The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
(1) Excludes an aggregate of up to 13,258,966 and 13,336,309 shares subject to possible redemption at March 31, 2019 and 2018, respectively.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements
(1) Excludes an aggregate of up to 13,283,086 and 13,348,443 shares subject to redemption at December 31, 2018 and 2017, respectively.
Black Ridge Acquisition
Corp. (“BRAC” or the “Company”, “we”, “us” and ”our”) was incorporated
in Delaware on May 9, 2017 as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business
Combination”). The Company’s efforts to identify a prospective target business were focused on businesses in the energy
or energy-related industries with an emphasis on opportunities in the upstream oil and gas industry in North America, but are not
limited to a particular industry or geographic region.
As of
December 31, 2018, the Company had not yet commenced operations. All activity through December 31, 2018 relates to the
Company’s formation and its Initial Public Offering, described below, identifying a target company for a Business
Combination and costs is connection with the Proposed Business Combination, discussed below. The Company is an early stage
and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and
emerging growth companies.
The registration statement
for the Company’s initial public offering (“Initial Public Offering”) was declared effective on October 4, 2017.
The registration statement was initially declared effective for 10,000,000 units (“Units” and, with respect to the
common stock included in the Units being offered, the “Public Shares”), but the offering was increased to 12,000,000
Units pursuant to Rule 462(b) under the Securities Act of 1933, as amended. On October 10, 2017, the Company consummated the Initial
Public Offering of 12,000,000 units, generating gross proceeds of $120,000,000, which is described in Note 3.
Simultaneous with
the closing of the Initial Public Offering, the Company consummated the sale of 400,000 units (the “Placement Units”)
at a price of $10.00 per Unit in a private placement to the Company’s sponsor and sole stockholder prior to the Initial Public
Offering, Black Ridge Oil & Gas, Inc. (the “Sponsor”), generating gross proceeds of $4,000,000, which is described
in Note 3.
Transaction costs
amounted to $2,882,226, consisting of $2,400,000 of underwriting fees and $482,226 of Initial Public Offering costs.
Following the closing
of the Initial Public Offering on October 10, 2017, an amount of $120,600,000 ($10.05 per Unit) from the net proceeds of the sale
of the Units in the Initial Public Offering and the Placement Units was placed in a trust account (“Trust Account”)
and will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3)
and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation
of a Business Combination or (ii) the distribution of the Trust Account, as described below.
On October 18, 2017,
in connection with the underwriters’ exercise of their over-allotment option in full, the Company consummated the sale of
an additional 1,800,000 Units, and the sale of an additional 45,000 Placement Units at $10.00 per Unit, generating total proceeds
of $18,450,000. Transaction costs for underwriting fees on the sale of the over-allotment units were $360,000. Following the closing,
an additional $18,090,000 of the net proceeds (10.05 per Unit) was placed in the Trust Account, bringing the total aggregate proceeds
held in the Trust Account to $138,690,000 (10.05 per Unit).
The Company’s
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and
private placement, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. Upon the closing
of the Initial Public Offering, $10.05 per Unit sold in the Initial Public Offering, including the proceeds of the Private Placements
was deposited in a Trust Account to be held until the earlier of (i) the consummation of its initial Business Combination or (ii)
the Company’s failure to consummate a Business Combination within 21 months from the consummation of the Initial Public Offering
(the “Combination Period”). Placing funds in the Trust Account may not protect those funds from third party claims
against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other
entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account,
there is no guarantee that such persons will execute such agreements. The Trust Account is maintained by a third party trustee.
The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence
on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust
Account balance may be released to the Company for any amounts that are necessary to pay the Company’s income and other tax
obligations and up to $50,000 that may be used to pay for the costs of liquidating the Company. The Sponsor has agreed that it
will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.05 per share by the claims of target
businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or
products sold to the Company, but there is no assurance that the Sponsor will be able to satisfy its indemnification obligations
if it is required to do so. Additionally, the agreement entered into by the Sponsor specifically provides for two exceptions to
the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other
entity who has executed an agreement with the Company waiving any right, title, interest or claim of any kind they may have in
or to any monies held in the Trust Account, or (2) as to any claims for indemnification by the underwriters of the Initial Public
Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended.
Pursuant to the Nasdaq
Capital Markets listing rules, the Company’s initial Business Combination must be with a target business or businesses whose
collective fair market value is at least equal to 80% of the balance in the Trust Account at the time of the execution of a definitive
agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. The fair
market value of the target will be determined by the Company’s board of directors based upon one or more standards generally
accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). The target business
or businesses that the Company acquires may have a collective fair market value substantially in excess of 80% of the Trust Account
balance. In order to consummate such a Business Combination, the Company may issue a significant amount of its debt or equity securities
to the sellers of such business and/or seek to raise additional funds through a private offering of debt or equity securities.
If the Company’s securities are not listed on NASDAQ after the Initial Public Offering, the Company would not be required
to satisfy the 80% requirement. However, the Company intends to satisfy the 80% requirement even if the Company’s securities
are not listed on NASDAQ at the time of the initial Business Combination.
The Company will provide
the public stockholders, who are the holders of the Common stock which was sold as part of the Units in the Initial Public Offering,
whether they are purchased in the Initial Public Offering or in the aftermarket, or “Public Shares”, including the
Sponsor to the extent that they purchase such Public Shares (“Public Stockholders”), with an opportunity to redeem
all or a portion of their Public Shares of the Company’s Common stock, irrespective of whether they vote for or against the
proposed transaction or if the Company conducts a tender offer, upon the completion of the initial Business Combination either
(1) in connection with a stockholder meeting called to approve the Business Combination, or (ii) by means of a tender offer, at
a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest (net
of franchise and income taxes payable, divided by the number of then outstanding Public Shares. The amount in the Trust Account,
net of franchise and income taxes payable, amounts to approximately $10.20 per Public Share as of December 31, 2018. The common
stock subject to redemption will be recorded at a redemption value and classified a temporary equity upon the completion of the
Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity”. The Company will proceed with a Business Combination only if the Company has net tangible assets
of at least $5,000,001 upon such consummation of a Business Combination and in the case of a stockholder vote, a majority of the
outstanding shares voted are voted in favor of the Business Combination. The decision as to whether the Company will seek stockholder
approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, based
on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require
it to seek stockholder approval under the law or stock exchange listing requirement. If a stockholder vote is not required and
the Company decides not to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to the proposed
amended and restated certificate of incorporation, (i) conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the
Exchange Act, which regulate issuer tender offers, and (ii) file tender offer documents with the SEC prior to completing the initial
Business Combination which contain substantially the same financial and other information about the initial Business Combination
and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
The Sponsor has agreed
to vote its Founder Shares (as described in Note 6), shares underlying the Placement units and any Public Shares purchased during
or after the Initial Public Offering in favor of the initial Business Combination, and the Company’s executive officers and
directors have also agreed to vote any Public Shares purchased during or after the Initial Public Offering in favor of the Initial
Business Combination. The Sponsor entered into a letter agreement, pursuant to which it agreed to waive its redemption rights with
respect to the Founder Shares, shares included in the Placement Units and Public Shares in connection with the completion of the
initial Business Combination. In addition, the Sponsor has agreed to waive its rights to liquidating distributions from the Trust
Account with respect to the Founder Shares and shares included in the Placement Units if the Company fails to complete the initial
Business Combination within the prescribed time frame. However, if the Sponsor (or any of the Company’s executive officers,
directors or affiliates) acquires Public Shares in or after the Initial Public Offering, it will be entitled to liquidating distributions
from the Trust Account with respect to such Public Shares in the event the Company does not complete the initial Business Combination
within such applicable time period.
On December 19, 2018,
the Company entered into a business combination agreement (the “Business Combination Agreement”) with Allied Esports
Entertainment, Inc. (“Allied Esports”), Ourgame International Holdings Ltd. (“Ourgame”), Noble Link Global
Limited, a wholly-owned subsidiary of Ourgame (“Noble”), and Primo Vital Ltd., also a wholly-owned subsidiary of Ourgame
(“Primo”), pursuant to which the Company will acquire two of Ourgame’s global esports and entertainment assets,
Allied Esports and WPT Enterprises, Inc. (“WPT”). See Note 7.
If the Company is unable
to complete the initial Business Combination within the Combination Period, the Company must: (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public
shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
(which interest shall be net of franchise and income taxes payable and up to $50,000 to pay for our liquidation and dissolution
expenses.) divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’
rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and
(iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders
and the Company’s Board of Directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The parent company, Black Ridge
Acquisition Corp., and Black Ridge Merger Sub Corp. will collectively be referred to herein as “the Company” or “Black
Ridge”. All significant intercompany transactions have been eliminated in the preparation of these financial statements.
The accompanying consolidated
financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the SEC.
The accompanying financial
statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of business. As of December 31, 2018, the Company had
working capital of $78,000 (excluding income taxes and franchise fees which may be paid out of the Trust Account and the note payable
to our sponsor). Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition
plans. The Company’s plans to consummate an initial Business Combination may not be successful.
Based on the foregoing,
the Company may not have sufficient funds available to operate its business for at least one year from the date the financial statements
are issued or until it closes an initial business combination and may need to obtain additional financing form its sponsor or other
sources in order to meet its obligations. The Company cannot be certain that additional funding will be available on acceptable
terms, or at all.
These matters, among
others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”),
as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.
Further, section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt
out of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using
the extended transition period difficult or impossible because of the potential differences in accountant standards used.
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company
did not have any cash equivalents as of December 31, 2018 and 2017.
As
of December 31, 2018 and 2017, $2,312 and $39,742, respectively, of cash and $141,304,995 and $138,940,611, respectively, of
marketable securities were held in the Trust Account.
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside
of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet.
Offering costs consist
of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the
Initial Public Offering. Offering costs totaling to $3,242,226 were charged to stockholders’ equity upon the completion of
the Initial Public Offering and subsequent sale of Units in connection with the underwriters’ exercise of their over-allotment
option.
The Company accounts
for income taxes under ASC Topic 740 “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred
tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets
and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally
requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will
not be realized.
ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken
or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as
of December 31, 2018. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position.
The Company may be
subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations
may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax
benefits will materially change over the next twelve months.
The Company’s
policy for recording interest and penalties associated with income tax audits is to record such expense as a component of interest
tax expense. There were no amounts accrued for penalties or interest as of December 31, 2018 or 2017. Management is currently unaware
of any issues under review that could result in significant payments, accruals or material deviations from its position.
On December 22, 2017
the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory
rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740 requires companies to recognize
the effect of tax law changes in the period of enactment; therefore, the Company was required to value its deferred tax assets
and liabilities at December 31, 2017 at the new rate. The impact on the financial statements was not material.
Financial instruments
that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which,
at times may exceed the Federal depository insurance coverage of $250,000. As of December 31, 2018, the Company had not experienced
losses on this account and management believes the Company is not exposed to significant risks on such account.
The preparation of the
balance sheet in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the
reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The fair value of the
Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements
and Disclosures”, approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their
short-term nature.
Net income (loss)
per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during
the period. An aggregate of 13,283,086 and 13,348,443 shares of common stock subject to possible redemption as of December 31,
2018 and 2017, respectively, have been excluded from the calculation of basic income (loss) per share since such shares, if redeemed,
only participate in their pro rata share of the trust earnings.
The Company's
net income (loss) is also shown adjusted for the portion of income attributable to shares subject to redemption, as these shares
only participate in the income of the trust account and not the operating losses of the Company. Accordingly, basic and diluted
net income (loss) per share attributable to shares not subject to redemption is as follows:
The
Company has not considered the effect of 1) warrants to purchase 14,845,000 shares of common stock, 2) rights that convert to
1,484,500 shares and 3) 600,000 shares included in the underwriters’ unit option sold in Public Offering, Private
Placement or underlying the unit option sold to the underwriter in the calculation of diluted loss per share, since the
exercise of the warrants, receipt of rights and ability exercise the unit option underlying the shares is contingent on the
occurrence of future events. Additionally, the Company has not considered the effect of any conversion into units of the
convertible note payable as that conversion is also contingent on future events.
Management does not
believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material
effect on the Company’s financial statements.
Pursuant to the Initial
Public Offering and including the subsequent over-allotment option exercised by the underwriter, the Company sold 13,800,000 Units
at a purchase price of $10.00 per Unit. Each Unit consists of one share of common stock, one right (“Public Right”)
and one warrant (“Public Warrant”). Each Public Right will convert into one-tenth (1/10) of one share of common stock
upon consummation of a Business Combination (see Note 6). Each Public Warrant entitles the holder to purchase one share of common
stock at an exercise price of $11.50 (see Note 6).
Simultaneous with
the Initial Public Offering and over-allotment option exercise, the Sponsor purchased an aggregate of 445,000 Placement Units at
a price of $10.00 per Unit (or an aggregate purchase price of $4,450,000). Each Placement Unit consists of one share of common
stock (“Placement Share”), one right (“Placement Right”) and one warrant (each, a “Placement Warrant”)
to purchase one share of the common stock at an exercise price of $11.50 per share. The proceeds from the Placement Units were
added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination
within the Combination Period, the proceeds of the sale of the Placement Units will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law) and the Placement Rights and Placement Warrants will expire worthless.
The Placement Units
are identical to the Units sold in the Initial Public Offering except that the Placement Warrants (i) are not redeemable by the
Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the Sponsor or any of its permitted
transferees. In addition, the Placement Units and their component securities may not be transferable, assignable or salable until
after the consummation of a Business Combination, subject to certain limited exceptions.
In connection with
the organization of the Company, a total of 2,875,000 shares of common stock were sold to the Sponsor at a price of approximately
$0.0087 per share for an aggregate of $25,000 (“Founder Shares”). On October 4, 2017, the Company effected a stock
dividend of 0.2 shares for each of the then outstanding shares, resulting in 3,450,000 Founders Shares including an aggregate of
up to 450,000 shares of common stock that would have been subject to forfeiture to the extent that the over-allotment option was
not exercised by the underwriters in full or in part (the underwriters exercised their over-allotment option in full). All share
and per share amounts have been retroactively restated to reflect the effect of the stock dividend.
Subject to
certain limited exceptions, 50% of the Founder Shares will not be transferred, assigned, sold until the earlier of: (i) one year
after the date of the consummation of the initial Business Combination or (ii) the date on which the closing price of the Company’s
common stock equals or exceeds $12.50 per share (as adjusted) for any 20 trading days within any 30-trading day period commencing
150 days after the initial Business Combination, and the remaining 50% of the Founder Shares will not be transferred, assigned,
sold until one year after the date of the consummation of the initial Business Combination, or earlier, in either case, if, subsequent
to the Company’s initial Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange,
reorganization or other similar transaction which results in all of shareholders having the right to exchange their common stock
for cash, securities or other property.
Prior to the closing
of the Initial Public Offering, the Company’s Sponsor advanced the Company an aggregate of $125,000. The advances were non-interest
bearing, unsecured and due on demand. The advances were repaid upon the consummation of the Initial Public Offering on October
10, 2017.
In order to finance
transaction costs in connection with an intended initial business combination, our sponsor, officers, directors or their affiliates
may, but are not obligated to, loan us funds as may be required. If we consummate an initial business combination, we would repay
such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment.
Up to $1,500,000 of such loans may be convertible into units of the post business combination entity at a price of $10.00 per unit
at the option of the lender. The units would be identical to the Placement Units.
As
of December 31, 2018, the Sponsor has loaned the Company, in the form of a convertible promissory note, an aggregate of
$350,000 to cover expenses related to a proposed business combination. This note, issued on December 10, 2018, is
unsecured, non-interest bearing and is payable at the consummation by the Company of a Business Combination. Upon
consummation of a Business Combination, the principal balance of the note may be converted, at the Sponsor’s option, to
units at a price of $10.00 per unit. The terms of the units are identical to the units issued by the Company in its private
placement. If the Sponsor converts the entire principal balance of the convertible promissory note, it would receive 35,000 units. If a
Business Combination is not consummated, the note will not be repaid by the Company and all amounts owed thereunder by the
Company will be forgiven except to the extent that the Company has funds available to it outside of its trust account
established in connection with the initial public offering. The issuance of the note to the Sponsor was exempt pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended.
Commencing on the
effective date of the Initial Public Offering through the earlier of our consummation of our initial business combination or our
liquidation, the Sponsor will make available to us certain general and administrative services, including office space, utilities
and administrative support, as we may require from time to time. The Company agreed to pay the Sponsor $10,000 per month for these
services
.
Management fee expense of $120,000 for the year ended December 31, 2018 and $28,710 for the period from the effective
date, October 4, 2017, through December 31, 2017 was recognized by the Company.
Accounts payable –
related party represents balances due to the Sponsor for administrative services and out of pocket expenses paid by the Sponsor
on behalf of the Company.
The Company engaged
the underwriters as advisors in connection with our Initial Business Combination to assist us in holding meetings with our shareholders
to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that
are interested in purchasing our securities, assist us in obtaining shareholder approval for the business combination and assist
us with our press releases and public filings in connection with the business combination. The Company will pay the underwriters
a cash fee for such services upon the consummation of our initial business combination in an amount of approximately $4,080,000
(exclusive of any applicable finders’ fees which might become payable).
We have engaged an
investment advisor to assist us in connection with due diligence, financial analysis and positioning the Company in the capital
markets (the “Capital Markets Fee”) related to the Proposed Business Combination. The Company will pay the investment
advisor a cash fee of approximately $2,000,000 for due diligence and advisory services upon the consummation of the Proposed Business
Combination. The Company will also pay the Capital Markets Fee of 3% of the cash or securities available for the closing of the
Proposed Business Combination including the proceeds received from the trust account net of cash reserved to fulfill redemption
requests upon the consummation of the Proposed Business Combination.
The holders of our
founders’ shares issued and outstanding on the date of the Initial Public Offering, as well as the holders of the private
units and any units our sponsor, officers, directors or their affiliates may be issued in payment of working capital loans made
to us (and all underlying securities), are entitled to registration rights pursuant to a registration rights agreement dated October
4, 2017. The holders of a majority of these securities are entitled to make up to two demands that we register such securities.
The holders of the majority of the founders’ shares can elect to exercise these registration rights at any time commencing
three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority
of the private units and units issued to our sponsor, officers, directors or their affiliates in payment of working capital loans
made to us (or underlying securities) can elect to exercise these registration rights at any time after we consummate a business
combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements
filed subsequent to our consummation of a business combination. We will bear the expenses incurred in connection with the filing
of any such registration statements.
The
Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such
designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of
December 31, 2018 and 2017, no preferred stock is issued or outstanding.
The
Company is authorized to issue 35,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2018 and
2017, the Company has issued an aggregate of 17,695,000 shares of common stock, inclusive of 13,283,086 and 13,348,443 shares
of common stock as of December 31, 2018 and 2017, respectively, subject to possible redemption classified as temporary equity
in the accompanying Balance Sheets.
Each holder of a right
will receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if a holder of such
right converted all ordinary shares held by it in connection with a Business Combination. No fractional shares will be issued upon
exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional
shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase
price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination
in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive
the same per share consideration the holders of the shares of common stock will receive in the transaction on an as-converted into
shares of common stock basis and each holder of rights will be required to affirmatively covert its rights in order to receive
1/10 of a share of common stock underlying each right (without paying additional consideration). The shares of common stock issuable
upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company).
If the Company is unable
to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account,
holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from
the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless.
Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of
a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the
rights may expire worthless.
The rights included
in the Private Units sold in the Private Placement are identical to the rights included in the Units sold in the Initial Public
Offering, except that, among others, the rights including the shares issuable upon exchange of such rights, are being purchased
pursuant to an exemption from the registration requirements of the Securities Act and will become tradable only after certain conditions
are met or the resale of such rights (including underlying securities) is registered under the Securities Act.
Warrants may only
be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Warrants. The Warrants will
become exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) October 10, 2018. No Warrants
will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common
stock issuable upon exercise of the Warrants and a current prospectus relating to such shares. Notwithstanding the foregoing, if
a registration statement covering the shares of common stock issuable upon the exercise of the Warrants is not effective within
30 days from the consummation of a Business Combination, the holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise the
Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from
registration is not available, holders will not be able to exercise their Warrants on a cashless basis. The Warrants will expire
five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Private Warrants
will be identical to the Warrants underlying the Units being sold in the Initial Public Offering, except the Private Warrants will
be exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such Private
Warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable by the Company, in
each case so long as they are still held by the Sponsor or its affiliates.
The Company may call
the Warrants for redemption (excluding the Private Warrants but including any outstanding Warrants issued upon exercise of the
unit purchase option issued to EarlyBirdCapital), in whole and not in part, at a price of $0.01 per Warrant:
If the Company
calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to
do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of common
stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a stock dividend,
extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted
for issuances of shares of common stock at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the Warrants. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect
to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with
respect to such Warrants. Accordingly, the Warrants may expire worthless.
On October 10, 2017,
the Company sold to the underwriter (and/or its designees), for $100, an option to purchase up to 600,000 Units exercisable at
$11.50 per Unit (or an aggregate exercise price of $6,900,000) commencing on the later of the first anniversary of the effective
date of the registration statement related to the Initial Public Offering and the consummation of a Business Combination. The unit
purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the
effective date of the registration statement related to the Initial Public Offering. The Units issuable upon exercise of this option
are identical to those offered in the Initial Public Offering. The Company accounted for the unit purchase option, inclusive of
the receipt of $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to stockholders’
equity. The Company estimated the fair value of this unit purchase option to be approximately $1,778,978 (or $2.97 per Unit) using
the Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriters was estimated as
of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.94% and
(3) expected life of five years. The option and such units purchased pursuant to the option, as well as the common stock underlying
such units, the rights included in such units, the common stock that is issuable for the rights included in such units, the warrants
included in such units, and the shares underlying such warrants, have been deemed compensation by FINRA and are therefore subject
to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not be sold,
transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date
of Initial Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering and their
bona fide officers or partners. The option grants to holders demand and “piggy back” rights for periods of five and
seven years, respectively, from the effective date of the registration statement with respect to the registration under the Securities
Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses
attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves.
The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including
in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the
option will not be adjusted for issuances of ordinary shares at a price below its exercise price.
On December 19, 2018, the Company entered
into an Agreement and Plan of Reorganization (the “Agreement”) by and among the Company, Black Ridge Merger Sub, Corp.,
a Delaware corporation and wholly-owned subsidiary of the Company formed on December 19, 2018 (“Merger Sub”), Allied
Esports Entertainment, Inc. (the “Allied Esports”), Ourgame International Holdings Ltd. (“Ourgame”), Noble
Link Global Limited, a wholly-owned subsidiary of Ourgame (“Noble”), and Primo Vital Ltd., also a wholly-owned subsidiary
of Ourgame (“Primo”).
Subject to
the Agreement, (i) Noble will merge with and into Allied Esports (the “Redomestication Merger”) with Allied Esports
being the surviving entity in such merger and (ii) immediately after the Redomestication Merger, Merger Sub will merge with and
into Allied Esports with Allied Esports being the surviving entity of such merger (the “Transaction Merger” and together
with the Redomestication Merger, the “Mergers”).
The Mergers will result in the Company acquiring two of Ourgame’s
global esports and entertainment assets, Allied Esports International, Inc. (“Allied Esports”) and WPT Enterprises,
Inc. (“WPT”). Allied Esports is a premier esports entertainment company with a global network of dedicated esports
properties and content production facilities. WPT is the creator of the World Poker Tour® (WPT®) – the premier name
in internationally televised gaming and entertainment with brand presence in land-based tournaments, television, online and mobile.
The proposed transaction will seek to strategically combine the globally recognized Allied Esports brand with the three-pronged
business model of the iconic World Poker Tour, featuring in-person experiences, multiplatform content and interactive services,
to leverage the high-growth opportunities in the global esports industry.
Upon consummation of the Mergers (the “Closing”),
the Company will issue to the former owners of Allied Esports and WPT (i) an aggregate of 11,602,754 shares of common stock, par
value $0.0001 per share, of the Company’s common stock and (ii) an aggregate of 3,800,003 warrants to purchase shares of
common stock of the Company.
In addition to the consideration described
above, the former owners of Allied Esports and WPT will be entitled to receive their pro rata portion of an aggregate of an additional
3,846,153 shares of the Company’s common stock if the last sales price of the Company’s common stock equals or exceeds
$13.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for thirty (30) consecutive
days at any time during the five (5) year period commencing on the date of the Closing (the “Closing Date”).
The Company is seeking
shareholder approval to amend its charter to increase the authorized shares of the Company’s common stock to 65,000,000 shares.
Consummation of the transactions contemplated
by the Agreement is subject to certain closing conditions including, among others, (i) approval by the stockholders of the Company
and Ourgame, and (ii) that the Company have available cash in an amount not less than $80,000,000 after payment to stockholders
who elect to redeem their shares of common stock in accordance with the provisions of the Company’s Charter Documents.
The Agreement may
be terminated at any time prior to the consummation of the Agreement (whether before or after the Company’s shareholder vote
has been obtained) by mutual written consent of the Company and Ourgame, Noble and the Acquired Company and in certain other limited
circumstances, including if the Proposed Business Combination has not been consummated by July, 10, 2019.
We account
for income taxes under the provisions of ASC Topic 740, Income Taxes, which provides for an asset and liability approach for income
taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using
currently enacted laws, attributable to temporary differences between the carrying value amounts of assets and liabilities for
financial reporting purposes and the amounts calculated for income tax purposes.
The Company evaluates events that have
occurred after the balance sheet date through the date hereof, which these financial statements were issued. No events occurred
of a material nature that would have required adjustments to or disclosure in these financial statements except as follows:
On February 20, 2019,
the Company issued a $100,000 convertible promissory note to the Sponsor. After issuing the promissory note, combined with
$350,000 in notes issued to the Sponsor in the year ended December 31, 2018, the total amount of convertible promissory notes
issued to the Sponsor is $450,000. The loan is unsecured, non-interest bearing and is payable at the consummation of a Business
Combination. Upon consummation of a Business Combination, the principal balance of the note may be converted, at the Sponsor’s
option, to units at a price of $10.00 per unit. The terms of the units will be identical to the units issued by the Company in
its initial public offering, except the warrants included in such units will be non-redeemable and may be exercised on a cashless
basis, in each case so long as they continue to be held by the Sponsor or its permitted transferees. If the Sponsor converts the
entire principal balance of the convertible promissory note, including the note issued on February 20, 2019, it would receive
45,000 units. If a Business Combination is not consummated, the note will not be repaid by the Company and all amounts owed thereunder
by the Company will be forgiven except to the extent that the Company has funds available to it outside of its trust account established
in connection with the initial public offering. The issuance of the note to the Sponsor was exempt pursuant to Section 4(a)(2)
of the Securities Act of 1933, as amended.
The accompanying combined financial statements
include the accounts of Noble Link Global Limited (“Noble”) and Allied Esports Media, Inc.,(“AEM”), formerly known as
Allied Esports Entertainment, Inc. Allied Esports Media changed its name from Allied Esports Entertainment, Inc. to Allied Esports
Media, Inc. on January 29, 2019. Allied Esports Media, together with its subsidiaries described below, is referred to herein as
“Allied Esports”)
Noble was incorporated in the
British Virgin Islands on May 5, 2015. Noble operates through its wholly-owned subsidiaries Peerless Media Limited
(“Peerless”), WPT Distribution Worldwide Limited (“WPT Distribution”) and WPT Studios Worldwide
Limited (“WPT Studios”) (Noble and its subsidiaries are collectively “World Poker Tour” or
“WPT”). World Poker Tour is an internationally televised gaming and entertainment company with brand presence in
land-based tournaments, television, online and mobile applications. WPT has been involved in the sport of poker since 2002
and created a television show based on a series of high-stakes poker tournaments. WPT has broadcasted globally in more than
150 countries and territories and is sponsored by a third-party online social poker site. WPT also operates ClubWPT.com, a
site that offers inside access to the WPT database, as well as sweepstakes-based poker available in 35 states across the
United States. WPT also participates in strategic brand licensing, partnership, and sponsorship opportunities.
Allied Esports operates through its wholly-owned
subsidiaries Allied Esports International, Inc., (“AEII”), Esports Arena Las Vegas, LLC (“ESALV”) and ELC
Gaming GMBH (“ELC Gaming”). Allied Esports Media, a Delaware Corporation, was formed in November 2018 to eventually
act as a holding company for Allied Esports and immediately prior to close of merger to also include WPT (see Note 8, Related Parties).
AEII operates global competitive Esports properties designed to connect players and fans via a network of connected arenas. ESALV
operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada. ELC Gaming operates a mobile Esports truck that
serves as both a battleground and content generation hub and also operates a studio for recording and streaming gaming events.
WPT and Allied Esports (collectively the
“Company”) are subsidiaries of Ourgame International Holdings Limited (“Parent”), which was incorporated
in the Cayman Islands on December 4, 2013. As of the earliest date of these financial statements, the Parent owned 100% and 84.6%
of WPT and AEII, respectively. The Company elected to apply pushdown accounting; accordingly, the combined financial statements
of WPT and Allied Esports represent the carrying value of the Parent’s historical cost in these entities.
On December 19, 2018, the Company became
a party to a Merger Agreement (the “Merger Agreement”) with Black Ridge Acquisition Corp. (“BRAC”),
which will result in BRAC acquiring Allied Esports and WPT (the “Merger”). The Merger is expected to be consummated
in the second quarter of 2019, after the required approval by the stockholders of BRAC and the Parent and the fulfillment
of certain other conditions prior to closing, as described in the Merger Agreement. The Merger Agreement requires that the acquiror
has a minimum of $80 million of cash on hand at closing, of which $35 million will be used to repay certain obligations to the
Parent.
The accompanying unaudited condensed combined
financial statements of WPT and Allied Esports (collectively the “Company”) have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly,
they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion
of management, such statements include all adjustments which are considered necessary for a fair presentation of the unaudited
condensed combined financial statements of the Company as of March 31, 2019 and for the three months ended March 31, 2019 and 2018.
The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results for
the full year ending December 31, 2019 or any other period. These unaudited condensed combined financial statements have been derived
from the accounting records of WPT and Allied Esports and should be read in conjunction with the accompanying notes thereto.
As of March 31, 2019, the Company had cash,
a working capital deficit and Parent’s net investment of approximately $5.7 million, $31.6 million and $20.2 million, respectively.
For the three months ended March 31, 2019 and 2018, the Company incurred net losses of approximately $3.9 million and $6.3 million,
respectively, and used cash in operations of $2.9 million and $4.5 million, respectively. The aforementioned factors raise substantial
doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial
statements.
The accompanying combined financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”),
which contemplate continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities
in the normal course of business. The condensed combined financial statements do not include any adjustments relating to the recoverability
and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to
continue as a going concern.
The Company’s continuation is dependent
upon attaining and maintaining profitable operations and, until that time, raising additional capital as needed, but there can
be no assurance that it will be able to close on sufficient financing. The Company’s ability to generate positive cash flow
from operations is dependent upon generating sufficient revenues. To date, Parent has funded the Company’s operations. The
Merger Agreement described above, is expected to be consummated in the second quarter of 2019, and requires that the acquiror have
a minimum of $80 million of cash on hand at closing, of which $35 million will be used to repay certain obligations to the Parent.
However, the Merger agreement is subject to approval by the stockholders and the fulfillment of certain other conditions and there
can be no assurance that the Merger will close. The Company cannot provide any assurances that it will be able to secure additional
funding, either from its Parent, or from equity offerings or debt financings on terms acceptable to the Company, if at all. If
the Company is unable to obtain the requisite amount of financing needed to fund its planned operations, it would have a material
adverse effect on its business and ability to continue as a going concern, and it may have to curtail, or even cease, certain operations.
There are no material changes from the
significant accounting policies set forth in Note 3 – Significant Accounting Policies of the Company’s accompanying
notes to combined financial statements for the year ended December 31, 2018, except for the following accounting policy.
On January 1,
2019, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core
principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates
may be required within the revenue recognition process than required under existing accounting principles generally accepted in
the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating
the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate
performance obligation.
The Company
adopted ASC 606 for all applicable contracts using the modified retrospective method, which would have required a cumulative-effect
adjustment, if any, as of the date of adoption. The adoption of ASC 606 did not have a material impact on the Company’s condensed
combined financial statements as of the date of adoption. As a result, a cumulative-effect adjustment was not required.
The Company’s multiplatform revenue is comprised of distribution revenue, sponsorship revenue, music royalty revenue and
online advertising revenue. Distribution revenue is generated through the distribution of content from both World Poker Tour’s
library as well as third-party content to global TV networks or through online channels such as Pluto and Unreel from which the
Company earns revenue through the placement of ads around WPT’s content. Sponsorship revenue is generated through the sponsorship
of the Company’s content such as its TV content, online events and online streams. Online advertising revenue is generated
from third-party advertisements placed on the Company’s website. Music royalty revenue is generated when the Company’s
music is played in the Company’s TV series both on TV networks and online.
The Company recognizes distribution revenue
and sponsorship revenue pursuant to the terms of each individual contract with the customer and records deferred revenue to the
extent the Company has received a payment for services that have yet to be performed or products that have yet to be delivered.
Music royalty revenue is recognized at the point in time when the music is played.
Multiplatform revenue was comprised of
the following for the three months ended March 31, 2019 and 2018:
The Company’s interactive revenue
is primarily comprised of subscription revenue, licensing, social gaming and virtual product revenue. Subscription revenue is generated
through fixed rate (monthly, quarterly, annual) subscriptions which offer the opportunity for subscribers to play unlimited poker
and access benefits not available to non-subscribers.
The Company recognizes subscription revenue
on a straight-line basis and records deferred revenue to the extent the Company receives payments for services that have yet to
be provided. The Company recognizes social gaming revenue and virtual product revenue at the point when the product has been delivered.
The Company generates licensing revenue by licensing the right to use the Company’s brand on products to third-parties. Licensing
revenue is recognized pursuant to the terms of each individual contract with the customer and records deferred revenue to the extent
the Company has received a payment for products that have yet to be delivered.
Interactive revenue was comprised of the
following for the three months ended March 31, 2019 and 2018:
The Company’s in-person revenue is
comprised of event revenue, merchandising revenue and other revenue. Event revenue is generated through World Poker Tour events
– TV, non-TV, and DeepStacks Entertainment, LLC and Deepstacks Poker Tour, LLC (collectively “DeepStacks”) events
– held at the Company’s partner casinos as well as Allied Esports events held at the Company’s Esports properties.
Event revenue is generated from sponsorship arrangements for such Company events, as well as ticket sales, admission fees and food
and beverage sales for events held at the Company’s Esports properties.
The Company recognizes event revenue either
on a straight-line basis over the duration of each event or pursuant to the terms of each individual contract with the customer
and records deferred revenue to the extent the Company has received a payment for services that have yet to be performed. Ticket
and gaming revenue is recognized at the completion of an event and ticket sales collected in advance of an event is recorded as
deferred revenue. Point of sale revenues, such as food, beverage and merchandising revenues, are recognized when control of the
related goods are transferred to the customer.
In-person revenue was comprised of the
following for the three months ended March 31, 2019 and 2018:
To determine the
proper revenue recognition method, the Company evaluates each of its contractual arrangements to identify its performance obligations.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of the
Company’s contracts have a single performance obligation because the promise to transfer the individual good or service is
not separately identifiable from other promises within the contract and is, therefore, not distinct. Some of the Company’s
contracts have multiple performance obligations, primarily related to the provision of multiple goods or services. For contracts
with more than one performance obligation, the Company allocates the total transaction price in an amount based on the estimated
relative standalone selling prices underlying each performance obligation.
The timing of the Company’s revenue
recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to
payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related
services, the Company records deferred revenue until the performance obligations are satisfied.
As of March 31, 2019, the Company
there was approximately $1.2 million related to contract liabilities where performance obligations have not yet been satisfied
and which was included within deferred revenue on the combined balance sheet as of December 31, 2018. The Company expects to satisfy
its remaining performance obligations within the next twelve months.
During the three months ended March 31,
2019, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.
In August 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-15, “Statement
of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The new
standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement
of cash flows. The new standard for private companies and emerging growth public companies is effective for fiscal years beginning
after December 15, 2018. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which
case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The adoption of ASU
2016-15 did not have a material impact on the Company’s condensed combined financial statements or disclosures.
In March 2019, the FASB issued ASU 2019-02,
which aligns the accounting for production costs of episodic television series with the accounting for production costs of films.
In addition, ASU 2019-02 modifies certain aspects of the capitalization, impairment, presentation and disclosure requirements
in Accounting Standards Codification (“ASC”) 926-20 and the impairment, presentation and disclosure requirements
in ASC 920-350. This ASU must be adopted on a prospective basis and is effective for annual periods beginning after
December 15, 2020, including interim periods within those years, with early adoption permitted. The Company is currently evaluating
the impact that this pronouncement will have on its condensed combined financial statements.
In April 2019, the FASB issued ASU
2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging,
and Topic 825, Financial Instruments. The new ASU provides narrow-scope amendments to help apply these recent standards.
The Company will be required to adopt the provisions of this ASU on January 1, 2020, with early adoption permitted for certain
amendments. The Company is currently assessing the impact that this pronouncement will have on its condensed combined financial
statements.
In January 2018, the Parent sold its 18.2%
ownership interest in Esports Arena, LLC ("ESA"), to Allied Esports. Simultaneously, Allied Esports paid cash of $1,337,454
to purchase an additional 64.2% interest in ESA, such that Allied Esports owned an aggregate 82.4% controlling interest in Esports
Arena. The acquisition was considered a business combination as the assets and the intangible assets acquired represent an integrated
set of inputs and processes.
The following table summarizes the fair
value of the assets acquired and the liabilities recognized at the acquisition date:
Allied Esports identified the following intangible assets that
meet the criteria for separate recognition apart from the goodwill for financial reporting purposes:
In January 2018, Allied Esports entered
into a contribution agreement with ESA (the "Contribution Agreement"), whereby Allied Esports committed to contribute
$40 million to ESA for the acquisition, construction and development of up to 12 new arenas through January 31, 2020 (“Funding”).
Pursuant to the terms of the Contribution
Agreement, in the event that Allied Esports failed to contribute the minimum funding commitments noted above, Allied Esports would
be required to convey a portion of its membership interests in ESA to the minority investors of ESA. Effective August 1, 2018,
Allied Esports entered into an amendment to the agreement with the non-controlling interest members of ESA (who are not related
parties to Allied Esports) to reduce Allied Esports's ongoing contribution requirements, and accordingly, conveyed a majority
of its membership interests in ESA to the minority investors, and only retained a 25% non-voting interest in ESA. Additionally,
as part of the amendment, Allied Esports reduced its future funding commitment to $1,803,126. As of August 1, 2018, Allied Esports
derecognized the assets, liabilities and equity of ESA since Allied Esports no longer had a controlling interest in ESA. See Note
5 – Investment for additional details. The deconsolidation of ESA is not considered a discontinued operation, because
deconsolidation of ESA does not meet the criteria for discontinued operations under ASC 205-20 “Presentation of Financial
Statements, Discontinued Operations”.
As of March 31, 2019, the Company
owns a 25% non-voting membership interest in ESA and its wholly-owned subsidiary. See Note 4 – Business Combination and Contribution
Agreement. The investment is accounted for as a cost method investment, since the Company does not have the ability to exercise
significant influence over the operating and financial policies of ESA.
During the three months ended March 31, 2019 the Company contributed $1,238,631, in order to fulfill the remainder of its funding commitment.
The Company recognized an immediate impairment of $600,000 related to this funding.
During the three months ended March 31,
2019 and 2018, production costs of $453,963 and $304,052, respectively, were expensed and are reflected in multiplatform costs
in the condensed combined statements of operations.
Each of the Company’s business segments offer different,
but synergistic products and services and are managed separately, by different chief operating decision makers.
The following tables present segment information for each of
the three months ended March 31, 2019 and 2018:
|
|
For the three months ended March 31, 2019
|
|
|
For the three months ended March 31, 2018
|
|
|
|
Gaming &
Entertainment
|
|
|
Esports
|
|
|
TOTAL
|
|
|
Gaming &
Entertainment
|
|
|
Esports
|
|
|
TOTAL
|
|
Revenues
|
|
$
|
4,817,818
|
|
|
$
|
1,417,230
|
|
|
$
|
6,235,048
|
|
|
$
|
4,265,700
|
|
|
$
|
520,273
|
|
|
$
|
4,785,973
|
|
Loss from Operations
|
|
$
|
(373,611
|
)
|
|
$
|
(2,880,541
|
)
|
|
$
|
(3,254,152
|
)
|
|
$
|
(793,504
|
)
|
|
$
|
(4,998,893
|
)
|
|
$
|
(5,792,397
|
)
|
|
|
As of March 31, 2019
|
|
|
As of March 31, 2018
|
|
|
|
Gaming &
Entertainment
|
|
|
Esports
|
|
|
TOTAL
|
|
|
Gaming &
Entertainment
|
|
|
Esports
|
|
|
TOTAL
|
|
Total Assets
|
|
$
|
36,480,238
|
|
|
$
|
25,562,632
|
|
|
$
|
62,042,870
|
|
|
$
|
35,771,104
|
|
|
$
|
35,508,553
|
|
|
$
|
71,279,657
|
|
One customer of the Gaming and Entertainment
segment accounted for 16% and 18% of its segment revenues for the three months ended March 31, 2019 and 2018, respectively. The
same customer accounted for 12% and 16% of total Company revenues for the three months ended March 31, 2019 and 2018, respectively.
During the three months ended March 31,
2019 and 2018, 6% and 12% of the Esports segment revenues, respectively, were from foreign sources, and 14% and 18%, of the Gaming
& Entertainment revenues, respectively were from foreign sources.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Condensed Combined Financial
Statements
Note 8 – Related Parties
Due to Parent
As of March 31, 2019 and December 31, 2018,
due to Parent consisted of payments of certain operating expenses, investing activities and financing activities made on behalf
of the Company by the Parent. There is no stated interest rate or definitive repayment terms related to this liability.
During the three months ended March 31,
2019 and 2018, Allied Esports received net aggregate advances of $0 from the Parent. During the three months ended March 31, 2019
WPT had paid expenses on behalf of the Parent which resulted in a net reduction in the amount due to Parent of $136,574. During
the three months ended March 31, 2018 WPT received net advances from the Parent totaling approximately $3,949,978. There are no
stated interest rates or defined repayment terms related to these advances. The weighted average balance of advances owed to the
Parent during the three months ended March 31, 2019 and 2018 was $32,919,558 and $13,323,437, respectively. Advances during the
three months ended March 31, 2018 were for the Company’s working capital requirements.
Note 9 – Commitments and Contingencies
Operating Leases
On March 29, 2019, WPT entered into an
operating lease for approximately 25,000 square feet of space located in Irvine, California (the “New Irvine Lease”)
with respect to its operations. The lease term is 167 months and monthly base rent under the New Irvine lease begins at $65,134
and increases to $95,652 over the term of the lease. The lease is guaranteed by the Parent. WPT has a one-time option of reducing
the size of the leased premises to 10,000 square feet on or before June 15, 2019. In the event of such reduction, the parties have
agreed to amend the lease agreement, along with the base rent and other costs payable by WPT, based upon the reduced square footage.
The Company’s aggregate rent expense
incurred during the three months ended March 31, 2019 and 2018 amounted to $612,414 and $940,082, respectively, Of the aggregate
rent incurred during the three months ended March 31, 2019, $107,518 was capitalized into deferred production costs, $312,501 was
included within in-person cost of revenues, and $192,395 was included within general administrative expenses on the condensed combined
statements of operations. Of the aggregate rent incurred during the three months ended March 31, 2018, $103,373 was capitalized
into deferred production costs, $473,486 was included within in-person cost of revenues, and $363,223 was included within general
administrative expenses on the condensed combined statements of operations.
Litigations, Claims, and Assessments
The Company is involved in various disputes,
claims, liens and litigation matters arising out of the normal course of business. While the outcome of these disputes, claims,
liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe
that the outcome of these matters will have a material adverse effect on the Company's combined financial position, results of
operations or cash flows.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Condensed Combined Financial
Statements
Note 10 – Subsequent Events
On May 20, 2019, Noble issued a series of secured convertible
promissory notes (the “Notes”) whereby investors provided Noble with $4 million to be used for the operations of AEII/WPT.
Ms. Man Sha purchased a $1 Million Note, and is the wife of Mr. Ng Kwok Leung Frank, a related party who is co-CEO of the Parent
and a Director of Noble. The Notes accrue annual interest at 12%; provided that no interest is payable in the event the Notes
are converted into BRAC Common Stock, as described below. The Notes are due and payable on the first to occur of (i) the one-year
anniversary of the issuance date, or (ii) the date on which a demand for payment is made during the time period beginning on
the closing date of the Merger and ending on the date that is three (3) months after the closing date of the Merger. If a Note
is paid by AEM or BRAC, the applicable investor will receive one year of interest. As security for purchasing the Notes, the investors
received a security interest in Allied Esports’ assets (second to any liens held by the landlord of the Las Vegas arena
for property located in that arena), as well as a pledge of the equity of all of the entities comprising WPT, and a guaranty of
Ourgame and the Company. Upon closing of the Mergers, the debt is convertible into shares of BRAC Common Stock at $8.50 per share.
If the Merger is consummated, each investor shall receive a
Warrant to purchase shares of BRAC Common Stock in an amount equal to the product of (i) 3,800,000 shares, multiplied by (ii) the
investor’s investment amount, divided by (iii) $100,000,000. The Warrants will be subject to the exercise price and such
other terms and conditions as determined by BRAC and Ourgame in the Merger; provided, however, the terms and conditions of the
Warrant and the date of issuance of the Warrants shall be the same as the warrants to be issued to Ourgame, the Company and/or
its affiliates in connection with the Merger.
The investors in the Notes are entitled to receive additional
shares of BRAC Common Stock equal to the product of (i) 3,846,153 shares, multiplied by (ii) the investor’s investment amount,
divided by (iii) $100,000,000, if such investor’s Note is converted into BRAC Common Stock and, at any time within five
years after the date of the closing of the Mergers, the last exchange-reported sale price of BRAC Common Stock is at or above
$13.00 for thirty (30) consecutive calendar days.
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and Board of Directors
of
World Poker Tour and Allied Esports
Opinion on the Financial Statements
We have audited the accompanying combined balance sheets of
World Poker Tour and Allied Esports (the “Company”) as of December 31, 2018 and 2017, the related combined statements
of operations and comprehensive loss, changes in parent’s net investment and cash flows for each of the two years in the
period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December
31, 2018, in conformity with accounting principles generally accepted in the United States of America
Explanatory Paragraph – Going Concern
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a
significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations
and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Marcum
llp
Marcum
llp
We have served as the Company’s auditor since 2018.
