UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14(a)
of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the SEC Only (as
permitted by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy Statement
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Definitive Additional
Materials
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Soliciting Material Pursuant to
14a-12
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SUPER LEAGUE
GAMING, INC.
(Name of Registrant as Specified in Its
Charter)
_________________________________
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate
box):
[X] No fee
required.
[ ] Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state
how it was determined):
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4.
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Proposed maximum aggregate value of
transaction:
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Total fee paid:
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[ ] Fee
paid previously with preliminary materials.
[ ] Check box if
any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement
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Filing Party:
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Date Filed:
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Super League Gaming,
Inc.
2912 Colorado
Ave., Suite #203
Santa Monica, California
90404
(802)
294-2754
April 30, 2021
Dear Fellow Stockholder:
On behalf of our management team and Board of
Directors, I hope that you and your loved ones are healthy and safe
as the world continues to operate amidst the uncertainty caused by
the COVID-19 pandemic.
You are cordially invited to attend the 2021
annual meeting of stockholders (the “Annual Meeting” or the
“Meeting”) of
Super League Gaming, Inc. (the “Company”) to be held at 10:00
a.m., Pacific Time, on May 27, 2021. In addition to certain routine
matters, including electing two Class I directors to our Board of
Directors and ratifying the appointment of Baker Tilly US, LLP, our
registered public accounting firm, we are asking our stockholders
to approve of the issuance of a total of 12,582,204 shares of our
common stock in exchange for all issued and outstanding securities
of Mobcrush Streaming, Inc. (“Mobcrush”) pursuant to the
Agreement and Plan of Merger executed on March 9, 2021 (the
“Merger”) (the
“Mobcrush Issuance
Proposal”). We believe the Merger with Mobcrush will
provide significant value to the Company and our stockholders, as
we expect the addition of Mobcrush provide the Company with
additional revenue, synergistic product offerings that provide
breadth to our overall product portfolio, and additional key
personnel with expertise in our sector. Please note, we are asking stockholders to
approve of the Mobcrush Issuance Proposal in order to comply with
Listing Rule 5635 of the Nasdaq Stock Market, and we are not asking
our stockholders to approve of the
Merger.
In addition, we are asking stockholders to
approve of an amendment to our Amended and Restated 2014 Stock
Option and Incentive Plan (the “2014 Plan”) to increase the
number of shares of common stock available for issuable under the
2014 Plan (the “2014 Plan
Amendment”). If approve, the 2014 Plan Amendment not
only enable us to continue to utilize the 2014 Plan as equity
compensation as a way to align the interests of our employees,
consultants and directors with those of our stockholders, but the
increase to the number of shares authorized under the 2014 Plan
will provide a sufficient number of shares to allow for the
issuance of options to Mobcrush employees following completion of
the Merger (the “2014 Plan
Proposal”). Details of the Mobcrush Issuance Proposal,
the 2014 Plan Proposal and all other matters to be considered at
the Meeting are included in the accompanying proxy
statement.
Due to concerns
about the COVID-19 pandemic and the related protocols implemented
by federal, state and local governments, the Annual Meeting will be
held via the internet and will be a completely virtual meeting. You
may attend and submit questions during the Annual Meeting on the
Internet at https://agm.issuerdirect.com/slgg.
Prior to the
Meeting, and during the Meeting until polls are closed, you may
vote by logging into https://www.iproxydirect.com/SLGG
using your shareholder information provided on the proxy card
accompanying this proxy statement.
Your vote is important, regardless of the number
of shares you hold. We will begin mailing this proxy statement,
copies of our Annual Report on Form 10-K for the year ended
December 31, 2020 (the “Annual Report”) and all other
related materials on or about May 3, 2021. Even if you do not plan
to attend the Annual Meeting, please read the enclosed proxy statement and
vote your shares as promptly as possible by the internet, telephone
or mail. Voting promptly will save the Company
additional expense in soliciting proxies and will ensure that your
shares are represented at the Meeting.
We look forward to your participation in the
Annual Meeting by attending virtually or by submitting your
proxy.
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Sincerely,
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Ann Hand
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Chief Executive Officer, President and
Chair
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Super League Gaming,
Inc.
2912 Colorado Avenue, Suite
#203
Santa Monica, California
90404
(802)
294-2754
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held on May 27,
2021
Dear Stockholders of Super League Gaming,
Inc.:
We are pleased to invite you to attend the 2021 annual meeting of
stockholders (the “Annual
Meeting” or the “Meeting”) of Super League Gaming,
Inc., a Delaware corporation (the “Company”), which takes place on
May 27, 2021 at 10:00 a.m., Pacific Time. The Annual Meeting will
be a virtual meeting, held on the Internet at https://agm.issuerdirect.com/slgg,
for the following purposes:
1.
to re-elect
two of our current directors to serve as Class I directors until
our 2024 annual meeting of stockholders, or until their respective
successor is duly elected and qualified;
2.
to
approve of an amendment to our Amended and Restated 2014 Stock
Option and Incentive Plan (the “2014 Plan Amendment”) to increase
the number of shares of common stock available for issuance
thereunder to a total of 5.0 million shares (the
“2014 Plan
Proposal”);
3.
to ratify
the appointment of Baker Tilly US, LLP as our independent auditors
for the year ending December 31, 2021;
4.
to
authorize, for purposes of complying with Nasdaq Listing Rule 5635,
the issuance of 12,582,204 shares of our common stock, pursuant to
the terms of the Agreement and Plan of Merger, dated March 9, 2021,
by and among the Company, Mobcrush Streaming, Inc.
(“Mobcrush”),
and the other parties thereto, which amount is in excess of 20% of
our common stock currently issued and outstanding and will result
in certain Mobcrush stockholders becoming holders of 20% or more of
our outstanding common stock following completion of the Merger
(the “Mobcrush Issuance
Proposal”);
5.
to
approve a proposal to grant discretionary authority to adjourn the
Meeting, if necessary, to solicit additional proxies (the
“Adjournment
Proposal”); and
6.
to vote upon such other matters as may properly
come before the Annual Meeting and any adjournment or postponement
thereof.
These matters are more fully discussed in the
attached proxy statement.
Beginning on or about May
3, 2021, we mailed copies
of this proxy statement, our Annual Report on Form 10-K for the
year ended December 31, 2020 (the “Annual
Report”) and
other related materials to stockholders entitled to receive notice
of and to vote at the Meeting. Please refer to these materials for
instructions regarding virtual attendance at the Annual Meeting and
how to submit your vote for the proposals described in this proxy
statement. This proxy statement and the Annual Report both are
available online at: https://www.iproxydirect.com/SLGG
The close of business on March 30, 2021 (the
“Record Date”)
has been fixed as the Record Date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournments or postponements thereof. Only holders
of record of our common stock at the close of business on the
Record Date are entitled to notice of, and to vote at, the Annual
Meeting. A complete list of stockholders entitled to vote at the
Annual Meeting will be available for examination by any of our
stockholders for purposes pertaining to the Annual Meeting at our
corporate offices, located at 2912 Colorado Avenue, Suite #203,
Santa Monica, California 90404, during normal business hours for a
period of ten days prior to the Annual Meeting, and at
the Annual Meeting.
Whether
or not you expect to virtually attend the Meeting, we urge you to
vote your shares as promptly as possible by Internet or telephone
so that your shares may be represented and voted at the Annual
Meeting. If your shares are held in the name of a bank,
broker or other fiduciary, please follow the instructions on the
voting instruction card furnished by the record
holder.
Our Board of Directors
recommends that you vote “FOR” each of the Class I
director nominees identified in Proposal No. 1 and
“FOR” Proposals No. 2, 3, 4 and 5. Each of these
Proposals are described in detail in the accompanying Proxy
Statement.
COPIES OF
THE ANNUAL REPORT AND PROXY
STATEMENT ARE AVAILABLE ONLINE AT:
https://www.iproxydirect.com/SLGG
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By Order of the Board of
Directors,
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David Steigelfest
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Chief Technology Officer, Corporate Secretary
and Director
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Santa Monica, California
April 30, 2021
Super League Gaming,
Inc.
2912 Colorado Avenue, Suite
#203
Santa Monica, California
90404
Tel. (802)
294-2754
PROXY STATEMENT
The enclosed
proxy is solicited on behalf of the Board of Directors
(“Board”) of
Super League Gaming, Inc., a Delaware corporation (the
“Company”), for
use at the Company’s 2021 annual meeting of stockholders (the
“Annual
Meeting” or the “Meeting”). Due to concerns
surrounding the ongoing COVID-19 pandemic and to assist in
protecting the health and well-being of our stockholders and
employees, the Meeting will take place exclusively in a virtual
meeting format on May 27, 2021, at 10:00 a.m., Pacific Time, and
will be held via the Internet at: https://agm.issuerdirect.com/slgg.
Beginning on or about May
3, 2021, we mailed copies
of this proxy statement, our Annual Report on Form 10-K for the
year ended December 31, 2020 (the “Annual
Report”) and
other related materials. Please refer to these materials for
instructions regarding virtual attendance at the Annual Meeting and
how to submit your vote for the proposals described in this proxy
statement.
This proxy statement and
the Annual Report can also be accessed free of charge online as of
May 3, 2021 at: https://www.iproxydirect.com/SLGG
Voting
The specific
proposals to be considered and acted upon at our Annual Meeting are
each described in this proxy statement. Only holders of our
common stock, par value $0.001 per share, as of the close of
business on March 30, 2021 (the “Record Date”) are entitled to
notice of and to vote at the Annual Meeting. On the Record Date,
there were 24,976,491 shares of common stock issued and
outstanding. Each holder of common stock is entitled to one vote
for each share held as of the Record Date.
Quorum
In order for any business to be conducted at the
Annual Meeting, a quorum must be present. The presence at the
Annual Meeting, either by virtual attendance or by proxy, of
holders of our common stock entitled to vote and representing at
least a majority of our outstanding voting power will constitute a
quorum for the transaction of business. If you submit a properly
executed proxy, regardless of whether you abstain from voting on
one or more matters, your shares will be counted as present at the
Annual Meeting for the purpose of establishing a quorum. Shares
that constitute broker non-votes will also be counted as present at
the Annual Meeting for the purpose of establishing a quorum. If a
quorum is not present at the scheduled time of the Annual Meeting,
the stockholders who are present may adjourn the Annual Meeting
until a quorum is present. The time and place of the adjourned
Annual Meeting will be announced at the time the adjournment is
taken, and no other notice will be given. An adjournment will have
no effect on the business that may be conducted at the Annual
Meeting.
Attendance at the Virtual
Special Meeting
We will host
the virtual Meeting live online, via Internet webcast. You may
attend the Meeting virtually by visiting https://agm.issuerdirect.com/slgg.
The Internet webcast will start at 10:00 a.m., Pacific Time,
on May 27, 2021.
To access the
virtual Meeting, please go to https://agm.issuerdirect.com/slgg.
You will have the option to log in to the virtual Meeting as a
“Stockholder” with a control number or as a
“Guest.” If you are a stockholder of record as of the
Record Date, you may log in as a “Stockholder” using
the control number and password for the Meeting, both of which can
be found on your proxy card. If you are not a stockholder of
record, but hold shares through an intermediary, such as a bank or
broker, trustee or nominee (sometimes referred to as holding in
“street name”), you may attend the Meeting as
“Guest” by entering your name and email address. As a
“Guest”, you will have access to the Meeting materials
and will be able to ask questions during the Meeting, but you will
not be able to vote during the Meeting.
If you hold your shares through an intermediary,
such as a bank or broker, and you desire to vote during the
Meeting, you must register in advance to attend the Meeting as a
“Stockholder”. To register to attend the virtual
Meeting as a “Stockholder”, you must provide proof of
beneficial ownership as of the Record Date, such as an account
statement, legal proxy from your broker, or similar evidence of
ownership along with your name and email address to Issuer
Direct.
Whether you attend the Meeting as a
“Stockholder” or as a “Guest”, please allow
yourself ample time for the online check-in
procedures.
Questions at the Special
Meeting
By accessing https://agm.issuerdirect.com/slgg
on the Internet, our stockholders will be able to submit
questions in writing in advance of or during the Meeting,
vote, view the Meeting procedures, and obtain copies of
proxy materials. Stockholders will need their unique control number
which appears on the proxy card accompanying this Proxy Statement
and the instructions that accompanied the proxy
materials.
Voting
If you are a stockholder of record as of the
Record Date, there are four ways you can vote:
(1)
By the
Internet: If you are a stockholder as of the Record Date, you may
vote over the Internet by following the instructions provided on
your proxy card.
(2)
By
Telephone: You may vote by telephone by following the instructions
on your proxy card.
(3)
By Postal
Mail: If you requested printed copies of proxy materials and are a
stockholder as of the Record Date, you may vote by mailing your
proxy as described in the proxy materials.
(4)
During the Meeting: You will have the ability to
attend the virtual Meeting and vote online via the Internet during
the Meeting. The Meeting will be a virtual only meeting and can be
accessed on the Internet at https://agm.issuerdirect.com/slgg.
Submitting a proxy will not prevent a stockholder from attending
the Meeting virtually, revoking an earlier-submitted proxy in
accordance with the process outlined below and voting online during
the Meeting.
In order to be counted, proxies submitted
electronically by telephone or
the Internet must be received
by 11:59 p.m., Eastern Standard Time, on May 26, 2021. Proxies
submitted by postal
mail must be received before the start of the virtual
Meeting.
If you hold your shares
through a bank or broker, please follow their
instructions.
Required Vote for
Approval
The vote required for each proposal and the
treatment and effect of abstentions and
broker non-votes with respect to each proposal is as
follows:
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No.
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Proposal
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Vote
Required
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1.
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Election of the two Class I director
nominees named in this proxy statement, each for a term of three
years.
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For each director, the number of votes cast for
the director’s election must exceed the number of votes
withheld or cast against the director’s
election.
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2
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Approval of an amendment to our Amended and
Restated 2014 Stock Option and Incentive Plan (the
“2014 Plan
Amendment”) to increase the number of shares of common
stock available for issuance thereunder to a total of 5.0 million
shares (the “2014 Plan
Proposal”).
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Affirmative vote of a majority of the votes
cast.
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3
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Ratification of the appointment of Baker Tilly
US, LLP as the Company’s independent registered public
accounting firm for the year ending December 31,
2021.
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Affirmative vote of a majority of the votes
cast.
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4
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For purposes of complying with Nasdaq Listing
Rule 5635, approval of the issuance of 12,582,204 shares of our
common stock, pursuant to the terms of the Agreement and Plan of
Merger, dated March 9, 2021, by and among the Company, Mobcrush
Streaming, Inc. (“Mobcrush”), and the other parties
thereto, which amount is in excess of 20% of our common stock
currently issued and outstanding and will result in certain
Mobcrush stockholders becoming holders of 20% or more of our
outstanding common stock following completion of the Merger (the
“Mobcrush Issuance
Proposal”).
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Affirmative vote of a majority of the votes
cast.
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5
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Approval of a proposal to grant discretionary
authority to adjourn the Meeting, if necessary, to solicit
additional proxies (the “Adjournment
Proposal”).
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Affirmative vote of a majority of the votes
cast.
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Broker
Non-Votes
A “broker non-vote” occurs when a
nominee (typically a broker or bank) holding shares for a
beneficial owner (typically referred to as shares being held in
“street name”) submits a proxy for the Annual Meeting,
but does not vote on a particular proposal because the nominee has
not received voting instructions from the beneficial owner and does
not have discretionary authority to vote the shares with respect to
that proposal.
Brokers and other nominees may vote on
“routine” proposals on behalf of beneficial owners who
have not furnished voting instructions, subject to the rules
applicable to broker nominees concerning transmission of proxy
materials to beneficial owners, and subject to any proxy voting
policies and procedures of those firms. The ratification of the
independent registered public accountants, for example, is a
routine proposal. Brokers and other nominees may not vote on
“non-routine” proposals, unless they have received
voting instructions from the beneficial owner. The election of
directors is considered a “non-routine” proposal. This
means that brokers and other firms must obtain voting instructions
from the beneficial owner to vote on these matters; otherwise they
will not be able to cast a vote for such “non-routine”
proposal. If your shares are held in the name of a broker, bank or
other nominee, please follow their voting instructions so you can
instruct your broker on how to vote your
shares.
Voting and Revocation of
Proxies
If your proxy is properly returned to the
Company, the shares represented thereby will be voted at the Annual
Meeting in accordance with the instructions specified thereon. If
you return your proxy without specifying how the shares represented
thereby are to be voted, the proxy will be voted
(i) FOR the
election of the two Class I director nominees identified in this
proxy statement, (ii) FOR
approval of the 2014 Plan Proposal, (iii) FOR ratification of the appointment
of Baker Tilly US, LLP as our independent auditors for the current
fiscal year, (iv) FOR
approval of the Mobcrush Issuance Proposal, (v) FOR approval of the Adjournment Proposal
and (vi) in the discretion of the proxy holders on any other matter
that may properly come before the Annual Meeting or any adjournment
or postponement thereof.
You may revoke or change your proxy at any time
before the Annual Meeting by filing, with our Corporate Secretary
at our principal executive offices, located at 2912 Colorado
Avenue, Suite #203, Santa Monica, California 90404, a notice of
revocation or another signed proxy with a later date. You may also
revoke your proxy by attending the Annual Meeting and voting in
person. Attendance at the Annual Meeting alone will not revoke
your proxy. If you are a stockholder whose shares are not
registered in your own name, you will need additional documentation
from your broker or record holder to vote personally at the Annual
Meeting.
No Appraisal
Rights
The
stockholders of the Company have no dissenter’s or appraisal
rights in connection with any of the proposals described
herein.
Solicitation
We will bear the entire cost of solicitation,
including the preparation, printing and mailing of this Proxy
Statement, the proxy card and any other solicitation materials or
services we may use in connection with the virtual Meeting or any
adjournment thereof, as well as the preparation and posting of all
proxy materials furnished to the stockholders in connection with
the Meeting or any adjournment thereof. We have retained Alliance
Advisors to assist in the solicitation of proxies for the Meeting.
We expect that the remuneration to Alliance Advisors for its
services will be approximately $15,000, plus reimbursement for
out-of-pocket expenses.
Copies of any solicitation materials will be
furnished to brokerage houses, fiduciaries and custodians holding
shares in their names that are beneficially owned by others so that
they may forward the solicitation materials to such beneficial
owners. In addition, we may reimburse such persons for their costs
in forwarding the solicitation materials to such beneficial owners.
The original solicitation of proxies may be supplemented by a
solicitation, by telephone, email or other means, by our directors,
officers or employees. No additional compensation will be paid to
these individuals for any such services.
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This summary highlights
selected information from this proxy statement. It may not contain
all of the information that is important to you. You are urged to
read carefully the entire proxy statement and the other documents
attached to or referred to in this proxy statement in order to
fully understand each proposal to be presented to stockholders for
approval at the Meeting, including the Mobcrush Issuance Proposal.
See “Where You Can Find More Information” beginning on
page 70 of
this proxy statement. Each item in this summary refers to the page
of this proxy statement on which the more detailed discussion of
that subject begins.
In this proxy statement, we
frequently use the terms “Super League,” “the
Company,” “we,” “our” and
“us” to refer to Super League Gaming, Inc., and its
subsidiaries. We use the term “Merger Sub” to refer to
our wholly owned subsidiary, SLG Merger Sub II, Inc., a Delaware
corporation.
The
Companies
Mobcrush Streaming,
Inc.
Mobcrush Streaming, Inc. is a company
incorporated under the laws of the state of Delaware in May 2020,
and a successor company to Mobcrush, Inc., a company incorporated
under the laws of the state of Delaware on July 17, 2014. On May 4,
2020, Mobcrush, Inc. completed an assignment for the benefit of
creditors pursuant to a formal asset purchase agreement, whereby
Mobcrush, Inc. transferred to Mobcrush ownership in and to certain
assets of Mobcrush, Inc. Please see the section titled
“Management’s
Discussion and Analysis of Financial Condition and Results of
Operations of Mobcrush” on page 61 of this proxy statement for
additional historical information about Mobcrush and Mobcrush, Inc.
Mobcrush is headquartered in Santa Monica,
California.
Mobcrush is a leading gaming technology platform
that empowers gamers and influencers to reach all of their fans
simultaneously across live streaming and social media platforms.
Mobcrush has been downloaded by more than 600,000 creators who
generate almost two million hours of original content annually and
have accumulated more than 4.5 billion fans and subscribers. Along
with free multi-streaming distribution, Mobcrush’s
proprietary technology, Replay Engine, gives gamers the ability to
capture and share amazing highlight moments in real time via
artificial intelligence with a single tap. Mobcrush powers
full-service live streaming, influencer activations, and esports
content creation and distribution at scale. Mobcrush’s
Sponsored Live Breaks and
other advertising solutions create authentic connections for brands
with creators and their fans across a broad spectrum of video game
entertainment. Mobcrush also owns and operates InPVP’s
Mineville, one of six official Microsoft Minecraft partner servers,
enjoyed by more than 22 million unique players annually. Through
its longstanding commitment to advancing the intersection of
gameplay, live streaming, and content creation, Mobcrush continues
to be a leading platform helping players and creators pursue their
passion and make a living while doing so.
Mobcrush's main office is located at 100
Wilshire Blvd., Suite 1200, Santa Monica, California, 90401, and
its telephone number is (424) 291-2103. Mobcrush's website address
is www.mobcrush.com.
Super League Gaming,
Inc.
We are a leading gaming community and content
platform that gives everyday gamers and creators multiple ways to
connect and engage with others while enjoying the video games they
love. Powered by patented, proprietary technology systems, Super
League offers players the ability to create gameplay-driven
experiences they can share with friends, the opportunity to watch
live streaming broadcasts and gameplay highlights across digital
and social channels, and the chance to compete in events and
challenges designed to celebrate victories and achievements across
multiple skill levels. With gameplay and content offerings
featuring more than a dozen of the top video game titles in the
world, Super League is building a broadly inclusive, global brand
at the intersection of gaming, experiences and entertainment.
Whether to access its expanding direct audience of young gamers,
creators and esports players, or to leverage the company’s
remote video production division, Virtualis Studios, third parties
ranging from consumer brands, video game publishers, professional
esports teams, traditional sports organizations, video content
producers, and more, are turning to Super League to provide
integrated solutions that drive business
growth.
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Our common stock is listed on the Nasdaq Capital
Market under the symbol "SLGG". We are subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”), and, as such, we file and furnish reports and
other information with the SEC from time to time. See the section
of this proxy statement entitled "Where You Can Find Additional
Information." For additional information with respect to the
Company, please see our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020, as filed with the SEC on March 19,
2021, and which is incorporated by reference herein and a copy of
which accompanies this proxy statement.
Super League is a Delaware corporation. The
Company's principal executive offices are located at 2912 Colorado
Avenue, Suite 203, Santa Monica, California, 90404, and its
telephone number is (802) 294-2754. Our website address is
www.superleague.com. The contents of the Company’s Internet
site are not incorporated by reference herein and are not deemed to
be part of this proxy statement.
The Merger and the Merger
Agreement (see pages 49 and 56)
We have entered into an Agreement and Plan of
Merger (the “Merger
Agreement”) pursuant to which it is contemplated that
Mobcrush will merge with and into our wholly owned subsidiary,
Merger Sub, and, if consummated, will result in Mobcrush becoming a
wholly owned subsidiary of Super League (the “Merger”).
Pursuant to the terms of the Merger Agreement,
we will issue approximately 12,582,204 shares of our common stock
to Mobcrush stockholders in consideration for the acquisition by
Merger Sub of all issued and outstanding securities of Mobcrush,
which will represent approximately 35% of our outstanding common
stock following the issuance, based on our issued and outstanding
common stock as of the Record Date.
The shares of common stock being issued to the
Mobcrush shareholders pursuant to the Merger Agreement are referred
to in this proxy statement as the “Merger
Consideration”. For a further discussion of the Merger
Agreement, see “The Merger
Agreement” beginning on page 56. A copy of the Merger
Agreement is attached to this proxy statement as Annex A.
Our Reasons for the Merger
(see pages 52-54)
We believe the
combination of Super League and Mobcrush brings together
industry-leading technology platforms and strengthens Super
League's position as a leading gaming community and content
platform, creating significantly enhanced scale and reach across
multiple platforms and user-bases. Mobcrush's services are
complementary to the Company's own offerings, strengthening the
Company's position within the industry. The combined company will
be a provider of video gaming and esports entertainment across
multiple platforms, offering greater access and broader
availability of service offerings to a combined user base of more
than 3.0 million per month, or 400,000 users per day. For a further
discussion of the reasons why we believe the Merger is in the best
interest of the Company and our stockholders, see
“Reasons for the
Merger” beginning on page
52.
Voting
Agreements
Pursuant to the Merger Agreement, certain
stockholders of Mobcrush and the Company (collectively, the
“Voting
Stockholders”) will enter into voting agreements
(collectively, the “Voting
Agreements”) pursuant to which the Voting Stockholders
will agree, among other things, to (i) vote in favor of the Merger
Agreement and the transactions contemplated thereby and (ii) be
bound by certain other covenants and agreements related to the
Merger. A form of the Voting Agreement is included as an exhibit to
the Merger Agreement, which is attached to this proxy statement as
Annex
B.
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|
Registration Rights
Agreement
At the closing of the Merger, the Company, Mike
Wann, and certain other holders of Mobcrush Preferred Stock (Mike
Wann and such holders of Mobcrush Preferred stock are collectively,
the "Rights Parties") will
enter into a registration rights agreement (the “Registration Rights Agreement”)
pursuant to which, among other matters, the Rights Parties will be
granted certain customary registration rights with respect to the
shares acquired pursuant to the Merger. A form of the Registration
Rights Agreement is included as an exhibit to the Merger Agreement,
which is attached to this proxy statement as Annex C.
Treatment of
Mobcrush Options (see page
55)
Immediately
prior to the closing of the Merger, we expect there will
be approximately 1,629,000 vested options and 1,687,000 unvested
options to acquire Mobcrush common stock outstanding. Immediately
prior to the effective time of the Merger, each vested option to
acquire shares of Mobcrush common stock will be exercised so that,
at the effective time of the Merger, shares of Mobcrush common
stock issued upon exercise of these vested options will receive
shares of Super League common stock issuable as Merger
Consideration.
Unvested
options to acquire shares of Mobcrush common stock that are
outstanding immediately prior to the effective time shall be
terminated, and a number of options to purchase shares of Super
League common stock will be issued to replace the cancelled options
in a manner consistent with options currently granted by Super
League under the 2014 Plan (the “Replacement Options”). Currently,
we expect to issue an aggregate total of approximately 500,000
Replacement Options upon closing of the Merger.
Conditions to Completion of
the Merger (see page 45)
Several conditions must be satisfied or waived
before the Company and Mobcrush complete the Merger, including, but
not limited to:
(i)
approval of the issuance of the Merger
Consideration at the Meeting, which is being presented to our
stockholders in Proposal No. 4, the Mobcrush Issuance Proposal,
beginning on page 46 of this proxy statement;
(ii)
approval of the Merger and Merger Agreement by
holders of a majority of Mobcrush’s outstanding voting
securities at an annual or special meeting of Mobcrush
stockholders, or by written consent;
(iii)
the execution and delivery of the Voting
Agreements by the Voting Stockholders;
(iv)
the execution and delivery of the Registration
Rights Agreement by all parties;
(v)
receipt of any required regulatory approvals,
including approval of the listing of the shares of common stock
issuable as Merger Consideration by the Nasdaq Stock
Market;
(vi)
the execution and delivery of receipt by each
party of the waivers, permits, consents, approvals or other
authorizations required to complete the Merger, as specified in the
Merger Agreement; and
(vii)
certain other customary
conditions.
Conduct of the
Company’s Business and Mobcrush’s Business Prior to
Closing (see page 56)
In the Merger Agreement, the Company and
Mobcrush have agreed that, between the date of the Merger Agreement
and the closing of the proposed Merger, each respective party will
continue to carry on their respective businesses in the ordinary
course and will work to preserve the attendant goodwill and assets
of their respective businesses.
|
|
Completion of the
Merger
It is currently anticipated that the Merger will
close as soon as possible after all requisite approvals are
obtained and all conditions have been satisfied, or where not
prohibited by applicable law, waived.
The Company’s Board of Directors reserves
the right to cancel or defer the timing of the Merger, even if the
Company’s stockholders vote to approve the Merger
Consideration Proposal and the other conditions to completion of
the Merger are satisfied or waived, if the Board of Directors
determines that the Merger is no longer advisable and in the best
interests of the Company and its stockholders.
Risk Factors (see page
58)
Before voting on any of the proposals described
in this proxy statement, you should carefully consider all of the
information contained in this proxy statement, as well as the
specific risk factors under the heading “Risk Factors” in this proxy
statement and the accompanying Annual Report on Form 10-K for the
fiscal-year ended December 31, 2020, filed with the SEC on March
19, 2021.
Opinion of the Financial Advisor for the
Company (see page 54)
In
considering whether to recommend approval of the issuance of the
Merger Consideration, the Board received an opinion of Economic
Partners on April 21, 2021, that the shares of the Company’s
common stock issuable as Merger Consideration was fair, from a
financial point of view, to the Company, as of the date of the
opinion.
The full text
of the written opinion of Economic Partners is attached to this
proxy statement at Annex D. You are encouraged to read the opinion
carefully and in its entirety for a description of the assumptions
made, procedures followed, matters considered and limitations on
the review undertaken. The opinion of Economic Partners was
delivered to the Board and addresses only the fairness, from a
financial point of view, to the Company of the shares of the
Company’s common stock issuable as Merger Consideration . The
opinion does not address any other aspect of the Merger, nor does
it constitute a recommendation to any stockholder as to how such
stockholder should vote or act with respect to any matters related
to the Merger or the Merger Agreement. You should carefully
consider the discussion of the analysis provided by Economic
Partners under the heading “Information About the Merger and Mobcrush
— Opinion of Economic Partners” beginning on
page 54.
Vote Required to Approve the
Issuance of the Shares (see page 46)
The Company’s Common Stock is listed on
the Nasdaq Capital Market (“Nasdaq”) and, as a result, the
Company is subject to Nasdaq’s Listing Rules, including
Nasdaq Listing Rules 5635(a) and 5635(b). Such rules require
stockholder approval for certain issuances of
securities.
Termination of the Merger
Agreement (see page 56)
The Merger Agreement contains certain customary
termination rights by either the Company or Mobcrush, including if
the Merger is not consummated by June 30, 2021.
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|
Effect of the Merger on the
Company’s Stockholders (see page 46)
Upon the closing of the Merger, the
Company’s stockholders would own approximately 65% of the
voting power of the Company, with the previous Mobcrush
stockholders owning the remaining 35% of the voting power of the
Company.
Composition of the
Company’s Board of Directors
At the closing of the Merger, the Board will
consist of eight directors and will be comprised of six members
designated by Super League and two members designated by Mobcrush
as follows: (i) Mike Wann and (ii) one additional member to be
mutually agreed upon by Mike Wann and the other members of Super
League’s Board of Directors, for which such director must
meet the requirements of an "independent director" pursuant to
Nasdaq rules and regulations.
Litigation Relating to the
Merger
As of April 30, 2021, no complaints had been
filed by purported Super League stockholders challenging the
Merger, and no complaints had been filed by purported Mobcrush
stockholders challenging the Merger.
Financial Statements of Super
League
For the historical audited financial statements
of the Company for its fiscal years ended December 31, 2020 and
2019, please see Super League’s Annual Report on Form 10-K
for the year ended December 31, 2020, which is incorporated by
reference herein, and is included as a part of the proxy materials
made available to stockholders for purposes of the
Meeting.
