees and ExpensesThe Company shall have paid all of the accrued fees and expenses (entitled to be paid hereunder) of each Purchaser for which invoices have been submitted at least one Business Day prior to the Closing.
Section 2.16 No New InformationNo Purchaser shall have become aware of any information or other matter affecting the Company, any of its Subsidiaries or the GameSpy Acquisition that in its judgment is inconsistent in a material and adverse manner with the information disclosed to such Purchaser prior to the date hereof, taken as a whole.
Section 2.17 Purchase Permitted by Applicable Laws; Legal InvestmentEach Purchaser’s purchase of and payment for the Notes to be purchased by it:
(a) shall not be prohibited by any applicable law or governmental regulation;(b) shall not subject it to any material penalty under or pursuant to any applicable law or governmental regulation; and(c) shall be permitted by the laws and regulations of the jurisdictions to which it is subject.If requested by any Purchaser, the Company shall have delivered to such Purchaser factual certificates or other evidence reasonably requested by it, in form and substance reasonably satisfactory to it, to enable such Purchaser to establish compliance with this condition, including copies of all state securities law or “blue sky” filings made in connection with the transactions contemplated hereby, if any.
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Section 2.18 No Material Adverse ChangeAt and as of the Closing Date, there shall have been:
(a) since December 31, 2003, no material adverse change and no event, condition, occurrence or development that, individually or in the aggregate, could reasonably be expected to result in a material adverse change, in:(i) the business, results of operations, cash flows, property, assets, liabilities, condition (financial or otherwise), management or prospects of the Company and GameSpy and their respective Subsidiaries taken as a whole,(ii) the industry of the Company or GameSpy,(iii) the projections of the Company and its Subsidiaries (including after the GameSpy Acquisition) or the assumptions underlying such projections as delivered to the Purchasers in the bound volume entitled “IGN.com Finance Review, dated January 23, 2004,” and(b) no litigation, investigation or other proceeding pending or threatened that, (i) if adversely determined, could reasonably be expected to result in material adverse impact on the Company, GameSpy and their respective Subsidiaries taken as a whole, or their respective businesses, or the ability of any of them to repay the Notes or otherwise perform any of their respective obligations under the Acquisition Documents (including the GameSpy Financing Documents, or (ii) challenges or purports to challenge any of the transactions contemplated by this Agreement or the Acquisition Documents or on any of the rights or remedies of the Purchasers under the Note Documents or the GameSpy Financing Documents.Section 2.19 Disbursement InstructionsThe Purchasers shall have received written instructions from the Company to the Purchasers directing the payment of the purchase price to be paid on the Closing Date.
Section 2.20 Other AssurancesThe Company shall have delivered to the Purchasers such other and further certificates, assurances and documents as the Purchasers or their respective counsel may have reasonably requested in order to evidence the accuracy of the representations and warranties thereof, the performance of the covenants and agreements to be performed at or prior to the Closing thereby, and the fulfillment of the conditions to the Purchasers’ obligations.
ARTICLE III The Company hereby agrees to grant to each Holder the following special rights:
Section 3.1 Service ChargesNo service charge shall be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental
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charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant Section 3.3 hereof not involving any transfer.
Section 3.2 Direct Payment(a) The Company will pay or cause to be paid all amounts payable with respect to any Note (without any presentment of such Note and without any notation of such payment being made thereon) by crediting (before 1:00 p.m., New York time), by intra-bank or federal funds wire transfer to each Holder’s account in any bank in the United States as may be designated and specified in writing by such Holder on the day of the applicable payment. Each Purchaser’s initial bank account for this purpose is on its signature page hereto.(b) Notwithstanding anything to the contrary contained in the Notes, if any principal amount payable with respect to a Note is payable on a Legal Holiday, then the Company will pay such amount on the next succeeding Business Day, and interest will accrue on such amount until the date on which such amount is paid and payment of such accrued interest will be made concurrently with the payment of such amount; provided that the Company may elect to pay in full (but not in part) any such amount on the last Business Day prior to the date such payment otherwise would be due, and no such additional interest will accrue on such amount.(c) Notwithstanding anything to the contrary contained in the Notes, if any interest amount payable with respect to a Note is payable on a Legal Holiday, then the Company will pay such amount on the next succeeding Business Day. The interest amount payable will include interest calculated from the last scheduled interest payment date up to and including the current scheduled interest payment date.Section 3.3 Lost, etc. NotesNotwithstanding any provision in any Note Document to the contrary, if any mutilated Note is surrendered to the Company, the Company shall execute and deliver in exchange therefor a new Note of the same principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company:
(a) evidence to its satisfaction of the destruction, loss or theft of any Note; and(b) such security or indemnity as may be reasonably required by the Company and any agent to save each of the Company and such agent harmless,then, in the absence of notice that such Note has been acquired by a bona fide purchaser, the Company shall execute and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of a like principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note in accordance with its terms. Upon the issuance of any new Note, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.
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Section 3.4 InspectionThe Company will allow one representative designated by the Majority Holders (together with such representative’s agents, the “ Noteholder Representative ”) the right to visit and inspect any of the offices or properties of the Company or any of its Subsidiaries, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, outside advisors, outside consultants and independent public accountants (and by this provision, the Company authorizes its officers, advisors, consultants and accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested; provided that, in the absence of a continuing Event of Default, all such visits and inspections will occur during normal business hours, upon reasonable notice and in a manner designed not to disrupt the business of the Company. The costs and expenses of such inspection will be paid by the Noteholder Representative, unless a Default or Event of Default then exists, in which case the costs and expenses will be paid by the Company.
Section 3.5 Private Placement NumberIf requested by any Holder, the Company will obtain a private placement number for the Notes from Standard & Poor’s CUSIP Service Bureau.
ARTICLE IV The Company hereby represents and warrants on behalf of itself and each of its Subsidiaries that each of the following statements is true as of the date of this Agreement and will be true as of the Closing Date (unless related to a specific date, in which case it shall be true as of such specific date), as if made on and as of the Closing Date, after giving effect to all the transactions contemplated by this Agreement to occur on the Closing Date:
Section 4.1 Organization, Standing and Qualification(a) Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; has all requisite corporate and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and is duly qualified or licensed to do business as a foreign corporation in good standing in all jurisdictions in which it owns or leases property or in which the conduct of its business requires it so to qualify or be licensed, except where the failure to be so qualified or licensed would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has heretofore delivered to Latham & Watkins LLP complete and correct copies of the Charter Documents of the Company and each of its Subsidiaries as currently in effect and has identified on Schedule 4.1(a) all jurisdictions in which the Company and each of its Subsidiaries is qualified or licensed to do business as a foreign corporation.