Melville, New York
April 29, 2019
WORLD POKER TOUR AND ALLIED ESPORTS
Combined Balance Sheets
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
10,471,296
|
|
|
$
|
5,589,229
|
|
Accounts receivable
|
|
|
1,533,235
|
|
|
|
555,405
|
|
Prepaid expenses and other current assets
|
|
|
711,889
|
|
|
|
376,187
|
|
Total Current Assets
|
|
|
12,716,420
|
|
|
|
6,520,821
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
–
|
|
|
|
8,020,909
|
|
Property and equipment, net
|
|
|
21,020,097
|
|
|
|
8,780,491
|
|
Goodwill
|
|
|
4,083,621
|
|
|
|
4,083,621
|
|
Intangible assets, net
|
|
|
17,234,992
|
|
|
|
20,277,562
|
|
Deposits
|
|
|
632,963
|
|
|
|
652,360
|
|
Deferred production costs
|
|
|
9,058,844
|
|
|
|
5,018,879
|
|
Investment, ESA
|
|
|
500,000
|
|
|
|
–
|
|
Total Assets
|
|
$
|
65,246,937
|
|
|
$
|
53,354,643
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Parent's Net Investment
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,072,499
|
|
|
$
|
1,979,013
|
|
Accrued expenses
|
|
|
2,442,145
|
|
|
|
1,902,379
|
|
Deferred revenue
|
|
|
3,307,843
|
|
|
|
1,740,854
|
|
Due to Parent
|
|
|
33,019,510
|
|
|
|
10,107,305
|
|
Total Current Liabilities
|
|
|
39,841,997
|
|
|
|
15,729,551
|
|
|
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
1,383,644
|
|
|
|
1,089,204
|
|
Notes payable to Parent
|
|
|
–
|
|
|
|
23,375,380
|
|
Accrued interest on notes payable to Parent
|
|
|
–
|
|
|
|
550,133
|
|
Total Liabilities
|
|
|
41,225,641
|
|
|
|
40,744,268
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent's Net Investment
|
|
|
|
|
|
|
|
|
Parent's net investment
|
|
|
24,021,296
|
|
|
|
12,610,375
|
|
Total Parent's Net Investment
|
|
|
24,021,296
|
|
|
|
12,610,375
|
|
Total Liabilities and Parent's Net Investment
|
|
$
|
65,246,937
|
|
|
$
|
53,354,643
|
|
The accompanying notes are an integral part of these combined financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Combined Statements of Operations and
Comprehensive Loss
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Multiplatform
|
|
$
|
2,996,657
|
|
|
$
|
1,440,634
|
|
Interactive
|
|
|
9,175,243
|
|
|
|
7,792,090
|
|
In-person
|
|
|
8,431,355
|
|
|
|
4,440,282
|
|
Total Revenues
|
|
|
20,603,255
|
|
|
|
13,673,006
|
|
|
|
|
–
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
Multiplatform (exclusive of depreciation and amortization)
|
|
|
2,296,790
|
|
|
|
7,879,750
|
|
Interactive (exclusive of depreciation and amortization)
|
|
|
2,473,970
|
|
|
|
2,688,556
|
|
In-person (exclusive of depreciation and amortization)
|
|
|
2,553,473
|
|
|
|
968,750
|
|
Online operating expenses
|
|
|
2,244,574
|
|
|
|
1,744,172
|
|
Selling and marketing expenses
|
|
|
4,022,602
|
|
|
|
3,384,222
|
|
General and administrative expenses
|
|
|
18,442,461
|
|
|
|
10,341,445
|
|
Depreciation and amortization
|
|
|
6,711,398
|
|
|
|
4,206,943
|
|
Impairment of investment in ESA
|
|
|
9,683,158
|
|
|
|
–
|
|
Impairment of deferred production costs and intangible assets
|
|
|
1,005,292
|
|
|
|
–
|
|
Total Costs and Expenses
|
|
|
49,433,718
|
|
|
|
31,213,838
|
|
Loss From Operations
|
|
|
(28,830,463
|
)
|
|
|
(17,540,832
|
)
|
|
|
|
|
|
|
|
|
|
Other (Expense) Income:
|
|
|
|
|
|
|
|
|
Other income
|
|
|
126,689
|
|
|
|
–
|
|
Interest expense, net
|
|
|
(2,117,438
|
)
|
|
|
(540,370
|
)
|
Foreign currency exchange loss
|
|
|
(198,513
|
)
|
|
|
(6,029
|
)
|
Total Other Expense
|
|
|
(2,189,262
|
)
|
|
|
(546,399
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(31,019,725
|
)
|
|
|
(18,087,231
|
)
|
Net loss attributed to non-controlling interest
|
|
|
403,627
|
|
|
|
–
|
|
Net Loss Attributable to Parent
|
|
$
|
(30,616,098
|
)
|
|
$
|
(18,087,231
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(31,019,725
|
)
|
|
$
|
(18,087,231
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation income (loss)
|
|
|
288,111
|
|
|
|
(193,222
|
)
|
Total Comprehensive Loss
|
|
|
(30,731,614
|
)
|
|
|
(18,280,453
|
)
|
Less: comprehensive loss attributable to
non-controlling interest
|
|
|
403,627
|
|
|
|
–
|
|
Comprehensive loss attributable to Parent
|
|
$
|
(30,327,987
|
)
|
|
$
|
(18,280,453
|
)
|
The accompanying
notes are an integral part of these combined financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Combined Statements of Changes in Parent’s
Net Investment
|
|
Parent's Net Investment
|
|
Balance at January 1, 2017
|
|
$
|
30,407,457
|
|
Net loss attributable to Parent
|
|
|
(18,087,231
|
)
|
Other comprehensive loss
|
|
|
(193,222
|
)
|
Net contributions from Parent
|
|
|
483,371
|
|
Balance at December 31, 2017
|
|
|
12,610,375
|
|
Net loss attributable to Parent
|
|
|
(30,616,098
|
)
|
Effect of restructuring
|
|
|
42,505,325
|
|
Net contributions from Parent
|
|
|
(766,417
|
)
|
Other comprehensive income
|
|
|
288,111
|
|
Balance at December 31, 2018
|
|
$
|
24,021,296
|
|
The accompanying notes are an integral part of these combined financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Combined Statements of Cash Flows
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(31,019,725
|
)
|
|
$
|
(18,087,231
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
(766,417
|
)
|
|
|
483,371
|
|
Bad debt (recovery)/expense
|
|
|
(79,414
|
)
|
|
|
26,604
|
|
Depreciation and amortization
|
|
|
6,711,398
|
|
|
|
4,206,943
|
|
Write-offs of capitalized software costs
|
|
|
648,563
|
|
|
|
–
|
|
Subsidiary loss during consolidation period
|
|
|
1,838,739
|
|
|
|
–
|
|
Impairment of investment in ESA
|
|
|
9,683,158
|
|
|
|
–
|
|
Impairment of deferred production costs
|
|
|
768,459
|
|
|
|
–
|
|
Impairment of intangibles
|
|
|
236,833
|
|
|
|
–
|
|
Deferred rent
|
|
|
294,440
|
|
|
|
929,155
|
|
Accrued interest on notes payable to Parent
|
|
|
1,843,659
|
|
|
|
550,133
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(902,614
|
)
|
|
|
170,237
|
|
Deposits
|
|
|
19,397
|
|
|
|
(652,360
|
)
|
Deferred production costs
|
|
|
(4,808,424
|
)
|
|
|
168,417
|
|
Prepaid expenses and other current assets
|
|
|
(336,555
|
)
|
|
|
88,354
|
|
Accounts payable
|
|
|
(861,632
|
)
|
|
|
1,239,656
|
|
Accrued expenses
|
|
|
551,593
|
|
|
|
246,342
|
|
Deferred revenue
|
|
|
1,566,989
|
|
|
|
(128,185
|
)
|
Total adjustments
|
|
|
16,408,172
|
|
|
|
7,328,667
|
|
Net Cash Used In Operating Activities
|
|
|
(14,611,553
|
)
|
|
|
(10,758,564
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(17,144,397
|
)
|
|
|
(5,871,076
|
)
|
Proceeds from licensing software
|
|
|
341,193
|
|
|
|
–
|
|
Purchases of intangible assets
|
|
|
(38,559
|
)
|
|
|
(262,092
|
)
|
Funding of ESA investment
|
|
|
(6,230,038
|
)
|
|
|
–
|
|
Net Cash Used In Investing Activities
|
|
|
(23,071,801
|
)
|
|
|
(6,133,168
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from notes payable to Parent
|
|
|
11,383,207
|
|
|
|
20,351,165
|
|
Due to Parent
|
|
|
22,912,205
|
|
|
|
8,123,017
|
|
Payment of acquisition liability
|
|
|
–
|
|
|
|
(500,000
|
)
|
Net Cash Provided By Financing Activities
|
|
|
34,295,412
|
|
|
|
27,974,182
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash
|
|
|
249,100
|
|
|
|
9,179
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase In Cash And Restricted Cash
|
|
|
(3,138,842
|
)
|
|
|
11,091,629
|
|
Cash and restricted cash - Beginning of period
|
|
|
13,610,138
|
|
|
|
2,518,509
|
|
Cash and restricted cash - End of period
|
|
$
|
10,471,296
|
|
|
$
|
13,610,138
|
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash consisted of the following:
|
|
|
|
|
|
|
|
|
Cash
|
|
|
10,471,296
|
|
|
|
5,589,229
|
|
Restricted cash
|
|
|
–
|
|
|
|
8,020,909
|
|
|
|
$
|
10,471,296
|
|
|
$
|
13,610,138
|
|
The accompanying notes are an integral part of these combined financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Combined Statements of Cash Flows, continued
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
55,178
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Due to Parent for purchase of Deepstacks
|
|
$
|
–
|
|
|
$
|
500,000
|
|
Non-cash investment in ESA
|
|
$
|
5,363,706
|
|
|
$
|
–
|
|
Notes payable to Parent for purchase of property and equipment
|
|
$
|
–
|
|
|
$
|
1,278,967
|
|
Due to Parent for purchase of property and equipment
|
|
$
|
–
|
|
|
$
|
525,582
|
|
Effect of restructuring
|
|
$
|
42,505,325
|
|
|
$
|
–
|
|
The accompanying notes are an integral part of these combined financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Note 1 – Background and Basis
of Presentation
The accompanying combined financial statements
include the accounts of Noble Link Global Limited (“Noble”) and Allied Esports Media, Inc., formerly known as
Allied Esports Entertainment, Inc. Allied Esports Media changed its name from Allied Esports Entertainment, Inc. to Allied Esports
Media, Inc. on January 29, 2019. Allied Esports Media, together with its subsidiaries described below, is referred to herein as
“Allied Esports”)
Noble was incorporated in the British
Virgin Islands on May 5, 2015. Noble operates through its wholly-owned subsidiaries Peerless Media Limited (“Peerless”),
WPT Distribution Worldwide Limited (“WPT Distribution”) and WPT Studios Worldwide Limited (“WPT Studios”)
(Noble and its subsidiaries are collectively “World Poker Tour” or “WPT”). World Poker Tour is an
internationally televised gaming and entertainment company with brand presence in land-based tournaments, television, online and
mobile applications. WPT has been involved in the sport of poker since 2002 and created a television show based on a series of
high-stakes poker tournaments. WPT has broadcasted globally in more than 150 countries and territories and is sponsored by a third-party
online social poker site. WPT also operates ClubWPT.com, a site that offers inside access to the WPT database, as well as sweepstakes-based
poker available in 35 states across the United States. WPT also participates in strategic brand licensing, partnership, and sponsorship
opportunities.
Allied Esports operates through its wholly-owned
subsidiaries Allied Esports International, Inc., (“AEII”), Esports Arena Las Vegas, LLC (“ESALV”) and ELC
Gaming GMBH (“ELC Gaming”). Allied Esports Media, a Delaware Corporation, was formed in November 2018 to eventually
act as a holding company for Allied Esports and immediately prior to close of merger to also include WPT (see Note 11, Related
Parties – Restructuring). AEII operates global competitive Esports properties designed to connect players and fans via a
network of connected arenas. ESALV operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada. ELC Gaming
operates a mobile Esports truck that serves as both a battleground and content generation hub and also operates a studio for recording
and streaming gaming events.
WPT and Allied Esports (collectively the
“Company”) are subsidiaries of Ourgame International Holdings Limited (“Parent”), which was incorporated
in the Cayman Islands on December 4, 2013. As of the earliest date of these financial statements, the Parent owned 100% and 69.3%
of WPT and AEII, respectively. The Company elected to apply pushdown accounting; accordingly, the combined financial statements
of WPT and Allied Esports represent the carrying value of the Parent’s historical cost in these entities.
On December 19, 2018, the Company became
a party to a Merger Agreement (the “Merger Agreement”) with Black Ridge Acquisition Corp. (“BRAC”),
which will result in BRAC acquiring Allied Esports and WPT (the “Merger”). The Merger is expected to be consummated
in the second quarter of 2019, after the required approval by the stockholders of BRAC and the Parent and the fulfillment
of certain other conditions prior to closing, as described in the Merger Agreement. The Merger Agreement requires that the acquiror
has a minimum of $80 million of cash on hand at closing, of which $35 million will be used to repay certain obligations to the
Parent.
Note 2 - Going Concern and Management’s
Plans
As of December 31, 2018, the Company had
cash, a working capital deficit and Parent’s net investment of approximately $10.5 million, $27.1 million and $24.0 million,
respectively. For the years ended December 31, 2018 and 2017, the Company incurred net losses of approximately $31.0 million and
$18.1 million, respectively, and used cash in operations of $14.6 million and $10.8 million, respectively. The aforementioned
factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance
date of these financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
The accompanying combined financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and the satisfaction
of liabilities in the normal course of business. The combined financial statements do not include any adjustments relating to
the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The Company’s continuation is dependent
upon attaining and maintaining profitable operations and, until that time, raising additional capital as needed, but there can
be no assurance that it will be able to close on sufficient financing. The Company’s ability to generate positive cash flow
from operations is dependent upon generating sufficient revenues. To date, Parent has funded the Company’s operations. The
Merger Agreement described above, is expected to be consummated in the second quarter of 2019, and requires that the acquiror have
a minimum of $80 million of cash on hand at closing, of which $35 million will be used to repay certain obligations to the Parent.
However, the Merger agreement is subject to approval by the stockholders and the fulfillment of certain other conditions and there
can be no assurance that the Merger will close. The Company cannot provide any assurances that it will be able to secure additional
funding, either from its Parent, or from equity offerings or debt financings on terms acceptable to the Company, if at all. If
the Company is unable to obtain the requisite amount of financing needed to fund its planned operations, it would have a material
adverse effect on its business and ability to continue as a going concern, and it may have to curtail, or even cease, certain operations.
Note 3 - Significant Accounting Policies
Basis of Presentation and Principles
of Combination
The combined financial statements have
been prepared using the consolidated accounting records of WPT and Allied Esports. All intercompany transactions and accounts
within and between WPT and Allied Esports, and intercompany transactions and balances between WPT and Allied Esports and their
subsidiaries, have been eliminated. The combined financial statements have been prepared in accordance with U.S. GAAP and pursuant
to the accounting rules and regulations of the United States Securities and Exchange Commission (“SEC”). Parent expenses
incurred on behalf of WPT and Allied Esports have been recorded on the books of each entity using specific identification.
Use of Estimates
Preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The
Company’s significant estimates used in these financial statements include, but are not limited to, the valuation and carrying
amount of goodwill and other intangible assets, accounts receivable reserves, the valuation of deferred tax assets and the recoverability
and useful lives of long-lived assets, including deferred production costs. Certain of the Company’s estimates could be affected
by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these
external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.
Business Combinations
The Company accounts for business combinations
under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business
Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business
are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is
recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations
are consolidated as of and subsequent to the acquisition date.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Cash and Cash Equivalents
All short-term investments of the Company
that have a maturity of three months or less when purchased are considered to be cash equivalents. There were no cash equivalents
as of December 31, 2018 or 2017.
Concentration Risks
Financial instruments that potentially
subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed
Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company has not experienced any losses in such accounts,
periodically evaluates the creditworthiness of the financial institutions and has determined the credit exposure to be negligible.
During the years ended December 31, 2018
and 2017, 11% and 15%, respectively, of the Companies revenues were from customers in foreign countries.
During the year ended December 31, 2018,
the Company’s largest customer accounted for 15% of the Company’s total revenues.
See Note - 10 Segment Data for additional
details.
Restricted Cash
Restricted cash was comprised of cash held
in an escrow account for the purposes of constructing the Company's Esports arena in Las Vegas, Nevada. Construction was completed
and the Esports arena opened in March 2018 and any remaining cash balances held for construction were released from escrow.
Accounts Receivable
Accounts receivable are carried at their
contractual amounts. Management establishes an allowance for doubtful accounts based on its historic loss experience and current
economic conditions. Losses are charged to the allowance when management deems further collection efforts will not produce additional
recoveries. As of December 31, 2018 and 2017, there was no bad debt allowance.
Property and Equipment
Property and equipment are stated at cost,
net of accumulated depreciation using the straight-line method over their estimated useful lives, once the asset is placed in service.
Leasehold improvements are amortized over the lesser of (a) the useful life of the asset; or (b) the remaining lease term (including
renewal periods that are reasonably assured). Expenditures for maintenance and repairs, which do not extend the economic useful
life of the related assets, are charged to operations as incurred, and expenditures which extend the economic life are capitalized.
When assets are retired or otherwise disposed of, the costs and related accumulated depreciation or amortization are removed from
the accounts and any gain or loss on disposal is recognized in the statement of operations for the respective period. Internally
generated software costs are expensed as incurred in the preliminary project phase and post-implementation phase and will be capitalized
during the application development stage. Assets are held in construction in progress until placed in service, upon which date,
we begin to depreciate those assets.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
The estimated useful lives of property
and equipment are as follows:
Equipment
|
|
|
3 - 5 years
|
|
Computer equipment
|
|
|
3 - 5 years
|
|
Production equipment
|
|
|
5 years
|
|
Furniture and fixtures
|
|
|
3 - 5 years
|
|
Software
|
|
|
1 - 5 years
|
|
Gaming truck
|
|
|
5 years
|
|
Leasehold improvements
|
|
|
5-10 years
|
|
Goodwill and Intangibles
Intangible assets are comprised of goodwill,
intellectual property, customer relationships, trademarks, and trade names. Intangible assets with definite lives are amortized
on a straight-line basis over the shorter of their estimate useful lives, ranging from two to ten years, or their contract periods,
if applicable. Intangible assets with indefinite lives are not amortized but are evaluated at least annually for impairment and
more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. Application
of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities
to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to
estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates,
consideration of the Company’s aggregate fair value, and other assumptions. Changes in these estimates and assumptions could
materially affect the determination of fair value and/or goodwill impairment.
When testing goodwill for impairment, the
Company may assess qualitative factors for some or all of our reporting units to determine whether it is more likely than not (that
is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill.
Alternatively, the Company may bypass this qualitative assessment for some or all of our reporting units and perform a detailed
quantitative test of impairment (step 1). If the Company performs the detailed quantitative impairment test and the carrying amount
of the reporting unit exceeds its fair value, the Company would perform an analysis (step 2) to measure such impairment. At December
31, 2018 and 2017, the Company performed a qualitative assessment to identify and evaluate events and circumstances to conclude
whether it is more likely than not that the fair value of the Company’s reporting units is less than their carrying amounts.
Based on the Company’s qualitative assessments, the Company concluded that a positive assertion can be made that it is more
likely than not that the fair value of the reporting units exceeded their carrying values and no impairments were identified at
December 31, 2018 and 2017.
Impairment of Long-Lived Assets
The Company reviews for the impairment
of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it.
Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment
loss would be recognized for the amount by which the carrying value of the asset exceeds its fair value. The evaluation of asset
impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions
require significant judgment and actual results may differ from assumed and estimated amounts. During the year ended December 31,
2018 the Company recorded an aggregate of $1,005,292 for impairment charges related to deferred production costs and intangible
assets as described in Note 8 - Deferred Production Costs and Note 7 – Intangible Assets, net, and recorded an impairment
charge of $9,683,158 related to its investment in ESA as described in Note 5 – Investment.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Deferred Production Costs
Capitalized production costs represent
the costs incurred to develop and produce the Company’s proprietary shows. These costs primarily consist of labor, equipment,
production overhead costs and travel expenses. Capitalized production costs are stated at the lower of cost, less accumulated amortization
and tax credits, if applicable, or fair value. Production costs in an amount up to the amount of ultimate revenue expected to be
earned from the related production are capitalized in accordance with FASB ASC Topic 926-20-50-2 “Other Assets – Film
Costs” and are expensed over the expected revenue period using a ratio of revenue earned during the period to estimated ultimate
revenues for the related production. Costs incurred in excess of expected ultimate revenue are expensed as incurred and included
in multiplatform costs in the accompanying combined statements of operations. Unamortized capitalized production costs are evaluated
for impairment at each reporting period on a season-by-season basis. If estimated remaining revenue is not sufficient to recover
the unamortized capitalized production costs for that season, the unamortized capitalized production costs will be written down
to fair value.
Due to the inherent uncertainties involved
in making such estimates of revenues and expenses, these estimates are likely to differ to some extent from actual results. The
Company’s management regularly reviews and revises when necessary its revenue and cost estimates, which may result in a change
in the rate of amortization of film costs, participations and residuals and/or write-down of all or a portion of the unamortized
deferred production costs to its net realizable value.
Fair Value of Financial Instruments
The Company measures the fair value of
financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC
820”).
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes
a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active
markets for identical assets or liabilities.
Level
2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level
3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
The carrying amounts of the Company’s
financial instruments, such as cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to
the short-term nature of these instruments.
Nonrecurring Fair Value Measurements
Certain nonfinancial assets and liabilities
are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as
when there is evidence of impairment. These fair value measurements are categorized within level 3 of the fair value hierarchy.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
The Company periodically evaluates the
carrying value of long-lived assets to be held and used when events or circumstances warrant such a review. Fair value is determined
primarily using anticipated cash flows assumed by a market participant discounted at a rate commensurate with the risk involved
or in the case of nonfinancial assets or liabilities. During the year ended December 31, 2018, the Company recognized an impairment
of $768,459 related to deferred production costs that were deemed impaired due to determination that the remaining revenue associated
with the deferred production costs is not sufficient to recover the unamortized cost. Additionally, during the year ended December
31, 2018, the Company recognized an impairment of $236,833 related to certain intangible assets that were deemed impaired due to
determination that the future cash flows is not sufficient to recover the carrying value of those assets.
During the year ended December 31, 2018
the Company recorded impairment expense of $9,683,158 to reduce the carrying value of its investment in ESA to fair value, which
was determined using a combination of the market approach and asset approach. See Note 5 – Investment for additional details.
Income Taxes
The Company recognizes deferred tax assets
and liabilities for the expected future tax consequences of items that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred
tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will
not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of
operations in the period that includes the enactment date.
The Company recognizes the tax
benefit from an uncertain income tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement by examining taxing authorities.
The Company’s policy is to recognize
interest and penalties accrued on uncertain income tax positions in interest expense in the Company’s statements of operations.
As of December 31, 2018, and 2017, the Company had no liability for unrecognized tax benefits. The Company does not expect the
unrecognized tax benefits to change significantly over the next 12 months.
See Note 12 – Income Taxes
for additional details including the effects of the Tax Cuts and Jobs Act enacted in December 2017.
Commitments and Contingencies
Liabilities for loss contingencies arising
from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has
been incurred and the amount of the assessment can be reasonably estimated.
Revenue Recognition
The Company recognizes revenue when the
following four criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been
rendered; (3) fees are fixed or determinable, and (4) the collectability is reasonably assured.
For multiple element contracts, the Company
allocates consideration to the multiple elements based on the relative selling price of each separate element which are determined
using vendor specific objective evidence, third-party evidence or the Company’s best estimate in order to assign relative
fair values.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Multiplatform revenue
The Company’s multiplatform revenue
is comprised of distribution revenue, sponsorship revenue, music royalty revenue and online advertising revenue. Distribution revenue
is generated through the distribution of content from both World Poker Tour’s library as well as third-party content to global
TV networks or through online channels such as Pluto and Unreel from which the Company earns revenue through the placement of ads
around WPT’s content. Sponsorship revenue is generated through the sponsorship of the Company’s content such as its
TV content, online events and online streams. Online advertising revenue is generated from third-party advertisements placed on
the Company’s website. Music royalty revenue is generated when the Company’s music is played in the Company’s
TV series both on TV networks and online.
The Company recognizes distribution revenue
and sponsorship revenue pursuant to the terms of each individual contract with the customer and records deferred revenue to the
extent the Company has received a payment for services that have yet to be performed or products that have yet to be delivered.
Music royalty revenue is recognized at the point in time when the music is played.
Multiplatform revenue was comprised of
the following for the years ended December 31, 2018 and 2017:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Distribution revenue
|
|
$
|
861,994
|
|
|
$
|
191,188
|
|
Sponsorship revenue
|
|
|
1,082,077
|
|
|
|
373,445
|
|
Music royalty revenue
|
|
|
1,031,425
|
|
|
|
876,001
|
|
Online advertising revenue
|
|
|
21,161
|
|
|
|
–
|
|
Total multiplatform revenue
|
|
$
|
2,996,657
|
|
|
$
|
1,440,634
|
|
Interactive revenue
The Company’s interactive revenue
is primarily comprised of subscription revenue, licensing, social gaming and virtual product revenue. Subscription revenue is generated
through fixed rate (monthly, quarterly, annual) subscriptions which offer the opportunity for subscribers to play unlimited poker
and access benefits not available to non-subscribers.
The Company recognizes subscription revenue
on a straight-line basis and records deferred revenue to the extent the Company receives payments for services that have yet to
be provided. The Company recognizes social gaming revenue and virtual product revenue at the point when the product has been delivered.
The Company generates licensing revenue by licensing the right to use the Company’s brand on products to third-parties. Licensing
revenue is recognized pursuant to the terms of each individual contract with the customer and records deferred revenue to the extent
the Company has received a payment for products that have yet to be delivered.
WORLD POKER TOUR
AND ALLIED ESPORTS
Notes to Combined Financial Statements
Interactive revenue was comprised of the following for the years
ended December 31, 2018 and 2017:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Subscription revenue
|
|
$
|
4,964,086
|
|
|
$
|
5,226,136
|
|
Virtual product revenue
|
|
|
3,093,973
|
|
|
|
–
|
|
Social gaming revenue
|
|
|
674,497
|
|
|
|
1,871,507
|
|
Licensing revenue
|
|
|
349,199
|
|
|
|
546,955
|
|
Other revenue
|
|
|
93,488
|
|
|
|
147,492
|
|
Total interactive revenue
|
|
$
|
9,175,243
|
|
|
$
|
7,792,090
|
|
In-person revenue
The Company’s in-person revenue is
comprised of event revenue, merchandising revenue and other revenue. Event revenue is generated through World Poker Tour events
– TV, non-TV, and DeepStacks Entertainment, LLC and Deepstacks Poker Tour, LLC (collectively “DeepStacks”) events
– held at the Company’s partner casinos as well as Allied Esports events held at the Company’s Esports properties.
Event revenue is generated from sponsorship arrangements for such Company events, as well as ticket sales, admission fees and food
and beverage sales for events held at the Company’s Esports properties.
The Company recognizes event revenue either
on a straight-line basis over the duration of each event or pursuant to the terms of each individual contract with the customer
and records deferred revenue to the extent the Company has received a payment for services that have yet to be performed. Ticket
and gaming revenue is recognized at the completion of an event and ticket sales collected in advance of an event is recorded as
deferred revenue. Point of sale revenues, such as food, beverage and merchandising revenues, are recognized when the related goods
are transferred to the customer.
In-person revenue consisted of the following for the years ended
December 31, 2018 and 2017:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Event revenue
|
|
$
|
5,802,399
|
|
|
$
|
4,440,282
|
|
Food and beverage revenue
|
|
|
814,247
|
|
|
|
–
|
|
Ticket and gaming revenue
|
|
|
1,621,721
|
|
|
|
–
|
|
Merchandising revenue
|
|
|
167,194
|
|
|
|
–
|
|
Other revenues
|
|
|
25,794
|
|
|
|
–
|
|
Total in-person revenue
|
|
$
|
8,431,355
|
|
|
$
|
4,440,282
|
|
Stock-Based Compensation
The Company measures the cost of services
received in exchange for an award of equity instruments based on the fair value of the award. For employees, the fair value of
the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting
dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over
the period during which services are required to be provided in exchange for the award, usually the vesting period. The Parent
estimates the fair value of the awards granted to its employees and service-providers using a binomial options pricing model based
on the market value of the Parent’s freely tradable common stock (listed on the Stock Exchange of Hong Kong), for awards
that have been granted by the Parent, with compensation expense recorded by the Company.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Advertising Costs
Advertising costs are charged to operations
in the year incurred and totaled approximately $1,240,000 and $1,352,000 for the years ended December 31, 2018 and 2017, respectively.
Foreign Currency Translation
The Company’s reporting currency
is the United States Dollar. The functional currencies of the Company’s operating subsidiaries are their local currencies
(United States Dollar and Euro). Euro-denominated assets and liabilities are translated into the United States Dollar at the balance
sheet date (1.1444 and 1.2002 at December 31, 2018 and 2017, respectively), and revenue and expense accounts are translated at
a weighted average exchange rate for the years then ended (1.1809 and 1.1304 for the years ended December 31, 2018 and 2017, respectively).
Resulting translation adjustments are made directly to accumulated other comprehensive (loss) income. Losses of $198,513 and $6,029
arising from exchange rate fluctuations on transactions denominated in a currency other than the reporting currency for the years
ended December 31, 2018 and 2017, respectively, are recognized in operating results in the combined statements of operations. The
Company engages in foreign currency denominated transactions with customers and suppliers, as well as between subsidiaries with
different functional currencies.
Subsequent Events
The Company evaluates events that have
occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did
not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the combined
financial statements, except as disclosed.
Segment Reporting
Reportable segments are components of an
enterprise about which separate financial information is available for evaluation by the chief operating decision maker in
making decisions about how to allocate resources and assess performance. The chief operating decision maker of WPT is WPT’s
Vice President of Finance and the chief operating decision maker of Allied Esports is Allied Esports’ Chief Executive Officer
and Chief Financial Officer. Separate discrete financial information for each of WPT and Allied Esports are reviewed separately
by different chief operating decision makers, and the operations of each of WPT and Allied Esports are managed separately. As such,
the operations of WPT (principally poker gaming and entertainment) and Allied Esports (principally video game events and competitions)
are reported as separate operating segments of the Company. See Note 10 – Segment.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Recent Accounting Pronouncements
In May 2014,
the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic
606),” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition
(“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide
clarification on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires
that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step
process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the
revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract,
estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each
separate performance obligation. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty
of revenue and cash flows arising from an entity’s contracts with customers. The guidance may be adopted through either
retrospective application to all periods presented in the financial statements (full retrospective approach) or through a cumulative
effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance was revised in July
2015 to be effective for private companies and emerging growth public companies for annual and interim periods beginning on or
after December 15, 2018. Except for certain contracts related to the Company’s distribution and event revenue streams, the
Company has completed its ASC 606 analysis and, to date, has not identified any material differences in revenue recognition policies
that would have a material impact on its combined financial statements.
In February 2016, the FASB issued ASU No.
2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities
arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures
to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising
from leases. ASU 2016-02 is effective for private companies and emerging growth public companies for fiscal years beginning after
December 15, 2019, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its combined
financial statements.
In March 2016, the FASB issued ASU No.
2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an
entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences,
classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective
for private companies and emerging growth public companies for fiscal years beginning after December 15, 2017, with early adoption
permitted. The Company adopted this guidance effective January 1, 2018, and the standard did not have a material impact on the
Company’s combined financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, “Statement
of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The new
standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement
of cash flows. The new standard for private companies and emerging growth public companies is effective for fiscal years beginning
after December 15, 2018. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which
case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The adoption of ASU
2016-15 is not expected to have a material impact on the Company’s combined financial statements or disclosures.
In November 2016, the FASB issued ASU 2016-18,
“Restricted Cash.” This guidance standardizes the presentation of changes to restricted cash on the statement of cash
flows by requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents,
and amount generally described as restricted cash or restricted cash equivalents. The provisions of this standard are effective
for annual reporting periods, and interim reporting periods contained therein, beginning after December 15, 2017, and early adoption
is permitted. The Company adopted this guidance effective January 1, 2018 and applied it retrospectively. The adoption of ASU
2016-18 had a material impact to the combined statements of cash flows, as the Company had $8,020,909 in restricted
cash at December 31. 2017.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
In May 2017, the FASB issued ASU No. 2017-09,
Compensation — Stock Compensation (Topic 718); Scope of Modification Accounting. The amendments in this ASU provide guidance
that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. If
the value, vesting conditions or classification of the award changes, modification accounting will apply. The guidance is effective
for private companies and emerging growth public companies’ fiscal years beginning after December 15, 2017 and interim periods
within those fiscal years. The Company adopted this guidance effective January 1, 2018, and the standard did not have a material
impact on the Company’s combined financial statements and related disclosures.
In June 2018, the FASB issued ASU No. 2018-07,
Compensation — Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which simplifies
accounting for share-based payment transactions resulting for acquiring goods and services from nonemployees. ASU 2018-07 is effective
for private companies and emerging growth public companies’ fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating ASU 2018-07 and its impact
on its combined financial statements or disclosures.
In July 2018, the FASB issued ASU No. 2018-10,
“Codification Improvements to Topic 842, Leases” (“ASU 2018-10”). The amendments in ASU 2018-10 provide
additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic
842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date,
ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required
to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to
make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a
right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset
for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual
reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using
a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative
periods presented in the financial statements. The Company is currently assessing the impact this guidance will have on its combined
financial statements.
In July 2018, the FASB issued ASU No. 2018-09,
“Codification Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to
certain ASC subtopics including the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10),
Debt - Modifications and Extinguishments (Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10),
Compensation - Stock Compensation - Income Taxes (Topic 718-740), Business Combinations - Income Taxes (Topic 805-740), Derivatives
and Hedging – Overall (Topic 815-10), and Fair Value Measurement – Overall (Topic 820-10). The majority of the amendments
in ASU 2018-09 will be effective in annual periods beginning after December 15, 2019. The Company is currently evaluating and assessing
the impact this guidance will have on its combined financial statements.
In July 2018, the FASB issued ASU No. 2018-11,
“Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to
transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition
method and separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The
amendments in ASU 2018-11 are effective for private companies and emerging growth public companies for fiscal years beginning after
December 15, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will
have on its combined financial statements.
In August 2018, the FASB issued ASU No.
2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair
Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with
fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The
amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to
develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively
for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should
be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for
fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including
adoption in an interim period. The Company is currently evaluating ASU 2018-13 and its impact on its combined financial statements.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Note 4 – Business Combination
In January 2018, the Parent sold its
18.2% ownership interest in Esports Arena, LLC ("ESA"), to Allied Esports. Simultaneously, Allied Esports paid
cash of $1,337,454 to purchase an additional 64.2% interest in ESA, such that Allied Esports owned an aggregate 82.4%
controlling interest in Esports Arena. The acquisition was considered a business combination as the assets and the intangible
assets acquired represent an integrated set of inputs and processes.
Allied Esports recognized goodwill of $4,337,660,
arising from the acquisition, which is due mainly to the strategic nature of the Esports Arena acquisition.
The goodwill acquired is expected to be deductible for income tax purposes.
The following table summarizes the fair
value of the assets acquired and the liabilities recognized at the acquisition date:
Assets acquired:
|
|
|
|
Cash
|
|
$
|
10,353
|
|
Property, plant and equipment
|
|
|
1,975,864
|
|
Customer list
|
|
|
940,000
|
|
Trade names
|
|
|
140,000
|
|
Goodwill
|
|
|
4,337,660
|
|
Other intangibles
|
|
|
22,300
|
|
Total assets acquired
|
|
|
7,426,177
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
|
|
Affiliate advances
|
|
|
(3,013,706
|
)
|
Accounts payable
|
|
|
(241,716
|
)
|
Debt
|
|
|
(120,447
|
)
|
Total liabilities assumed
|
|
|
(3,375,869
|
)
|
|
|
|
|
|
Non-controlling interests
|
|
|
(712,854
|
)
|
|
|
|
|
|
|
|
$
|
3,337,454
|
|
Allied Esports identified the following
intangible assets that meet the criteria for separate recognition apart from the goodwill for financial reporting purposes:
|
·
|
Customer list in the amount of $940,000,
which represents the important relationships with its customers who purchased sponsorships, merchandise, gaming services and rented
the facilities, and,
|
|
·
|
Trade names in the aggregate amount of
$140,000, which includes Esports Arena names, trademarks, and related domain names, which have recognition in the industry.
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Contribution Agreement
In January 2018, Allied Esports entered
into a contribution agreement with ESA (the "Contribution Agreement"), whereby Allied Esports committed to contribute
$40 million to ESA for the acquisition, construction and development of up to 12 new arenas through January 31, 2020 (“Funding”).
Pursuant to the terms of the Contribution
Agreement, in the event that Allied Esports failed to contribute the minimum funding commitments noted above, Allied Esports would
be required to convey a portion of its membership interests in ESA to the minority investors of ESA. Effective August 1, 2018,
Allied Esports entered into an amendment to the agreement with the non-controlling interest members of ESA (who are not related
parties to Allied Esports) to reduce Allied Esports's ongoing contribution requirements, and accordingly, conveyed a majority of
its membership interests in ESA to the minority investors, and only retained a 25% non-voting interest in ESA. Additionally, as
part of the amendment, Allied Esports reduced its funding commitment to $1,803,126. As of August 1, 2018, Allied Esports derecognized
the assets, liabilities and equity of ESA since Allied Esports no longer had a controlling interest in ESA. See Note 5 –
Investment for additional details. The deconsolidation of ESA is not considered a discontinued operation, because deconsolidation
of ESA does not meet the criteria for discontinued operations under ASC 205-20 “Presentation of Financial Statements, Discontinued
Operations”.
Note 5 – Investment
As of December 31, 2018, the Company owns
a 25% non-voting membership interest in ESA and its wholly-owned subsidiary. See Note 4 – Business Combination and Contribution
Agreement. The investment is accounted for as a cost method investment, since the Company does not have the ability to exercise
significant influence over the operating and financial policies of ESA.
Management estimated the fair
value of ESA with the assistance of a third-party valuation advisor who weighted the estimated fair values determined using
the asset approach and the market approach. The income approach wasn’t utilized due to the uncertainty
associated with any financial projections that could have been prepared. Under the asset approach, management assessed
the fair value of the assets and liabilities using the ESA balance sheets as of each valuation date. Under the market
approach, management assessed the fair value of ESA by applying the observed market multiples for a group of comparable
public companies, include revenue multiples of 3.7-4.5x and book value multiples of 0.6-1.3x, depending on the valuation
date. Management wrote down the carrying value of the investment in ESA to its estimated fair value, recording an aggregate
2018 impairment charge of $9,683,158, which consisted of a $7,438,324 impairment loss at deconsolidation and an
additional subsequent impairment loss of $2,244,834.
Note 6 – Property and Equipment, net
Property and equipment consist of the following:
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Software
|
|
$
|
3,551,214
|
|
|
$
|
3,771,509
|
|
Equipment
|
|
|
1,172,882
|
|
|
|
1,158,650
|
|
Computer equipment
|
|
|
2,616,510
|
|
|
|
2,206,391
|
|
Esports gaming truck
|
|
|
1,128,905
|
|
|
|
771,279
|
|
Furniture and fixtures
|
|
|
877,472
|
|
|
|
292,374
|
|
Production equipment
|
|
|
7,487,752
|
|
|
|
–
|
|
Leasehold improvements
|
|
|
12,903,762
|
|
|
|
281,753
|
|
|
|
|
29,738,497
|
|
|
|
8,481,956
|
|
Less: accumulated depreciation and amortization
|
|
|
(8,718,400
|
)
|
|
|
(4,970,620
|
)
|
Subtotal
|
|
|
21,020,097
|
|
|
|
3,511,336
|
|
Construction-in-progress
|
|
|
–
|
|
|
|
5,269,155
|
|
Property and equipment, net
|
|
$
|
21,020,097
|
|
|
$
|
8,780,491
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
During the years ended December 31, 2018
and 2017, depreciation and amortization expense amounted to $3,867,102 and $1,111,936 respectively. During the years ended December
31, 2018 and 2017, the Company disposed of an aggregate of $67,784 and $335,694 of fully depreciated property and equipment, respectively.
Construction in progress consists of the
following:
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Esports arena in Las Vegas, Nevada
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
$
|
–
|
|
|
$
|
2,630,809
|
|
Computer equipment
|
|
|
–
|
|
|
|
2,012,470
|
|
Furniture and fixtures
|
|
|
–
|
|
|
|
263,248
|
|
Software
|
|
|
–
|
|
|
|
5,000
|
|
Total Esports arena in Las Vegas, Nevada
|
|
|
–
|
|
|
|
4,911,527
|
|
Gaming truck
|
|
|
–
|
|
|
|
357,628
|
|
Total construction-in-progress
|
|
$
|
–
|
|
|
$
|
5,269,155
|
|
In preparation for hosting Esports events,
Allied Esports committed to repurpose leased space in the Luxor Hotel (the "Lessor") in Las Vegas into an Esports gaming
arena, which opened in March 2018. As part of the lease agreement with the Lessor, Allied Esports deposited $9,000,000 with a third-party
escrow company. The deposit was held for the sole purpose of constructing the leasehold improvements and withdrawals require approval
from a third-party quality control engineer approved by the Lessor. At December 31, 2018 and 2017, $-0- and $8,020,909, respectively
remained in the escrow account.
As of December 31, 2017, Allied Esports
was in the process of developing a mobile gaming truck to allow the Company to host videogaming events and create content generation
hubs throughout the United States. The mobile gaming truck was completed and placed into service during 2018.
Note 7 – Intangible Assets, net
Intangible assets consist of the following:
|
|
Indefinite-Lived Trade Names
|
|
|
Trademarks
|
|
|
Customer Relationships
|
|
|
Intellectual Property
|
|
|
Accumulated Amortization
|
|
|
Total
|
|
Balance as of January 1, 2017
|
|
|
1,000,000
|
|
|
|
24,882,577
|
|
|
|
3,457,724
|
|
|
|
–
|
|
|
|
(6,229,824
|
)
|
|
|
23,110,477
|
|
Purchases of intangibles
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
262,092
|
|
|
|
–
|
|
|
|
262,092
|
|
Amortization expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,095,007
|
)
|
|
|
(3,095,007
|
)
|
Balance as of December 31, 2017
|
|
|
1,000,000
|
|
|
|
24,882,577
|
|
|
|
3,457,724
|
|
|
|
262,092
|
|
|
|
(9,324,831
|
)
|
|
|
20,277,562
|
|
Purchases of intangibles
|
|
|
–
|
|
|
|
31,739
|
|
|
|
–
|
|
|
|
6,820
|
|
|
|
–
|
|
|
|
38,559
|
|
Amortization expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,844,296
|
)
|
|
|
(2,844,296
|
)
|
Impairment of intellectual property
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(236,833
|
)
|
|
|
–
|
|
|
|
(236,833
|
)
|
Balance as of December 31, 2018
|
|
$
|
1,000,000
|
|
|
$
|
24,914,316
|
|
|
$
|
3,457,724
|
|
|
$
|
32,079
|
|
|
$
|
(12,169,127
|
)
|
|
$
|
17,234,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining amortization period at December 31, 2018 (in years)
|
|
|
n/a
|
|
|
|
6.5
|
|
|
|
n/a
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Amortization of intangible assets consists
of the following:
|
|
Indefinite-Lived Trade Names
|
|
|
Trademarks
|
|
|
Customer Relationships
|
|
|
Intellectual Property
|
|
|
Accumulated Amortization
|
|
Balance as of January 1, 2017
|
|
$
|
–
|
|
|
$
|
3,720,649
|
|
|
$
|
2,509,175
|
|
|
$
|
–
|
|
|
$
|
6,229,824
|
|
Amortization expense
|
|
|
–
|
|
|
|
2,494,174
|
|
|
|
600,833
|
|
|
|
–
|
|
|
|
3,095,007
|
|
Balance as of December 31, 2017
|
|
|
–
|
|
|
|
6,214,823
|
|
|
|
3,110,008
|
|
|
|
–
|
|
|
|
9,324,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
–
|
|
|
|
2,494,174
|
|
|
|
347,716
|
|
|
|
2,406
|
|
|
|
2,844,296
|
|
Balance as of December 31, 2018
|
|
$
|
–
|
|
|
$
|
8,708,997
|
|
|
$
|
3,457,724
|
|
|
$
|
2,406
|
|
|
$
|
12,169,127
|
|
As of December 31, 2018, management determined
that the projected cash flows from certain intellectual property would not be sufficient to recover the carrying value of those
assets. Accordingly, the Company recorded an impairment charge of $236,833 which is included in operating costs and expenses on
the accompanying combined statements of operations. As of December 31, 2018, trademarks in the aggregate amount of $133,853 have
not yet been placed in service and therefore the Company has not recognized any amortization expense relating to these intangibles
for the periods presented. These intangible assets will be amortized on a straight-line basis over the shorter of their license
periods or estimated useful lives ranging from two to ten years.
Estimated future amortization expense is
as follows:
Years Ending December 31,
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
$
|
2,497,382
|
|
|
2020
|
|
|
|
2,497,382
|
|
|
2021
|
|
|
|
2,497,382
|
|
|
2022
|
|
|
|
2,497,382
|
|
|
2023
|
|
|
|
2,497,382
|
|
|
Thereafter
|
|
|
|
3,748,082
|
|
|
|
|
|
$
|
16,234,992
|
|
Note 8 – Deferred Production Costs
Deferred production costs consist of the
following:
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Deferred production costs
|
|
$
|
23,604,111
|
|
|
$
|
17,905,111
|
|
Less: accumulated amortization
|
|
|
(14,545,267
|
)
|
|
|
(12,886,232
|
)
|
Deferred production costs, net
|
|
$
|
9,058,844
|
|
|
$
|
5,018,879
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining amortization period at December 31, 2018 (in
years)
|
|
|
4.02
|
|
|
|
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
During the years ended December 31, 2018
and 2017, production costs of $1,663,835 and $3,707,590, respectively, were expensed and are reflected in multiplatform costs in
the combined statements of operations. In addition, the Company recorded impairment of capitalized production costs of $768,459
and $0 during the years ended December 31, 2018 and 2017, respectively.
Note 9 – Line of Credit
In May 2018, Allied Esports entered into
a $5,000,000 line of credit with a bank, bearing interest of 2.650% per annum with monthly payments of interest only. The line
of credit is secured by a $5,000,000 certificate of deposit provided by Parent as collateral. All outstanding principal and accrued
interest are due at maturity in May 2019. In October 2018, the $5,000,000 line of credit was repaid by the Parent using its collateralized
certificate of deposit. As a result, Allied Esports owed $5,000,000 to the Parent as of December 31, 2018. There is no stated interest
rate or repayment terms related to this liability. See Note 11 – Related Parties – Due to Parent for additional details.
During 2018, the Company incurred $55,178 of interest expense related to this line of credit.
Note 10 – Segment Data
Each of the Company’s business segments offer different,
but synergistic products and services and are managed separately, by different chief operating decision makers.
The Company’s business consists of two reportable segments:
|
·
|
Poker gaming and entertainment, provided through WPT, including televised
gaming and entertainment, land-based poker tournaments, online and mobile poker applications.
|
|
·
|
Esports, provided through Allied Esports, including multiplayer video
game competitions.
|
The following tables present segment information
for each of the last two years:
|
|
For
the year ended December 31, 2018
|
|
|
For
the year ended December 31, 2017
|
|
|
|
Gaming
&
Entertainment
|
|
|
Esports
|
|
|
TOTAL
|
|
|
Gaming
&
Entertainment
|
|
|
Esports
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
16,326,923
|
|
|
$
|
4,276,332
|
|
|
$
|
20,603,255
|
|
|
$
|
13,575,239
|
|
|
$
|
97,767
|
|
|
$
|
13,673,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Foreign
Operations
|
|
$
|
2,499,058
|
|
|
$
|
384,433
|
|
|
$
|
2,883,491
|
|
|
$
|
2,199,058
|
|
|
$
|
97,663
|
|
|
$
|
2,296,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
$
|
(2,116,272
|
)
|
|
$
|
(26,714,191
|
)
|
|
$
|
(28,830,463
|
)
|
|
$
|
(13,512,157
|
)
|
|
$
|
(4,028,675
|
)
|
|
$
|
(17,540,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
$
|
4,003,937
|
|
|
$
|
2,707,461
|
|
|
$
|
6,711,398
|
|
|
$
|
4,070,283
|
|
|
$
|
136,660
|
|
|
$
|
4,206,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, net
|
|
$
|
–
|
|
|
$
|
(2,117,438
|
)
|
|
$
|
(2,117,438
|
)
|
|
$
|
(49
|
)
|
|
$
|
(540,321
|
)
|
|
$
|
(540,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
$
|
735,031
|
|
|
$
|
16,409,366
|
|
|
$
|
17,144,397
|
|
|
$
|
1,473,437
|
|
|
$
|
6,202,188
|
|
|
$
|
7,675,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
37,315,493
|
|
|
$
|
27,931,444
|
|
|
$
|
65,246,937
|
|
|
$
|
32,978,709
|
|
|
$
|
20,375,934
|
|
|
$
|
53,354,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Equipment,
net
|
|
$
|
711,863
|
|
|
$
|
20,308,234
|
|
|
$
|
21,020,097
|
|
|
$
|
2,128,635
|
|
|
$
|
6,651,856
|
|
|
$
|
8,780,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and
Equipment, net in Foreign Countries
|
|
$
|
–
|
|
|
$
|
442,925
|
|
|
$
|
442,925
|
|
|
$
|
2,573
|
|
|
$
|
611,809
|
|
|
$
|
614,382
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
One customer of the Gaming and Entertainment
segment accounted for 18% of its segment revenues and 15% of total Company revenues for the year ended December 31, 2018.