Financial Statements of
Mobcrush (see page E-1)
For the audited financial statements of Mobcrush
for its fiscal years ended December 31, 2020 and 2019, see
“Index to Mobcrush's
Consolidated Financial Statements” as Annex E.
Pro Forma Financial
Statements of the Combined Company (See Annex
F)
For the pro forma financial statements of the
combined company in connection with the Merger, see
“Unaudited Pro Forma
Condensed Combined Financial Statements”
as Annex
F.
Other Matters to be Presented
to Stockholders at the Meeting (see page 72)
In addition to the Mobcrush Issuance Proposal,
holders of Super League common stock as of the Record Date will be
asked to consider and vote on the following
proposals:
●
to elect two Class
I director nominees to the Company’s Board, each for
three-year terms;
●
to approve the 2014
Plan Amendment, as further described in the 2014 Plan
Proposal;
●
to ratify the
appointment of Baker Tilly US, LLP as the Company’s
registered public accounting firm for the year ending December 31,
2021; and
●
to approve the
Adjournment Proposal.
Approval of the
Mobcrush Issuance Proposal is required for completion of the
Merger.
Recommendation of the Company
Board of Directors
The Company’s Board of Directors has
unanimously determined that issuance of the Merger Consideration in
connection with the completion of the Merger is in the best
interests of the Company and its stockholders and has approved the
Merger, the Merger Agreement, and the Mobcrush Issuance Proposal
set forth in this proxy statement. The Board of Directors
recommends that the Company stockholders vote “FOR” the Mobcrush Issuance
Proposal and the other proposals set forth in this proxy
statement.
Stockholders Entitled to Vote
(see page 5)
The Board of Directors has fixed the close of
business on March 30, 2021 as the record date for the determination
of stockholders entitled to receive notice of, and to vote at, the
Annual Meeting.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
We make forward-looking statements in this Proxy
Statement within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements relate to
expectations for future financial performance, business strategies
or expectations for our business. These statements may be preceded
by, followed by or include the words “may,”
“might,” “will,” “will likely
result,” “should,” “estimate,”
“plan,” “project,” “forecast,”
“intend,” “expect,”
“anticipate,” “believe,”
“seek,” “continue,” “target” or
similar expressions.
These forward-looking statements are based on
information available to us as of the date they were made, and
involve a number of risks and uncertainties which may cause them to
turn out to be wrong. Accordingly, forward-looking statements
should not be relied upon as representing our views as of any
subsequent date, and we do not undertake any obligation to update
forward-looking statements to reflect events or circumstances after
the date they were made, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws. As a result of a number of known and
unknown risks and uncertainties, our actual results or performance
may be materially different from those expressed or implied by
these forward-looking statements. Some factors that could cause
actual results to differ include:
●
overall
strength and stability of general economic conditions and of the
electronic video game sports (“esports”) industry in the United
States and globally;
●
the impact
of the recent coronavirus (COVID-19) pandemic and our response to
it;
●
failure to
consummate or realize the expected benefits of the acquisition of
Mobcrush Streaming, Inc.;
●
changes in
consumer demand for, and acceptance of, our services and the games
that we license for our tournaments and other experiences, as well
as online gaming in general;
●
changes in
the competitive environment, including adoption of technologies,
services and products that compete with our
own;
●
competition
and the ability of our business to grow and manage growth
profitably;
●
our ability
to generate consistent revenue;
●
our ability
to effectively execute our business plan;
●
changes in
the price of streaming services, licensing fees, and network
infrastructure, hosting and maintenance;
●
changes in
laws or regulations governing our business and
operations;
●
our ability
to maintain adequate liquidity and financing sources and an
appropriate level of debt on terms favorable to
us;
●
our ability
to effectively market our services;
●
costs and
risks associated with litigation;
●
our ability
to obtain and protect our existing intellectual property
protections, including patents, trademarks and
copyrights;
●
our ability
to obtain and enter into new licensing agreements with game
publishers and owners;
●
changes in
accounting principles, or their application or interpretation, and
our ability to make estimates and the assumptions underlying the
estimates, which could have an effect on
earnings;
●
interest
rates and the credit markets;
●
our ability
to consummate accretive acquisitions of third parties;
and
●
other risks
and uncertainties described in the "Risk Factors" section of this proxy
statement, as well as our Annual Report on Form 10-K for
the year ended December 31, 2020, which is incorporated herein by
reference.
MATTERS TO BE CONSIDERED AT THE ANNUAL
MEETING
PROPOSAL NO.
1
ELECTION OF TWO CLASS I
DIRECTOR NOMINEES
General
Our Amended and Restated Bylaws
(“Bylaws”)
provide that the number of directors that
constitute the entire Board of Directors (the
“Board”)
shall be fixed from time to time by resolution adopted by a
majority of the entire Board, but that in no event shall the number
be less than one. Our Board currently consists of the following six
persons:
|
Ann Hand
Chief Executive Officer,
President and Chair
|
|
Jeff Gehl
Independent
Director
|
Kristin
Patrick*
Independent
Director
|
|
Mark Jung
Independent
Director
|
David
Steigelfest*
Chief Product Officer,
Corporate Secretary and Director
|
|
Michael
Keller
Independent
Director
|
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____________________
|
*
|
Director Nominees at the Annual
Meeting
|
At our 2020 annual meeting of stockholders, our
stockholders approved, and we effected an amendment to our Amended
and Restated Certificate of Incorporation (our “Charter”) to classify our Board
of Directors into three classes with staggered three-year terms
(with the exception of the expiration of the initial Class I and
Class II directors). Pursuant to this amendment to our Charter, our
Board is now classified into three classes with staggered
three-year terms (with the exception of the initial Class I and
Class II directors), designated as follows:
●
Class I, comprised of two directors,
Kristin Patrick and David Steigelfest, whose terms expire at the
Annual Meeting and each of whom have been nominated by our
Nominating and Governance Committee for re-election as the Class I
directors at the Annual Meeting;
●
Class II, comprised of two directors,
Jeff Gehl and Michael Keller (with their initial terms expiring at
our 2022 annual meeting of stockholders); and
●
Class III, comprised of two directors,
Ann Hand and Mark Jung (with their initial terms expiring at our
2023 annual meeting of stockholders).
Kristin Patrick and David Steigelfest, each of
whom are currently serving terms which expire at our Annual
Meeting, have been nominated by our Nominating and Governance
Committee for election as the Class I directors at the Annual
Meeting. If any of the director nominees is unable or unwilling to
serve as a nominee for the office of director at the date of the
Annual Meeting or any postponement or adjournment thereof, the
proxies may be voted for a substitute nominee, designated by the
proxy holders or by the present Board to fill such vacancy, or for
the balance of those nominees named without nomination of a
substitute, and the Board may be reduced accordingly. The
Board has no reason to believe that any of such nominees will be
unwilling or unable to serve if elected as a
director.
Required Vote and
Recommendation
At the recommendation of the Nominating and
Corporate Governance Committee, the Board has nominated Kirstin
Patrick and David Steigelfest for re-election as
Class I directors, each for a three-year
term.
Ms. Patrick and Mr. Steigelfest have each
consented to being named as a director nominee in this proxy
statement and agreed to serve if re-elected. Set forth below
is information about the two director nominees, including each such
individual’s principal occupation, business experience and
qualifications that led the Company’s Board of Directors to
conclude that each such director nominee should serve on the Board
of Directors.
|
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The Board of
Directors unanimously recommends that you vote FOR Ms. Patrick and
Mr. Steigelfest.
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Director
Biographies
The following section sets forth certain
information regarding the nominees for election as directors and
the standing directors of the Company.
Director Nominees with Terms Expiring at the
Annual Meeting
Kristin
Patrick
Independent
Director
Ms. Patrick has served as a director on our
Board since November 2018, and currently serves as President and
Chief Marketing Officer of Eros Innovations, a position she has
held since January 2019. Previously, Ms. Patrick served as Global
Chief Marketing Officer of Soda Brand at Pepsico, Inc., a position
she has held from June 2013 to January 2019. Prior to her time with
Pepsico, Inc., Ms. Patrick served as Chief Marketing Officer of
Playboy Enterprises, Inc. from November 2011 to June 2013, and as
Executive Vice President of Marketing Strategy for William Morris
Endeavor from January 2010 to November 2011. Ms. Patrick has also
held senior marketing positions at Liz Claiborne's Lucky
Brand, Walt Disney Company, Calvin Klein, Revlon and NBC Universal
and Gap, Inc. A Brandweek "Next Gen Marketer" and Reggie Award
recipient, Ms. Patrick received her Bachelor of Arts from Emerson
College and J.D. from Southwestern University.
As we continue to expand the visibility of our
Brand, we believe Ms. Patrick will provide instrumental input on
our marketing efforts, and will assist the Board and management
with initiating marketing programs to enable us to meet our
short-term and long-term growth objectives. Ms. Patrick also serves
as a member of the Board’s Compensation Committee and the
Nominating and Corporate Governance Committee.
David
Steigelfest
Chief Product Officer,
Director
Mr. Steigelfest co-founded the Company in 2014
and has served as a director on our Board since that time. In
addition, Mr. Steigelfest served has our Chief Product Officer
since May 2018. An attorney by education, David has served as an
executive and entrepreneur in the digital and technology space for
more than 20 years. Prior to co-founding the Company in 2014, Mr.
Steigelfest founded rbidr LLC, a media and technology startup and a
pioneer in yield management and price optimization software, where
he served as Chief Executive Officer from 2008 to 2013. From 2013
to 2014, Mr. Steigelfest worked for Cosi Consulting, where he
provided management consulting services ranging from complex
project management, PMO, software design, 3rd party software
integration and migration, enterprise content management, data
management and system-based regulatory compliance to various
Fortune 500 companies. From 2001 to 2008, Mr. Steigelfest worked on
Wall Street at Deutsche Bank, where he oversaw various
multi-million-dollar change management projects. In addition, Mr.
Steigelfest previously served as Vice President of eCommerce at
Starguide Digital Networks, where he had responsibility over the
streaming media portal, CoolCast. CoolCast utilized satellite
technology to distribute high quality streaming content into
multi-cast enabled networks bypassing Internet bottlenecks. Prior
to Starguide, Mr. Steigelfest served as the Director of Product
Management at Gateway Computers, where he oversaw Gateway.com and
Gateway’s business-to-business extranet system, eSource. In
addition, Mr. Steigelfest has consulted for companies of all sizes
throughout his career addressing a wide variety of IT and business
challenges, including complex business process change, software
implementation and e-commerce. Mr. Steigelfest received a
Bachelor of Arts in International Relations and Psychology from
Syracuse University, and a JD with an emphasis in business
transactions and business law from Widener University School of
Law.
As a co-founder of the Company and a lead
developer of the Company’s platform, Mr. Steigelfest provides
the Board with critical insight into the technological aspects of
the Company’s operations and the ongoing development of the
platform, attributes that make Mr. Steigelfest a particularly
valued member of the Board.
Continuing
Directors
Ann Hand
Chief Executive Officer,
President, Chair of the Board
Ms. Hand has served as our Chief Executive
Officer, President and Chair of our Board since June 2015. Over the
past 20 years, Ms. Hand has served as a market-facing executive
with a track record in brand creation and turn- around with notable
delivery at the intersection of social impact with consumer trends
and technology to create bold offers, drive consumer preference and
deliver bottom line results. Prior to joining the Company, from
2009 to 2015, Ms. Hand served as Chief Executive Officer and as a
director of Project Frog, a venture-backed firm with a mission to
democratize healthy, inspired buildings that are better, faster,
greener, and more affordable than traditional construction. From
1998 through 2008, Ms. Hand served in various senior executive
positions with BP plc, including Senior Vice President, Global
Brand Marketing & Innovation from 2005 to 2008, during which
time she led many award-winning integrated marketing campaigns and
oversaw the entire brand portfolio of B2C and B2B brands, including
BP, Castrol, Arco, am/pm and Aral. Additionally, she served as
Chief Executive, Global Liquefied Gas Business Unit with full
P&L accountability across 15 countries and 3,000 staff,
covering operations, logistics, sales and marketing with over $3
billion in annual revenue. Ms. Hand was recognized by Goldman Sachs
- “100 Most Intriguing Entrepreneurs” in 2014, by
Fortune - “Top 10 Most Powerful Women Entrepreneurs” in
2013, and Fast Company – “100 Most Creative
People” in 2011. Ms. Hand earned a Bachelor of Arts in
Economics from DePauw University, an MBA from Northwestern’s
Kellogg School of Management, and completed executive education at
Cambridge, Harvard and Stanford
Universities.
Ms. Hand’s extensive background in
corporate leadership and her practical experience in brand creation
and turn- around directly align with the Company’s focus, and
ideally position her to make substantial contributions to the
Board, both as Chair of the Board and as the leader of the
Company’s executive team.
Jeff Gehl
Independent
Director
Mr. Gehl has served as a director on our Board
since 2015. Mr. Gehl is a Co-Owner at VLOC LLC. Since 2001, Mr.
Gehl has been a Managing Partner of RCP Advisors. Mr. Gehl is
responsible for leading RCP's client relations function and
covering private equity fund managers in the Western United States.
He is a General Partner of BKM Capital Partners, L.P. Previously,
Mr. Gehl was an Advisor at Troy Capital Partners until 2018.
In addition, Mr. Gehl founded and served as Chairman and Chief
Executive Officer of MMI, a technical staffing company, and
acquired Big Ballot, Inc., a sports marketing firm. He currently
serves as a Director of P10 Industries, Inc., a Director of
Veritone, Inc. (NASDAQ: VERI) and an Advisory Board member of
several of RCP’s underlying funds, as well as Accel-KKR and
Seidler Equity Partners. Mr. Gehl was the Manager of VLOC. Mr. Gehl
received the 1989 “Entrepreneur of the Year” award from
University of Southern California’s Entrepreneur Program. He
obtained a Bachelor of Science in Business Administration from the
University of Southern California's Entrepreneur
Program.
Mr. Gehl’s wide range of experience
in financing,
developing and managing high-growth technology companies, as well
as his entrepreneurial experience, has considerably
broadened the Board’s perspective, particularly as the
Company engaged in capital raising activities to fund the early
stages of its development. Mr. Gehl also serves as our
Board-designated “audit committee financial expert,” as
the Chair of the Board’s Audit Committee and as a member of
the Nominating and Corporate Governance
Committee.
Mark Jung
Independent
Director
Mr. Jung has served as a director on our Board
since July 2019. Mr. Jung currently serves as an independent
consultant to multiple media and technology companies. Previously,
Mr. Jung served on the board of directors of Accela, a leading
provider of cloud-based productivity and civic engagement solutions
for government, from March 2016 to April 2019. During his tenure on
the board of Accel, Mr. Jung also held executive management
positions for Accela, including as Chairman and interim Chief
Executive Officer from August 2016 to March 2017 and from April
2018 to October 2018, as well as serving as Executive Chairman from
March 2017 to April 2018. Prior to Accela, Mr. Jung served as
Executive Chairman of OL2, a leading cloud solutions provider for
gaming and graphics-rich applications, from May 2013 to March 2015.
Currently, Mr. Jung serves as a member of the board of
directors of Millennium Trust Company, a leading financial services
company offering niche alternative custody solutions to
institutions, advisors and individuals; lnMar, a provider of
intelligent commerce network solutions; Samba Safety, a provider of
driver risk management solutions; and ReadyUp, a provider of an
esports platform for player networking and team management.
Mr. Jung graduated with a BS in engineering from Princeton
University and received his MBA from Stanford University Graduate
School of Business.
With over three decades of
experience serving as a C-suite executive at several prominent
companies within the digital entertainment and video game
industries, and extensive public and private board member
experience, we believe Mr. Jung provides our Board with invaluable
knowledge and insight regarding key strategies and best practices
for building gaming communities and creating a demand for
gaming-related content in the market that can accelerate our
audience development and content monetization strategies, and will
also share key learnings with Super League gained from his
experience navigating the transition of companies from private to
public. Mr. Jung also serves as Chair of the Board’s
Compensation Committee and as a member of the Audit
Committee.
Michael
Keller
Independent
Director
Mr. Keller has served as a director on our Board
since November 2018. From July 2014 to February 2018, Mr. Keller
served as an advisor and board member for Cake Entertainment, an
independent entertainment company specializing in the production,
distribution, development, financing and brand development of
kids’ and family properties, as managing director of
Tiedemann Wealth Management from March 2008 to December 2013, as
co-founder and principal of Natrica USA, LLC from August 2006 to
March 2008 and as Senior Vice President of Brown Brothers Harriman
Financial Services from July 1996 to June 2006. Mr. Keller earned a
Bachelor of Arts in History from Colby College.
With over 15 years of experience in asset and
portfolio management, and experience in helping companies gain
exposure for their products and services, including in the
entertainment industry, we believe Mr. Keller provides our Board
with useful insight that will help us as we allocate resources to
expand the utility of our platform and other technologies. Mr.
Keller also serves as Chair of the Board’s Nominating and
Corporate Governance Committee and as a member of the Audit
Committee and the Compensation Committee.
Board Composition and
Election of Directors
Board
Composition
Our Board currently consists of the following
six members:
|
Name
|
Age
|
Positions
|
Class
|
Director Since
|
Committee Memberships
|
|
|
A
|
CP
|
NCG
|
|
Ann
Hand
|
52
|
Chief Executive
Officer, President, Chair
|
Class
III
|
2015
|
|
|
|
|
Jeff
Gehl
|
52
|
Independent
Director
|
Class
II
|
2015
|
C
|
|
M
|
|
Mark
Jung
|
58
|
Independent
Director
|
Class
III
|
2019
|
M
|
C
|
|
|
Michael
Keller
|
50
|
Independent
Director
|
Class
II
|
2018
|
M
|
M
|
C
|
|
Kristin
Patrick*
|
50
|
Independent
Director Nominee
|
Class
I
|
2018
|
|
M
|
M
|
|
David
Steigelfest*
|
53
|
Chief Product
Officer, Corporate Secretary and Director Nominee
|
Class
I
|
2014
|
|
|
|
____________________
A
– Audit Committee
C – Committee
Chair
CP – Compensation
Committee
NCG – Nominating and Corporate
Governance Committee
M
– Committee Member
Our Board is authorized to appoint persons to
the offices of Chair of the Board of Directors, Vice Chair of the
Board of Directors, Chief Executive Officer, President, one or more
Vice Presidents, Chief Financial Officer, Treasurer, one or more
Assistant Treasurers, Secretary, one or more Assistant Secretaries,
and such other officers as may be determined by the Board. The
Board may also empower the Chief Executive Officer, or in absence
of a Chief Executive Officer, the President, to appoint such other
officers and agents as our business may require. Any number of
offices can be held by the same person.
Director
Independence
Our Board has determined that the following four
of our six directors qualify as independent directors, as
determined in accordance with the Listing Rule 5605 of the Nasdaq
Stock Market: Messrs. Gehl, Keller and Jung, and Mr. Patrick.
Nasdaq Listing Rule 5605 includes a series of objective tests,
including that the director is not, and has not been for at least
three years, one of our employees and that neither the director nor
any of his family members has engaged in various types of business
dealings with us. In addition, as required by Nasdaq Stock Market
listing rules, our Board has made a subjective determination as to
each independent director that no relationships exist, which, in
the opinion of our Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. In making these determinations, our Board reviewed and
discussed information provided by the directors and us with regard
to each director’s business and personal activities and
relationships as they may relate to us and our
management.
Ms. Hand, our President and Chief Executive
Officer, is a first cousin of Mr. Gehl, a member of our Board.
There are no other family relationships among any of our directors
or executive officers.
Role of Board in Risk
Oversight Process
Our Board has responsibility for the oversight
of the Company’s risk management processes and, either as a
whole or through its committees, regularly discusses with
management our major risk exposures, their potential impact on our
business, and the steps we take to manage them. The risk oversight
process includes receiving regular reports from Board committees
and members of senior management to enable our Board to understand
our risk identification, risk management and risk mitigation
strategies with respect to areas of potential material risk,
including operations, finance, legal, regulatory, strategic and
reputational risk. Cybersecurity risk is a key consideration in our
operational risk management capabilities. We are in the process of
instituting a formal information security management program, which
will be subject to oversight by, and reporting to, our Board. Given
the nature of our operations and business, cybersecurity risk may
manifest itself through various business activities and channels
and is thus considered an enterprise-wide risk which is subject to
control and monitoring at various levels of management throughout
the business. Our Board will oversee and review reports on
significant matters of corporate security, including cybersecurity.
In addition, we maintain specific cyber insurance through our
corporate insurance program, the adequacy of which is subject to
review and oversight by our Board.
Our audit committee reviews information
regarding liquidity and operations and oversees our management of
financial risks. Periodically, our audit committee reviews our
policies with respect to risk assessment, risk management, loss
prevention and regulatory compliance. Oversight by the audit
committee includes direct communication with our external auditors,
and discussions with management regarding significant risk
exposures and the actions management has taken to limit, monitor or
control such exposures. Our compensation committee is responsible
for assessing whether any of our compensation policies or programs
has the potential to encourage excessive risk-taking. Matters of
significant strategic risk are considered by our Board as a
whole.
Board Committees and
Independence
Our Board has established the following three
standing committees: audit committee, compensation committee, and
nominating and governance committee. Our Board has adopted written
charters for each of these committees, copies of which are
available under the Corporate Governance section of our website at
http://ir.superleague.com.
Audit
Committee
Our audit committee is currently comprised of
Jeff Gehl, who serves as the committee chair, Michael Keller and
Mark Jung, each of whom are independent directors as determined in
accordance with the rules of the Nasdaq Stock Market. The audit
committee’s main function is to oversee our accounting and
financial reporting processes and the audits of our financial
statements. The Audit Committee met four times during the year
ended December 31, 2020. Pursuant to its charter, the audit
committee’s responsibilities include, among other
things:
●
appointing, compensating,
retaining, evaluating, terminating, and overseeing our independent
registered public accounting firm;
●
reviewing
with our independent registered public accounting firm the scope
and results of their audit;
●
approving
the audit and non-audit services to be performed by our independent
registered public accounting firm;
●
evaluating the qualifications, independence and
performance of our independent registered public accounting
firm;
●
reviewing
the design, implementation, adequacy and effectiveness of our
internal accounting controls and our critical accounting
policies;
●
reviewing and
discussing our annual audited financial statements and quarterly
financial statements with management and the independent auditor,
including our disclosures under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” prior
to the release of such information;
●
reviewing
and reassessing the adequacy of the audit committee’s
charter, at least annually;
●
reviewing, overseeing and monitoring the
integrity of our financial statements and our compliance with legal
and regulatory requirements as they relate to financial statements
or accounting matters;
●
reviewing
on a periodic basis, or as appropriate, our policies with respect
to risk assessment and management, and our plan to monitor, control
and minimize such risks and exposures, with the independent public
accountants, internal auditors, and management;
●
reviewing
any earnings announcements and other public announcements regarding
our results of operations;
●
preparing
the report that the SEC requires in our annual proxy statement,
upon becoming subject to the Exchange Act;
●
complying
with all preapproval requirements of Section 10A(i) of the Exchange
Act and all SEC rules relating to the administration by the audit
committee of the auditor engagement to the extent necessary to
maintain the independence of the auditor as set forth in 17 CFR
Part 210.2-01(c)(7);
●
administering the policies and procedures for
the review, approval and/or ratification of related party
transactions involving the Company or any of its subsidiaries;
and
●
making
such other recommendations to the Board on such matters, within the
scope of its function, as may come to its attention and which in
its discretion warrant consideration by the
Board.
Our Board has affirmatively determined that all
members of our audit committee meet the requirements for
independence and financial literacy under the applicable rules and
regulations of the SEC and the Nasdaq Stock Market. Our Board has
determined that Mr. Gehl qualifies as an “audit committee
financial expert” as defined by applicable SEC rules and has
the requisite financial sophistication as defined under the
applicable Nasdaq Stock Market rules and regulations. The audit
committee operates under a written charter that satisfies the
applicable standards of the SEC and the Nasdaq Stock
Market.
Compensation
Committee
Our compensation committee is currently
comprised of Mark Jung, who serves as the committee chair, Kristin
Patrick and Michael Keller, each of whom are independent directors
as determined in accordance with the rules of the Nasdaq Stock
Market. The compensation committee’s main function is to
assist our Board in the discharge of its responsibilities related
to the compensation of our executive officers. The compensation
committee met five times during the year ended December 31, 2020.
Pursuant to its charter, the compensation committee is primarily
responsible for, among other things:
●
reviewing
our compensation programs and arrangements applicable to our
executive officers, including all employment-related agreements or
arrangements under which compensatory benefits are awarded or paid
to, or earned or received by, our executive officers, and advising
management and the Board regarding such programs and
arrangements;
●
reviewing
and recommending to the Board the goals and objectives relevant to
CEO compensation, evaluating CEO performance in light of such goals
and objectives, and determining CEO compensation based on the
evaluation;
●
retaining, reviewing and assessing the
independence of compensation advisers;
●
monitoring issues associated with CEO succession
and management development;
●
overseeing and administering our equity
incentive plans;
●
reviewing
and making recommendations to our Board with respect to
compensation of our executive officers and senior
management;
●
reviewing
and making recommendations to our Board with respect to director
compensation;
●
endeavoring to ensure that our executive
compensation programs are reasonable and appropriate, meet their
stated purpose (which, among other things, includes rewarding and
creating incentives for individuals and Company performance), and
effectively serve the interests of the Company and our
stockholders; and
●
upon
becoming subject to the Exchange Act, preparing and approving an
annual report on executive compensation and such other statements
to stockholders which are required by the SEC and other
governmental bodies.
Nominating
and Governance Committee
Our nominating and governance committee is
currently comprised of Michael Keller, who serves as the
committee chair, Kristin Patrick and Jeff Gehl, each of whom are
independent directors as determined in accordance with the rules of
the Nasdaq Stock Market. The Nominating and Governance Committee
met three times during the year ended December 31, 2020. Pursuant
to its charter, the nominating and governance committee is
primarily responsible for, among other
things:
●
assisting
the Board in identifying qualified candidates to become directors,
and recommending to our Board nominees for election at the next
annual meeting of stockholders;
●
leading
the Board in its annual review of the Board’s
performance;
●
recommending to the Board nominees for each
Board committee and each committee chair;
●
reviewing
and overseeing matters related to the independence of Board and
committee members, in light of independence requirement of the
Nasdaq Stock Market and the rules and regulations of the
SEC;
●
overseeing the process of succession planning of
our CEO and other executive officers; and
●
developing and recommending to the Board
corporate governance guidelines, including our Code of Business
Conduct, applicable to the Company.
Board
Diversity
Our
nominating and governance committee is responsible for reviewing
with the Board, on an annual basis, the appropriate
characteristics, skills and experience required for the Board as a
whole and its individual members. In evaluating the suitability of
individual candidates (both new candidates and current members),
the nominating and governance committee, in recommending candidates
for election, and the Board, in approving (and, in the case of
vacancies, appointing) such candidates, will take into account many
factors, including the following:
●
personal
and professional integrity, ethics and values;
●
experience in corporate management, such as
serving as an officer or former officer of a publicly-held
company;
●
experience as a board member or executive
officer of another publicly-held company;
●
strong
finance experience;
●
diversity
of expertise and experience in substantive matters pertaining to
our business relative to other board members;
●
diversity
of background and perspective, including, but not limited to, with
respect to age, gender, race, place of residence and specialized
experience;
●
experience relevant to our business industry and
with relevant social policy concerns; and
●
relevant
academic expertise or other proficiency in an area of our business
operations.
Currently, our Board evaluates each individual
in the context of the Board as a whole, with the objective of
assembling a group that can best maximize the success of the
business and represent stockholder interests through the exercise
of sound judgment using its diversity of experience in these
various areas.
Compensation Committee
Interlocks and Insider Participation
None of the members of our compensation
committee, at any time, have been one of our officers or employees.
None of our executive officers currently serves, or in the past
year has served, as a member of the board of directors or
compensation committee of any other entity that has one or more
executive officers on our Board of Directors or compensation
committee.
Our Board’s Leadership
Structure
Our Board has discretion to determine whether to
separate or combine the roles of Chair and Chief Executive Officer.
Ms. Hand, has served in both roles since 2015, and our Board
continues to believe that her combined role is most advantageous to
the Company and its stockholders. Ms. Hand possesses in-depth
knowledge of the issues, opportunities and risks facing us, as well
as our business and our industry and is best positioned to fulfill
the Chair’s responsibility to develop meeting agendas that
focus the Board’s time and attention on critical matters and
to facilitate constructive dialogue among Board members on
strategic issues.
In addition to Ms. Hand’s leadership, the
Board maintains effective independent oversight through a number of
governance practices, including, open and direct communication with
management, input on meeting agendas, and regular executive
sessions.
Code of Business Conduct and
Ethics
We have adopted
a Code of Business Conduct and Ethics applicable to our employees,
officers and directors. We provide our Code of Business
Conduct and Ethics under the Corporate Governance section of our
website at http://ir.superleague.com. The
reference to our website address does not constitute incorporation
by reference of the information contained at or available through
our website, and you should not consider it to be a part of this
prospectus. We intend to disclose any future amendments to
certain provisions of our Code of Business Conduct and Ethics, or
waivers of these provisions, on our website or in our filings with
the SEC under the Exchange Act.
Limitation of Liability and
Indemnification
Our Charter, and our Bylaws provide the
indemnification of our directors and officers to the fullest extent
permitted under the Delaware General Corporation Law
(“DGCL”). In
addition, the Charter provides that our directors shall not be
personally liable to us or our shareholders for monetary damages
for breach of fiduciary duty as a director and that if the DGCL is
amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of
our directors shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
As permitted by the DGCL, we have entered into
or plan to enter into separate indemnification agreements with each
of our directors and certain of our officers that require us, among
other things, to indemnify them against certain liabilities which
may arise by reason of their status as directors, officers or
certain other employees. We expect to obtain and maintain insurance
policies under which our directors and officers are insured, within
the limits and subject to the limitations of those policies,
against certain expenses in connection with the defense of, and
certain liabilities that might be imposed as a result of, actions,
suits or proceedings to which they are parties by reason of being
or having been directors or officers. The coverage provided by
these policies may apply whether or not we would have the power to
indemnify such person against such liability under the provisions
of the DGCL.
We believe that these provisions and agreements
are necessary to attract and retain qualified persons as our
officers and directors. At present, there is no pending litigation
or proceeding involving our directors or officers for whom
indemnification is required or permitted, and we are not aware of
any threatened litigation or proceeding that may result in a claim
for indemnification.
Stockholder
Communications
If you wish to communicate with the Board of
Directors, you may send your communication in writing
to:
Super League Gaming, Inc.
2912 Colorado Avenue, Suite
#203
Santa Monica, California
90404
Attn: Corporate Secretary
You must include your name and address in the
written communication and indicate whether you are a stockholder of
the Company. Our Corporate Secretary will review any communication
received from a stockholder, and all material and appropriate
communications from stockholders will be forwarded to the
appropriate director or directors or committee of the Board of
Directors based on the subject matter.
Section 16(a) Beneficial
Ownership Reporting Compliances
Section 16(a) of the Exchange Act requires our
officers, directors, and persons who beneficially own more than 10%
of our common stock to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and
greater-than-ten-percent shareholders are also required by the SEC
to furnish us with copies of all Section 16(a) forms that they
file.