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(b) Each of the Note Parties has all requisite corporate power and authority to enter into and perform all of its obligations under the Note Documents to which it is a party and to carry out the transactions contemplated hereby and thereby.(c) The Company has identified on Schedule 4.1(c) :(i) the name and jurisdiction of incorporation or organization of each of its Subsidiaries; and(ii) the percentage of the issued and outstanding Capital Stock and other equity securities (including rights, warrants and options to acquire, and all securities convertible into or exchangeable for, such Capital Stock) of each such Subsidiary owned by the Company or any of its Wholly Owned Subsidiaries.All such shares of Capital Stock and other equity securities have been duly authorized and validly issued and are fully paid and nonassessable and are (or will be, in the case of GameSpy and its Subsidiaries) owned by the Company and its Wholly Owned Subsidiaries beneficially and of record, free and clear of any Lien except for Permitted Liens.
(d) No Subsidiary of the Company is a party to, or otherwise subject to, any law, restriction or any agreement (other than this Agreement and the agreements listed on Schedule 4.1(d) and customary limitations imposed by the applicable law) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of Capital Stock or similar equity securities of such Subsidiary, except for such restrictions that would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.Section 4.2 CapitalizationThe authorized Capital Stock of the Company consists solely of,
(i) 1,500,000 shares of Common Stock, of which (A) 1,000,000 shares are issued and outstanding and (B) 25,200 shares have been reserved for issuance pursuant to various employee stock option plans, and(ii) 70,500,000 million shares of Preferred Stock, of which (A) 70,273,074 shares are designated Series A Preferred Stock, of which 34,923,565 shares are issued and outstanding, and (B) 226,926 shares of Series B Preferred Stock, none of which are issued and outstanding.Immediately after the closing of the transactions contemplated hereby, the authorized capital stock of the Company shall consist solely of:
(i) 1,400,000 shares of Common Stock, of which (A) 1,035,631 shares will be issued and outstanding, owned of record by the Persons in the respective amounts set forth on Schedule 5.03(b) to the Securities Purchase Agreement, (B) 56,298 shares of which are reserved for issuance upon
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conversion of the Series B Preferred Stock, (C) 56,298 shares of which are reserved for issuance upon exercise of the Warrant issued pursuant to the Securities Purchase Agreement, and (D) 37,000 shares of which are reserved for issuance pursuant to the Equity Incentive Plan; and(ii) 40,000,000 shares of Preferred Stock, of which (A) 39,922,957 shares will be designated as Series A Preferred Stock, all of which are issued and outstanding, owned of record by the Persons in the respective amounts set forth on Schedule 5.03(b) to the Securities Purchase Agreement, (B) 56,298 shares are designated as Series B Preferred Stock, all of which are issued and outstanding, owned of record by the Persons in the respective amounts set forth on Schedule 5.03(b) to the Securities Purchase Agreement, and (C) 20,745 shares shall be undesignated preferred stock, none of which are outstanding.All such shares have been duly authorized and validly issued (or validly reserved for future issuance) and are (or will be, when issued) fully paid and nonassessable.
Except as set forth in Schedule 4.2 :
(i) there are no outstanding subscriptions, warrants, options, calls or commitments of any character relating to or entitling any Person to purchase or otherwise acquire any Capital Stock or other equity securities of the Company or any of its Subsidiaries;(ii) there are no obligations or securities convertible into or exchangeable or exercisable for shares of any Capital Stock or other equity securities of the Company or any of its Subsidiaries or any commitments of any character relating to or entitling any Person to purchase or otherwise acquire any such obligations or securities; and(iii) there are no preemptive or similar rights to subscribe for or to purchase any Capital Stock or other equity securities of the Company or any of its Subsidiaries;
provided that the representation set forth in clauses (i) through (iii) above, insofar as it relates to any agreements or arrangements to which the Company is not a party, is qualified by the Company’s knowledge.
Schedule 4.2 identifies:
(i) all holders of Capital Stock of the Company, all holders of outstanding rights, warrants and options to acquire Capital Stock of the Company and all holders of any other obligations or securities convertible into or exchangeable or exercisable for shares of Capital Stock;(ii) the title of the class and series, and amount, of securities held by each of such holders;
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(iii) the number of shares of Common Stock into which the securities held by each of such holders may be exchanged, exercised or converted; and(iv) the total number of shares of Common Stock that are reserved for future issuance for any purpose.Section 4.3 Directors, Owners and Affiliates of the CompanySchedule 4.3 contains (except as noted therein) complete and correct lists:
(i) of the Affiliates controlled by the Company, other than its Subsidiaries; and(ii) of the Company’s directors and senior officers.Section 4.4 Authorization of the Note DocumentsThe Company has taken all actions necessary to authorize it:
(i) to enter into and perform all of its obligations under each of the Note Documents and the Acquisition Documents; and(ii) to issue and perform all of its obligations with respect to the Notes,and to consummate the transactions contemplated hereby and thereby. Each of the Note Documents and the Acquisition Documents is a valid and legally binding obligation of the Company, enforceable against it in accordance with its terms, except for (A) the effect thereon of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the rights of creditors generally and (B) limitations imposed by federal or state law or equitable principles upon the specific enforceability of any of the remedies, covenants or other provisions thereof and upon the availability of injunctive relief or other equitable remedies.
Each of the Guarantors has taken all actions necessary to authorize it:
(i) to enter into and perform all of its obligations under this Agreement; and(ii) to perform all of its Obligations pursuant to its Guarantee of the Notes,and to consummate the transactions contemplated hereby and thereby. This Agreement and the Note Guarantees constitute valid and legally binding obligations of each of the Guarantors, enforceable against each of the Guarantors in accordance with their respective terms, except for (A) the effect thereon of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the rights of creditors generally and (B) limitations imposed by federal or state law or equitable principles upon the specific enforceability of any of the remedies, covenants or other provisions thereof and upon the availability of injunctive relief or other equitable remedies.
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Section 4.5 No ViolationThe execution and delivery of the Note Documents and the Acquisition Documents, the issuance, sale and delivery of the Notes, the performance by the Company and the Guarantors of their respective obligations under the Note Documents, the Acquisition Documents and the GameSpy Financing Documents, and the consummation of the transactions contemplated hereby and thereby, will not:
(i) violate any provision of the Charter Documents of the Company or any of its Subsidiaries;(ii) violate any statute, law, rule or regulation or any judgment, decree, order, regulation or rule of any court or governmental authority to which the Company or any of its Subsidiaries or any of their respective assets or properties may be subject, except for such violations as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;(iii) permit or cause the acceleration of the maturity of any Indebtedness or other obligation of the Company or any of its Subsidiaries; or(iv) violate, or conflict with, or constitute a default under, or permit the termination of, or require the consent of any Person under, or result in the creation of any Lien upon any asset or property of the Company or any of its Subsidiaries under any mortgage, indenture, loan agreement, note, debenture or other agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries (or the respective assets or properties of any of them) may be bound, other than such violations, conflicts, defaults, terminations and Liens, or such failures to obtain consents, as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.Except as disclosed on Schedule 4.5 , all required consents, approvals or authorizations of, or notices to or filings, registrations or qualifications with, any governmental authority or other Person required in connection with the transactions contemplated by the Note Documents, the Acquisition Documents, and the GameSpy Financing Documents have been obtained or made.