During the years ended December 31, 2018
and 2017, 9% and 100% of the Esports segment revenues, respectively, were from foreign sources, and 15% and 16%, of the Gaming
and Entertainment revenues, respectively, were from foreign sources.
Note 11 – Related Parties
Notes Payable to Parent
The Company has promissory notes payable
to Parent. Borrowings on the notes are unsecured and bear interest at 6% per annum. The notes mature on December 31, 2021. As of
December 31, 2017, the Company owed principal and interest under the Notes Payable to Parent of $23,375,380 and $550,133, respectively.
From January – October 2018, Notes Payable to Parent increased by $13,997,142 of which $8,357,057 represented cash proceeds
and $5,610,085 represented non-cash. During November and December 2018, as part of a corporate restructuring, the Parent converted
$37,372,522 of the outstanding notes payable to Parent to Parent’s Net Investment. In addition, in connection with the restructuring,
accrued interest in the amount of $2,150,487 was forgiven by the Parent, and was recorded as a contribution to capital.
Due to Parent
As of December 31, 2018 and 2017, due to
Parent consisted of payments of certain operating expenses, investing activities and financing activities made on behalf of the
Company by the Parent. There is no stated interest rate or definitive repayment terms related to this liability.
In May 2018, Allied Esports entered into
a $5,000,000 line of credit with a bank, bearing interest of 2.650% per annum with monthly payments of interest only. The line
of credit was secured by a $5,000,000 certificate of deposit held by Parent as collateral. All outstanding principal and accrued
interest were due at maturity in May 2019. In October 2018, the $5,000,000 line of credit was repaid using the collateralized
certificate of deposit. As a result, Allied Esports owed $5,000,000 to Parent, which is included in the amount Due to Parent as
of December 31, 2018. There is no stated interest rate or defined repayment terms related to this liability.
During the year ended December 31, 2018,
Allied Esports received net aggregate advances of $16,800,000 from the Parent. During the years ended December 31, 2018 and 2017,
WPT received advances from the Parent net of repayments, totaling approximately $6,112,000 and $9,148,000, respectively. These
advances from the Parent were partially funded from the bridge financing described below. There are no stated interest rates or
defined repayment terms related to these advances. The weighted average balance of advances owed to the Parent during the years
ended December 31, 2018 and 2017 was $21,965,152 and $6,426,526, respectively. Advances during the years ended December 31, 2018
and 2017 consisted of the following:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Advances for working capital needs
|
|
$
|
22,912,205
|
|
|
$
|
8,123,017
|
|
Due to Parent for purchase of Deepstacks
|
|
|
–
|
|
|
|
500,000
|
|
Due to Parent for purchase of property and equipment
|
|
|
–
|
|
|
|
525,582
|
|
|
|
$
|
22,912,205
|
|
|
$
|
9,148,599
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Bridge Financing
On October 11, 2018, the Parent issued
a series of secured convertible promissory notes (the “Notes”) whereby investors provided Parent with $10 million
to be used for the operations of the Company. The Notes are due and payable on the first to occur of (i) the one-year anniversary
of the issuance date, or (ii) upon conversion of the Notes into equity as part of the Merger. As security for purchasing the Notes,
the investors received a security interest in Allied Esports’ assets (second to any liens held by the landlord of the Las
Vegas arena for property located in that arena), as well as a pledge of the equity of all of the entities comprising WPT. The
liens and pledge described above only apply during the period of time that the investors are note holders.
Restructuring
In November and December 2018, the Company
underwent a corporate entity restructuring for the purpose preparing the Company for the Merger. As part of the restructuring,
AEEI, a new holding entity, was formed and AEII became a wholly-owned subsidiary of AEEI. The plan is for WPT to also become a wholly-owned
subsidiary of AEEI prior to the closing of the Merger. The restructuring resulted in a $42,505,325 increase in Parent’s net
investment consisting of notes payable, accrued interest and other related liabilities.
Stock Options
In 2015, the Parent issued options to purchase
common stock of the Parent to certain employees and a consultant of WPT. Accordingly, during the years ended December 31, 2018
and 2017, the Company recorded ($766,417) and $483,371, respectively, of stock-based compensation which is reflected in general
and administrative expenses in the combined statements of operations. As of December 31, 2018, there was $5,877 of unamortized
stock-based compensation expense which will be recognized over a remaining period of 0.5 years.
Profit Participation Plan
In January 2018, certain employees of WPT
entered into profit participation agreements pursuant to which the employees, commencing with the calendar year 2018, were entitled
to an annual payment equal to a range of 1% to 4% of the net profits of the Company during such calendar year. Upon an occurrence
of a change in control of WPT, the employees would be entitled to: (i) a payment equal to a range of 1% to 4% of the net profits
of the Company through the fiscal quarter end prior to the closing of such change in control; and (ii) a payment equal to a range
of 0.5% to 4% of the value of outstanding shares of WPT, pursuant to the profit participation agreement. In connection with the
profit participation agreement, the participating employees forfeited the unvested portion of their options to purchase the Parent’s
common stock. The Company recognized expense of $70,000 related to the Profit Participation Plan during the year ended December
31, 2018.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Share Purchase Agreements
On November 5, 2018, Allied Esports Media
Inc. sold 1,199,191 shares of restricted common stock, representing an aggregate 12.16% ownership interest, to certain employees
and stakeholders of the Company, for consideration of $0.001 per share. A December 17, 2018 Letter Agreement between the parties
clarifies that if the Merger fails to close before July 1, 2019, upon the request of Allied Esports Media, Inc. or Allied Esports
International, Inc., the common stock will be forfeited and it will be replaced with an equivalent number of options to purchase
the equity of Allied Esports International, Inc., but the remaining option terms, including the exercise price, have not been
specified. Accordingly, the option doesn’t currently meet the accounting definition of a grant. The Company has determined
that it cannot consider the closing of the Merger to be probable as of December 31, 2018. Accordingly, the Company has not recognized
any stock-based compensation during 2018. The excess of the grant date fair value of the common stock as compared to the purchase
price will eventually be recorded as stock-based compensation, if the merger closes on a timely basis. Management, with the assistance
of a third-party valuator, estimated the grant date fair value on November 5, 2018 (prior to combination with World Poker Tour
and prior to the conversion of notes payable to Parent to Parent’s Net Investment) to be $0.33 per share by weighting the
estimated values derived under the asset approach, the market approach and by reference to the letter of intent terms for the
Merger.
Note 12 – Income Taxes
The Company and its subsidiaries file tax
returns in the United States (federal and California), Gibraltar, Ireland and Germany.
In December 2017, the U.S. Congress enacted
The Tax Cuts and Jobs Act (the “Act”). The primary provisions of the Act impacting the Company is the reduction to
the U.S. corporate income tax rate from 35% to 21%, eliminating certain deductions, and imposing a mandatory one-time transition
tax on accumulated earnings of foreign subsidiaries. The change in tax law required the Company to remeasure existing net deferred
tax assets using the lower rate in the period of enactment resulting in an income tax expense of approximately $5,300,000 which
is fully offset by a corresponding tax benefit of $5,300,000 which related to the corresponding reduction in the valuation allowance
for the year ended December 31, 2017. There were no specific impacts of Tax Reform that could not be reasonably estimated which
the Company accounted for under prior tax law.
The U.S. and foreign components of income
(loss) before income taxes were as follows:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(28,118,382
|
)
|
|
$
|
(14,890,677
|
)
|
Foreign
|
|
|
(2,901,343
|
)
|
|
|
(3,196,554
|
)
|
Loss before income taxes
|
|
$
|
(31,019,725
|
)
|
|
$
|
(18,087,231
|
)
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
The income tax provision (benefit) for
the years ended December 31, 2018 and 2017 consist of the following:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Federal
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
–
|
|
|
$
|
–
|
|
Deferred
|
|
|
(4,840,852
|
)
|
|
|
847,315
|
|
State and local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
–
|
|
|
|
–
|
|
Deferred
|
|
|
346,679
|
|
|
|
(1,290,314
|
)
|
Foreign
|
|
|
|
|
|
|
|
|
Current
|
|
|
–
|
|
|
|
–
|
|
Deferred
|
|
|
(187,853
|
)
|
|
|
(160,764
|
)
|
|
|
|
(4,682,026
|
)
|
|
|
(603,763
|
)
|
Change in valuation allowance
|
|
|
4,682,026
|
|
|
|
603,763
|
|
Income tax provision (benefit)
|
|
$
|
–
|
|
|
$
|
–
|
|
The reconciliation of the expected tax
expense (benefit) based on the U.S. federal statutory rates for 2018 and 2017, respectively, with the actual expense is as follows:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
U.S. federal statutory rate
|
|
|
(21.0%
|
)
|
|
|
(34.0%
|
)
|
State taxes, net of federal benefit
|
|
|
(2.0%
|
)
|
|
|
(6.0%
|
)
|
Permanent differences
|
|
|
3.8%
|
|
|
|
1.4%
|
|
Statutory rate differential - domestic. vs. foreign
|
|
|
1.8%
|
|
|
|
6.2%
|
|
Changes in tax rates
|
|
|
2.9%
|
|
|
|
29.2%
|
|
Other
|
|
|
(0.6%
|
)
|
|
|
(0.1%
|
)
|
Change in valuation allowance
|
|
|
15.1%
|
|
|
|
3.3%
|
|
Income tax provision (benefit)
|
|
|
0.0%
|
|
|
|
0.0%
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
The tax effects of temporary differences
that give rise to deferred tax assets are presented below:
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
13,521,964
|
|
|
$
|
7,465,367
|
|
Production costs
|
|
|
2,056,726
|
|
|
|
3,512,147
|
|
Investment
|
|
|
2,183,396
|
|
|
|
–
|
|
Stock-based compensation
|
|
|
40,516
|
|
|
|
540,277
|
|
Capitalized start-up costs
|
|
|
411,842
|
|
|
|
517,932
|
|
Property and equipment
|
|
|
–
|
|
|
|
123,241
|
|
Accruals and other
|
|
|
398,310
|
|
|
|
343,689
|
|
Gross deferred tax assets
|
|
|
18,612,754
|
|
|
|
12,502,653
|
|
Property and equipment
|
|
|
(1,428,075
|
)
|
|
|
–
|
|
Net deferred tax assets
|
|
|
17,184,679
|
|
|
|
12,502,653
|
|
Valuation allowance
|
|
|
(17,184,679
|
)
|
|
|
(12,502,653
|
)
|
Deferred tax assets, net of valuation allowance
|
|
$
|
–
|
|
|
$
|
–
|
|
As of December 31, 2018, the Company had
approximately $51,000,000, $33,500,000 and $3,500,000 of federal, state and foreign net operating loss (“NOL”) carryforwards
available to offset against future taxable income. Of the federal NOLS, $25,900,000 may be carried forward for twenty years and
begin to expire in 2035, while $25,100,000 have no expiration. The federal and state NOL carryovers are subject to annual limitations
under Section 382 of the U.S. Internal Revenue Code when there is a greater than 50% ownership change, as determined under the
regulations. There was a change of control on or about June 2015 and the Company has determined that, approximately $34,000,000
of federal and state NOLs will expire unused and are not included in the available NOLs stated above. Therefore, we reduced the
related deferred tax asset for these NOL carryovers by approximately $13,600,000 from June 2015 forward. To date, no additional
annual limitations have been triggered, but the Company remains subject to the possibility that a future greater than 50% ownership
change could trigger annual limitations on the usage of NOLs.
The Company assesses the likelihood that
deferred tax assets will be realized. ASC 740, “Income Taxes” requires that a valuation allowance be established when
it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all
available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies. After consideration of all the information available, management
believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established
a full valuation allowance as of December 31, 2018 and 2017. For the years ended December 31, 2018 and 2017, the increase in the
valuation allowance was $4,682,026 and $603,763, respectively.
The Company’s tax returns remain
subject to examination by various taxing authorities beginning with the tax year ended December 31, 2015. No tax audits were commenced
or were in process during the years ended December 31, 2018 and 2017.
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Note 13 – Commitments and Contingencies
Operating Leases
Effective on March 23, 2017, Allied Esports
entered into a non-cancellable operating lease for 30,000 square feet of event space in Las Vegas, Nevada, for the purpose of hosting
Esports activities (the “Las Vegas Lease”). As part of the Las Vegas Lease, Allied Esports committed to build leasehold
improvements to repurpose the space for Esports events prior to March 23, 2018, the day the Arena opened to the public (the “Commencement
Date”). Initial lease terms are for minimum monthly payments of $125,000 for 60 months with an option to extend for an additional
60 months at $137,500 per month. Additional annual tenant obligations are estimated at $2 per square foot for Allied Esports’
portion of real estate taxes and $5 per square foot for common area maintenance costs. Lease payments are scheduled to start at
the Commencement Date. The aggregate base rent payable over the lease term will be recognized on a straight-line basis.
The Las Vegas Lease also provides for Allied
Esports to pay to the lessor an amount equal to 7% of Allied Esports gross sales from the Las Vegas arena, as defined, ("Percentage
Rent") to the extent that the Percentage Rent exceeds the minimum annual rent commitment. The Percentage rent shall not exceed
$3,000,000 per lease year and is to be paid in monthly installments.
The Company recognized lease expense related
to the Las Vegas Lease amounted to $1,250,000 and $968,750 for years ended December 31, 2018 and 2017, respectively, which is included
in in-person costs on the accompanying statement of operations.
WPT entered into a non-cancellable operating
lease in 2004 for 8,519 square feet of space located in Los Angeles, California (the “LA Lease”) with respect to its
operations. The LA Lease calls for an annual base rental during the term ranging between $393,578 and $442,975 and expires in January
2021, with an option to extend for an additional 60 months at the market rate, as defined. The aggregate base rent payable over
the lease term will be recognized on a straight-line basis. Rent expense in connection with the LA Lease is capitalized as deferred
production costs as incurred (see Note 8 - Deferred Production Costs).
ELC Gaming maintains an office space under
a non-cancellable operating lease in Germany that expires in December 2019 with an option to extend for three years (the “Germany
Lease”). Lease payments are approximately $7,100 per month.
WPT entered into a non-cancellable operating
lease in 2011 for 11,156 square feet of space located in Irvine, California (the “Irvine Lease”) with respect to its
operations. The Irvine Lease calls for minimum monthly payments ranging between $25,101 and $29,563 during the rental term and
expires in April 2019 with an option to extend for an additional 60 months at the market rate, as defined. The aggregate base rent
payable over the lease term is recognized on a straight-line basis. The lease was not renewed and WPT plans to move its headquarters
to a temporary location while construction is completed on a new lease that the Company entered on March 29, 2019 (see Note 14
– Subsequent Events).
The Company’s aggregate rent expense
related to the Germany Lease and the Irvine Lease amounted to $432,707 and $400,224 for the years ended December 31, 2018 and 2017,
respectively, and is reflected in general and administrative expenses in the combined statements of operations.
The scheduled future minimum lease payments
under the Company’s leases are as follows:
Year Ending
December 31,
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2,163,160
|
|
|
2020
|
|
|
|
1,941,900
|
|
|
2021
|
|
|
|
1,536,915
|
|
|
2022
|
|
|
|
1,500,000
|
|
|
2023
|
|
|
|
337,500
|
|
|
|
|
|
$
|
7,479,475
|
|
WORLD POKER TOUR AND ALLIED ESPORTS
Notes to Combined Financial Statements
Executive Engagement Agreement
In January 2018, the Parent amended an
employment agreement between the Parent and the Chief Executive Officer of WPT (the “WPT CEO”), such that WPT guarantees
any unpaid compensation obligations earned through June 2019, including payments to the WPT CEO upon the closing of the Merger,
as described below.
Payments to WPT CEO
Pursuant to the employment agreement of the WPT CEO, both
personally and through his consulting company, upon the closing of the Merger, the WPT CEO will be entitled to receive
payments equal to (i) 2% of the sale of WPT up to $45 million, and 1% of the sale of WPT over $45 million; (ii) 2.5% of the
shares and cash received by Parent in the Merger; and (iii) a payment of $1.5 million for reaching certain profitability
goals of WPT, as described above, which are an obligation of the Parent.
Litigations, Claims, and Assessments
The Company is involved in various disputes,
claims, liens and litigation matters arising out of the normal course of business. While the outcome of these disputes, claims,
liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe
that the outcome of these matters will have a material adverse effect on the Company's combined financial position, results of
operations or cash flows.
Note 14 – Subsequent Events
Lease Agreement
On March 29, 2019, WPT entered into
an operating lease for approximately 25,000 square feet of space located in Irvine, California (the “New Irvine
Lease”) with respect to its operations. The lease term is 167 months and monthly base rent under the New Irvine lease
begins at $65,134 and increases to $95,652 over the term of the lease. The lease is guaranteed by the Parent. WPT has a
one-time option of reducing the size of the leased premises to 10,000 square feet on or before June 15, 2019. In the event of
such reduction, the parties have agreed to amend the lease agreement, along with the base rent and other costs payable by
WPT, based upon the reduced square footage.
Annex
A
AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BLACK RIDGE ACQUISITION
CORP.,
BLACK RIDGE MERGER
SUB, CORP.,
ALLIED ESPORTS
ENTERTAINMENT, INC.,
NOBLE LINK GLOBAL
LIMITED,
OURGAME INTERNATIONAL
HOLDINGS LTD.,
AND
PRIMO VITAL LTD.
DATED AS OF DECEMBER 19, 2018
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND
PLAN OF REORGANIZATION is made and entered into as of December 19, 2018, by and among Black Ridge Acquisition Corp., a Delaware
corporation (“
Parent
”), Black Ridge Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of
Parent (“
Merger Sub
”), Allied Esports Entertainment, Inc., a Delaware corporation (“
Company
”),
Noble Link Global Limited, a British Virgin Islands exempted company (“
Noble
”), Ourgame International Holdings
Ltd., a Cayman Islands corporation (“
Ourgame
”), and Primo Vital Ltd., a British Virgin Islands exempted company
and wholly owned subsidiary of Ourgame (“
Primo
”), which will be the holder of a majority of the outstanding
capital stock of the Company immediately prior to the Transaction Effective Time (as defined below). The term “
Agreement
”
as used herein refers to this Agreement and Plan of Reorganization, as the same may be amended from time to time, and all schedules
hereto (including the Company Schedule, Noble Schedule, and the Parent Schedule, as defined in the preambles to Articles II, III,
and IV hereof, respectively). Defined terms used in this Agreement are listed alphabetically in Section 10.1, together with the
section and, if applicable, subsection in which the definition of each such term is located.
RECITALS
A. Upon
the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law and the
British Virgin Islands Business Companies Act 2004, as amended (collectively, the “
Corporate Law
”), the Parties
intend to enter into a business combination transaction by which (i) Noble will merge with and into the Company (the “
Redomestication
Merger
”) with the Company being the surviving entity of such merger, and (ii) immediately after the consummation of
the Redomestication Merger, Merger Sub will merge with and into the Company with the Company being the surviving entity of such
merger (the “
Transaction Merger
” and together with the Redomestication Merger, the “
Mergers
”)
and a direct wholly owned subsidiary of Parent (“
Surviving Company
”), and the holders (the “
Shareholders
”)
of the common stock of the Company (the “
Company Common Stock
”) immediately prior to the effective time of
the Mergers will be entitled to receive shares of the common stock of Parent, $0.0001 par value per share (“
Parent Common
Stock
”), and five-year warrants to purchase Parent Common Stock at a price per share of $11.50 (“
Parent Warrants
”),
as provided by this Agreement.
B. The
boards of directors of each of Parent, Merger Sub, Noble, and the Company have determined that the Mergers, taken together, are
fair to, and in the best interests of, their respective companies and their respective stockholders.
NOW, THEREFORE, in
consideration of the covenants, premises, and representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGERS
1.1
The
Mergers
.
(a) At
the Redomestication Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions
of the Corporate Law, Noble will merge with and into the Company, the separate existence of Noble will cease, and the Company
will continue as the surviving entity of the Redomestication Merger. At the Redomestication Effective Time, the effect of the
Redomestication Merger shall be as provided in this Agreement, the Plan of Merger between the Company and Noble, the Redomestication
Merger Certificate, and the applicable provisions of the Corporate Law. Without limiting the generality of the foregoing, and
subject thereto, at the Redomestication Effective Time, all the property, rights, privileges, powers, and franchises of Noble
shall vest in the Company, and all debts, liabilities, and duties of Noble shall become the debts, liabilities, and duties of
the Company, and each Noble Ordinary Share shall be cancelled.
(b)
At
the Transaction Effective Time (which shall occur immediately after the Redomestication Effective Time) and subject to and upon
the terms and conditions of this Agreement and the applicable provisions of the Corporate Law, Merger Sub will merge with and
into the Company, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Company
after the Transaction Merger and as a wholly owned subsidiary of Parent. At the Transaction Effective Time, the effect of the
Transaction Merger shall be as provided in this Agreement, the Transaction Merger Certificate, and the applicable provisions of
the Corporate Law. Without limiting the generality of the foregoing, and subject thereto, at the Transaction Effective Time all
the property, rights, privileges, powers and franchises of each of the Company and Merger Sub shall vest in Surviving Company,
and all debts, liabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities and duties of
Surviving Company, and each share of capital stock of the Company shall be converted as described in Section 1.5 hereof.
1.2
Effective
Times; Closing
. Subject to the conditions of this Agreement, as soon as practicable on or after the Closing Date, the parties
hereto shall cause the Redomestication Merger to be consummated by filing with the Secretary of State of the State of Delaware
a Certificate of Merger (“
Redomestication Certificate of Merger
”) and by filing a copy of the Redomestication
Certificate of Merger with the British Virgin Islands Registry of Corporate Affairs, each in such form as required by, and executed
and filed in accordance with, the applicable provisions of the Corporate Law (the time of such filing, or such later time as may
be agreed in writing by the Company and Parent and specified in the Plan of Merger and the Redomestication Certificate of Merger
being the “
Redomestication Effective Time
”). Subject to the conditions of this Agreement, immediately after
the Redomestication Effective Time, the parties hereto shall cause the Transaction Merger to be consummated by filing a Certificate
of Merger (the “
Transaction Certificate of Merger
”, and together with the Redomestication Certificate of Merger,
the “
Certificates of Merger
”) with the secretary of state of the State of Delaware in accordance with the applicable
provisions of the Corporate Law (the time of such filing, or such later time as may be agreed in writing by Company and Parent
and specified in the Transaction Certificate of Merger being the “
Transaction Effective Time
”). Unless this
Agreement shall have been terminated pursuant to Section 9.1, the consummation of the Mergers (the “
Closing
”),
other than the filing of the Certificates of Merger, shall take place at the offices of Graubard Miller, counsel to Parent, 405
Lexington Avenue, 11th Floor, New York, New York 10174-1901, via teleconference, at a time and date to be specified by the parties,
which shall be no later than the fifth (5th) business day after the satisfaction or waiver of the conditions set forth in Article
VII, or at such other time, date and location as the parties hereto agree in writing (the “
Closing Date
”).
Closing signatures may be transmitted by facsimile or by email pdf files.
1.3
Governing
Documents
.
(a)
At
the Redomestication Effective Time, the Certificate of Incorporation and Bylaws of the Company in effect immediately prior to
the Redomestication Effective Time shall become the Certificate of Incorporation and Bylaws of the Company, as the surviving corporation
in such merger.
(b)
At
the Transaction Effective Time, the Certificate of Incorporation and Bylaws of Merger Sub shall become the Certificate of Incorporation
and Bylaws of Surviving Company, except that the name of the Surviving Company shall be a name mutually agreeable to the parties.
1.4
Transaction
Merger Consideration; Effect of Transaction Merger on Common Stock
. Subject to the terms and conditions of this Agreement,
at the Transaction Effective Time, by virtue of the Mergers and this Agreement and without any further action on the part of the
Parent, Merger Sub or the Company or the holders of any of the securities of Parent or Company, the following shall occur:
(a)
Conversion
of Company Common Stock
. All of the Company Common Stock issued and outstanding immediately prior to the Transaction Effective
Time will be automatically cancelled and extinguished and be converted, collectively, into the right to receive (i) an aggregate
of 11,602,754 shares of Parent Common Stock, (ii) an aggregate of 3,800,003 Parent Warrants, and (iii) an aggregate of 3,846,153
Contingent Shares issuable pursuant to Section 1.11 below (collectively, the “
Merger Consideration
”). The Merger
Consideration shall be paid to the Shareholders in the respective amounts set forth on
Schedule 1.4(a)
hereto.
(b)
No
Fractional Shares
. No fraction of a share of Parent Common Stock will be issued by virtue of the Mergers or the transactions
contemplated hereby, and each Shareholder of the Company who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such Shareholder) shall
be deemed to receive from Parent, in lieu of such fractional share, one (1) share of Parent Common Stock.
(c)
Intentionally
Omitted.
(d)
Adjustments
to Merger Consideration
. The numbers of shares of Parent Common Stock and Parent Warrants that the Shareholders are entitled
to receive as a result of the Mergers shall be equitably adjusted to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of securities convertible into shares of Parent Common Stock),
extraordinary cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like
change with respect to Parent Common Stock occurring on or after the date hereof until the Closing Date.
1.5
Treatment
of Company Options
. The Company shall take any actions necessary to ensure that all outstanding Company Options will vest
immediately prior to the Transaction Effective Time. Holders of Company Options who properly exercise all or a portion of their
Company Options prior to the Transaction Effective Time shall, to the extent of such holder’s exercised Company Options,
be entitled to receive their pro rata portion of the Merger Consideration. Company Options unexercised as of the Transaction Effective
Time shall be cancelled.
1.6
Exchange
Procedures
.
(a)
Surrender
of Certificates
. At the Closing, Shareholders will surrender their certificates (if such certificates exist) or other instruments
cancelling their Company Common Stock (collectively, the “
Company Certificates
”), or in the case of a lost,
stolen or destroyed Company Certificate, upon delivery of an affidavit in the manner provided in Section 1.6(c) below, to Parent
for cancellation together with any related documentation reasonably requested by Parent in connection therewith. After the Closing
Date, each outstanding Company Certificate will be deemed for all corporate purposes to evidence only the right to receive the
applicable Merger Consideration in accordance with the provisions of this Article I.
(b)
Procedure
.
Certificates representing the shares of Parent Common Stock and Parent Warrants shall be issued to the Shareholders upon surrender
of their Company Certificates as provided for herein or otherwise agreed by the parties. Upon surrender of the Company Certificates
(or in the case of a lost, stolen or destroyed Company Certificate, upon delivery of an affidavit (and indemnity, if required)
in the manner provided in Section 1.6(c)) for cancellation to Parent or to such other agent or agents as may be appointed by Parent,
Parent shall issue, or cause to be issued, to each Shareholder such certificates representing the number of shares of Parent Common
Stock and certificates representing Parent Warrants, a portion of which shall be held in escrow pursuant to Section 1.9 below,
for which their Company Common Stock are exchangeable at the Closing Date and any dividends or distributions payable pursuant
to Section 1.4(d), and the Company Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding
Company Certificates will be deemed, from and after the Closing Date, to evidence only the right to receive the applicable Merger
Consideration issuable pursuant to this Article I.
(c)
Lost,
Stolen or Destroyed Certificates
. In the event that any Company Certificates shall have been lost, stolen, or destroyed, Parent
shall issue in exchange for such lost, stolen, or destroyed Company Certificates, upon the making of an affidavit of that fact
by the holder thereof, the applicable Merger Consideration into which the Company Common Stock formerly represented by such Company
Certificates was converted into and any dividends or distributions payable pursuant to Section 1.4(d);
provided
,
however
,
that, as a condition precedent to the delivery of such Merger Consideration, the owner of such lost, stolen, or destroyed Company
Certificates shall indemnify Parent against any claim that may be made against Parent or Surviving Company with respect to the
Company Certificates alleged to have been lost, stolen, or destroyed.
1.7
Tax
Consequences
. It is intended by the parties hereto that the Mergers shall each constitute a tax-free transaction pursuant
to Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the “
Code
”) and the regulations thereunder.
1.8
Taking
of Necessary Action; Further Action
. If, at any time after the Closing Date, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest Surviving Company with full right, title, and possession to all assets,
property, rights, privileges, powers, and franchises of the Company, Noble, and Merger Sub, the officers and directors of the
Company, Noble, and Merger Sub will take all such lawful and necessary action.
1.9
Escrow
.
As the sole remedy for the indemnity obligations set forth in Article VIII, at the Closing, the Shareholders shall, as a group,
deposit in escrow an aggregate of ten percent (10%) of the shares of Parent Common Stock and ten percent (10%) of the Parent Warrants
received hereunder (collectively, the “
Escrow Consideration
”), which shall be allocated among the Shareholders
in the same proportions as the total Merger Consideration is allocated among them, all in accordance with the terms and conditions
of the Escrow Agreement to be entered into at the Closing between Parent, the Representative appointed pursuant to Section 1.12(b),
and Continental Stock Transfer & Trust Company (“
Continental
”), as Escrow Agent, in the form annexed hereto
as Exhibit A (the “
Escrow Agreement
”). The Escrow Consideration shall be issued in the name of the Shareholders
in the manner set forth above, and deposited directly with Continental pursuant to the terms of the Escrow Agreement. The Escrow
Agreement shall provide that, on the first anniversary of the Closing Date (the “
Escrow Termination Date
”),
the Escrow Agent shall release the Escrow Consideration, less that portion of the Escrow Consideration applied in satisfaction
of or reserved with respect to indemnification claims made prior to such date, to the Shareholders entitled to receive them in
the same proportions as originally deposited into escrow. Any Escrow Consideration held with respect to any unresolved claim for
indemnification and not applied as indemnification with respect to such claim upon its resolution shall be delivered to such Shareholders
promptly upon such resolution.
1.10
Shareholder
Matters
.
(a)
Subject
to receipt of the Ourgame Stockholder Approval, each of Ourgame, in its capacity as a Shareholder of Primo and Noble, and Primo,
in its capacity as a Shareholder of the Company, hereby approves and adopts this Agreement and authorizes the Company, Noble,
Primo and each of their respective directors and officers to take all actions necessary for the consummation of the Mergers and
the other transactions contemplated hereby pursuant to the terms of this Agreement and its exhibits. Subject to receipt of the
Ourgame Stockholder Approval, such execution shall be deemed to be action taken by the irrevocable written consent of Ourgame
and Primo for purposes of the relevant provisions of the Corporate Law. Ourgame represents and warrants that the entities executing
the Ourgame Support Agreements hold a sufficient number of ordinary shares of Ourgame necessary to obtain the Ourgame Stockholder
Approval.
(b)
Ourgame
and Primo jointly represents and warrants as follows:
(i)
this
Agreement has been duly and validly executed and delivered by such party and, assuming the due authorization, execution and delivery
thereof by the other parties hereto, constitutes the legal and binding obligation of such party, enforceable against it in accordance
with its terms, except as may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement
of creditors’ rights generally and by general principles of equity;
(ii)
such
party is an “accredited investor” as defined by Rule 501 of Regulation D promulgated under the Securities Act of 1933,
as amended (“
Securities Act
”);
(iii)
such
party has had both the opportunity to ask questions and receive answers from the officers and directors of Parent and all persons
acting on Parent’s behalf concerning the business and operations of Parent and to obtain any additional information to the
extent Parent possesses or may possess such information or can acquire it without unreasonable effort or expense necessary to
verify the accuracy of such information;
(iv)
such
party had access to the Parent SEC Reports (as defined in Section 4.7(a)) filed prior to the date of this Agreement;
(v)
subject
to receipt of the Ourgame Stockholder Approval, such party has all necessary approval and authorization to execute and deliver
this Agreement and execute his, her or its obligations hereunder;
(vi)
that
the execution and delivery of this Agreement by Ourgame does not, and the performance of its obligations hereunder will not, require
any consent, approval, authorization, or permit of, or filing with or notification to, any
Governmental Entity
,
except
(1) for applicable requirements, if any, of the Securities Act, the Securities Exchange Act of 1934, as amended (“
Exchange
Act
”), state securities laws
(“Blue Sky Laws
”), and the rules and regulations thereunder, (2) the
Ourgame Stockholder Approval, and (3) where the failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect on Ourgame, Primo or the Company or, after the Closing, Parent, or prevent consummation of the Mergers or otherwise prevent
the parties hereto from performing their material obligations under this Agreement;
(vii)
such
party understands that it must bear the economic risk of the investment in the shares of Parent Common Stock, which cannot be
sold by it unless such shares are registered under the Securities Act or an exemption therefrom is available thereunder;
(viii)
all
shares of Parent Common Stock to be acquired by such party pursuant to this Agreement will be acquired for its account and not
with a view towards distribution thereof;
(ix)
such
party is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under Regulation
D of the Securities Act (a “
Disqualification Event
”), except for a Disqualification Event covered by Rule 506(d)(2)
or (d)(3)
(x)
that
Ourgame owns all of the issued and outstanding Noble Ordinary Shares, free and clear of all Liens, and except as set forth on
Schedule 2.3(a)
, it has not granted to any person or entity any options or other rights to buy the Noble Ordinary Shares,
nor does any other person or entity have any interest in the Noble Ordinary Shares of any nature; and
(xi)
that
Primo owns the Company Common Stock listed on
Schedule 2.3(a)
as being owned by it, free and clear of all Liens, and except
as set forth on
Schedule 2.3(a)
, it has not granted to any person or entity any options or other rights to buy or acquire
the Company Common Stock, nor does any other person or entity have any interest in the Company Common Stock of any nature.
1.11
Contingent
Consideration
. The Shareholders shall be issued their pro rata portion of an aggregate of additional 3,846,153 shares of Parent
Common Stock (“
Contingent Shares
”), if the last sales price of the Parent Common Stock reported equals or exceeds
$13.00 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for any consecutive thirty
(30) calendar days during the five (5) year period commencing on the Closing Date.
1.12
Parent
Committee; Representative
.
(a)
Parent
Committee
. Prior to the Closing, the Board of Directors of Parent shall appoint a committee consisting of one or more of its
then members to act on behalf of Parent to take all necessary actions and make all decisions pursuant to the Escrow Agreement
regarding Parent’s right to indemnification pursuant to Article VIII hereof and such other matters related to the Mergers
as may be required after the Closing Date. In the event of a vacancy in such committee, the Board of Directors of Parent, or after
the consummation of the Mergers, a majority of those Persons who served on Parent’s Board of Directors immediately prior
to the Closing Date, shall appoint as a successor some other Person who would qualify as an “independent” director
of Parent and who has not had any relationship with the Company prior to the Closing.
(b)
Representative
.
The Company hereby designates Eric Yang Qing (the “
Representative
”) to represent the interests of the Shareholders
entitled to receive Merger Consideration as a result of the Mergers for purposes of executing and thereafter approving amendments
to each of this Agreement, the Escrow Agreement and the Registration Rights Agreement, giving consents and approvals hereunder
and thereunder and making those determinations hereunder and thereunder that are specifically reserved to the Representative by
the terms hereof and thereof. If such Person ceases to serve in such capacity, for any reason, those members of the board of directors
of Parent who were members of the board of directors of the Company prior to the Closing shall appoint as successor a Person who
was a former manager of the Company or such other Person as such members shall designate. Notwithstanding anything to the contrary
contained herein, the Representative shall have no liability to the Company or any stockholder thereof or any party hereto for
any action taken or omitted to be taken hereunder, unless such liability is determined by a judgment or a court of competent jurisdiction
to have resulted from the gross negligence, or willful misconduct of the Representative. Ourgame shall defend, indemnify, and
hold harmless the Representative for all losses, damages, costs, and expenses (including reasonable attorney’s fees and
costs of investigation) arising out of or in connection with, the performance by the Representative of its duties and obligations
under this Agreement, unless such liability is determined by a judgment or a court of competent jurisdiction to have resulted
from the gross negligence, or willful misconduct of the Representative.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Subject to the exceptions
set forth in
Schedule 2
attached hereto (the “
Company Schedule
”), the Company hereby represents and
warrants to, and covenants with, Parent and Merger Sub as follows:
2.1
Organization
and Qualification
.
(a) The
Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has the requisite
corporate power and authority to own, lease, and operate its assets and properties and to carry on its business as it is now being
or currently planned by the Company to be conducted. The Company is in possession of all Governmental Actions/Filings necessary
to own, lease, and operate the properties it purports to own, operate, or lease and to carry on its business as it is now being
or currently planned by the Company to be conducted, except where the failure to have such Governmental Actions/Filings could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct
copies of the certificate of incorporation and bylaws (or other comparable governing instruments with different names) (collectively
referred to herein as “
Charter Documents
”) of the Company, as amended and currently in effect, have been heretofore
delivered or made available to Parent or Parent’s counsel. The Company is not in violation of any of the provisions of the
Company’s Charter Documents.
(b) The
Company is duly qualified or licensed to do business as a foreign company and is in good standing in each jurisdiction where the
character of the properties owned, leased, or operated by it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in good standing that could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Each jurisdiction in which the Company
is so qualified or licensed is listed in
Schedule 2.1(b)
.
(c) The
Company’s minute books contain true, complete, and accurate records of all meetings and consents in lieu of meetings of
its board of directors (and any committees thereof), similar governing bodies, and shareholders, and copies of the minute books
of the Company have been heretofore delivered or made available to Parent or Parent’s counsel.
2.2
Subsidiaries
.
(a) During
the period between the date hereof and the Closing Date, the Company will reorganize (the “
Pre-Closing Reorganization
”)
its corporate structure so that it will have no direct or indirect subsidiaries (“
Subsidiaries
”) or participations
in joint ventures or other entities other than those listed in
Schedule 2.2(a)(i)
. Except as set forth in
Schedule 2.2(a)(ii)
,
the Company owns all of the outstanding equity securities of the Subsidiaries, free and clear of all Liens. Except for the Subsidiaries
and except as set forth in
Schedule 2.2(a)(iii)
, neither the Company nor the Subsidiaries owns, directly or indirectly,
any ownership, equity, profits, or voting interest in any Person or has any agreement or commitment to purchase any such interest,
and has not agreed and is not obligated to make nor is bound by any written, oral, or other agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit
plan, commitment, or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become
obligated to make, any future investment in or capital contribution to any other entity.
(b) Each
Subsidiary that is a corporation is duly incorporated, validly existing, and in good standing under the laws of its state of incorporation
(as listed in
Schedule 2.1(b)
) and has the requisite corporate power and authority to own, lease, and operate its assets
and properties and to carry on its business as it is now being or currently planned by the Company to be conducted. Each Subsidiary
that is a limited liability company is duly organized or formed, validly existing, and in good standing under the laws of its
state of organization or formation (as listed in
Schedule 2.1(b)
) and has the requisite power and authority to own, lease,
and operate its assets and properties and to carry on its business as it is now being or currently planned by the Company to be
conducted. Each Subsidiary is in possession of all Governmental Actions/Filings necessary to own, lease, and operate the properties
it purports to own, operate, or lease and to carry on its business as it is now being or currently planned to be conducted, except
where the failure to have such Governmental Actions/Filings could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on such Subsidiary. Complete and correct copies of the Charter Documents of each Subsidiary,
as amended and currently in effect, have been heretofore delivered or made available to Parent or Parent’s counsel. No Subsidiary
is in violation of any of the provisions of its Charter Documents.
(c) Each
Subsidiary is duly qualified or licensed to do business as a foreign corporation or foreign limited liability company and is in
good standing in each jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in
good standing that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company or such Subsidiary. Each jurisdiction in which each Subsidiary is so qualified or licensed is listed in
Schedule 2.1(b)
.
(d) The
minute books of each Subsidiary contain true, complete, and accurate records of all meetings and consents in lieu of meetings
of its board of directors (and any committees thereof), similar governing bodies, and shareholders, and copies of the minute books
of each Subsidiary have been heretofore delivered or made available to Parent or Parent’s counsel.
2.3
Capitalization
.
(a) As
of the date of this Agreement, the authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock
and 1,000,000 shares of preferred stock.
Schedule 2.3(a) sets forth
the shares of Company Common Stock that will be issued
and outstanding as a result of the Pre-Closing Reorganization, all of which shares shall be validly issued, fully paid, and nonassessable.
Other than the Company Common Stock, the only class or series of securities or ownership interests authorized by the Company’s
Charter Documents is preferred stock, none of which has been issued or is outstanding.
Schedule 2.3(a)
hereto contains
a list of all Company Common Stock that owned by each Shareholder as a result of the Pre-Closing Reorganization, and each Shareholder’s
residence address.
Schedule 2.3(a)
sets forth the issued and outstanding equity securities of each Subsidiary, all of which
shares are validly issued, fully paid, and nonassessable. Other than as set forth in
Schedule 2.3(a)
, none of the Subsidiaries
have any class or series of securities or ownership interests authorized by its Charter Documents.
(b) Except
as set forth in Schedule 2.3(b), no shares of Company Common Stock are (i) reserved for issuance upon the exercise of outstanding
warrants, options or other rights to purchase shares of Company Common Stock, and there are no outstanding warrants, options or
other rights; and (ii) no shares of Company Common Stock are reserved for issuance upon the conversion of preferred stock or any
outstanding convertible notes, debentures, or securities, and no preferred stock, convertible notes, debentures, or securities
are outstanding. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, and nonassessable.
All outstanding shares of Company Common Stock have been issued and granted in compliance with (x) all applicable securities laws
and (in all material respects) other applicable laws and regulations, and (y) all requirements set forth in any applicable Company
Contracts. No Company Options are outstanding.
(c) Except
as set forth in
Schedule 2.3(c)
hereto or as set forth in Sections 2.3(a) and 2.3(b) hereof, there are no subscriptions,
options, warrants, equity securities, partnership interests, or similar ownership interests, calls, rights (including preemptive
rights), commitments, or agreements of any character to which the Company or any of its Subsidiaries is a party or by which it
is bound obligating the Company or any of its Subsidiaries to issue, deliver, or sell, or cause to be issued, delivered, or sold,
or repurchase, redeem, or otherwise acquire, or cause the repurchase, redemption, or acquisition of, any ownership interests of
the Company or obligating the Company to grant, extend, accelerate the vesting of, or enter into any such subscription, option,
warrant, equity security, call, right, commitment, or agreement.
(d) Except
as set forth in
Schedule 2.3(d)
or as contemplated by this Agreement, there are no registration rights, and there is no
voting trust, proxy, rights plan, anti-takeover plan, or other agreements or understandings to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound with respect to any ownership interests of
the Company.
(e) Except
as provided for in this Agreement or as set forth in
Schedule 2.3(e)
, as a result of the consummation of the transactions
contemplated hereby, no shares of capital stock, warrants, options, or other securities of the Parent are issuable and no rights
in connection with any shares, warrants, options, or other securities of the Parent accelerate or otherwise become triggered (whether
as to vesting, exercisability, convertibility, or otherwise).
(f) No
outstanding ownership interest of the Company is unvested or subjected to a repurchase option, risk of forfeiture, or other condition
under any applicable agreement with the Company or any of its Subsidiaries.
2.4
Authority
Relative to this Agreement
. Upon receipt of the Ourgame Stockholder Approval, the Company will have full corporate power and
authority to: (i) execute, deliver, and perform this Agreement and each ancillary document that the Company has executed or delivered
or is to execute or deliver pursuant to this Agreement, and (ii) carry out the Company’s obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby (including the Mergers). The execution and delivery of this
Agreement by the Company and, upon receipt of the Ourgame Stockholder Approval, the consummation by the Company of the transactions
contemplated hereby (including the Mergers) have been duly and validly authorized by all necessary corporate action on the part
of the Company (including the approval by its board of directors and the Shareholders by execution of this Agreement as required
by the Corporate Law), and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution, and delivery thereof by the other parties hereto, constitutes the legal
and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally
and by general principles of equity.
2.5
No
Conflict; Required Filings and Consents
. Except as set forth in
Schedule 2.5
hereto:
(a) The
execution and delivery of this Agreement by the Company do not, and upon receipt of the Ourgame Stockholder Approval, the performance
of this Agreement by the Company shall not, (i) conflict with or violate the Company’s Charter Documents or the Charter
Documents of any of its Subsidiaries, (ii) conflict with or violate any Legal Requirements, (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair the Company’s
or any of its Subsidiaries’ rights or alter the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration, or cancellation of, or result in the creation of a Lien or encumbrance on any of the
properties or assets of the Company or any of its Subsidiaries pursuant to, any Company Contracts, or (iv) result in the triggering,
acceleration, or increase of any payment to any Person pursuant to any Company Contract, including any “change in control”
or similar provision of any Company Contract, except, with respect to clauses (ii), (iii) or (iv), for any such conflicts, violations,
breaches, defaults, triggerings, accelerations, increases, or other occurrences that would not, individually and in the aggregate,
have a Material Adverse Effect on the Company or the Subsidiaries taken as a whole.
(b) The
execution and delivery of this Agreement by the Company does not, and the performance of its obligations hereunder will not, require
any consent, approval, authorization, or permit of, or filing with or notification to, any
Governmental Entity or other third
party (including, without limitation, lenders, lessors, and licensors)
, except (i) for the filing of the Certificates of Merger
in accordance with the Corporate Law, (ii) for applicable requirements, if any, of the Securities Act, the Exchange Act, or
Blue
Sky Laws
, and the rules and regulations thereunder, and appropriate documents received from or filed with the relevant authorities
of other jurisdictions in which the Company is licensed or qualified to do business, (iii) for the filing of any notifications
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “
HSR Act
”), and the
expiration of the required waiting period thereunder, (iv) the consents, approvals, authorizations, and permits described in
Schedule
2.5(a)
, all of which have been obtained and are in full force and effect, (v) the Ourgame Stockholder Approval, and (vi) where
the failure to obtain such consents, approvals, authorizations, or permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole, or, after the Closing, the Parent, or prevent consummation of the Mergers or otherwise prevent the parties hereto
from performing their obligations under this Agreement.
2.6
Compliance
.
The Company and each of its Subsidiaries has complied with and is not in violation of any Legal Requirements with respect to the
conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually
or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole. The businesses and activities of the Company and of each of its Subsidiaries have not been and are not being
conducted in violation of any Legal Requirements, except for failures to comply or violations which, individually or in the aggregate,
have not had and are not reasonably likely to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Neither the Company nor any of its Subsidiaries is in default or violation of any term, condition, or provision of any applicable
Charter Documents. Except as set forth in
Schedule 2.6
, no written notice of non-compliance with any Legal Requirements
has been received by the Company (and the Company has no knowledge of any such notice delivered to any other Person). Neither
the Company nor any of its Subsidiaries is in violation of any term of any Company Contract, except for failures to comply or
violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect
on the Company and its Subsidiaries as a whole.
2.7
Permits
.
The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals, and orders (“
Permits
”) necessary to own, lease, and operate the properties
it purports to own, operate, or lease and to carry on its business as it is now being or currently planned by the Company to be
conducted, except where the failure to have such Permits could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Schedule 2.7
lists all current Permits
issued to the Company and its Subsidiaries, including their respective dates of issuance and expiration. No event has occurred
or is currently expected to occur that, with or without notice or the issuance of time or both, would reasonably be expected to
result in the revocation, suspension, lapse, or limitation of any Permits.
2.8
Financial
Statements.