Based solely on a review of copies of such
reports furnished to our Company and representation that no other
reports were required during the fiscal year ended December 31,
2020, we believe that all persons subject to the reporting
requirements pursuant to Section 16(a) filed the required reports
on a timely basis with the Securities and Exchange
Commission.
NON-EXECUTIVE DIRECTOR COMPENSATION
On January 31, 2019, and as amended on August
13, 2019, effective July 1, 2019, our Board adopted a director
compensation plan for our non-employee directors, the details of
which are presented in the table below. We do not
provide deferred compensation or retirement plans
for non-employee directors.
Schedule of Director
Fees
|
Compensation
Element
|
|
|
|
Annual Retainer
|
$25,000(3)
|
$60,000(4)
|
|
Audit Committee Chair
|
$15,000
|
$-
|
|
Compensation Committee Chair
|
$10,000
|
$-
|
|
Nominating and Governance Committee
Chair
|
$5,000
|
$-
|
|
Audit and Nominating and Governance Committee
Member
|
$5,000
|
$-
|
|
Compensation Committee
Member
|
$3,500
|
$-
|
|
(1)
|
Cash compensation is payable in equal
installments on a quarterly basis; provided, however, that no monthly cash retainer
will be paid after any termination of service.
|
|
(2)
|
Equity awards will be issuable in the form
of restricted stock units (“RSUs”). On the date of the
Company’s annual meeting of stockholders, each director will
receive RSUs at a per share price equal to the closing price of the
Company’s common stock on the grant date, which RSU will
become fully vested on the one-year anniversary of the initial
grant date.
|
|
(3)
|
Any new non-employee director appointed to
the Board will receive cash compensation equal to a prorated
portion of the annual retainer amount.
|
|
(4)
|
Any new non-employee director appointed to the Board
will receive RSUs having a grant date value equal to a prorated
portion of annual RSU award amount, which RSUs will become fully
vested on the earlier of (i) the one-year anniversary of the
initial grant date or (ii) the next annual meeting of the
Company’s
stockholders.
|
2020 Summary Table of
Director Compensation
The following table sets forth the compensation
awarded to, earned by, or paid to each person who served as a
non-employee director during the fiscal year ended December 31,
2020:
|
Name
|
Fees Earned
or Paid
in Cash ($)
|
|
|
|
|
Current
Directors
|
|
|
|
|
|
Jeff Gehl(2)
|
$40,000
|
$86,000
|
$–
|
$126,000
|
|
Mark Jung(3)(4)
|
$40,000
|
$72,000
|
$90,000
|
$202,000
|
|
Michael Keller(5)
|
$38,000
|
$86,000
|
$–
|
$124,000
|
|
Kristian Patrick(6)
|
$28,000
|
$86,000
|
$–
|
$114,000
|
|
Former
Directors
|
|
|
|
|
|
Robert Stewart(7)
|
$7,000
|
$–
|
$–
|
$7,000
|
|
(1)
|
The following table presents: (a) the
aggregate number of restricted stock units (“RSUs”) granted during the year
ended December 31, 2020, the grant date fair values of which are
reflected in the table above; (b) the aggregate number of
outstanding unvested RSUs at December 31, 2020; and
(c) the aggregate number of outstanding options (both vested
and unvested) at December 31, 2020. All RSUs granted during
the year ended December 31, 2020 vest in equal monthly installments
over a 48-month period beginning on the grant
date.
The grant date fair value
is calculated in accordance with the FASB’s Accounting
Standards Codification Topic 718, Compensation – Stock
Compensation (“ASC
718”). The methodology
used to calculate the estimated value of the equity awards granted
is set forth under Note 2 and Note 8 to the audited Financial
Statements as of and for the years ended December 31, 2020 and
2019, included in our Annual Report on Form 10-K for the year ended
December 31, 2020, which is incorporated by reference into this
prospectus. These amounts do not represent the actual value, if
any, that may be realized by the individuals listed in the
table.
|
|
|
Restricted Stock Awards
Listed in the Table Above
|
Aggregate Awards as
of
December 31,
2020
|
|
Name
|
Number of
Unvested Shares of Restricted
Stock
|
Number of Vested Shares of
Restricted Stock
|
Aggregate Number of Unvested
Restricted Stock Awards Outstanding
|
Aggregate Number of Options
Outstanding
|
|
Current
Directors
|
|
|
|
|
|
Gehl
|
36,344
|
-
|
36,344
|
25,001
|
|
Jung
|
30,112
|
-
|
30,112
|
-
|
|
Keller
|
36,344
|
-
|
36,344
|
-
|
|
Patrick
|
36,344
|
-
|
36,344
|
-
|
|
Former
Directors
|
|
|
|
|
|
Stewart
|
-
|
-
|
-
|
-
|
|
(2)
|
Amounts paid to Mr. Gehl consist of his
annual retainer and Audit Committee chair fees, as described
above.
|
|
(3)
|
Amounts paid to Mr. Jung consist of his
annual retainer, Compensation Committee chair fees, and Audit
Committee member fees, as described above.
|
|
|
|
|
(4)
|
In connection with Mr. Jung’s
appointment as a director on our Board, the Company and Mr. Jung
entered into the Consulting Agreement (defined below), pursuant to
which Mr. Jung will provide the Company with strategic advice and
planning services for which Mr. Jung receives a cash payment of
$7,500 per month from the Company. The Consulting Agreement had an
initial term that extended to December 31, 2019, was extended
through June 30, 2020, and continues on a month-to-month basis in
2021, upon mutual agreement of Mr. Jung and the
Company.
|
|
(5)
|
Amounts paid to Mr. Keller consist of his
annual retainer, Nominating and Governance Committee chair fees,
Compensation Committee member fees and Audit Committee member fees,
as described above. Mr. Keller was appointed to the Compensation
Committee in April 2020.
|
|
(6)
|
Amounts paid to Ms. Patrick consist of her
annual retainer and Compensation Committee member fees, as
described above.
|
|
(7)
|
Mr. Stewart served as a director during the year
ended December 31, 2020 until his resignation from the Board on
March 31, 2020.
|
EXECUTIVE OFFICERS AND EXECUTIVE
COMPENSATION
Executive
Officers
Our executive officers are appointed by the
Board and serve at the discretion of the Board, subject to the
terms of any employment agreements they may have with the Company.
The following is a brief description of the present and past
business experience of each of the Company’s current
executive officers.
|
Name
|
Age
|
Positions
|
|
Ann Hand
|
52
|
Chief Executive Officer and
President
|
|
Clayton Haynes
|
51
|
Chief Financial Officer
|
|
Matt Edelman
|
51
|
Chief Commercial Officer
|
|
David Steigelfest
|
53
|
Chief Product Officer and Corporate
Secretary
|
Ann Hand
Chief Executive Officer,
President, Chair of the Board
Please see Ms. Hand’s biography in the
preceding section under the heading “Director Biographies – Continuing
Directors” on page 18.
Clayton
Haynes
Chief Financial
Officer
Mr. Haynes was appointed as our Chief Financial
Officer in August 2018. From 2001 to August 2018, Mr. Haynes served
as Chief Financial Officer, Senior Vice President of Finance and
Treasurer of Acacia Research Corporation (NASDAQ: ACTG), an
industry-leading intellectual property licensing and enforcement
and technology investment company. From 1992 to March 2001, Mr.
Haynes was employed by PricewaterhouseCoopers LLP, ultimately
serving as a Manager in the Audit and Business Advisory Services
practice, where he provided and managed full scope financial
statement audit and business advisory services for public and
private company clients with annual revenues up to $1 billion in a
variety of sectors, including manufacturing, distribution, oil and
gas, engineering, aerospace and retail. Mr. Haynes received a
Bachelor of Arts in Economics and Business/Accounting from the
University of California at Los Angeles, an MBA from the University
of California at Irvine Paul Merage School of Business and is a
Certified Public Accountant (Inactive).
Matt
Edelman
Chief Commercial
Officer
Mr. Edelman oversees the Company’s
revenue, marketing, content, creative services and business
development activities, and has served as our Chief Commercial
Officer since July 2017. Mr. Edelman is the owner of PickTheBrain,
a leading digital self-improvement business, a board member and
marketing committee member of the Epilepsy Foundation of Greater
Los Angeles and has over 20 years of experience working in the
digital and traditional media and entertainment industries. Since
2001, he has served as an advisor and consultant to numerous
digital and media companies, including, amongst others, Nike,
Marvel, MTV, Sony Pictures, 20th Century Fox and TV Guide. Prior to
joining the Company, from 2014 to 2017, Mr. Edelman served as the
Head of Digital Operations and Marketing Solutions at WME-IMG (now
Endeavor), where he was responsible for several areas, including
digital audience and revenue growth through content, social media
and paid customer acquisition across the company’s global
live events business within sports, fashion culinary and
entertainment verticals; digital marketing services for consumer
brands, college athletics programs and talent; and management of
direct-to-consumer digital content businesses, including both
eSports and Fashion OTT properties. From 2010 to 2013, Mr. Edelman
served as the Chief Executive Officer of Glossi (previously
ThisNext), an authoring platform enabling individuals to create
their own digital magazines. Previously, Mr. Edelman also founded
and/or served in executive positions at multiple early stage
digital media companies. Mr. Edelman earned a Bachelor of Arts in
Politics from Princeton University.
David
Steigelfest
Chief Product Officer,
Corporate Secretary and Director Nominee
Please see Mr. Steigelfest’s biography in
the preceding section under the heading “Director Biographies – Director Nominees
with Terms Expiring at the Annual Meeting” on page
17.
Summary Compensation
Table
We are an emerging growth company for purposes
of the SEC’s executive compensation disclosure rules. In
accordance with such rules, we are required to provide a Summary
Compensation Table and an Outstanding Equity Awards at Fiscal Year
End Table, as well as limited narrative disclosures regarding
executive compensation for our last two completed fiscal years.
Further, our reporting obligations extend only to our “named
executive officers,” who are those individuals serving as our
principal executive officer and our two other most highly
compensated executive officers who were serving as executive
officers at December 31, 2020, the end of the last completed fiscal
year (the “Named Executive
Officers”).
We have identified Ann Hand, David Steigelfest
and Matt Edelman as our Named Executive Officers for the year ended
December 31, 2020. Our Named Executive Officers for our fiscal year
ending December 31, 2021 is subject to change, as we may hire or
appoint new executive officers.
For the fiscal years ended December 31, 2020 and
2019, compensation for our Named Executive Officers was as
follows:
Name and principal
position
|
|
|
|
|
|
|
|
Ann Hand
|
2020
|
$400,000
|
$184,000
|
(2)(6)
|
437,000(3)
|
$1,021,000
|
|
Chief Executive Officer,
President
|
2019
|
$400,000
|
$350,000
|
(2)
|
$-
|
$750,000
|
|
|
|
|
|
|
|
|
David Steigelfest
|
2020
|
$300,000
|
$80,000
|
(6)
|
183,000(4)
|
$563,000
|
|
Chief Product Officer and
Corporate Secretary
|
2019
|
$300,000
|
$105,000
|
|
$-
|
$405,000
|
|
|
|
|
|
|
|
|
Matt Edelman
|
2020
|
$300,000
|
$80,000
|
(6)
|
218,000(5)
|
$598,000
|
|
Chief Commercial
Officer
|
2019
|
$300,000
|
$-
|
|
$-
|
$300,000
|
(1)
This column represents the grant date
fair value calculated in accordance with the FASB’s
Accounting Standards Codification Topic 718, Compensation –
Stock Compensation (“ ASC 718”).
The methodology used to calculate the estimated value of the equity
awards granted is set forth under Note 2 and Note 8 to the audited
Financial Statements as of and for the years ended December 31,
2020 and 2019, included in our Annual Report on Form 10-K for the
year ended December 31, 2020, which is incorporated by reference
into this prospectus. These amounts do not represent the actual
value, if any, that may be realized by the Named Executive
Officers.
(2)
Refer to
“Employment
Agreements and Potential Payments upon Termination or Change of
Control” below for additional information. For Ms.
Hand, the bonus amount earned pursuant to her existing employment
agreement (as described at “Employment
Agreements and Potential Payments upon Termination or Change of
Control”) for fiscal year 2020 totaled
$50,000.
(3)
On
February 11, 2020, Ms. Hand canceled 150,000 stock options with
original grant dates of June 16, 2017 and October 31, 2018 and
exercise prices of $9.00 and $10.80, respectively, in exchange
for67,500 restricted stock units, pursuant to a Board approved
exchange. The 2020 equity award information above excludes the
restricted stock units issued in the exchange and the reissuance
of48,667 options on February 11, 2020, with the same terms of the
original stock option granted, representing the reissuance of the
balance of the original stock option not included in the exchange.
The restricted stock units issued in the exchange vest over two
years commencing on the grant date, with 50% of the restricted
stock units vesting at the end of the first year, and 50% vesting
at the end of the second year. The fair value of the stock options
canceled in the exchange did not exceed the fair value of the
restricted stock units issued in the exchange, therefore no
additional stock compensation expense was recognized under
ASC718.
(4)
On
February 11, 2020, Mr. Steigelfest canceled 70,000 stock options
with original grant dates of June 16, 2017 and October 31, 2018 and
exercise prices of $9.00 and $10.80, respectively, in exchange
for31,500 RSUs, pursuant to a Board approved exchange. The 2020
equity award information above excludes the RSUs issued in the
exchange and the reissuance of 96,667 options on February 11, 2020,
with the same terms of the original stock options granted,
representing the reissuance of the balance of the original stock
options not included in the exchange. RSUs issued in the exchange
vest over two years commencing on the grant date, with 50% of the
RSUs vesting at the end of the first year, and 50% vesting at the
end of the second year. The fair value of the stock options
canceled in the exchange did not exceed the fair value of the RSUs
issued in the exchange,therefore no additional stock compensation
expense was recognized under ASC 718.
(5)
On
February 11, 2020, Mr. Edelman canceled 100,000 stock options with
original grant dates of July 24, 2017, June 29, 2018 and October
31, 2018 and an exercise price of $10.80, in exchange for 45,000
RSUs, pursuant to a Board approved exchange. The 2020 equity award
information above excludes the RSUs issued in the exchange and the
reissuance of 7,107 options on February 11, 2020, with the same
terms of the original stock options granted, representing the
reissuance of the balance of the original stock options not
included in the exchange. The RSUs issued in the exchange vest over
two years commencing on the grant date, with 50% of the RSUs
vesting at the end of the first year, and 50% vesting at the end of
the second year. The fair value of the stock options canceled in
the exchange did not exceed the fair value of the RSUs issued in
the exchange, therefore no additional stock compensation expense
was recognized under ASC 718.
(6)
Includes executive bonus
amounts earned in connection with the 2020 Executive Bonus program
approved in the discretion of the Board.
Elements of
Compensation
Our executive compensation program consisted of
the following components of compensation during the years ended
December 31, 2020 and 2019:
Base
Salary
Each of our executive officers receives a base
salary for the expertise, skills, knowledge and experience he or
she offers to our management team. The base salary of each of our
executive officers is re-evaluated annually, and may be adjusted to
reflect:
●
the
nature, responsibilities, and duties of the officer’s
position;
●
the
officer’s expertise, demonstrated leadership ability, and
prior performance;
●
the
officer’s salary history and total compensation, including
annual equity incentive awards; and
●
the
competitiveness of the officer’s base
salary.
Executive
Bonus
The Compensation Committee
assesses the level of the executive officer’s achievement of
meeting individual goals, as well as that executive officer’s
contribution towards our business objectives. Bonus amounts depend
on the level of achievement of individual performance goals, with a
target bonus generally set as a percentage of base salary and based
on the achievement of pre-determined milestones. For the
year ended December 31, 2020, each of our Named Executive Officers
was awarded a bonus by the Compensation Committee in the amount set
forth in the Summary Compensation Table above. At the time of this
proxy statement, the Compensation Committee has not determined or
awarded a bonus to any Named Executive Officer for the fiscal year
ended December 31, 2021. Payment of a bonus to any of our Named
Executive Officers for fiscal 2021, if any, is at the discretion of
the Compensation Committee which may consider factors other than
attainment of individual or corporate goals in its determination of
bonus amounts to be granted.
Equity Incentive
Awards
We believe that to attract and retain
management, key employees and non-management directors, the
compensation paid to these persons should include, in addition to
base salary, annual equity incentives. Our compensation
committee determines the amount and terms of equity-based
compensation granted to each individual. In determining whether to
grant certain equity awards to our executive officers, the
compensation committee assesses the level of the executive
officer’s achievement of meeting individual goals, as well as
the executive officer’s contribution towards goals of the
Company. All equity awards issued to our Named Executive Officers
during the years ended December 31, 2020 and 2019 were issued under
our 2014 Plan.
Employment Agreements and
Potential Payments upon Termination or Change of
Control
Ann Hand
On June 16, 2017, we entered into an employment
agreement with Ms. Hand to serve as our Chief Executive Officer,
President and Chair of the Board. The initial term of the agreement
is three years (the “Hand
Initial Term”), and provided that neither party
provides 30 days’ notice prior to the expiration of the Hand
Initial Term or a Renewal Term (defined below) of their intent to
allow the agreement to expire and thereby terminate, the agreement
shall continue in effect for successive periods of one year (each,
a “Hand Renewal
Term”). The employment agreement with Ms. Hand
provides for a base annual salary of $400,000, which amount
may be increased annually, at the sole discretion of the
Board. Additionally, Ms. Hand shall be entitled to (i) an
annual cash bonus, the amount of which shall be determined by our
compensation committee, (ii) health insurance for herself and her
dependents, for which the Company shall pay 90% of the premiums,
(iii) reimbursement for all reasonable business expenses, and (iv)
participate in the Company’s 401(k) Plan upon the Board
electing to institute it. As additional compensation, Ms. Hand
was issued a warrant to purchase 100,000 shares of Company Common
Stock at an exercise price of $10.80 per share (the
“Hand
Warrant”). The warrant has a ten-year term and shall
vest at a rate of 1/36th per month, subject to the acceleration of
all unvested shares upon a Change of Control, as defined in the
employment agreement.
Ms. Hand’s employment agreement is
terminable by either party at any time. In the event of termination
by us without Cause or by Ms. Hand for Good Reason, as those terms
are defined in the agreement, she shall receive a severance package
consisting of the following: (i) all accrued obligations as of the
termination date; (ii) a cash payment equal to the greater of (A)
her base annual salary for 18 months, payable 50% upon termination,
25% 90 days after the termination date and 25% 180 days after the
termination date, or (B) the remaining payments due for the term of
the agreement; and (iii) an additional 18 months’ vesting on
the Hand Warrant. In the event of termination by us with Cause or
by Ms. Hand without Good Reason, Ms. Hand shall be entitled to all
salary and benefits accrued prior to the termination date, and
nothing else; provided,
however, that Ms. Hand shall be entitled to exercise that
portion of the Hand Warrant that has vested as of the effective
date of the termination until the Hand Warrant’s
expiration.
Ms. Hand’s employment agreement was
amended and restated on November 15, 2018, pursuant to which the
Hand Initial Term of the agreement was extended through December
31, 2021, with the terms of the Hand Renewal Term remaining the
same. In addition, under the terms of the amended and restated
employment agreement, Ms. Hand shall be entitled to the following
compensation: (i) a base annual salary of $400,000, which
amount may be increased annually, at the sole discretion of the
Board; (ii) cash bonuses as follows: (a) $100,000 upon the close of
a fully subscribed $10.0 million private placement of 9.00% secured
convertible promissory notes, (b) $250,000 upon the consummation of
the Company’s IPO or a private financing of not less than
$15.0 million (a “Qualified
Financing”), (c) $150,000, payable in three increments
of $50,000 upon achievement of certain milestones, as determined by
the compensation committee; (iii) health insurance for herself and
her dependents, for which the Company shall pay 90% of the
premiums; (iv) reimbursement for all reasonable business expenses;
and (v) participate in the Company’s 401(k) Plan upon the
Board electing to institute it. As additional compensation, Ms.
Hand was also granted (i) a ten-year common stock purchase warrant
to purchase up to 250,000 shares of the Company’s common
stock, exercisable at $10.80 per share, which vested as follows:
(a) 25% immediately upon issuance, (b) 50% upon the consummation of
the Company’s IPO or a Qualified Financing, and (c) 25% on
the one-year anniversary of the IPO or a Qualified Financing; and
(ii) ten-year stock options to purchase 166,667 shares of Common
Stock, exercisable at $10.80 per share, which vested as follows:
(a) 50% upon consummation of the Company’s IPO or a Qualified
Financing, (b) 25% upon achievement of 300,000 registered users,
and (c) 25% upon achievement of 400,000 registered users. Further,
pursuant to the terms of the amended and restated employment
agreement, in the event that Ms. Hand is terminated other than for
Cause, Ms. Hand shall be entitled to receive all of her severance
benefits on the effective date of termination.
David
Steigelfest
Effective October 31, 2016, we entered into an
employment agreement with Mr. Steigelfest to serve as our Chief
Technology Officer. The initial term of the agreement is two years
(the “Steigelfest Initial
Term”), and provided that neither party provides 30
days' notice prior to the expiration of the Steigelfest Initial
Term or a Steigelfest Renewal Term of their intent to allow the
agreement to expire and thereby terminate, the agreement shall
continue in effect for successive periods of one year (each, a
“Steigelfest Renewal
Term”). The employment agreement with Mr. Steigelfest
provides for a base annual salary of $270,000, which amount
may be increased annually, at the sole discretion of the Board and
was increased to $300,000 by the Board in the fourth quarter of
2017. Additionally, Mr. Steigelfest shall be
entitled to (i) health insurance for himself and his dependents,
for which the Company shall pay 50% of the premiums, (ii)
reimbursement for all reasonable business expenses, and (iv)
participate in the Company’s 401(k) Plan upon the Board
electing to institute it.
Mr. Steigelfest’s employment agreement is
terminable by either party at any time. In the event of termination
by us without Cause, as defined in the agreement, he shall be
entitled to all salary and benefits accrued prior to the date of
termination, as well as six months of accelerated vesting of the
Option from the date of termination. In the event of termination by
us with Cause, Mr. Steigelfest shall be entitled to all salary
accrued prior to the termination date, and nothing
else; provided,
however, that Mr. Steigelfest shall be entitled to exercise
any stock options that have vested prior to the date of
termination.
Mr. Steigelfest’s employment agreement was
amended and restated on November 1, 2018, pursuant to which the
Steigelfest Initial Term of the agreement was extended to two years
from November 1, 2018 and Mr. Steigelfest shall serve as both the
Company’s Chief Technology Officer and Chief Product Officer.
Effective July 22, 2019, in connection with the hiring of Samir
Ahmed, the Company’s former Chief Technology Officer, Mr.
Steigelfest now serves as the Company’s Chief Product
Officer. In addition, under the terms of the amended and restated
employment agreement, Mr. Steigelfest shall be entitled to the
following compensation: (i) a base annual salary of
$300,000, which amount may be increased annually, at the sole
discretion of the Board; (ii) cash bonuses as follows: (a) $50,000
upon the consummation of the Company’s IPO or a Qualified
Financing, (b) $75,000, payable in five separate increments of
$15,000 upon achievement of certain milestones, as determined by
the compensation committee, and (c) $100,000, payable in four
separate increments of $25,000 upon achievement of certain
milestones on or before June 30, 2019; (iii) health insurance for
himself and his dependents, for which the Company shall pay 90% of
the premiums; (iv) reimbursement for all reasonable business
expenses; and (v) participate in the Company’s 401(k) Plan
upon the Board electing to institute it. As additional
compensation, Mr. Steigelfest was also granted ten-year stock
options to purchase 100,000 shares of Common Stock, exercisable at
the same price per share of the Company’s IPO, which shall
vest in accordance with the Company’s traditional vesting
schedule. Further, pursuant to the terms of the amended and
restated employment agreement, in the event that Mr. Steigelfest is
terminated other than for Cause, Mr. Steigelfest shall be entitled
to receive cash equal to his annual base salary for one year on the
effective date of termination.
Matt
Edelman
Effective November 1, 2018, we entered into an
employment agreement with Mr. Edelman to serve as our Chief
Commercial Officer. The initial term of Mr. Edelman’s
employment agreement is two years (the “Edelman Initial Term”), and
provided that neither party provides 30 days’ notice prior to
the expiration of the Edelman Initial Term or an Edelman Renewal
Term (defined below) of their intent to allow the agreement to
expire and thereby terminate, the agreement shall continue in
effect for successive periods of one year (each, an
“Edelman Renewal
Term”). The employment agreement with Mr. Edelman
provides for a base annual salary of $300,000, which amount
may be increased annually, at the sole discretion of the
Board. Additionally, Mr. Edelman shall be entitled
to (i) health insurance for himself and his dependents, for which
the Company shall pay 90% of the premiums, (ii) reimbursement for
all reasonable business expenses, and (iii) participate in the
Company’s 401(k) Plan upon the Board electing to institute
it.
Mr. Edelman’s employment agreement is
terminable by either party at any time. In the event of termination
by us without Cause, as defined in the agreement, he shall be
entitled to the following severance payment based upon his length
of employment with the Company and his existing annual salary,
which he shall receive 30 days after the final day of his
employment: (i) from six to nine months of employment, one month of
severance pay; (ii) from nine months to one year of employment, two
months of severance pay; (iii) from one year to two years of
employment, three months of severance pay; and (iv) for each
additional year of employment beyond one year, one additional month
of severance pay; provided,
however, that in the event of a change of control
transaction involving the Company, Mr. Edelman shall be entitled to
six months of severance pay. In the event of such termination, and
in order to receive the foregoing severance benefits, Mr. Edelman
shall be required to execute a mutually agreed upon Mutual Release
agreement. In the event of termination by us with Cause, Mr.
Edelman shall be entitled to all salary accrued prior to the
termination date, and nothing else; provided, however, that Mr. Edelman
shall be entitled to exercise any stock options that have vested
prior to the date of termination.
Outstanding Equity Awards at
Fiscal Year-End
The following table discloses outstanding stock
option awards held by each of the Named Executive Officers as of
December 31, 2020:
|
|
|
|
|
|
Name
|
|
Number of securities underlying unexercised
options/ warrants (#)
Exercisable
|
|
Number of securities underlying
unexercised options/ warrants (#)
Unexercisable
|
|
Option/ warrant
exercise price ($)
|
Option/ warrant
expiration date
|
Number of
shares or units of stock that have not vested (#)
|
|
Market value of
shares or units of stock that have not vested(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann Hand
|
6/5/15
|
166,667
|
|
-
|
|
$9.00
|
|
|
|
|
|
6/16/17
|
51,334
|
|
-
|
|
$9.00
|
|
|
|
|
|
6/16/17
|
100,000
|
|
-
|
|
$10.80
|
|
|
|
|
|
10/31/18
|
250,000
|
|
-
|
|
$10.80
|
|
|
|
|
|
2/11/20
|
48,667
|
(6)
|
-
|
|
$10.80
|
|
|
|
|
|
2/11/20
|
-
|
|
-
|
|
-
|
-
|
67,5000
|
(6)
|
$191,025
|
|
8/5/20
|
16,667
|
|
183,333
|
(1)
|
$2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Steigelfest
|
10/16/14
|
116,667
|
|
-
|
|
$0.30
|
|
|
|
|
|
12/21/15
|
833
|
|
-
|
|
$9.00
|
|
|
|
|
|
2/11/20
|
25,833
|
(7)(2)
|
-
|
|
$9.00
|
|
|
|
|
|
2/11/20
|
21,465
|
(7)
|
49,369
|
(3)
|
$10.80
|
|
|
|
|
|
2/11/20
|
-
|
|
-
|
|
-
|
-
|
31,500
|
(7)
|
$89,145
|
|
8/5/20
|
7,000
|
|
77,000
|
(4)
|
$2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matt Edelman
|
2/11/20
|
2,451
|
(8)
|
4,656
|
(5)
|
$10.80
|
|
|
|
|
|
2/11/20
|
-
|
|
-
|
|
-
|
-
|
45,000
|
(8)
|
$127,350
|
|
8/5/20
|
8,333
|
|
91,667
|
(9)
|
$2.88
|
|
|
|
|
(1)
Represents an option to purchase shares of
our common stock, which option vests in equal monthly installments
over a 48-month period beginning on the grant date of August 5,
2020.
(2)
Represents an option to purchase shares of
our common stock. 8,834 shares of the original option were returned
to the Issuer on February 11, 2020.
(3)
Represents an option to purchase shares of
our common stock, which option vested with respect to 25,000 shares
on October 31, 2019, and the remainder vesting at a rate of 2,084
shares per month, becoming fully vested on October 30, 2022. 29,166
shares of the original option were returned to the Issuer on
February 11, 2020.
(4)
Represents an option to purchase shares of
our common stock, which option vests in equal monthly installments
over a 48-month period beginning on the grant date of August 5,
2020.
(5)
Represents an option to purchase shares of
our common stock, which option vested with respect to 4,167 shares
on October 31, 2019, and then at a rate of 348 shares per month
thereafter. 9,560 shares of the original option were returned to
the Issuer on February 11, 2020.
(6)
On
February 11, 2020, Ms. Hand canceled 150,000 stock options
with original grant dates of June 16, 2017and October 31, 2018 and
exercise prices of $9.00 and $10.80,respectively, in exchange for
67,500 RSUs, pursuant to a Board approved exchange. The outstanding
equity award table above includes the RSUs issued in the exchange
and reflects the reissuance of 48,667 options on February 11, 2020,
with the same terms of the original stock option granted,
representing the reissuance of the balance of the original stock
option grants not included in the exchange. The RSUs issued in the
exchange vest over two years commencing on the grant date, with 50%
of the RSUs vesting at the end of the first year, and 50% vesting
at the end of the second year.
(7)
On
February 11, 2020, Mr. Steigelfest canceled 70,000 stock
options with original grant dates of June 16,2017 and October 31,
2018 and exercise prices of $9.00 and $10.80,respectively, in
exchange for 31,500 RSUs, pursuant to a Board approved exchange.
The outstanding equity award table above includes the RSUs issued
in the exchange and reflects the reissuance of 96,667 options on
February 11, 2020, with the same terms of the original stock
options granted, representing the reissuance of the balance of the
original stock option grants not included in the exchange. The RSUs
issued in the exchange vest over two years commencing on the grant
date, with 50% of the RSUs vesting at the end of the first year,
and 50% vesting at the end of the second
year.
(8)
On February
11, 2020, Mr. Edelman canceled 100,000 stock options with original
grant dates of July 24, 2017, June 29, 2018 and October 31, 2018
and an exercise price of $10.80, in exchange for 45,000 RSUs,
pursuant to a Board approved exchange. The outstanding equity award
table above includes the RSUs issued in the exchange and reflects
the reissuance of 7,107 options on February 11, 2020, with the same
terms of the original stock options granted, representing the
reissuance of the balance of the original stock option grants not
included in the exchange. The RSUs issued in the exchange vest over
two years commencing on the grant date, with 50% of the RSUs
vesting at the end of the first year, and 50% vesting at the end of
the second year.
(9)
Represents an
option to purchase shares of our common stock, which option vests
in equal monthly installments over a 48-month period beginning on
the grant date of August 5, 2020.
Securities Authorized for
Issuance under Equity Compensation Plans
The following table provides a summary of the
securities authorized for issuance under our equity compensation
plans as of December 31, 2020.
|
Plan
category
|
Number of securities to be
issued upon exercise of outstanding options, warrants and
rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number of securities
remaining available for future issuance under equity compensation
plans (excluding securities reflected in column (a))
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders
|
|
|
|
|
2014
Plan
|
1,535,000
|
$5.62
|
588,000
|
|
Equity compensation plans not approved by
security holders
|
|
|
|
|
Total
|
103,000
|
$5.20
|
-
|
_______________
(1)
Excludes 382,144
shares of common stock issuable upon the vesting of RSUs as of
December 31, 2020.