Section 4.6 No DefaultsNo event has occurred or failed to occur that constitutes:
(i) a default or event of default (or that would constitute a default or event of default with the giving of notice or the passage of time or both) under this Agreement or any other GameSpy Financing Document; or(ii) an event of default under any other agreement for borrowed money, and
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the conditions to the closing of the Merger set froth in Sections 10.1 of the Merger Agreement shall have been satisfied.
Section 4.7 Use of ProceedsThe net proceeds from the sale of the Notes pursuant to this Agreement and the sale of Series A Preferred Stock and Series B Preferred Stock pursuant to the Securities Purchase Agreement will be used as provided on Schedule 2.7 .
Section 4.8 Outstanding Indebtedness; LiensThe capitalization table on Schedule 4.8 sets forth and identifies in reasonable detail all outstanding short-term and long-term Indebtedness of the Company and its Subsidiaries as of the Closing Date (other than under this Agreement), including all notes issued by the Company to finance the acquisition of real or personal property, prior to and after giving effect to the GameSpy Acquisition and the other transactions contemplated by this Agreement. Schedule 4.8 includes the names of the holders, principal amounts, required interest payments and maturity dates of all such Indebtedness and specifies all Indebtedness which is in any way subordinated to the Indebtedness represented by the Notes. Set forth on Schedule 4.8 is a list and description of all existing Liens, other than Permitted Liens, on the property of the Company and the Guarantors as of the Closing Date.
As of the Closing Date and after giving effect to the transactions contemplated hereby to occur on the Closing Date (including the GameSpy Acquisition), the Company shall have total funded Indebtedness (excluding accounts payable and accrued expenses) on a consolidated basis not in excess of $42.5 million.
Section 4.9 Financial Statements; Projections; No Undisclosed Liabilities(a) The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 4.9(a) . All such financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject to the normal year-end adjustments and the absence of footnotes in the case of the unaudited financial statements).(b) The Company has delivered to each Purchaser copies of the financial projections listed on Schedule 4.9(b) (the “ Projections ”). All of those financial projections were prepared by the Company in good faith based upon reasonable assumptions. It is understood and agreed that the Projections are estimates and not a guarantee of actual results.
(c) Except as set forth on Schedule 4.9(c) , neither the Company nor any of its Subsidiaries has any liability (absolute or contingent) except:
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(i) those shown on the most recent balance sheets described in Section 4.9(a) hereof;(ii) those incurred in the ordinary course of business since the date of such balance sheets;(iii) those incurred under the Note Documents and the Acquisition Documents; and(iv) those that would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.(d) The pro forma financial statements of the Company and its Subsidiaries to be delivered pursuant to Section 2.8 will be prepared in accordance with the accounting requirements of Rule 11-02 of Regulation S-X and other accounting requirements of the Exchange Act and the related published rules and regulations thereunder that would be applicable to a registration statement filed under the Securities Act. The assumptions used in preparing the pro forma financial statements delivered hereby provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amountsSection 4.10 No Material Adverse ChangeSince December 31, 2003, no event, condition, occurrence or development has occurred that has had, either individually or in the aggregate, a Material Adverse Effect, on the Company and its Subsidiaries taken as a whole, and no event, condition, occurrence or development has occurred that would, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Section 4.11 LitigationExcept as set forth on Schedule 4.11 , there is no action, proceeding or investigation commenced or, to the Company’s knowledge, threatened, against or affecting the Company or any of its Subsidiaries in any court or before any governmental or quasi-governmental authority or arbitration board or tribunal, foreign or domestic, except for such actions which would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and there is no such action seeking to restrain, enjoin, prevent the consummation of or otherwise challenge any of the Note Documents, the GameSpy Financing Documents or the Acquisition Documents, the issuance of the Notes, Series A Preferred Stock or Series B Preferred Stock, or the consummation of any of the other transactions contemplated hereby or thereby.
Neither the Company nor any of its Subsidiaries is subject to any judgment, order, decree, rule or regulation of any court, governmental authority or arbitration board or tribunal that has had or that would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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Section 4.12 Title to and Condition of PropertiesExcept for Permitted Liens, each of the Company and its Subsidiaries has good and marketable title to all the real properties and other material assets (tangible or intangible) it purports to own, free and clear of all Liens.
All leases and other material agreements to which the Company or any of its Subsidiaries is a party are valid and binding and in full force and effect, no default has occurred or is continuing thereunder and no consent need be obtained (other than consents that have been or will be obtained prior to the Closing) from any Person in respect of any such lease or agreement in connection with the transactions contemplated by the Acquisition Documents, the GameSpy Financing Documents or the Note Documents, except such as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries enjoys peaceful and undisturbed possession under all leases to which it is a party as lessee, except for such leases that, both singly and in the aggregate, are immaterial to the business of the Company and its Subsidiaries taken as a whole.
Except for such assets, plants and facilities as are immaterial in the aggregate to the business of the Company and its Subsidiaries taken as a whole, all tangible assets, plants and facilities of each of the Company and its Subsidiaries are in good condition and repair and are adequate, in the reasonable opinion of the Company, for the uses to which they are being put or would be put in the ordinary course of business.
Section 4.13 Environmental Compliance(a) Except as disclosed on Schedule 4.13 and except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:(i) each of the Company and its Subsidiaries:(A) is in compliance with the provisions of all Environmental Laws relating to its business, properties and assets, including to the Real Property owned, leased or operated by any of them or the ownership, use, control, management, operation or occupancy thereof; and(B) possesses all Environmental Permits that may be necessary for such ownership, use, control, management, operation or occupancy as may otherwise be necessary for the operation of its business;(ii) none of the Company or any of its Subsidiaries has violated any provision of any applicable Environmental Laws; and(iii) none of the Company or any of its Subsidiaries has any liability, absolute or contingent, under any Environmental Law, including, any liability related to the “release” (as defined in CERCLA) of, or any containment caused by, any Hazardous Materials.