(a) Attached
to
Schedule 2.8(a)
are (i) true and complete copies of the draft combined financial statements consisting of the combined
balance sheets, and related combined statements of operations, stockholder’s equity (deficit) and cash flows of Allied eSports
International, Inc., a Nevada corporation and wholly owned subsidiary of the Company (“
Esports Sub
”), for the
fiscal period July 11, 2016 (inception) through December 31, 2016, fiscal year ended December 31, 2017, and the nine months ended
September 30, 2018 (including, in each case, the notes and schedules thereto, the “
Company Financial Statements
”).
The Company Financial Statements fairly present in all material respects the financial position of the Esports Sub and its Subsidiaries
at the dates thereof and the results of their operations and cash flows for the period indicated, subject to the absence of footnotes
and, with respect to the Company Financial Statements for the nine months ended September 30, 2018, year-end adjustments.
(b) Effective
on and after the date on which Parent files the preliminary Proxy Statement: (i) the Company will have established and maintained
a system of internal controls, and (ii) to the Company’s knowledge, such internal controls will be sufficient to provide
reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company Financial
Statements for external purposes in accordance with U.S. generally accepted accounting principles (“
U.S. GAAP
”).
(c) There
are no outstanding loans or other extensions of credit made by the Company or any Subsidiary to any executive officer (as defined
in Rule 3b-7 under the Exchange Act) or director of the Company or any Subsidiary. The Company and its Subsidiaries have
not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.
(d) The
books of account, minute books, and transfer ledgers and other similar books and records of the Company and its Subsidiaries are
complete and correct in all material respects, and there have been no material transactions that are required to be set forth
therein and which have not been so set forth.
(e) Except
as otherwise noted in the Company Financial Statements, the accounts and notes receivable of the Company and its Subsidiaries
reflected in the Company Financial Statements: (i) arose from bona fide sales transactions in the ordinary course of business
and are payable on ordinary trade terms, (ii) are legal, valid, and binding obligations of the respective debtors enforceable
in accordance with their terms, except as such may be limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors’ rights generally, and by general equitable principles, (iii) are not subject to any valid set-off or
counterclaim to which the Company has been notified in writing as of the date hereof except to the extent set forth in such balance
sheet contained therein, and (iv) are not the subject of any actions or proceedings brought by or on behalf of the Company or
any of its Subsidiaries as of the date hereof.
(f) To
the knowledge of the Company, the auditor of the Company and each Subsidiary have at all required times since the date of enactment
of the Sarbanes-Oxley Act been: (i) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley
Act); (ii) “independent” with respect to the Company within the meaning of Regulation S-X under the Exchange Act;
and (iii) in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the rules and regulations promulgated
by the SEC and the Public Company Accounting Oversight Board thereunder.
2.9
No
Undisclosed Liabilities
. Except as set forth in
Schedule 2.9
hereto, the Company (including its Subsidiaries) has no
liabilities (absolute, accrued, contingent, or otherwise) of a nature required to be disclosed on a balance sheet or in the related
notes to Company Financial Statements that are, individually or in the aggregate, material to the business, results of operations,
or financial condition of the Company, except: (i) liabilities provided for in or otherwise disclosed in the balance sheet included
in the most recent Company Financial Statements or in the notes to the most recent Company Financial Statements, and (ii) such
liabilities arising in the ordinary course of the Company’s business since the date of the most recent Company Financial
Statement, none of which, individually or in the aggregate, would have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole.
2.10
Absence
of Certain Changes or Events
. Except as contemplated by this Agreement or as set forth in
Schedule 2.10
hereto, since
the date of the most recent Company Financial Statement, there has not been: (i) any Material Adverse Effect on the Company and
its Subsidiaries taken as a whole, (ii) any declaration, setting aside, or payment of any dividend on, or other distribution (in
stock or property other than cash) in respect of, any of the Company’s capital stock, or any purchase, redemption, or other
acquisition by the Company of any of the Company’s capital stock or any other securities of the Company or any options,
warrants, calls, or rights to acquire any such shares or other securities, (iii) any split, combination, or reclassification of
any of the Company’s capital stock, (iv) any granting by the Company or any of its Subsidiaries of any increase in compensation
or fringe benefits, except for normal increases of cash compensation in the ordinary course of business consistent with past practice,
or any payment by the Company or any of its Subsidiaries of any bonus, except for bonuses made in the ordinary course of business
consistent with past practice, or any granting by the Company or any of its Subsidiaries of any increase in severance or termination
pay or any entry by the Company or any of its Subsidiaries into any currently effective employment, severance, termination, or
indemnification agreement or any agreement the benefits of which are contingent or the terms of which are materially altered upon
the occurrence of a transaction involving the Company of the nature contemplated hereby, (v) entry by the Company or any of its
Subsidiaries into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property
other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with respect
to any licensing agreement filed or required to be filed by the Company or any of its Subsidiaries with respect to any Governmental
Entity, (vi) any material change by the Company or any of its Subsidiaries in its accounting methods, principles, or practices,
except as required by concurrent changes in U.S. GAAP, (vii) any change in the auditors of the Company, (vii) any issuance of
capital stock of the Company, (viii) any revaluation by the Company or any of its Subsidiaries of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of
assets of the Company or any of its Subsidiaries other than in the ordinary course of business, or (ix) any material change to
the Company’s or any of its Subsidiaries’ cash management practices and its policies, practices, and procedures with
respect to collection of accounts receivable, establishment of reserves for uncollectable accounts, accrual of accounts receivable,
prepayment of expenses, payment of accounts payable, accrual of other expenses, deferral of revenue, or acceptance of customer
deposits.
2.11
Litigation
.
There are no claims, suits, actions, or proceedings pending or, to the knowledge of the Company, threatened against the Company
or the Subsidiaries before any court, governmental department, commission, agency, instrumentality, or authority, or any arbitrator.
2.12
Employee
Benefit Plans
.
(a)
Schedule
2.12(a)
lists all employee compensation, incentive, fringe, or benefit plans, programs, policies, commitments, or other arrangements
(whether or not set forth in a written document) covering any active or former employee, director, or consultant of the Company,
any Subsidiary or any trade or business (whether or not incorporated) which will be under common control with the Company as a
result of the Pre-Closing Reorganization, with respect to which the Company or any Subsidiary has liability (the “
Plans
”).
The Company has made available to Parent accurate, current, and complete copies of all Plans, summary plan descriptions, summaries
of material modifications, summaries of benefits and coverage, employee handbooks, and other communications relating to any Plans.
All Plans have been maintained and administered in all material respects in compliance with their respective terms and with the
requirements prescribed by any and all statutes, orders, rules, and regulations which are applicable to such Plans, and all liabilities
with respect to the Plans have been properly reflected in the Company Financial Statements and other records of the Company or
Subsidiary, as applicable. No suit, action, or other litigation (excluding claims for benefits incurred in the ordinary course
of Plan activities) has been brought, or, to the knowledge of the Company, is threatened, against or with respect to any Plan.
There are no audits, inquiries or proceedings pending or, to the knowledge of the Company, threatened by any governmental agency
with respect to any Plan. All contributions, reserves, or premium payments required to be made or accrued as of the date hereof
to the Plans have been timely made or accrued. The Company does not have any plan or commitment to establish any new Plan, to
modify any Plan (except to the extent required by law or to conform any such Plan to the requirements of any applicable law, in
each case as previously disclosed to Parent in writing, or as required by this Agreement), or to enter into any new Plan. Except
as disclosed in
Schedule 2.12(a)
, each Plan can be amended, terminated, or otherwise discontinued after the Closing in
accordance with its terms, without liability to Parent or the Surviving Company (other than ordinary administration expenses and
expenses for benefits accrued but not yet paid).
(b) Except
as disclosed in
Schedule 2.12(b)
hereto, neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute,
bonus, or otherwise) becoming due to any Shareholder, director, officer, or employee of the Company or any Subsidiary under any
Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Plan, or (iii) result in the acceleration
of the time of payment or vesting of any such benefits.
(c) Each
person who is classified by the Company or any of its Subsidiaries as an independent contractor has been properly classified for
purposes of participation and benefit accrual under each Plan, except for failures to properly classify such persons which, individually
or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company and its Subsidiaries
as a whole.
2.13
Labor
Matters
.
(a)
Schedule
2.13(a)
contains a list of all Persons who are executive employees, employees receiving annual compensation of $75,000 or
more, or independent contractors, or consultants of the Company and its Subsidiaries as of the date hereof, and sets forth the
name and title or position for each such Person. There is no material commission, bonus, or other incentive-based compensation,
or fringe benefit provided to any such individual. All compensation, including wages, commissions, bonuses, fees, and other compensation,
payable to all employees, independent contractors, or consultants for services rendered on or prior to the date hereof has been
paid in full in accordance with the Company’s customary payroll practices and there are no outstanding agreements, understandings,
or commitments with respect to any compensation, commissions, bonuses, or fees.
(b) Except
as set forth on
Schedule 2.13(b)
, neither the Company nor any Subsidiary is a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by the Company or its Subsidiaries nor does the Company know of any
activities or proceedings of any labor union to organize any such employees. There has never been, nor has there been any threat
of, any strike, slowdown, work stoppage, lockout, concerted refusal to work, or other similar labor disruption or dispute affecting
the Company, the Subsidiaries or any of their respective employees. There are no pending grievance or similar proceedings involving
the Company, the Subsidiaries or any of their respective employees subject to a collective bargaining agreement or other labor
union contract and there are no continuing obligations of the Company or any Subsidiary pursuant to the resolution of any such
proceeding that is no longer pending.
(c) The
Company and each Subsidiary is and has been in compliance with the terms of the collective bargaining agreements and other labor
union contracts listed in
Schedule 2.13(b)
, and all applicable laws pertaining to employment and employment practices,
including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination,
harassment, retaliation, reasonable accommodation, disability rights or benefits, wages, hours, overtime compensation, child labor,
hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’
compensation, leaves of absence, paid sick leave, and unemployment insurance, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company
and its Subsidiaries as a whole, and is not liable for any arrears of wages or penalties with respect thereto. The Company is
in compliance with and has complied with all immigration laws, including Form I-9 requirements and any applicable mandatory EVerify
obligations, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably
likely to have a Material Adverse Effect on the Company and its Subsidiaries as a whole.
(d) Except
as set forth on
Schedule 2.13(d)
, each employee and consultant of the Company and the Subsidiaries is terminable “at
will” subject to applicable notice periods as set forth by law or in the employment agreement, but in any event not more
than ninety (90) days, and there are no agreements or understandings between the Company or a Subsidiary and any of its employees
or consultants that their employment or services will be for any particular period. The Company is not aware that any of its officers
or key employees, or that any of the officers or key employees of any Subsidiary, intends to terminate his or her employment with
the Company or the Subsidiary, as applicable. The Company and each Subsidiary is in compliance in all material respects and, to
the Company’s knowledge, each of its employees and consultants is in compliance in all material respects, with the terms
of the respective employment and consulting agreements between the Company or the Subsidiary, as applicable, and such individuals.
There are not, and there have not been, any material oral or informal arrangements, commitments or promises between the Company
or any Subsidiary and any employees or consultants that have not been documented as part of the formal written agreements between
any such individuals and the Company or Subsidiary that have been made available to Parent.
(e) The
obligations of the Company and each Subsidiary to provide statutory severance pay to its employees are fully funded or accrued
on the most recent Company Financial Statements and the Company has no knowledge of any circumstance that could give rise to any
valid claim by a current or former employee for compensation on termination of employment (beyond the statutory severance pay
to which employees are entitled). All amounts that the Company and the Subsidiaries are legally or contractually required either
(x) to deduct from its employees’ salaries or to transfer to such employees’ pension or provident, life insurance,
incapacity insurance, continuing education fund, or other similar funds or (y) to withhold from its employees’ salaries
and benefits and to pay to any Governmental Entity as required by applicable Legal Requirements have, in each case, been duly
deducted, transferred, withheld, and paid, and the Company or Subsidiary, as applicable, does not have any outstanding obligation
to make any such deduction, transfer, withholding, or payment. Except as set forth on
Schedule 2.13(e)
, there are no pending,
or to the Company’s knowledge, threatened or reasonably anticipated claims or actions against the Company or any Subsidiary
by any employee in connection with such employee’s employment or termination of employment by the Company or Subsidiary.
(f) No
employee or former employee of the Company or any Subsidiary is owed any wages, benefits, or other compensation for past services
(other than wages, benefits, and compensation accrued in the ordinary course of business during the current pay period and any
accrued benefits for services, which by their terms or under applicable law, are payable in the future, such as accrued vacation,
recreation leave, and severance pay).
2.14
Restrictions
on Business Activities
. Except as disclosed in
Schedule 2.14
hereto, there is no agreement, commitment, exclusive license,
judgment, injunction, order, or decree binding upon the Company or any Subsidiary, or their assets or to which the Company or
any Subsidiary is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Company or any Subsidiary, any acquisition of property by the Company or any Subsidiary, or the conduct
of business by the Company or any Subsidiary.
2.15
Title
to Property
.
(a) Neither
the Company nor any Subsidiary owns any real property. All real property leased, used, or held for use in connection with the
business of the Company and its Subsidiaries (“
Real Property
”) is shown or reflected on the balance sheet included
in the most recent Company Financial Statements or on
Schedule 2.15(a)
hereto. The applicable Subsidiary has a good and
valid leasehold interest in all Real Property used by it in the ordinary course of its business, and the Company has delivered
or made available to Parent or Parent’s counsel true, complete, and correct copies of all leases and subleases of Real Property.
Except as set forth in
Schedule 2.15(a)
, neither the Company nor any Subsidiary is a sublessor or grantor under any sublease
or other instrument granting to any other Person any right to the possession, lease, occupancy, or enjoyment of any leased Real
Property.
Schedule 2.15(a)
hereto also contains a list of all options or other contracts under which the Company and each
Subsidiary has a right to acquire or the obligation to sell any interest in Real Property.
(b) All
personal property and other assets leased, owned, used, or held for use in connection with the business of the Company and the
Subsidiaries (“
Personal Property
”) is shown or reflected on a balance sheet included in the most recent Company
Financial Statements, other than those entered into or acquired on or after the date of the most recent Company Financial Statements
in the ordinary course of business. The Company or its Subsidiary has good and valid title to the Personal Property owned by it,
and all such Personal Property is in each case held free and clear of all Liens, except for Liens disclosed in the Company Financial
Statements, none of which Liens is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on
such property or on the present or contemplated use of such property in the businesses of the Company.
(c)
Schedule
2.15(c)
hereto contains a list of all leases of Real Property and Personal Property held by the Company and the Subsidiaries.
All leases pursuant to which the Company or any Subsidiary leases from others material Real Property or Personal Property are
valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material
default or event of default of the Company or Subsidiary or, to the Company’s knowledge, any other party (or any event which
with notice or lapse of time, or both, would constitute a material default), which has not been waived, except where the lack
of such validity and effectiveness or the existence of such default or event of default could not reasonably be expected to have
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. The use and operation of Real Property and Personal
Property in the conduct of the Company’s business do not violate in any material respect any law, covenant, condition, restriction,
easement, license, permit, or agreement.
(d) The
Company or a Subsidiary is in possession of, or has valid and effective rights to, all properties, assets, and rights (including
Intellectual Property) required, in all material respects for the effective conduct of its business, as it is currently operated
and expected to be operated in the future, in the ordinary course.
2.16
Condition
and Sufficiency of Assets
. The buildings, structures, furniture, fixtures, machinery, equipment, vehicles, and other items
of tangible Personal Property of the Company and each of its Subsidiaries are structurally sound, in good operating condition
and repair, are adequate to the uses to which they are being put, and are sufficient for the continued conduct of the business
of the Company and its Subsidiaries after the Closing in substantially the same manner as conducted prior to the Closing.
2.17
Intellectual
Property
.
(a)
Schedule
2.17(a)
hereto contains a description of all Intellectual Property of the Company and the Subsidiaries. The Company and each
of the Subsidiaries owns or has enforceable rights to use all Intellectual Property necessary or required for the conduct of its
business as presently conducted or as presently contemplated to be conducted. Except as disclosed in
Schedule 2.17(a)
hereto,
no Intellectual Property that is owned by, or licensed to, the Company or a Subsidiary, including software and software programs
developed by or exclusively licensed to the Company or any Subsidiary (specifically excluding any off the shelf or shrink-wrap
software) or any current version of products or service offerings of the Company or any Subsidiary is subject to any material
proceeding or outstanding decree, order, judgment, contract, license, agreement, or stipulation restricting in any manner the
use, transfer, or licensing thereof by the Company or any Subsidiary, or which may affect the validity, use, or enforceability
of such Intellectual Property, which in any such case could reasonably be expected to have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole.
(b) Except
as disclosed in
Schedule 2.17(b)
hereto, the Company or a Subsidiary owns and has good and exclusive title to each material
item of Intellectual Property owned by it free and clear of any Liens (excluding non-exclusive licenses and related restrictions
granted by it in the ordinary course of business), and neither the Company nor any Subsidiary has entered into any agreement,
and has no current plans, to sell, transfer, dispose of, or enter into an exclusive license with respect to any material item
of Intellectual Property. The Company or a Subsidiary is the exclusive owner of all material Patents and registered Trademarks
and Copyrights used in connection with the operation or conduct of the business of the Company and its Subsidiaries including
the sale of any products or the provision of any services by the Company and its Subsidiaries.
(c) The
Company and each of the Subsidiaries have complied with the duty of candor and good faith in dealing with the U.S. Patent and
Trademark Office and any similar duties in dealing with any foreign intellectual property office. To the Company’s knowledge,
there are no material defects in the preparation and filing of any of the Company’s or its Subsidiaries’ owned or
licensed Patents, Trademarks, and Copyrights.
(d) The
operation of the business of the Company and its Subsidiaries as such business currently is conducted, including the Company’s
or Subsidiaries’ use of any product, device, or process, has not and does not infringe or misappropriate the Intellectual
Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction and neither
the Company nor its Subsidiaries has received any claims, notices, or threats from third parties alleging any such infringement,
misappropriation, conflict, or violation of such third party’s Intellectual Property rights, or unfair competition or trade
practices with respect thereof, and the Company is unaware of any facts which would form a reasonable basis for any such claim.
(e) To
the Company’s knowledge, no employee of the Company or the Subsidiaries is in or has ever been in violation in any material
respect of any term of any employment contract, Patent disclosure agreement, invention assignment agreement, non-competition agreement,
non-solicitation agreement, nondisclosure agreement, or any other restrictive covenant to or with a former employer where the
basis of such violation relates to such employee’s employment with the Company or a Subsidiary, or actions undertaken by
the employee while employed with the Company or a Subsidiary, and could reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.
(f) The
Company and the Subsidiaries have taken reasonable steps necessary to secure interests in the Intellectual Property developed
by their employees, consultants, agents, and contractors in the course of their service to the Company or Subsidiary, as applicable,
including the execution of valid assignment and nondisclosure agreements for the benefit of the Company or its Subsidiaries by
such employees, consultants, agents, and contractors under which they have assigned to the Company or its Subsidiaries all of
their right, title, and interest in and to any Intellectual Property rights developed by them in the course of their service to
the Company or its Subsidiaries and used in or related to the business of the Company or its Subsidiaries.
2.18
Taxes
.
Except as set forth in
Schedule 2.18
hereto:
(a) The
Company and the Subsidiaries have timely filed all federal, state, local, and foreign returns, estimates, information statements,
and reports relating to Taxes (“
Returns
”) required to be filed by the Company and the Subsidiaries with any
Tax authority prior to the date hereof, except such Returns that are not material to the Company. All such Returns are true, correct,
and complete in all material respects. The Company has paid all Taxes shown to be due and payable on such Returns.
(b) All
Taxes that the Company or the Subsidiaries are required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper Governmental Entity to the extent due and payable.
(c) Neither
the Company nor any Subsidiary has been delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed,
or assessed against the Company or any Subsidiary, nor has the Company or any Subsidiary executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or collection of any Tax.
(d) No
audit or other examination of any Return of the Company or any Subsidiary by any Tax authority is presently in progress, nor has
the Company or any Subsidiary been notified in writing of any request for such an audit or other examination.
(e) No
adjustment relating to any Returns filed by the Company or any Subsidiary has been proposed in writing, formally or informally,
by any Tax authority to the Company or any Subsidiary or any representative thereof.
(f) Neither
the Company nor any Subsidiary has any liability for any unpaid Taxes which have not been accrued for or reserved on the balance
sheets included in the Company Financial Statements, whether asserted or unasserted, contingent or otherwise, other than any material
liability for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation
of the business of the Company in the ordinary course of business.
(g) The
Company is not, nor has it been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period.
(h) There
is no limitation on the utilization of net operating losses, capital losses, built-in losses, tax credits, or similar items of
the Company or any Subsidiary under Sections 269, 382, 383, 384, or 1502 of the Code.
(i)
Schedule
2.18(i)
sets forth all foreign jurisdictions in which the Company or the Subsidiaries is subject to Tax. Neither the Company
nor any Subsidiary has entered into a gain recognition agreement pursuant to Treasury Regulations 1.367(a)-8. Neither the Company
nor any Subsidiary has transferred an intangible, the transfer of which would be subject to Section 367(d) of the Code.
2.19
Environmental
Matters
.
(a) Except
for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect on the Company
and the Subsidiaries as a whole: (i) the Company and Subsidiaries have complied with all applicable Environmental Laws; (ii) the
properties currently operated or being constructed by the Company and the Subsidiaries (including soils, groundwater, surface
water, air, buildings, or other structures) are not contaminated with any Hazardous Substances; (iii) the properties formerly
owned, operated, or constructed by the Company and the Subsidiaries were not contaminated with Hazardous Substances during the
period of ownership, operation, or construction by the Company or the Subsidiaries or, to the Company’s knowledge, during
any prior period; (iv) neither the Company nor any Subsidiary is subject to liability for any Hazardous Substance disposal or
contamination on any third party or public property (whether above, on, or below ground or in the atmosphere or water); (v) neither
the Company nor any Subsidiary has been associated with any release or threat of release of any Hazardous Substance; (vi) neither
the Company nor any Subsidiary has received any written notice, demand, letter, claim, or request for information alleging that
the Company or any Subsidiary may be in violation of or liable under any Environmental Law; and (vii) neither the Company nor
any Subsidiary is subject to any orders, decrees, injunctions, or other arrangements with any Governmental Entity or subject to
any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous
Substances.
(b) There
are no environmental studies and investigations completed or in process with respect to the Company and/or the Subsidiaries or
their respective properties, assets, or operations, including all phase reports, that are known to the Company. All such written
reports and material documentation relating to any such study or investigation have been heretofore provided or made available
by the Company to Parent or its counsel.
2.20
Brokers;
Third Party Expenses
. Except as set forth in
Schedule 2.20
hereto, neither the Company nor any Subsidiary has incurred,
nor will it incur, directly or indirectly, any liability for brokerage, finders’ fees, agent’s commissions, or any
similar charges in connection with this Agreement or any transactions contemplated hereby. Notwithstanding the foregoing, in no
event will Parent be required to issue unrestricted shares of Parent Common Stock to any Person in connection with this Agreement
or any transactions contemplated hereby.
2.21
Agreements,
Contracts, and Commitments
.
(a)
Schedule
2.21(a)
hereto sets forth a complete and accurate list of all Material Company Contracts, specifying the parties thereto.
For purposes of this Agreement, the term “
Company Contracts
” means all contracts, agreements, leases, mortgages,
indentures, notes, bonds, licenses, permits, franchises, purchase orders, sales orders, and other understandings, commitments
and obligations (including, without limitation, outstanding offers and proposals) of any kind, whether written or oral, to which
the Company or any Subsidiary is a party or by or to which any of their properties or assets may be bound, subject or affected
(including without limitation notes or other instruments payable to the Company); the term “
Material Company Contracts
”
means (i) each Company Contract (A) providing for payments (present or future) to the Company or any Subsidiary in excess of $250,000
in the aggregate or (B) under or in respect of which the Company or any Subsidiary presently has any liability or obligation of
any nature whatsoever (absolute, contingent or otherwise) in excess of $250,000, (ii) each Company Contract that otherwise is
or may be material to the businesses, operations, assets, condition (financial or otherwise), or prospects of the Company or any
Subsidiary, and (iii) the limitations of subclauses (i) and (ii) notwithstanding, each of the following Company Contracts:
(1) any
mortgage, indenture, note, installment obligation, or other instrument, agreement, or arrangement for or relating to any borrowing
of money by or from the Company or any Subsidiary and by or to any officer, director, employee, Shareholder, or holder of derivative
securities of the Company or any Subsidiary (“
Insider
”);
(2) any
mortgage, indenture, note, installment obligation, or other instrument, agreement, or arrangement for or relating to any borrowing
of money from an Insider by the Company;
(3) any
guaranty, direct or indirect, by the Company, a Subsidiary, or any Insider of the Company of any obligation for borrowings or
otherwise, excluding endorsements made for collection in the ordinary course of business;
(4) any
Company Contract of employment or management;
(5) any
Company Contract made other than in the ordinary course of business or (x) providing for the grant of any preferential rights
to purchase or lease any asset of the Company or any Subsidiary or (y) providing for any right (exclusive or non-exclusive) to
sell or distribute, or otherwise relating to the sale or distribution of, any product or service of the Company or any Subsidiary;
(6) any
obligation to register any shares of the capital stock or other securities of the Company with any Governmental Entity;
(7) any
obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the business, assets, or stock of
other Persons;
(8) any
obligation to make payments or capital contributions, contingent or otherwise, to any Affiliate;
(9) any
collective bargaining agreement with any labor union;
(10) any
lease or similar arrangement for the use by the Company or any Subsidiary of real property or Personal Property where the annual
lease payments are greater than $100,000 (other than any lease of vehicles, office equipment, or operating equipment made in the
ordinary course of business);
(11) any
Company Contract granting or purporting to grant, or otherwise in any way relating to, any mineral rights or any other interest
(including, without limitation, a leasehold interest) in real property;
(12) any
Company Contract to which any Insider, or any entity owned or controlled by an Insider, is a party; and
(13) any
offer or proposal which, if accepted, would constitute any of the foregoing.
(b) Each
Material Company Contract was entered into at arms’ length and in the ordinary course, is in full force and effect and is
valid and binding upon and enforceable against each of the parties thereto, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or
by principles governing the availability of equitable remedies. To the Company’s knowledge, no other party to a Material
Company Contract is the subject of a bankruptcy or insolvency proceeding. True, correct, and complete copies of all Material Company
Contracts and all offers and proposals that, if accepted, would constitute Material Company Contracts (or written summaries in
the case of oral Material Company Contracts or offers or proposals) have been heretofore delivered to Parent or Parent’s
counsel.
(c) Except
as set forth in
Schedule 2.21(c),
neither the Company nor Subsidiary party thereto, nor to the Company’s knowledge,
any other party thereto is in breach of or in default under, and no event has occurred which with notice or lapse of time or both
would become a breach of or default under, any Company Contract, and no party to any Company Contract has given any written notice
of any claim of any such breach, default, or event, which, individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on the Company. Each Material Company Contract that has not expired by its terms in full force and effect.
2.22
Insurance
.
Schedule 2.22
sets forth the Company’s and Subsidiaries’ insurance policies, financial arrangements with respect
to the payment of premiums under insurance policies, and fidelity and surety bonds covering the assets, business, equipment, properties,
operations, employees, officers, and directors (collectively, the “
Insurance Policies
”). To the Company’s
knowledge, the coverages provided by such Insurance Policies are of the type and in the amounts customarily carried by persons
conducting a business similar to the Company’s or Subsidiary’s business, as applicable, and are adequate in amount
and scope for the Company’s or Subsidiary’s business and operations, including any insurance required to be maintained
by Company Contracts. Neither the Company nor any of its Subsidiaries has received any written notice of cancellation of, or premium
increase with respect to, or alteration of coverage under, any such Insurance Policies. Except as set forth in
Schedule 2.22
,
there are no claims related to the business of the Company or any Subsidiary pending under any such Insurance Policies as to which
coverage has been questioned, denied, or disputed or in respect of which there is an outstanding reservation of rights.
2.23
Governmental
Actions/Filings
.
(a) Except
as set forth in
Schedule 2.23(a)
, the Company and its Subsidiaries have been granted and hold, and have made, all Governmental
Actions/Filings (including, without limitation, Governmental Actions/Filings required for emission or discharge of effluents and
pollutants into the air and the water) necessary to the conduct by the Company and the Subsidiaries of its business (as presently
conducted) or used or held for use by the Company and the Subsidiaries, and true, complete, and correct copies of which have heretofore
been delivered to Parent. Each such Governmental Action/Filing is in full force and effect and, except as disclosed in
Schedule
2.23(a)
hereto, will not expire prior to December 31, 2018 and the Company and the Subsidiaries are in substantial compliance
with all of their respective obligations with respect thereto. No event has occurred and is continuing which requires or permits,
or after notice or lapse of time or both would require or permit, and consummation of the transactions contemplated by this Agreement
or any ancillary documents will not require or permit (with or without notice or lapse of time, or both), any modification or
termination of any such Governmental Actions/Filings except such events which, either individually or in the aggregate, would
not have a Material Adverse Effect upon the Company.
(b)
Except
as set forth in
Schedule 2.23(b)
, no Governmental Action/Filing is necessary to be obtained, secured, or made by the Company
to enable the Surviving Company to continue to conduct the Company’s businesses and operations and use its properties after
the Closing in a manner which is consistent with current practice.
2.24
Interested
Party Transactions
. Except as set forth in the
Schedule 2.20
hereto, no employee, officer, director, or Shareholder
of the Company or the Subsidiaries or, to the Company’s knowledge any member of his or her immediate family, is indebted
to the Company or any Subsidiary, nor is the Company or any Subsidiary indebted (or committed to make loans or extend or guarantee
credit) to any of such Persons, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company, and (iii) for other employee benefits made generally available to all employees. Except
as set forth in
Schedule 2.24
, to the Company’s knowledge, no executive or management employee, officer, director,
or Shareholder of the Company or the Subsidiaries or, to the Company’s knowledge any member of his or her immediate family,
has any direct or indirect ownership interest in any Person with whom the Company is affiliated or with whom the Company has a
contractual relationship, or in any Person that competes with the Company or its Subsidiaries, except that each Insider and members
of their respective immediate families may own less than 5% of the outstanding stock in publicly traded companies that may compete
with the Company or its Subsidiaries. Except as set forth in
Schedule 2.24
, to the knowledge of the Company, no Insider
or any member of an Insider’s immediate family is, directly or indirectly, interested in any Material Company Contract with
the Company (other than such contracts as relate to any such Person’s ownership of capital stock or other securities of
the Company or such Person’s employment with the Company).
2.25
Board
Approval
. The Board of Directors of the Company (including any required committee or subgroup thereof) has, as of the date
of this Agreement, duly approved this Agreement and the transactions contemplated hereby.
2.26
Interim
Financing
. The Company and Ourgame have consummated the Interim Financing as of the date hereof and have received the full
$10,000,000 from such financing.
2.27
No
Additional Representations and Warranties
. Except as provided in this Article II, Section 1.10(b), Section 6.1(c) and Section
6.6(a), neither the Company, any Subsidiary, any of their respective Affiliates, nor any of their respective directors, officers,
employees, stockholders, partners, members or representatives has made, or is making, any representation or warranty whatsoever
to Parent or Merger Sub or their Affiliates and no such party shall be liable in respect of the accuracy or completeness of any
information provided to Parent or Merger Sub or their Affiliates.
2.28
Survival
of Representations and Warranties
. The representations and warranties of the Company set forth in this Agreement shall survive
the Closing as set forth in Section 8.4(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING NOBLE
Subject to the exceptions
set forth in
Schedule 3
attached hereto (the “
Noble Schedule
”), Noble hereby represents and warrants
to, and covenants with, Parent and Merger Sub as follows (as used in this Article III, and elsewhere in this Agreement, the term
“Noble” includes Noble’s Subsidiaries, unless the context clearly indicates otherwise):
3.1
Organization
and Qualification
.
(a) Noble
is an entity duly formed, validly existing and in good standing under the laws of the British Virgin Islands and has the requisite
corporate power and authority to own, lease, and operate its assets and properties and to carry on its business as it is now being
or currently planned by Noble to be conducted. Noble is in possession of all Governmental Actions/Filings necessary to own, lease,
and operate the properties it purports to own, operate, or lease and to carry on its business as it is now being or currently
planned by Noble to be conducted, except where the failure to have such Governmental Actions/Filings could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on Noble. Complete and correct copies of the Charter
Documents of Noble, as amended and currently in effect, have been heretofore delivered or made available to Parent or Parent’s
counsel. Noble is not in violation of any of the provisions of Noble’s Charter Documents.
(b) Noble
is duly qualified or licensed to do business as a foreign company and is in good standing in each jurisdiction where the character
of the properties owned, leased, or operated by it or the nature of its activities makes such qualification or licensing necessary,
except for such failures to be so duly qualified or licensed and in good standing that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Noble. Each jurisdiction in which Noble is so qualified or licensed
is listed in
Schedule 2.1(b)
.
(c) Noble’s
minute books contain true, complete, and accurate records of all meetings and consents in lieu of meetings of its board of directors
(and any committees thereof), similar governing bodies, and shareholders, and copies of Noble’s minute books have been heretofore
delivered or made available to Parent or Parent’s counsel.
3.2
Subsidiaries
.
(a) Except
as set forth in
Schedule 3.2(a)
, Noble owns all of the outstanding equity securities of the its Subsidiaries, free and
clear of all Liens. Except for the Subsidiaries, neither Noble nor its Subsidiaries owns, directly or indirectly, any ownership,
equity, profits, or voting interest in any Person or has any agreement or commitment to purchase any such interest, and has not
agreed and is not obligated to make nor is bound by any written, oral, or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment,
or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make,
any future investment in or capital contribution to any other entity.
(b) Each
Subsidiary that is a corporation is duly incorporated, validly existing, and in good standing under the laws of its state of incorporation
(as listed in
Schedule 3.2(b)
) and has the requisite corporate power and authority to own, lease, and operate its assets
and properties and to carry on its business as it is now being or currently planned by Noble to be conducted. Each Subsidiary
that is a limited liability company is duly organized or formed, validly existing, and in good standing under the laws of its
state of organization or formation (as listed in
Schedule 3.2(b)
) and has the requisite power and authority to own, lease,
and operate its assets and properties and to carry on its business as it is now being or currently planned by Noble to be conducted.
Each Subsidiary is in possession of all Governmental Actions/Filings necessary to own, lease, and operate the properties it purports
to own, operate, or lease and to carry on its business as it is now being or currently planned to be conducted, except where the
failure to have such Governmental Actions/Filings could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on such Subsidiary. Complete and correct copies of the Charter Documents of each Subsidiary, as amended
and currently in effect, have been heretofore delivered or made available to Parent or Parent’s counsel. No Subsidiary is
in violation of any of the provisions of its Charter Documents.
(c) Each
Subsidiary is duly qualified or licensed to do business as a foreign corporation or foreign limited liability company and is in
good standing in each jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in
good standing that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Noble
or such Subsidiary. Each jurisdiction in which each Subsidiary is so qualified or licensed is listed in
Schedule 3.2(c)
.
(d) The
minute books of each Subsidiary contain true, complete, and accurate records of all meetings and consents in lieu of meetings
of its board of directors (and any committees thereof), similar governing bodies, and shareholders, and copies of the minute books
of each Subsidiary have been heretofore delivered or made available to Parent or Parent’s counsel.
3.3
Capitalization
.
(a) As
of the date of this Agreement, the authorized capital stock of Noble consists of 100 Noble Ordinary Shares, all of which shares
are validly issued, fully paid, and nonassessable. Other than the Noble Ordinary Shares, Noble has no class or series of securities
or ownership interests authorized by its Charter Documents.
Schedule 3.3(a)
hereto contains a list of all Noble Ordinary
Shares owned by each Person, and each Person’s residence address.
(b) Except
as set forth in
Schedule 3.3(b)
: (i) no Noble Ordinary Shares are reserved for issuance upon the exercise of outstanding
options to purchase Noble Ordinary Shares granted to employees of Noble, its Subsidiaries, or other parties (“
Noble Options
”)
and there are no outstanding Noble Options; (ii) no Noble Ordinary Shares are reserved for issuance upon the exercise of outstanding
warrants or other rights to purchase Noble Ordinary Shares, and there are no outstanding warrants or other rights; and (iii) no
Noble Ordinary Shares are reserved for issuance upon the conversion of preferred shares or any outstanding convertible notes,
debentures, or securities, and no preferred shares, convertible notes, debentures, or securities are outstanding. All Noble Ordinary
Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instrument pursuant to which
they are issuable, will be duly authorized, validly issued, fully paid, and nonassessable. All outstanding Noble Ordinary Shares
and Noble Options have been issued and granted in compliance with (x) all applicable securities laws and (in all material respects)
other applicable laws and regulations, and (y) all requirements set forth in any applicable Noble Contracts. No Noble Options
are outstanding.
(c) Except
as set forth in
Schedule 3.3(c)
hereto or as set forth in Sections 3.3(a) and 3.3(b) hereof, there are no subscriptions,
options, warrants, equity securities, partnership interests, or similar ownership interests, calls, rights (including preemptive
rights), commitments, or agreements of any character to which Noble is a party or by which it is bound obligating Noble to issue,
deliver, or sell, or cause to be issued, delivered, or sold, or repurchase, redeem, or otherwise acquire, or cause the repurchase,
redemption, or acquisition of, any ownership interests of Noble or obligating Noble to grant, extend, accelerate the vesting of,
or enter into any such subscription, option, warrant, equity security, call, right, commitment, or agreement.
(d) Except
as set forth in
Schedule 3.3(d)
or as contemplated by this Agreement, there are no registration rights, and there is no
voting trust, proxy, rights plan, anti-takeover plan, or other agreements or understandings to which Noble is a party or by which
Noble is bound with respect to any ownership interests of Noble.
(e) Except
as provided for in this Agreement or as set forth in
Schedule 3.3(e)
, as a result of the consummation of the transactions
contemplated hereby, no shares of capital stock, warrants, options, or other securities of the Parent are issuable and no rights
in connection with any shares, warrants, options, or other securities of the Parent accelerate or otherwise become triggered (whether
as to vesting, exercisability, convertibility, or otherwise).
(f) No
outstanding ownership interest of Noble is unvested or subjected to a repurchase option, risk of forfeiture, or other condition
under any applicable agreement with Noble.
3.4
Authority
Relative to this Agreement
. Noble has full corporate power and authority to: (i) execute, deliver, and perform this Agreement
and each ancillary document that Noble has executed or delivered or is to execute or deliver pursuant to this Agreement, and (ii)
subject to the Ourgame Stockholder Approval, carry out Noble’s obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby (including the Redomestication Merger). The execution and delivery of this Agreement
by Noble and, upon receipt of the Ourgame Stockholder Approval, the consummation by Noble of the transactions contemplated hereby
(including the Redomestication Merger) will have been duly and validly authorized by all necessary corporate action on the part
of Noble (including the approval by its board of directors and shareholders as required by the Corporate Law), and no other corporate
proceedings on the part of Noble are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Noble and, assuming the due authorization, execution, and delivery
thereof by the other parties hereto, constitutes the legal and binding obligation of Noble, enforceable against Noble in accordance
with its terms, except as may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement
of creditors’ rights generally and by general principles of equity.
3.5
No
Conflict; Required Filings and Consents
. Except as set forth in
Schedule 3.5
hereto:
(a) The
execution and delivery of this Agreement by Noble do not, and upon receipt of the Ourgame Stockholder Approval, the performance
of this Agreement by Noble shall not, (i) conflict with or violate Noble’s Charter Documents, (ii) conflict with or violate
any Legal Requirements, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or materially impair Noble’s rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment, acceleration, or cancellation of, or result in the creation
of a Lien or encumbrance on any of the properties or assets of Noble pursuant to, any Noble Contracts, or (iv) result in the triggering,
acceleration, or increase of any payment to any Person pursuant to any Noble Contract, including any “change in control”
or similar provision of any Noble Contract, except, with respect to clauses (ii), (iii) or (iv), for any such conflicts, violations,
breaches, defaults, triggerings, accelerations, increases, or other occurrences that would not, individually and in the aggregate,
have a Material Adverse Effect on Noble or its Subsidiaries taken as a whole.
(b) The
execution and delivery of this Agreement by Noble does not, and the performance of its obligations hereunder will not, require
any consent, approval, authorization, or permit of, or filing with or notification to, any
Governmental Entity or other third
party (including, without limitation, lenders, lessors, and licensors)
, except (i) for the filing of the Redomestication Certificate
of Merger in accordance with the Corporate Law, (ii) for applicable requirements, if any, of the Securities Act, the Exchange
Act, or
Blue Sky Laws
, and the rules and regulations thereunder, and appropriate documents received from or filed with
the relevant authorities of other jurisdictions in which Noble is licensed or qualified to do business, (iii) for the filing of
any notifications required under the HSR Act, and the expiration of the required waiting period thereunder, (iv) the consents,
approvals, authorizations, and permits described in
Schedule 3.5(b)
, all of which have been obtained and are in full force
and effect, (v) the Ourgame Stockholder Approval, and (vi) where the failure to obtain such consents, approvals, authorizations,
or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Noble and its Subsidiaries taken as a whole, or, after the Closing, the Parent, or prevent consummation
of the Mergers or otherwise prevent the parties hereto from performing their obligations under this Agreement.
3.6
Compliance
.
Noble has complied with and is not in violation of any Legal Requirements with respect to the conduct of its business, or the
ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have
not had and are not reasonably likely to have a Material Adverse Effect on Noble. The businesses and activities of Noble have
not been and are not being conducted in violation of any Legal Requirements, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on Noble. Noble
is not in default or violation of any term, condition, or provision of any applicable Charter Documents. Except as set forth in
Schedule 3.6
, no written notice of non-compliance with any Legal Requirements has been received by Noble (and Noble has
no knowledge of any such notice delivered to any other Person). Noble is not in violation of any term of any Noble Contract, except
for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have
a Material Adverse Effect on Noble and its Subsidiaries as a whole.
3.7
Permits
.
Noble is in possession of all Permits necessary to own, lease, and operate the properties it purports to own, operate, or lease
and to carry on its business as it is now being or currently planned by Noble to be conducted, except where the failure to have
such Permits could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Noble.
Schedule
3.7
lists all current Permits issued to Noble, including their respective dates of issuance and expiration. No event has occurred
or is currently expected to occur that, with or without notice or the issuance of time or both, would reasonably be expected to
result in the revocation, suspension, lapse, or limitation of any Permits.
3.8
Financial
Statements.
(a) Attached
to
Schedule 3.8(a)
are true and complete copies of the draft consolidated financial statements consisting of the consolidated
balance sheet and the related statements of income and retained earnings, stockholders’ equity, and cash flow of WPT Enterprises,
Inc. for the fiscal years ended December 31, 2017 and 2016, and for the nine-month period ended September 30, 2018 (including,
in each case, the notes and schedules thereto, the “
Noble Financial Statements
,” and together with the Company
Financial Statements, the “
Draft Financial Statements
”). The Noble Financial Statements fairly present in all
material respects the financial position of Noble and its Subsidiaries at the date thereof and the results of their operations
and cash flows for the period indicated, subject to the absence of footnotes and, with respect to the Company Financial Statements
for the nine months ended September 30, 2018, year-end adjustments and those items set forth on Schedule 3.8.
(b) Effective
on and after the date on which Parent files the preliminary Proxy Statement: (i) Noble has established and maintained a system
of internal controls, and (ii) to Noble’s knowledge, such internal controls are sufficient to provide reasonable assurance
regarding the reliability of Noble’s financial reporting and the preparation of the Noble Financial Statements for external
purposes in accordance with U.S. GAAP.
(c) There
are no outstanding loans or other extensions of credit made by Noble to any executive officer (as defined in Rule 3b-7 under
the Exchange Act) or director of Noble. Noble has not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.
(d) The
books of account, minute books, and transfer ledgers and other similar books and records of Noble and its Subsidiaries are complete
and correct in all material respects, and there have been no material transactions that are required to be set forth therein and
which have not been so set forth.
(e) Except
as otherwise noted in the Noble Financial Statements, the accounts and notes receivable of Noble and its Subsidiaries reflected
in the Noble Financial Statements: (i) arose from bona fide sales transactions in the ordinary course of business and are payable
on ordinary trade terms, (ii) are legal, valid, and binding obligations of the respective debtors enforceable in accordance with
their terms, except as such may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting creditors’
rights generally, and by general equitable principles, (iii) are not subject to any valid set-off or counterclaim to which Noble
has been notified in writing as of the date hereof except to the extent set forth in such balance sheet contained therein, and
(iv) are not the subject of any actions or proceedings brought by or on behalf of Noble or any of its Subsidiaries as of the date
hereof.
(f) To
the knowledge of Noble, the auditor of Noble and each of its Subsidiary have at all required times since the date of enactment
of the Sarbanes-Oxley Act been: (i) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley
Act); (ii) “independent” with respect to Noble within the meaning of Regulation S-X under the Exchange Act; and (iii)
in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the rules and regulations promulgated by
the SEC and the Public Company Accounting Oversight Board thereunder.
3.9
No
Undisclosed Liabilities
. Except as set forth in
Schedule 3.9
hereto, Noble (including its Subsidiaries) has no liabilities
(absolute, accrued, contingent, or otherwise) of a nature required to be disclosed on a balance sheet or in the related notes
to Noble Financial Statements that are, individually or in the aggregate, material to the business, results of operations, or
financial condition of Noble, except: (i) liabilities provided for in or otherwise disclosed in the balance sheet included in
the most recent Noble Financial Statements or in the notes to the most recent Noble Financial Statements, and (ii) such liabilities
arising in the ordinary course of Noble’s business since the date of the most recent Noble Financial Statement, none of
which, individually or in the aggregate, would have a Material Adverse Effect on Noble and its Subsidiaries taken as a whole.
3.10
Absence
of Certain Changes or Events
. Except as contemplated by this Agreement or as set forth in
Schedule 3.10
hereto, since
the date of the most recent Noble Financial Statement, there has not been: (i) any Material Adverse Effect on Noble, (ii) any
declaration, setting aside, or payment of any dividend on, or other distribution (in stock or property other than cash) in respect
of, any of Noble’s capital stock, or any purchase, redemption, or other acquisition by Noble of any of Noble’s capital
stock or any other securities of Noble or any options, warrants, calls, or rights to acquire any such shares or other securities,
(iii) any split, combination, or reclassification of any of Noble’s capital stock, (iv) any granting by Noble of any increase
in compensation or fringe benefits, except for normal increases of cash compensation in the ordinary course of business consistent
with past practice, or any payment by Noble of any bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by Noble of any increase in severance or termination pay or any entry by Noble into any currently
effective employment, severance, termination, or indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a transaction involving Noble of the nature contemplated hereby,
(v) entry by Noble into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property
other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with respect
to any licensing agreement filed or required to be filed by Noble with respect to any Governmental Entity, (vi) any material change
by Noble in its accounting methods, principles, or practices, except as required by concurrent changes in U.S. GAAP, (vii) any
change in the auditors of Noble, (vii) any issuance of capital stock of Noble, (viii) any revaluation by Noble of any of its assets,
including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or
any sale of assets of Noble other than in the ordinary course of business, or (ix) any material change to Noble’s cash management
practices and its policies, practices, and procedures with respect to collection of accounts receivable, establishment of reserves
for uncollectable accounts, accrual of accounts receivable, prepayment of expenses, payment of accounts payable, accrual of other
expenses, deferral of revenue, or acceptance of customer deposits.
3.11
Litigation
.
Except as disclosed in
Schedule 3.11
hereto, there are no claims, suits, actions, or proceedings pending or, to the knowledge
of Noble, threatened against Noble or its Subsidiaries before any court, governmental department, commission, agency, instrumentality,
or authority, or any arbitrator.
3.12
Employee
Benefit Plans
.