Stock Option and Incentive
Plan
Amended and Restated 2014
Stock Option and Incentive Plan
Our Board unanimously approved the 2014 Plan on
October 13, 2014. The 2014 Plan was subsequently amended in May
2015, May 2016, July 2017, October 2018 and May 2020. The maximum
number of shares of common stock issuable under the 2014 Plan is
currently 2,583,333 shares, subject to adjustments for stock
splits, stock dividends or other similar changes in our common
stock or our capital structure.
On April 29, 2021, our Board approved of an
amendment to the 2014 Plan (the “2014 Plan Amendment”), subject to
approval by our stockholders at the Annual Meeting. A summary of
the terms of 2014 Plan is available under Proposal No. 2, Approval
of an Amendment to the Amended and Restated Super League Gaming,
Inc. 2014 Stock Option and Incentive Plan, beginning on page 38
below.
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
In connection with Mr. Jung’s appointment
as a director on our Board, the Company and Mr. Jung entered into a
consulting agreement (the “Consulting Agreement”), pursuant
to which Mr. Jung will provide the Company with strategic advice
and planning services for which Mr. Jung will receive a cash
payment of $7,500 per month from the Company. The Consulting
Agreement had an initial term that continued until December 31,
2019, and was extended through December 31, 2020 upon mutual
agreement of Mr. Jung and the Company, and continues on a
month-to-month basis during 2021.
Related Party Transaction
Policy
Our Board recognizes the fact that transactions
with related persons present a heightened risk of conflicts of
interests and/or improper valuation (or the perception thereof).
Accordingly, our Board has adopted a written policy addressing the
approval of transactions with related persons, in conformity with
the requirements for issuers having publicly held common stock
listed on the Nasdaq Capital Market. Pursuant to our Related
Persons Transactions Policy (the “Policy”), any related-person
transaction, and any material amendment or modification of a
related-person transaction, is required to be reviewed and approved
or ratified by the Board’s audit committee, which shall be
composed solely of independent directors who are disinterested, or
in the event that a member of the audit committee is a Related
Person, as defined below, then by the disinterested members of the
audit committee; provided,
however, that in the event that management determines that
it is impractical or undesirable to delay the consummation of a
related person transaction until a meeting of the audit committee,
then the Chair of the audit committee may approve such transaction
in accordance with this policy; such approval must be reported to
the audit committee at its next regularly scheduled meeting. In
determining whether to approve or ratify any related person
transaction, the audit committee must consider all of the relevant
facts and circumstances and shall approve only those transactions
that are deemed to be in the best interests of the
Company.
Pursuant to our Policy and SEC rules, a
“related person transaction” includes any transaction,
arrangement or relationship which: (i) the Company is a
participant; (ii) the amount involved exceeds $120,000; and (iii)
an executive officer, director or director nominee, or any person
who is known to be the beneficial owner of more than 5% of our
common stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our common stock, had or will have a direct or
indirect material interest (each a “Related
Person”).
In connection with the review and approval or
ratification of a related person transaction:
●
Management shall be responsible for determining
whether a transaction constitutes a related person transaction
subject to the Policy, including whether the Related Person has a
material interest in the transaction, based on a review of all of
the facts and circumstances; and
●
Should
management determine that a transaction is a related person
transaction subject to the Policy, it must disclose to the audit
committee all material facts concerning the transaction and the
Related Person’s interest in the
transaction.
APPROVAL OF AN AMENDED AND
RESTATED SUPER LEAGUE GAMING, INC.
2014 STOCK OPTION AND
INCENTIVE PLAN
Background of the 2014
Plan
Our Board unanimously approved the 2014
Plan on October 13, 2014. The 2014 Plan was subsequently
amended in May 2015, May 2016, July 2017, October 2018 and May
2020. The maximum number of shares of common stock issuable under
the 2014 Plan is currently 2,583,333 shares, subject to adjustments
for stock splits, stock dividends or other similar changes in our
common stock or our capital structure.
The 2014 Plan provides for the grant of (i)
Incentive Stock Options (within the meaning of Section 422 of
the Code) to our full-time employees (“Employees”), subject to the
requirements of Section 422(c)(6) where an Employee owns 10% or
more of our voting stock outstanding; (ii) Non-Qualified Options
(together with Incentive Stock Options, “Options”); (iii) stock awards;
and (iv) performance shares to any individual who is (a) an
Employee, (b) a member of our Board, or (c) an independent
contractor who provides services for the
Company.
Reasons for the 2014 Plan
Amendment
On April 29,
2021, our Board unanimously approved, subject to stockholder
approval at the Annual Meeting, of an amendment to the 2014 Plan
(the “2014 Plan
Amendment”) in order to increase the number of shares
of common stock available for issuance under the 2014 Plan to a
total of 5.0 million shares, subject to adjustment to take account
of stock dividends, stock splits, recapitalizations and similar
corporate events
As of April 30, 2021 there were 1,914,263 shares
of common stock issued or reserved for issuance under the terms of
the 2014 Plan. As a result, we currently have a limited number
of shares available for issuance as new awards under the 2014
Plan.
As a part of
our negations to complete the Merger with Mobcrush, we have agreed
to issue to holders of unvested Mobcrush options at the effective
time of the Merger (the “Mobcrush Options”), which
Mobcrush Options will be cancelled immediately prior to the
effective time, and a number of options to purchase shares of Super
League common stock (the "Replacement Options") will be issued to replace the
cancelled options in a manner consistent with options currently
granted by Super League. The Replacement Options will have an
exercise price of not less than 85% of the closing price of our
common stock on the date of issuance, will have a term of ten
years, and will be subject to our traditional four-year vesting
schedule with vesting beginning on the one-year anniversary of the
closing of the Merger. In total, we expect to issue approximately
500,000 Replacement Options.
In addition to having a sufficient number of
shares of common stock available under the 2014 Plan to issue the
Replacement Options, our Board believes it is important to have
reserved a sufficient number of shares to support stock option
grants and awards for the foreseeable future. The 2014 Plan
Amendment will provide an important mechanism by which stock
options and other stock awards may be granted to directors,
employees and consultants as an incentive and to tie their
interests closer to those of our stockholders.
If stockholders do not approve of the 2014 Plan
Amendment at the Meeting, we will be unable to issue the
Replacement Options following the closing of the Merger, nor will
we have a sufficient number of shares available to issue new awards
to our Employees, including employees new to the Company as a
result of the Merger, as equity compensation.
Below is a summary of the terms
and conditions of the 2014 Plan following the effectiveness of the
2014 Plan Amendment. Unless otherwise indicated, all capitalized
terms shall have the same meaning as defined in the 2014 Plan. This
summary does not purport to be complete, and is qualified, in its
entirety, by the specific language of the 2014 Plan, which is
incorporated by reference into our Annual Report on Form 10-K for
the year ended December 31, 2020, a copy of which accompanies this
proxy statement.
Summary of the 2014 Plan
|
Plan
Administration
|
Pursuant to the 2014 Plan, our Board has
delegated the authority to administer the 2014 Plan to the
Board’s compensation committee (the “Committee”). Subject to the
provisions of our 2014
Plan, the Committee has the power to determine the terms of
the awards, including the exercise price, the number of shares
subject to each award, the exercisability of the awards, and the
form of consideration, if any, payable upon exercise. The Committee
also has the authority to amend, modify, extend renew or terminate
outstanding Options, or may accept the cancellation of outstanding
Options, whether or not granted under the 2014 Plan, in return for the
grant of new Options at the same or a different price.
Additionally, the Committee may shorten the vesting period, extend
the exercise period, remove any or all restrictions or convert an
Incentive Option to a Non-Qualified Option, if, at its sole
discretion, it determines that such action is in the best interest
of the Company; provided,
however, that any modification made to outstanding
Options requires the prior consent of the holder(s) of such
Options, unless the Committee determines that the action would not
materially and adversely affect such holder(s).
|
|
Incentive Stock
Options
|
The exercise price of Incentive Stock Options
granted under our 2014
Plan must at least be equal to 100% of the fair market value
of our common stock on the date of grant. The term of an Incentive
Stock Option may not exceed ten years, except that with respect to
any participant who owns more than 10% of the voting power of all
classes of our outstanding stock, the term must not exceed five
years and the exercise price must equal at least 110% of the fair
market value on the grant date.
|
|
Non-Qualified Stock
Options
|
The exercise price of Non-Qualified Options
granted under our 2014
Plan must at least be equal to 85% of the fair market value
of our common stock on the date of grant. The term of a
Non-Qualified Stock Option may not exceed ten
years.
|
|
Stock Awards or
Sales
|
Eligible individuals may be issued shares of
common stock directly, upon the attainment of performance
milestones or the completion of a specified period of service or as
a bonus for past services. The purchase price for the shares shall
not be less than 100% of the fair market value of the shares on the
date of issuance, and payment may be in the form of cash or past
services rendered. Eligible individuals shall have no stockholder
rights with respect to any unvested restricted shares or restricted
share units issued to them under the stock award or sales program,
however, eligible individuals shall have the right to receive any
regular cash dividends paid on such shares.
|
|
Termination of
Relationship
|
Except as the Committee may otherwise determine
with respect to a Non-Qualified Stock Option, if the holder of an
Option ceases to have a Relationship (as defined in the
2014 Plan) with the
Company for any reason other than death or permanent disability,
any Options granted to him shall terminate 90 days from the date on
which such Relationship terminates; provided, however, that no Option may
be exercised or claimed by the holder of an Option following the
termination of his Relationship for Cause (as defined in the
2014 Plan). In the
event that the Relationship terminates as a result of the death or
permanent disability of the Option holder, any Options granted to
him shall terminate one year from the date of his death or
termination due to permanent disability. In no event may an option
be exercised later than the expiration of its
term.
|
|
Certain
Adjustments
|
In the event of certain changes in our
capitalization, to prevent diminution or enlargement of the
benefits or potential benefits available under the 2014 Plan, the administrator
will adjust the number and class of shares available for future
grants under the 2014
Plan, the exercise price of outstanding Options, the number
of shares covered by each outstanding award, or the purchase price
of each outstanding award.
|
|
Reorganization
|
In the event we are a party to a merger or other
corporate reorganization, all outstanding Options shall be subject
to the agreement of merger or reorganization. Such agreement may
provide for the assumption of the outstanding Options by the
surviving corporation or its parent or for their continuation by
the Company (if the Company is a surviving
corporation); provided,
however, that if the assumption or continuation is not
provided by such agreement, then the Committee, in its sole
discretion, shall have the option of offering the payment of a cash
settlement equal to the difference between the amount to be paid
for one share under the agreement and the exercise
price.
|
|
Change of
Control
|
Under the 2014 Plan, a Change of Control
is generally defined as: (i) the sale of all or substantially
all of the assets of the Company, or (ii) any merger, consolidation
or acquisition of the Company with, by or into another corporation,
entity or third party, the result of which is a change in the
ownership of more than 50% of the voting capital stock of the
Company.
In the event of a Change of Control, all
restrictions on all awards or sales of shares will accelerate and
vesting on all unexercised and unvested Options will occur on the
Change of Control date.
|
|
Amendment and
Termination
|
The Board or Compensation Committee may amend,
alter or discontinue the 2014 Plan, but no amendment, alteration or
discontinuation may be made that would materially impair the rights
of the participant with respect to a previously granted award,
except such an amendment made to comply with applicable law, the
listing standards of the applicable exchange or accounting rules.
In addition, no amendment may be made without the approval of
stockholders to the extent such approval is required by applicable
law or the listing standards of the applicable stock
exchange.
The 2014 Plan will expire on July 1,
2027.
|
U.S. Federal Income Tax
Consequences
The 2014 Plan is, in
part, is a qualified plan for federal income tax purposes. As such,
the Company is entitled to (i) withhold and deduct from future
wages of any award recipient, or make other arrangements for the
collection of, all legally required amounts necessary to satisfy
any and all federal, state and local withholding and
employment-related tax requirements attributable to an award,
including, without limitation, the grant, exercise or vesting of,
or payment of dividends with respect to, an award or a
disqualifying disposition of stock received upon exercise of an
award, or (ii) require the award recipient promptly to remit the
amount of such withholding to the Company before taking any action,
including issuing any shares of common stock, with respect to an
award.
Plan
Benefits
Participation in
the 2014 Plan
is entirely within the discretion of
the Committee. Because we cannot predict the rate at which the
Committee will issue new awards or the terms of awards granted
under the 2014 Plan,
if it is approved by our stockholders
at the Annual Meeting, it is not possible to determine the number
of shares that will be purchased or the value of benefits that may
be obtained by executive officers and other employees under
the 2014 Plan
in the
future.
Instead, the following table sets forth
information with respect to issuances under the 2014 Plan during the
year ended December 31, 2020 to each of our current executive
officers, outside directors and employees:
|
Name and
Position
|
|
|
|
Ann Hand
|
$576,000
|
200,000
|
|
President, Chief Executive
Officer and Chair
|
|
|
|
David Steigelfest
|
$242,000
|
84,000
|
|
Chief Technology Officer and
Director
|
|
|
|
Matt Edelman
|
$288,000
|
100,000
|
|
Chief Commercial
Officer
|
|
|
|
Clayton Haynes
|
$259,000
|
90,000
|
|
Chief Financial
Officer
|
|
|
|
Executive Officer
Group
|
$1,365,000
|
474,000
|
|
Non-Employee Director Group
(2)
|
$330,000
|
139,000
|
|
Non-Executive Officer
Employee Group (3)
|
$1,022,000
|
341,000
|
(1)
Amounts shown in the Dollar Value column
represent an aggregate of the number of stock options granted
multiplied by the exercise price of such options or the grant date
fair value of RSUs issued during the year ended December 31, 2020
and outstanding as of December 31, 2020.
(2)
Represents an aggregate total of 139,000 RSUs
issued to our non-employee directors during the year ended December
31, 2020 and outstanding as of that date.
(3)
Represents an aggregate total of 340,000
stock options granted to employees who were not executive officers
on December 31, 2020 under the 2014 Plan.
(4)
In February 2020, the Board of
Directors approved the cancellation of 540,000 stock options in
exchange for 243,000 RSUs (the “Stock Swap”) for five
employees included in the Executive Officer group and two employees
included in the Non-Executive Officer Employee group. The stock
options canceled were originally granted in 2018 and prior, had a
weighted average exercise price of $10.16, and a weighted average
grant date fair value of $8.33. The RSUs issued had weighted
average grant date fair value of $2.60 and vest over two years. The
2020 equity award information above excludes the RSUs issued in the
Stock Swap and the reissuance of 225,444 options on February 11,
2020, with the same terms of the original stock options granted,
representing the reissuance of the balance of the original stock
option grants not included in the Stock Swap. The RSUs issued in
the exchange vest over two years commencing on the grant date, with
50% of the RSUs vesting at the end of the first year, and 50%
vesting at the end of the second year.
Effectiveness of the 2014 Plan
Amendment
If approved by stockholders at the Meeting, the
2014 Plan Amendment will become effective on the date of the Annual
Meeting. By approving the 2014 Plan Amendment, the Company’s
stockholders will also satisfy Nasdaq Stock Market requirements for
stockholder approval of equity compensation
plans.
Vote Required and
Recommendation
The affirmative “FOR” vote of a
majority of the shares present in person or by proxy and entitled
to vote is necessary for approval of the 2014 Plan Amendment.
Unless otherwise instructed on the proxy or unless authority to
vote is withheld, shares represented by executed proxies will be
voted “FOR” approval of the 2014 Plan Amendment, as
presented in this Proposal No. 2.
|
|
|
|
|
|
|
The Board of Directors recommends
that stockholders vote “FOR” Proposal No. 2 to approve
of an amendment to Amended and Restated Super League Gaming, Inc.
2014 Stock Option and Incentive Plan.
|
RATIFICATION OF THE APPOINTMENT
OF
BAKER
TILLY US, LLP TO SERVE AS OUR
REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL
YEAR
Upon recommendation of the Audit Committee of
the Board of Directors, the Board appointed Baker Tilly US, LLP
(formerly Squar Milner LLP) (“Baker Tilly”) as our independent
registered public accounting firm for the year ending December 31,
2021, and hereby recommends that the stockholders ratify such
appointment.
The Board may terminate the appointment of Baker
Tilly as the Company’s independent registered public
accounting firm without the approval of the Company’s
stockholders whenever the Board deems such termination necessary or
appropriate.
Representatives of Baker Tilly will be present
at the Annual Meeting or available by telephone and will have an
opportunity to make a statement if they so desire and to respond to
appropriate questions from stockholders.
Audit
Fees
The following table presents fees billed by
Baker Tilly LLP for professional services rendered for the fiscal
years ended December 31, 2020 and 2019:
|
|
|
|
|
Audit fees
(1)
|
$113,000
|
$161,700
|
|
Audit related
fees(2)
|
52,700
|
38,200
|
|
Tax fees
(3)
|
7,700
|
39,700
|
|
All other
fees (4)
|
-
|
-
|
|
Total
|
$173,400
|
$239,600
|
(1)
Audit Fees include fees and expenses for
professional services rendered in connection with the audit of our
financial statements for those years, reviews of the interim
financial statements that are normally provided by the independent
registered public accounting firm in connection with statutory and
regulatory filings or engagements.
(2)
Audit Related Fees consist of fees billed
for assurance related services that are reasonably related to the
performance of the audit or review of our financial statements and
are not reported under “Audit Fees.” Included in Audit
Related Fees are fees and expenses related to reviews of
registration statements and SEC filings other than annual reports
on Form 10-K and quarterly reports on Form
10-Q.
(3)
Tax Fees include the aggregate fees billed
during the fiscal year indicated for professional services for tax
compliance, tax advice and tax planning. No such fees were billed
by Baker Tilly for 2020 or 2019.
(4)
All Other Fees consist of fees for products
and services other than the services reported above. No such fees
were billed by Baker Tilly for 2020 or 2019.
Changes in and Disagreements
with Accountants on Accounting and Financial
Disclosure
There have been no changes in or disagreements
with accountants on accounting and financial
disclosure.
Auditor
Independence
Our Audit Committee and our full Board of
Directors considered that the work done for us in the years ended
December 31, 2020 and 2019, respectively, by Baker Tilly was
compatible with maintaining Baker Tilly
independence.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
Date: March 19, 2021
The Audit Committee has reviewed and discussed
with management and Baker Tilly US, LLP, our independent registered
public accounting firm, the audited consolidated financial
statements in the Super League Gaming, Inc. Annual Report on Form
10-K for the year ended December 31, 2020.
Baker Tilly US, LLP also provided the Audit
Committee with the written disclosures and the letter required by
the applicable requirements of the PCAOB regarding the independent
auditor’s communication with the Audit Committee concerning
independence. The Audit Committee has discussed with the registered
public accounting firm their independence from our
Company.
Based on its discussions with management and the
registered public accounting firm, and its review of the
representations and information provided by management and the
registered public accounting firm, including as set forth above,
the Audit Committee recommended to our Board that the audited
financial statements be included in our Annual Report on Form 10-K
for the year ended December 31, 2020.
|
|
Respectfully Submitted,
Jeff Gehl
Michael Keller
Mark Jung
|
The information contained above under the
caption “Report of the
Audit Committee of the Board of Directors” shall not
be deemed to be soliciting material or to be filed with the SEC,
nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent
that we specifically incorporate it by reference into such
filing.
Required Vote and
Recommendation
Ratification of the selection of Baker Tilly as
the Company’s independent auditors for the fiscal year ending
December 31, 2021 requires the affirmative vote of a majority of
the shares present or represented by proxy and entitled to vote at
the Annual Meeting. Unless otherwise instructed on the proxy or
unless authority to vote is withheld, shares represented by
executed proxies will be voted “FOR” the ratification
of Baker Tilly as the Company’s independent auditors for the
fiscal year ending December 31, 2021.
|
|
|
The Board recommends that
stockholders vote “FOR” the ratification of the
selection of Baker Tilly US, LLP as our independent auditors for
the fiscal year ending December 31, 2021.
|
APPROVAL OF THE
ISSUANCE OF OUR COMMON STOCK AS MERGER CONSIDERATION PURSUANT TO
NASDAQ LISTING RULE 5635
Background
Our Board is proposing for approval by our
stockholders, for purposes of complying with Nasdaq Listing Rule
5635, the issuance of an aggregate of 12,582,204 shares of common
stock to existing stockholder of Mobcrush as the Merger
Consideration in connection with the closing of the Merger, an
amount that is in excess of 20% of our outstanding common stock as
of the Record Date. The key terms of the Merger Agreement are
summarized below, and a copy of the Merger Agreement is attached to
this proxy statement as Annex A and is incorporated
herein by reference.
The following summaries do not purport to be
complete and are each subject to, and are qualified in their
entirety by, the full text of such agreements. Copies of the Merger
Agreement, Voting Agreements and the Registration Rights Agreement
have been filed as Exhibits 2.1, 10.1, and 10.2, respectively, to
our Current Report on Form 8-K filed with the SEC on March 11,
2021, which Current Report on Form 8-K is incorporated herein by
reference. You are encouraged to review the full text of the
Current Report on Form 8-K filed on March 11, 2021, as well as each
agreement related to the Merger.
Nasdaq Listing
Rules
Our common stock is listed on the Nasdaq Capital
Market and we are subject to the Listing Rules of the Nasdaq Stock
Market. Although we are not required to obtain stockholder approval
of the Merger Agreement or the Merger itself, we are required under
Nasdaq Listing Rules 5635(a) and 5635(b) to seek stockholder
approval of the proposed issuance of the Merger Consideration, as
such issuance is in an amount in excess of 20% of our issued and
outstanding shares of common stock as of the Record Date, and,
following the issuance of the Merger Consideration, certain of
Mobcrush’s existing stockholders will become the beneficial
owner of more than 20% of our issued and outstanding
securities.
Nasdaq Listing Rule 5635(a) requires stockholder
approval prior to the issuance of securities “in connection
with” the acquisition of the stock or assets of another
company, where due to the present or potential issuance of common
stock (or securities convertible into or exercisable for common
stock), other than a public offering for cash, the common stock to
be issued (a) constitutes voting power in excess of 20% of the
outstanding voting power prior to the issuance or (b) is or will be
in excess of 20% of the outstanding common stock prior to the
issuance. We anticipate that if this Proposal No. 4 is approved, we
will issue shares of common stock in an amount equal to
approximately 54% of our issued and outstanding securities as of
the Record Date, or approximately 35% of our capital stock, on a
fully-diluted basis.
Nasdaq Listing Rule 5635(b) requires stockholder
approval prior to the issuance of securities when the issuance or
potential issuance will result in a change of control, which is
Nasdaq considers to occur when, as a result of the issuance, an
investor or a group would own, or have the right to acquire, 20% or
more of the outstanding shares of common stock or voting power and
such ownership or voting power would be the largest ownership
position. In the event this Proposal No. 4 is approved, we expect
the following person to become holders of more than 20% of our
issued and outstanding common stock:
|
Investor
|
|
|
|
Post Merger
Ownership - Super League Shares
|
% Ownership
Combined Company (1)
|
|
Evolution Media MC Holdings,
LLC
|
17,796,186
|
75%
|
52.8%
|
9,393,925
|
25%
|
|
Sony Corporation of America
|
1,815,835
|
8%
|
52.8%
|
958,510
|
3%
|
|
Knollwood Investment Fund
LLC
|
907,935
|
4%
|
52.8%
|
479,264
|
1%
|
|
Option Plan
|
3,316,220
|
14%
|
52.8%
|
1,750,505
|
5%
|
|
|
23,836,176
|
100%
|
|
12,582,204
|
34%
|
|
|
|
|
|
|
|
(1)
Percentage
ownership based on 24,976,491 shares of our common stock
outstanding, as of March 30, 2021, and 12,582,204 shares of our
common stock to be issued as Merger
Consideration.
Value of the Merger
Consideration
As further
described below in the section titled “Information about the Merger
Agreement,” at the time of closing of the Merger, each
outstanding share of Mobcrush common stock, par value $0.001 per
share ("Mobcrush Common
Stock"), and Mobcrush preferred stock, par value $0.001
("Mobcrush Preferred
Stock", and with the Mobcrush Common Stock, the
"Mobcrush Stock") (other
than dissenting shares) will be canceled and converted into the
right to receive 0.528 shares of our common stock. Subject to
certain adjustments and other terms and conditions more
specifically set forth in the Merger Agreement, we expect to issue
12,582,204 shares of our common stock as the Merger
Consideration.
As we have agreed to issue a fixed number of
shares of our common stock as Merger Consideration at the closing
of the Merger, the fair market value of Merger Consideration will
fluctuate at the same rate as the trading price of our common
stock. The following table presents the varying value of the Merger
Consideration based on the closing prices of our common stock on
January 29, 2021, March 9, 2021, March 11, 2021, March 30, 2021,
and April 30, 2021, the dates of the execution of the term sheet,
execution of the Merger Agreement, public announcement of the
Merger, the Record Date, and the date of filing of this Definitive
Proxy Statement, respectively, each as reported on the Nasdaq
Capital Market.
|
Date
|
|
Aggregate
Value of Merger Consideration ($)
|
|
January 29,
2021
|
3.07
|
$38,627,366
|
|
March 9, 2021
|
$5.08
|
$63,917,596
|
|
March 11, 2021
|
$ 6.87
|
$86,439,741
|
|
March 30, 2021
|
$7.62
|
$95,876,394
|
|
April
30, 2021
|
$5.38
|
$67,692,258
|
Reasons for Seeking
Stockholder Approval
We are required under Nasdaq Listing Rules
5635(a) and 5635(b) to seek stockholder approval of the proposed
issuance of the Merger Consideration.
It is important to understand
that we are not required to, nor are we seeking, stockholder
approval of the Merger, the Merger Agreement, the Registration
Rights Agreement, or the Voting Agreements. Rather, we are seeking
stockholder approval for the purposes of complying with the Nasdaq
Listing Rules relating to the issuance of shares of common stock as
the Merger Consideration in connection with the completion of the
Merger.
Potential Effects of the
Proposal
If this
Proposal No. 4 is approved, our existing stockholders will
experience substantial dilution in voting rights upon the issuance
of the Merger Consideration. As described above, if approved, the
Merger Consideration issued to existing Mobcrush stockholders will
total 12,582,204 shares of our common stock, which would amount to
approximately 35% of the outstanding shares of our common stock
following the closing of the Merger.
Your approval of this Proposal No. 4 will assist
us in meeting our obligations under the Merger Agreement. If this
Proposal No. 4 is not approved, we will be unable to complete the
Merger under the current terms of the Merger Agreement, and
Mobcrush will remain a separate legal entity.
Interests of Directors and
Executive Officers
Our directors and executive officers have no
substantial interests, directly or indirectly, in the matters set
forth in this Proposal No. 4 except to the extent of: (i) their
ownership of shares of our common stock, and (ii) that each officer
and director are expected to be employed by and will continue to
serve on the our Board following the Merger (assuming, in the case
of Ms. Patrick and Mr. Steigelfest, that each are re-elected
pursuant to Proposal No. 1), for which they each receive cash and
equity compensation.
Voting
Agreements
Following the
execution of the Merger Agreement, certain stockholders of the
Company, owning an aggregate of approximately 2.9% of the
outstanding shares of our common stock, entered into Voting
Agreements, pursuant to which each stockholder will agree to vote
all of their shares of common stock held in favor of this Proposal
No. 4 and/or any proposal that would reasonably be expected to
further implement or carry into effect the purposes and intent of
the transactions contemplated by the Merger Agreement. Therefore,
we expect approximately 734,797 shares of our common stock to vote
in favor of this Proposal No. 4 pursuant to the Voting
Agreements.
Vote Required and
Recommendation
Approval of this Proposal No. 4 requires the
affirmative vote (in person or by proxy) of holders of a majority
of the shares present or represented by proxy and entitled to vote
at the Annual Meeting. Unless otherwise instructed on the proxy or
unless authority to vote is withheld, shares represented by
executed proxies will be voted “FOR” the issuance of
12,582,204 shares of common stock as Merger Consideration in
connection with the completion of the Merger.
|
|
|
The Board recommends that
stockholders vote “FOR” the issuance of 12,582,204
shares of common stock as Merger Consideration in connection with
the completion of the Merger.
|
INFORMATION ABOUT
THE MERGER AND MOBCRUSH
Background of the
Merger
The terms of the Merger Agreement are the result
of arm’s-length negotiations between representatives of the
Company and Mobcrush. The following is a brief discussion of the
background of these negotiations, the Merger Agreement and the
Merger.
As part of Super League’s ongoing
consideration and evaluation of its long-term prospects and
strategies, Super League’s board and management regularly
review strategic opportunities involving potential acquisition
opportunities. In addition, Super League’s management
regularly participates in industry conferences and roundtables and
keeps abreast of best practices and technological developments in
the industry. In this regard, Ann Hand, Super League’s Chief
Executive Officer, and Mike Wann, the Chief Executive Officer of
Mobcrush, spoke on multiple occasions beginning in August of 2019
about the dynamics in both companies' industry, development of
symbiotic technology platforms, and the possible benefits of
mutually beneficial commercial arrangements or the combination of
the two companies.
In connection
with such discussions between Ms. Hand and Mr. Wann, Super League
entered into a Non-Disclosure Agreement (the "Needham NDA") with Mobcrush, Inc.'s
banking representative, Needham & Company ("Needham") in October 2019.
Notwithstanding the execution of the Needham NDA and the exchange
of a limited amount of information, the discussions between Super
League and Mobcrush did not lead to a definitive agreement and were
terminated in May, 2020 due to Mobcrush, Inc. entering into an
assignment for the benefit of creditors (the "ABC"), whereby Mobcrush became the
successor to Mobcrush, Inc.
In early
September 2020, over several phone conversations, Ms. Hand and
Mr. Wann, along with certain members of the management teams of
both companies, again discussed the mutual benefit to Super
League’s and Mobcrush’s customers, viewers,
competitors, and investors of a strategic combination or other
commercial arrangement between the two companies. These
conversations included an overview of the business models and
strategies of both Super League and Mobcrush, and a discussion
ensued regarding the further exchange of operating data between the
two companies and their respective Boards of Directors to consider
the opportunity to combine companies. Pursuant to these
discussions, on September 9, 2020, Matt Edelman, Chief Operating
Officer of Super League, and Mr. Wann executed a Mutual
Non-Disclosure Agreement (the "NDA") on behalf of Super League and
Mobcrush, respectively.
From
September 11, 2020 through December 20, 2020, Super League and
Mobcrush exchanged financial and operating data, and Ms. Hand and
Mr. Wann began to discuss the preliminary valuation of Mobcrush and
potential business terms of the combination. In connection with
these discussions, Ms. Hand, along with other members of Super
League's management team, also spoke with a representative of
Mobcrush’s significant investors regarding acceptable terms
of a possible business combination, and Mr. Ann, along with
other members of Super League's management team, attended meetings
with Mr. Wann and senior management of Mobcrush and members of
Mobcrush’s Board of Directors.
On September 15, 2020, Ms. Hand, Mr. Edelman,
and Clayton Haynes, Chief Financial Officer of the Company, held a
conference call with Jeff Hopkins of Halo Finance, LLC, in order to
review the financial model and results disclosed in Mobcrush's data
room in order to determine if an alliance or transaction with
Mobcrush would be financially beneficial to the
Company.