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(b) To the knowledge of the Company, there have been no discharges, emissions, or releases of Hazardous Material on, upon, under, into or from any Real Property, or any real property owned, leased or operated by any predecessor in interest of the Company and any of its Subsidiaries.(c) To the knowledge of the Company, no current or former Real Property of the Company or any of its Subsidiaries or any current or former Real Property of any predecessor in interest of the Company or any of its Subsidiaries is listed or proposed for listing on the National Priorities List or the Comprehensive Environmental Response, Compensation, and Liability Information System, both as promulgated under CERCLA, or any comparable state list, and none of the Company or any of its Subsidiaries has received any written notification of potential or actual liability, or any written request for information, with respect to any current or former Real Property pursuant to CERCLA or any comparable state or local Environmental Laws.Section 4.14 Intellectual PropertyExcept as disclosed in Schedule 4.14 and except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, to the Company’s knowledge:
(i) the Company and its Subsidiaries own, possess or license all right, title and interest in and to all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks, trade dress, trade secrets, know-how, computer software, data source code, object code and documentation thereof, trade names, domain names and corporate names and registrations or rights thereto (“ Intellectual Property Rights ”), that are required to conduct its business as currently being conducted and as proposed to be conducted in the future, free and clear of all Liens and of claims of others;(ii) there have been no claims made or threatened against the Company or any of its Subsidiaries asserting the invalidity, misuse or unenforceability of any of the Intellectual Property Rights owned, possessed or licensed by them, and no product of the Company or any of its Subsidiaries infringes, in any material respect, any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and(iii) the Company and its Subsidiaries have taken all necessary actions to maintain the Intellectual Property Rights that they own, possess and license, and there is no material violation by any Person of any right of the Company or any of its Subsidiaries with respect to Intellectual Property Rights owned, possessed, licensed or used by the Company or any of its Subsidiaries.
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Section 4.15 TaxesExcept as would not, individually or in the aggregate, have a Material Adverse Effect on the liability of Company or its Subsidiaries for taxes:
(i) all tax returns required to be filed by the Company or any of its Subsidiaries in any jurisdiction (including foreign jurisdictions) have been timely filed, and all such tax returns are true, correct and are complete;(ii) all taxes, assessments, fees and other charges due from the Company or any of its Subsidiaries that are due and payable have been paid other than any taxes being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and for which adequate reserves or other appropriate provisions have been made in accordance with GAAP;(iii) the Company knows of no actual or proposed material additional tax assessments for any fiscal period against the Company or any of its Subsidiaries;(iv) none of the Company’s or any of its Subsidiaries’ tax returns are under audit, and no waivers of the statute of limitations or extensions of time with respect to any tax returns have been granted by the Company or any of its Subsidiaries;(v) neither the Company nor any of its Subsidiaries has received written notice from any governmental agency in a jurisdiction in which such entity does not file a tax return stating that such entity is or may be subject to taxation by that jurisdiction; and(vi) the charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of federal, state or other taxes for all fiscal periods are adequate in accordance with GAAP.The Company is not a United States real property holding corporation as defined in Section 897(c)(2) of the Internal Revenue Code.
Section 4.16 ERISASchedule 4.16(a) contains a complete list of Plans. Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the Closing Date with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The sum of the present value of all accumulated benefits under all Single Employer Plans (based on the assumptions used to fund such plans) did not, as reflected in the last annual actuarial valuation report issued prior to the Closing Date, exceed the aggregate market value of the assets of such plans. Except
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as would not reasonably be expected to have a Material Adverse Affect, (x) neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in any liability under ERISA, and (y) neither the Company nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Company or any Commonly Controlled Entity was to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the Closing Date. No such Multiemployer Plan is in Reorganization or is Insolvent.
(b) Except as listed on Schedule 4.16(b) or as required under Part 6 of Title I of ERISA and Section 4980B of the Code or other comparable state or local law, neither the Company nor any Commonly Controlled Entity has an obligation to make any payment to, or with respect to, any former employee of the Company or any Commonly Controlled Entity pursuant to Plans which are “employee welfare benefits plans” (as defined in Section 3(1) of ERISA).
Section 4.17 Material ContractsAll Material Contracts are set forth in Schedule 4.17 .
Section 4.18 Compliance with Laws; Charter Documents; Material ContractsExcept as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, neither of the Company nor any of its Subsidiaries is in violation of any statutes, laws, ordinances, or governmental rules or regulations or any judgment, order or decree (federal, state, local or foreign) to which any of them or any of their respective assets or properties is subject or has failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership or operation of their respective properties or the conduct of their respective businesses.
Additionally, neither the Company nor any of its Subsidiaries is in conflict with, or breach or violation of, their respective Charter Documents, and except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, neither the Company nor any of its Subsidiaries is in breach or violation of, or default under, any Material Contract.
Section 4.19 Labor RelationsNeither the Company nor any of its Subsidiaries is, to the knowledge of the Company, engaged in any unfair labor practice. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, there is:
(i) no unfair labor practice complaint pending or to the best knowledge of the Company threatened against the Company or any of its Subsidiaries before the National Labor Relations Board and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is so pending or known to be threatened;
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(ii) no strike, labor dispute, slowdown or stoppage pending or to the best knowledge of the Company threatened against the Company or any of its Subsidiaries; and(iii) no union representation question existing with respect to the employees of the Company or any of its Subsidiaries and no union organizing activities are taking place.Section 4.20 No Violation of Regulations of Board of Governors of Federal Reserve SystemNone of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Exchange Act or any regulation issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System.
Section 4.21 Private OfferingAssuming the accuracy of the representations of the Purchasers in Section 1.3 , the sale of the Notes pursuant to this Agreement is exempt from the registration and prospectus delivery requirements of the Securities Act. In the case of each offer or sale of the Notes, no form of general solicitation or general advertising was used by the Company or its representatives, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
The Purchasers are the only purchasers of the Notes. No similar securities have been issued and sold by the Company within the six-month period immediately prior to the date hereof in such a manner as to bring the issuance and sale of the Notes to any Purchaser hereunder within the provisions of Section 5 of the Securities Act. The Company agrees that neither it, nor anyone acting on behalf of it, will offer or sell the Notes, or any similar securities, in the future if such offer or sale might bring the issuance and sale of the Notes to any Purchaser hereunder within the provisions of Section 5 of the Securities Act.
Section 4.22 Governmental RegulationsNeither the Company nor any of its Subsidiaries is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money.
Section 4.23 BrokersExcept as disclosed on Schedule 4.23 , neither the Company nor any of its Subsidiaries has dealt with any broker, finder, commission agent or other Person in connection with the sale of the Notes and the transactions contemplated by this Agreement and neither the Company nor GameSpy is under an obligation to pay any broker’s or finder’s fee or commission or similar payment in connection with such transactions. The Company hereby agrees to indemnify and
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hold the Holders harmless from and against any and all actions, suits, claims, costs, expenses, losses, liabilities and/or obligations in connection with or relating to any broker’s or finder’s fees or commission or similar payment in connection with such transactions.