(a)
Schedule
3.12(a)
lists all employee compensation, incentive, fringe, or benefit plans, programs, policies, commitments, or other arrangements
(whether or not set forth in a written document) covering any active or former employee, director, or consultant of Noble, or
any trade or business (whether or not incorporated) which is common control with Noble, with respect to which Noble or any Subsidiary
has liability (the “
Noble Plans
”). Noble has made available to Parent accurate, current, and complete copies
of all Noble Plans, summary plan descriptions, summaries of material modifications, summaries of benefits and coverage, employee
handbooks, and other communications relating to any Plans. All Noble Plans have been maintained and administered in all material
respects in compliance with their respective terms and with the requirements prescribed by any and all statutes, orders, rules,
and regulations which are applicable to such Noble Plans, and all liabilities with respect to the Noble Plans have been properly
reflected in the Noble Financial Statements and other records of Noble or its Subsidiaries, as applicable. No suit, action, or
other litigation (excluding claims for benefits incurred in the ordinary course of Noble Plan activities) has been brought, or,
to the knowledge of Noble, is threatened, against or with respect to any Noble Plan. There are no audits, inquiries or proceedings
pending or, to the knowledge of Noble, threatened by any governmental agency with respect to any Noble Plan. All contributions,
reserves, or premium payments required to be made or accrued as of the date hereof to the Noble Plans have been timely made or
accrued. Noble does not have any plan or commitment to establish any new Noble Plan, to modify any Noble Plan (except to the extent
required by law or to conform any such Noble Plan to the requirements of any applicable law, in each case as previously disclosed
to Parent in writing, or as required by this Agreement), or to enter into any new Noble Plan. Except as disclosed in
Schedule
3.12(a)
, each Noble Plan can be amended, terminated, or otherwise discontinued after the Closing in accordance with its terms,
without liability to Parent or the Company (other than ordinary administration expenses and expenses for benefits accrued but
not yet paid).
(b) Except
as disclosed in
Schedule 3.12(b)
hereto, neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute,
bonus, or otherwise) becoming due to any shareholder, director, officer, or employee of Noble under any Noble Plan or otherwise,
(ii) materially increase any benefits otherwise payable under any Noble Plan, or (iii) result in the acceleration of the time
of payment or vesting of any such benefits.
(c)
Each
person who is classified by Noble as an independent contractor has been properly classified for purposes of participation and
benefit accrual under each Noble Plan, except for failures to properly classify such persons which, individually or in the aggregate,
have not had and are not reasonably likely to have a Material Adverse Effect on Noble and its Subsidiaries as a whole.
3.13
Labor
Matters
.
(a)
Schedule
3.13(a)
contains a list of all persons who are executive employees of, or independent contractors or consultants that have
been paid over $250,000, of Noble and its Subsidiaries as of the date hereof, and sets forth the name and title or position for
each such Person. Except as set forth on
Schedule 3.13(a)
, there is no material commission, bonus, or other incentive-based
compensation, or fringe benefit provided to any such individual. All compensation, including wages, commissions, bonuses, fees,
and other compensation, payable to all employees, independent contractors, or consultants for services rendered on or prior to
the date hereof has been paid in full in accordance with Noble’s customary payroll practices and there are no outstanding
agreements, understandings, or commitments with respect to any compensation, commissions, bonuses, or fees.
(b) Except
as set forth on
Schedule 3.13(b)
, neither Noble nor any of its Subsidiary is a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by Noble or its Subsidiaries nor does Noble know of any activities
or proceedings of any labor union to organize any such employees. There has never been, nor has there been any threat of, any
strike, slowdown, work stoppage, lockout, concerted refusal to work, or other similar labor disruption or dispute affecting Noble,
its Subsidiaries, or any of their respective employees. There are no pending grievance or similar proceedings involving Noble,
its Subsidiaries, or any of their respective employees subject to a collective bargaining agreement or other labor union contract
and there are no continuing obligations of Noble or any Subsidiary pursuant to the resolution of any such proceeding that is no
longer pending.
(c) Noble
and each Subsidiary is and has been in compliance with the terms of the collective bargaining agreements and other labor union
contracts listed in
Schedule 3.13(b)
, and all applicable laws pertaining to employment and employment practices, including
all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment,
retaliation, reasonable accommodation, disability rights or benefits, wages, hours, overtime compensation, child labor, hiring,
promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’
compensation, leaves of absence, paid sick leave, and unemployment insurance, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on Noble and its
Subsidiaries as a whole, and is not liable for any arrears of wages or penalties with respect thereto. Noble is in compliance
with and has complied with all immigration laws, including Form I-9 requirements and any applicable mandatory EVerify obligations,
except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely
to have a Material Adverse Effect on Noble and its Subsidiaries as a whole.
(d) Except
as set forth on
Schedule 3.13(d)
, each employee and consultant of Noble is terminable “at will” subject to
applicable notice periods as set forth by law or in the employment agreement, but in any event not more than ninety (90) days,
and there are no agreements or understandings between Noble and any of its employees or consultants that their employment or services
will be for any particular period. Noble is not aware that any of its officers or key employees intends to terminate his or her
employment with Noble. Noble is in compliance in all material respects and, to Noble’s knowledge, each of its employees
and consultants is in compliance in all material respects, with the terms of the respective employment and consulting agreements
between Noble and such individuals. There are not, and there have not been, any material oral or informal arrangements, commitments
or promises between Noble and any employees or consultants of Noble that have not been documented as part of the formal written
agreements between any such individuals and Noble that have been made available to Parent.
(e) Noble’s
obligations to provide statutory severance pay to its employees are fully funded or accrued on the most recent Noble Financial
Statements and Noble has no knowledge of any circumstance that could give rise to any valid claim by a current or former employee
for compensation on termination of employment (beyond the statutory severance pay to which employees are entitled). All amounts
that Noble is legally or contractually required either (x) to deduct from its employees’ salaries or to transfer to such
employees’ pension or provident, life insurance, incapacity insurance, continuing education fund, or other similar funds
or (y) to withhold from its employees’ salaries and benefits and to pay to any Governmental Entity as required by applicable
Legal Requirements have, in each case, been duly deducted, transferred, withheld, and paid, and Noble does not have any outstanding
obligation to make any such deduction, transfer, withholding, or payment. Except as set forth on
Schedule 3.13(e)
, there
are no pending, or to Noble’s knowledge, threatened or reasonably anticipated claims or actions against Noble by any employee
in connection with such employee’s employment or termination of employment by Noble.
(f) No
employee or former employee of Noble is owed any wages, benefits, or other compensation for past services (other than wages, benefits,
and compensation accrued in the ordinary course of business during the current pay period and any accrued benefits for services,
which by their terms or under applicable law, are payable in the future, such as accrued vacation, recreation leave, and severance
pay).
3.14
Restrictions
on Business Activities
. Except as disclosed in
Schedule 3.14
hereto, there is no agreement, commitment, exclusive license,
judgment, injunction, order, or decree binding upon Noble or any Subsidiary, or their assets or to which Noble or any Subsidiary
is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice
of Noble or any Subsidiary, any acquisition of property by Noble or any Subsidiary, or the conduct of business by Noble or any
Subsidiary.
3.15
Title
to Property
.
(a) Neither
Noble nor any Subsidiary owns any Real Property. All Real Property leased, used, or held for use in connection with the business
of Noble and its Subsidiaries is shown or reflected on the balance sheet included in the most recent Noble Financial Statements
or on
Schedule 3.15(a)
hereto. Noble and each Subsidiary has a good and valid leasehold interest in all Real Property used
by it in the ordinary course of its business, and Noble has delivered or made available to Parent or Parent’s counsel true,
complete, and correct copies of all leases and subleases of Real Property. Neither Noble nor any Subsidiary is a sublessor or
grantor under any sublease or other instrument granting to any other Person any right to the possession, lease, occupancy, or
enjoyment of any leased Real Property.
Schedule 3.15(a)
hereto also contains a list of all options or other contracts under
which Noble and each Subsidiary has a right to acquire or the obligation to sell any interest in Real Property.
(b) All
Personal Property and other assets leased, owned, used, or held for use in connection with the business of Noble and its Subsidiaries
is shown or reflected on a balance sheet included in the most recent Noble Financial Statements, other than those entered into
or acquired on or after the date of the most recent Noble Financial Statements in the ordinary course of business. Each of Noble
and its Subsidiaries have good and valid title to the Personal Property owned by it, and all such Personal Property is in each
case held free and clear of all Liens, except for Liens disclosed in the Noble Financial Statements or in
Schedule 3.15(b)
hereto, none of which Liens is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on
such property or on the present or contemplated use of such property in the businesses of Noble.
(c)
Schedule
3.15(c)
hereto contains a list of all leases of Real Property and Personal Property held by Noble and its Subsidiaries. All
leases pursuant to which Noble or any Subsidiary leases from others material Real Property or Personal Property are valid and
effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default
or event of default of Noble or a Subsidiary or, to Noble’s knowledge, any other party (or any event which with notice or
lapse of time, or both, would constitute a material default), which has not been waived, except where the lack of such validity
and effectiveness or the existence of such default or event of default could not reasonably be expected to have a Material Adverse
Effect on Noble. The use and operation of Real Property and Personal Property in the conduct of Noble’s business do not
violate in any material respect any law, covenant, condition, restriction, easement, license, permit, or agreement.
(d) Noble
is in possession of, or has valid and effective rights to, all properties, assets, and rights (including Intellectual Property)
required, in all material respects for the effective conduct of its business, as it is currently operated and expected to be operated
in the future, in the ordinary course.
3.16
Condition
and Sufficiency of Assets
. The buildings, structures, furniture, fixtures, machinery, equipment, vehicles, and other items
of tangible Personal Property of Noble are structurally sound, in good operating condition and repair, are adequate to the uses
to which they are being put, and are sufficient for the continued conduct of the business of Noble and its Subsidiaries after
the Closing in substantially the same manner as conducted prior to the Closing.
3.17
Intellectual Property
.
(a)
Schedule
3.17(a)
hereto contains a description of all Intellectual Property of Noble and its Subsidiaries. Noble and each of its Subsidiaries
owns or has enforceable rights to use all Intellectual Property necessary or required for the conduct of its business as presently
conducted or as presently contemplated to be conducted. Except as disclosed in
Schedule 3.17(a)
hereto, no Intellectual
Property that is owned by, or licensed to, Noble or a Subsidiary, including software and software programs developed by or exclusively
licensed to Noble or any Subsidiary (specifically excluding any off the shelf or shrink-wrap software) or any current version
of products or service offerings of Noble or any Subsidiary is subject to any material proceeding or outstanding decree, order,
judgment, contract, license, agreement, or stipulation restricting in any manner the use, transfer, or licensing thereof by Noble
or any Subsidiary, or which may affect the validity, use, or enforceability of such Intellectual Property, which in any such case
could reasonably be expected to have a Material Adverse Effect on Noble.
(b) Except
as disclosed in
Schedule 3.17(b)
hereto, Noble or a Subsidiary owns and has good and exclusive title to each material item
of Intellectual Property owned by it free and clear of any Liens (excluding non-exclusive licenses and related restrictions granted
by it in the ordinary course of business), and neither Noble nor any Subsidiary has entered into any agreement, and has no current
plans, to sell, transfer, dispose of, or enter into an exclusive license with respect to any material item of Intellectual Property.
Noble or a Subsidiary is the exclusive owner of all material Patents and registered Trademarks and Copyrights used in connection
with the operation or conduct of the business of Noble and its Subsidiaries including the sale of any products or the provision
of any services by Noble and its Subsidiaries.
(c) Noble
and each of its Subsidiaries have complied with the duty of candor and good faith in dealing with the U.S. Patent and Trademark
Office and any similar duties in dealing with any foreign intellectual property office. To Noble’s knowledge, there are
no material defects in the preparation and filing of any of Noble’s or its Subsidiaries’ owned or licensed Patents,
Trademarks, and Copyrights.
(d) The
operation of the business of Noble and its Subsidiaries as such business currently is conducted, including Noble’s use of
any product, device, or process, has not and does not infringe or misappropriate the Intellectual Property of any third party
or constitute unfair competition or trade practices under the laws of any jurisdiction and neither Noble nor its Subsidiaries
has received any claims, notices, or threats from third parties alleging any such infringement, misappropriation, conflict, or
violation of such third party’s Intellectual Property rights, or unfair competition or trade practices with respect thereof,
and Noble is unaware of any facts which would form a reasonable basis for any such claim.
(e) To
Noble’s knowledge, no employee of Noble or its Subsidiaries is in or has ever been in violation in any material respect
of any term of any employment contract, Patent disclosure agreement, invention assignment agreement, non-competition agreement,
non-solicitation agreement, nondisclosure agreement, or any other restrictive covenant to or with a former employer where the
basis of such violation relates to such employee’s employment with Noble or a Subsidiary, or actions undertaken by the employee
while employed with Noble or a Subsidiary, and could reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect.
(f) Noble
and its Subsidiaries have taken reasonable steps necessary to secure interests in the Intellectual Property developed by their
employees, consultants, agents, and contractors in the course of their service to Noble or a Subsidiary, as applicable, including
the execution of valid assignment and nondisclosure agreements for the benefit of Noble or its Subsidiaries by such employees,
consultants, agents, and contractors under which they have assigned to Noble or its Subsidiaries all of their right, title, and
interest in and to any Intellectual Property rights developed by them in the course of their service to Noble or its Subsidiaries
and used in or related to the business of Noble or its Subsidiaries.
3.18
Taxes
.
Except as set forth in
Schedule 3.18
hereto:
(a) Noble
and its Subsidiaries have timely filed all Returns required to be filed by Noble and its Subsidiaries with any Tax authority prior
to the date hereof, except such Returns that are not material to Noble. All such Returns are true, correct, and complete in all
material respects. Noble has paid all Taxes shown to be due and payable on such Returns.
(b) All
Taxes that Noble or its Subsidiaries are required by law to withhold or collect have been duly withheld or collected, and have
been timely paid over to the proper Governmental Entity to the extent due and payable.
(c) Neither
Noble nor any Subsidiary has been delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed,
or assessed against Noble or any Subsidiary, nor has Noble or any Subsidiary executed any unexpired waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(d) No
audit or other examination of any Return of Noble or any Subsidiary by any Tax authority is presently in progress, nor has Noble
or any Subsidiary been notified in writing of any request for such an audit or other examination.
(e) No
adjustment relating to any Returns filed by Noble or any Subsidiary has been proposed in writing, formally or informally, by any
Tax authority to Noble or any Subsidiary or any representative thereof.
(f) Neither
Noble nor any Subsidiary has any liability for any unpaid Taxes which have not been accrued for or reserved on the balance sheets
included in the Noble Financial Statements, whether asserted or unasserted, contingent or otherwise, other than any material liability
for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation of the business
of the Noble in the ordinary course of business.
(g) There
is no limitation on the utilization of net operating losses, capital losses, built-in losses, tax credits, or similar items of
Noble under Sections 269, 382, 383, 384, or 1502 of the Code.
(h)
Schedule
3.18(i)
sets forth all foreign jurisdictions in which Noble or its Subsidiaries is subject to Tax. Neither Noble nor any Subsidiary
has entered into a gain recognition agreement pursuant to Treasury Regulations 1.367(a)-8. Neither Noble nor any Subsidiary has
transferred an intangible, the transfer of which would be subject to Section 367(d) of the Code.
3.19
Environmental
Matters
.
(a) Except
for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect on Noble
and its Subsidiaries as a whole, or as disclosed in
Schedule 3.19(a)
hereto: (i) Noble and its Subsidiaries have complied
with all applicable Environmental Laws; (ii) the properties currently operated or being constructed by Noble and its Subsidiaries
(including soils, groundwater, surface water, air, buildings, or other structures) are not contaminated with any Hazardous Substances;
(iii) the properties formerly owned, operated, or constructed by Noble and its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership, operation, or construction by Noble or its Subsidiaries or, to Noble’s knowledge,
during any prior period; (iv) neither Noble nor any Subsidiary is subject to liability for any Hazardous Substance disposal or
contamination on any third party or public property (whether above, on, or below ground or in the atmosphere or water); (v) neither
Noble nor any Subsidiary has been associated with any release or threat of release of any Hazardous Substance; (vi) neither Noble
nor any Subsidiary has received any written notice, demand, letter, claim, or request for information alleging that Noble or any
Subsidiary may be in violation of or liable under any Environmental Law; and (vii) neither Noble nor any Subsidiary is subject
to any orders, decrees, injunctions, or other arrangements with any Governmental Entity or subject to any indemnity or other agreement
with any third party relating to liability under any Environmental Law or relating to Hazardous Substances.
(b)
Schedule
3.19(b)
sets forth all environmental studies and investigations completed or in process with respect to Noble and its Subsidiaries
or their respective properties, assets, or operations, including all phase reports, that are known to Noble. All such written
reports and material documentation relating to any such study or investigation have been heretofore provided or made available
by Noble to Parent or its counsel.
3.20
Brokers;
Third Party Expenses
. Except as set forth in
Schedule 3.20
hereto, neither Noble nor any Subsidiary has incurred, nor
will it incur, directly or indirectly, any liability for brokerage, finders’ fees, agent’s commissions, or any similar
charges in connection with this Agreement or any transactions contemplated hereby. Notwithstanding the foregoing, in no event
will Parent be required to issue unrestricted shares of Parent Common Stock to any Person in connection with this Agreement or
any transactions contemplated hereby.
3.21
Agreements,
Contracts, and Commitments
.
(a)
Schedule
3.21(a)
hereto sets forth a complete and accurate list of all Material Noble Contracts, specifying the parties thereto. For
purposes of this Agreement, the term “
Noble Contracts
” means all contracts, agreements, leases, mortgages,
indentures, notes, bonds, licenses, permits, franchises, purchase orders, sales orders, and other understandings, commitments
and obligations (including, without limitation, outstanding offers and proposals) of any kind, whether written or oral, to which
Noble or any Subsidiary is a party or by or to which any of their properties or assets may be bound, subject or affected (including
without limitation notes or other instruments payable to Noble); the term “
Material Noble Contracts
” means
(i) each Noble Contract (A) providing for payments (present or future) to Noble or any Subsidiary in excess of $25,000 in the
aggregate or (B) under or in respect of which Noble or any Subsidiary presently has any liability or obligation of any nature
whatsoever (absolute, contingent or otherwise) in excess of $25,000, (ii) each Noble Contract that otherwise is or may be material
to the businesses, operations, assets, condition (financial or otherwise), or prospects of Noble or any Subsidiary, and (iii)
the limitations of subclauses (i) and (ii) notwithstanding, each of the following Noble Contracts:
(1) any
mortgage, indenture, note, installment obligation, or other instrument, agreement, or arrangement for or relating to any borrowing
of money by or from Noble or any Subsidiary and by or to any Insider;
(2) any
mortgage, indenture, note, installment obligation, or other instrument, agreement, or arrangement for or relating to any borrowing
of money from an Insider by Noble;
(3) any
guaranty, direct or indirect, by Noble, a Subsidiary, or any Insider of Noble of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of business;
(4) any
Noble Contract of employment or management;
(5) any
Noble Contract made other than in the ordinary course of business or (x) providing for the grant of any preferential rights to
purchase or lease any asset of Noble or any Subsidiary or (y) providing for any right (exclusive or non-exclusive) to sell or
distribute, or otherwise relating to the sale or distribution of, any product or service of Noble or any Subsidiary;
(6) any
obligation to register any shares of the capital stock or other securities of Noble with any Governmental Entity;
(7) any
obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the business, assets, or stock of
other Persons;
(8) any
obligation to make payments or capital contributions, contingent or otherwise, to any Affiliate;
(9) any
collective bargaining agreement with any labor union;
(10) any
lease or similar arrangement for the use by Noble or any Subsidiary of real property or Personal Property where the annual lease
payments are greater than $100,000 (other than any lease of vehicles, office equipment, or operating equipment made in the ordinary
course of business);
(11) any
Noble Contract granting or purporting to grant, or otherwise in any way relating to, any mineral rights or any other interest
(including, without limitation, a leasehold interest) in real property;
(12) any
Noble Contract to which any Insider, or any entity owned or controlled by an Insider, is a party; and
(13) any
offer or proposal which, if accepted, would constitute any of the foregoing.
(b) Each
Material Noble Contract was entered into at arms’ length and in the ordinary course, is in full force and effect and is
valid and binding upon and enforceable against each of the parties thereto, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or
by principles governing the availability of equitable remedies. To Noble’s knowledge, no other party to a Material Noble
Contract is the subject of a bankruptcy or insolvency proceeding. True, correct, and complete copies of all Material Noble Contracts
and all offers and proposals that, if accepted, would constitute Material Noble Contracts (or written summaries in the case of
oral Material Noble Contracts or offers or proposals) have been heretofore delivered to Parent or Parent’s counsel.
(c) Except
as set forth in
Schedule 3.21(c),
neither Noble nor any Subsidiary party thereto, nor to Noble’s knowledge, any other
party thereto is in breach of or in default under, and no event has occurred which with notice or lapse of time or both would
become a breach of or default under, any Noble Contract, and no party to any Noble Contract has given any written notice of any
claim of any such breach, default, or event, which, individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on Noble. Each Material Noble Contract that has not expired by its terms in full force and effect.
3.22
Insurance
.
Schedule 3.22
sets forth Noble’s and its Subsidiaries’ Insurance Policies. To Noble’s knowledge, the
coverages provided by such Insurance Policies are of the type and in the amounts customarily carried by persons conducting a business
similar to Noble’s business and are adequate in amount and scope for Noble’s business and operations, including any
insurance required to be maintained by Noble Contracts. Noble has not received any written notice of cancellation of, or premium
increase with respect to, or alteration of coverage under, any such Insurance Policies. Except as set forth in
Schedule 3.22
,
there are no claims related to the business of Noble or any Subsidiary pending under any such Insurance Policies as to which coverage
has been questioned, denied, or disputed or in respect of which there is an outstanding reservation of rights.
3.23
Governmental
Actions/Filings
.
(a) Except
as set forth in
Schedule 3.23(a)
, Noble and its Subsidiaries have been granted and hold, and have made, all Governmental
Actions/Filings (including, without limitation, Governmental Actions/Filings required for emission or discharge of effluents and
pollutants into the air and the water) necessary to the conduct by Noble and its Subsidiaries of its business (as presently conducted)
or used or held for use by Noble and its Subsidiaries, and true, complete, and correct copies of which have heretofore been delivered
to Parent. Each such Governmental Action/Filing is in full force and effect and, except as disclosed in
Schedule 3.23(a)
hereto, will not expire prior to December 31, 2018 and Noble and its Subsidiaries are in substantial compliance with all of their
respective obligations with respect thereto. No event has occurred and is continuing which requires or permits, or after notice
or lapse of time or both would require or permit, and consummation of the transactions contemplated by this Agreement or any ancillary
documents will not require or permit (with or without notice or lapse of time, or both), any modification or termination of any
such Governmental Actions/Filings except such events which, either individually or in the aggregate, would not have a Material
Adverse Effect upon Noble.
(b) Except
as set forth in
Schedule 3.23(b)
, no Governmental Action/Filing is necessary to be obtained, secured, or made by Noble
to enable the Company to continue to conduct Noble’s businesses and operations and use its properties after the Closing
in a manner which is consistent with current practice.
3.24
Interested
Party Transactions
. Except as set forth in the
Schedule 3.24
hereto, no employee, officer, director, or shareholder
of Noble or its Subsidiaries or, to Noble’s knowledge any member of his or her immediate family, is indebted to Noble or
any Subsidiary, nor is Noble or any Subsidiary indebted (or committed to make loans or extend or guarantee credit) to any of such
Persons, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of Noble, and (iii) for other employee benefits made generally available to all employees. Except as set forth in
Schedule
3.20
, to Noble’s knowledge, none of such individuals has any direct or indirect ownership interest in any Person with
whom Noble is affiliated or with whom Noble has a contractual relationship, or in any Person that competes with Noble or its Subsidiaries,
except that each Insider and members of their respective immediate families may own less than 5% of the outstanding stock in publicly
traded companies that may compete with Noble or its Subsidiaries. Except as set forth in
Schedule 3.20
, to the knowledge
of Noble, no Insider or any member of an Insider’s immediate family is, directly or indirectly, interested in any Material
Noble Contract with Noble (other than such contracts as relate to any such Person’s ownership of capital stock or other
securities of Noble or such Person’s employment with Noble).
3.25
Board
Approval
. The Board of Directors of Noble (including any required committee or subgroup thereof) has, as of the date of this
Agreement, duly approved this Agreement and the transactions contemplated hereby.
3.26
No
Additional Representations and Warranties
. Except as provided in this Article III, Section 1.10(b), Section 6.1(c) and Section
6.6(a), neither Noble, any Subsidiary, any of their respective Affiliates, nor any of their respective directors, officers, employees,
stockholders, partners, members or representatives has made, or is making, any representation or warranty whatsoever to Parent
or Merger Sub or their Affiliates and no such party shall be liable in respect of the accuracy or completeness of any information
provided to Parent or Merger Sub or their Affiliates.
3.27
Survival
of Representations and Warranties
. The representations and warranties of Noble set forth in this Agreement shall survive the
Closing as set forth in Section 8.4(a).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Subject to the exceptions
set forth in
Schedule 4
attached hereto (the “
Parent Schedule
”), Parent and Merger Sub represent and
warrant to, and covenant with, the Company, Noble, and Shareholders, as follows:
4.1
Organization
and Qualification
.
(a) Each
of Parent and Merger Sub is a corporation duly incorporated, validly existing, and in good standing under the Corporate Law and
has the requisite corporate power and authority to own, lease, and operate its assets and properties and to carry on its business
as it is now being or currently planned by Parent to be conducted. Each of Parent and Merger Sub is in possession of all Governmental
Actions/Filings necessary to own, lease, and operate the properties it purports to own, operate, or lease and to carry on its
business as it is now being or currently planned by Parent to be conducted, except where the failure to have such Governmental
Actions/Filings could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent.
Complete and correct copies of the Charter Documents of each of Parent and Merger Sub, as amended and currently in effect, have
been heretofore delivered or made available to the Company or its counsel. Neither Parent nor Merger Sub is in violation of any
of the provisions of its Charter Documents.
(b) Each
of Parent and Merger Sub is duly qualified or licensed to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. Each jurisdiction in
which Parent or Merger Sub is so qualified or licensed is listed in
Schedule 4.1(b)
4.2
Subsidiaries
.
Parent has no direct or indirect subsidiaries or participations in joint ventures or other entities other than Merger Sub. Parent
owns all of the outstanding equity securities of Merger Sub, free and clear of all Liens. Merger Sub does not have any assets
or properties of any kind, does not now conduct and has never conducted any business, and has and will have at the Closing no
obligations or liabilities of any nature whatsoever, except for such obligations as are imposed under this Agreement.
4.3
Capitalization
.
(a) As
of the date of this Agreement, the authorized capital stock of Parent consists of 35,000,000 shares of Parent Common Stock, par
value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share (“
Parent Preferred Stock
”),
of which 17,695,000 shares of Parent Common Stock and no shares of Parent Preferred Stock are issued and outstanding, all of which
are validly issued, fully paid, and nonassessable.
(b) Except
as set forth in
Schedule 4.3(b)
: (i) no shares of Parent Common Stock are reserved for issuance upon the exercise of outstanding
options to purchase Parent Common Stock granted to employees of Parent or other parties (“
Parent Stock Options
”)
and there are no outstanding Parent Stock Options; (ii) 14,245,000 shares of Parent Common Stock are reserved for issuance upon
the exercise of outstanding
Parent Warrants
; (iii) 1,424,500 shares of Parent Common Stock are reserved for issuance upon
the exchange of outstanding rights exchangeable for Parent Common Stock (“
Parent Rights
”); (iv) 1,260,000 shares
of Parent Common Stock are reserved for issuance upon the exercise of outstanding unit purchase options (“
Parent Unit
Purchase Options
”) and upon the exercise of securities underlying such Parent Unit Purchase Options; and (v) no shares
of Parent Common Stock are reserved for issuance upon the conversion of any outstanding convertible notes, debentures, or securities.
All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the
instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, and nonassessable. All outstanding
shares of Parent Common Stock and all outstanding Parent Warrants, Parent Rights, and Parent Unit Purchase Options have been issued
and granted in compliance with (x) all applicable securities laws and (in all material respects) other applicable laws and regulations,
and (y) all requirements set forth in any applicable Parent Contracts.
(c)
Except
as set forth in
Schedule 4.3(c)
hereto or as set forth in Sections 4.3(a) and 4.3(b) hereof, there are no subscriptions,
options, warrants, equity securities, partnership interests, or similar ownership interests, calls, rights (including preemptive
rights), commitments, or agreements of any character to which Parent or Merger Sub is a party or by which Parent or Merger Sub
is bound obligating Parent to issue, deliver, or sell, or cause to be issued, delivered, or sold, or to repurchase, redeem, or
otherwise acquire, or cause the repurchase, redemption, or acquisition of, any shares of capital stock of Parent or obligating
Parent to grant, extend, accelerate the vesting of, or enter into any such subscription, option, warrant, equity security, call,
right, commitment, or agreement.
(d) Except
as set forth in
Schedule 4.3(d)
or as contemplated by this Agreement, there are no registrations rights, and there is no
voting trust, proxy, rights plan, anti-takeover plan, or other agreements or understandings to which Parent is a party or by which
Parent is bound with respect to any equity security of any class of the Parent Stock.
(e) Except
as provided for in this Agreement or as set forth in
Schedule 4.3(e)
, as a result of the consummation of the transactions
contemplated hereby, no shares of capital stock, warrants, options, or other securities of Parent are issuable and no rights in
connection with any shares, warrants, options, or other securities of the Parent accelerate or otherwise become triggered (whether
as to vesting, exercisability, convertibility or otherwise).
(f) No
outstanding shares of Parent Common Stock are unvested or subjected to a repurchase option, risk of forfeiture, or other similar
condition under any applicable agreement with Parent.
(g) The
shares of Parent Common Stock and Parent Warrants to be issued by Parent in connection with the Transaction Merger, upon issuance
in accordance with the terms of this Agreement, will be duly authorized and validly issued and such shares of Parent Common Stock
and Parent Warrants will be fully paid and nonassessable.
4.4
Authority
Relative to this Agreement
. Each of Parent and Merger Sub has full corporate power and authority to: (i) execute, deliver,
and perform this Agreement, and each ancillary document that it has executed or delivered or is to execute or deliver pursuant
to this Agreement, and (ii) carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby (including the Mergers). The execution and delivery of this Agreement by Parent and Merger Sub and the consummation
by Parent and Merger Sub of the transactions contemplated hereby (including the Mergers) have been duly and validly authorized
by all necessary corporate action on the part of Parent and Merger Sub (including the approval by its board of directors), and
no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, other than approval of the Parent Stockholder Matters. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution, and delivery thereof by
the other parties hereto, constitutes the legal and binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, or other similar
laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
4.5
No
Conflict; Required Filings and Consents
.
(a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and
Merger Sub shall not: (i) conflict with or violate Parent’s or Merger Sub’s Charter Documents, (ii) conflict with
or violate any Legal Requirements, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or materially impair Parent’s or Merger Sub’s rights or alter the rights
or obligations of any third party under, or give to others any rights of termination, amendment, acceleration, or cancellation
of, or result in the creation of a Lien on any of the properties or assets of Parent or Merger Sub pursuant to, any Parent Contracts,
except, with respect to clauses (ii) or (iii), for any such conflicts, violations, breaches, defaults, or other occurrences that
would not, individually and in the aggregate, have a Material Adverse Effect on Parent and Merger Sub taken as a whole.
(b) The
execution and delivery of this Agreement by Parent and Merger Sub does not, and the performance of their obligations hereunder
will not, require any consent, approval, authorization, or permit of, or filing with or notification to, any Governmental Entity,
except (i) for the filing of the Certificates of Merger in accordance with the Corporate Law, (ii) for applicable requirements,
if any, of the Securities Act, the Exchange Act, Blue Sky Laws, and the rules and regulations thereunder, and appropriate documents
with the relevant authorities of other jurisdictions in which Parent is qualified to do business, (iii) for the filing of any
notifications required under the HSR Act and the expiration of the required waiting period thereunder, (iv) the qualification
of Parent as a foreign corporation in those jurisdictions in which the business of the Company makes such qualification necessary,
and (v) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, or prevent consummation
of the Mergers or otherwise prevent the parties hereto from performing their obligations under this Agreement.
4.6
Compliance
.
Each of Parent and Merger Sub has complied with and is not in violation of any Legal Requirements with respect to the conduct
of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually
or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on Parent. The businesses and
activities of Parent and Merger Sub have not been and are not being conducted in violation of any Legal Requirements, except for
failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a
Material Adverse Effect on Parent. Neither Parent nor Merger Sub is in default or violation of any term, condition or provision
of any applicable Charter Documents. Except as set forth in
Schedule 4.6
, no written notice of non-compliance with any
Legal Requirements has been received by Parent or Merger Sub (and Parent and Merger Sub have no knowledge of any such notice delivered
to any other Person). Neither Parent nor Merger Sub is in violation of any term of any Parent Contract, except for failures to
comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse
Effect on Parent.
4.7
Parent
SEC Reports and Financial Statements
.
(a) The
Parent has timely filed all required registration statements, reports, schedules, forms, statements, and other documents required
to be filed by it with the SEC since October 2, 2017 (collectively, as they have been amended since the time of their filing and
including all exhibits thereto, the “
Parent SEC Reports
”). None of the Parent SEC Reports, as of their respective
dates (or if amended or superseded by a filing prior to the date of this Agreement or the Closing Date, then on the date of such
filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited
financial statements of Parent (“
Parent Audited Financial Statements
”) and unaudited interim financial statements
of Parent (“
Parent Unaudited Financial Statements
” and, together with the Parent Audited Financial Statements,
the “
Parent Financial Statements
”) (including, in each case, the notes and schedules thereto) included in the
Parent SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with U.S. GAAP applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC)
and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments
and the absence of complete footnotes) in all material respects the financial position of Parent and its Subsidiaries as of the
respective dates thereof and the results of their operations and cash flows for the respective periods then ended.
(b) Parent
has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act) designed
to ensure that material information relating to Parent is made known to Parent’s principal executive officer and its principal
financial officer, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared.
To Parent’s knowledge, such disclosure controls and procedures are effective in timely alerting Parent’s principal
executive officer and principal financial officer to material information required to be included in Parent’s periodic reports
required under the Exchange Act.
(c) Parent
has established and maintained a system of internal controls. To Parent’s knowledge, such internal controls are effective
to provide reasonable assurance regarding the reliability of Parent’s financial reporting and the preparation of the Parent
Financial Statements for external purposes in accordance with U.S. GAAP.
(d) There
are no outstanding loans or other extensions of credit made by Parent to any executive officer (as defined in Rule 3b-7 under
the Exchange Act) or director of Parent. Parent has not taken any action prohibited by Section 402 of the Sarbanes-Oxley
Act.
(e) The
books of account, minute books, and transfer ledgers and other similar books and records of Parent and Merger Sub are complete
and correct in all material respects, and there have been no material transactions that are required to be set forth therein and
which have not been so set forth.
(f) Except
as otherwise noted in the Parent Financial Statements, the accounts and notes receivable of Parent reflected in the Parent Financial
Statements: (i) arose from bona fide transactions in the ordinary course of business and are payable on ordinary trade terms,
(ii) are legal, valid, and binding obligations of the respective debtors enforceable in accordance with their terms, except as
such may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting creditors’ rights generally,
and by general equitable principles, (iii) are not subject to any valid set-off or counterclaim to which Parent has been notified
in writing as of the date hereof except to the extent set forth in such balance sheet contained therein, and (iv) are not the
subject of any actions or proceedings brought by or on behalf of Parent as of the date hereof.
4.8
No
Undisclosed Liabilities
. Except as set forth in
Schedule 4.8
hereto, Parent and Merger Sub have no liabilities (absolute,
accrued, contingent, or otherwise) of a nature required to be disclosed on a balance sheet or in the related notes to Parent Financial
Statements that are, individually or in the aggregate, material to the business, results of operations, or financial condition
of Parent, except: (i) liabilities provided for in or otherwise disclosed in the balance sheet included in the most recent Parent
Financial Statements or in the notes to the most recent Parent Financial Statements, and (ii) such liabilities arising in the
ordinary course of the Parent’s business since the date of the most recent Parent Financial Statement, none of which, individually
or in the aggregate, would have a Material Adverse Effect on Parent.
4.9
Absence
of Certain Changes or Events
. Except as set forth in Parent SEC Reports filed prior to the date of this Agreement, and except
as contemplated by this Agreement, since the date of the most recent Parent Financial Statement, there has not been: (i) any Material
Adverse Effect on Parent, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in
cash, stock, or property) in respect of, any of Parent’s capital stock, or any purchase, redemption, or other acquisition
by Parent of any of Parent’s capital stock or any other securities of Parent or any options, warrants, calls, or rights
to acquire any such stock or other securities, (iii) any split, combination, or reclassification of any of Parent’s capital
stock, (iv) any granting by Parent of any increase in compensation or fringe benefits, except for normal increases of cash compensation
in the ordinary course of business consistent with past practice, or any payment by Parent of any bonus, except for bonuses made
in the ordinary course of business consistent with past practice, or any granting by Parent of any increase in severance or termination
pay or any entry by Parent into any currently effective employment, severance, termination, or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are materially altered upon the occurrence of a transaction
involving Parent of the nature contemplated hereby, (v) entry by Parent into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property other than licenses in the ordinary course of business consistent with
past practice or any amendment or consent with respect to any licensing agreement filed or required to be filed by Parent with
respect to any Governmental Entity, (vi) any material change by Parent in its accounting methods, principles, or practices, except
as required by concurrent changes in U.S. GAAP, (vii) any change in the auditors of Parent, (viii) any issuance of capital stock
of Parent, or (ix) any revaluation by Parent of any of its assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets of Parent other than in the ordinary course of business.
4.10
Litigation
.
There are no claims, suits, actions, or proceedings pending, or, to Parent’s knowledge, threatened against Parent or Merger
Sub, before any court, governmental department, commission, agency, instrumentality, or authority, or any arbitrator.
4.11
Employee
Benefit Plans
. Neither Parent nor Merger Sub maintains, and has no liability under, any Plan, and neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus, or otherwise) becoming due to any stockholder, director, or employee
of Parent or Merger Sub, or (ii) result in the acceleration of the time of payment or vesting of any such benefits.
4.12
Labor
Matters
. Neither Parent nor Merger Sub is a party to any collective bargaining agreement or other labor union contract applicable
to persons employed by Parent or Merger Sub and neither Parent nor Merger Sub knows of any activities or proceedings of any labor
union to organize any such employees.
4.13
Business
Activities
. Since its organization, neither Parent nor Merger Sub has conducted any business activities other than activities
directed toward the accomplishment of a business combination. Except as set forth in the Parent Charter Documents, there is no
agreement, commitment, exclusive license, judgment, injunction, order, or decree binding upon Parent or Merger Sub or to which
Parent or Merger Sub is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Parent, any acquisition of property by Parent, or the conduct of business by Parent.
4.14
Title
to Property
. Neither Parent nor Merger Sub owns or leases any real property or personal property. Except as set forth in
Schedule
4.14
, there are no options or other contracts under which Parent or Merger Sub has a right or obligation to acquire or lease
any interest in real property or personal property.
4.15
Intellectual
Property
. Neither Parent nor Merger Sub owns, licenses, or otherwise has any right, title or interest in any material Intellectual
Property.
4.16
Taxes
.
Except as set forth in
Schedule 4.16
hereto:
(a) Each
of Parent and Merger Sub has timely filed all Returns required to be filed by Parent and Merger Sub with any Tax authority prior
to the date hereof, except such Returns which are not material to Parent. All such Returns are true, correct, and complete in
all material respects. Each of Parent and Merger Sub has paid all Taxes shown to be due and payable on such Returns.
(b) All
Taxes that Parent and Merger Sub are required by law to withhold or collect have been duly withheld or collected, and have been
timely paid over to the proper Governmental Entity to the extent due and payable.
(c) Neither
Parent nor Merger Sub has been delinquent in the payment of any Tax, nor is there any Tax deficiency outstanding, proposed or
assessed against Parent, nor has Parent or Merger Sub executed any unexpired waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(d) No
audit or other examination of any Return of Parent or Merger Sub by any Tax authority is presently in progress, nor has Parent
or Merger Sub been notified in writing of any request for such an audit or other examination.
(e) No
adjustment relating to any Returns filed by Parent or Merger Sub has been proposed in writing, formally or informally, by any
Tax authority to Parent or Merger Sub or any representative thereof.
(f) Neither
Parent nor Merger Sub has any liability for any unpaid Taxes which have not been accrued for or reserved on Parent’s balance
sheets included in the Parent Audited Financial Statements for the most recent fiscal year ended, whether asserted or unasserted,
contingent or otherwise, other than any material liability for unpaid Taxes that may have accrued since the end of the most recent
fiscal year in connection with the operation of the business of Parent in the ordinary course of business, none of which is material
to the business, results of operations or financial condition of Parent.
4.17
Environmental
Matters
. Except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse
Effect: (i) each of Parent and Merger Sub has complied with all applicable Environmental Laws; (ii) the properties currently operated
or being constructed by Parent and Merger Sub (including soils, groundwater, surface water, air, buildings, or other structures)
are not contaminated with any Hazardous Substances; (iii) the properties formerly owned, operated, or constructed by Parent and
Merger Sub were not contaminated with Hazardous Substances during the period of ownership, operation, or construction by Parent
or Merger Sub or, to Parent’s or Merger Sub’s knowledge, during any prior period; (iv) neither Parent nor Merger Sub
is subject to liability for any Hazardous Substance disposal or contamination on any third party or public property (whether above,
on, or below ground or in the atmosphere or water); (v) neither Parent nor Merger Sub has been associated with any release or
threat of release of any Hazardous Substance; (vi) neither Parent nor Merger Sub has received any notice, demand, letter, claim,
or request for information alleging that Parent or Merger Sub may be in violation of or liable under any Environmental Law; and
(vii) neither Parent nor Merger Sub is subject to any orders, decrees, injunctions, or other arrangements with any Governmental
Entity or subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or
relating to Hazardous Substances.
4.18
Brokers
.
Except as set forth in
Schedule 4.18
, neither Parent nor Merger Sub has incurred, and neither will incur, directly or indirectly,
any liability for brokerage or finders’ fees or agent’s commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
4.19
Agreements,
Contracts, and Commitments
.
(a) Except
as set forth in the Parent SEC Reports filed prior to the date of this Agreement or as set forth in
Schedule 4.19(a)
, other
than confidentiality and non-disclosure agreements, there are no contracts, agreements, leases, mortgages, indentures, notes,
bonds, Liens, licenses, Permits, franchises, purchase orders, sales orders, or other understandings, commitments, or obligations
(including outstanding offers or proposals) of any kind, whether written or oral, to which Parent or Merger Sub is a party or
by or to which any of the properties or assets of Parent or Merger Sub may be bound, subject or affected, which may not be cancelled
by Parent or Merger Sub on 30 days’ or less prior notice (“
Parent Contracts
”).
(b) Except
as set forth in the Parent SEC Reports filed prior to the date of this Agreement, each Parent Contract was entered into at arms’
length and in the ordinary course, is in full force and effect, and is valid and binding upon and enforceable against each of
the parties thereto, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting creditors’ rights generally or by principles governing the availability of equitable remedies.
True, correct, and complete copies of all Parent Contracts (or written summaries in the case of oral Parent Contracts) have been
heretofore been made available to the Company or Company counsel.
(c) Neither
Parent or Merger Sub nor, to the knowledge of Parent, any other party thereto is in breach of or in default under, and no event
has occurred which with notice or lapse of time or both would become a breach of or default under, any Parent Contract, and no
party to any Parent Contract has given any written notice of any claim of any such breach, default or event, which, individually
or in the aggregate, are reasonably likely to have a Material Adverse Effect on Parent. Each Parent Contract that has not expired
by its terms is in full force and effect, except where such failure to be in full force and effect is not reasonably likely to
have a Material Adverse Effect on Parent.
4.20
Insurance
.
Except for directors’ and officers’ liability insurance, neither Parent nor Merger Sub maintains any Insurance Policy.
4.21
Interested
Party Transactions
. Except as set forth in the Parent SEC Reports filed prior to the date of this Agreement: (a) no employee,
officer, director, or stockholder of Parent or Merger Sub or a member of his or her immediate family is indebted to Parent nor
is Parent indebted (or committed to make loans or extend or guarantee credit) to any of them, other than reimbursement for reasonable
expenses incurred on behalf of Parent; and (b) to Parent’s knowledge, no officer, director, or stockholder or any member
of their immediate families is, directly or indirectly, interested in any material contract with Parent (other than such contracts
as relate to any such individual ownership of capital stock or other securities of Parent).
4.22
Parent
Listing
. Parent’s units, the Parent Common Stock, Parent Warrants, and Parent Rights are listed for trading on the Nasdaq
Capital Markets (“
Nasdaq
”). There is no action or proceeding pending or, to the Company’s knowledge,
threatened against Parent by Nasdaq with respect to any intention by Nasdaq to prohibit or terminate the listing of Parent’s
securities on Nasdaq.
4.23
Board
Approval
. Parent’s Board of Directors has, as of the date of this Agreement, unanimously (i) declared the advisability
of the Mergers and approved this Agreement and the transactions contemplated hereby, (ii) determined that the Mergers are in the
best interests of the stockholders of Parent, and (iii) determined that the fair market value of the Company is equal to at least
80% of the balance in the Trust Fund.
4.24
Trust
Fund
. As of the last Parent Unaudited Financial Statements prior to the date hereof, Parent had $140,580,447 invested in United
States Government securities or money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act of 1940 in a trust account administered by Continental (the “
Trust Fund
”). The Trust Fund shall
be utilized in accordance with Section 6.14 hereof.
4.25
No
Additional Representations and Warranties
. Except as provided in this Article IV, Section 6.1(c), Section 6.2(c) and Section
6.6(a), neither Parent or Merger Sub, any of their respective Affiliates, nor any of their respective directors, officers, employees,
shareholders, partners, members or representatives has made, or is making, any representation or warranty whatsoever to the Company,
any Subsidiary, or their Affiliates and no such party shall be liable in respect of the accuracy or completeness of any information
provided to the Company, any Subsidiary or their Affiliates.
4.26
No
Survival of Representations and Warranties
. The representations and warranties of Parent and Merger Sub set forth in this
Agreement shall terminate at the Closing.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING DATE
5.1
Conduct
of Business by the Company, Noble, Parent, and Merger Sub
. During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to its terms or the Closing, and except to the extent that the
other party otherwise consents in writing or as contemplated by this Agreement or as part of the Pre-Closing Reorganization, each
of the Company and its Subsidiaries, Noble and its Subsidiaries, Parent, and Merger Sub:
(a) shall
carry on its business in the usual, regular, and ordinary course consistent with past practices, in substantially the same manner
as heretofore conducted and in compliance with all applicable laws and regulations (except where noncompliance would not be reasonably
expected to have a Material Adverse Effect, pay its debts and taxes when due subject to good faith disputes over such debts or
taxes, pay or perform other material obligations when due, and use its commercially reasonable best efforts, consistent with past
practices and policies, to (i) preserve substantially intact its present business organization, (ii) keep available the services
of its present key officers and employees, (iii) preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others with which it has significant business dealings, and (iv) preserve and maintain all Permits.