On October 5, 2020, Super League management
prepared and reviewed a combined financial model for Super League
and Mobcrush. After this review, Super League's management
requested additional due diligence materials from Mobcrush,
including a demonstration of Mobcrush's AI-highlight generation
technology and the Mobcrush financials through September
2020.
On October 6, 2020, Super League's management
team discusses moving forward with a potential business combination
with Mobcrush, including additional due diligence necessary to
determine valuation and business synergy, potential deal terms for
a combination, capital requirements, and capital raising activities
that may be associated with such a combination.
On October 14, 2020, an investment brief
prepared by Ms. Hand is circulated to Super League's management
team and board of directors, setting forth the potential of a
combined Super League/Mobcrush entity, the synergies of customers,
offers, technologies, and scales. In mid-October 2020, Super League
proposed to engage in additional valuation work and due diligence
to explore the potential value of a merger between Super League and
Mobcrush.
On October 23, 2020, Mobcrush's representatives
provided Super League's management with Mobcrush's financials for
the quarter and year ended September 30, 2020.
On November 5, 2020, the Board of Directors of
Super League held a special meeting to discuss strategic
opportunities, including the status of discussions with Mobcrush.
At this meeting, management reviewed the strategic rationale of a
business combination transaction with Mobcrush and management
presented draft financial analysis and valuation modeling,
preliminary synergies and value creation for Super League
shareholders.
On November 11, 2020, Super League's senior
management inform Disclosure Law Group, a Professional Corporation
("DLG"), Super League's
outside counsel, of the potential Mobcrush acquisition and
requesting DLG provide an initial draft of a term sheet for the
acquisition of Mobcrush. From November 11, 2020, to November 20,
2020, senior management and DLG discuss the proposed terms and
conditions of the potential acquisition of Mobcrush by Super
League.
On November 20, 2020, DLG circulated, for
discussion purposes, a draft term sheet for the merger with
Mobcrush containing indicative terms of a potential business
combination between Super League and Mobcrush. Ms. Hand discusses
the draft term sheet and potential combination of Super League and
Mobcrush with certain members of Super League's Board of Directors,
and calls a special meeting of the Board of Directors of Super
League to be held on November 23, 2020.
The term sheet contemplated customary
representations, warranties and covenants, with Mobcrush subject to
indemnification for certain representations and warranties,
covenant breaches, and certain other items, including matters
uncovered in diligence or excluded from coverage under a
representation and warranties insurance policy contemplated to be
obtained. The term sheet also set forth certain proposed closing
conditions, and customary termination
provisions.
On November 23, 2020, Ms. Hand submitted the
draft term sheet to the Board of Directors of Super League for
review. On November 24, 2020, the Board of Directors of Super
League held a special telephonic board meeting to discuss strategic
opportunities, including the status of discussions with Mobcrush.
At this meeting, management reviewed the strategic rationale of a
business combination transaction with Mobcrush and Ms. Hand
presented her report regarding preliminary synergies and value
creation for Super League shareholders.
On November 25, 2020, Ms. Hand delivered the
draft term sheet to Mr. Wan for discussion purposes. On December 2,
2020, Ms. Hand held a telephonic conference with certain directors
of Mobcrush to discuss the draft term sheet.
Beginning on December 2, 2020, to December 23,
2020, Ms. Hand and Mr. Wann, along with senior members of the
respective companies’ management teams, held several
conversations by way of teleconference regarding the terms set
forth in the draft term sheet.
On December 18, 2020, the Board of Directors
held a special meeting via telephonic conference in regard to the
potential acquisition of Mobcrush, reviewed the financial analysis
of a business combination transaction with Mobcrush, and received
an update on the status of the negotiation and the transaction
documents from Super League’s senior
management.
On December 21, 2020, Mr. Wann provides Super
League's management with Mobcrush's financials through November 30,
2020. Based upon the Mobcrush financials as of November 30, 2020,
on December 28, 2020, Clayton Haynes, Chief Financial Officer of
Super League, prepares and circulates an updated combined company
financial forecast and the cash requirements for the proposed
combination of Super League and Mobcrush.
On December 30, 2020, the full Board of
Directors for both Mobcrush and Super League held an introductory
telephonic conference call, during which call the respective boards
discussed the potential combination of Super League and Mobcrush,
including the terms as set forth in the draft term
sheet.
On December 31,
2020, the Board of Directors of Super League hold a special meeting
via telephonic conference to discuss revisions to the draft term
sheet, including the number of shares of common stock issuable as
merger consideration and the amount of the collective funding that
would occur concurrent with the closing of the Merger.
On January 2,
2021, Ms. Hand provides a draft of the term sheet to members of
Mobcrush's Board of Directors.
Throughout
January 2021, Super League's senior management team continued due
diligence on Mobcrush's financial statements, technology
engineering and architecture, and key performance
indicators.
From January 4,
2021, to January 12, 2021, Ms. Hand, Mr. Wann, and senior
management from both Mobcrush and Super League, along with Cooley
and DLG, held several telephonic discussions regarding the current
terms set forth in the draft term sheet, potential revisions, and
an overview of how the transaction will be structured.
On January 13,
2021, Mr. Wann provides Ms. Hand with a counter-draft of the term
sheet. The revised term sheet further contemplated that material
shareholders of Super League would enter into a voting agreement to
support and vote in favor of the proposal under Nasdaq’s
Listing Rules to issue Super League common stock contemplated to be
issued at closing. Mobcrush’s term sheet further proposed an
increase of the Super League board by two members to be designated
by Mobcrush shareholders. Additionally, the revised term sheet
contemplated that the transaction would be a
“public-style” merger with the Mobcrush shareholders
retaining no post-closing indemnification obligations, and no
termination fee in the event of a termination of the definitive
agreement for a breach by Super League. In addition, the revised
term sheet contemplated the removal of the “earn-out”
and “holdback” of shares of common stock following the
close of the Merger.
On January 16,
2021, after discussion and review with members of Super League's
Board of Directors and senior management, Ms. Hand sent a
counter-draft to Mobcrush's draft of the term sheet. The revised
term sheet proposed, among other things, changes to net working
capital adjustments, a proposed timeline for term sheet completion
and due diligence, reinsertion of the “holdback”
provision, modification to the “earn-out” provision,
increase in the number of issued and outstanding shares of common
stock of Super League resulting from its $8.0 million registered
offering, insertion of a bridge financing provision relating to
Mobcrush and requirement that the financial statements of Mobcrush
be audited by Baker Tilly at the expense of Super League, and
removal of the break-up fee.
On January 19,
2021 and January 20, 2021, senior management from both Mobcrush and
Super League held telephonic conferences discussing the most
current draft of the revised term sheet. After these discussions,
on January 20, 2021, Mobcrush's senior management delivered a
counter-draft to the revised term sheet to Ms. Hand. Mobcrush's
counter-draft included the removal of net working capital
adjustment requirement, update of exclusivity period through April
30th, and contemplated the option of bridge financing from both
parties prior to closing, the removal of the
“earn-out”, and the removal of the break-up
fee.
On January 21,
2021, senior management from both Super League and Mobcrush held a
telephonic conference to discuss the revised term sheet provided by
Mobcrush's senior management.
On January 24,
2021, senior management of Super League holds an internal
conference to discuss the financials, deal status, and the drafting
of a final term sheet to present to Mobcrush's Board of
Directors.
On January 25,
2021, members of Super League's senior management team have a due
diligence call with Mr. Wann to inquire into Mobcrush's employee
roster, key employees, and integration of Mobcrush employees into
Super League. Later, on January 25, 2021, senior management of both
Super League and Mobcrush hold another telephonic conference to
discuss the current status of the term sheet, and final revisions
that will be made thereto.
On January 26,
2021, Super League submitted its revised and final term sheet to
Mobcrush's Board of Directors for review. The term sheet proposed
Mobcrush cancellation of existing stock option plans and adoption
of Super League’s 2014 Plan, expansion of board for two
additional members, and a lockup terms for Mobcrush shareholders,
specifics on the bridge financing impact on the shares of Super
League common stock issuable to Mobcrush shareholders, and an
exclusivity period.
On January 27, 2021 to January 28, 2021, senior
management of both Super League and Mobcrush hold telephonic
conferences to discuss treatment of options to purchase the common
stock of Mobcrush, and how such options will be treated in the
merger.
On January 29, 2021, the Board of Directors of
Super League held a special meeting via teleconference, during
which time the Board of Directors reviewed and approved the term
sheet as proposed by Ms. Hand. Also on January 29, 2021, Mobcrush
approved the term sheet, and Ms. Hand and Mr. Wann, on behalf of
Super League and Mobcrush, respectively, executed the term
sheet.
On January 30, 2021, Mobcrush's representatives
send Super League's senior management the unaudited 2021 financial
statements for Mobcrush for Super League to update its forecasts
and analysis of a combination between Mobcrush and Super
League.
Throughout February 2021, Super League continues
its due diligence investigation into Mobcrush's technology,
financials, employees, potential liabilities, and exploration of
synergies between the companies.
On February 5, 2021, senior management and
counsel for Super League held a due diligence call with Sherwood
Partners, representatives of Mobcrush, to ascertain any liabilities
or issues associated with the assignment for the benefit of
creditors that may be assumed by Merger Sub upon the closing of the
merger between Merger Sub and Mobcrush.
On February 18, 2021, DLG provides Mobcrush and
its counsel with the initial draft of an Agreement and Plan of
Merger (the "Merger
Agreement"). The draft Merger Agreement included, among
other things, customary representations and warranties, customary
closing conditions, the payment of expenses if the Merger Agreement
were terminated in certain circumstances, and a to-be-determined
fixed exchange ratio of Mobcrush common and preferred stock for
Super League Common Stock.
From February 19, 2021, to February 24, 2021,
senior management of Super League scheduled calls with key
employees of Mobcrush in order to further the due diligence on
Mobcrush employee integration, roles of key employees, technology
platforms, and sales processes.
On February 26, 2021, Ropes & Gray, LLP
("Ropes & Gray"), legal
counsel to Mobcrush, sent to DLG a revised draft of the merger
agreement. During the period between February 26, 2021 and March 7,
2021, DLG, on the one hand, and Ropes and Gray, on the other hand,
at the direction and with the guidance and input of their
respective clients, exchanged several drafts of the merger
agreement and related agreements and documents and engaged in
negotiations regarding the terms and conditions of the Merger
Agreement. During such period, members of senior management of
Super League, on the one hand, and Mobcrush, on the other hand,
also engaged in negotiations regarding the terms and conditions of
the Merger Agreement, including treatment of options to purchase
Mobcrush common stock, no-shop provisions, and termination upon
certain events and the payment of transaction expenses in the event
of such termination.
On March 1, 2021, the Board of Directors of
Super League hold a special meeting in which they discuss the
current status of the Merger Agreement, the proposed terms as
currently set forth in the draft Merger Agreement, and the status
of the discussions and negotiations between the management and
outside advisors of Mobcrush and Super League.
Over the course of the afternoon of March 8 and
through the evening of March 9, 2021, representatives of each of
DLG and Ropes & Gray continued to negotiate the draft Merger
Agreement, including the parties’ confidential disclosure
schedules to the Merger Agreement.
On March 9, 2021, the Board of Directors of
Super League reviewed the final Merger Agreement, and unanimously
approved the Merger Agreement and the Acquisition by written
consent.
On March 10, 2021, Super League, Mobcrush, and
Merger Sub, executed and delivered the Merger Agreement, providing
for the acquisition of all of the equity interests in Mobcrush for
an aggregate of 12,582,204 shares of Super League Common
Stock.
On March 11, 2021, the transaction was announced
before the market open in New York.
On April 20, 2021, the
parties came to an agreement on the treatment of outstanding stock
options previously issued by Mobcrush following the closing of the
Merger. As a result, on April 20, 2021 the parties entered into an
amendment to the Merger Agreement to include the treatment of the
outstanding Mobcrush options within the terms of the Merger
Agreement, and to extend the termination date for the Merger
Agreement to June 30, 2021.
Overview of
Mobcrush
Mobcrush Streaming, Inc. is a company
incorporated under the laws of the state of Delaware in May 2020,
and a successor company to Mobcrush, Inc., a company incorporated
under the laws of the state of Delaware on July 17, 2014. On May 4,
2020, Mobcrush, Inc. completed an assignment for the benefit of
creditors pursuant to a formal asset purchase agreement, whereby
Mobcrush, Inc. transferred to Mobcrush ownership in and to certain
assets of Mobcrush, Inc. Mobcrush is headquartered in Santa Monica,
California.
Mobcrush is a
leading gaming technology platform that empowers gamers and
influencers to reach all of their fans simultaneously across live
streaming and social media platforms. Mobcrush has been downloaded
by more than 600,000 creators who generate almost two million hours
of original content annually and have accumulated more than 4.5
billion fans and subscribers. Along with free multi-streaming
distribution, Mobcrush’s proprietary technology ReplayEngine
gives gamers the ability to capture and share amazing highlight
moments in real time via artificial intelligence with a single tap.
Mobcrush powers full-service live streaming, influencer
activations, and esports content creation and distribution at
scale. The company’s Sponsored Live Breaks and other
advertising solutions create authentic connections for brands with
creators and their fans across a broad spectrum of video game
entertainment. The company also owns and operates InPVP’s
Mineville, one of six official Microsoft Minecraft partner servers,
enjoyed by more than 22 million unique players annually. Through
its longstanding commitment to advancing the intersection of
gameplay, live streaming, and content creation, Mobcrush continues
to be a leading platform helping players and creators pursue their
passion and make a living while doing so.
Mobcrush's main office is located at 100
Wilshire Blvd., Ste. 1200, Santa Monica, California, 90401, and its
telephone number is +1 (424) 291-2103. Mobcrush's website address
is www.mobcrush.com.
Reasons for the
Merger
We believe the Merger is in the best interests
of the Company and its stockholders because we believe that the
combination of Mobcrush and Super League brings together
industry-leading technology platforms and strengthens Super
League’s position as a leading provider of e-gaming content
and related services, creating significantly enhanced scale and
geographic reach across the United States.
Our focus has always been to provide competitive
video gaming and esports entertainment for everyday players of all
ages, and, over the 12 months we have gained an increasing
appreciation for the value of putting tools into the hands of the
players themselves to create and share their own gameplay and
relevant content with others. This mission speaks to the overall
democratization of content creation, the Gen Z and Millennial
thirst to create and share, and their desire to spend more and more
of their day connecting and communicating in a virtual space and
time and in a highly engaging and creative way. We believe gaming
is only an entry point, and the opportunity is larger than just
gaming, and in fact, Super League is a social, media, and
entertainment platform, and, when combined with Mobcrush, we expect
to substantially increase this reach.
Currently, we engage with large audiences of
gamers and extend beyond just gameplay, generating three primary
sources of value as follows:
●
First, we
create a powerful marketing channel for advertisers and brands to
reach the elusive, Gen Z, Millennial, gamer and creator
audience.
●
Second, our
digital marketplace launch that we seeded in the second half of
2020 empowers the players and creators themselves to create a
diverse breadth of digital goods that speak to precisely what our
community wants and participate in the economy.
●
Third, the
significant amount of derivative content produced on our technology
platform that, in itself, provides a significant source of future
monetization opportunities.
Key macro trends that speak to how Gen Z and
Millennials want to create, share, and participate in their own
content creation have established a powerful business model for
Super League. We believe the acquisition of Mobcrush represents the
most material shift in Super League’s overall trajectory,
providing a step-function increase in our scale and forward revenue
generating opportunities.
Mobcrush is a live streaming platform used by
hundreds of thousands of gaming influencers who generate and
distribute almost two million hours of original content annually to
their own social audiences aggregating more than 4.5 billion fans
and subscribers across the most popular live streaming and social
media platforms, including Twitch, YouTube, Facebook, Instagram,
Twitter, and more. Mobcrush also owns Mineville, one of six
exclusive, official Minecraft server partners enjoyed by more than
22 million unique players annually.
We believe that our two companies are aligned
and are complementary in the most critical aspects of our business-
our customers and offerings, monetization, key performance
indicators and other revenue opportunities, each as further
described below.
Customers and
Offers
Super League has consistently focused on
individuals considered to be ‘mid-tier gamer’. These
individuals are not considered full-time gamers, but are highly
competitive and engaged, enjoy sharing their gameplay and
entertainment content more widely. Our offers such as Framerate,
Super League Arena and Super League TV align with that segment. And
uniquely inside of this tier, we have a growing foothold on the
younger engaged gamer mainly through our owned and operated digital
property, Minehut – one of the world’s largest,
expanding online communities of Minecraft players with over 1
million unique monthly players. Players enjoy
‘freemium’ or limited free-to-play, private server
hosting along with social, gameplay and entertainment
experiences.
We believe Mobcrush focuses on the same
segments. Mobcrush’s free live streaming toolkit is offered
to up-and-coming mid-tier streamers as a way to build and monetize
their own livestream content. Their mission is to provide these
streamers with an opportunity to turn their passion into their
livelihood. This demographic aligns with Super League’s 16-
to 34-year-old target demographic. In addition, Mobcrush’s
Mineville product is highly complementary to Super League’s
Minehut audience, which is squarely focused on young, avid
Minecraft players.
Monetization
We believe there is significant alignment with
respect to the monetization of Super League and Mobcrush. First
both companies have focused on audience development to support
their primary revenue stream to-date – a premium advertising
model. We believe media is all about scale – and while both
companies have reached a degree of critical mass organically and
individually – we believe Super League and Mobcrush combined
will make us a leading provider of content-driven advertising
solutions to brands, advertisers, and other consumer facing
businesses with substantial audience reach across channels in video
gaming, including advertising at competitive events, social media
and live streaming content, and in-game
experiences.
In addition, with the acquisition of Mobcrush,
we believe we are building a formidable, highly scalable
gaming-centric media and advertising platform that reaches one of
the largest addressable audiences of gamers in the U.S. We believe
that Super League’s premium owned and operated in-game and
video inventory, coupled with Mobcrush’s
television-equivalent and ad-blocker-proof in-stream sponsor
inventory, has the potential to create a sought-after solution for
advertisers targeting gamers. Further, we believe both companies
also share revenue potential by way of direct gamer monetization
through Super League’s and Mobcrush’s Minehut and
Mineville Minecraft properties, respectively. Minehut’s
early-stage marketplace offering players and creators both
subscription and one-time digital offerings that allow our
customers to purchase expanded server capability, purchase cosmetic
goods, and over time, purchase access to new games. Similarly, in
Mineville, players can purchase digital goods in Minecraft’s
marketplace – such as game entry fees and cosmetic skins. We
believe that there are significant opportunities to amplify both of
these businesses through the cross-marketing of our communities and
the cross-fertilization of our offers.
Moreover, we believe each company has an
additional emerging leg of revenue, focused on both the value of
our derivative content and our proprietary technology to create and
distribute content. During 2020, Super league reported a
significant increase in revenues generated from syndicating our
derivative content to others like Snapchat and Cox Media, and we
now have partnerships in place or pending to syndicate our content
through multiple over-the-top services. Similarly, Mobcrush’s
live streaming technology platform and proprietary AI-driven
gameplay highlights software amasses a large amount of derivative
content that we believe, when coupled with our gamer generated
content, can create a compelling library of competitive gameplay
and entertainment content for future
monetization.
Key Performance
Indicators
From a key performance indicator and metrics
standpoint, we believe the combination of Super League and Mobcrush
has the potential to represent a new, higher level of increased
scale and reach, including the following:
●
The combined
companies have the potential to reach more than 25 million players
per year, three million players per month, with over 400,000
players per day.
●
In addition,
the combination of Super League and Mobcrush has the potential for
a U.S. monthly viewing audience of 85 million, which would create
for a top 50 U.S. media property according to measurements used by
Nielsen.
●
Annually,
Super League and Mobcrush combined have the potential to generate
7.7 billion annual U.S video views across live streaming platforms,
two billion views on social media platforms, and enable 60 million
hours of gameplay on owned and operated
platforms.
●
Collectively, we believe the combined companies
could generate and distribute over 200,000 gameplay highlights
across streaming and social channels per month.
Established Revenue
Stream
We expect Mobcrush to bring two established
revenue streams to Super League as a result of the Merger. First,
Mobcrush has an established sales and business development team,
driving branded media activations in gaming, social media, and
packaging and bringing branded sponsorships underwriting the free
AI-clipping service ReplayEngine for streamers to enhance their
content and generate incremental revenue during their live streams.
Second, Mineville, Mobcrush’s Minecraft Bedrock edition
server, is one of six server partners for Microsoft available
across consoles, PCs, and mobile devices. Mineville is a free
to play Minecraft server that monetizes based on sales of game
modes, ranks, pets, and cosmetic items players purchase in the free
to play server environment.
Opinion of Super League’s Financial Advisor
Super League has retained
Economics Partners, LLC, which we refer to as Economics Partners,
to act as Super League’s financial advisor in connection with
the Merger.
On April 21,
2021, Economics Partners rendered its oral opinion to the Super
League board (which was subsequently confirmed in writing by
delivery of Economics Partners’ written opinion dated the
same date) that, as of April 21, 2021, the shares of Super League
common stock issuable as Merger Consideration (the
“Per Shar Merger
Consideration to be paid by Super League pursuant to the
Merger Agreement was fair, from a financial point of view, to Super
League.
Economics
Partners’ opinion was directed to the Super League board, and
only addressed the fairness, from a financial point of view, to
Super League of the Per Shar Merger Consideration to be paid Super
League in the Merger and did not address any other aspect or
implication of the Merger. The summary of Economics Partners’
opinion in this proxy statement is qualified in its entirety by
reference to the full text of its written opinion, which is
included as Annex
D this proxy statement and sets forth the procedures
followed, assumptions made, qualifications and limitations on the
review undertaken and other matters considered by Economics
Partners in connection with the preparation of its opinion.
However, neither Economics Partners’ written opinion nor the
summary of its opinion and the related analyses set forth in this
proxy statement is intended to be, and they do not constitute,
advice or a recommendation to any securityholder as to how such
securityholder should vote or act with respect to any matter
relating to the Merger.
In
arriving at its opinion, Economics Partners:
●
reviewed the Merger
Agreement and other documents related to the proposed transaction;
Economics Partners notes that after discussions with Super League,
it is our understanding that the material terms of the agreement
were agreed to on the date the term sheet for the Merger (the
“Term Sheet”)
was signed – January 29th, 2021;
●
reviewed certain publicly
available business and financial information relating to Super
League;
●
reviewed certain other
information relating to Mobcrush and Super League, including
financial forecasts relating to Mobcrush for the calendar years
ending December 31, 2021 through December 31, 2022 prepared by the
management of Mobcrush and revised and provided to us by the
management of Super League;
●
met with the managements
of Mobcrush and Super League and certain of their respective
representatives to discuss the businesses and prospects of Mobcrush
and Super League;
●
reviewed estimates
prepared and provided to Economics Partners by the management of
Super League with respect to the cost savings and revenue
synergies, net of costs necessary to achieve such cost savings and
revenue synergies, anticipated by such management to result from
the Merger, which we refer to as the synergies
estimates;
●
considered certain
financial data of Mobcrush and Super League and certain stock
market data of Super League, in each case through January 29, 2021,
and compared that data with similar data for the period through
January 29, 2021, for companies with other publicly traded equity
securities in businesses Economics Partners deemed similar to those
of Mobcrush;
●
considered, to the extent
publicly available on or prior to January 29, 2021, the financial
terms of certain other business combinations and other transactions
which had been completed or announced and which Economic Partners
deemed relevant; and
●
considered such other
information, financial studies, analyses and investigations and
financial, economic and market criteria that Economics Partners
deemed relevant.
In
connection with its review, Economics Partners did not
independently verify any of the foregoing information, and, with
the consent of the Super League board, Economics Partners assumed
and relied upon such information being complete and accurate in all
respects material to its analyses and opinion. With respect to the
Mobcrush financial projections that Economics Partners relied upon
for purposes of its analyses, Economics Partners was advised by the
managements of Mobcrush and Super League, and Economics Partners
assumed with Super League’s consent, that such forecasts and
estimates had been reasonably prepared in good faith on bases
reflecting the best currently available estimates and judgments of
the managements of each of Mobcrush and Super League as to the
future financial performance of Mobcrush. With respect to the
synergies estimates that Economics Partners relied upon for
purposes of its analyses, Economics Partners has been advised by
the management of Super League, and Economics Partners assumed with
Super League’s consent, that such estimates have been
reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of the management of
Super League as to the cost savings and revenue synergies, net of
costs necessary to achieve such cost savings and revenue synergies,
anticipated by such management to result from the Merger, and will
be realized in the amounts and the times indicated thereby. At
Super League’s direction, Economics Partners assumed that the
projections for Mobcrush and the synergies estimates are a
reasonable basis upon which to evaluate Mobcrush and the Merger
and, at Super League’s direction, Economics Partners relied
upon the projections for Mobcrush and the synergies estimates for
purposes of its analyses and opinion. Economics Partners expressed
no view or opinion with respect to the Super League projections for
Mobcrush, or the synergies estimates, or the assumptions and
methodologies upon which they are based.
For
purposes of its analyses and opinion, Economics Partners had been
advised and Economics Partners assumed, the Merger will qualify as
a “reorganization” within the meaning of Section 368(a)
of the Code. With the consent of the Super League board, Economics
Partners assumed that, in the course of obtaining any regulatory or
third party consents, approvals or agreements in connection with
the Merger, no delay, limitation, restriction or condition would be
imposed that would have an adverse effect on Mobcrush, Super League
or the contemplated benefits of the Merger, and that the Merger
would be consummated in compliance with all applicable laws and
regulations and in accordance with the terms of the Merger
agreement, without waiver, modification or amendment of any term,
condition or agreement thereof that was material to Economics
Partners’ analyses or opinion. In addition, Economics
Partners was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Mobcrush or Super League, nor was
Economics Partners furnished with any such evaluations or
appraisals.
Economics Partners’
opinion addressed only the fairness, from a financial point of
view, to Super League of the Per Share Merger Consideration to be
paid by Super League pursuant to the Merger Agreement and did not
address any other aspect or implication of the Merger or any other
agreement, arrangement or understanding entered into in connection
therewith or otherwise, including, without limitation, the form or
structure of the Merger or the Per Share Merger Consideration and
the fairness of the amount or nature of, or any other aspect
relating to, any compensation, if any, or consideration to be
received by or otherwise payable to any officers, directors,
employees, securityholders or affiliates of any party to the
merger, or class of such persons, relative to the Per Share Merger
Consideration or otherwise. Furthermore, Economics Partners did not
express any advice or opinion regarding matters that require legal,
regulatory, accounting, insurance, tax, environmental, intellectual
property, executive compensation or other similar professional
advice. Economics Partners assumed that Super League had or would
obtain such advice or opinions from the appropriate professional
sources. The issuance of Economics Partners’ opinion was
approved by Economics Partners’ authorized internal
committee.
Economics Partners’
opinion was necessarily based upon information made available to
Economics Partners as of the date of its opinion and financial,
economic, market and other conditions as they existed and could be
evaluated on the date of its opinion. Economics Partners did not
undertake, and is under no obligation, to update, revise, reaffirm
or withdraw its opinion, or otherwise comment on or consider events
occurring or coming to Economics Partners’ attention after
the date of its opinion. Economics Partners did not express any
opinion as to what the value of Super League common stock actually
will be when issued to the holders of Mobcrush common and preferred
stock pursuant to the Merger Agreement or the prices or ranges of
prices at which Mobcrush common and preferred stock or Super League
common stock may be purchased or sold at any time. Economics
Partners assumed that Super League common stock to be issued in the
Merger will be listed on the Nasdaq Stock Markets as of the
consummation of the Merger. Economics Partners’ opinion did
not address the relative merits of the Merger as compared to
alternative transactions or strategies that might have been
available to Super League, nor did it address the underlying
business decision of the Super League board or Super League to
proceed with or effect the Merger.
Economics Partners’
opinion was for the information of the Super League board and does
not constitute a recommendation to any securityholder of Super
League or Mobcrush as to how such securityholder should vote or act
on any matter relating to the proposed Merger.
In
preparing its opinion to the Super League board, Economics Partners
performed a variety of analyses, including those described below.
The summary of Economics Partners’ financial analyses is not
a complete description of the analyses underlying Economics
Partners’ opinion. The preparation of such an opinion is a
complex process involving various quantitative and qualitative
judgments and determinations with respect to the financial,
comparative and other analytic methods employed and the adaptation
and application of those methods to the unique facts and
circumstances presented. As a consequence, neither Economics
Partners’ opinion nor the analyses underlying its opinion are
readily susceptible to partial analysis or summary description.
Economics Partners arrived at its opinion based on the results of
all analyses undertaken by it and assessed as a whole and did not
draw, in isolation, conclusions from or with regard to any
individual analysis, analytic method or factor. Accordingly,
Economics Partners believes that its analyses must be considered as
a whole and that selecting portions of its analyses, analytic
methods and factors, without considering all analyses and factors
or the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying its
analyses and opinion.
In
performing its analyses, Economics Partners considered business,
economic, industry and market conditions, financial and otherwise,
and other matters as they existed on, and could be evaluated as of,
the date of its opinion. No company, business or transaction used
in Economics Partners’ analyses for comparative purposes is
identical to Mobcrush, Super League or the Merger. While the
results of each analysis were taken into account in reaching its
overall conclusion with respect to fairness, Economics Partners did
not make separate or quantifiable judgments regarding individual
analyses. The implied valuation reference ranges indicated by
Economics Partners’ analyses are illustrative and not
necessarily indicative of actual values nor predictive of future
results or values, which may be significantly more or less
favorable than those suggested by the analyses. In addition, any
analyses relating to the value of assets, businesses or securities
do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold, which may depend on
a variety of factors, many of which are beyond the control of Super
League, Mobcrush and Economics Partners. Much of the information
used in, and accordingly the results of, Economics Partners’
analyses are inherently subject to substantial
uncertainty.
Neither Economics
Partners’ opinion nor its analyses were determinative of the
Per Share Merger Consideration or of the views of the Super League
board with respect to the Merger.
Financial Analyses
The
following is a summary of the material financial analyses performed
in connection with the preparation of Economics Partners’
opinion rendered to the Super League board on April 21, 2021. The
analyses summarized below include information presented in tabular
format. The tables alone do not constitute a complete description
of the analyses. Considering the data in the tables below without
considering the full narrative description of the analyses, as well
as the methodologies underlying, and the assumptions,
qualifications and limitations affecting, each analysis, could
create a misleading or incomplete view of Economics Partners’
analyses.
Based
on the Per Share Merger Consideration to be received by holders of
Mobcrush common and preferred stock in the Merger of 12,582,204
shares of Super League common stock, Economics Partners noted that
the implied value of the Per Share Merger Consideration was $38.63
million (based on the closing price for Super League common stock
on January 29, 2021 of $3.07, as reported on the Nasdaq Capital
Market).
For
purposes of its analyses, Economics Partners reviewed a number of
financial metrics, including:
●
Enterprise Value
—generally the value as of a specified date of the relevant
company’s outstanding equity securities (taking into account
its options and other outstanding dilutive securities) plus the
value as of such date of its net debt (the value of its outstanding
indebtedness, preferred stock and capital lease obligations less
the amount of cash and cash equivalents on its balance sheet) and
non-controlling interests (as applicable).
●
Trailing Twelve Month
(“TTM”) Revenue —generally the amount of
the relevant company’s revenues in the four most recent
fiscal quarters available as filed as of the date of the
opinion.
●
Estimated 2021
Revenue —generally the amount of the relevant
company’s revenues projected for the fiscal year ended
December 31, 2021.