Section 4.24 SolvencyThe Company is not, and will not be after giving effect to the issuance of the Notes, Senior Subordinated Notes, Series A Preferred Stock, and Series B Preferred Stock, and the execution, delivery and performance of the Acquisition Documents, the GameSpy Financing Documents, the Note Documents and any instrument governing Indebtedness of the Company or a Subsidiary of the Company incurred as of the Closing Date, (A) unable to pay its debts and meet its Obligations as they become due or (B) left with unreasonably small capital with which to engage in its anticipated business, and the Company has not, and will not have after giving effect to the issuance of the Notes, Senior Subordinated Notes, Series A Preferred Stock, and Series B Preferred Stock and the other transactions contemplated by the Note Documents, the GameSpy Financing Documents and the Acquisition Documents, incurred debts beyond its ability to pay such debts as they mature.
Section 4.25 Full DisclosureNone of the Note Documents, any document attached hereto or thereto or contemplated hereby or thereby, or furnished by or on behalf of the Company to each Purchaser in connection with the negotiation and sale of the Notes, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Company that has not been disclosed to each Purchaser that would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. In addition, to the best knowledge of the Company, there is not currently any statute, regulation, rule or requirement that would have, either individually or in the aggregate, a Material Adverse Effect on the ability of the Company and its Subsidiaries to conduct their respective businesses as currently conducted.
Section 4.26 Representations in Securities Purchase AgreementAll of the representations and warranties of the Company set forth in Article V of the Securities Purchase Agreement and Articles II and III of the Series A Preferred Stock Purchase Agreement are true and correct.
Section 4.27 Survival of Representations and WarrantiesAll statements contained in any certificate or other document delivered to any Purchaser by or on behalf of the Company (a) at Closing, pursuant to the terms of this Agreement, and (b) after Closing, pursuant to Section 5.2 , shall be deemed to constitute representations and warranties under this Agreement with the same force and effect as the representations and warranties expressly set forth herein. All of the Company’s representations and warranties thereunder and hereunder shall survive the execution and delivery of the same, any investigation by any Purchaser and the issuance of the Notes.
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Section 4.28 Security InterestsThe Security Documents, when filed and/or recorded, will create, in favor of the Collateral Agent for the ratable benefit of the Holders, as security for the Secured Obligations, a legal, valid, enforceable and perfected security interest in and Lien upon all of the Collateral, superior to and prior to the rights of all third persons other than the holders of Permitted Liens and subject to no other Liens except Permitted Liens. The mortgagor under each Mortgage has good and marketable title to the Mortgaged Real Property owned by it and a valid, marketable and insurable leasehold interest or estate in the Mortgaged Real Property leased by it, each free and clear of all Liens other than Permitted Liens. The respective pledgor or assignor, as the case may be, has (or on or after the time it executes the respective Security Document, will have) good and marketable title to all items of Collateral (other than real property subject to a Mortgage) covered by such Security Document free and clear of all Liens except Permitted Liens. No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document which shall have been made prior to, contemporaneously with or promptly after the execution and delivery thereof.
Section 4.29 Real PropertyExcept as set forth on Schedule 4.29 , neither the Company nor any of its Subsidiaries has any interest in any real property.
ARTICLE V So long as any of the Notes remain unpaid and outstanding, the Company covenants to the Holders of outstanding Notes as follows:
Section 5.1 Payment of NotesThe Company will pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in this Agreement and the Notes.
Section 5.2 Delivery of Financial and Other Statements and Reports(a) The Company will deliver to each Holder the following:(i) Monthly Financial Statements. As soon as available, but in any event not later than 30 days after the last day of each month (except for the last month of each fiscal quarter), a consolidated balance sheet of the Company and its Subsidiaries as of the end of such month and related consolidated statements of operations and cash flows, of the Company and its Subsidiaries for such month and for the portion of the fiscal year through the end of such month, together with related consolidating statements for such periods (provided that such consolidating statements are being prepared for the Company’s management or other creditors), all
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in reasonable detail and prepared in accordance with GAAP consistently applied, and accompanied by a comparison of current month and year-to-date results as reported in such consolidated statements to (A) results for the corresponding periods of the prior fiscal year and (B) results projected for such periods in the budget and business plans delivered to Holders pursuant to Section 5.2(a)(iv) at the commencement of the then current fiscal year;(ii) Quarterly Financial Statements. As soon as available, but in any event not later than 45 days after the last day of each fiscal quarter (except for the last fiscal quarter of each fiscal year), a consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter and related consolidated statements of operations, stockholders’ equity and cash flows, of the Company and its Subsidiaries for such quarter and for the portion of the fiscal year through the end of such quarter, together with related consolidating statements for such periods (provided that such consolidating statements are being prepared for the Company’s management or other creditors), all in reasonable detail and prepared in accordance with GAAP consistently applied, and accompanied by a comparison of current quarter and year-to-date results as reported in such consolidated statements to (A) results for the corresponding periods of the prior fiscal year and (B) results projected for such periods in the budget and business plans delivered to Holders pursuant to Section 5.2(a)(iv) at the commencement of the then current fiscal year;(iii) Annual Financial Statements. As soon as available, but in any event not later than 90 days after the close of each fiscal year, an audited consolidated balance sheet of the Company and its Subsidiaries as of the close of such fiscal year, and related audited consolidated statements of operations, cash flows and changes in stockholder’s equity of the Company and its Subsidiaries for such fiscal year, reported on (without any material qualification arising from the scope of the audit or with respect to the continuance of the Company and its Subsidiaries as going concerns) by a nationally recognized firm of independent certified public accountants and prepared in accordance with GAAP consistently applied;(iv) Budgets . As soon as available, but in any event not later than 60 days after the first day of each fiscal year, a reasonably detailed consolidated monthly budget for the Company and its Subsidiaries for the immediately forthcoming fiscal year, which plan shall have been approved by the Company’s board of directors;(v) Auditor Reports . Promptly upon receipt thereof (unless restricted by applicable professional standards), copies of all material reports submitted to the Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of the Company and its Subsidiaries made by such accountants, including any
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comment letter submitted by such accountants to management in connection with their annual audit;(vi) Information Provided to Other Securityholders . Concurrently with the provision of the same to or by the holders of Senior Subordinated Notes, Common Stock, Series A Preferred Stock or Series B Preferred Stock copies of any financial or other report or notice delivered to, or received from, any such holders, in each case as a class; and(vii) Other Information. On an as requested basis, any other information reasonably requested by any Holder.(b) Compliance Certificates. The Company will deliver to each Holder, together with the financial statements under Section 5.2(a)(ii) , within 45 days after the end of each fiscal quarter, an Officers’ Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal quarter has been made under the supervision of the signing officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Agreement, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Agreement and is not in Default in the performance or observance of any of the terms, provisions and conditions of this Agreement (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of, or interest and premium, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.(c) Accountant Letters . So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 5.2(iii) will be accompanied by a written statement of the Company’s independent public accountants (who shall be a firm of established national reputation or otherwise approved by the Majority Holders) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would cause them to believe that any Default or Event of Default has occurred or, if any such Default or Event of Default has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such Default or Event of Default. The Majority Holders hereby approve Burr, Pilger & Mayer as the independent public accountants of the Company for purposes of delivering the first report to be delivered pursuant to this Section 5.2(c) .(d) Notice of Defaults. So long as any of the Notes are outstanding, the Company will deliver to each Holder, forthwith upon any officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.
