Item
1.01 Entry into a Material Definitive Agreement.
Merger
Agreement
On
August 12, 2020, NTN Buzztime, Inc. (“NTN Buzztime”) entered into an Agreement and Plan of Merger and Reorganization
(the “Merger Agreement”) with Brooklyn Immunotherapeutics LLC, a Delaware limited liability company (“Brooklyn”),
and BIT Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of NTN Buzztime (“Merger Sub”).
Pursuant to, and on the terms and subject to the conditions of, the Merger Agreement, Merger Sub will be merged with and into
Brooklyn (the “Merger”), with Brooklyn surviving the Merger as a wholly-owned subsidiary of NTN Buzztime.
On
the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger (the “Effective
Time”), the membership interests of Brooklyn will convert into the right to receive an aggregate number of shares of
NTN Buzztime common stock, par value $0.005 per share (the “Common Stock”), equal to 94.08% of the total outstanding
shares of Common Stock of NTN Buzztime immediately following such issuance, which percentage is subject to adjustment as more
particularly set forth in the Merger Agreement, but in no event shall be greater than 96.74%. Upon completion of the Merger, the
board of directors of the combined company is expected to consist entirely of individuals designated by Brooklyn and the officers
of the combined company are expected to be members of Brooklyn’s current management team. The Merger is intended to be a
tax-deferred transaction as described in Section 351(a) of the Internal Revenue Code of 1986, as amended.
The
Merger Agreement contains customary representations, warranties and covenants made by NTN Buzztime and Brooklyn, including covenants
relating to both parties using their commercially reasonable efforts to cause the transactions contemplated by the Merger Agreement
to be satisfied, as well as covenants regarding the conduct of their respective businesses between the date of signing of the
Merger Agreement and the closing.
The
Merger Agreement requires NTN Buzztime to file, as promptly as practicable, a Form S-4 registration statement with the U.S. Securities
and Exchange Commission (“SEC”) to register the offer and sale of the shares of Common Stock to be issued pursuant
to the Merger Agreement (the “Registration Statement”), and to convene a special meeting of stockholders, as
promptly as practicable following the effectiveness of the Registration Statement, to vote to approve (i) the issuance of shares
of Common Stock to the members of Brooklyn pursuant to the terms of the Merger Agreement, (ii) amendments to NTN Buzztime’s
certificate of incorporation to increase the authorized number of shares of Common Stock, change the corporate name to “Brooklyn
Immunotherapeutics, Inc.”, and provide the holders of Series A Convertible Preferred Stock with voting rights (in order
to help ensure the tax-deferred nature of the transactions contemplated by the Merger Agreement), (iii) a reverse stock split
of the outstanding shares of Common Stock in a ratio to be agreed upon by NTN Buzztime and Brooklyn, (iv) a new stock incentive
plan, which will become effective upon the Merger and will authorize the issuance of no more than 7.5% of the fully-diluted
outstanding shares of Common Stock immediately following the Effective Time, and (v) such other matters as may be agreed by NTN
Buzztime and Brooklyn (collectively, the “NTN Buzztime Stockholder Matters”).
Consummation
of the Merger is subject to certain closing conditions including, among others, (i) the approval of the stockholders of NTN Buzztime
of each of the NTN Buzztime Stockholder Matters, (ii) the approval of the Merger and the transactions contemplated by the Merger
Agreement by the beneficial holders of the Class A membership units of Brooklyn, (iii) the amendment of NTN Buzztime’s certificate of incorporation to provide voting rights to the holders of
Series A Convertible Preferred Stock, (iv) the receipt of tax opinions from counsel to NTN Buzztime and Brooklyn, (v) Brooklyn
having not less than $10 million in cash and cash equivalents and not more than $750,000 of indebtedness for borrowed money at
the closing, (vi) NTN Buzztime having a deficit of “Parent Net Cash” (as defined and calculated in the Merger Agreement)
of no more than $3 million, and (vii) the shares of Common Stock continuing to be traded on the NYSE American until the Effective
Time and the approval for listing of the shares of Common Stock to be issued pursuant to the Merger Agreement on the NYSE American.
In addition, the obligation of each party to consummate the Merger is also conditioned on the other party’s representations
and warranties being true and correct (subject to certain materiality qualifications) and the other party having performed in
all material respects its obligations under the Merger Agreement. Each party’s obligations to consummate the Merger are
further subject to the absence of a material adverse effect with respect to the other party since the date of the Merger Agreement.
The
Merger Agreement contains certain termination rights for each party, including that either party may terminate the Merger Agreement
if the Merger has not been consummated by December 31, 2020, subject to extension under specified circumstances. The Merger Agreement
also provides that, upon the termination of the Merger Agreement under specified circumstances, NTN Buzztime or Brooklyn will
be required to pay the other party a $750,000 termination fee or reimburse the other party for up to $250,000 of its third party
expenses.
The
Merger Agreement requires that NTN Buzztime not solicit proposals relating to alternative transactions and not enter into discussions
concerning or provide confidential information in connection with alternative transactions (with an exception related to a sale
of substantially all of the assets of NTN Buzztime, the terms of any definitive agreement for which are subject to the approval
of Brooklyn, not to be unreasonably withheld, conditioned or delayed). These restrictions are subject to a “fiduciary out”
provision that allows NTN Buzztime under certain limited circumstances to provide confidential information to, enter into discussions
and negotiations with, and enter into an alternative transaction with a third party and/or to make a recommendation change adverse
to the Merger, which may result in payment of the termination fee described above.
The
foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by the full text
of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this report and is incorporated by reference herein.
The Merger Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide
any other factual information about NTN Buzztime, Merger Sub, or Brooklyn or otherwise to modify or supplement any factual disclosures
about NTN Buzztime in its reports filed with the SEC. The representations, warranties and covenants of each party in the Merger
Agreement have been made only for the purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement,
may be subject to limitations agreed upon by the contracting parties, and may be subject to standards of materiality applicable
to the contracting parties that differ from those generally applicable to SEC filings, and may have been used for purposes of
allocating risk among the parties to the Merger Agreement. Certain of the exhibits and schedules that are a part of the Merger
Agreement are not being filed and contain information that modifies, qualifies and creates exceptions to the representations and
warranties and certain covenants set forth in the Merger Agreement. Accordingly, the representations and warranties may not describe
the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements
of fact.
Support
Agreements
In
connection with the Merger and the Merger Agreement, each of the directors and officers of NTN Buzztime and certain beneficial
holders of the Class A membership interests of Brooklyn, including the managers and officers of Brooklyn, signed a Support Agreement,
made and entered into as of August 12, 2020, among NTN Buzztime, Brooklyn, and each such person (the “Support Agreements”).
Pursuant to the Support Agreements, each director, manager, and officer has agreed that he or she will not, until the termination
date of the Merger Agreement, sell or transfer any shares of the Common Stock or any of the beneficial interests in the Class
A membership interests of Brooklyn, respectively, that he or she owns or may acquire prior to the termination of the Merger Agreement.
Each such director, manager, and officer has further agreed that he or she will vote all shares of the Common Stock and all beneficial
interests in the Class A membership units in Brooklyn, respectively, owned by such individual in favor of the Merger and the transactions
contemplated by the Merger Agreement.
The
foregoing description of the Support Agreements does not purport to be complete and is qualified in its entirety by the
full text of the Support Agreements, the forms of which are filed as Exhibit 10.1 and Exhibit 10.2 to this report
and are incorporated herein by reference.