Selected
Companies Analysis Regarding Mobcrush
Economics Partners
considered certain financial data for Mobcrush and selected
companies with publicly traded equity securities that Economics
Partners deemed relevant. The selected companies were selected
because they were deemed to be similar to Mobcrush in one or more
respects. Stock prices for the selected companies used in the
selected companies analysis described below were as of January 29,
2021. The estimates of Mobcrush’s future financial
performance for the fiscal years ending December 31, 2021 and
December 31, 2022 used in the selected companies analysis described
below were based on the Company’ projections. Estimates of
the future financial performance of the selected companies listed
below for the calendar years ending December 31, 2021 and December
31, 2022 were based on publicly available research analyst
estimates for those companies that were publicly available on or
prior to January 29, 2021. The implied valuation metrics for
Mobcrush set forth below did not include expected
synergies.
The
financial data reviewed included:
●
Enterprise Value as a
multiple of TTM Revenue
●
Enterprise Value as a
multiple of estimated Revenue for calendar year ended December 31,
2021, which we refer to as 2021E Revenue
The
companies selected by Economics Partners and the multiples
considered by Economics Partners in its analysis were as
follows:
Taking into account the
results of the selected companies analysis, Economics Partners
applied multiple ranges (in each case selected based upon its
professional judgment of (i) 3.0x to 4.5x to Mobcrush’s
estimates of its TTM Revenue as of December 31, 2020 and (ii)
2.5x to 4.0x to Super Leagues’
estimates of the Company’s expected revenue for the fiscal
year ending December 31, 2021. The selected companies analysis
indicated the following approximate implied enterprise value
reference ranges for Mobcrush, as compared to the implied value of
the Per Share Merger Consideration (based on the closing price for
Super League common stock on January 29, 2021 of
$3.07):
|
Implied Enterprise Value Reference Range -
TTM
|
|
Per Share Merger Consideration
|
|
$19.60 million
to $29.40 million
|
|
$38.63
million
|
|
Implied Enterprise Value Reference Range –
2021E
|
|
Per Share MergerConsideration
|
|
$44.40 million to $71.00 million
|
|
$38.63 million
|
Selected Transactions Analysis Regarding Mobcrush
Economics
Partners also considered the financial terms of certain business
combinations and other transactions announced or completed since
2018 and on or prior to January 29, 2021 that Economics Partners
deemed relevant. The selected transactions were selected because
the target companies were deemed to be similar to Mobcrush in one
or more respects. Financial data for the selected transactions were
based on public filings, publicly available research
analysts’ estimates, and other publicly available
information. Financial data for Mobcrush were based on information
provided by Mobcrush and Super League.
The
financial data for the selected transactions reviewed by Economics
Partners included:
●
Enterprise Value implied by the consideration
proposed or paid in each selected transaction, as a multiple of the
target company’s TTM Revenue as of the transaction
announcement date, which we refer to as “Trailing
Revenue”.
●
Enterprise Value implied by the consideration
proposed or paid in each selected transaction, as a multiple of the
target company’s estimated next twelve months Revenue, which
we refer to as “NTM Revenue”.
The
transactions selected by Economics Partners and the multiples
considered by Economics Partners in its analysis were as
follows:
Taking into
account the results of the selected transactions analysis,
Economics Partners applied a multiple range of (i) 3.25x to 4.50x
to Mobcrush’s TTM Revenue as of December 31, 2020 and (ii)
2.00x to 3.00x to Mobcrush’s NTM Revenue as of December 31,
2020. The selected transactions analysis indicated the following
approximate implied enterprise value reference range for Mobcrush,
as compared to the implied value of the Per Share Merger
Consideration (based on the closing price for Super League common
stock on January 29, 2021 of $3.07):
|
Implied Enterprise Value Reference Range –
TTM
|
|
Per Share MergerConsideration
|
|
$21.20 million to $29.40 million
|
|
$38.63 million
|
|
Implied Enterprise Value Reference Range –
NTM
|
|
Per Share MergerConsideration
|
|
$35.50 million to $53.3 million
|
|
$38.63 million
|
Base Discounted Cash Flow Analysis Regarding Mobcrush
Economics
Partners also performed a discounted cash flow analysis with
respect to Mobcrush by calculating the estimated net present value
of the projected after-tax, unlevered free cash flows of Mobcrush
based on the Company’s projections. Economics Partners
applied a range of terminal value multiples of 2.75x to 3.25x to
Super Leagues’ estimate of Mobcrush’s fiscal year
ending December 31, 2022 revenue and discount rates ranging from
30.0% to 40.0%. The discounted cash flow analysis indicated the
following approximate implied equity value reference range for
Mobcrush, as compared to the implied value of the Per Share Merger
Consideration (based on the closing price for Super League common
stock on January 29, 2021 of $3.07):
|
Implied Enterprise Value Reference Range
|
|
Per Share MergerConsideration
|
|
$51.50 million to $68.50 million
|
|
$38.63 million
|
Synergy Discounted Cash Flow Analysis Regarding
Mobcrush
Economics
Partners also performed a discounted cash flow analysis with
respect to Mobcrush by calculating the estimated net present value
of the projected after-tax, unlevered free cash flows of Mobcrush
based on the Company’s projections. Economics Partners also
included in this analysis the net benefit of synergies as projected
by Super League. Economics Partners applied a range of terminal
value multiples of 2.75x to 3.25x to Super Leagues’ estimate
of Mobcrush’s fiscal year ending December 31, 2022 revenue
and discount rates ranging from 30.0% to 40.0%. The discounted cash
flow analysis indicated the following approximate implied
enterprise value reference range for Mobcrush, as compared to the
implied value of the Per Share Merger Consideration (based on the
closing price for Super League common stock on January 29, 2021 of
$3.07):
|
Implied Enterprise Value Reference Range
|
|
Per Share Merger Consideration
|
|
$52.90 million to $70.00 million
|
|
$38.63 million
|
Other Matters
Super League retained Economics Partners as its
financial advisor in connection with the proposed Merger based on
Economics Partners’ qualifications, experience and reputation
as an internationally recognized management consulting and
financial advisory firm and Economics Partners’ experience in
transactions similar to the Merger and familiarity with Mobcrush
and its business. Economics Partners will become entitled to
receive a transaction fee of $85,000 which became payable upon the
delivery of Economics Partners’ opinion. In addition, Super
League has agreed to reimburse Economics Partners for certain of
its expenses and indemnify Economics Partners and certain related
parties for certain liabilities and other items arising out of or
related to its engagement.
Economics
Partners and its affiliates in the past provided valuation services
to Mobcrush for which services Economics Partners and its
affiliates have received compensation, including, during the past
two years, providing 409a valuation services. In addition,
Economics Partners and its affiliates may in the future provide
management consulting and other financial advice and services to
Mobcrush, Super League and their respective affiliates for which
advice and services Economics Partners and its affiliates would
expect to receive compensation. Economics Partners is a management
consulting and financial services firm. In the ordinary course of
business, Economics Partners and its affiliates may provide
services to Mobcrush, Super League, or its customers or
associates.
INFORMATION ABOUT THE
MERGER AGREEMENT
The
following is a summary of the material provisions of the Merger
Agreement, but does not purport to describe all of the terms
thereof and may not contain all of the information about the Merger
Agreement that is important to you. The following summary is
qualified in its entirety by reference to the complete text of the
Merger Agreement, which is attached as Annex A to this proxy
statement. You should refer to the full text of the Merger
Agreement for details about the transaction and the terms and
conditions of the Merger Agreement.
On March 9,
2021, the Company, Merger Sub, and Mobcrush, entered into the
Merger Agreement, pursuant to which the Company agreed to acquire
Mobcrush through the merger of Merger Sub with and into Mobcrush,
with Mobcrush continuing as the surviving corporation of such
merger, subject to the satisfaction or waiver of certain
conditions, as further described below. For U.S. federal income Tax
purposes, it is intended that the Merger qualify as a
"reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and the regulations promulgated thereunder,
that this Agreement will constitute a "plan of reorganization" for
purposes of Sections 354 and 361 of the Code.
As disclosed
above, the agreed upon purchase price for the Merger is 12,582,204
in shares of our common stock, subject to certain adjustments for
amounts owed by Mobcrush pursuant to certain outstanding
convertible promissory notes. In addition, we expect approximately
2,087,000 unvested option to acquire shares of Mobcrush common
stock outstanding immediately prior to the effective time will be
terminated, and options to purchase shares of Super League common
stock will be issued to replace the cancelled options (the
“Replacement
Options”) in an amount and under terms and conditions
as is customary for Super League and as determined by Super
League's Board of Directors. The Replacement Options will have an
exercise price of not less than 85% of the closing price of our
common stock on the date of the Merger Agreement, have a term of
ten years, and will be subject to Super League’s traditional
four-year vesting schedule, with vesting beginning on the one-year
anniversary of the closing of the Merger. We expect to issue an
aggregate total of approximately 500,000 Replacement Options upon
closing of the Merger.
Pursuant to the
Merger Agreement, certain stockholders of Mobcrush and the Company
(collectively, the “Voting
Stockholders”) will enter into voting agreements
(collectively, the “Voting
Agreements”) pursuant to which the Voting Stockholders
will agree, among other things, to (i) vote in favor of the Merger
Agreement and the transactions contemplated thereby and (ii) be
bound by certain other covenants and agreements related to the
Merger. A form of the Voting Agreement is included as an exhibit to
the Merger Agreement, which is attached to this proxy statement as
Annex
B.
Pursuant to the
Merger Agreement, the Company agreed to increase the size of its
board of directors by two members in order to elect to the board of
directors, promptly following and in any event within five business
days following the Closing Date, Mike Wann as a director (and as
the initial appointee of the previous Mobcrush equityholders as
described below) and the remaining member to be mutually agreed
upon by Mike Wann and the other members of Parent's Board of
Directors, for which such director must meet the requirements of an
"independent director" pursuant to the rules and regulations of the
Nasdaq Stock Market.
At the closing
of the Merger, among other things contemplated in the Merger
Agreement: (i) the directors and officers of Merger Sub, as
appointed and elected by Super League's Board of Directors, shall
be the directors and officers of Mobcrush; (ii) the holders of
Mobcrush securities will receive a fraction of a share of Super
League equal to 52.8% (the "Exchange Ratio"), for an aggregate
number of 12,582,204 shares of Super League Common Stock to be
issued to the Mobcrush equity holders; (iii) the previous Mobcrush
equityholders will receive cash in lieu of fractional shares of
Super League Common Stock; and (iv) the Company, Mike Wann, and
certain other holders of Mobcrush Preferred Stock (Mike Wann and
such holders of Mobcrush Preferred stock are collectively, the
"Rights Parties") will
enter into a registration rights agreement (the “Registration Rights Agreement”)
pursuant to which, among other matters, the Rights Parties will be
granted certain customary registration rights with respect to the
shares of Super League acquired pursuant to the Merger. A form of
the Registration Rights Agreement is included as an exhibit to the
Merger Agreement, which is attached to this proxy statement as
Annex
A.
The obligations of Super League and Mobcrush to
consummate the transactions contemplated by the Merger Agreement
are subject to the satisfaction or waiver of, among other closing
conditions, (i) the accuracy of the representations and warranties
in the Merger Agreement, (ii) the compliance by the parties with
the covenants in the Merger Agreement, (iii) the absence of any
legal order barring the Merger, (iv) Mobcrush receiving written
notice from Microsoft Corporation consenting to the transactions
contemplated by the Merger Agreement, and waiving its right to
terminate, that certain Minecraft Online Channel Agreement, dated
April 24, 2017 (the "Channel
Agreement"), with such notice to further provide
confirmation that the Channel Agreement shall remain in full force
and effect after the closing of the Merger Agreement, and (v) the
receipt of any pertinent regulatory approvals. The obligation of
the Company to effect the closing is also subject to the
satisfaction or waiver of the condition that no more than 2% of the
shares of common stock and preferred stock of Mobcrush issued and
outstanding as of immediately prior to the closing have properly
demanded appraisal for such shares pursuant to Section 262 of
the General Corporation Law of the State of
Delaware.
The Merger Agreement contains customary
representations and warranties given by Mobcrush, the Company, and
Merger Sub, in each case generally subject to customary materiality
qualifiers. The Company and Mobcrush have also each made customary
covenants in the Merger Agreement, including covenants by each of
the parties relating to conduct of their respective businesses
prior to the closing of the Merger. The Merger Agreement also
contains a covenant by Mobcrush and the Company not to, and to
cause its affiliates, subsidiaries, officers, directors, employees
and representatives not to, solicit, initiate or encourage the
initiation of, participate in any discussions or negotiations
regarding, or agree to any acquisition proposal by a third
party.
Pursuant to the Merger Agreement, the parties
are provided with customary termination rights, including the right
of either party to terminate the Merger Agreement if the
consummation of the Merger has not occurred on or prior to April
30, 2021 ("Outside Date")
unless the party electing to terminate the Merger Agreement is in
breach of its representations or obligations under the Merger
Agreement and such breach caused the failure of a condition to
closing or was the primary cause of the failure to consummate the
closing prior to the Outside Date. If the Merger Agreement is
terminated for a breach pursuant to the terms of the Merger
Agreement, either by the Company or Mobcrush, the breaching party
is responsible to the non-breaching party for expenses incurred in
relation to the Merger and the drafting and negotiation of the
Merger Agreement. The Merger is expected to close in the second
quarter of 2021 subject to the satisfaction of the closing
conditions as described above.
The representations, warranties and pre-closing
covenants of Mobcrush under the Merger Agreement do not survive the
closing of the Merger, and the Company disclaims any remedies for
any such matters following the closing.
On April 20, 2021, the
Company and Mobcrush entered into Amendment No. 1 to Agreement and
Plan of Merger (the “Amendment”), amending the Merger
Agreement. Pursuant to the Amendment, the Merger Agreement was
modified as follows: (i) the termination date was extended to June
30, 2021, and (ii) all vested options of Mobcrush common stock will
be exercised prior to the consummation of the Merger, and all
unvested options will be cancelled. We expect there will be
approximately 1,230,000 vested options and 2,087,000 unvested
options to acquire Mobcrush common stock outstanding immediately
prior to the closing of the Merger. The vested options exercised
prior to the closing of the Merger will not increase the 12,582,204
shares of the Company’s common stock expected to be issued as
Merger Consideration under the terms of the Merger Agreement, as
amended by the Amendment.
RISK FACTORS RELATED TO THE MERGER AND MERGER
AGREEMENT
Investment in our securities
involves a high degree of risk. You should consider carefully the
following risks and the risks and uncertainties described under the
heading “Risk Factors” in our Annual Report on Form
10-K for the fiscal year ended December 31, 2020, as updated
by our subsequent Quarterly Reports on Form 10-Q, and our other
filings with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, which are incorporated herein by
reference, before you decide whether to purchase any of our
securities. These risks could materially adversely affect our
business, financial condition, results of operations and cash
flows, and you may lose part or all of your investment. For more
information, see “Where You Can Find More
Information.”
We may
experience difficulties in integrating the operations of Mobcrush
into our business and in realizing the expected benefits of the
Merger.
The success of the Merger will depend in part on
our ability to realize the anticipated business opportunities from
combining the operations of Mobcrush with our business in an
efficient and effective manner. The integration process could take
longer than anticipated and could result in the loss of key
employees, the disruption of each company’s ongoing
businesses, tax costs or inefficiencies, or inconsistencies in
standards, controls, information technology systems, procedures and
policies, any of which could adversely affect our ability to
maintain relationships with customers, employees or other third
parties, or our ability to achieve the anticipated benefits of the
Merger, and could harm our financial performance. If we are unable
to successfully or timely integrate the operations of Mobcrush with
our business, we may incur unanticipated liabilities and be unable
to realize the revenue growth, synergies and other anticipated
benefits resulting from the Merger, and our business, results of
operations and financial condition could be materially and
adversely affected.
We have incurred significant costs in connection
with the Merger. The substantial majority of these costs are
non-recurring expenses related to the Merger. These non-recurring
costs and expenses are not reflected in the unaudited
pro forma condensed combined financial information
incorporated by reference in this proxy statement. We may incur
additional costs in the integration of Mobcrush’s business,
and may not achieve cost synergies and other benefits sufficient to
offset the incremental costs of the Merger.
The
Merger is subject to conditions to closing that could result in the
Merger being delayed or not consummated and can be terminated in
certain circumstances, each of which could negatively impact our
stock price and future business and operations.
The Merger is subject to conditions to closing
as set forth in the Merger Agreement. In addition, each of the
Company and Mobcrush has the right, in certain circumstances, to
terminate the Merger Agreement. If the Merger Agreement is
terminated or any of the conditions to the Merger are not satisfied
and, where permissible, not waived, the Merger will not be
consummated. Failure to consummate the Merger or any delay in the
consummation of the Merger or any uncertainty about the
consummation of the Merger may adversely affect the Company’s
stock price or have an adverse impact on the Company’s future
business operations.
If the Merger is not completed, the
Company’s ongoing business may be adversely affected and,
without realizing any of the benefits of having completed the
Merger, it would be subject to a number of risks, including the
following:
●
negative
reactions from the financial markets and from persons who have or
may be considering business dealings with the
Company;
●
financial
difficulties that the Company may experience;
●
the Company
will be required to pay certain costs relating to the Merger,
whether or not the Merger is completed; and
●
the Company
has agreed to pay Mobcrush's expenses if the Merger Agreement is
terminated in certain circumstances.
In addition, the Company could be subject to
litigation related to any failure to complete the Merger or related
to any proceeding commenced against the Company seeking to require
the Company to perform its obligations under the Merger
Agreement.
The
Merger will present challenges associated with integrating
operations, personnel, and other aspects of the companies and
assumption of liabilities that may exist at Mobcrush and which may
be known or unknown by the Company.
The results of the combined company following
the Merger will depend in part upon the Company’s ability to
integrate Mobcrush’s business with the Company’s
business in an efficient and effective manner. The Company’s
attempt to integrate two companies that have previously operated
independently may result in significant challenges, and the Company
may be unable to accomplish the integration smoothly or
successfully. In particular, the necessity of coordinating
geographically dispersed organizations and addressing possible
differences in corporate cultures and management philosophies may
increase the difficulties of integration. The integration may
require the dedication of significant management resources, which
may temporarily distract management’s attention from the
day-to-day operations of the businesses of the combined company. In
addition, the combined company may adjust the way in which Mobcrush
or the Company has conducted its operations and utilized its
assets, which may require retraining and development of new
procedures and methodologies. The process of integrating operations
and making such adjustments after the Merger could cause an
interruption of, or loss of momentum in, the activities of one or
more of the combined company’s businesses and the loss of key
personnel. Employee uncertainty, lack of focus, or turnover during
the integration process may also disrupt the businesses of the
combined company. Any inability of management to integrate the
operations of the Company and Mobcrush successfully could have a
material adverse effect on the business and financial condition of
the combined company.
In addition, the Merger will subject the Company
to contractual or other obligations and liabilities of Mobcrush,
some of which may be unknown. Although the Company and its legal
and financial advisors have conducted due diligence on Mobcrush and
its business, there can be no assurance that the Company is aware
of all obligations and liabilities of Mobcrush. These liabilities,
and any additional risks and uncertainties related to
Mobcrush’s business and to the Merger not currently known to
the Company or that the Company may currently be aware of, but that
prove to be more significant than assessed or estimated by the
Company, could negatively impact the business, financial condition,
and results of operations of the combined company following
consummation of the Merger.
The pro
forma financial statements are presented for illustrative purposes
only and might not be an indication of the combined company’s
financial condition or results of operations following the
Merger.
The pro forma financial statements contained in
this proxy statement are presented for illustrative purposes only
and might not be an indication of the combined company’s
financial condition or results of operations following the Merger
for several reasons. For example, the pro forma financial
statements have been derived from the historical financial
statements of the Company and Mobcrush and certain adjustments and
assumptions have been made regarding the combined company after
giving effect to the Merger. The information upon which these
adjustments and assumptions have been made is preliminary, and
these kinds of adjustments and assumptions are difficult to make
with complete accuracy. Moreover, the pro forma financial
statements do not reflect all costs that are expected to be
incurred by the combined company in connection with the Merger. For
example, the impact of any incremental costs incurred in
integrating the Company and Mobcrush is not reflected in the pro
forma financial statements. In addition, the assumptions used in
preparing the pro forma financial information might not prove to be
accurate, and other factors may affect the combined company’s
financial condition or results of operations following the Merger.
The Company’s stock price may be adversely affected if the
actual results of the combined company fall short of the pro forma
financial statements contained in this proxy statement. See the
Unaudited Pro Forma Condensed Combined Financial Statements
attached as Annex F
to this proxy statement.
Completion
of the Merger would result in the issuance of a significant number
of additional shares of the Company’s Common Stock, which
would reduce the voting power of the Company’s current
stockholders and may depress the trading price of our common
stock.
Completion of the Merger would result in the
issuance of a significant number of shares of the Company’s
common stock. As a result, the Company’s existing
stockholders will not exert the same degree of voting power with
respect to the combined company that they did before the
consummation of the Merger. Further, the issuance of such a
significant amount of common stock, and its potential sale in the
public market from time to time, could depress the trading price of
our common stock and you may lose all or a part of your
investment.
The
Company has incurred and will continue to incur significant
transaction, combination-related and restructuring costs in
connection with the Merger.
The Company has incurred and will continue to
incur transaction fees and other expenses related to the Merger,
including filing fees, legal and accounting fees, soliciting fees,
regulatory fees, and printing and mailing costs. The Company also
expects to incur significant costs associated with combining the
operations of the two companies. It is difficult to predict the
amount of these costs before we begin the integration process. The
combined company may incur additional unanticipated costs as a
consequence of difficulties arising from efforts to integrate the
operations of the two companies. Although we expect that the
elimination of duplicative costs, as well as the realization of
other efficiencies related to the integration of the businesses,
can offset incremental transaction, combination-related, and
restructuring costs over time, we may not be able to achieve this
net benefit in the near term, or at all. If the Merger is not
completed, the Company would have to recognize these expenses
without realizing the expected benefits of the
Merger.
RISKS RELATED TO MOBCRUSH'S
BUSINESS
Many of
Mobcrush’s products rely on patent, copyright and/or other
intellectual property protection and the combined company’s
success will depend in part on obtaining and maintaining effective
patent and other intellectual property protection for the
proprietary technology and service offerings.
As with the Company’s current products and
service offerings, the products and service offerings in Mobcrush's
portfolio rely on patent and intellectual property exclusivity. The
intellectual property rights protecting the Mobcrush services and
products might not afford the combined company with meaningful
protection from third parties infringing on the proprietary rights
of Mobcrush. Competitors could also design around any of
Mobcrush’s intellectual property or otherwise design
competitive products that do not infringe Mobcrush’s
intellectual property. If a product is approved for commercial sale
and competitors are successful in such designs, it could have an
adverse impact on the combined company’s revenue or results
of operations.
If
Mobcrush or the combined company fails to comply with obligations
under any license, collaboration or other agreements, the combined
company could lose intellectual property rights that are necessary
for developing and commercializing product
candidates.
Mobcrush’s
intellectual property relating to the Minecraft Online Channel
Agreement licensed from
Microsoft corporation intellectual property relating to
InPVP’s Mineville, one of six official Microsoft Minecraft
partner servers. Mobcrush’s license agreements with Microsoft
impose, and any future licenses or collaboration agreements the
combined company might enter into are likely to impose, various
development, maintenance, funding, milestone, royalty, diligence,
sublicensing, copyright prosecution and enforcement and other
obligations]. These type of agreements and related obligations are
complex and subject to contractual disputes. If Mobcrush (and the
combined company following the closing of the Merger) breaches any
of these imposed obligations, or use the intellectual property
licensed to Mobcrush in an unauthorized manner, Mobcrush (and the
combined company following the closing of the Merger) might be
required to pay damages or the licensor might have the right to
terminate the license, which could result in the loss of the
intellectual property rights and Mobcrush (and the combined company
following the closing of the Merger) being unable to develop,
manufacture and sell drugs that are covered by the licensed
technology.
FINANCIAL
INFORMATION ABOUT MOBCRUSH
For information
about Mobcrush’s operations and financial condition, see
(i) the unaudited consolidated financial statements of
Mobcrush Streaming, Inc. as of March 31, 2021 and 2020 and for
the quarter then ended and the related notes thereto, which
are attached hereto as Annex E, and (ii) the
unaudited pro forma condensed combined financial information,
and the related notes thereto, of Super League Gaming, Inc. as of
and for the quarter ended March 31, 2021, which are attached
hereto as Annex
F.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MOBCRUSH
STREAMING, INC.
The
following table sets forth the consolidated results of operations
of Mobcrush. Mobcrush’s results of operations distinguish
between a predecessor period (Predecessor) relating to Mobcrush,
Inc. for the quarter ended March 31, 2020 and the successor period
(Successor) relating to Mobcrush Streaming, Inc. for the quarter
ended March 31, 2021. The information for the period ended March
31, 2021 is unaudited and does not comply with accounting
principles generally accepted in the United States (U.S.
GAAP).
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
2,377,000
|
1,659,000
|
718,000
|
43%
|
|
|
|
|
|
|
|
Cost of
sales
|
1,581,000
|
1,034,000
|
547,000
|
53%
|
|
|
|
|
|
|
|
Gross
Profit
|
796,000
|
625,000
|
171,000
|
27%
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
Selling and marketing
expenses
|
455,000
|
757,000
|
(302,000)
|
(40)%
|
|
Research and
development expenses
|
793,000
|
1,093,000
|
(300,000)
|
(27)%
|
|
General and
administrative expenses
|
771,000
|
704,000
|
67,000
|
10%
|
|
Total operating
expenses
|
2,019,000
|
2,554,000
|
(535,000)
|
(21)%
|
|
|
|
|
|
|
|
Loss
from Operations
|
(1,223,000)
|
(1,929,000)
|
706,000
|
(37)%
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
Interest
income
|
-
|
9,000
|
(9,000)
|
(100)%
|
|
Interest
expense
|
(6,000)
|
(39,000)
|
33,000
|
(85)%
|
|
Other income
(expense)
|
(2,000)
|
(1,000)
|
(1,000)
|
100%
|
|
|
|
|
|
|
|
Total
Other Income (Expense)
|
(8,000)
|
(31,000)
|
23,000
|
(74)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$(1,231,000)
|
$(1,960,000)
|
729,000
|
(37)%
|
Comparison of the Results of Operations for the Three Months Ended
March 31, 2021 and 2020
Revenue
|
|
Three
Months End March 31,
|
|
|
|
|
|
|
|
|
|
Platform-as-a-service
|
744,000
|
$493,000
|
$251,000
|
51%
|
|
Advertising and
content sales
|
1,633,000
|
1,166,000
|
$467,000
|
40%
|
|
Total
revenue
|
$2,377,000
|
$1,659,000
|
$718,000
|
43%
|
Revenues
for the three months ended March 31, 2021 increased $718,000, or
approximately 43%, compared to the three months ended March 31,
2020.
The
increase in revenues primarily reflects significant increases in
advertising across the Mobcrush creator network and sponsorship
revenues, compared to the first quarter of 2020, reflecting
Mobcrush’s continued focus on the monetization of its
increasing access to creator inventory and AI-driven content
sponsorship. The increase was partially offset by a decrease of
seasonal first quarter advertising market trends.
Advertising
and sponsorship revenues for the three months ended March 31, 2021
increased by $467,000, or 40%, and composition of advertisers
increased quarter over quarter by 10 campaigns, or
77%.
Mobcrush generates in-game
Platform sales revenues via digital goods sold within the platform,
including cosmetic items, durable goods, player ranks and game
modes, leveraging the flexibility of the Microsoft Minecraft
Bedrock platform, and powered by the InPvP cloud architecture
technology platform. Revenue is generated when transactions are
facilitated between Microsoft and the end user, either via in-game
currency or cash.
Total Platform sales revenues for three months ended March 31, 2021
increased $251,000, or 51%, compared to the first quarter of
2020.
In the first three
months of 2021, product composition of sales of durables and
cosmetics were 18%/82%, respectively. In the first three months of
2020, product composition of sales of durables and cosmetics were
27%/73%, respectively, as platform focus on server transactional
revenues as a strategy became realized. Revenues generated via
durables for the first three months
of 2021 decreased by 4% compared to the first three months of 2020.
Revenues generated via in-server digital goods for the first three
months of 2021 increased by 67% compared to the first three months
of 2020.
Cost of Sales
|
|
Three
Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
$1,581,000
|
$1,034,000
|
$547,000
|
53%
|
Cost of
sales for the three months ended March 31, 2021 increased $547,000,
or 53% compared to the three months ended March 31, 2020, as
compared to the 43% increase in related revenues for the same
periods. The greater than proportionate increase in cost of sales
was driven by a relative increase in creator costs in the first
quarter of 2021.
Cost of
sales fluctuate period to period based on the specific campaigns
and revenue streams contributing to revenue each period and the
related cost profile of Mobcrush’s advertising and in-game
sales activities occurring each period.
Operating Expenses
|
|
Three
Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Selling and
marketing
|
$455,000
|
$757,000
|
$(302,000)
|
(40)%
|
|
Technology platform
& infrastructure
|
793,000
|
$1,093,000
|
(300,000)
|
(27)%
|
|
General and
administrative
|
771,000
|
$704,000
|
67,000
|
10%
|
|
Total
revenue
|
$2,019,000
|
$2,554,000
|
$(535,000)
|
(21)%
|
Noncash
stock-based compensation expense for the periods presented was
included in general and administrative expenses.
Selling, Marketing and
Advertising. The decrease in
selling, marketing and advertising expense for the first three
months of 2021 was primarily due to a reduction in personnel costs
associated with the decrease in Mobcrush’s in-house direct
sales force.
Technology Platform and
Infrastructure. Technology
platform and infrastructure costs include (i) allocated personnel
costs, including salaries, taxes and benefits related to
Mobcrush’s internal software developers and engineers,
employed by Mobcrush, engaged in the operation, maintenance,
management, administration, testing, development and enhancement of
its proprietary gaming and technology platform, (ii) third-party
contract software development and engineering resources engaged in
developing and enhancing its proprietary gaming and technology
platform, and (iii) technology platform related cloud services,
broadband and other technology platform costs. The decrease
in technology platform and infrastructure costs for the
first three months of 2021 primarily reflects a reduction in
technology platform costs and third-party consultant
services.
General and
Administrative. General
and administrative expense for the periods presented was comprised
of the following:
|
|
Three
Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Personnel
costs
|
$274,000
|
$183,000
|
$91,000
|
50%
|
|
Office and
facilities
|
5,000
|
113,000
|
(108,000)
|
(96)%
|
|
Professional
fees
|
234,000
|
187,000
|
47,000
|
25%
|
|
Stock-based
compensation
|
21,000
|
100,000
|
(79,000)
|
(79)%
|
|
Depreciation and
amortization
|
132,000
|
9,000
|
123,000
|
+300%
|
|
Other
|
105,000
|
113,000
|
(8,000)
|
(7)%
|
|
Total general and
administrative
|
$771,000
|
$705,000
|
$66,000
|
9%
|
A summary
of the main drivers of the net increase in general and
administrative expenses for the periods presented is as
follows:
Personnel costs
increased due to increased headcount in
operations.
●
Office and facilities
costs decreased due to the Company’s termination of its lease
in Santa Monica, California, and converting to a fully remote work
structure, resulting in significant rent and facilities costs
savings commencing in the second quarter of 2020 and going
forward.
●
Professional fees
expense increased in the first three months of 2021 primarily
related to due diligence costs for the pending Super League
transaction.