(b) shall
not (except where noncompliance would not be reasonably expected to have a Material Adverse Effect or as expressly contemplated
by
Schedule 5.1(b)
hereto):
(1) Transfer
or license to any person or otherwise extend, amend, or modify any material rights to any Intellectual Property or enter into
grants to transfer or license to any person future Patent rights, other than in the ordinary course of business consistent with
past practices;
(2) Declare,
set aside, or pay any dividends on or make any other distributions (whether in cash, stock, equity securities, or property) in
respect of any capital stock (or membership interest) or split, combine, or reclassify any capital stock (or membership interest)
or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
other than distributions of cash to the stockholders or equity holders of the Company, Noble and their respective Subsidiaries;
provided that such distributions will not cause less than an aggregate of $2,500,000 of cash as of the Closing Date to remain
on the balance sheet of the Company, Noble and their respective Subsidiaries on a consolidated basis unless Parent provides prior
written consent to such distribution;
(3) Except
in connection with the Redomestication Merger, purchase, redeem, or otherwise acquire, directly or indirectly, any ownership interests
of the Company, Noble, or Parent;
(4) Issue,
deliver, sell, authorize, pledge, or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital
stock or other equity securities, or any securities convertible into or exchangeable for shares of capital stock or other equity
securities, or subscriptions, rights, warrants, or options to acquire any shares of capital stock or other equity securities or
any securities convertible into or exchangeable for shares of capital stock or other equity securities, or enter into other agreements
or commitments of any character obligating it to issue any such shares, equity securities or convertible or exchangeable securities;
(5) Amend
its Charter Documents;
(6) Acquire
or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership, association, or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to the business of Parent,
Noble, or the Company, as applicable, or enter into any joint ventures, strategic partnerships or alliances or other arrangements
that provide for exclusivity of territory or otherwise restrict such party’s ability to compete or to offer or sell any
products or services. For purposes of this paragraph, “material” includes the requirement that, as a result of such
transaction, financial statements of the acquired, merged or consolidated entity be included in the Proxy Statement;
(7) Sell,
lease, license, encumber, or otherwise dispose of any properties or assets, except (A) sales of inventory in the ordinary course
of business consistent with past practice, and (B) the sale, lease, or disposition (other than through licensing) of property
or assets that are not material, individually or in the aggregate, to the business of such party;
(8) Incur
any indebtedness for borrowed money or guarantee any such indebtedness of another Person or Persons, issue or sell any debt securities
or options, warrants, calls or other rights to acquire any debt securities of Parent, Noble, or the Company, as applicable, enter
into any “keep well” or other agreement to maintain any financial statement condition, or enter into any arrangement
having the economic effect of any of the foregoing;
(9) Adopt
or amend any employee benefit plan, policy, or arrangement, any employee stock purchase or employee stock option plan, or accelerate,
amend, or change the period of exercisability of options or restricted stock, or reprice options granted under any employee, consultant,
director, or other equity plans or authorize cash payments in exchange for any options granted under any of such plans, or permit
any Person to exercise any of its discretionary rights under any plan to provide for the automatic acceleration of any
outstanding
options, the termination of any outstanding repurchase rights, or the termination of any cancellation rights issued pursuant
to such plans, or enter into any employment contract or collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice with employees who are terminable “at will”),
pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers, employees or consultants, except in the ordinary
course of business consistent with past practices or to conform to the requirements of any applicable law, or grant any severance
or termination pay to any officer or any employee, except pursuant to applicable law, written agreements outstanding, or policies
existing on the date hereof and as previously or concurrently disclosed in writing or made available to the other party, or adopt
any new severance plan, or amend or modify or alter in any manner any severance plan, agreement, or arrangement existing on the
date hereof;
(10) Pay,
discharge, settle, or satisfy any claims, liabilities, or obligations (absolute, accrued, asserted, or unasserted, contingent
or otherwise), or litigation (whether or not commenced prior to the date of this Agreement) other than the payment, discharge,
settlement, or satisfaction, in the ordinary course of business consistent with past practices or in accordance with their terms,
or liabilities recognized or disclosed in the Company Financial Statements, the Noble Financial Statements, or in the most recent
financial statements included in the Parent SEC Reports filed prior to the date of this Agreement, as applicable, or incurred
since the date of such financial statements, or waive the benefits of, agree to modify in any manner, terminate, release any person
from, or knowingly fail to enforce any confidentiality or similar agreement to which the Company is a party or of which the Company
is a beneficiary or to which Noble is a party or of which Noble is a beneficiary, or to which Parent is a party or of which Parent
is a beneficiary, as applicable;
(11) Settle
any litigation where the consideration given is other than monetary or to which an Insider is a party;
(12) Except
in the ordinary course of business consistent with past practices, modify, amend, or terminate any Company Contract, Noble Contract,
or Parent Contract, as applicable, or waive, delay the exercise of, release, or assign any material rights or claims thereunder;
(13) Except
as required by U.S. GAAP, revalue any of its assets or make any change in accounting methods, principles or practices, or make
any material change to its cash management practices and its policies, practices, and procedures with respect to collection of
accounts receivable, establishment of reserves for uncollectable accounts, accrual of accounts receivable, prepayment of expenses,
payment of accounts payable, accrual of other expenses, deferral of revenue, or acceptance of customer deposits;
(14) Except
in the ordinary course of business consistent with past practices, incur or enter into any agreement, contract, or commitment
requiring such party to pay in excess of $250,000 in any 12 month period;
(15) Make
or rescind any Tax elections that, individually or in the aggregate, could be reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of such party, settle or compromise any material income tax liability or,
except
as required by applicable law,
materially
change any method of
accounting for Tax purposes or prepare or file any Return in a manner inconsistent with past practice;
(16) Form
or establish any subsidiary except in the ordinary course of business consistent with prior practice or as contemplated by this
Agreement;
(17) Make
capital expenditures except in accordance with prudent business and operational practices consistent with prior practice;
(18) Make
or omit to take any action which would be reasonably expected to have a Material Adverse Effect;
(19) Enter
into any transaction with or distribute or advance any assets or property to any of its officers, directors, partners, stockholders,
managers, members, or other Affiliates other than (i) the payment of salary and benefits and tax distributions in the ordinary
course of business consistent with prior practice, and (ii) distributions of cash to the stockholders of the Company, Noble and
their respective Subsidiaries (provided that such distributions will not cause less than an aggregate of $2,500,000 of cash as
of the Closing Date to remain on the balance sheet of the Company, Noble and their respective Subsidiaries on a consolidated basis
unless Parent provides prior written consent to such distribution); or
(20) Agree
in writing or otherwise agree, commit or resolve to take any of the actions described in Section 5.1(b)(1) through (19) above.
5.2
Confidentiality;
Access to Information
.
(a)
Confidentiality
.
The parties agree that they shall be bound by the confidentiality agreement previously executed by the parties (the “
Confidentiality
Agreement
”) with respect to all nonpublic information exchanged in connection with this Agreement and the negotiations
related thereto. The terms of the Confidentiality Agreement are hereby incorporated herein by reference and shall continue in
full force and effect until the Closing, at which time the Confidentiality Agreement shall terminate. If this Agreement is, for
any reason, terminated prior to the Closing, the Confidentiality Agreement shall continue in full force and effect, subject to
Section 9.2(b) hereof.
(b)
Access
to Information
.
(i) Each
of the Company and Noble will afford Parent and its financial advisors, accountants, counsel and other representatives reasonable
access during normal business hours, upon reasonable notice, to the properties, books, records and personnel of the Company and
Noble during the period prior to the Closing to obtain all information concerning the business, including the status of business
development efforts, properties, results of operations and personnel of the Company and Noble, as Parent may reasonably request.
No information or knowledge obtained by Parent in any investigation pursuant to this Section 5.2 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Mergers.
(ii) Parent
will afford the Company, Noble, and each of their financial advisors, underwriters, accountants, counsel and other representatives
reasonable access during normal business hours, upon reasonable notice, to the properties, books, records and personnel of Parent
during the period prior to the Closing to obtain all information concerning the business, including properties, results of operations
and personnel of Parent, as the Company or Noble may reasonably request. No information or knowledge obtained by the Company or
Noble in any investigation pursuant to this Section 5.2 will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the Mergers.
5.3
No
Solicitation
. During the period from the date of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Closing, (a) each of the Company and Noble, will not, and will cause its respective Affiliates,
employees, agents, officers, directors and representatives not to, directly or indirectly, solicit or enter into discussions or
transactions with, or encourage, or provide any information to, any corporation, partnership or other entity or group (other than
Parent and its designees) concerning any merger, sale of ownership interests and/or assets of the Company and/or Noble, recapitalization
or similar transaction and (b) each of Parent and Merger Sub will not, and will cause its respective Affiliates, employees, agents,
officers, directors and representatives not to, directly or indirectly, solicit or enter into discussions or transactions with,
or encourage, or provide any information to, any corporation, partnership or other entity or group (other than the Company, Noble,
and its or their designees) concerning any merger, purchase of ownership interests and/or assets, recapitalization or similar
business combination transaction. In addition, (i) each of the Company and Noble will, and will cause its respective Affiliates,
employees, agents, officers, directors and representatives to, immediately cease any and all existing discussions or negotiations
with any Person conducted heretofore with respect to any alternative merger, sale of ownership interests and/or assets of the
Company and/or Noble, recapitalization or similar transaction and (ii) each of Parent and Merger Sub will, and will cause its
respective Affiliates, employees, agents, officers, directors and representatives to, immediately cease any and all existing discussions
or negotiations with any Person conducted heretofore with respect to any alternative merger, purchase of ownership interests and/or
assets, recapitalization or similar business combination transaction. Each of the Company and Noble will promptly notify Parent
if it receives, or if any of its or its Affiliates’ employees, agents, officers, directors or representatives receives,
any proposal, offer or submission with respect to a competing transaction after the date of this Agreement. The parties agree
that the rights and remedies for noncompliance with this Section 5.3 include specific performance, it being acknowledged and agreed
that any breach or threatened breach will cause irreparable injury to the non-breaching party and that money damages would not
provide an adequate remedy for such injury. Parent and Merger Sub acknowledge that any efforts undertaken by the Company and its
Affiliates in order to complete the Interim Financing shall not constitute a violation of this Section.
5.4
Certain
Financial Information
. Within fifteen (15) business days after the end of each month between the date hereof and the earlier
of the Closing Date and the date on which this Agreement is terminated, each of the Company and Noble shall deliver to Parent
unaudited consolidated financial statements for such month, including a balance sheet, statement of operations, statement of cash
flows and statement of shareholders’ equity, that are certified as correct and complete by their respective Chief Executive
Officer and Chief Financial Officer, prepared in accordance with U.S. GAAP applied on a consistent basis to prior periods (except
as may be indicated in the notes thereto) and fairly presenting in all material respects the financial position of the Company
or Noble, as applicable, at the date thereof and the results of operations and cash flows for the period indicated, except that
such statements need not contain notes and may be subject to normal adjustments that are not expected to have a Material Adverse
Effect on the Company or Noble.
5.5
Access
to Financial Information
. During the period from the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Closing, each of the Company and Noble will, and will cause its auditors to (a)
continue to provide Parent and its advisors reasonable access to all of the financial information used in the preparation of Company
Financial Statements, Noble Financial Statements, and the financial information furnished pursuant to Section 5.4 hereof and (b)
reasonably cooperate with any reviews performed by Parent or its advisors of any such Company Financial Statements, Noble Financial
Statements, or information.
5.6
Commercially
Reasonable Best Efforts
. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees
to use its commercially reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the Mergers and the other transactions contemplated by this Agreement, including using
commercially reasonable best efforts to accomplish the following: (i) the taking of all reasonable acts necessary to cause
the conditions precedent set forth in Article VII to be satisfied, (ii) the obtaining of all necessary actions, waivers, consents,
approvals, orders and authorizations from Governmental Entities and the making of all necessary registrations, declarations and
filings (including registrations, declarations and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all consents, approvals or waivers from third parties required as a result of the transactions contemplated in this
Agreement, including the consents referred to in
Schedules 2.5
and
3.5
, (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (v) the execution or delivery of any additional instruments reasonably necessary
to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Parent and its board of directors, Noble and its board of directors, and the Company and its board
of directors shall, if any state takeover statute or similar statute or regulation is or becomes applicable to the Mergers, this
Agreement or any of the transactions contemplated by this Agreement, use its commercially reasonable best efforts to enable the
Mergers and the other transactions contemplated by this Agreement to be consummated as promptly as practicable on the terms contemplated
by this Agreement. Notwithstanding anything herein to the contrary, nothing in this Agreement shall be deemed to require Parent,
Noble, or the Company to agree to any divestiture by itself or any of its Affiliates of shares of capital stock or of any business,
assets or property, or the imposition of any material limitation on the ability of any of them to conduct their business or to
own or exercise control of such assets, properties and stock.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1
Proxy
Statement; Special Meeting
.
(a) As
soon as is reasonably practicable after receipt by Parent from the Company and Noble of all financial and other information relating
to the Company and Noble as Parent may reasonably request for its preparation, Parent shall prepare and file with the SEC under
the Exchange Act, and with all other applicable regulatory bodies, a proxy statement (“
Proxy Statement
”) to
be used for the purpose of soliciting proxies from holders of Parent Common Stock to vote in favor of (i) the adoption of this
Agreement and the approval of the Transaction Merger, (ii) the change of the name of Parent to “Allied Esports Entertainment,
Inc.”, (iii) an increase in the number of authorized shares of Parent Common Stock to a number mutually agreeable to Parent
and the Company, (iv) amendments to Parent’s Certificate of Incorporation to be effective from and after the Closing to
amend Article Sixth thereof so that the existence of Parent shall be perpetual and to remove all SPAC-related provisions that
will no longer be applicable to Parent following the Closing, (v) the election to the board of directors of Parent of the individuals
identified on
Schedule 6.3
(the matters set forth in clauses (i) through (v) being referred to herein as the “
Parent
Stockholder Matters
”), (vi) the adoption of an incentive stock option plan (the “
Parent Plan
”), and
(vii) such other matters as mutually agreed upon between the Company and Parent at a meeting of holders of Parent Common Stock
to be called and held for such purpose (the “
Special Meeting
”). The Parent Plan shall provide that an aggregate
of fifteen percent (15%) of the shares of Parent Common Stock to be outstanding at Closing shall be reserved for issuance pursuant
to the Parent Plan. The Company and Noble shall each furnish to Parent all information concerning the Company and/or Noble as
Parent may reasonably request in connection with the preparation of the Proxy Statement. The Company and its counsel and Noble
and its counsel shall be given an opportunity to review and comment on the preliminary Proxy Statement prior to its filing with
the SEC, and any SEC comments on the Proxy Statement received by Parent after the initial filing of the Proxy Statement. Parent,
with the assistance of the Company and Noble, shall promptly respond to any SEC comments on the Proxy Statement and shall otherwise
use commercially reasonable best efforts to cause the Proxy Statement to be approved by the SEC as promptly as practicable. Parent
shall also take any and all actions required to satisfy the requirements of the Securities Act and the Exchange Act.
(b) As
soon as practicable following the approval for distribution of the Proxy Statement by the SEC, Parent shall distribute the Proxy
Statement to the holders of Parent Common Stock and, pursuant thereto, shall call the Special Meeting in accordance with the Corporate
Law and, subject to the other provisions of this Agreement, solicit proxies from such holders to vote in favor of the Parent Stockholder
Matters, adoption of the Parent Plan and the other matters presented for approval or adoption at the Special Meeting.
(c) Parent
shall comply with all applicable provisions of and rules under the Exchange Act and all applicable provisions of the Corporate
Law in the preparation, filing, and distribution of the Proxy Statement, the solicitation of proxies thereunder, and the calling
and holding of the Special Meeting. Without limiting the foregoing, Parent shall ensure that the Proxy Statement does not, as
of the date on which it is first distributed to holders of Parent Common Stock, and as of the date of the Special Meeting, contain
any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading (provided that Parent shall not be responsible for the accuracy
or completeness of any information relating to the Company or Noble or any other information furnished by the Company or Noble
for the purpose of inclusion in the Proxy Statement). The Company represents and warrants that the information relating to the
Company supplied by the Company for the purpose of inclusion in the Proxy Statement will not as of the date on which the Proxy
Statement (or any amendment or supplement thereto) is first distributed to holders of Parent Common Stock or at the time of the
Special Meeting contain any statement which, at such time and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in
order to make the statement therein not false or misleading. Noble represents and warrants that the information relating to Noble
supplied by Noble for the purpose of inclusion in the Proxy Statement will not as of the date on which the Proxy Statement (or
any amendment or supplement thereto) is first distributed to holders of Parent Common Stock or at the time of the Special Meeting
contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make
the statement therein not false or misleading.
(d) Parent,
acting through its Board of Directors, shall include in the Proxy Statement the recommendation of its Board of Directors that
the holders of Parent Common Stock vote in favor of the adoption of Parent Stockholders Matters and Parent Plan, and shall otherwise
use commercially reasonable best efforts to obtain the approval of the Parent Stockholder Matters, Parent Plan and such other
matters as mutually agreed upon between the Company and Parent.
6.2
Ourgame
Stockholder Approval
.
(a) As
soon as is reasonably practicable after receipt by Ourgame from the Parent and Merger Sub of all financial and other information
relating to the Parent and Merger Sub as Ourgame may reasonably request for its preparation, Ourgame shall prepare and submit
to the Stock Exchange of Hong Kong Limited (the “
Stock Exchange
”) under the Rules Governing the Listing of
the Securities on The Stock Exchange of Hong Kong Limited (the “
Listing Rules
”), and with all other applicable
regulatory bodies, a circular (“
Circular
”) to be used for the purpose of soliciting proxies from shareholders
of Ourgame to vote in favor of, among others, the adoption of this Agreement and the approval of the Transaction Merger (the “
Ourgame
Stockholder Matters
”). The Parent and Merger Sub shall each furnish to Ourgame all information concerning the Parent
and/or Merger Sub as Ourgame may reasonably request in connection with the preparation of the Circular. The Parent and its counsel
and Merger Sub and its counsel shall be given an opportunity to review and comment on the preliminary draft Circular prior to
its submission to the Stock Exchange, and any Stock Exchange’s comments on the Circular received by Ourgame after the submission
of the Circular. Ourgame, with the assistance of the Parent and Merger Sub, shall promptly respond to any Stock Exchange’s
comments on the Circular and shall otherwise use commercially reasonable best efforts to cause the Circular to be approved by
the Stock Exchange as promptly as practicable. Ourgame shall also take any and all actions required to satisfy the requirements
of the Listing Rules and applicable rules, regulations and guidance letters.
(b) As
soon as practicable following the approval for distribution of the Circular by the Stock Exchange, Ourgame shall distribute the
Circular to the shareholders of Ourgame and, pursuant thereto, shall call a meeting of the shareholders (the “
General
Meeting
”) in accordance with the articles of association of Ourgame and, subject to the other provisions of this Agreement,
solicit proxies from such shareholders to vote in favor of the Ourgame Stockholder Matters and the other matters presented for
approval or adoption at the General Meeting.
(c) Ourgame
shall comply with its articles of association, the Listing Rules, and all applicable rules, regulations and guidance letters in
the preparation and distribution of the Circular, the solicitation of proxies thereunder, and the calling and holding of the General
Meeting. Without limiting the foregoing, Ourgame shall ensure that the Circular does not, as of the date on which it is first
distributed to shareholders of Ourgame, and as of the date of the General Meeting, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which
they were made, not misleading (provided that Ourgame shall not be responsible for the accuracy or completeness of any information
relating to the Parent or Merger Sub or any other information furnished by the Parent or Merger Sub for the purpose of inclusion
in the Circular). The Parent represents and warrants that the information relating to the Parent supplied by the Parent for the
purpose of inclusion in the Circular will not as of the date on which the Circular (or any amendment or supplement thereto) is
first distributed to shareholders of Ourgame or at the time of the General Meeting contain any statement which, at such time and
in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state
any material fact required to be stated therein or necessary in order to make the statement therein not false or misleading. Merger
Sub represents and warrants that the information relating to Merger Sub supplied by Merger Sub for the purpose of inclusion in
the Circular will not as of the date on which the Circular (or any amendment or supplement thereto) is first distributed to shareholders
of Ourgame or at the time of the General Meeting contain any statement which, at such time and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be
stated therein or necessary in order to make the statement therein not false or misleading.
(d) Ourgame,
acting through its board of directors, shall include in the Circular the recommendation of its board of directors that the shareholders
of Ourgame vote in favor of the adoption of Ourgame Stockholders Matters.
(e) Concurrently
with the execution and delivery of this Agreement, Parent has entered into support agreements (the “
Ourgame Support Agreements
”),
the form of which is attached hereto as Exhibit B, with certain shareholders of Ourgame.
6.3
Directors
and Officers of Parent and the Company After Merger
. On or before the Closing Date, Parent shall take all necessary action
to increase the number of members of the Board of Directors of Parent to 11. The parties shall take all necessary action so that
the Persons listed in
Schedule 6.3
are elected and appointed to the positions of officers and directors of Parent and Surviving
Company, as set forth therein, to serve in such positions effective immediately after the Closing. If any Person listed in
Schedule
6.3
is unable to serve, the party appointing such Person (as reflected on
Schedule 6.3
) shall designate a successor;
provided that, if such designation is to be made after the Closing, any successor to a Person designated by Parent shall be made
by the Parent’s Board of Directors (or any committee thereof), and any successor to a Person designated by the Company shall
be made by the Representative.
6.4
HSR
Act
. If required pursuant to the HSR Act, as promptly as practicable after the date of this Agreement, Parent and the Company
shall each prepare and file the notification required of it and its Affiliates thereunder in connection with the Mergers and shall
promptly and in good faith respond to all information requested of it by the Federal Trade Commission and Department of Justice
in connection with such notification and otherwise cooperate in good faith with each other and such Governmental Entities. Parent
and the Company shall (a) promptly inform the other of any communication to or from the Federal Trade Commission, the Department
of Justice, or any other Governmental Entity regarding the transactions contemplated by this Agreement, (b) give the other prompt
notice of the commencement of any action, suit, litigation, arbitration, proceeding, or investigation by or before any Governmental
Entity with respect to such transactions, and (c) keep the other reasonably informed as to the status of any such action, suit,
litigation, arbitration, proceeding, or investigation. Filing fees with respect to the notifications required under the HSR Act
shall be borne by the Parent and Company in equal amounts.
6.5
Public
Announcements
.
(a) As
promptly as practicable after execution of this Agreement, (i) Parent will prepare and file a Current Report on Form 8-K pursuant
to the Exchange Act (“
Signing Form 8-K
”) and (ii) Ourgame will prepare and publish an announcement in accordance
with the requirements under the Listing Rules (the “
Announcement
”), to report the execution of this Agreement.
(b) Promptly
after the execution of this Agreement, Parent, the Company, and Noble shall also issue a joint press release announcing the execution
of this Agreement (the “
Signing Press Release
”).
(c) At
least five (5) days prior to Closing, Parent shall prepare a draft Current Report on Form 8-K announcing the Closing, together
with, or incorporating by reference, the financial statements prepared by the Company and its accountant and the financial statements
prepared by Noble and its accountant, and such other information that may be required to be disclosed with respect to the Mergers
in any report or form to be filed with the SEC (“
Closing Form 8-K
”), which shall be in a form reasonably acceptable
to the Company. Prior to Closing, Parent and the Company shall prepare a press release announcing the consummation of the Mergers
hereunder (“
Closing Press Release
”). Concurrently with the Closing, Parent shall issue the Closing Press Release.
Concurrently with the Closing, or as soon as practicable thereafter, Parent shall file the Closing Form 8-K with the Commission.
6.6
Required
Information
.
(a) In
connection with the preparation of the Signing Form 8-K, the Signing Press Release, the Proxy Statement, the Closing Form 8-K,
the Closing Press Release, the Announcement, the Circular, or any other statement, filing, notice, or application made by or on
behalf of Parent, Noble, the Company and/or Ourgame to any Governmental Entity or other third party in connection with Mergers
and the other transactions contemplated hereby (each, a “
Reviewable Document
”), and for such other reasonable
purposes, each of the Company, Noble, Ourgame and Parent shall, upon request by the other, furnish the other with all information
concerning themselves, their Subsidiaries, and each of their and their Subsidiaries’ respective directors, officers, and
stockholders (including the directors of Parent and the Surviving Company to be elected effective as of the Closing pursuant to
Section 6.3 hereof) and such other matters as may be reasonably necessary or advisable in connection with the Mergers. Each party
warrants and represents to the other party that all such information shall be true and correct in all material respects and will
not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under which they were made, not misleading.
(b) At
a reasonable time prior to the filing, issuance, or other submission or public disclosure of a Reviewable Document by Ourgame,
Noble, Parent or the Company, the other parties shall each be given an opportunity to review and comment upon such Reviewable
Document and give its consent to the form thereof, such consent not to be unreasonably withheld, and each party shall accept and
incorporate all reasonable comments from the other party to any such Reviewable Document prior to filing, issuance, submission
or disclosure thereof.
(c) Any
language included in a Reviewable Document that reflects the comments of the reviewing party, as well as any text as to which
the reviewing party has not commented upon after being given a reasonable opportunity to comment (and in any event no fewer than
three (3) business days), shall be deemed to have been approved by the reviewing party and may henceforth be used by other party
in other Reviewable Documents and in other documents distributed by the other party in connection with the transactions contemplated
by this Agreement without further review or consent of the reviewing party.
(d) Prior
to the Closing Date (i) Ourgame, the Company, Noble, and Parent shall notify each other as promptly as reasonably practicable
upon becoming aware of any event or circumstance which should be described in an amendment of, or supplement to, a Reviewable
Document that has been filed with or submitted to the Governmental Authority, and (ii) Ourgame, the Company, Noble, and Parent
shall each notify the other as promptly as practicable after the receipt by it of any written or oral comments of the Governmental
Authority on, or of any written or oral request by the Governmental Authority for amendments or supplements to, any such Reviewable
Document, and shall promptly supply the other with copies of all correspondence between it or any of its representatives and the
Governmental Authority with respect to any of the foregoing filings or submissions. Ourgame, Parent, Noble, and the Company shall
use their respective commercially reasonable best efforts, after consultation with each other, to resolve all such requests or
comments with respect to the any Reviewable Document as promptly as reasonably practicable after receipt of any comments of the
Governmental Authority. All correspondence and communications to the Governmental Authority made by Ourgame, Parent, Noble, or
the Company with respect to the transactions contemplated by this Agreement or any agreement ancillary hereto shall be considered
to be Reviewable Documents subject to the provisions of this Section 6.6.
6.7
No
Parent Securities Transactions
. Neither the Company nor any of its Affiliates, nor Noble nor any of its Affiliates, directly
or indirectly, shall engage in any transactions involving the securities of Parent prior to the time of the filing of the Signing
8-K. Each of the Company and Noble shall use its best efforts to require each of its officers, directors and employees, and shall
use commercially reasonable best efforts to require each of its agents, advisors, contractors, associates, clients, customers,
and representatives, to comply with the foregoing requirement.
6.8
No
Claim Against Trust Fund
. Notwithstanding anything else in this Agreement, each of the Company, Ourgame, Primo and Noble acknowledges
that it has read Parent’s final prospectus dated October 4, 2017 and understands that Parent has established the Trust Fund
for the benefit of Parent’s public stockholders and that Parent may disburse monies from the Trust Fund only (a) to Parent’s
public stockholders in the event they elect to convert their shares into cash in accordance with Parent’s Charter Documents
and/or the liquidation of Parent or (b) to Parent to pay for its tax obligations and (c) to Parent after, or concurrently with,
the consummation of a business combination (which Parent represents and warrants to the Company and Noble includes the Mergers).
Each of the Company, Ourgame, Primo, and Noble further acknowledges that, if the transactions contemplated by this Agreement,
or, upon termination of this Agreement, another business combination, are not consummated by July 10, 2019, or such later date
as shall be set forth in an amendment to Parent’s Amended and Restated Certificate of Incorporation for the purpose of extending
the date by which Parent must complete a business combination, Parent will be obligated to return to its stockholders the amounts
being held in the Trust Fund. Accordingly, each of the Company, Ourgame, Primo and Noble, for itself and its respective Subsidiaries,
Affiliates, directors, officers, employees, representatives, advisors, and all other associates, hereby waive all right, title,
interest, or claim of any kind against Parent to collect from the Trust Fund any monies that may be owed to them by Parent for
any reason whatsoever, including but not limited to a breach of this Agreement by Parent or any negotiations, agreements or understandings
with Parent (whether in the past, present or future), and will not seek recourse against the Trust Fund at any time for any reason
whatsoever. This paragraph will survive this Agreement and will not expire and will not be altered in any way without the express
written consent of Parent.
6.9
Disclosure
of Certain Matters
. Each of Parent, Noble, and the Company will provide the other with prompt written notice of any event,
development or condition that (a) would cause any of such party’s representations and warranties to become untrue or misleading
or which may affect its ability to consummate the transactions contemplated by this Agreement, (b) had it existed or been known
on the date hereof would have been required to be disclosed under this Agreement, (c) gives such party any reason to believe that
any of the conditions set forth in Article VII will not be satisfied, (d) is of a nature that is or may be materially adverse
to the operations, prospects or condition (financial or otherwise) of the Surviving Company, or (e) would require any amendment
or supplement to the Proxy Statement. The parties shall have the obligation to supplement or amend the Company Schedules, Noble
Schedules, and Parent Schedules (the “
Disclosure Schedules
”) being delivered concurrently with the execution
of this Agreement with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Disclosure Schedules. The obligations of the parties to amend or
supplement the Disclosure Schedules being delivered herewith shall terminate on the Closing Date. Notwithstanding any such amendment
or supplementation, for purposes of Sections 7.2(a), 7.3(a), 9.1(d) and 9.1(e), the representations and warranties of the parties
shall be made with reference to the Disclosure Schedules as they exist at the time of execution of this Agreement, subject to
such anticipated changes as are set forth in
Schedule 5.1
or otherwise expressly contemplated by this Agreement or that
are set forth in the Disclosure Schedules as they exist on the date of this Agreement.
6.10
Securities
Listing
. Parent and the Company shall use commercially reasonable best efforts to continue the listing for trading of the
Parent Common Stock and Parent Warrants on Nasdaq after the Closing.
6.11
Charter
Protections; Directors’ and Officers’ Liability Insurance
.
(a) All
rights to indemnification for acts or omissions occurring through the Closing Date now existing in favor of the current directors
and officers of Parent, the Company, Noble, or the Subsidiaries as provided in the Charter Documents of Parent, the Company, Noble,
or any Subsidiary, or in any indemnification agreements of such directors and officers, shall survive the Mergers and shall continue
in full force and effect in accordance with their terms.
(b) For
a period of six (6) years after the Closing Date, each of Parent, the Company, Noble, and Subsidiaries shall cause to be maintained
in effect the current policies of directors’ and officers’ liability insurance maintained by such company, respectively
(or policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous), with respect
to claims arising from facts and events that occurred prior to the Closing Date.
(c) If
Parent, the Company, Noble, or any Subsidiary, or any of their successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving entity of such consolidation or merger, or (ii) transfers or conveys
all or substantially all of its properties and assets to any Person, then, in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns thereof assume the obligations set forth in this Section 6.11.
(d) The
provisions of this Section 6.11 are intended to be for the benefit of, and shall be enforceable by, each Person who will have
been a director or officer of Parent, the Company, Noble, and any Subsidiary for all periods ending on or before the Closing Date
and may not be changed without the consent of Parent’s Board of Directors (or any committee thereof).
6.12
Insider
Loans; Equity Ownership in Subsidiaries
. At or prior to Closing, each of the Company and Noble shall cause each of their respective
Insiders or the Insiders of their respective Subsidiaries to (i) repay to the Company, Noble, or their Subsidiaries, as applicable
any loan to such Person and any other amount owed by such Person to the Company, Noble, or any Subsidiary; (ii) cause any guaranty
or similar arrangement pursuant to which the Company, Noble, or any Subsidiary has guaranteed the payment or performance of any
obligations of such Person to a third party to be terminated; and (iii) cease to own any direct equity interests in any Subsidiary
or in any other Person that utilizes the name “esports” or “world poker tour” or any derivative thereof.
6.13
Parent
Borrowings
. Through the Closing, Parent shall be allowed to borrow funds from its directors, officers, and/or stockholders
to meet its reasonable capital requirements, with any such loans to be made only as reasonably required by the operation of Parent
in due course on a non-interest bearing basis and repayable at Closing (or convertible into securities of Parent in accordance
with the terms of the promissory notes issued to evidence the borrowing).
6.14
Trust
Fund Disbursement
. Parent shall cause the Trust Fund to be disbursed as contemplated by this Agreement immediately upon the
Closing. All liabilities and obligations of Parent due and owing or incurred at or prior to the Closing Date shall be paid as
and when due, including all amounts payable (i) to stockholders who elect to have their shares of Parent Common Stock converted
to cash in accordance with the provisions of Parent’s Charter Documents, (ii) for income Tax or other Tax obligations of
Parent prior to Closing, (iii) as repayment of loans and reimbursement of expenses to directors, officers and stockholders of
Parent, (iv) to EarlyBirdCapital, Inc. pursuant to the Business Combination Marketing Agreement dated October 4, 2017, (v) to
third parties (e.g., professionals, printers, etc.) who have rendered services to Parent in connection with its operations and
efforts to effect the Mergers and (vi) in satisfaction of the Ourgame Notes pursuant to Section 6.18.
6.15
Lock-Up
Agreements
. Prior to the Closing Date, each Shareholder shall enter into a Lock-Up Agreement in the form of Exhibit C (the
“
Lock-Up Agreements
”) pursuant to which the Shareholders will agree not to transfer the shares of Parent Common
Stock or Parent Warrants to be received hereunder for a period of one year from the Closing, subject to certain exceptions. The
Parent Certificates evidencing shares of Parent Common Stock and Parent Warrants issued to the Shareholders shall each include
prominent disclosure or bear a prominent legend evidencing the fact that such shares are subject to such Lock-Up Agreements.
6.16
Registration
Rights Agreement
. The Parties hereto agree to enter into a registration rights agreement (the “
Registration Rights
Agreement
”) in the form of Exhibit D hereto at the Closing pursuant to which, among other things, Parent will under
certain circumstances agree to register for resale under the Securities Act the shares of Parent Common Stock and the shares of
Parent Common Stock underlying the Parent Warrants to be issued to the Shareholders pursuant to this Agreement.
6.17
Parent
Working Capital
. On the Closing Date, after payment of amounts that Parent may pay in accordance with Section 6.14(i) hereof,
Parent shall have at least $80,000,000 in cash or liquid securities available for the working capital needs of the Surviving Company
and for general corporate purposes. $35,000,000 of such amount will be used to pay the Ourgame Notes at Closing pursuant to Section
6.18.
6.18
Ourgame
Notes
. Parent will assume Thirty-Five Million US Dollars ($35,000,000) of outstanding debt obligations of the Company held
by Ourgame (the “
Ourgame Notes
”). Parent will repay the Ourgame Notes on the Closing Date.
6.19
WPT
Business Indebtedness
. Each of the Company and Noble shall ensure that, with respect to the “world poker tour”
business (“
WPT
”) conducted by certain Subsidiaries, as of the Closing Date, there is no outstanding indebtedness
for borrowed money or obligation evidenced by bond, debenture, note, letter of credit, or other similar instrument, or accrued
interest, premium, penalty, or other fee relating to the foregoing.
6.20
Trademarks
.
On or prior to the Closing Date, Ourgame and one of the Subsidiaries, Peerless Media Limited, a Gibraltar corporation (“
Peerless
”),
will enter into a Mutual Rescission and Restoration Agreement pursuant to which, among other things, such parties will, effective
as of December 31, 2017, (i) rescind the Trademark Assignment and License Termination Agreement dated December 31, 2017, and (ii)
restore the WPT Asia Blanket Territory License Agreement dated December 11, 2014, and the corresponding International Television
Distribution License Agreement (Asia) dated January 8, 2016.
6.21
Access
to Information
. Subject to applicable laws, Parent will use its commercially reasonable efforts to provide Ourgame any reasonably
requested information necessary for Ourgame to comply with its disclosure obligations set forth in the Listing Rules and applicable
law.
ARTICLE VII
CONDITIONS TO THE TRANSACTION
7.1
Conditions
to Obligations of Each Party to Effect the Mergers
. The respective obligations of each party to this Agreement to effect the
Mergers shall be subject to the satisfaction at or prior to the Closing Date of the following conditions:
(a)
Parent
Stockholder Matters
. The Parent Stockholder Matters and Parent Plan shall have been duly approved and adopted by the stockholders
of Parent by the requisite vote under the Corporate Law and the Parent Charter Documents.
(b)
Ourgame
Stockholder Approval
. The approval of the Ourgame Stockholder Matters by the independent shareholders of Ourgame at the General
Meeting (the “
Ourgame Stockholder Approval
”).
(c)
Parent
Net Tangible Assets
. Parent shall have at least $5,000,001 of net tangible assets following the exercise by holders of shares
of Parent Common Stock issued in Parent’s initial public offering of securities and outstanding immediately before the Closing
of their right to convert their shares into a pro rata share of the Trust Fund in accordance with Parent’s Charter Documents.
(d)
HSR
Act; No Order
. All specified waiting periods under the HSR Act shall have expired and no Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which has the effect of making the Mergers illegal or otherwise prohibiting
consummation of the Mergers, substantially on the terms contemplated by this Agreement.
(e)
Listing
.
The shares of Parent Common Stock and Parent Warrants shall be approved for listing upon Closing on Nasdaq subject to the requirement
to have a sufficient number of round lot holders.
7.2
Additional
Conditions to Obligations of the Company and Noble
. The obligations of the Company and Noble to consummate and effect the
Mergers shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which
may be waived, in writing, by the Company or Noble for itself and its Subsidiaries:
(a)
Representations
and Warranties
. Each representation and warranty of Parent and Merger Sub contained in this Agreement that is (i) qualified
as to “materiality” or “Material Adverse Effect” shall have been true and correct (A) as of the date of
this Agreement and (B) subject to the provisions of Section 6.9, on and as of the Closing Date with the same force and effect
as if made on the Closing Date, and (ii) not qualified as to “materiality” or “Material Adverse Effect”
shall have been true and correct (A) as of the date of this Agreement and (B) subject to the provisions of Section 6.9, in all
material respects on and as of the Closing Date with the same force and effect as if made on the Closing Date. The Company shall
have received a certificate with respect to the foregoing signed on behalf of Parent and Merger Sub by an authorized officer of
Parent and Merger Sub (“
Parent Closing Certificate
”).
(b)
Agreements
and Covenants
. Parent and Merger Sub shall have performed or complied with all agreements and covenants required by this Agreement
to be performed or complied with by them on or prior to the Closing Date, except to the extent that any failure to perform or
comply (other than a willful failure to perform or comply or failure to perform or comply with an agreement or covenant reasonably
within the control of Parent) does not, or is not reasonably expected to, constitute a Material Adverse Effect with respect to
Parent, and the Parent Closing Certificate shall include a provision to such effect.
(c)
No
Litigation
. No action, suit or proceeding shall be pending or threatened before any Governmental Entity which is reasonably
likely to (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii) affect materially and adversely or otherwise encumber
the title of the shares of Parent Common Stock to be issued by Parent in connection with the Transaction Merger, and no order,
judgment, decree, stipulation or injunction to any such effect shall be in effect.
(d)
Consents
.
Parent and Merger Sub shall have obtained the consents, waivers and approvals required to be obtained by Parent and Merger Sub
in connection with the consummation of the transactions contemplated hereby, other than consents, waivers and approvals the absence
of which, either alone or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent and the
Parent Closing Certificate shall include a provision to such effect.
(e)
Material
Adverse Effect
. No Material Adverse Effect with respect to Parent shall have occurred since the date of this Agreement.
(f)
SEC
Compliance
. Immediately prior to Closing, Parent shall be in compliance with the reporting requirements under the Securities
Act and Exchange Act.
(g)
Other
Deliveries
. At or prior to Closing, Parent shall have delivered to the Company (i) certificates of good standing of the Parent
and Merger Sub from the secretary of state of the State of Delaware, (ii) copies of resolutions and actions taken by Parent’s
and Merger Sub’s board of directors and stockholders in connection with the approval of this Agreement and the transactions
contemplated hereunder, and (iii) such other documents or certificates as shall reasonably be required by the Company and its
counsel in order to consummate the transactions contemplated hereunder.
(h)
Resignations
.
The persons listed in
Schedule 7.2(h)
shall have resigned from all of their positions and offices with Parent and Merger
Sub.
(i)
Registration
Rights Agreement
. The Registration Rights Agreement shall have been executed and delivered and shall be in full force and
effect.
7.3
Additional
Conditions to the Obligations of Parent and Merger Sub
. The obligations of Parent and Merger Sub to consummate and effect
the Transaction Merger shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions,
any of which may be waived, in writing, exclusively by Parent:
(a)
Representations
and Warranties
. Each representation and warranty of the Company, Noble, Ourgame and Primo contained in this Agreement that
is (i) qualified as to “materiality” or “Material Adverse Effect” shall
have
been true and correct
(A) as of the date of this Agreement and (B) subject to the provisions of Section 6.9, on and as of the Closing Date with the
same force and effect as if made on the Closing Date, and (ii) not qualified as to “materiality” or “Material
Adverse Effect” shall have been true and correct (A) as of the date of this Agreement and (B) subject to the provisions
of Section 6.9, in all material respects on and as of the Closing Date with the same force and effect as if made on the Closing
Date. Parent shall have received a certificate with respect to the foregoing signed on behalf of the Company by an authorized
officer of the Company (“
Company Closing Certificate
”) and a certificate with respect to the foregoing signed
on behalf of Noble by an authorized officer of Noble (“
Noble Closing Certificate
”).
(b)
Agreements
and Covenants
. The Company, Noble, and the Shareholders shall have performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by them at or prior to the Closing Date, including the surrender of
Company Certificates pursuant to Section 1.5, and the Company Closing Certificate shall include a provision to such effect.
(c)
No
Litigation
. No action, suit or proceeding shall be pending or threatened before any Governmental Entity which is reasonably
likely to (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii) affect materially and adversely the right of the
Surviving Company to own, operate or control any of the assets and operations of the Company following the Mergers, and no order,
judgment, decree, stipulation or injunction to any such effect shall be in effect.
(d)
Consents
.
Each of the Company and Noble shall have obtained all consents, waivers, permits and approvals required to be obtained by it in
connection with the consummation of the transactions contemplated hereby, other than consents, waivers and approvals the absence
of which, either alone or in the aggregate, would not reasonably be expected to have a Material Adverse Effect and the Company
Closing Certificate and Noble Closing Certificate shall each include a provision to such effect.
(e)
Material
Adverse Effect
. No Material Adverse Effect with respect to the Company or Noble shall have occurred since the date of this
Agreement.
(f)
Lock-Up
Agreements
. The Lock-Up Agreements shall have been executed and delivered by each Shareholder and shall all be in full force
and effect.
(g)
Escrow
Agreement. The Escrow Agreement shall have been executed and delivered and shall be in full force and effect.
(h)
Other
Deliveries
. At or prior to Closing, the Company and Noble, as applicable, shall have delivered to Parent: (i) certificates
of good standing (or the equivalent) of the Company, Noble, and each Subsidiary from the secretary of state or similar Governmental
Authority of the jurisdiction in which the Company, Noble, and each Subsidiary is organized, (ii) a certificate pursuant to Treasury
Regulations Section 1.1445-2(b) that the Company is not a foreign person within the meaning of Section 1445 of the Code, (iii)
copies of resolutions and actions taken by its respective board of directors and shareholders in connection with the approval
of this Agreement and the transactions contemplated hereunder, and a certificate of the secretary or equivalent officer stating
that all such resolutions are in full force and effect, and (iv) such other documents or certificates as shall reasonably be required
by Parent and its counsel in order to consummate the transactions contemplated hereunder.
(i)
Insider
Loans; Equity Ownership in Subsidiaries
. (i) All outstanding indebtedness owed by the Company, Noble, the Subsidiaries, and
each of their Insiders shall have been repaid in full, including the indebtedness and other obligations described on
Schedules
2.24
and
3.24
; (ii) all outstanding guaranties and similar arrangements pursuant to which the Company or Noble has
guaranteed the payment or performance of any obligations of any Insiders to a third party shall have been terminated; and (iii)
no Insider shall own any direct equity interests in any Subsidiary of the Company or any Subsidiary of Noble, or in any other
Person that utilizes in its name “esports” or “world poker tour” or any derivative thereof.
(j)
Pre-Closing
Reorganization
. The Company has completed the Pre-Closing Reorganization and owns the outstanding equity securities of the
Subsidiaries as set forth in
Schedule 2.2(a)
.
(k)
Redomestication
Merger
. The Redomestication Effective Time shall have occurred and the Redomestication Merger shall have been consummated
in accordance with the terms hereof.
(l)
Audited
Financial Statements
. The Draft Financial Statements shall have been finalized and auditors thereof shall have issued their
audit reports with respect thereto (the “
Audited Financial Statements
”). The Audited Financial Statements shall
not have been materially different from the Draft Financial Statements (excluding any adjustments set forth on Schedule 3.8),
and shall comply as to form in all material respects, and be prepared in accordance, with U.S. GAAP applied on a consistent basis
throughout the periods involved, and fairly present in all material respects the financial position of Esports Sub and WPT Enterprises,
Inc., as applicable, at the dates thereof and the results of their operations and cash flows for the period indicated.
ARTICLE VIII
INDEMNIFICATION
8.1
Indemnification
of Parent Indemnitees
.
(a) Subject
to the terms and conditions of this Article VIII (including without limitation the limitations set forth in Section 8.4), Parent
and Surviving Company and their respective representatives, successors, and permitted assigns (the “
Parent Indemnitees
”)
shall be indemnified, defended, and held harmless by the Shareholders, but only to the extent of the Escrow Consideration, from
and against all Losses asserted against, resulting to, imposed upon, or incurred by any Parent Indemnitee by reason of, arising
out of or resulting from:
(i) the
inaccuracy or breach of any representation or warranty of the Company or Noble contained in or made pursuant to this Agreement,
any Schedule (including, for purposes of this Section 8.1(a)(i), after giving effect to any information disclosed in any supplement
or amendment to the Disclosure Schedules delivered pursuant to Section 6.9) or any certificate delivered by the Company or Noble
to Parent pursuant to this Agreement with respect hereto or thereto in connection with the Closing; and
(ii) the
non-fulfillment or breach of any covenant or agreement of the Company or Noble contained in this Agreement.
(b) As
used in this Article VIII, the term “
Losses
” includes all losses, liabilities, damages, judgments, awards,
orders, penalties, settlements, costs and expenses (including, without limitation, interest, penalties, court costs and reasonable
legal fees and expenses) including those arising from any demands, claims, suits, actions, costs of investigation, notices of
violation or noncompliance, causes of action, proceedings and assessments whether or not made by third parties or whether or not
ultimately determined to be valid, but shall exclude any punitive, incidental, consequential, special or indirect damages, including
loss of future revenue or income, loss of business reputation or opportunity relating to the breach of alleged breach of this
Agreement or diminution of value. Solely for the purpose of determining the amount of any Losses (and not for determining any
breach) for which the Parent Indemnitees may be entitled to indemnification pursuant to Article VIII, any representation or warranty
contained in this Agreement that is qualified by a term or terms such as “material,” “materially,” or
“Material Adverse Effect” shall be deemed made or given without such qualification and without giving effect to such
words.
8.2
Indemnification
of Third Party Claims
. The indemnification obligations and liabilities under this Article VIII with respect to actions, proceedings,
lawsuits, investigations, demands or other claims brought against a Parent Indemnitee by a Person other than the Company or Noble
(a “
Third Party Claim
”) shall be subject to the following terms and conditions:
(a)
Notice
of Claim
. Parent, acting through the Parent’s board of directors (or any committee thereof), will give the Representative
prompt written notice after receiving written notice of any Third Party Claim or discovering the liability, obligation or facts
giving rise to such Third Party Claim (a “
Notice of Claim
”) which Notice of Third Party Claim shall set forth
(i) a brief description of the nature of the Third Party Claim, (ii) the total amount of the actual out-of-pocket Loss or the
anticipated potential Loss (including any costs or expenses which have been or may be reasonably incurred in connection therewith),
and (iii) whether such Loss may be covered (in whole or in part) under any insurance and the estimated amount of such Loss which
may be covered under such insurance, and the Representative shall be entitled to participate in the defense of Third Party Claim
at its expense.
(b)
Defense
.