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Section 5.3 TaxesThe Company will timely pay, and will cause each of its Subsidiaries to timely pay, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.
Section 5.4 InsuranceThe Company will maintain liability, casualty, business continuity and other insurance with a reputable insurer or insurers in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets.
Section 5.5 Corporate ExistenceThe Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate or other entity existence of each of its Subsidiaries in accordance with the respective organizational documents of each of them and the corporate or other entity rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided , however , that with respect to any Subsidiary of the Company, the Company will not be required to preserve any such right, license or franchise, or corporate or other entity existence, if the board of directors of the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to any Holder.
Section 5.6 Books and RecordsThe Company will, and will cause each of its Subsidiaries to, keep proper books of record and account, in which full and materially correct entries shall be made in accordance with GAAP of all financial transactions and the assets and business of Company and each of its Subsidiaries.
Section 5.7 Compliance with LawsThe Company will, and will cause each of its Subsidiaries to, comply with all statutes, ordinances, governmental rules and regulations, judgments, orders and decrees (including all Environmental Laws and Environmental Permits) to which any of them is subject, and obtain and keep in effect all licenses, permits (including Environmental Permits), franchises and other governmental authorizations necessary to the ownership or operation of their respective properties or the conduct of their respective businesses, except to the extent that the failure to so comply or obtain and keep in effect would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 5.8 Use of ProceedsThe Company will apply the proceeds from the sale of the Notes, Senior Subordinated Notes, Series A Preferred Stock and Series B Preferred Stock in accordance with, and at the times specified by, the statement of sources and uses delivered pursuant to Section 2.7 .
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Section 5.9 Offer to Purchaser with Excess Cash and Net Financing ProceedsWithin 30 days of the receipt of any Net Financing Proceeds, and within 90 days of the end of each fiscal year ending after December 31, 2004 in which the Company generated Excess Cash Flow, the Company will commence an offer to all Holders of Notes to purchase the maximum principal amount of, plus accrued and unpaid interest on, the Notes that may be purchased out of such Net Financing Proceeds and the Applicable Percentage of such Excess Cash Flow (“ Mandatory Repurchase Offer ”). The offer price in any Mandatory Repurchase Offer will be equal to the principal amount Notes being repurchased plus accrued and unpaid interest to the date of purchase, and will be payable in cash. If any Net Financing Proceeds or Excess Cash Flow remains after completion of a Mandatory Repurchase Offer, the Company may use such Net Financing Proceeds or Excess Cash Flow for any purpose not otherwise prohibited by this Agreement. Other than as specifically provided in this Section 5.9 any Mandatory Repurchase Offer or purchase of Notes pursuant to this Section 5.9 shall be made pursuant to the provisions of Sections 10.2 through 10.6 .
Section 5.10 Additional Collateral, etc.(a) With respect to any Property acquired after the Closing Date by the Company or any of its Subsidiaries (other than (i) any Property described in Section 5.10(b) or Section 5.10(c) and (ii) Property acquired by an Excluded Foreign Subsidiary) as to which the Collateral Agent, for the benefit of the Secured Parties, does not have a perfected Lien, promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement or such other documents as may be required under any applicable law or as the Collateral Agent deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Secured Parties, a security interest in such Property and (ii) take all actions necessary or advisable to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected first priority security interest in such Property subject only to Permitted Liens, including the filing of UCC financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Collateral Agent.(b) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary) created or acquired after the Closing Date (which, for the purposes of this paragraph, shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary), by the Company or any of its Subsidiaries, promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement as may be required under any applicable law or as the Collateral Agent deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by the Company or any of its Subsidiaries, (ii) deliver to the Collateral Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Company or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary or advisable to grant to the Collateral Agent for the benefit of the Secured Parties a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the recording of instruments in the United States Patent and Trademark Office and the United States Copyright Offices, the execution and delivery by all
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necessary persons of control agreements, and the filing of UCC financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Collateral Agent, and (iv) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent.(c) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing Date by the Company or any of its Subsidiaries (other than any Excluded Foreign Subsidiaries), promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement or such other documents as may be required under any applicable law or as the Collateral Agent deems necessary or advisable in order to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by the Company or any of its Subsidiaries (other than any Excluded Foreign Subsidiaries), ( provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Excluded Foreign Subsidiary be required to be so pledged), (ii) deliver to the Collateral Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Company or such Subsidiary, as the case may be, and take such other action as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the Lien of the Collateral Agent thereon, and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent.(d) Notwithstanding anything to the contrary in this Section 5.10 , paragraphs (a), (b), (c) and (e) of this Section 5.10 shall not apply to any Property, new Subsidiary or new Excluded Foreign Subsidiary created or acquired after the Closing Date, as applicable, as to which the Collateral Agent has determined in its sole discretion that the collateral value thereof is insufficient to justify the difficulty, time and/or expense of obtaining a perfected security interest therein.(e) With respect to any fee interest (or leasehold interest, to the extent such leasehold is created under a triple net ground lease or similar transaction) in any real property having a value (together with improvements thereof) of at least $100,000 acquired after the Closing Date by the Company or any of its Subsidiaries (other than any such real property owned by an Excluded Foreign Subsidiary), promptly (i) execute and deliver a first priority Mortgage in favor of the Collateral Agent, for the benefit of the Secured Parties, covering such real property, (ii) if requested by the Collateral Agent, provide the Holders with (A) title and extended coverage insurance, complying with the provisions of Section 5.10(f) , covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Collateral Agent) as well as a current ALTA survey thereof complying with the provisions of Section 5.10(g) together with a surveyor’s certificate, (B) flood insurance complying with the provisions of Section 5.10(h) and (C) any consents or estoppels reasonably deemed necessary or advisable by the Collateral Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Collateral Agent and (iii) if requested by the Collateral Agent, deliver to the