●
Noncash stock
compensation expense included in general and administrative expense
decreased by 79%, primarily due to the lower per share price of the
Successor compared to the Predecessor
●
Depreciation and amortization expense decreased
due to the amortization of intangible assets acquired in the
purchase of Mobcrush, Inc. in May
2020.
●
Other general and administrative expenses
were relatively flat with an increase in directors and
officer’s (“D&O”)
insurance premiums, offset by a decrease in travel related expenses
due to the COVID-19 pandemic.
Other Income (expense)
Other
income (expense), net, for the three months ended March 31, 2021
and 2020, was ($8,694) and ($31,177), respectively. Other income
and expense, net for fiscal year 2020 was primarily comprised of
interest expense related to the convertible note and for fiscal
year 2019 was primarily comprised of interest income.
|
|
Three
Months Ended
March
31,
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$-
|
$9,000
|
$(9,000)
|
(100)%
|
|
Interest
expense
|
(6,000)
|
(39,000)
|
33,000
|
(84)%
|
|
Other
|
(2,000)
|
(1,000)
|
(1,000)
|
100%
|
|
Total
other income (expense)
|
$(8,000)
|
$(31,000)
|
$23,000
|
(74)%
|
Interest
Expense. Interest expense
for 2021 relates to the issuance of 12.00% unsecured convertible
promissory note, commencing in February 2021. Principal and
interest as of March 31, 2021 totaled $506,000. Interest expense for 2020 relates to the issuance
of 5.00% unsecured convertible promissory note, commencing in
December 2019 through May 2020, at which time the note was forgiven
as described below under Liquidity and Capital
Resources. Principal and
interest as of March 31, 2020 totaled
$3,166,000.
Liquidity and Capital Resources
General
Cash and
cash equivalents totaled $0.96 million and $1.29 million at
March 31, 2021 and 2020, respectively.
To date,
Mobcrush’s principal sources of
capital used to fund its operations have been the net proceeds
received from sales of equity securities and proceeds received from
the issuance of convertible debt in 2019 and 2021, as described
elsewhere herein. Mobcrush’s management believes that
its cash balances will be sufficient to meet its cash requirements
through at least May 2021. Mobcrush may, however, encounter
unforeseen difficulties that may deplete its capital resources more
rapidly than anticipated, including those set forth under the
heading “Risk Factors” included in Part I, Item 1A of
this Report.
Recent Activities
On March 9,
2021, Mobcrush entered into the Merger Agreement, which provides
for the acquisition of Mobcrush Streaming Inc. by Super League
Gaming, Inc. pursuant to the merger of a wholly owned subsidiary of
SLGG with and into Mobcrush, with Mobcrush as the surviving
corporation. Upon completion of the Merger, Mobcrush will be a
wholly-owned subsidiary of SLGG. In accordance with the terms and
subject to the conditions of the Merger Agreement, each outstanding
share of Mobcrush Streaming Inc. stock will be canceled and
converted into the right to receive 0.528 shares of SLGG’s
common stock.
Cash Flows for the Three Months Ended March 31, 2021 and
2020
The
following table summarizes the change in cash balances for the
periods presented:
|
|
Three
Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Operating Activities
|
$(1,254,000)
|
$(1,561,000)
|
$307,000
|
(20)%
|
|
Cash Flows From
Investing Activities
|
-
|
(12,000)
|
12,000
|
(100)%
|
|
Cash Flows From
Financing Activities
|
500,000
|
-
|
500,000
|
n/a
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
$(754,000)
|
$(1,573,000)
|
$819,000
|
(52)%
|
|
Cash and Cash
Equivalents at Beginning of Period
|
$1,712,000
|
$2,866,000
|
$(1,154,000)
|
(40)%
|
|
Cash and Cash
Equivalents at End of Period
|
$958,000
|
$1,293,000
|
$(335,000)
|
(26)%
|
As of March
31, 2021, Mobcrush had $0.96 million in cash and cash equivalents,
a decrease of $0.34 million from the end of the first quarter of
2020.
Cash used
in operating activities decreased during the three months ended
March 31, 2021 compared to the first quarter of 2020, due to
reduced net loss and changes in working capital. Changes in working
capital include increases in both accounts payables and accounts
receivables, both largely driven by the growth in revenue in the
first quarter of 2201.
Cash used
in investing activities decreased in the three months ended March
31, 2021 compared to the first quarter of 2020, due to the Company
making no equipment purchases.
Cash
provided by financing activities increased in the three months
ended March 31, 2021 compared to the first quarter of 2020, which
reflects the $500,000 convertible note issued by the Company in
February 2021.
Convertible Note
In December
2019, Mobcrush issued a $3,115,000 convertible promissory note to a
minority stockholder. The note bore interest at 5% compounded
annually and was due at the earlier of January 31, 2020 or the
closing of the next equity financing. Upon the next equity
financing, the note was to automatically convert into the shares
issued in the equity financing at a conversion price equal to 75%
of the price per share paid in the equity financing. In May 2020,
the note holder became the majority stockholder of newly formed
Mobcrush Streaming, Inc. and assigned the note to that company. On
May 4, 2020, in connection with Mobcrush Streaming, Inc.’s
purchase of the assets of Mobcrush, Inc., the note plus accrued
interest balance of $3,181,000 was forgiven. The fair value of this
loan forgiveness was considered part of the purchase price
consideration.
On February
23, 2021, Mobcrush issued a $500,000 convertible promissory note to
a minority stockholder. The note bears interest at 12% compounded
monthly and is due February 23, 2022. Upon the closing of a sale of
Mobcrush (as contemplated by the Merger Agreement), the note will
automatically convert into the common shares of the acquirer (i.e.
Super League).
Contractual Obligations
As of March 31, 2021, Mobcrush had no significant
commitments for capital expenditures, nor does Mobcrush have any
committed lines of credit, non-cancelable operating leases
obligations, other committed funding or long-term debt, and no
guarantees.
Off-Balance Sheet Commitments and Arrangements
We have not
entered into any off-balance sheet financial guarantees
or other off-balance sheet commitments to guarantee the
payment obligations of any third parties. Mobcrush has not entered
into any derivative contracts that are indexed to Mobcrush’s
shares and classified as stockholder’s equity or that are not
reflected in Mobcrush’s financial statements included
elsewhere herein. Furthermore, Mobcrush does not have any retained
or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to
such entity. Mobcrush does not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market
risk or credit support to us or engages in leasing, hedging or
product development services with us.
Contingencies
Certain
conditions may exist as of the date the financial statements are
issued, which may result in a loss to Mobcrush, but which will only
be resolved when one or more future events occur or fail to occur.
Mobcrush’s management, in consultation with its legal counsel
as appropriate, assesses such contingent liabilities, and such
assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are
pending against Mobcrush or unasserted claims that may result in
such proceedings, Mobcrush, in consultation with legal counsel,
evaluates the perceived merits of any legal proceedings or
unasserted claims, as well as the perceived merits of the amount of
relief sought or expected to be sought therein. If the assessment
of a contingency indicates it is probable that a material loss has
been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in Mobcrush’s
financial statements. If the assessment indicates a potentially
material loss contingency is not probable, but is reasonably
possible, or is probable, but cannot be estimated, then the nature
of the contingent liability, together with an estimate of the range
of possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed
unless they involve guarantees, in which case the guarantees would
be disclosed.
Comparison of Operating Results for Mobcrush Streaming, Inc. for
the Fiscal Years Ended December 31, 2020, and December 31,
2019
The following
table sets forth the consolidated results of operations.
Mobcrush’s results of operations distinguish between a
predecessor period (Predecessor) relating to Mobcrush, Inc. for the
period prior to the ABC and the successor period (Successor)
relating to Mobcrush Streaming, Inc. for the period following the
consummation of the ABC. As a result of the ABC and in order to
present Management’s Discussion and Analysis in a way that
offers a meaningful comparison, the 2020 Predecessor results are
presented as combined with the 2020 Successor results, on an
unaudited combined basis (Combined). Any reference to fiscal year
2020 represents the results on an unaudited combined basis. The
unaudited Combined information for the year ending December 31,
2020 does not comply with accounting principles generally accepted
in the United States (U.S. GAAP) and is not intended to represent
what the consolidated result operations would have been if
Mobcrush, as successor to Mobcrush, Inc., had actually been formed
on January 1, 2020, nor do the following tables attempt to either
include or exclude expenses or income that would have resulted had
the ABC actually occurred on January 1, 2020. Variances resulting
primarily from the ABC on May 5, 2020 are discussed in the
appropriate section:
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2020
|
Period
from May 4, 2020 to December 31, 2020
|
Period
from January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$6,527,000
|
$4,457,000
|
$2,070,000
|
$3,974,000
|
$2,553,000
|
64%
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
4,169,000
|
2,967,000
|
1,202,000
|
2,824,000
|
1,345,000
|
48%
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
2,358,000
|
1,490,000
|
868,000
|
1,150,000
|
1,208,000
|
105%
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
Selling
and marketing expenses
|
2,212,000
|
1,211,000
|
1,001,000
|
1,993,000
|
219,000
|
11%
|
|
Research
and development expenses
|
3,551,000
|
2,118,000
|
1,433,000
|
3,712,000
|
(161,000)
|
-4%
|
|
General
and administrative expenses
|
3,985,000
|
2,263,000
|
1,722,000
|
3,053,000
|
932,000
|
31%
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
(7,390,000)
|
(4,102,000)
|
(3,288,000)
|
(7,608,000)
|
218,000
|
-3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
Interest
income
|
9,000
|
-
|
9,000
|
52,000
|
(43,000)
|
-83%
|
|
Interest
expense
|
(54,000)
|
-
|
(54,000)
|
(13,000)
|
(41,000)
|
315%
|
|
Other
income (expense)
|
(11,000)
|
(8,000)
|
(3,000)
|
(14,000)
|
3,000
|
-21%
|
|
|
|
|
|
|
|
|
|
Total Other Income (Expense)
|
(56,000)
|
(8,000)
|
(48,000)
|
25,000
|
(81,000)
|
-324%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$(7,446,000)
|
$(4,110,000)
|
$(3,336,000)
|
$(7,583,000)
|
$137,000
|
-2%
|
Comparison of the Results of Operations for Fiscal Years 2020 and
2019
Revenue
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2020
|
Period from May 4, 2020 to December 31, 2020
|
Period
from January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2020
|
|
|
|
Platform-as-a-service
|
$2,108,000
|
$1,312,000
|
$796,000
|
$1,702,000
|
406,000
|
24%
|
|
Advertising
and content sales
|
4,419,000
|
3,145,000
|
1,274,000
|
2,221,000
|
2,198,000
|
99%
|
|
Other
|
-
|
-
|
-
|
50,000
|
(50,000)
|
-100%
|
|
Total
revenue
|
$6,527,000
|
$4,457,000
|
$2,070,000
|
$3,973,000
|
$2,554,000
|
64%
|
Revenues for
the Combined year ending December 31, 2020 increased $2,554,000, or
approximately 64%, compared to the Predecessor year ended December
31, 2019. During the period from May 5, 2020 through December
31, 2020, Mobcrush had three major customers that accounted for
approximately 29%, 14%, and 14%, respectively, of Company’s
total revenues. During the period from January 1, 2020 through May
4, 2020, Mobcrush had three major customers that accounted for
approximately 38%, 29%, and 27%, respectively, of Mobcrush’s
total revenues. During 2019, Mobcrush had two major customers that
accounted for approximately 42% and 12%, respectively, of
Mobcrush’s total revenues.
The increase in
revenues primarily reflects significant increases in advertising
across the Mobcrush creator network and sponsorship revenues,
compared to the prior year, reflecting Mobcrush’s continued
focus on the monetization of its increasing access to creator
inventory and AI-driven content sponsorship. The increase was
partially offset by a decrease in traditional sponsorship revenues
due to the industry wide pause in sponsorship spending and
resetting of marketing strategies by brand and sponsors in
connection with the uncertainty caused by the COVID-19 pandemic in
2020.
Advertising
and sponsorship revenues for fiscal year 2020 increased by
$2,151,000, or 93%, and composition of advertisers increased year
over year by 19 campaigns, or 61%.
Although
Mobcrush was impacted by the general deferral in advertising
spending by brands and sponsors resulting from the COVID-19
pandemic for a significant portion of fiscal year 2020, Mobcrush
reported significant quarter over quarter growth in total revenues
in the second half of fiscal 2020 and expects to continue to expand
its advertising revenue and revenue from the sponsorship of
Mobcrush’s proprietary sponsored live breaks and AI-generated
content for future periods, as it continues to expand its
advertising inventory, viewership and related sales
activities.
Mobcrush
generates in-game Platform
sales revenues via digital goods sold within the platform,
including cosmetic items, durable goods, player ranks and game
modes, leveraging the flexibility of the Microsoft Minecraft
Bedrock platform, and powered by the InPvP cloud architecture
technology platform. Revenue is generated when transactions are
facilitated between Microsoft and the end user, either via in-game
currency or cash.
Total platform sales revenues for fiscal
year 2020 increased $406,000, or 24%, compared to fiscal year 2019.
In fiscal year 2019, product composition of sales of durables and cosmetics
are 68%/32%, respectively. In
fiscal year 2020, product composition of sales of durables and cosmetics
are 36%/64%, respectively, as
platform focus on server transactional revenues as a strategy
became realized. Revenues generated via durables for fiscal year 2020 increased by 19%
compared to fiscal year 2019. Revenues generated via
in-server digital goods
for fiscal year 2020 increased
by 348% compared to fiscal year 2019.
Cost of Sales
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2020
|
Period
from May 4, 2020 to December 31, 2020
|
Period
from January 1, 2020 to May 3, 2020
|
Year ended December 31,
2019
|
|
|
|
Cost
of sales
|
$4,169,000
|
$2,967,000
|
$1,202,000
|
$2,824,000
|
1,345,000
|
48%
|
Cost of sales
for fiscal year 2020 increased $1,345,000, or 48% compared to
fiscal year 2019, as compared to the 64% increase in related
revenues for the same periods. The less than proportionate increase
in cost of sales was driven by a relative decrease in creator costs
and production costs for server-based development in fiscal year
2020.
Cost of sales
fluctuate period to period based on the specific campaigns and
revenue streams contributing to revenue each period and the related
cost profile of Mobcrush’s advertising and in-game sales
activities occurring each period.
Operating Expenses
|
|
|
|
|
Predecessor
|
|
|
|
|
Year
ended December 31, 2020
|
Period from May 4,
2020 to December 31, 2020
|
Period from January
1, 2020 to May 3, 2020
|
Year ended December
31,2019
|
|
|
|
Selling and
marketing
|
$2,213,000
|
$1,211,000
|
$1,001,000
|
$1,993,000
|
220,000
|
11%
|
|
Technology platform &
infrastructure
|
3,551,000
|
2,118,000
|
1,433,000
|
3,712,000
|
(161,000)
|
-4%
|
|
General and
administrative
|
3,984,000
|
2,263,000
|
1,722,000
|
3,053,000
|
931,000
|
30%
|
|
Total
revenue
|
$9,748,000
|
$5,592,000
|
$4,156,000
|
$8,758,000
|
$990,000
|
11%
|
Selling, Marketing and Advertising. The
increase in selling, marketing and advertising expense for fiscal
year 2020 was primarily due to an increase in personnel costs,
including noncash stock compensation, associated with the increase
in Mobcrush’s in-house direct sales force focused on the
monetization of its increasing advertising inventory and
audience.
Technology Platform and
Infrastructure. Technology platform and infrastructure
costs include (i) allocated personnel costs, including salaries,
noncash stock compensation, taxes and benefits related to
Mobcrush’s internal software developers and engineers,
employed by Mobcrush, engaged in the operation, maintenance,
management, administration, testing, development and enhancement of
its proprietary gaming and technology platform, (ii) third-party
contract software development and engineering resources engaged in
developing and enhancing its proprietary gaming and technology
platform, (iii) the amortization of capitalized internal use
software costs, and (iv) technology platform related cloud
services, broadband and other technology platform
costs. Capitalized internal use software development costs are
amortized on a straight-line basis over the software’s
estimated useful life. The increase in technology
platform and infrastructure costs for fiscal year 2020
primarily reflects an increase in cloud services and other
technology platform costs totaling $1,904,400.
General and
Administrative. General and administrative expense for
the periods presented was comprised of the
following:
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2020
|
Period
from May 4, 2020 to December 31, 2020
|
Period
from January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
|
|
Personnel
costs
|
$1,523,000
|
$1,228,000
|
$295,000
|
$1,162,000
|
361,000
|
31%
|
|
Office
and facilities
|
883,000
|
335,000
|
548,000
|
745,000
|
138,000
|
19%
|
|
Professional
fees
|
642,000
|
275,000
|
367,000
|
543,000
|
99,000
|
18%
|
|
Stock-based
compensation
|
199,000
|
66,000
|
133,000
|
369,000
|
(170,000)
|
-46%
|
|
Depreciation
and amortization
|
368,000
|
356,000
|
12,000
|
44,000
|
324,000
|
736%
|
|
Other
|
369,000
|
2,000
|
367,000
|
190,000
|
179,000
|
94%
|
|
Total
general and administrative
|
$3,984,000
|
$2,262,000
|
$1,722,000
|
$3,053,000
|
$931,000
|
30%
|
A summary of
the main drivers of the net increase in general and
administrative expenses for the periods presented is as
follows:
●
Office and facilities costs
decreased due to the termination of its lease in Santa Monica,
California, and converting to a fully remote work structure,
resulting in significant rent and facilities costs savings
commencing in the second quarter of 2020 and going
forward.
●
Professional fees expense
increased primarily related to the asset transfer and related
professional fees in fiscal year 2020.
●
Noncash stock compensation
expense included in general and administrative expense decreased by
46%, primarily due to the lower per share price of the Successor
compared to the Predecessor
●
Depreciation and
amortization expense decreased due primarily to a decrease in
scheduled amortization related to fully depreciated assets with
useful lives that expired during fiscal 2020 or prior, and the
acceleration of depreciation related to liquidation of office
equipment disposed of during fiscal 2020.
●
Other general and
administrative expenses increased primarily due to an increase in
directors and officer’s (“D&O ”) insurance premiums,
liquidation expense related to ceasing the operations of the
Predecessor, amortization of intangibles from Mobcrush, Inc.
acquisition and personnel costs, partially offset by a decrease in
travel related expenses due to the COVID-19 pandemic.
Other Income (expense)
Other income
(expense), net, for fiscal year 2020 and 2019, was ($56,228) and
$25,000, respectively. Other income and expense, net for fiscal
year 2020 was primarily comprised of interest expense related to
the convertible note and net for fiscal year 2019 was primarily
comprised of interest income, as follows:
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2020
|
Period from May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
|
|
Interest
income
|
$9,000
|
$-
|
$9,000
|
$52,000
|
(43,000)
|
-83%
|
|
Interest
expense
|
(54,000)
|
-
|
(54,000)
|
(13,000)
|
(41,000)
|
315%
|
|
Other
|
(11,000)
|
(8,000)
|
(3,000)
|
(14,000)
|
3,000
|
-21%
|
|
Total
other income (expense)
|
$(56,000)
|
$(8,000)
|
$(48,000)
|
$25,000
|
$(81,000)
|
-324%
|
Interest Expense. Interest expense
relates to the issuance of 5.00% unsecured convertible promissory
note, commencing in December 2019 through May 2020, at which time
the note was forgiven as described below under Liquidity and Capital Resources.
Principal and interest as of May 4, 2020 totaled
$3,115,000.
Liquidity and Capital Resources
General
Cash and cash
equivalents totaled $1,712,000 and $2866,000 at December 31,
2020 and 2019, respectively.
To date, Mobcrush’s
principal sources of
capital used to fund its operations have been the net proceeds
received from sales of equity securities and proceeds received from
the issuance of convertible debt in 2019, as described elsewhere
herein. Mobcrush’s management believes that its
cash balances will be sufficient to meet its cash requirements
through at least May 2021. Mobcrush may, however, encounter
unforeseen difficulties that may deplete its capital resources more
rapidly than anticipated, including those set forth under the
heading “Risk Factors” included in Part I, Item 1A of
this Report.
Recent Activities
On March 9,
2021, Mobcrush entered into the Merger Agreement, which provides
for the acquisition of Mobcrush Streaming Inc. by Super League
Gaming, Inc. pursuant to the merger of a wholly owned subsidiary of
SLGG with and into Mobcrush, with Mobcrush as the surviving
corporation. Upon completion of the Merger, Mobcrush will be a
wholly-owned subsidiary of SLGG. In accordance with the terms and
subject to the conditions of the Merger Agreement, each outstanding
share of Mobcrush Streaming Inc. stock will be canceled and
converted into the right to receive 0.528 shares of SLGG’s
common stock.
Cash Flows for Fiscal Years 2020 and 2019
The following
table summarizes the change in cash balances for the periods
presented:
|
|
|
|
|
|
|
|
|
Period from May 4, 2020 to
|
Period from
January 1, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Operating Activities
|
$(6,327,000)
|
$(3,481,000)
|
$(2,848,000)
|
$(5,770,000)
|
|
Cash
Flows From Investing Activities:
|
(18,000)
|
(1,000)
|
(15,000)
|
(17,000)
|
|
Cash
Flows From Financing Activities
|
5,191,000
|
5,191,000
|
-
|
3,115,000
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(1,154,000)
|
1,709,000
|
(2,863,000)
|
(2,672,000)
|
|
Cash
and Cash Equivalents at Beginning of Period
|
2,866,000
|
3,000
|
2,866,000
|
5,538,000
|
|
Cash
and Cash Equivalents at End of Period
|
$1,712,000
|
$1,712,000
|
$3,000
|
$2,866,000
|
As of December
31, 2020, Mobcrush had $1,712,000 in cash and cash equivalents, a
decrease of $1,154,000 from the end of fiscal year
2019.
Cash used in
operating activities increased in fiscal year 2020 compared to
fiscal year 2019, due to changes in working capital and higher
non-cash adjustments, partially offset by reduced net loss. Changes
in working capital include increases in accounts receivables, both
due to higher fiscal year 2020 revenue, and a prepayment of
royalties to Arm.
Cash used in
investing activities increased in fiscal year 2020 compared to cash
provided in fiscal year 2019, which primarily reflects the
Successor’s shift to a fully remote work
structure.
Cash provided
by financing activities increased in fiscal year 2021 compared to
cash used in fiscal year 2020, which primarily reflects the equity
financings in May 2020 and November 2020 compared to the
convertible note in December 2019.
Convertible Note
In December
2019, Mobcrush issued a $3,115,000 convertible promissory note to a
minority stockholder. The note bore interest at 5% compounded
annually and was due at the earlier of January 31, 2020 or the
closing of the next equity financing. Upon the next equity
financing, the note was to automatically convert into the shares
issued in the equity financing at a conversion price equal to 75%
of the price per share paid in the equity financing. In May 2020,
the note holder became the majority stockholder of newly formed
Mobcrush Streaming, Inc. and assigned the note to that company. On
May 4, 2020, in connection with Mobcrush Streaming, Inc.’s
purchase of the assets of Mobcrush, Inc., the note plus accrued
interest balance of $3,181,000 was forgiven. The fair value of this
loan forgiveness was considered part of the purchase price
consideration.
Equity Financings
In May 2020
upon inception of Mobcrush Streaming, Inc., Mobcrush issued 1,000
shares of common stock and 15,979,351 shares of Series A preferred
stock to the convertible promissory note holder described in Note
6. As consideration for the shares, the investor paid cash for
proceeds of $300,000 and the note receivable was forgiven as
described above. The net proceeds from this offering were for
working capital.
In May 2020,
Mobcrush issued 3,631,670 shares of Series A-1 Preferred Stock at a
price of $1.1014 per share, raising aggregate net proceeds of
approximately $3.9 million, after deducting placement agent fees of
$100,000. The net proceeds from this offering were for working
capital and other general corporate purposes, including sales
and marketing activities, product development and capital
expenditures. Net proceeds from this offering were also available
for use in connection with the acquisition of, or investment in,
technologies, solutions or businesses that may complement
Mobcrush’s business and accelerate its growth.
In November
2020, Mobcrush issued 907,935 shares of Series A-1 Preferred Stock
at a price of $1.1014 per share, raising aggregate net proceeds of
approximately $1.0 million, after deducting offering expenses
totaling $8,638. The net proceeds are for working capital and other
general corporate purposes, including new personnel, sales and
marketing activities, product development and capital expenditures.
Net proceeds from this offering were also available for use in
connection with the acquisition of, or investment in, technologies,
solutions or businesses that may complement Mobcrush’s
business and accelerate its growth.
CARES Act
On April 22,
2020, Mobcrush entered into the potentially forgivable PPP Loan
from the SBA, pursuant to the PPP program enacted under the CARES
Act, resulting in net proceeds of $546,810. To facilitate the PPP
Loan, Mobcrush entered into the PPP Loan Agreement with a
third-party lender.
The PPP Loan
matures on April 22, 2022. However, under the CARES Act and the PPP
Loan Agreement, all payments of both principal and interest will be
deferred until at least October 22, 2020. The PPP Loan accrues
interest at a rate of 1.00% per annum, and interest will continue
to accrue throughout the period the PPP Loan is outstanding, or
until it is forgiven. Mobcrush is eligible to apply for forgiveness
of all loan proceeds used to pay payroll costs and other qualifying
expenses during the 24-week period following receipt of the loan,
provided that Mobcrush maintains its employment and compensation
within certain parameters during such period. Any amounts forgiven
will not be included in Mobcrush’s taxable income. As
specifically intended under the program, the PPP Loan, together
with Mobcrush’s cost savings initiatives, helped us to
continue operations without salary reductions, layoffs or
furloughs, during this challenging and uncertain economic
environment created by the COVID-19 pandemic.
The PPP Loan is
accounted for as a financial liability in accordance with FASB ASC
470, “Debt” and
interest is accrued in accordance with the interest method.
Additional interest is not imputed at a market rate pursuant to a
scope exception for interest rates prescribed by governmental
agencies under the applicable guidance.
The proceeds
from the PPP Loan were recorded as a long-term liability on the
balance sheet. In conjunction with the asset sale of the
Predecessor to the Successor, the PPP Loan was paid off to the
creditor.
Bridge Note
On February 23,
2021, Mobcrush issued a $500,000 convertible promissory note to a
minority stockholder. The note bears interest at 12% compounded
monthly and is due February 23, 2022. Upon the closing of a sale of
Mobcrush (as contemplated by the Merger Agreement), the note will
automatically convert into the common shares of the acquirer (i.e.
Super League).
Contractual Obligations
As of December
31, 2020, except as described below, Mobcrush had no significant
commitments for capital expenditures, nor does Mobcrush have any
committed lines of credit, non-cancelable operating leases
obligations, other committed funding or long-term debt, and no
guarantees.
Off-Balance Sheet Commitments and Arrangements
We have not
entered into any off-balance sheet financial guarantees
or other off-balance sheet commitments to guarantee the
payment obligations of any third parties. Mobcrush has not entered
into any derivative contracts that are indexed to Mobcrush’s
shares and classified as stockholder’s equity or that are not
reflected in Mobcrush’s financial statements included
elsewhere herein. Furthermore, Mobcrush does not have any retained
or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to
such entity. Mobcrush does not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market
risk or credit support to us or engages in leasing, hedging or
product development services with us.
Contingencies
Certain
conditions may exist as of the date the financial statements are
issued, which may result in a loss to Mobcrush, but which will only
be resolved when one or more future events occur or fail to occur.
Mobcrush’s management, in consultation with its legal counsel
as appropriate, assesses such contingent liabilities, and such
assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are
pending against Mobcrush or unasserted claims that may result in
such proceedings, Mobcrush, in consultation with legal counsel,
evaluates the perceived merits of any legal proceedings or
unasserted claims, as well as the perceived merits of the amount of
relief sought or expected to be sought therein. If the assessment
of a contingency indicates it is probable that a material loss has
been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in Mobcrush’s
financial statements. If the assessment indicates a potentially
material loss contingency is not probable, but is reasonably
possible, or is probable, but cannot be estimated, then the nature
of the contingent liability, together with an estimate of the range
of possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed
unless they involve guarantees, in which case the guarantees would
be disclosed.
Recent Accounting Pronouncements
Refer to Note 3
to the financial statements included elsewhere within this proxy
statement.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SUPER LEAGUE GAMING,
INC.
For management’s discussion and analysis
of financial condition and results of operations of Super League,
please refer to the section entitled “Item 7.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations” set forth in Super League’s
Annual Report on Form 10-K for the year ended December 31,
2020, filed with the SEC on March 19, 2021 and incorporated by
reference herein.
ADJOURNMENT OF THE ANNUAL
MEETING
Our
stockholders are being asked to approve a proposal that will give
Ann Hand, the Chair of our Board, authority to adjourn the Annual
Meeting one or more times, if necessary, to solicit additional
proxies if there are not sufficient votes to approve the various
matters being submitted to stockholders at the time of the Annual
Meeting or any adjournment or postponement thereof. If this
Proposal No. 5 is approved, the Annual Meeting could be adjourned
to any date. Any determination of whether it is necessary to
adjourn the Annual Meeting (or any adjournment or postponement
thereof) to solicit additional proxies will be made solely by our
Board.
Vote Required and Recommendation
Approval of
this Proposal No. 5 requires the affirmative vote (in person or by
proxy) of holders of a majority of the shares present or
represented by proxy and entitled to vote at the Annual Meeting.