The Representative shall have the right, at its option (subject to the limitations set forth in subsection 8.2(c) below) and at
its own expense, by written notice to Parent, to assume the entire control of, subject to the right of Parent to participate (at
its own expense and with counsel of its choice) in, the defense, compromise or settlement of the Third Party Claim as to which
such Notice of Claim has been given, and shall be entitled to appoint a recognized and reputable counsel reasonably acceptable
to Parent to be the lead counsel in connection with such defense. If the Representative is permitted and elects to assume the
defense of a Third Party Claim:
(i) the
Representative shall diligently and in good faith defend such Third Party Claim and shall keep Parent reasonably informed of the
status of such defense;
(ii) any
settlement shall be approved by Parent, which approval will not be unreasonably withheld, delayed or conditioned; provided that
no approval shall be required if the settlement (1) is for money Losses only that are fully satisfied from the Escrow Consideration;
and (2) provides full and unconditional release from all liability and obligation in respect of such action without any payment
by any Parent Indemnitee (other than set forth in (1)); and
(iii) Parent
shall cooperate fully in all respects with the Representative in any such defense, compromise or settlement thereof, including,
without limitation, the selection of counsel, and Parent shall make available to the Representative all pertinent information
and documents under its control.
(c)
Limitations
of Right to Assume Defense
. The Representative shall not be entitled to assume control of such defense and shall pay the fees
and expenses of counsel retained by Parent if (i) the Third Party Claim relates to or arises in connection with any criminal proceeding,
action, indictment, allegation, or investigation; (ii) the Third Party Claim seeks an injunction or equitable relief against a
Parent Indemnitee; or (iii) there is a reasonable probability that a Third Party Claim may materially and adversely affect Parent
or its Subsidiaries other than as a result of money damages or other money payments.
(d)
Other
Limitations
. Failure to give prompt Notice of Claim or to provide copies of relevant available documents or to furnish relevant
available data shall not constitute a defense (in whole or in part) to any Third Party Claim by a Parent Indemnitee against the
Representative and shall not affect the Representative’s duty or obligations under this Article VIII, except to the extent
(and only to the extent that) such failure shall have adversely affected the ability of the Representative to defend against or
reduce its liability or caused or increased such liability or otherwise caused the damages for which the Representative is obligated
to be greater than such damages would have been had Parent given the Representative prompt notice hereunder. So long as the Representative
is defending any such action actively and in good faith, Parent shall not settle such action. Parent shall make available to the
Representative all relevant records and other relevant materials required by them and in the possession or under the control of
Parent, for the use of the Representative and its representatives in defending any such action, and shall in other respects give
reasonable cooperation in such defense.
(e)
Failure
to Defend
. If the Representative, promptly after receiving a Notice of Claim, fails to defend such Third Party Claim actively
and in good faith, Parent, at the reasonable cost and expense of the Representative, will (upon further written notice) undertake
the defense, compromise or settlement of such Third Party Claim as it may determine in its reasonable discretion, provided that
the Representative shall have the right to approve any settlement, which approval will not be unreasonably withheld, delayed or
conditioned.
(f)
Parent
Indemnitee Rights
. Anything in this Section 8.2 to the contrary notwithstanding, the Representative shall not, without the
written consent of the Parent’s board of directors (or any committee thereof), settle or compromise any action or consent
to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff
to each of the Parent Indemnitees of a full and unconditional release from all liability and obligation in respect of such action
without any payment by any Parent Indemnitee (other than money Losses only that are fully satisfied from the Escrow Consideration).
(g)
Representative
Consent
. Unless the Representative has consented to a settlement of a Third Party Claim, the amount of the settlement shall
not be a binding determination of the amount of the Loss and such amount shall be determined in accordance with the provisions
of the Escrow Agreement.
8.3
Insurance
Effect
. To the extent that any Losses subject to indemnification pursuant to this Article VIII may reasonably be covered by
any insurance of the Company, Noble, Parent or their Subsidiaries, Parent shall use commercially reasonable best efforts to obtain
the maximum recovery under such insurance prior to making any indemnification claim hereunder; provided that the time limitations
set forth in Section 8.4 hereof for bringing a claim of indemnification under this Agreement shall be tolled during the pendency
of such insurance claim effective upon written notice of Parent that it has initiated an insurance claim. Notwithstanding any
other provisions of this Agreement, it is the intention of the parties that no insurer or any other third party shall be (i) entitled
to a benefit it would not be entitled to receive in the absence of the foregoing indemnification provisions, or (ii) relieved
of the responsibility to pay any claims for which it is obligated.
8.4
Limitations
on Indemnification
.
(a)
Survival;
Time Limitation
. The representations, warranties, covenants and agreements in this Agreement or in any writing delivered by
the Company to Parent in connection with this Agreement (including the certificates required to be delivered by each of the Company
and Noble pursuant to Section 7.3(a)) shall survive the Closing for the period that ends on the Escrow Termination Date (the “
Survival
Period
”).
(b) Any
indemnification claim made by Parent Indemnitees prior to the termination of the Survival Period shall be preserved despite the
subsequent termination of such period and any claim set forth in a Notice of Claim sent prior to the expiration of such period
shall survive until final resolution thereof. Except as set forth in the immediately preceding sentence, no claim for indemnification
under this Article VIII shall be brought after the end of the Survival Period.
(c)
Basket
.
No amount shall be payable under Article VIII unless and until the aggregate amount of all indemnifiable Losses otherwise payable
exceeds $500,000 (the “
Basket
”), all of which shall be indemnifiable as to all Losses that so arise from the
first dollar thereof.
8.5
Exclusive
Remedy
. Parent, on behalf of itself and the other Parent Indemnitees, hereby acknowledges and agrees that, from and after
the Closing, the sole remedy of the Parent Indemnitees with respect to any and all claims for money damages arising out of or
relating to this Agreement shall be pursuant and subject to the requirements of the indemnification provisions set forth in this
Article VIII. Notwithstanding any of the foregoing, nothing contained in this Article VIII shall in any way impair, modify, or
otherwise limit a Parent Indemnitee’s right to bring any claim, demand, or suit against the other party based upon such
other party’s actual fraud, it being understood that a mere breach of a representation and warranty does not constitute
fraud,
provided however
, that the maximum aggregate amount that may be recovered shall not exceed the Merger Consideration
and no Shareholder shall be liable for more than its pro rata share of the Merger Consideration.
8.6
Adjustment
to Merger Consideration
. Amounts paid for indemnification under Article VIII shall be deemed to be an adjustment to the Merger
Consideration, except as otherwise required by Law.
8.7
Representative
Capacities; Application of Escrow
. The parties acknowledge that the Representative’s obligations under this Article
VIII are solely as a representative of the Shareholders in the manner set forth in the Escrow Agreement and that the Representative
shall have no personal responsibility for any expenses incurred by him in such capacity. Out-of-pocket expenses of the Representative
for attorneys’ fees and other costs shall be borne in the first instance by Parent, which may make a claim for reimbursement
thereof against the Escrow Amounts upon the claim with respect to which such expenses are incurred becoming an Established Claim
(as defined in the Escrow Agreement). The parties further acknowledge that all actions to be taken by the Parent Indemnitees pursuant
to this Article VIII shall be taken on their behalf by the Parent’s board of directors (or any committee thereof) in accordance
with the provisions of the Escrow Agreement and Section 1.12(a). The Escrow Agent, pursuant to the Escrow Agreement after the
Closing, may apply all or a portion of the Escrow Amounts, as appropriate, to satisfy claims for indemnification pursuant to this
Article VIII. The Escrow Agent will hold the remaining portion of the Escrow Amounts, until final resolution of all claims for
indemnification or disputes relating thereto. Notwithstanding anything to the contrary contained herein, the Representative shall
have no liability to the Company, Noble, or any stockholder thereof or any party hereto for any action taken or omitted to be
taken hereunder, unless such liability is determined by a judgment or a court of competent jurisdiction to have resulted from
the gross negligence, or willful misconduct of the Representative. Each of the Company and Noble shall defend, indemnify, and
hold harmless the Representative for all losses, damages, costs, and expenses (including reasonable attorney’s fees and
costs of investigation) arising out of or in connection with, the performance by the Representative of its duties and obligations
under this Agreement, unless such liability is determined by a judgment or a court of competent jurisdiction to have resulted
from the gross negligence, or willful misconduct of the Representative.
ARTICLE IX
TERMINATION
9.1
Termination
.
This Agreement may be terminated at any time prior to the Closing:
(a) by
mutual written agreement of Parent, Ourgame, Noble, and the Company at any time;
(b) by
any of Parent, Ourgame, Noble, or the Company if the Mergers shall not have been consummated by July 10, 2019, or such later date
or dates as shall be set forth in an amendment or amendments to Parent’s Amended and Restated Certificate of Incorporation
for the purpose of extending the date by which Parent is required to have completed a business combination; provided, however,
that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the Mergers to occur on or before such date and such action
or failure to act constitutes a breach of this Agreement;
(c) by
any of Parent, Ourgame, Noble, or the Company if a Governmental Entity shall have issued an order, decree, judgment or ruling
or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Mergers,
which order, decree, ruling or other action is final and nonappealable;
(d) by
Ourgame, the Company or Noble, upon a material breach of any representation, warranty, covenant or agreement on the part of Parent
or Merger Sub set forth in this Agreement, or if any representation or warranty of Parent or Merger Sub shall have become untrue,
in either case such that the conditions set forth in Article VII would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become untrue, provided, that if such breach by Parent or Merger Sub is curable
by Parent or Merger Sub prior to the Closing Date, then the Company may not terminate this Agreement under this Section 9.1(d)
for thirty (30) days after delivery of written notice from Ourgame, the Company or Noble to Parent and Merger Sub of such breach,
provided Parent and Merger Sub continues to exercise commercially reasonable best efforts to cure such breach (it being understood
that neither Ourgame, the Company nor Noble may terminate this Agreement pursuant to this Section 9.1(d) if it shall have materially
breached this Agreement or if such breach by Parent or Merger Sub is cured during such thirty (30)-day period);
(e) by
Parent, upon a material breach of any representation, warranty, covenant or agreement on the part of the Company, Noble, or Ourgame
set forth in this Agreement, or if any representation or warranty of the Company, Noble, or Ourgame shall have become untrue,
in either case such that the conditions set forth in Article VII would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become untrue, provided, that if such breach is curable by the Company, Noble,
or Ourgame prior to the Closing Date, then Parent may not terminate this Agreement under this Section 9.1(e) for thirty (30) days
after delivery of written notice from Parent to the Company of such breach, provided the Company and the Shareholders continue
to exercise commercially reasonable best efforts to cure such breach (it being understood that Parent may not terminate this Agreement
pursuant to this Section 9.1(e) if it shall have materially breached this Agreement or if such breach by the Company, Noble, or
Ourgame is cured during such thirty (30)-day period);
(f) by
any of Parent, Ourgame, Noble, or the Company, if, at the Special Meeting (including any adjournments thereof), the Parent Stockholder
Matters or Parent Plan are not approved as required by the Corporate Law and Parent’s Charter Documents;
(g) by
any of Parent, Ourgame, the Company or Noble, if, at the General Meeting (including any adjournments thereof), the Ourgame Stockholder
Matters are not approved;
(h) by
any of Parent, Ourgame, Noble, or the Company if Parent will have less than $5,000,001 of net tangible assets following the exercise
by the holders of shares of Parent Common Stock issued in Parent’s initial public offering of their rights to convert the
shares of Parent Common Stock held by them into cash in accordance with Parent’s Charter Documents; or
(i) by
Ourgame, the Company or Noble, if immediately prior to the Mergers, Parent does not have cash on hand of $80,000,000 after payment
of amounts that Parent may pay in accordance with Section 6.14(i).
9.2
Notice
of Termination; Effect of Termination
.
(a) Any
termination of this Agreement under Section 9.1 above will be effective immediately upon (or, if the termination is pursuant to
Section 9.1(d) or Section 9.1(e) and the proviso therein is applicable, thirty (30) days after) the delivery of written notice
of the terminating party to the other parties hereto.
(b) In
the event of the termination of this Agreement as provided in Section 9.1, this Agreement shall be of no further force or effect
and the Mergers shall be abandoned, except for and subject to the following: (i) Sections 5.2(a), 6.8, 9.2 and 9.3 and Article
XI (General Provisions) shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from
liability for any breach of this Agreement, including a breach by a party electing to terminate this Agreement pursuant to Section
9.1(b) caused by the action or failure to act of such party constituting a principal cause of or resulting in the failure of the
Mergers to occur on or before the date stated therein. Following any termination of this Agreement, the Confidentiality Agreement
shall survive and remain in full force and effect for the longer of (x) the remainder of the term as set forth in the Confidentiality
Agreement and (y) one (1) year following such termination.
9.3
Fees
and Expenses
. Except as otherwise set forth in this Agreement, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Mergers are consummated.
ARTICLE X
DEFINED TERMS
10.1
Defined
Terms
. Terms defined in this Agreement are organized alphabetically as follows, together with the Section and, where applicable,
paragraph, number in which definition of each such term is located:
“Affiliate”
|
Section
10.2(a)
|
“Agreement”
|
Heading
|
“Announcement”
|
Section 6.5(a)
|
“Basket”
|
Section 8.4(c)
|
“Blue Sky
Laws”
|
Section 1.9(b)(vi)
|
“Certificates
of Merger”
|
Section 1.2
|
“Charter Documents”
|
Section 2.1(a)
|
“Closing”
|
Section 1.2
|
“Closing Date”
|
Section 1.2
|
“Closing Form
8-K”
|
Section 6.5(c)
|
“Closing Press
Release”
|
Section 6.5(c)
|
“Code”
|
Section 1.7
|
“Company”
|
Heading
|
“Company Certificates”
|
Section 1.6(a)
|
“Company Closing
Certificate”
|
Section 7.3(a)
|
“Company Contracts”
|
Section 2.21(a)
|
“Company Common
Stock”
|
Recital A
|
“Company Financial
Statements”
|
Section 2.8(a)
|
“Company Options”
|
Section 2.3(b)
|
“Company Schedule”
|
Article II Preamble
|
“Confidentiality
Agreement”
|
Section 5.2(a)
|
“Continental”
|
Section 1.9(a)
|
“Contingent
Shares”
|
Section 1.11
|
“Copyrights”
|
Section 9.2(b)
|
“Corporate
Law”
|
Recital A
|
“Disclosure
Schedules”
|
Section 6.9
|
“Disqualification
Event”
|
Section 1.10(b)(ix)
|
“Draft Financial
Statements”
|
Section 3.8(a)
|
“Environmental
Law”
|
Section 9.2(c)
|
“Escrow Agreement”
|
Section 1.9(a)
|
“Escrow Consideration”
|
Section 1.9(a)
|
“Escrow Termination
Date”
|
Section 1.9(a)
|
“Exchange
Act”
|
Section 1.10(b)(vi)
|
“Governmental
Action/Filing”
|
Section
10.2(d)
|
“Governmental
Entity”
|
Section 10.2(e)
|
“Hazardous
Substance”
|
Section 10.2(f)
|
“HSR Act”
|
Section 2.5(b)
|
“Insider”
|
Section 2.21(a)(1)
|
“Insurance
Policies”
|
Section 2.22
|
“Intellectual
Property”
|
Section 10.2(g)
|
“knowledge”
|
Section 10.2(h)
|
“Legal Requirements”
|
Section 10.2(i)
|
“Lien”
|
Section 10.2(j)
|
“Lock-Up Agreements”
|
Section 6.15
|
“Losses”
|
Section 8.1(b)
|
“Material
Adverse Effect”
|
Section 10.2(k)
|
“Material
Company Contracts”
|
Section 2.21(a)
|
“Material
Noble Contracts”
|
Section 3.21(a)
|
“Merger”
|
Recital A
|
“Merger Consideration”
|
Section 1.4(a)
|
“Merger Sub”
|
Heading
|
“Nasdaq”
|
Section 4.22
|
“Noble”
|
Heading
|
“Noble Closing
Certificate”
|
Section 7.3(a)
|
“Noble Contracts”
|
Section 3.21(a)
|
“Noble Financial
Statements”
|
Section 3.8(a)
|
“Noble Options”
|
Section 3.3(b)
|
“Noble Plans”
|
Section 3.12
|
“Noble Schedule”
|
Article III Preamble
|
“Notice of
Claim”
|
Section 8.2(a)
|
“Ourgame”
|
Heading
|
“Ourgame Notes”
|
Section 6.18
|
“Ourgame Stockholder
Approval”
|
Section 7.1(b)
|
“Ourgame Support
Agreements”
|
Section 6.2(e)
|
“Parent”
|
Heading
|
“Parent Audited
Financial Statements”
|
Section 4.7(a)
|
“Parent Closing
Certificate”
|
Section 7.2(a)
|
“Parent Common
Stock”
|
Recital A
|
“Parent Contracts”
|
Section 4.19(a)
|
“Parent Financial
Statements”
|
Section 4.7(a)
|
“Parent Indemnitees”
|
Section 8.1(a)
|
“Parent Plan”
|
Section 6.1(a)
|
“Parent
Preferred Stock”
|
Section
4.3(a)
|
“Parent Schedule”
|
Article IV Preamble
|
“Parent SEC
Reports”
|
Section 4.7(a)
|
“Parent Stockholder
Matters”
|
Section 6.1(a)
|
“Parent Stock
Options”
|
Section 4.3(b)
|
“Parent Unaudited
Financial Statements”
|
Section 4.7(a)
|
“Parent Warrants”
|
Recital A
|
“Patents”
|
Section 10.2(l)
|
“Peerless”
|
Section 6.20
|
“Permits”
|
Section 2.7
|
“Person”
|
Section 10.2(m)
|
“Personal
Property”
|
Section 2.15(b)
|
“Plan/Plans”
|
Section 2.12(a)
|
“Proxy Statement”
|
Section 5.1(a)
|
“Redomestication
Certificate of Merger”
|
Section
1.2
|
“Redomestication
Effective Time”
|
Section 1.2
|
“Registration
Rights Agreement”
|
Section 6.16
|
“Reorganization”
|
Section 1.7
|
“Representative”
|
Section 1.9(c)
|
“Returns”
|
Section 2.18(a)
|
“Reviewable
Document”
|
Section 6.6(a)
|
“Securities
Act”
|
Section 1.10(b)(ii)
|
“Shareholders”
|
Recital A
|
“Signing Form
8-K”
|
Section 6.5(a)
|
“Signing Press
Release”
|
Section 6.5(b)
|
“Special Meeting”
|
Section 5.1(a)
|
“Subsidiaries”
|
Section 2.2(a)
|
“Surviving
Company”
|
Recital A
|
“Tax/Taxes”
|
Section 10.2(i)
|
“Third Party
Claim”
|
Section 8.2
|
“Trademarks”
|
Section 10.2(o)
|
“Transaction
Effective Time”
|
Section 1.2
|
“Transaction
Certificate of Merger”
|
Section 1.2
|
“Trust Fund”
|
Section 4.24
|
“U.S. GAAP”
|
Section 2.8(b)
|
“WPT”
|
Section 6.19
|
10.2
Additional
Terms
. For purposes of this Agreement:
(a) the
term “
Affiliate
” means, as applied to any Person, any other Person directly or indirectly controlling, controlled
by or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including
with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”),
as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities, by contract or otherwise;
(b) the
term “
Copyrights
” means copyrights, copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world;
(c) the
term “
Environmental Law
” means any federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to (1) the protection, investigation or restoration of the environment,
health and safety, or natural resources, (2) the handling, use, presence, disposal, release or threatened release of any Hazardous
Substance or (3) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property and
shall include, but not limited to, including but not the Clean Air Act, Clean Water Act, Comprehensive Environmental Response,
Compensation and Liability Act, Emergency Planning and Community Right-to-Know Act, Endangered Species Act, Hazardous Materials
Transportation Act, Migratory Bird Treaty Act, National Environmental Policy Act, Occupational Safety and Health Act, Oil Pollution
Act of 1990, Resource Conservation and Recovery Act, Safe Drinking Water Act and the Toxic Substances Control Act;
(d) the
term “
Governmental Action/Filing
” means any franchise, license, certificate of compliance, authorization, consent,
order, permit, approval, consent or other action of, or any filing, registration or qualification with, any federal, state, municipal,
foreign or other governmental, administrative or judicial body, agency or authority;
(e) the
term “
Governmental Entity
” means any court, administrative agency, commission, governmental or regulatory authority
or similar body (including any relevant securities exchange), domestic or foreign;
(f) the
term “
Hazardous Substance
” means any substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (iii) any other substance which is the subject of regulatory action
by any Governmental Entity pursuant to any Environmental Law;
(g) the
term “
Interim Financing
” means the $10,000,000 financing consummated prior to the date hereof by Ourgame and
the Company.
(h) the
term “
Intellectual Property
” means any or all of the following and all worldwide common law and statutory rights
in, arising out of, or associated therewith: (i) Patents; (ii) inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how, technology, formulae, technical data, and customer lists, and
all documentation relating to any of the foregoing; (iii) Copyrights; (iv) Trademarks; (v) computer programs, software, and software
programs, whether in source code, object code, or other form, including but not limited to (x) software implementations or algorithms,
models, methodologies, libraries, and subroutines, (y) descriptions, flow-charts, architectures, development tools, and other
materials used to design or develop the foregoing, and (z) all documentation, including development, diagnostic support, user
and training documentation relating to any of the foregoing; (vi) computer hardware and gaming hardware; (vii) domain names, uniform
resource locators and other names and locators associated with the Internet (viii) industrial designs and any registrations and
applications therefor; (ix) all databases and data collections and all rights therein; (x) all moral and economic rights of authors
and inventors, however denominated, and (xi) any similar or equivalent rights to any of the foregoing (as applicable);
(i) the
term “
knowledge
” means actual knowledge or awareness, after due inquiry, as to a specified fact or event of
a Person that is an individual or of an executive officer of a Person that is a corporation or of a Person in a similar capacity
of an entity other than a corporation;
(j) the
term “
Legal Requirements
” means any federal, state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted,
adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity;
(k) the
term “
Lien
” means any mortgage, pledge, security interest, encumbrance, lien, restriction or charge of any
kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or
any agreement to give any security interest);
(l) the
term “
Material Adverse Effect
” when used in connection with the Company, Parent or Noble, as the case may be,
means any change, event, or occurrence, individually or when aggregated with other changes, events, or occurrences, that has a
materially adverse effect on the business, financial condition or (except for purposes of Sections 7.2(e) and 7.3(e)) prospects,
of the Company, Noble or Parent, as applicable, and their respective subsidiaries taken as a whole, provided however that none
of the following alone or in combination shall be deemed, in and of itself, to constitute a Material Adverse Effect: any changes,
events, occurrences or effects arising out of, resulting from or attributable to (A) acts of war, sabotage or terrorism, or any
escalation or worsening of any such acts of war, sabotage or terrorism, (B) earthquakes, hurricanes, tornados or other natural
disasters, or (C) changes attributable to the public announcement or pendency of the transactions contemplated hereby.
(m) the
term “
Patents
” means registered patents and applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations, and continuations-in-part thereof.
(n) the
term “
Person
” means any individual, corporation (including any non-profit corporation), general partnership,
limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company
or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity;
(o)
the
term
“
Tax
” refers to any and all federal, state, local and foreign taxes, including, without limitation,
gross receipts, income, profits, sales, use, occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, assessments, governmental charges and duties together with all interest, penalties and
additions imposed with respect to any such amounts and any obligations under any agreements or arrangements with any other Person
with respect to any such amounts and including any liability of a predecessor entity for any such amounts;
(p) the
term “
Trademarks
” means trade names, logos, common law trademarks and service marks, trademark and service
mark registrations and applications therefor; and
ARTICLE XI
GENERAL PROVISIONS
11.1
Notices
.
All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via email or facsimile to the parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
if to Parent or Merger Sub,
to:
Black Ridge
Acquisition Corp.
110 N 5th Street, Suite 410
Minneapolis,
MN 55403
Attention:
James Moe
Telephone:
(952) 426-0333
Facsimile:
E-mail: ken.decubellis@blackridgeoil.com
with a copy to:
Graubard Miller
405 Lexington
Avenue
New York,
New York 10174-1901
Attention: David Alan Miller,
Esq. / Jeffrey M. Gallant, Esq.
Telephone:
212-818-8880 Facsimile: 212-818-8881
Email: dmiller@graubard.com
/ jgallant@graubard.com
if to the Company
to:
Allied Esports Entertainment,
Inc.
c/o WPT Enterprises, Inc.
1920 Main St., Ste. 1150
Irvine, CA 92614
Attention: David Polgreen,
Senior Director of Business and Legal Affairs
Telephone: (949) 225-2639
Facsimile: (949) 225-2602
Email: David.Polgreen@WPT.com
with a copy to:
Maslon LLP
300 Wells
Fargo Center
90 South 7th
Street
Minneapolis,
MN 55402
Attention:
Brad Pederson
Telephone:
(612) 672-8341
Facsimile:
(612) 642-8341
Email: bradley.pederson@maslon.com
if to Ourgame, Primo
or Noble to:
Ourgame International Holdings
Limited
Tower B Fairmont, No. 1 Building,
17
th
Floor
33# Community, Guangshun North
Street,
Chaoyang District, Beijing,
100102, China
Attention:
Telephone:
Email:
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom
42/F, Edinburgh Tower, The Landmark
15 Queen's Road Central, Hong
Kong
Attention: Christopher W. Betts
Telephone: 852.3740.4827
Facsimile: 852.3740.4727
Email: christopher.betts@skadden.com
11.2
Interpretation
.
The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context
shall require, any pronoun shall include the corresponding masculine, feminine and neuter forms. When a reference is made in this
Agreement to an Exhibit or Schedule, such reference shall be to an Exhibit or Schedule to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections or subsections, such reference shall be to a Section or subsection of this
Agreement. Unless otherwise indicated the words “include,” “includes” and “including” when
used herein shall be deemed in each case to be followed by the words “without limitation.” The headings contained
in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
When reference is made herein to “the business of” an entity, such reference shall be deemed to include the business
of all direct and indirect subsidiaries of such entity. Reference to the subsidiaries of an entity shall be deemed to include
all direct and indirect subsidiaries of such entity.
11.3
Counterparts;
Electronic Delivery
. This Agreement and each other document executed in connection with the transactions contemplated hereby,
and the consummation thereof, may be executed in one or more counterparts, all of which shall be considered one and the same document
and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party,
it being understood that all parties need not sign the same counterpart. Delivery by facsimile or electronic transmission to counsel
for the other party of a counterpart executed by a party shall be deemed to meet the requirements of the previous sentence.
11.4
Entire
Agreement; Third Party Beneficiaries
. This Agreement and the documents and instruments and other agreements among the parties
hereto as contemplated by or referred to herein, including the Exhibits and Schedules hereto (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, it being understood that the letter of intent between Parent
and the Company dated September 25, 2018 is hereby terminated in its entirety and shall be of no further force and effect (except
to the extent expressly stated to survive the execution of this Agreement and the consummation of the transactions contemplated
hereby); and (b) are not intended to confer upon any other person any rights or remedies hereunder (except as specifically provided
in this Agreement).
11.5
Severability
.
In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and
the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent
of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or
unenforceable provision.
11.6
Other
Remedies; Specific Performance
. Except as otherwise provided herein, any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party,
and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court
of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at
law or in equity.
11.7
Governing
Law
. This Agreement shall be governed by and construed in accordance with the internal law of the State of Delaware regardless
of the law that might otherwise govern under applicable principles of conflicts of law thereof.
11.8
Consent
to Jurisdiction
. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of the state and
federal courts of Delaware in connection with any matter based upon or arising out of this Agreement or the transactions contemplated
hereby, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons
and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and
manner of service of process. Each party hereto hereby agrees not to commence any legal proceedings relating to or arising out
of this Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein.
11.9
Rules
of Construction
. The parties hereto agree that they have been represented by counsel during the negotiation and execution
of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
11.10
Assignment
.
No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the first sentence of this Section 11.10, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and permitted assigns.
11.11
Amendment
.
This Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each
of the parties.
11.12
Extension;
Waiver
. At any time prior to the Closing, any party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any document delivered pursuant hereto and (iii) waive compliance with
any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Delay
in exercising any right under this Agreement shall not constitute a waiver of such right.
11.13
Currency
.
All references to currency amounts in this Agreement shall mean United States dollars.
IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the date first written above.
|
BLACK
RIDGE ACQUISITION CORP.
By:
/s/ Ken DeCubellis
Name:
Ken DeCubellis
Title:
Chief Executive Officer
BLACK
RIDGE MERGER SUB CORP.
By:
/s/ Ken DeCubellis
Name:
Ken DeCubellis
Title:
Chief Executive Officer
ALLIED
ESPORTS ENTERTAINMENT, INC.,
By:
/s/ Adam Pliska
Name:
Adam Pliska
Title:
Secretary
NOBLE
LINK GLOBAL LIMITED
By:
/s/ Kwok Leung Frank NG
Name: Kwok
Leung Frank NG
Title:
Director
OURGAME
INTERNATIONAL HOLDINGS LTD.
By:
/s/ Eric Qing Yang
Name:
Eric Qing Yang
Title:
CEO
PRIMO
VITAL LTD.
By:
/s/ Kwok Leung Frank NG
Name:
Kwok Leung Frank NG
Title:
Director
|
Annex
B
OPINION OF CRAIG-HALLUM
December 19, 2018
Personal and Confidential
Board of Directors of
Black Ridge Acquisition Corporation
110 North Fifth Street, Suite 410
Minneapolis, Minnesota 55403
Members of the Board of Directors:
You have requested our opinion as to (i)
the fairness, from a financial point of view, to Black Ridge Acquisition Corporation, a Delaware corporation (the “
Company
”),
of the Merger Consideration (as defined below) to be paid by the Company pursuant to that certain Agreement and Plan of Reorganization
(the “
Agreement
”) by and among the Company, Black Ridge Merger Sub Corporation, a Delaware corporation and
wholly owned subsidiary of the Company (“
Merger Sub
”), Allied Esports Entertainment, Inc., a Delaware corporation
(the “
Target
”), Noble Link Global Limited, a British Virgin Islands exempted company (“
Noble
”),
Ourgame International Holdings Ltd., a Cayman Islands corporation (“
Ourgame
”), and Primo Vital Ltd., a British
Virgin Islands exempted company and wholly owned subsidiary of Ourgame, pursuant to which (a) Noble will merger with an into the
Target, with the Target being the surviving entity of such merger (the “
Redomestication Merger
”), and (b) following
the consummation of the Redomestication Merger, the Merger Sub will merge with and into the Target, with the Target being the
surviving entity of such merger and a direct wholly owned subsidiary of the Company (the “
Transaction Merger
”
and, together with the Redomestication Merger and the other transaction contemplated by the Agreement, the “
Transaction
”),
and (ii) whether the fair market value of the Target equals or exceeds 80% of the amount held by the Company in trust for benefit
of its public stockholders (excluding any deferred underwriting commissions and taxes payable on the income earned on the trust
account). The consideration to be paid by the Company to the holders of shares of capital stock of the Target upon consummation
of the Transaction consists of the following (collectively, the “
Merger Consideration
”), subject to certain
adjustments as further set forth in the Agreement: (x) an aggregate of 11,602,754 shares of common stock, par value $0.0001 per
share (the “
Company Common Stock
”), of the Company; (ii) an aggregate of 3,800,003 warrants to purchase shares
of Company Common Stock at a price per share of $11.50; and (iii) an aggregate of 3,846,153 shares of Company Common Stock if
the last sales price of the Company Common Stock as reported on the Nasdaq Capital Market equals or exceeds $13.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for any consecutive thirty (30) calendar days
during the five (5) year period commencing on the Closing Date (the “
Contingent Consideration
”). On the Closing
Date, the Company shall have at least $80.0 million in cash or liquid securities available for the working capital needs of the
Target and for general corporate purposes (the “
Company Working Capital
”). Of such Company Working Capital,
$35.0 million shall be used by the Company to pay the Target’s fee required under the Transaction Facilitation Agreement
at Closing (the “
Cash Payment
”), subject to certain conditions further set forth in the Agreement. For purposes
of our analyses, we have assumed with the consent of management of the Company and the Target that the implied enterprise value
of the Target as of the Closing includes such Cash Payment. The specific terms and conditions of the Transaction are more fully
set forth in the Agreement. Capitalized terms used but not otherwise defined in this letter have the same meaning as in the Agreement.
We, as a customary part of our investment
banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. We have been
engaged by the Company to render this opinion to its Board of Directors and we will receive a fee from the Company for providing
this opinion, which is not contingent upon closing of the Transaction, and the Company has agreed to reimburse certain of our
expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement relating to advising the
Company on the Transaction. Furthermore, we have not been requested to, and did not, (i) participate in negotiations with respect
to the Agreement, (ii) solicit any expressions of interest from any other parties with respect to any business combination with
the Company or any other alternative transaction or (iii) advise the Board of Directors of the Company or any other party with
respect to alternatives to the Transaction. In addition, we were not requested to and did not provide advice regarding the structure
or any other aspect of the Transaction, or to provide services other than the delivery of this opinion. We have not otherwise
acted as financial advisor to any party to the Transaction. In the ordinary course of our business, we and our affiliates may
actively trade securities of the Company for our own account or the account of our customers and, accordingly, we may at any time
hold a long or short position in such securities. We may seek to be engaged for compensation in the future to perform investment
banking services for the Company.
In connection with our review of the Transaction
and in arriving at our opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate
under the circumstances. Among other things, we have: (i) reviewed and analyzed the financial terms of the draft of the Agreement
received on December 17, 2018; (ii) reviewed and analyzed certain historical financial, operating and business information related
to the Target; (iii) reviewed and analyzed certain internal financial projections of the Target prepared for financial planning
purposes and furnished by the management of the Target; (iv) reviewed and analyzed certain publicly available information relative
to the Company; (v) reviewed and analyzed certain historical financial, operating, market and securities data of the Company publicly
available or furnished by the management of the Company, as applicable; (vi) conducted discussions with management of the Company
with respect to the Company’s strategic reasons for pursuing the Transaction and the Company’s valuation of the Target;
(vii) conducted discussions with members of management of the Company and the Target with respect to the business and prospects
of the Company and the Target, respectively, on a stand-alone basis and on a combined basis; (viii) reviewed and analyzed the
reported prices and trading activity of shares of Company Common Stock; (ix) compared the financial performance of the Target
with that of certain other publicly traded companies deemed by us to be comparable to the Target; (x) to the extent publicly available,
reviewed and analyzed financial terms of certain acquisition transactions involving companies operating in businesses and industries
deemed similar to that in which the Target operates and selected companies deemed comparable to the Target; (xi) performed discounted
cash flows analyses on the Target on a stand-alone basis incorporating various assumptions provided to us by the management of
each of the Company and the Target; and (xii) compared the fair market value of the Target implied by the various financial analyses
that we conducted to the amount held by the Company in trust for the benefit of its public stockholders (excluding any deferred
underwriting commissions and taxes payable on the income earned on the trust account), as provided by management of the Target
and the Company, as applicable. In addition, we have conducted such other analyses, examinations and inquiries and considered
such other financial, economic and market criteria as we have deemed necessary and appropriate in arriving at our opinion.
In conducting our review of the Transaction,
financial analyses and in rendering our opinion, we have relied upon and assumed, without independent verification, the accuracy
and completeness of all data, material and other information furnished, or otherwise made available, to us, discussed with or
reviewed by us, or publicly available, and do not assume any responsibility with respect to such data, material and other information.
In addition, management of the Company has advised us, and we have assumed, that the financial projections reviewed by us have
been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management
of the Company as to the future financial results and condition of the Company and the combined company, the best currently available
estimates and judgments of the management of the Target as to the future financial results and condition of the Target, and we
express no opinion with respect to such projections or the assumptions on which they are based. If any of the foregoing assumptions
are not accurate, the conclusion set forth in this opinion could be materially affected. Neither the Company nor the Target publicly
disclose internal financial information of the type provided to us in connection with our review of the Transaction. As a result,
such information was prepared for financial planning purposes by management of the Company and the Target, as applicable, and
was not prepared with the expectation of public disclosure.
We have been advised by management of
the Company, and we have assumed with the consent of management of the Company, that, as of the date hereof, (i) the amount held
by the Company in trust for the benefit of its public stockholders (excluding any deferred underwriting commissions and taxes
payable on the income earned on the trust account) is equal to $140.6 million, (ii) the fair market value of the Target (the “
Target
Fair Market Value
”) is equal to (a) $151.3 million (excluding the Contingent Consideration), and (b) $201.3 million
(including the Contingent Consideration), and (iii) the Target Fair Market Value is a reasonable basis upon which to evaluate
the Target.
As you are aware, the credit, financial
and stock markets have from time to time experienced unusual volatility and we express no opinion or view as to any potential
effects of such volatility on the Transaction and this opinion does not purport to address potential developments in any such
markets.
We have relied upon and assumed, without
independent verification, that there has been no change in the business, assets, liabilities, financial condition, results of
operations, cash flows or prospects of the Company or the Target since the respective dates of the most recent financial statements
and other information, financial or otherwise, provided to us that would be material to our analyses or this opinion, and that
there is no information or any facts that would make any of the information reviewed by us incomplete or misleading.
We have assumed that the final form of
the Agreement will be substantially similar to the draft, received on December 17, 2018, reviewed by us, without modification
of material terms or conditions. We have assumed that the Transaction will be consummated pursuant to the terms of the Agreement
without amendments thereto and without waiver by any party of any conditions or obligations thereunder. In arriving at our opinion,
we have assumed that all the necessary regulatory approvals and consents required for the Transaction will be obtained in a manner
that will not adversely affect the Company or the Target, or alter the terms of the Transaction.
In arriving at our opinion, we have not
performed any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of the Company or the
Target, including any intellectual property for which the Company or the Target may or may not currently receive royalty or licensing
fees, and we have not been furnished with any such appraisals or valuations, and have made no physical inspection of the property
or assets of the Company or the Target. We express no opinion regarding the liquidation value of any entity.
We were not requested to opine, and no
opinion is hereby rendered, as to whether any analyses of an entity, other than as a going concern, is appropriate in the circumstances
and, accordingly, we have performed no such analyses. We have undertaken no independent analysis of any pending or threatened
litigation, governmental proceedings or investigations, possible unasserted claims or other contingent liabilities, to which any
of the Company, the Target or their respective affiliates is a party or may be subject and at the Company’s direction and
with its consent, our opinion makes no assumption concerning and therefore does not consider, the possible assertion of claims,
outcomes, damages or recoveries arising out of any such matters. No company or transaction used in any analysis for purposes of
comparison is identical to the Company, the Target or the Transaction. Accordingly, an analysis of the results of the comparisons
is not mathematical; rather, it involves complex considerations and judgments about differences in the companies and transactions
to which the Company, the Target and the Transaction were compared and other factors that could affect the public trading value
or transaction value of the companies, as applicable.
This opinion is necessarily based upon
the financial, market, economic and other conditions that exist on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion and that we disclaim any undertaking or obligation
to advise any person of any change in any fact or matter affecting this opinion which may come or be brought to our attention
after the date of the opinion. We are not expressing any opinion herein as to the price at which shares of Company Common Stock
have traded or such stock may trade following announcement of the Transaction or at any future time. We have not undertaken to
reaffirm or revise this opinion or otherwise comment upon any events occurring after the date hereof and do not have any obligation
to update, revise or reaffirm this opinion.
Consistent with applicable legal and regulatory
requirements, we have adopted policies and procedures to establish and maintain the independence of our research department and
personnel. As a result, our research analysts may hold opinions, make statements or recommendations, and/or publish research reports
with respect to the Company, the Target, the Transaction and other participants in the Transaction that differ from the views
of our investment banking personnel.
This opinion is furnished pursuant to
our engagement letter dated December 5, 2018 (the “Engagement Letter”). This opinion is directed to the Board of Directors
of the Company in connection with its consideration of the Transaction. This opinion is not intended to be and does not constitute
a recommendation to any stockholder of the Company as to how such stockholder should act or vote with respect to the Transaction
or any other matter. Notwithstanding the foregoing, the Board of Directors of the Company is authorized to rely upon this opinion.
Except with respect to the use of this opinion in connection with the proxy or information statement relating to the Transaction
in accordance with the Engagement Letter, this opinion shall not be published, disclosed or otherwise used, nor shall any public
references to us be made, without our prior written approval; provided that any summary of this opinion is in form and substance
reasonably acceptable to us and our counsel.
This opinion addresses solely (i) the
fairness, from a financial point of view, to the Company of the Merger Consideration to be paid in the Transaction pursuant to
the Agreement, and (ii) whether the fair market value of the Target equals or exceeds 80% of the amount held by the Company in
trust for benefit of its public stockholders (excluding any deferred underwriting commissions and taxes payable on the income
earned on the trust account), and does not address any other terms or agreement relating to the Transaction. We were not requested
to opine as to, and this opinion does not address, the basic business decision to proceed with or effect the Transaction, or any
solvency or fraudulent conveyance consideration relating to the Transaction. We express no opinion as to the relative merits of
the Transaction as compared to any alternative business strategies or transactions that might exist for the Company, the Target
or any other party or the effect of any other transaction in which the Company, the Target or any other party might engage. We
express no opinion as to the amount, nature or fairness of the consideration or compensation to be received in or as a result
of the Transaction by securityholders, officers, directors or employees of the Company, or any other class of such persons, or
relative to or in comparison with the Merger Consideration. We have not been asked to consider, and this opinion does not address,
the price at which the Company Common Stock will trade at any time or as to the impact of the Transaction on the solvency or viability
of the Company to pay its obligations when they come due. We are not rendering any financial, legal, accounting or other advice
and understand that the Company is relying on its legal counsel and accounting advisors as to legal and accounting matters in
connection with the Transaction.
The preparation of a fairness opinion
is a complex, analytical process involving various determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances and is not necessarily susceptible to partial analysis
or summary description. In arriving at this opinion, we did not attribute any particular weight to any particular analysis or
factor considered by us, but rather made qualitative judgments as to the significance and relevance of each analysis and factor.
Several analytical methodologies were employed by us in our analyses, and no one method of analysis should be regarded as critical
to the overall conclusion reached herein. Each analytical technique has inherent strengths and weaknesses, and the nature of the
available information may further affect the value of particular techniques. Accordingly, we believe that our analyses must be
considered as a whole and that selecting portions of our analyses and of the factors considered by us, without considering all
analyses and factors in their entirety, could create a misleading or incomplete view of the evaluation process underlying this
opinion. The conclusion reached by us, therefore, is based on the application of our own experience and judgment to all analyses
and factors considered by us, taken as a whole. This opinion was reviewed and approved by the Craig-Hallum Fairness Opinion Committee.
Based upon and subject to the foregoing
and based upon such other factors as we consider relevant, it is our opinion that, as of the date hereof, (i) the Merger Consideration
to be paid by the Company in the Transaction pursuant to the Agreement is fair, from a financial point of view, to the Company,
and (ii) the fair market value of the Target equals or exceeds 80% of the amount held by the Company in trust for benefit of its
public stockholders (excluding any deferred underwriting commissions and taxes payable on the income earned on the trust account).
Sincerely,
/s/ Craig-Hallum Capital Group LLC
Craig-Hallum Capital Group LLC
Annex
C
ALLIED ESPORTS ENTERTAINMENT, INC.
2019 Equity Incentive Plan
Section 1.
Purpose; Definitions.
1.1.
Purpose
.
The purpose of the Plan is to enable the
Company to offer to employees, officers, and directors of, and consultants to, the Company and its Subsidiaries whose past, present
and/or potential future contributions to the Company and its Subsidiaries have been, are or will be important to the success of
the Company, an opportunity to share monetarily in the success of and/or acquire an equity int
erest
in the Company. The various types of long-term incentive awards that may be provided under the Plan will enable the Company to
respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its businesses.
1.2.
Definitions
.
For purposes of the Plan, the
following terms shall be defined as set forth below:
(a)
“Affiliate” means a corporation, limited liability company, or other entity that controls, is controlled by,
or is under common control with the Company or any of its Subsidiaries.
(b)
“Agreement” means the agreement between the Company and the Holder, or such other document as may be determined
by the Committee, setting forth the terms and conditions of an award under the Plan.
(c)
“Asset Sale” means an acquisition by any one person, or more than one person acting as a group, together with
acquisitions during the 12-month period ending on the date of the most recent acquisition by such person or persons, of assets
from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all
of the assets of the Company immediately before such acquisition or acquisitions. For this purpose, gross fair market value means
the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets.
(d)
“Board” means the Board of Directors of the Company.
(e)
“Change of Control” means a transaction in which any one person, or more than one person acting as a group,
acquires the ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than
50% of the total Fair Market Value or combined voting power of the stock of the Company. A Change of Control caused by an increase
in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company
acquires its stock in exchange for property is not treated as a Change of Control for purposes of the Plan.
(f)
“Code” means the Internal Revenue Code of 1986, as amended from time to time, the Treasury Regulations thereunder,
and any other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department.
(g)
“Committee” means the committee of the Board designated to administer the Plan as provided in Section 2.1.
If no Committee is so designated, then all references in this Plan to “Committee” shall mean the Board.
(h)
“Common Stock” means the Common Stock of the Company, par value $0.0001 per share.
(i)
“Company” means Allied Esports Entertainment, Inc., a corporation organized under the laws of the State of
Delaware.
(j)
“Disability” means physical or mental impairment as determined under procedures established by the Committee
for purposes of the Plan.
(k)
“Effective Date” means the date determined pursuant to Section 11.1.
(l)
“Fair Market Value,” unless otherwise required by any applicable provision of the Code or any regulations issued
thereunder, means, as of any given date: (i) if the Common Stock is listed on a national securities exchange or is traded over-the-counter
and last sale information is available, unless otherwise determined by the Committee, the last sale price of the Common Stock
in the principal trading market for the Common Stock on such date, as reported by the exchange or by such source that the Committee
deems reliable, as the case may be; or (ii) if the fair market value of the Common Stock cannot be determined pursuant to clause
(i), such price as the Committee shall determine, in good faith.
(m)
“Holder” means a person who has received an award under the Plan.
(n)
“Incentive Stock Option” means any Stock Option intended to be and designated as an “incentive stock
option” within the meaning of Section 422 of the Code.
(o)
“Non-qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
(p)
“Normal Retirement” means retirement from active employment with the Company or any Subsidiary on or after
such age which may be designated by the Committee as “retirement age” for any particular Holder. If no age is designated,
it shall be 65.
(q)
“Other Stock-Based Award” means an award under Section 8 that is valued in whole or in part by reference to,
or is otherwise based upon, Common Stock.
(r)
“Parent” means any present or future “parent corporation” of the Company, as such term is defined
in Section 424(e) of the Code.
(s)
“Plan” means this 2019 Equity Incentive Plan, as hereinafter amended from time to time.
(t)
“Repurchase Value” means the Fair Market Value if the award to be settled under Section 2.2(g) or repurchased
under Section 5.2(l) is comprised of shares of Common Stock and the difference between Fair Market Value and the exercise price
(if lower than Fair Market Value) if the award is a Stock Option or Stock Appreciation Right; in each case, multiplied by the
number of shares subject to the award. “Repurchase Value,” if the award to be repurchased under Section 9.2 is comprised
of shares of Common Stock, means the greater of the Fair Market Value or the value of such award based upon the price per share
of Common Stock received or to be received by other stockholders of the Company in the event. “Repurchase Value,”
if the award to be repurchased under Section 9.2 is comprised of Stock Options or Stock Appreciation Rights, means the difference
between the greater of (1) the Fair Market Value or the value of such award based upon the price per share of Common Stock received
or to be received by other stockholders of the Company in the event and (2) the exercise price (if lower), multiplied by the number
of shares subject to the award.
(u)
“Restriction Period” means the time or times with
in which awards may be subject
to forfeiture, including upon termination of employment or failure of performance conditions.
(v)
“Restricted Stock” means Common Stock received under an award made pursuant to Section 7 that is subject
to restrictions under Section 7.
(w)
“Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one
share or an amount in cash or other consideration determined by the Committee to be of equal value as of such settlement date,
subject to certain vesting conditions and other restrictions.