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Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent.(f) If requested by the Collateral Agent pursuant to Section 5.10(e) , the Collateral Agent shall receive in respect of each mortgaged property a mortgagee’s title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Collateral Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on, and security interest in, such Mortgaged Property free and clear of all defects and encumbrances, except for Permitted Liens disclosed therein; (D) name the Collateral Agent for the benefit of the Secured Parties as the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970 form B (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Collateral Agent may reasonably request in form and substance acceptable to the Collateral Agent, including (to the extent applicable with respect to such mortgaged property and available in the jurisdiction in which such mortgaged property is located), the following: variable rate endorsement; survey endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last dollar and tie-in endorsement; access coverage; separate tax parcel coverage; contiguity coverage; usury; closing business; subdivision; environmental protection lien; CLTA 119.2 and CLTA 119.3 (for leased Real Estate, only); and such other endorsements as the Collateral Agent shall reasonably require in order to provide insurance against specific risks identified by the Collateral Agent in connection with such mortgaged property, and (G) be issued by title companies satisfactory to the Collateral Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Collateral Agent). Also, the Collateral Agent shall receive (i) evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid and (ii) a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to above and a copy of all other material documents affecting the mortgaged properties.(g) If requested by the Collateral Agent pursuant to Section 5.10(e) , the Collateral Agent shall receive, and the title insurance company issuing the policy referred to in Section 5.10(e) (the “ Title Insurance Company ”) shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Collateral Agent and the Title Insurance Company in a manner satisfactory to them, dated not more than 30 days prior to the acquisition of an interest in such property unless the Title Insurance Company has agreed to delete its survey disclosure exception on the basis of an earlier survey and such survey is, in any event, dated not more than 2 years prior to such date by an independent professional licensed land surveyor satisfactory to the Collateral Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1997 or 1999 and meeting the accuracy requirements as defined therein, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: each survey shall (A) be a current “as-built” survey showing the location of any adjoining streets (including their widths and any pavement or other improvements), easements (including the recorded information with respect to all recorded instruments), the mean high water base line or other legal boundary lines of any adjoining bodies of water, fences, zoning or
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restriction setback lines, rights-of-way, utility lines to the points of connection and any encroachments; (B) locate all means of ingress and egress, certifying the amount of acreage and square footage, indicate the address of the property, contain the legal description of the property, and also contain a location sketch of the property; (C) show the location of all improvements as constructed on the property, all of which shall be within the boundary lines of the property and conform to all applicable zoning ordinances, set-back lines and restrictions and the surveyor shall certify compliance with the foregoing; (D) indicate the location of any improvements on the property with the dimensions in relations to the lot and building lines; (E) show measured distances from the improvements to be set back and specified distances from street or property lines in the event that deed restrictions, recorded plats or zoning ordinances require same; (F) designate all courses and distances referred to in the legal description, and indicate the names of all adjoining owners on all sides of the property, to the extent available; and (G) indicate the flood zone designation, if any, in which the property is located. The legal description of the applicable property shall be shown on the face of each survey, and the same shall conform to the legal description contained in the title policy described below.(h) If requested by the Collateral Agent pursuant to Section 5.10(e) , the Collateral Agent shall receive, (A) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage (2) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the indebtedness secured by such Mortgage or that may be extended to such maturity date and (B) confirmation that the Company has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board.Section 5.11 Security InterestsThe Company, each Guarantor and each of their respective Domestic Subsidiaries will perform any and all acts and execute any and all documents (including, the execution, amendment or supplementation of any financing statement and continuation statement) for filing in any appropriate jurisdiction under the provisions of the UCC, local law or any statute, rule or regulation of any applicable jurisdiction which are necessary in order to maintain or confirm in favor of the Collateral Agent a valid and perfected Lien on the Collateral and any Additional Collateral, subject to no Liens except for Permitted Liens. Upon request of the Collateral Agent, the Company shall, as promptly as practicable after the filing of any financing statements, deliver to the Collateral Agent acknowledgment copies of, or copies of lien search reports confirming the filing of, financing statements duly filed under the UCC of all jurisdictions as may be necessary or desirable to perfect the Lien created, or purported or intended to be created, by each Security Document.
Section 5.12 Post Closing Security Interest Matters(a) No later than 30 days following the date of this Agreement, each Obligor shall deliver to each Holder and the Collateral Agent, either(i) a fully executed Control Agreement (in the form of either (1) Exhibit E to the Guarantee and Collateral Agreement or (2) a Control Agreement
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delivered to the Collateral Agent on the Closing Date, or otherwise approved by the Majority Holders) with respect to each of its Deposit Accounts (as such term is defined in the Guarantee and Collateral Agreement), or(ii) an Officer’s Certificate certifying that such Obligor is in compliance with Section 5.2(d) of the Guarantee and Collateral Agreement.(b) No later than 15 days following the date of this Agreement, each Obligor shall file all documents and take all reasonable steps necessary to cause all their intellectual property rights registered with each Governmental Authority (including but not limited to the United States Patent and Trademark Office and the European Union) to be registered in the name of either the Company or GameSpy, to the reasonable satisfaction of the Collateral Agent.(c) No later than 30 days following the date of this Agreement, the Company shall, either(i) consummate the dissolution Two Cents, Inc. pursuant to the applicable laws of the State of New Jersey, or(ii) cause Two Cents, Inc. to deliver (1) a duly executed counterpart signature page to the Guarantee and Collateral Agreement and the Intellectual Property Security Agreement attached as an exhibit to the Guarantee and Collateral Agreement, (2) a Secretary’s Certificate in substantially the form of the Secretary’s Certificate delivered pursuant to Section 2.4 , and (3) an opinion of counsel covering the matters set forth in the opinions delivered pursuant to Section 2.5 .So long as any of the Notes remain unpaid and outstanding, the Company covenants to the Holders of outstanding Notes as follows:
Section 6.1 Incurrence of Indebtedness and Issuance of Preferred Stock(a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “ incur ”) any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock.(b) The provisions of Section 6.1(a) hereof will not prohibit the incurrence of, or prohibit the Company and its Subsidiaries from remaining liable with respect to, any of the following items of Indebtedness (collectively, “ Permitted Debt ”):(i) Existing Debt, excluding the Notes and the Senior Subordinated Notes;
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(ii) the incurrence by the Company of Indebtedness represented by the Notes to be issued on the date of this Agreement;(iii) the incurrence by the Company of Indebtedness represented by the Senior Subordinated Notes issued on the date of this Agreement pursuant to the Securities Purchase Agreement;(iv) the incurrence by the Company of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that is described in Section 6.1(b)(ii) and Section 6.1(b)(iv) ;(v) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness owed to the Company or any of its Wholly Owned Subsidiaries; provided, however , that:(A) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor;(B) in each case where the Company or any Guarantor is the creditor, such Indebtedness is evidenced by a demand promissory note pledged to the Collateral Agent for the ratable benefit of the Holders pursuant to the Security Agreement;(C) the following will be deemed, in each case, to constitute an incurrence of Indebtedness by the Company or one of its Subsidiaries, as the case may be, that was not permitted by this Section 6.1(b)(iv) ;(1) any subsequent issuance or transfer of Equity Interests that result in any Indebtedness originally incurred pursuant to this Section 6.1(b)(iv) being held by a Person other than the Company or a Subsidiary thereof, and(2) any sale or other transfer of any Indebtedness originally incurred pursuant to this Section 6.1(b)(iv) to a Person that is not either the Company or a Wholly Owned Subsidiary thereof,(vi) the issuance by any of the Company’s Subsidiaries to the Company or to any of its Wholly Owned Subsidiaries of shares of preferred stock; provided , however , that the following will be deemed, in each case, to constitute an issuance of preferred stock by such Subsidiary that was not permitted by this Section 6.1(b)(vi) :