(x)
“SAR Value” means the excess of the Fair Market Value (on the exercise date) over (a) the exercise price that
the participant would have otherwise had to pay to exercise the related Stock Option or (b) if a Stock Appreciation Right is granted
unrelated to a Stock Option, the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right,
in either case, multiplied by the number of shares for which the Stock Appreciation Right is exercised.
(y)
“Stock Appreciation Right” means the right to receive from the Company, without a cash payment to the Company,
either a number of shares of Common Stock equal to the SAR Value divided by the Fair Market Value (on the exercise date) or, at
the Company’s election, cash in the amount of the SAR Value.
(z)
“Stock Option” or “Option” means any option to purchase shares of Common Stock which is granted
pursuant to the Plan. Stock Options may be Incentive Stock Options or Non-qualified Stock Options.
(aa) “Subsidiary”
means any present or future “subsidiary corporation” of the Company, as such term is defined in Section 424(f) of
the Code.
(bb) “vest” means
to become exercisable or to otherwise obtain ownership rights in an award.
Section 2.
Administration.
2.1.
Committee Membership
.
The Plan shall
be administered by the Board or a Committee. If administered by a Committee, such Committee shall be composed of at least two
directors, all of whom are
“non-employee” directors within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended
. Committee members shall serve for such term as the Board may in each case
determine and shall be subject to removal at any time by the Board.
2.2.
Powers of Committee
.
The Committee shall have
full authority to award, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, (iv) Restricted Stock Units and/or (v) Other Stock-Based Awards. For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to the express provisions of this Plan) to:
(a)
select the officers, employees, directors, and consultants of the Company or Subsidiary to whom Stock Options, Stock Appreciation
Rights Restricted Stock, Restricted Stock Units and/or Other Stock-Based Awards may from time to time be awarded hereunder;
(b)
determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including,
but not limited to, number of shares, share exercise price or types of consideration paid upon exercise of such options, such
as other securities of the Company or other property, any restrictions or limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the Committee shall determine);
(c)
interpret this Plan and the terms of awards granted hereunder;
(d)
determine any specified performance goals or such other factors or criteria which need to be attained for the vesting of
an award granted hereunder;
(e)
make all determinations with respect to a Holder’s service and the termination of such service for purposes of any
award;
(f)
determine the terms and conditions under which awards granted hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other awards under this Plan and cash and non-cash awards made by the Company and/or Subsidiary outside of
this Plan;
(g)
make payments and distributions with respect to awards (
i.e
., to “settle” awards) through cash payments
in an amount equal to the Repurchase Value;
(h)
accelerate the vesting or exercisability of any award at any time, and make decisions with respect to outstanding awards
that may become necessary upon a Change of Control, Asset Sale, or an event that triggers anti-dilution adjustments under the
terms of an outstanding award;
(i)
correct any defect(s) or omission(s) or reconcile any ambiguity(ies) or inconsistency(ies) in the Plan or any award thereunder;
(j)
decide all disputes arising in connection with the Plan and to otherwise supervise the administration of the Plan;
(k)
subject to the terms of the Plan, amend the terms of an award in any manner that is not inconsistent with the Plan;
(l)
adopt such procedures, modifications or sub-plans as are necessary or appropriate to permit participation in the Plan by
eligible persons who are foreign nationals or employed outside of the United States; and
(m)
generally, to exercise such powers and to perform such acts as the Committee deems necessary or expedient to promote the
best interests of the Company and that are not in conflict with the provisions of the Plan or awards.
The Committee may not modify or amend any
outstanding Option or Stock Appreciation Right to reduce the exercise price of such Option or Stock Appreciation Right below the
exercise price as of the date of grant of such Option or Stock Appreciation Right. In addition, no payment of cash or other property
having a value greater than the Repurchase Value may be made, and no Option or Stock Appreciation Right with a lower exercise
price may be granted, in exchange for, or in connection with, the cancellation or surrender of an Option or Stock Appreciation
Right.
2.3.
Interpretation of Plan
.
(a)
Committee Authority.
Subject to Section 10,
the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable, to interpret the terms and provisions of the Plan and any award issued
under the Plan (and to determine the form and substance of all Agreements relating thereto), and to otherwise sup
ervise
the administration of the Plan. Subject to Section 10, all decisions made by the Committee pursuant to the provisions of the Plan
shall be made in the Committee’s sole discretion and shall be final and binding upon all persons, including the Company
and its Subsidiaries and the Holders.
(b)
Incentive Stock Options
. Anything in the Plan to the contrary notwithstanding, no term or provision of the
Plan relating to Incentive Stock Options (including but not limited to Stock Appreciation Rights granted in conjunction with an
Incentive Stock Option) nor any Agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the
Code or, without the consent of the Holder(s) affected, to disqualify any Incentive Stock Option under such Section 422 of the
Code.
2.4
Award Agreements
. The
terms and conditions of each award made hereunder, as determined by the Committee, shall be set forth in an Agreement, which shall
be delivered to the Holder receiving such award upon, or as promptly as reasonably practicable following, the grant of such award.
The effectiveness of an award shall be subject to the Holder’s acceptance of the Agreement, unless otherwise provided in
the Agreement.
2.5
Indemnification
. In
addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent
allowed by Delaware law, the members of the Committee shall be indemnified by the Company against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any action, suit, or proceeding or in connection with any appeal therein,
to which the members of the Committee may be party by reason of any action taken or failure to act under or in connection with
the Plan or any award granted under the Plan, and against all amounts paid by the members of the Committee in settlement thereof
(
provided, however
, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld)
or paid by the members of the Committee in satisfaction of a judgment in any such action, suit, or proceeding, except in relation
to matters as to which it shall be adjudged in such action, suit, or proceeding that such member of the Committee did not act
in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case
of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful;
provided, however
, that
within 60 days after the institution of any such action, suit, or proceeding, such members of the Committee shall, in writing,
offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding. The Company shall advance
expenses to members of the Committee in connection with the Company’s indemnification obligations hereunder; provided that
such member agrees in writing to reimburse the Company for such advances if such member if ultimately not entitled to indemnification
hereunder.
Section 3.
Stock Subject to Plan.
3.1.
Number of Shares
.
The total number of shares
of Common Stock reserved and available for issuance under the Plan shall be up to 5,000,000
1
shares of Common Stock (the “Shares”). Shares may consist, in whole or in part, of authorized and unissued
shares or treasury shares.
3.2.
Recycling Provision
. If any shares of Common Stock that have been granted pursuant to a Stock Option cease
to be subject to a Stock Option, or if any shares of Common Stock that are subject to any Stock Appreciation Right, Res
tricted
Stock award, Restricted Stock Units or Other Stock-Based Award granted hereunder are forfeited, or any such award otherwise terminates
without a payment being made to the Holder in the form of Common Stock, such shares shall again be available for distribution
in connection with future grants
and
awards under the Plan. Shares that are surrendered by a
Holder or withheld by the Company as full or partial payment in connection with any award under the Plan, as well as any Shares
surrendered by a Holder or withheld by the Company or its Subsidiaries to satisfy the tax withholding obligations related to any
award under the Plan shall not be available for subsequent awards under the Plan.
3.3.
Adjustment Upon Changes in Capitalization, Etc.
In
the event of any Common Stock dividend payable on shares of Common Stock, Common Stock split or reverse split, combination or
exchange of shares of Common Stock, or other extraordinary or unusual event which results in a change in the shares of Common
Stock of the Company as a whole, the Committee shall determine, in its sol
e discretion, whether such
change equitably requires an adjustment in the terms of any award in order
to
prevent dilution
or enlargement of the benefits available under the Plan (including number of shares subject to the award and the exercise price)
or the aggregate number of shares reserved for issuance under the Plan. Any such adjustmen
ts will be made by the Committee,
whose determination will be final, binding and conclusive.
3.4.
Administrative Stand Still
.
In the event of any changes in
capitalization described above in Section 3.3, or any other extraordinary transaction or change affecting the shares or the share
price of Common Stock, including any equity restructuring or any securities offering or other similar transaction, for administrative
convenience, the Committee may refuse to permit the exercise of any award for up to sixty days before and/or after such transaction;
provided, however, that the Committee may not refuse to permit the exercise of any award during the last five trading days prior
to the expiration of such award.
3.5.
Substitute Awards
. In connection with an entity’s merger or consolidation with the Company or any Subsidiary
or the Company’s or any Subsidiary’s acquisition of an entity’s property or stock, the Committee may grant awards
in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity
or its affiliate. Substitute awards may be granted on such terms as the Committee deems appropriate, notwithstanding limitations
on awards in the Plan. Substitute awards will not count against the plan limit, except that shares acquired by exercise of substitute
Incentive Stock Options will count against the maximum number of shares that may be issued pursuant to the exercise of Incentive
Stock Options under the Plan.
3.7
Incentive Stock Option Limit.
No
more than 5,000,000 shares of Common Stock may be issued pursuant to the exercise of Incentive Stock Options.
2
3.8
Individual Limits.
No
person may be granted awards exercisable for in excess of ________ shares of Common Stock during any calendar year, provided that
non-employee directors may not be granted during any calendar year in excess of the lesser of ______ shares of Common Stock or
$___________ (calculating the value of any awards based on the grant date fair value).
3
_______________
1
NTD: 15% of the outstanding common stock of the company after consummation of the Mergers.
2
NTD: the ISO rules require that the plan set an upper limit for the number of ISOs that may be granted under the
plan.
3
NTD: the plan must set a “meaningful limit” on director compensation. The limit for non-employee directors
is separately listed to make the limit clear.
Section 4.
Eligibility.
Awards may be made or granted to employees,
officers, directors and consultants of the Company or its Subsidiaries who are deemed to have rendered or to be able to render
significant services to the Company or its Subsidiaries and who are deemed to have contributed or to have the potential to contribute
to the success of the Company or Subsidiary and which recipients are qualified to receive options under the regulations governing
Form S-8 registration statements under the Securities Act of 1933, as amended (“Securities Act”). No Incentive Stock
Option shall be granted to any person who is not an employee of
the Company or a Subsidiary (including
any non-employee directors) at the time of grant or so qualified as set forth in the immediately preceding sentence. Notwithstanding
anything to the contrary, an award may be made or granted to a person in connection with his hiring or retention, or at any time
on or after the date he reaches an agreement (oral or written) with the Company or its Subsidiaries with respect to such hiring
or retention, even though it may be prior to the date the person first performs services for the Company or its Subsidiaries;
provided, however, that no portion of any such award shall vest prior to the date the person first performs such services and
the date of grant shall be deemed to be the date hiring or retention commences.
Section 5.
Stock Options.
5.1.
Grant
.
Stock Options granted under the Plan
may be of two types: (i) Incentive Stock Options and (ii) Non-qualified Stock Options. Any Stock Option granted under the Plan
shall contain such terms, not inconsistent with this Plan, or with respect to Incentive Stock Options, not inconsistent with the
Plan and the Code, as the Committee may from time to time approve. The Agreement for a Stock Option shall indicate whether the
Stock Option is intended to be an Incentive Stock Option or a Non-qualified Stock Option. To the extent that any Stock Option
intended to qualify as an Incentive Stock Option does not so qualify, it shall constitute a separate Non-qualified Stock Option,
and the Company shall have no liability to the Holder arising from such failure of the Stock Option to qualify as an Incentive
Stock Option.
5.2.
Terms and Conditions
.
Stock Options granted
under the Plan shall be subject to the following terms and conditions:
(a)
Option Term
.
The term of each Stock
Option shall be fixed by the Committee; provided, however, that no Stock Option may be exercisable after the expiration of ten
years from the date of grant; provided, further, that no Incentive Stock Option granted to a person who, at the time of gr
ant,
owns stock possessing more than 10% of the total combined voting power of all classes of voting stock of
the
Company
(“10% Shareholder”)
may be exercisable after the expiration of five years from the date of grant
.
(b)
Exercise Price
.
The exercise price per share
of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant; provided, however,
that the exercise price of a Stock Option may not be less than 100% of the Fair Market Value on the date of grant or, if greater,
the par value of a share of Common Stock; provided, further, that the exercise price of an Incentive Stock Option granted to a
10% Shareholder may not be less than 110% of the Fair Market Value on the date of grant.
(c)
Exercisability
.
Stock Options shall
be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. The Committee
intends generally to provide that Stock Options be exercisable only in installments, i.e., tha
t they
vest over time, typically over a two- to five-year period. The Committee may waive such installment exercise provisions at any
time at or after the time of grant in whole or in part, based upon such factors as the Committee determines in its sole discretion.
(d)
Method of Exercise
.
Subject to the installment,
exercise and waiting period provisions as set forth in the Agreement, Stock Options may be exercised in whole or in part at any
time during the term of the Option by giving written notice of exercise to the Company specifying the number of shares of Common
Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, which shall be in cash or, if
provided in the Agreement, either in shares of Common Stock (includ
ing Restricted Stock and other contingent
awards under this Plan or a reduction of the number of shares of Common Stock otherwise deliverable upon exercise of such Option)
or partly in cash and partly in such Common Stock, or such other means which the Committee determines are consistent with the
Plan’s purpose and applicable law. Cash payments shall be made by wire transfer, certified or bank check or personal check,
in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver certificates
for shares of Common Stock with respect to which an Option is exercised until the Company has confirmed the receipt of good and
available funds in payment of the purchase price thereof (except that, in the case of an exercise arrangement approved by the
Committee and described in the next sentence of this
section
, pa
yment may be made as
soon as practicable after the exercise).
The Committee may permit a Holder to elect to pay the exercise
price upon the exercise of a Stock Option by irrevocably authorizing a third party to sell shares of Common Stock (or a sufficient
portio
n of the shares) acquired upon exercise of the Stock Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise. The Committee may also authorize
other means for paying the exercise price of a Stock Option, including using the value of the Stock Option (as determined by the
difference in the Fair Market Value of the Common Stock and the exercise price of the Stock Option or other means determined by
the Committee).
(e)
Stock Payments
.
Payments in the form of Common
Stock shall be valued at the Fair Market Value on the date of exercise. Such payments shall be made by delivery of stock certificates
in negotiable form that are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances.
(f)
Transferability
.
Except as may be set forth in the
next sentence of this Section or in the Agreement, no Stock Option shall be transferable by the Holder other than by will or by
the laws of descent and distribution, and all Stock Options shall be exercisable, during the Holder’s lifetime, onl
y
by the Holder (or, to the extent of legal incapacity or incompetency, the Holder’s guardian or legal representative). Notwithstanding
the foregoing, a Holder, with the approval of the Committee, may transfer a Non-Qualified Stock Option (i) (A) by gift, for no
consideration, or (B) pursuant to a domestic relations order, in either case, to or for the benefit of the Holder’s “Immediate
Family” (as defined below), or (ii) to an entity in which the Holder and/or members of Holder’s Immediate Family own
more than fifty percent of the voting interest, subject to such limits as the Committee may establish and the execution of such
documents as the Committee may require, and in any case the transferee shall remain subject to all the terms and conditions applicable
to the Non-Qualified Stock Option prior to such transfer. The term “Immediate Family” shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Holder’s household
(other than a tenant or employee), a trust in which these persons have more than fifty percent beneficial interest, and a foundation
in which these persons (or the Holder) control the management of the assets. The Committee may, in its sole discretion, permit
transfer of an Incentive Stock Option in a manner consistent with applicable tax and securities law upon the Holder’s request.
(g)
Termination by Reason of Death
.
If a Holder’s
employment by, or association with, the Company or Subsidiary terminates by reason of death, any Stock Option held by such Holder,
unless otherwise determined by the Committee and set forth in the Agreement, shall thereupon automatically terminate, except that
the portion of such Stock Option that has vested on the date of death may thereafter be exercised by the legal representative
of the e
state or by the legatee of the Holder under the will of the Holder, for a period of one year
(or such other greater or lesser period as the Committee may specify in the Agreement) from the date of such death or until the
expiration of the stated term of su
ch Stock Option, whichever period is shorter.
(h)
Termination by Reason of Disability
.
If
a Holder’s employment by, or association with, the Company or Subsidiary terminates by reason of Disability, any Stock Option
held by such Holder, unless otherwise determined by the Committee and set forth in the Agreement, shall thereupon automatically
terminate, except that the portion of such Stock Option that has vested on the date of termination may thereafter be exercised
by the Holder for a period of one year (or such other great
er or lesser period as the Committee may
specify in the Agreement) from the date of such termination or until the expiration of the stated term of such Stock Option, whichever
period is shorter.
(i)
Termination by Reason of Normal Retirement
.
Subject
to the provisions of Section 12.3, if such Holder’s employment by, or association with, the Company or Subsidiary terminates
due to Normal Retirement, any Stock Option held by such Holder, unless otherwise determined by the Committee and set forth in
the Agreement, shall thereupon automatically terminate, except that the portion of such Stock Option that has vested on the date
of termination may thereafter be exercised by the Holder for a period of one year in the case of a Non-Qualified Stock Option
or three months in the case of an Incentive Stock Option (or such other greater or lesser period as the Committee may specify
in the Agreement)
from the date of such termination or until the expiration of the stated term of such
Stock Option, whichever period is shorter
.
(j)
Other Termination
.
Subject to the provisions
of Section 12.3, if such Holder’s employment by, or association with, the Company or Subsidiary terminates for any reason
other than death, Disability or Normal Retirement, any Stock Option held by such Holder, unless otherwise determined by the Committee
and set forth in the Agreement, shall thereupon automatically terminate, except that, if the Holder’s employment is terminated
by the Company or Subsidiary without cause, the portion of such Stock Option that has vested on
the
date of termination may thereafter be exercised by the Holder for a period of three months
(or such other greater or lesser
period as the Committee may specify in the Agreement)
from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is shorter.
(k)
Incentive Stock Options
.
The aggregate Fair Market Value (on the date of grant
of the Stock Option) of shares of Common Stock with respect to which Incentive Stock Options become exercisable for the first
time by a Holder during any calendar year (under all such plans of the Company and its Subsidiaries) shall not exceed $100,000.
To the extent that any Stock Option intended to qualify as an
Incentive
Stock Option does not
so qualify, including by reason of the immediately preceding sentence, it shall constitute a separate Non-qualified
Stock
Option. The Company shall have no liability to any Holder or any other person if a Stock Option designated as an Incentive Stock
Option fails to qualify as such at any time or if a Stock Option is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A of the Code and the terms of such Stock Option do not satisfy the requirements of Section 409A
of the Code.
(l)
Buyout and Settlement Provisions
.
The Committee
may at any time, in its sole discretion, offer to repurchase a Stock Option previously granted, at a purchase price not to exceed
the Repurchase Value, based upon such terms and conditions as the Committee shall establish and communicate to the Holder at the
time that such offer is made.
(m)
Rights as Stockholder
.
A Holder shall have
none of the rights of a stockholder with respect to the shares subject to the Option until such shares shall be tra
nsferred
to the Holder upon the exercise of the Option.
Section 6.
Stock Appreciation Rights.
6.1.
Grant
.
Subject to the terms and conditions
of the Plan, the Committee may grant Stock Appreciation Rights in tandem with an Option (“Related Right”) or alone
and unrelated to an Option. The Committee may grant Stock Appreciation Rights to participants who have been or are being granted
Stock Options under the Plan as a
means of allowing such participants to exercise their Stock Options
without the need to pay the exercise price in cash. In the case of a Non-qualified Stock Option, a Stock
Appreciation
Right
may be granted either at or after the time of the grant of such
Non-qualified Stock Option. In the case of an Incentive
Stock Option, a Stock Appreciation Right may be granted only at the time of the grant of such Incentive Stock Option.
6.2.
Terms and Conditions
.
Stock Appreciation Rights
shall be subject to the following terms and conditions:
(a)
Exercisability
.
Stock Appreciation Rights shall
be exercisable as shall be determined by the Committee and set forth in the Agreement. Notwithstanding the foregoing, a Related
Right shall be exercisable only to the same extent as the related Option, subject to the limitations, if any, imposed by the Code
with respect to related Incentive Stock Options, and provided that the Holder surrenders the applicable portion of the related
Stock Option upon exercise of the Related Right. Upon exercise of all or a portion of a Stock Appreciation Right and, if applicable,
surrender of the applicable portion of the related Stock Option, the Holder shall be entitled to receive a number of shares of
Common Stock equal to the SAR Value divided by the Fair Market Value on the date the Stock Appreciation Right is exercised or,
at the Company’s election, cash for the value so calculated.
(b)
Termination
.
All or a portion of a Related
Right shall terminate and shall no longer be exercisable upon the termination or after the exercise of the applicable portion
of the related Stock Option.
(c)
Shares Available Under Plan
. The granting of a Stock Appreciation Right in tandem with a Stock Option shall not
affect the number of shares of Common Stock available for awards under the Plan. The number of shares available for awards under
the Plan will, however, be reduced by the number of shares of Common Stock acquirable upon exercise of the Stock Option to which
such Stock Appreciation Right relates.
Section 7.
Restricted Stock; Restricted Stock Units.
7.1.
Grant
.
Shares of Restricted Stock and
Restricted Stock Units may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be awarded, the number
of shares to be awarded, the price (if any) to be paid by the Holder, any Restriction Period
, the vesting
schedule and rights to acceleration thereof, and all other terms and conditions of the awards.
In
addition, the Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock
Units will be awarded, and the vesting and forfeiture conditions during the applicable Restriction Period, as set forth in an
Agreement.
7.2.
Restricted Stock Terms and Conditions
.
Each
Restricted Stock award shall be subject to the following terms and conditions:
(a)
Certificates
.
Restricted Stock, when
issued, will be represented by a stock certificate or certificates registered in the name of the Holder to whom such Restricted
Stock shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities
constituting Retained Distributions (as defined below) shall bear a legend to the effect that ownership of t
he
Restricted Stock (and such Retained Distributions) and the enjoyment of all rights appurtenant thereto are subject to the restrictions,
terms and conditions provided in the Plan and the Agreement. Such certificates shall be deposited by the Holder with the Company,
together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company
of all or any portion of the
Restricted
Stock and any securities constituting Retained Distributions
that shall be forfeited or that shall not become vested in accordance with the Plan and the Agreement.
(b)
Rights of Holder
.
Restricted Stock shall constitute
issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted
Stock and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock,
with the exceptio
ns that (i) the Holder will not be entitled to delivery of the stock
certificate
or certificates representing such Restricted Stock until the Restriction Period shall have expired
and unless all other vesting requirements with respect thereto shall have been fulfilled; (ii) the Company will retain custody
of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (iii) the Company will
retain custody of all dividends and distributions (“Retained Distributions”) made, paid or declared with respect to
the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable
to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall
have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired;
and (iv) a breach by the Holder of any of the restrictions, terms or conditions contained in this Plan or the Agreement or otherwise
established by the Committee with respect to any Restricted Stock or Retained Distributions wi
ll cause a forfeiture of
such Restricted Stock and any Retained Distributions with respect thereto.
(c)
Vesting; Forfeiture
.
Upon the expiration of
the Restriction Period with respect to each award of Restricted Stock and the satisfaction of any other applicable restrictions,
terms and conditions (i) all or part of such Restricted Stock shall become vested in accordance with the terms of the Agreement,
and (ii) any Retained Distributions with respect to such Restricted Stock shall bec
ome vested to the
extent that the Restricted Stock related thereto shall have become vested. Any such Restricted Stock and Retained Distributions
that do not vest shall be forfeited to the Company and the Holder shall not thereafter
have any rights with respect to
such Restricted Stock and Retained Distributions that shall have been so forfeited.
7.3.
Restricted Stock Units Terms and Conditions
.
Each
Restricted Stock Units award shall be subject to the following terms and conditions:
(a)
Settlement
. The Committee may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably
practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Holder’s election,
in a manner intended to comply with Section 409A.
(b)
No Rights as a Stockholder
. A Holder will have no rights of a holder of Common Stock with respect to shares subject
to any Restricted Stock Unit unless and until the shares are delivered in settlement of the Restricted Stock Unit. No shares of
Common Stock will be issued at the time a Restricted Stock Unit is granted.
(c)
Dividend Equivalents
. If the Committee provides, a grant of Restricted Stock Units
may provide a Holder with the right to receive dividend equivalents. Dividend equivalents may be paid currently or credited to
an account for the Holder, settled in cash or shares and subject to the same restrictions on transferability and forfeitability
as the Restricted Stock Units with respect to which the dividend equivalents are granted and subject to other terms and conditions
as set forth in the Agreement.
(d)
Forfeiture
. Upon the expiration of the Restriction Period with respect to each award of Restricted Stock Units,
if the applicable restrictions, terms, and conditions have not been met, all or part of such Restricted Stock Units shall be forfeited
to the Company and the Holder shall not thereafter have any rights with respect to such Restricted Stock Units that shall have
been so forfeited.
7.4
Removal
of Restrictions
. The Committee may remove any or all of the restrictions on Restricted Stock or Restricted Stock Units
upon the determination that, by reason of changes in applicable laws or other changes in circumstances arising after the date
of grant, such action is appropriate.
Section 8.
Other Stock-Based Awards.
Other Stock-Based Awards may be awarded,
subject to li
mitations under applicable law, that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to, shares of Common Stock, as deemed by the Committee to be consistent
with the purposes of the Plan, including, without limitation, purchase rights, shares of Common Stock awarded which are not subject
to any restrictions or conditions, convertible or exchangeable debentures, or other rights convertible into shares of Common Stock
and awards valued by reference to the value of securities of or the performance of specified Subsidiaries.
These Other
Stock-Based Awards may include performance shares or options, whose award is tied to specific performance goals. Other Stock-Based
Awards may be awarded either alone
or in addition to or in tandem with any other awards under this
Plan or any other plan of the Company. Each Other Stock-Based Award shall be subject to such terms and conditions as may be determined
by the Committee.
Section
9.
Accelerated Vesting and Exe
rcisability.
9.1.
Non-Approved Transactions
.
If there is a Change
of Control,
and the Board does not authorize or otherwise approve such transaction, then the vesting
periods of any and all Stock Options and other awards granted and outstanding under the Plan shall be accelerated and all such
Stock Options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right
to purchase
and
/or receive any and all Common Stock subject to such Stock Options and awards
on the terms set forth in this Plan and the respective Agreements respecting such Stock Options and awards, and all performance
goals will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met.
9.2.
Approved Transactions
.
In
the event of an Asset Sale or if there is a Change of Control
that
has been approved by the
Company’s Board of Directors, then the Committee may (i) accelerate the vesting of any and all Stock Options and other
awards granted and outstanding under the Plan; (ii) require a Holder of any Stock Option, Stock Appreciation Right, Restricted
Stock award or Other Stock-Based Award granted under this Plan to relinquish such award to the Company upon the tender by the
Company to Holder of cash, stock or other property, or any combination thereof, in an amount equal to the Repurchase Value of
such award; provided, however, that the obligation to tender the Repurchase Value to such Holders may be subject to any terms
and conditions to which the tender of consideration to the Company’s stockholders in connection with the acquisition is
subject, including any terms and conditions of the acquisition providing for an adjustment to or escrow of such consideration;
and provided, further, that in the case of any Stock Option or Stock Appreciation Right with an exercise price that equals or
exceeds the price paid for a share of Common Stock in connection with the acquisition, the Committee may cancel the Stock Option
or Stock Appreciation Right without the payment of consideration therefor; and/or (iii) terminate all incomplete performance periods
in respect of awards in effect on the date the acquisition occurs, determine the extent to which performance goals have been met
based upon such information then available as it deems relevant and cause to be paid to the Holder all or the applicable portion
of the award based upon the Committee's determination of the degree of attainment of performance goals, or on such other basis
determined by the Committee.
9.3.
Code Section 409A
.
Notwithstanding any
provisions of this Plan or any award granted hereunder to the contrary, no acceleration shall occur with respect to any aw
ard
to the extent such acceleration would cause the Plan or an award granted hereunder to fail to comply with Code Section 409A.
Section 10.
Amendment and Termination.
The Board may at any time, and from time
to time, amend alter, suspend or discontinue any of the provisions of the Plan or any Agreement, but no amendment, alteration,
suspension or discontinuance shall be made tha
t would impair the rights of a Holder under any Agreement
theretofore entered into hereunder, without the Holder’s consent, except as set forth in this Plan or the Agreement. Notwithstanding
anything to the contrary herein, no amendment to the provisions of the Plan shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary to satisfy any provision of the Code or other applicable law or
the listing requirements of any national securities exchange on which the Company’s securities are listed.
Section 11.
Term of Plan.
11.1.
Effective Date
.
The Effective Date of the Plan shall
be [●], 2019, subject to the approval of the Plan by the Company’s stockholders on or prior to the one-year anniversary
of the Effective Date. Only Stock Options may be granted under the Plan prior to such approval of the Plan by the Company’s
stockholders;
provided, however
, that if the Plan is not approved by the affirmative vote of the holders of a majority
of the Common Stock within one year from the Effective Date, then (i) no Incentive Stock Options may be granted hereunder and
(ii) all Incentive Stock Options previously granted hereunder shall be automatically converted into Non-qualified Stock Options.
11.2.
Termination Date
.
Unless terminated
by the Board, this Plan shall continue to remain effective until such time as no further awards may be granted and all awards
g
ranted under the Plan are no longer outstanding. Notwithstanding the foregoing, grants of Incentive
Stock Options may be made only during the ten-year period beginning on the Effective Date.
Section 12.
General Provisions.
12.1.
Written Agreements
.
Each award
granted
under the Plan shall be confirmed by, and shall be subject to the terms of, the Agreement executed by the Company and the Holder,
or such other document as may be determined by the Committee. The Committee may terminate any award made under the Plan if the
Agreement
relating
thereto is not executed and returned to the Company within 10 days after
the Agreement has been delivered to the Holder for his or her execution.
12.2.
Unfunded Status of Plan
.
The Plan is
intended to constitute an “unfunded”
plan for incentive and deferred compensation.
Neither
the Company, the Board, nor the Committee shall be required to establish any special or separate fund or to segregate any assets
to ensure the performance of obligations under the Plan.
With respect to any payments not yet made
to a Holder by the Company, nothing contained herein shall give any such Holder any rights that are greater than those of a general
creditor of the
Company
.
12.3.
Employees
.
(a)
Engaging in Competition with the Company; Solicitation of Customers and Employees; Disclosure of Confidential
Information
.
If a Holder’s employment with the
Company or Subsidiary is terminated for any reason whatsoever, and Holder (i) within three months after the date thereof, accepts
employment with any competitor of, or otherwise engages in competition with, the Company, any Subsidiary, or any Affiliate thereof,
(ii) within two years after the date thereof, solicits any customers or employees of the Company, any Subsidiary, or any Affiliate
thereof to do business with or render services to the Holder or any business with which the Holder becomes affiliated or to which
the Holder renders services or (iii) at any time uses or discloses to anyone outside the Company any confidential information
of the Company, any Subsidiary, or any Affiliate thereof in violation of the Company’s policies or any agreement between
the Holder and the Company or Subsidiary, the Committee, in its sole discretion, may require such Holder to return (through the
payment of cash, return and transfer to the Company of shares of Common Stock or by other methods determined by the Committee)
to the Company the economic value of any award that was realized or obtained by such Holder at any time during the period beginning
on the date that is six months prior to the date such Holder’s employment with the Company is terminated
;
provided, however, that if the Holder is a resident of the State of California, such right must be exercised by the Company for
cash within six months after the date of termination of the Holder’s service to the Company or within six months after exercise
of the applicable Stock Option, whichever is later
. In such event, Holder agrees to (1) remit to the Company, in cash,
an amount equal to the difference between the Fair Market Value of the shares subject to the award on the date of termination
(or the sales price of such Shares if the Shares were sold during such six month period) and the price the Holder paid the Company
for such shares, or (2) in the case of SARs, shall, at the Company’s election, return the full amount paid to the Holder
in connection therewith.
(b)
Termination for Cause
.
If a Holder’s
employment with the Company or Subsidiary is terminated for “cause” (as may be defined in the Agreement or an employment
agreement entered into by the Holder), the Committee may, in its sole discre
tion, require such Holder
to return to the Company the economic value of any award that was realized or obtained by such Holder at any time during the period
beginning on that date that is six months prior to the date such Holder’s
employment
with
the Company is terminated. In such event, Holder agrees to (1) remit to the Company, in cash, an amount equal to the difference
between the Fair Market Value of the shares on the date of termination (or the sales price of such Shares if the shares were sold
during such six month period) and the price the Holder paid the Company for such shares,
(2) with the consent of the Company,
which may be withheld for any reason or no reason, surrender to the Company shares of Common Stock having Fair Market Value equal
to the Fair Market Value on the date they were acquired upon exercise of the Option
or
(3) in
the case of SARs, return the full amount paid to the Holder in connection therewith.
(c)
No Right of Employment
.
Nothing contained
in the Plan or in any award hereunder shall be deemed to confer upon any Holder who is an employee of the Company, or Subsidiary
any right to continued employment with the Company or Subsidiary, nor shall it interfere in any way
with the right of the Company or Subsidiary to terminate the employment of any Holder who is an employee at any time.
12.4.
No Fractional Shares
. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The
Committee shall determine whether cash, additional awards or other securities or property shall be issued or paid in lieu of fractional
shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
12.5.
Limitations on Liability
.
(a)
Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the
Company or any Subsidiary, Parent or Affiliate, or member of the Committee, will be liable to any Holder, former Holder, spouse,
beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any award,
and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed
in his or her capacity as member of the Committee, director, officer, other employee or agent of the Company or any Subsidiary,
Parent or Affiliate. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company
or any Subsidiary, Parent or Affiliate and member of the Committee that has been or will be granted or delegated any duty or power
relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or
liability (including any sum paid in settlement of a claim with the Committee’s approval) arising from any act or omission
concerning this Plan unless arising from such person’s own fraud or bad faith.
(b)
Neither the Company nor any Subsidiary shall be liable to a Holder or any other person as to: (i) the non-issuance or sale of
shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by
the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and (ii) any tax consequence
expected, but not realized, by any Holder or other person due to the receipt, exercise or settlement of any Award granted hereunder.
12.6.
Lock-Up Period
. The Company may, at the request of any underwriter, placement agent or otherwise, in connection with the
registered offering of any Company securities under the Securities Act or pursuant to an exemption therefrom, prohibit Holders
from, directly or indirectly, selling or otherwise transferring any shares or other Company securities acquired under this Plan
during a period of up to one hundred eighty (180) days following either the effective date of a Company registration statement
filed under the Securities Act, in the case of a registered offering, or the closing date of the sale of the Company securities,
in the case of an offering exempt from registration, or for such longer period as determined by the underwriter or placement agent.
12.7.
Data Privacy
. As a condition for receiving any award, each Holder explicitly and
unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this
paragraph by and among the Company and its Subsidiaries, Affiliates, and any Parent exclusively for implementing, administering
and managing the Holder’s participation in the Plan. The Company and its Subsidiaries, Affiliates, and any Parent may hold
certain personal information about a Holder, including the Holder’s name, address and telephone number; birthdate; social
security, insurance number or other identification number; salary; nationality; job title(s); any shares held in the Company or
its Subsidiaries, Affiliates, and any Parent; and award details, to implement, manage and administer the Plan and awards (the
“Data”). The Company and its Subsidiaries, Affiliates, and any Parent may transfer the Data amongst themselves as
necessary to implement, administer and manage a Holder’s participation in the Plan, and the Company and its Subsidiaries,
Affiliates, and any Parent may transfer the Data to third parties assisting the Company with Plan implementation, administration
and management. These recipients may be located in the Holder’s country, or elsewhere, and the Holder’s country may
have different data privacy laws and protections than the recipients’ country. By accepting an award, each Holder authorizes
such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer
and manage the Holder’s participation in the Plan, including any required Data transfer to a transfer agent, broker or other
third party with whom the Company or the Holder may elect to deposit any shares. The Data related to a Holder will be held only
as long as necessary to implement, administer, and manage the Holder’s participation in the Plan. A Holder may, at any time,
view the Data that the Company holds regarding such Holder, request additional information about the storage and processing of
the Data regarding such Holder, recommend any necessary corrections to the Data regarding the Holder or refuse or withdraw the
consents in this Section 12.7 in writing, without cost, by contacting the local human resources representative. The Company may
cancel Holder’s ability to participate in the Plan and, in the Committee’s discretion, the Holder may forfeit any
outstanding awards if the Holder refuses or withdraws the consents in this Section 12.7. For more information on the consequences
of refusing or withdrawing consent, Holders may contact their local human resources representative.
12.8.
Successor
. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization
succeeding to all or substantially all of the assets and business of the Company and its Subsidiaries, taken as a whole.
12.9.
Investment Representations; Company Policy
.
The
Committee may require each person acquiring shares of Common Stock pursuant to a Stock Option or other award under the Plan to
represent to and agree with the Company in writing that the Holder is acquiring the shar
es for investment
without a view to distribution thereof. Each person acquiring shares of Common Stock pursuant to a Stock Option or other award
under the Plan shall be required to abide by all policies of the Company in effect at the time of such acquisition and thereafter
with respect to the ownership and trading of the Company’s securities.
12.10.
Additional Incentive Arrangements
.
Nothing
contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may
deem
desirable, including, but not limited to, the granting of Stock Options and the awarding of Common Stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases.
12.11.
Withholding Taxes
.
Not later than the
date as of which an amount must first be included in the gross income of the Holder for Federal income tax purposes with respect
to any Stock Option or other award under the Plan, the Holder shall pay to the Company, or ma
ke arrangements
satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld
or paid with respect to such amount. If permitted by the Committee, tax withholding or payment obligations may be settled with
Common Stock, including Common Stock that is
part
of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company
or the Holder’s employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Holder from the Company or any Subsidiary.
12.12.
Clawback
. Notwithstanding any other provisions of the Plan, any award which is subject to recovery under any law,
government regulation or listing requirement of any national securities exchange on which the Company’s securities are listed,
will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or listing
requirement (or any policy adopted by the Company pursuant to any such law, government regulation or listing requirement).
12.13.
Governing Law
.
The Plan and all awards
made
and actions taken thereunder shall be governed by and construed in
accordance
with the law of
the State of Delaware (without regard to choice of law provisions).
12.14.
Other Benefit Plans
.
Any award granted
under the Plan shall not be deemed compensat
ion for purposes of computing benefits under any retirement
plan of the Company or any Subsidiary and shall not affect any
benefits
under any other benefit
plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to awards under this Plan).
12.15.
Non-Transferability
.
Except as otherwise
expressly provided in the Plan or the Agreement, no right or benefit under the Plan may be al
ienated,
sold, assigned, hypothecated, pledged, exchanged, transferred, encumbered or
charged
, and any
attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void.
12.16.
Applicable Laws
.
The obli
gations
of the Company with respect to all Stock Options and other awards under the Plan shall be
subject
to
(i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including,
without limitation, the Securities Act, and (ii) the rules and regulations of any securities exchange on which the Common Stock
may be listed.
Notwithstanding anything herein to the contrary, the Plan and all awards will be administered only in conformance
with such applicable laws. To the extent such applicable laws permit, the Plan and all Agreements will be deemed amended as necessary
to conform to such applicable laws.
12.17.
Conflicts
.
If any of the terms or provisions
of the Plan or an Agreement conflict with t
he requirements of Section 422 of the Code, then such terms
or provisions shall be deemed inoperative to the extent they so conflict with such requirements. Additionally, if this Plan or
any Agreement does not contain any provision required to be included herein under Section 422 of the Code, such provision shall
be deemed to be incorporated herein and therein with the same force and effect as if such provision had been set out at length
herein and therein. If any of the terms or provisions of any Agreement
conflict
with any terms
or provisions of the Plan, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements
of the Plan. Additionally, if any Agreement does not contain any provision required to be included therein under the Plan, such
provision shall be deemed to be incorporated therein with the same force and effect as if such provision had been set out at length
therein.
12.18.
Compliance with Section 409A of the Code
.
The
Company intends that any awards be structured in compliance with, or to satisfy an exemption from, Section 409A of the Code, such
that there are no adverse tax consequences, interest, or penalties pursuant to Section 409A of the Code as a result of the awards
.
Notwithstanding the Company’s intention, in the event any award is subject to Section 409A of the Code, the Committee may,
in its sole discretion and without a participant’s prior consent, amend this Plan and/or outstanding Agreements, adopt policies
and procedures, or take any other actions (including amendments, policies, procedures and actions with retroactive effect) as
are necessary or appropriate to (i) exempt this Plan and/or any award from the application of Section 409A of
the
Code,
(ii) preserve the intended tax treatment of any such award, or (iii) comply with the requirements of Section 409A of the Code,
including without limitation any such regulations guidance, compliance programs and other interpretive authority that may be issued
after the date of grant of an award. This Plan shall be interpreted at all times in such a manner that the terms and provisions
of the Plan and the awards are exempt from or comply with Section 409A of the Code.
Notwithstanding anything to the contrary
in this Plan (and unless the Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and
if a Holder holding an award that constitutes “deferred compensation” under Section 409A of the Code is a “specified
employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation
from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued
or paid before the date that is six (6) months following the date of such Holder’s “separation from service”
or, if earlier, the date of the Holder’s death, unless such distribution or payment can be made in a manner that complies
with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period
elapses, with the balance paid thereafter on the original schedule.
12.19.
Sub-Plans
. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying blue
sky, securities, tax or other laws of various jurisdictions in which the Company intends to grant awards. Any sub-plans shall
contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans
shall be deemed a part of the Plan, but each sub-plan shall apply only to the participants in the jurisdiction for which the sub-plan
was designed.
12.20.
Non-Registered Stock
.
The shares of Common
Stock to be distributed under this Plan have not been, as of the Effective Date
, registered under the
Securities Act or any applicable state or foreign securities laws and the Company has no obligation to any Holder to register
the Common Stock or to assist the Holder in obtaining an exemption from the various registration requirements, or to list the
Common Stock on a national securities exchange or any other trading or quotation system
.
12.21.
Non-Uniform Treatment
. The Committee's determinations under the Plan need not be uniform and may be made by it selectively
among persons who are eligible to receive, or actually receive, awards. Without limiting the generality of the foregoing, the
Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform
and selective Agreements, in each case as it determines in its sole and absolute discretion.
Annex
D
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLACK RIDGE ACQUISITION CORP.
- - - - - - - - - - - - - - - - - - -
- - - - - - -
Pursuant to Section 245 of the
General Corporation Law of the State
of Delaware
- - - - - - - - - - - - - - - - - - -
- - - - - - -
BLACK RIDGE ACQUISITION
CORP., a corporation existing under the laws of the State of Delaware (the “Corporation”), by its Chief Executive Officer,
hereby certifies as follows:
1. The name of the Corporation is “Black Ridge Acquisition Corp.”
2. The
Corporation’s Certificate of Incorporation was filed in the office of the Secretary of State of the State of Delaware on
May 9, 2017. The Corporation’s first Amended and Restated Certificate of Incorporation was filed in the office of the Secretary
of State of the State of Delaware on October 4, 2017.
3. This
Second Amended and Restated Certificate of Incorporation restates, integrates and amends the first Amended and Restated Certificate
of Incorporation of the Corporation.
4. This
Second Amended and Restated Certificate of Incorporation was duly adopted by joint written consent of the directors and stockholders
of the Corporation in accordance with the applicable provisions of Sections 141(f), 228, 242 and 245 of the General Corporation
Law of the State of Delaware (“GCL”).
5. The text of
the Certificate of Incorporation of the Corporation is hereby amended and restated to read in full as follows:
FIRST: The name of
the corporation is Allied Esports Entertainment, Inc. (hereinafter sometimes referred to as the “Corporation”).
SECOND: The registered
office of the Corporation is to be located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its
registered agent at that address is The Corporation Trust Company.
THIRD: The purpose
of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the GCL.
FOURTH: The total number
of shares of all classes of capital stock which the Corporation shall have authority to issue is 66,000,000 of which 65,000,000
shares shall be Common Stock of the par value of $0.0001 per share and 1,000,000 shares shall be Preferred Stock of the par value
of $0.0001 per share.
A.
Preferred
Stock
. The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or more series,
and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed
in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “Preferred Stock
Designation”) and as may be permitted by the GCL. The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of
the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any
series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.
B.
Common
Stock
. Except as otherwise required by law or as otherwise provided in any Preferred Stock Designation, the holders of the
Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote.
FIFTH: The name and
mailing address of the sole incorporator of the Corporation are as follows:
|
Name
|
Address
|
|
|
|
|
Jeffrey M. Gallant
|
Graubard Miller
|
|
|
The Chrysler Building
|
|
|
405 Lexington Avenue
|
|
|
New York, New York 10174
|
SIXTH: The Board
of Directors shall be divided into three classes: Class A, Class B and Class C. The number of directors in each class shall
be fixed exclusively by the Board of Directors and shall be as nearly equal as possible. The directors in Class A shall be
elected for a term expiring at the first annual meeting of stockholders after the date on which this Certificate of
Incorporation was first filed in the office of the Secretary of State of the State of Delaware (the “Effective
Date”). The directors in Class B shall be elected for a term expiring at the second annual meeting of stockholders
after the Effective Date. The directors in Class C shall be elected for a term expiring at the third annual meeting of
stockholders after the Effective Date. Commencing at the first annual meeting of stockholders after the Effective Date, and
at each annual meeting thereafter, directors elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders after their election. Except as the GCL may
otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the
election of directors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of
directors for cause, may be filled only by the vote of a majority of the remaining directors then in office, although less
than a quorum (as defined in the Corporation’s Bylaws), or by the sole remaining director. All directors shall hold
office until the expiration of their respective terms of office and until their successors shall have been elected
and qualified. A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall
serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy
and until his successor shall have been elected and qualified.
SEVENTH: The following
provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
A. Election
of directors need not be by ballot unless the by-laws of the Corporation so provide.
B. The
Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to
or repeal the by-laws of the Corporation as provided in the by-laws of the Corporation.
C. In
addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless,
to the provisions of the statutes of Delaware, of this Certificate of Incorporation, and to any by-laws from time to time made
by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have
been valid if such by-law had not been made.
EIGHTH: A. A director of the
Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL is
amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the GCL, as so amended. Any repeal
or modification of this paragraph A by the stockholders of the Corporation shall not adversely affect any right or protection of
a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.
B. The
Corporation, to the full extent permitted by Section 145 of the GCL, as amended from time to time, shall indemnify all persons
whom it may indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending
any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled
to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized hereby.
NINTH: Whenever a compromise
or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and
its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree
to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement,
the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders,
of this Corporation, as the case may be, and also on this Corporation.
TENTH:
A. Unless the Corporation consents in writing to the selection of an alternative
forum, the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action
or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by
any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii)
any action asserting a claim arising pursuant to any provision of the GCL or this Certificate of Incorporation or
the Corporation’s Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the
Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, another state court
located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the
federal district court for the District of Delaware) in all cases subject to the court’s having personal jurisdiction
over the indispensable parties named as defendants.
B. If
any action the subject matter of which is within the scope of Section A immediately above is filed in a court other than a court
located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be
deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware
in connection with any action brought in any such court to enforce Section A immediately above (an “FSC Enforcement Action”)
and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s
counsel in the Foreign Action as agent for such stockholder.
C. If
any provision or provisions of this Article TENTH shall be held to be invalid, illegal or unenforceable as applied to any person
or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability
of such provisions in any other circumstance and of the remaining provisions of this Article TENTH (including, without limitation,
each portion of any sentence of this Article TENTH containing any such provision held to be invalid, illegal or unenforceable that
is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities
and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise acquiring
any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of
this Article TENTH.
ELEVENTH: The doctrine
of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers
or directors in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual
obligations they may have as of the date of this Certificate of Incorporation or in the future. In addition to the foregoing, the
doctrine of corporate opportunity shall not apply to any other corporate opportunity with respect to any of the directors or officers
of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer
of the Corporation and such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise
be reasonable for the Corporation to pursue.
IN WITNESS WHEREOF,
the Corporation has caused this Second Amended and Restated Certificate of Incorporation to be signed by Frank Ng, its Chief Executive
Officer, as of the __ day of __________, 2019.
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Frank Ng
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Chief Executive Officer
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