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(A) any subsequent issuance or transfer of Equity Interests that results in any preferred stock originally issued pursuant to this Section 6.1(b)(vi) being held by a Person other than the Company or a Wholly Owned Subsidiary of the Company; and(B) any sale or transfer of any preferred stock originally issued pursuant to this Section 6.1(b)(vi) to a Person that is not either the Company or a Wholly-Owned Subsidiary of the Company;(vii) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations in the ordinary course of business;(viii) the Guarantee by the Company or any of its Subsidiaries of Indebtedness of the Company or a Subsidiary of the Company that was permitted to be incurred by another provision of this Section 6.1 ; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;(ix) the incurrence by the Company or any of its Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, bankers’ acceptances, performance and surety bonds in the ordinary course of business;(x) the incurrence by the Company of any Indebtedness represented by the Series A Preferred Stock and Series B Preferred Stock outstanding or issued on the Closing Date; and(xi) the incurrence by the Company or any of its Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five Business Days.The accrual of interest, the accretion or amortization of original issue discount on any Indebtedness, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 6.1
Section 6.2 No Layering.The Company will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantee on substantially identical terms; provided , however , that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the
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Company solely by virtue of being unsecured or by virtue of being secured on a first or junior Lien basis.
Section 6.3 Restrictions on LiensThe Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness, Attributable Debt, or trade payables on any asset now owned or hereafter acquired, except Permitted Liens.
Section 6.4 Limitation on Restricted PaymentsThe Company will not, and will not permit any of its Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Subsidiaries’ Equity Interests (including any payment in connection with any merger or consolidation involving the Company or any of its Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Subsidiary of the Company);(ii) purchase, redeem or otherwise acquire or retire for value (including in connection with any merger or consolidation involving the Company or any of its Subsidiaries) any Equity Interests of the Company or any direct or indirect parent of the Company;(iii) make any payment (whether or not in cash) on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is pari passu with or subordinated to the Notes or any of the Note Guarantees (collectively “ Junior Debt ”); or(iv) make any Restricted Investment,(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “ Restricted Payments ”).
The foregoing provisions will not prohibit:
(i) so long as (A) no bankruptcy, insolvency or liquidation proceeding is pending and (B) no Default in the payment of an amount due under the Note Documents has occurred and is continuing or would be caused thereby, the payment of regularly scheduled interest payments on the Senior Subordinated Notes pursuant to their terms on the date hereof;(ii) so long as no Default has occurred and is continuing or would be caused thereby, the payment of any dividend (or, in the case of any partnership or
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limited liability company, any similar distribution) by a Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis;(iii) so long as no Default has occurred and is continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any current or former officer, director or employee of the Company or any of its Subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders’ agreement or similar agreement; provided , that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $750,000; provided further that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $250,000 in any twelve-month period;(iv) so long as no Default has occurred and is continuing or would be caused thereby, and so long as the Holders have waived in writing, pursuant to Section 12.4 , any Default or Event of Default that would result from such Change of Control or Initial Public Offering (such waiver to be in the Holders’ sole and absolute discretion), the redemption of the Senior Subordinated Notes upon a Change of Control or Initial Public Offering pursuant to the terms of the Senior Subordinated Notes as in effect on the date hereof; and(v) so long as no Default has occurred and is continuing or would be caused thereby, the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options.The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this shall be determined by the board of directors of the Company whose resolution with respect thereto shall be conclusive. !
Section 6.5 No Amendment to Senior Subordinated Notes or Preferred Stock.Without the consent of the Majority Holders, the Company will not amend, modify or alter, or take any action that could cause to be amended, modified or altered, the terms of the Securities Purchase Agreement, the Series A Preferred Stock Purchase Agreement, the Company’s Charter Documents, any Senior Subordinated Note, any share of Series A Preferred Stock, or any share of Series B Preferred Stock, in any way to:
(i) alter the terms of any of the Company’s Equity Securities, if, pursuant to the terms of the Company’s Equity Securities, as altered, the Company or any of its Subsidiaries could be required to take an action, whether upon the occurrence of an event, delivery of notice, on any date, or otherwise,
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that would, directly or indirectly, result in a Default or Event of Default or entitle the holder or holders of any Indebtedness of the Company or any of its Subsidiaries (with or without the giving of notice or lapse of time) to accelerate the maturity of such Indebtedness;(ii) increase the rate of or change the time for payment of interest on any Senior Subordinated Notes or any Permitted Refinancing Indebtedness;(iii) increase the principal of, advance the final maturity date of or shorten the Weighted Average Life to Maturity of the Senior Subordinated Notes or any Permitted Refinancing Indebtedness;(iv) tighten the redemption provisions or increase the price or terms at which the Company is required to offer to purchase any Senior Subordinated Notes or any Permitted Refinancing Indebtedness;(v) amend the provisions of Article XI of the Securities Purchase Agreement; or(vi) amend, restate, or modify (a “ Financing Change ”) any document related to the Senior Subordinated Notes (collectively, the “ Subordinated Debt Documents ”) in a manner that imposes covenants or events of default upon the Company or its Subsidiaries which are more restrictive than the covenants contained in such documents prior to such Financing Change, unless the Company and the Majority Holders shall, within 10 Business Days after such Financing Change, execute and deliver an amendment to this Agreement or any other applicable Note Document for the purpose of effecting a change similar and in proportion to the changes to the Subordinated Debt Documents; provided , that upon any failure of the Company or the Majority Holders to do so, this Agreement shall be deemed automatically amended to effect such similar and proportionate amendment.Section 6.6 Asset Sales; Casualty Proceeds(a) The Company will not, and will not permit any of its Subsidiaries to, consummate any other Asset Sale unless:(i) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;(ii) the fair market value is determined by the Company’s board of directors and evidenced by a resolution of the board of directors set forth in an Officers’ Certificate delivered to the Holders; and
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