Unless otherwise instructed on the proxy or unless authority to
vote is withheld, shares represented by executed proxies will be
voted “FOR” providing our Chair the authority to
adjourn the Annual Meeting one or more times, if necessary, to
solicit additional proxies if there are not sufficient votes to
approve the various matters being submitted to stockholders at the
time of the Annual Meeting or any adjournment or postponement
thereof.
|
|
|
The Board
recommends that stockholders vote “FOR” providing our Chair the authority to adjourn
the Annual Meeting one or
more times if necessary to solicit additional proxies, if
necessary.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following
table sets forth certain information known to us regarding
beneficial ownership of our common stock as of April 1, 2021 for
(i) each of our executive officers and directors individually, (ii)
all of our executive officers and directors as a group, and (iii)
each person, or group of affiliated persons, known by us to be the
beneficial owner of more than 5% of our capital stock. A person is
also deemed to be a beneficial owner of any securities of which
that person has a right to acquire beneficial ownership within 60
days. The percentage of beneficial ownership in the table below is
based on 24,976,491 shares of common stock deemed to be outstanding
as of April 1, 2021 less shares reserved for issuance upon exercise
and/or vesting of awards issued under our 2014 Plan.
|
Name,
address and title of beneficial owner (1)
|
|
Total Number
of Shares Subject to Exercisable Options and Warrants
|
Total Number
of Shares Beneficially Owned
|
|
Percentage
of Voting Common Stock Outstanding (2)
|
|
Officers and Directors
|
|
|
|
|
|
|
Ann
Hand
Chief
Executive Officer, President and Chair
|
143,874
|
654,168
|
798,042
|
(3)
|
3.5%
|
|
David
Steigelfest
Chief
Products and Technology Officer
|
81,500
|
190,447
|
271,947
|
(4)
|
1.2%
|
|
Clayton
Haynes
Chief
Financial Officer
|
33,500
|
33,542
|
67,042
|
(5)
|
*
|
|
Matt
Edelman
Chief
Commercial Officer
|
47,500
|
22,426
|
69,926
|
(6)
|
*
|
|
Jeff
Gehl
Director
|
163,549
|
112,100
|
275,649
|
(7)
|
1.2%
|
|
Kristin
Patrick
Director
|
41,799
|
-
|
41,799
|
|
*
|
|
Michael
Keller
Director
|
142,353
|
100,839
|
243,192
|
(8)
|
1.1%
|
|
Mark
Jung
Director
|
80,722
|
-
|
80,722
|
|
*
|
|
Executive Officers and Directors as a
Group (8 persons)
|
734,797
|
1,113,522
|
1,848,319
|
|
8.0%
|
______________________
* Less than 1.0%
|
(1)
|
Unless otherwise indicated, the business
address for each of the executive officers and directors is c/o
Super League Gaming, Inc., 2912 Colorado Avenue, Suite #203, Santa
Monica, CA 90404.
|
|
|
|
|
(2)
|
Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of
shares beneficially owned by a person and the percentage of
ownership by that person, shares of voting common stock subject to
outstanding rights to acquire shares of voting common stock held by
that person that are currently exercisable or exercisable within 60
days are deemed outstanding. Such shares are not deemed outstanding
for the purpose of computing the percentage of ownership by any
other person.
|
|
|
|
|
(3)
|
Includes (i) 516,667 shares of common stock
issuable upon conversion of warrants exercisable within 60 days of
April 1, 2021, and (ii) 137,501 shares of common stock issuable
upon exercise of stock options exercisable within 60 days of April
1, 2021.
|
|
|
|
|
(4)
|
Includes 190,447 shares of common stock
issuable upon exercise of stock options exercisable within 60 days
of April 1, 2021 held directly, and (ii) 833 shares issuable upon
exercise of stock options exercisable within 60 days of April 1,
2021held jointly with spouse.
|
|
(5)
|
Includes (i) 16,667 shares of common stock
issuable upon conversion of warrants exercisable within 60 days of
April 1, 2021, and (ii) 16,875 shares issuable upon conversion of
stock options exercisable within 60 days of April 1,
2021.
|
|
|
|
|
(6)
|
Includes 22,426 shares issuable upon
conversion of stock options exercisable within 60 days of April 1,
2021.
|
|
|
|
|
(7)
|
Includes (i) 25,001 shares of common stock
issuable upon exercise of stock options exercisable within 60 days
of April 1, 2021 held directly, (ii) 40,802 shares issuable upon
conversion of warrants exercisable within 60 days of April 1, 2021
held directly, (iii) 76,911 shares of common stock held by BigBoy
Investment Partnership, LLC, (iv) and 24,532 shares of common stock
and 46,297 shares issuable upon conversion of warrants exercisable
within 60 days of April 1, 2021 held by BigBoy,
LLC.
Mr. Gehl is the Managing Member of BigBoy
Investment Partnership and BigBoy, LLC, and, therefore, may be
deemed to beneficially own these shares. The business address for
BigBoy Investment Partnership and BigBoy, LLC is 111 Bayside Dr.,
Suite 270, Newport Beach, CA 92625.
|
|
|
|
|
(8)
|
Includes (i) 100,301 shares of common stock
and 95,491 shares of common stock issuable upon conversion of
warrants exercisable within 60 days of April 1, 2021 held by the
Michael R. Keller Trust, (ii) 2,854 shares of common stock and
2,674 shares of common stock issuable upon conversion of warrants
exercisable within 60 days of April 1, 2021 held by the Keller 2004
IRR Trust FBO William, and (iii) 2,854 shares of common stock and
2,674 shares of common stock issuable upon conversion of warrants
exercisable within 60 days of April 1, 2021 held by the Keller 2004
IRR Trust FBO Charles.
|
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly
and special reports, proxy statements and other information with
the SEC. The SEC maintains a Web site that contains reports, proxy
statements and other information about issuers, like the Company,
who file electronically with the SEC. The address of that site is
http://www.sec.gov.
Copies of these documents may also be obtained by writing our
secretary at the address specified above.
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE
The SEC allows us to incorporate by reference
into this proxy Statement information contained in documents that
we file with it. This means that we can disclose important
information to you by referring you to those documents. We hereby
incorporate by reference into this proxy statement the following
documents:
●
our Annual
Report on Form 10-K for the year ended December 31, 2020, filed on
March 19, 2021;
●
our Current
Report on Form 8-K, filed on January 14, 2021;
●
our Current
Report on Form 8-K, filed on February 12, 2021;
●
our Current
Report on Form 8-K, filed on March 11,
2021;
●
our Current
Report on Form 8-K, filed on March 23,
2021;
●
our Current Report on Form
8-K, filed on April 21, 2021.
Any statement incorporated by reference in this
proxy statement from an earlier dated document that is inconsistent
with a statement contained in this proxy statement or in any other
document filed after the date of the earlier dated document, but
prior to the date hereof, which also is incorporated by reference
into this proxy statement, shall be deemed to be modified or
superseded for purposes hereof by such statement contained in this
proxy statement or in any other document filed after the date of
the earlier dated document, but prior to the date hereof, which
also is incorporated by reference into this proxy
statement.
Any person to whom this proxy statement is
delivered may (i) request copies of this proxy
statement and any of the documents incorporated by
reference herein, without charge, by written
request to:
Super League Gaming, Inc.
2912 Colorado Avenue, Suite
#203
Santa Monica, California
90404
or
by calling us at (610) 630-6357. In addition, stockholders as
of the Record Date may download copies of each of the documents
incorporated by reference herein from our website at http://ir.superleague.com
or from the SEC’s website at http://www.sec.gov.
Documents incorporated by reference into this proxy statement are
available without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference into
those documents.
Except as expressly provided above, no other
information, including none of the information on our website, is
incorporated by reference into this proxy
statement.
STOCKHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING OF
STOCKHOLDERS
Pursuant to Rule 14a-8 under the Exchange Act,
stockholder proposals to be included in our next proxy statement
must be received by us at our principal executive offices no later
than 90 days nor more than 120 days prior to the first anniversary
of the preceding year’s annual meeting. A stockholder
proposal not included in the Company’s proxy statement for
the 2022 Annual Meeting of Stockholders will be ineligible for
presentation at the meeting unless the stockholder gives timely
notice of the proposal in writing to the Secretary of the Company
at the principal executive offices of the Company. To be timely,
the Company must have received the stockholder’s notice not
less than 90 days nor more than 120 days in advance of the date the
proxy statement was released to stockholders in connection with the
previous year’s annual meeting of stockholders. However, if
the date of the 2022 Annual Meeting of Stockholders is changed by
more than 30 days from the date of this year’s Annual
Meeting, the Company must receive the stockholder’s notice no
later than the close of business on (i) the 90th day prior to such
annual meeting and (ii) the seventh day following the day on
which public announcement of the date of such meeting is first
made.
We reserve the right to reject, rule out of
order, or take other appropriate action with respect to any
proposal that does not comply with these and all other applicable
requirements.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies
and intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with respect
to two or more stockholders sharing the same address by delivering
a single proxy statement and annual report addressed to those
stockholders. This process, which is commonly referred to as
“householding,” potentially means extra convenience for
stockholders and cost savings for companies.
A number of brokers with account holders who are
stockholders of the Company will be “householding” the
Company’s proxy materials. A single set of the
Company’s proxy materials will be delivered to multiple
stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have
received notice from your broker that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate set of the Company’s proxy
materials, please notify your broker or direct a written request to
the Company at 2912 Colorado Avenue, Suite #203, Santa Monica,
California 90404, or contact us at (802) 294-2754. The Company
undertakes to deliver promptly, upon any such oral or written
request, a separate copy of its proxy materials to a stockholder at
a shared address to which a single copy of these documents was
delivered. Stockholders who currently receive multiple copies of
the Company’s proxy materials at their address and would like
to request “householding” of their communications
should contact their broker, bank or other nominee, or contact the
Company at the above address or phone number.
OTHER
MATTERS
At the date of this Proxy Statement, the Company
knows of no other matters, other than those described above, that
will be presented for consideration at the Annual Meeting. If any
other business should come before the Annual Meeting, it is
intended that the proxy holders will vote all proxies using their
best judgment in the interest of the Company and the
stockholders.
The proxy card accompanying this proxy
statement, which we began mailing to eligible stockholders on or
about March 30, 2021, contain instructions on how to
access our Annual Report on Form 10-K for the fiscal year ended
December 31, 2020. The Annual Report, which includes audited
financial statements, does not form any part of the material for
the solicitation of proxies.
The Board invites you to attend the Annual
Meeting in person. Whether or not you expect to attend the Annual
Meeting in person, please submit your vote by Internet, telephone
or e-mail as promptly as possible so that your shares will be
represented at the Annual Meeting.
REGARDLESS OF WHETHER YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE READ THE
ACCOMPANYING PROXY STATEMENT AND THEN VOTE BY INTERNET, TELEPHONE
OR E-MAIL AS PROMPTLY AS POSSIBLE. VOTING PROMPTLY WILL
SAVE US ADDITIONAL EXPENSE IN SOLICITING PROXIES AND WILL ENSURE
THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING.
Merger Agreement
TABLE OF
CONTENTS
|
ARTICLE I THE MERGER
|
|
|
Section 1.01 The
Merger.
|
|
|
Section 1.02
Closing.
|
|
|
Section 1.03 Effective
Time.
|
|
|
Section 1.04 Effects of the
Merger.
|
|
|
Section 1.05 Certificate of
Incorporation; By-Laws.
|
|
|
Section 1.06 Directors and
Officers.
|
|
|
ARTICLE II EFFECT OF THE MERGER ON CAPITAL
STOCK
|
|
|
Section 2.01 Effect of the
Merger on Capital Stock.
|
|
|
Section 2.02 Exchange
Procedures.
|
|
|
Section 2.03 Dissenting
Shares.
|
|
|
Section 2.04
Adjustments.
|
|
|
Section 2.05 Withholding
Rights.
|
|
|
Section 2.06 Lost
Certificates.
|
|
|
Section 2.07 Treatment of
Stock Options and Other Stock-Based Compensation.
|
|
|
Section 2.08Tax
Treatment.
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
|
|
|
Section 3.01 Organization
and Qualification of Company.
|
|
|
Section 3.02 Authority and
Board Approval.
|
|
|
Section 3.03 No Conflicts;
Consents; Anti-Takeover Statutes.
|
|
|
Section 3.04 Capital
Structure.
|
|
|
Section 3.05 Financial
Statements; Undisclosed Liabilities
|
|
|
Section 3.06 Absence of
Certain Changes, Events and Conditions.
|
|
|
Section 3.07
Taxes.
|
|
|
Section 3.08 Intellectual
Property.
|
|
|
Section 3.09 Compliance;
Permits.
|
|
|
Section
3.10 Litigation.
|
|
|
Section
3.11 Employee Matters.
|
|
|
Section
3.12 Employment Law Matters; Labor.
|
|
|
Section
3.13 Real Property and Personal Property Matters.
|
|
|
Section
3.14 Environmental Matters.
|
|
|
Section
3.15 Material Contracts.
|
|
|
Section
3.16 Accounts Receivable.
|
|
|
Section
3.17 Customers and Suppliers.
|
|
|
Section
3.18 Insurance.
|
|
|
Section
3.19 Information Supplied.
|
|
|
Section
3.20 Anti-Corruption Matters.
|
|
|
Section
3.21 Books and Records.
|
|
|
Section
3.22 Related-Party Transactions.
|
|
|
Section
3.23 Brokers.
|
|
|
Section
3.24 Full Disclosure.
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB
|
|
|
Section
4.01 Organization; Standing and Power; Charter Documents;
Subsidiaries.
|
|
|
Section
4.02 Capital Structure.
|
|
|
Section
4.03 Authority; Non-Contravention; Governmental Consents; Board
Approval.
|
|
|
Section
4.04 SEC Filings; Financial Statements; Undisclosed
Liabilities.
|
|
|
Section
4.05 Litigation.
|
|
|
Section
4.06 Absence of Certain Changes or Events.
|
|
|
Section
4.07 Intellectual Property.
|
|
|
Section
4.08 Employee Matters.
|
|
|
Section
4.09 Employment Law Matters; Labor.
|
|
|
Section
4.10 Environmental Matters.
|
|
|
Section
4.11 Material Contracts.
|
|
|
Section
4.12 Insurance.
|
|
|
Section
4.13 Brokers.
|
|
|
Section
4.14 Information Supplied.
|
|
|
Section
4.15 Ownership of Company Stock.
|
|
|
Section
4.16 Intended Tax Treatment.
|
|
|
ARTICLE V COVENANTS
|
|
|
Section 5.01 Conduct of
Business of the Company.
|
|
|
Section 5.02 Conduct of the
Business of Parent.
|
|
|
Section 5.03 Access to
Information; Confidentiality.
|
|
|
Section 5.04 No
Solicitation.
|
|
|
Section 5.05 Parent Board
Composition.
|
|
|
Section 5.06 Proxy
Statement.
|
|
|
Section 5.07 Company
Stockholders Meeting.
|
|
|
Section 5.08 Parent
Stockholders Meeting; Approval by Sole Stockholder of Merger
Sub.
|
|
|
Section 5.09 Notices of
Certain Events.
|
|
|
Section 5.10 Notices of
Certain Events; Stockholder Litigation; No Effect on Disclosure
Letter.
|
|
|
Section 5.11 Employees;
Benefit Plans.
|
|
|
Section 5.12 Directors' and
Officers' Indemnification and Insurance.
|
|
|
Section 5.13 Reasonable
Best Efforts.
|
|
|
Section 5.14 Public
Announcements.
|
|
|
Section 5.15 Anti-Takeover
Statutes.
|
|
|
Section 5.16 Section 16
Matters.
|
|
|
Section 5.17 Stock Exchange
Matters.
|
|
|
Section 5.18 Certain Tax
Matters.
|
|
|
Section 5.19 Further
Assurances.
|
|
|
ARTICLE VI CONDITIONS
|
|
|
Section 6.01 Conditions to
Each Party's Obligation to Effect the Merger.
|
|
|
Section 6.02 Conditions to
Obligations of Parent and Merger Sub.
|
|
|
Section 6.03 Conditions to
Obligation of the Company.
|
|
|
ARTICLE VII TERMINATION, AMENDMENT, AND
WAIVER
|
|
|
Section 7.01 Termination By
Mutual Consent.
|
|
|
Section 7.02 Termination By
Either Parent or the Company.
|
|
|
Section 7.03 Termination by
Parent.
|
|
|
Section 7.04 Termination by
the Company.
|
|
|
Section 7.05 Notice of
Termination; Effect of Termination.
|
|
|
Section 7.06 Fees and
Expenses Following Termination.
|
|
|
Section 7.07
Amendment.
|
|
|
Section 7.08 Extension;
Waiver.
|
|
|
ARTICLE VIII MISCELLANEOUS
|
|
|
Section
8.01 Definitions.
|
|
|
Section
8.02 Interpretation; Construction.
|
|
|
Section
8.03 Survival.
|
|
|
Section
8.04 Governing Law.
|
|
|
Section
8.05 Submission to Jurisdiction.
|
|
|
Section
8.06 Waiver of Jury Trial.
|
|
|
Section
8.07 Notices.
|
|
|
Section
8.08 Entire Agreement.
|
|
|
Section
8.09 No Third Party Beneficiaries.
|
|
|
Section
8.10 Severability.
|
|
|
Section
8.11 Assignment.
|
|
|
Section
8.12 Remedies.
|
|
|
Section
8.13 Specific Performance.
|
|
|
Section
8.14 Counterparts; Effectiveness.
|
|
EXHIBITS
[Exhibits Intentionally Omitted]
SCHEDULES
[Schedules Intentionally Omitted]
AGREEMENT AND PLAN OF MERGER
among
SUPER LEAGUE GAMING, INC.
and
MOBCRUSH STREAMING, INC.
and
SLG MERGER SUB II, INC
dated as of
March 9,
2021
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this
"Agreement"), is entered into as of March
9, 2021, by and among Mobcrush
Streaming, Inc., a Delaware corporation (the "Company"), Super League Gaming, Inc., a Delaware
corporation ("Parent"), and SLG Merger Sub II, Inc., a Delaware
corporation and a wholly-owned Subsidiary of Parent
("Merger
Sub"). Capitalized terms used
herein (including in the immediately preceding sentence) and not
otherwise defined herein shall have the meanings set forth
in Section 8.01
hereof.
WHEREAS, the parties intend that Merger Sub be merged
with and into the Company, with the Company surviving that merger
on the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of the Company (the
"Company
Board") has unanimously: (a)
determined that it is in the best interests of the Company and the
holders of shares of the Company's common stock, par value $0.0001
per share (the "Company Common
Stock"), and preferred stock,
par value $0.0001 (the "Company Preferred
Stock", and collectively with
the Company Common Stock, the "Company
Stock") and declared it
advisable, to enter into this Agreement with Parent and Merger Sub;
(b) approved the execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated
hereby, including the Merger; and (c) resolved, subject to the
terms and conditions set forth in this Agreement, to recommend
adoption of this Agreement by the stockholders of the Company; in
each case, in accordance with the Delaware General Corporation Law
(the "DGCL");
WHEREAS, the respective Boards of Directors of Parent
(the "Parent
Board") and Merger Sub (the
"Merger Sub
Board") have each unanimously:
(a) determined that it is in the best interests of Parent or Merger
Sub, as applicable, and their respective stockholders, and declared
it advisable, to enter into this Agreement; and (b) approved the
execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby, including the
Merger; in each case, in accordance with the
DGCL;
WHEREAS, the Parent Board has resolved to recommend that
the holders of shares of Parent's common stock, par value $0.001
per share (the "Parent Common
Stock") approve the issuance of
shares of Parent Common Stock in connection with the Merger on the
terms and subject to the conditions set forth in this Agreement
(the "Parent
Stock Issuance");
WHEREAS, for U.S. federal income Tax purposes, the
parties intend that the Merger qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and that this Agreement be, and is hereby,
adopted as a plan of reorganization within the meaning of Section
368(a) of the Code; and
WHEREAS, the parties desire to make certain
representations, warranties, covenants, and agreements in
connection with the Merger and the other transactions contemplated
by this Agreement and also to prescribe certain terms and
conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, and agreements contained in
this Agreement, the parties, intending to be legally bound, agree
as follows:
ARTICLE I
THE MERGER
Section
1.01 The Merger. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the
Effective Time: (a) Merger Sub will merge with and into the Company
(the "Merger"); (b) the separate corporate existence of Merger
Sub will cease; and (c) the Company will continue its corporate
existence under the DGCL as the surviving corporation in the Merger
and a Subsidiary of Parent (sometimes referred to herein as the
"Surviving
Corporation").
Section
1.02 Closing. Upon the terms and subject to the conditions set
forth herein, the closing of the Merger (the "Closing") will take place at 12:00 P.M., Pacific Time, as
soon as practicable (and, in any event, within three (3) Business
Days) after the satisfaction or, to the extent permitted hereunder,
waiver of all conditions to the Merger set forth in
ARTICLE
VI (other than those conditions
that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or, to the extent permitted hereunder,
waiver of all such conditions), unless this Agreement has been
terminated pursuant to its terms or unless another time or date is
agreed to in writing by the parties hereto. The Closing shall take
place via the electronic exchange of documents and executed
signature pages, unless another place or means is agreed to in
writing by the parties hereto, and the actual date of the Closing
is hereinafter referred to as the "Closing Date."
Section
1.03 Effective
Time. Subject to the provisions
of this Agreement, at the Closing, the Company, Parent, and Merger
Sub will cause a certificate of merger (the "Certificate of
Merger") to be executed,
acknowledged, and filed with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL.
The Merger will become effective at such time as the Certificate of
Merger has been duly filed with the Secretary of State of the State
of Delaware or at such later date or time as may be agreed by the
Company and Parent in writing and specified in the Certificate of
Merger in accordance with the DGCL (the effective time of the
Merger being hereinafter referred to as the "Effective
Time").
Section
1.04 Effects
of the Merger. The Merger shall
have the effects set in this Agreement and in the applicable
provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, from and after the Effective Time,
all property, rights, privileges, immunities, powers, franchises,
licenses, and authority of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, and duties of each of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions, and
duties of the Surviving Corporation.
Section
1.05 Certificate
of Incorporation; By-Laws. At
the Effective Time: (a) the certificate of incorporation of the
Surviving Corporation shall be amended and restated so as to read
in its entirety as set forth in Exhibit
A, and, as so amended and
restated, shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended in accordance with
the terms thereof or as provided by applicable Law; and (b) the
by-laws of Merger Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation,
except that references to Merger Sub's name shall be replaced with
references to the Surviving Corporation's name, until thereafter
amended in accordance with the terms thereof, the certificate of
incorporation of the Surviving Corporation, or as provided by
applicable Law.
Section 1.06
Directors and
Officers.
(a) Directors
and Officers of Surviving Corporation. The directors and officers of Merger Sub, in
each case, immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
certificate of incorporation and by-laws of the Surviving
Corporation.
(b) Directors
of Parent. After the Closing,
the composition of the Board of Directors of Parent shall be as set
forth in Section
5.05,
hereinbelow.
EFFECT OF THE MERGER ON
CAPITAL STOCK
Section
2.01 Effect of the Merger on Capital
Stock. At the Effective Time,
as a result of the Merger and without any action on the part of
Parent, Merger Sub, or the Company or the holder of any capital
stock of Parent, Merger Sub, or the Company:
(a) Cancellation
of Certain Company Stock. Each
share of Company Stock that is owned by the Company (as treasury
stock or otherwise) or any of their respective direct or indirect
wholly-owned Subsidiaries as of immediately prior to the Effective
Time (the "Cancelled
Shares") will automatically be
cancelled and retired and will cease to exist, and no consideration
will be delivered in exchange therefor.
(b) Conversion
of Company Stock. Subject to
any applicable adjustments to be made relating to (i) the Bridge
Financing Note converting into Parent Common Stock at Closing, and
(ii) the vesting of certain restricted stock units and stock
options granted to Parent's directors, officers, employees, and
other parties under Parent's current equity incentive
plan , each share
of Company Common Stock and Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than
shares to be cancelled and retired in accordance with
Section
2.01(a), and Dissenting Shares,
as defined below) will be automatically converted into the right to
receive:
(i) a
fraction of a share of Parent Common Stock equal to 52.8% (the
“Exchange
Ratio”), for an aggregate
number of 12,582,204 shares of Parent Common Stock (the
"Parent
Stock Consideration");
(ii) any
cash in lieu of fractional shares of Parent Common Stock payable
pursuant to Section
2.01(e);
and
(iii) any
dividends or other distributions to which the holder thereof
becomes entitled to upon the surrender of such shares of Company
Stock in accordance with Section 2.02(g)
(clauses (i), (ii), and (iii) of
this Section
2.01(b), the
"Merger
Consideration").
(iv) Schedule
2.01(b), attached hereto, sets
forth the assumptions, calculations, and formula used to determine
the Exchange Ratio, as agreed upon by Parent, Merger Sub, and
Company.
(v) For
the avoidance of doubt, and as stated in 2.01(b) and Schedule
2.01(b), the conversion of the loan amounts pursuant to the Bridge
Financing Note into Parent Common Stock, the assignment and
conversion of vested, but unexercised, Company Stock Options and/or
Company Restricted Shares into Parent Stock Options or Parent
Restricted Shares, pursuant to Section 2.07(a) or Section 2.07(b),
as applicable, are, and shall be, included in the 12,582,204 shares
of Parent Common Stock issued pursuant to this Agreement and the
transactions contemplated hereby, it being expressly agreed to and
acknowledged by the parties that the shares of Parent Stock
Consideration attributable to the assignment and conversion of
vested Company Stock Options and/or Company Restricted Shares shall
be maintained in reserve by Parent pursuant to its Parent Stock
Plan until exercise of such vested Company Stock Options and/or
Company Restricted Shares, into Parent Stock Options and/or Parent
Restricted Shares.
(c) Cancellation
of Shares. At the Effective
Time, all shares of Company Stock will no longer be outstanding and
all shares of Company Stock will be cancelled and retired and will
cease to exist, and each holder of: (i) a certificate formerly
representing any shares of Company Stock (each, a
"Certificate"); or (ii) any book-entry shares which
immediately prior to the Effective Time represented shares of
Company Stock (each, a "Book-Entry
Share") will, subject to
applicable Law in the case of Dissenting Shares, cease to have any
rights with respect thereto, except the right to receive (A) the
Merger Consideration in accordance with Section 2.02
hereof, (B) any cash in lieu of
fractional shares of Parent Common Stock payable pursuant to
Section
2.01(e), and (C) any dividends
or other distributions to which the holder thereof becomes entitled
to upon the surrender of such shares of Company Common Stock in
accordance with Section
2.02(g).
(d) Conversion
of Merger Sub Capital Stock.
Each share of common stock, par value $0.001 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and become one newly issued, fully paid,
and non-assessable share of common stock, par value $0.001 per
share, of the Surviving Corporation with the same rights, powers,
and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving
Corporation. From and after the Effective Time, all certificates
representing shares of Merger Sub Common Stock shall be deemed for
all purposes to represent the number of shares of common stock of
the Surviving Corporation into which they were converted in
accordance with the immediately preceding
sentence.
(e) Fractional
Shares. No certificates or
scrip representing fractional shares of Parent Common Stock shall
be issued upon the conversion of Company Stock pursuant to
Section
2.01(b) and such fractional
share interests shall not entitle the owner thereof to vote or to
any other rights of a holder of shares of Parent Common Stock.
Notwithstanding any other provision of this Agreement, each holder
of shares of Company Stock converted pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share
of Parent Common Stock (after taking into account all shares of
Company Stock exchanged by such holder) shall in lieu thereof, upon
surrender of such holder's Certificates and Book-Entry Shares,
receive in cash (rounded to the nearest whole cent), without
interest, an amount equal to such fractional amount multiplied by
the last reported sale price of Parent Common Stock on NASDAQ Stock
Market ("Nasdaq") on the last complete trading day prior to the
date of the Effective Time.
Section
2.02 Exchange
Procedures.
(a) Exchange
Agent; Exchange Fund. Prior to
the Effective Time, Parent shall appoint an exchange agent (the
"Exchange
Agent") to act as the agent for
the purpose of paying the Merger Consideration for: (i) the
Certificates; and (ii) the Book-Entry Shares. At or promptly
following the Effective Time, Parent shall deposit, or cause the
Surviving Corporation to deposit, with the Exchange Agent: (i)
certificates representing the shares of Parent Common Stock to be
issued as Merger Consideration (or make appropriate alternative
arrangements if uncertificated shares of Parent Common Stock
represented by book-entry shares will be issued); and (ii) cash
sufficient to make payments in lieu of fractional shares pursuant
to Section
2.01(e). In addition, Parent
shall deposit or cause to be deposited with the Exchange Agent, as
necessary from time to time after the Effective Time, any dividends
or other distributions, if any, to which the holders of Company
Stock may be entitled pursuant to Section 2.02(g)
for distributions or dividends, on the
Parent Common Stock to which they are entitled to pursuant
to Section
2.01(b), with both a record and
payment date after the Effective Time and prior to the surrender of
the shares of Company Stock in exchange for such Parent Common
Stock. Such shares of Parent Common Stock, cash in lieu of any
fractional shares payable pursuant to Section
2.01(e), and the amount of any
dividends or other distributions deposited with the Exchange Agent
pursuant to this Section
2.02(a), are referred to
collectively in this Agreement as the "Exchange
Fund."
(b) Procedures
for Surrender; No Interest.
Promptly after the Effective Time, Parent shall send, or shall
cause the Exchange Agent to send, to each record holder of shares
of Company Stock at the Effective Time, a letter of transmittal and
instructions (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates or transfer of the Book-Entry Shares
to the Exchange Agent, and which letter of transmittal will be in
customary form and have such other provisions as Parent and the
Surviving Corporation may reasonably specify) for use in such
exchange. Each holder of shares of Company Stock that have been
converted into the right to receive the Merger Consideration shall
be entitled to receive the Merger Consideration into which such
shares of Company Stock have been converted pursuant to
Section
2.01(b) in respect of the
Company Stock represented by a Certificate or Book-Entry Share, any
cash in lieu of fractional shares which the holder has the right to
receive pursuant to Section
2.01(e), and any dividends or
other distributions pursuant to Section 2.02(g)
upon: (i) surrender to the Exchange
Agent of a Certificate; or (ii) receipt of an "agent's message" by
the Exchange Agent (or such other evidence, if any, of transfer as
the Exchange Agent may reasonably request) in the case of
Book-Entry Shares; in each case, together with a duly completed and
validly executed letter of transmittal and such other documents as
may reasonably be requested by the Exchange Agent. No interest
shall be paid or accrued upon the surrender or transfer of any
Certificate or Book-Entry Share. Upon payment of the Merger
Consideration pursuant to the provisions of this
ARTICLE
II, each Certificate or
Certificates or Book-Entry Share or Book-Entry Shares so
surrendered or transferred, as the case may be, shall immediately
be cancelled.
(c) Investment
of Exchange Fund. Until
disbursed in accordance with the terms and conditions of this
Agreement, the cash in the Exchange Fund will be invested by the
Exchange Agent, as directed by Parent or the Surviving Corporation.
No losses with respect to any investments of the Exchange Fund will
affect the amounts payable to the holders of Certificates or
Book-Entry Shares. Any income from investment of the Exchange Fund
will be payable to Parent or the Surviving Corporation, as Parent
directs.
(d) Payments
to Non-Registered Holders. If
any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate or
the transferred Book-Entry Share, as applicable, is registered, it
shall be a condition to such payment that: (i) such Certificate
shall be properly endorsed or shall otherwise be in proper form for
transfer or such Book-Entry Share shall be properly transferred;
and (ii) the Person requesting such payment shall pay to the
Exchange Agent any transfer or other Tax required as a result of
such payment to a Person other than the registered holder of such
Certificate or Book-Entry Share, as applicable, or establish to the
reasonable satisfaction of the Exchange Agent that such Tax has
been paid or is not payable.
(e) Full
Satisfaction. All Merger
Consideration paid upon the surrender of Certificates or transfer
of Book-Entry Shares in accordance with the terms hereof shall be
deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Stock formerly represented by
such Certificate or Book-Entry Shares, and from and after the
Effective Time, there shall be no further registration of transfers
of shares of Company Stock on the stock transfer books of the
Surviving Corporation. If, after the Effective Time, Certificates
or Book-Entry Shares are presented to the Surviving Corporation,
they shall be cancelled and exchanged as provided in this
ARTICLE
II.
(f) Termination
of Exchange Fund. Any portion
of the Exchange Fund that remains unclaimed by the holders of
shares of Company Stock six (6) months after the Effective Time
shall be returned to Parent, upon demand, and any such holder who
has not exchanged shares of Company Stock for the Merger
Consideration in accordance with this Section 2.02
prior to that time shall thereafter
look only to Parent (subject to abandoned property, escheat, or
other similar Laws), as general creditors thereof, for payment of
the Merger Consideration without any interest. Notwithstanding the
foregoing, Parent shall not be liable to any holder of shares of
Company Stock for any amounts paid to a public official pursuant to
applicable abandoned property, escheat, or similar Laws. Any
amounts remaining unclaimed by holders of shares of Company Stock
two (2) years after the Effective Time (or such earlier date,
immediately prior to such time when the amounts would otherwise
escheat to or become property of any Governmental Entity) shall
become, to the extent permitted by applicable Law, the property of
Parent free and clear of any claims or interest of any Person
previously entitled thereto.
(g) Distributions
with Respect to Unsurrendered Shares of Company
Stock. All shares of Parent
Common Stock to be issued pursuant to the Merger shall be deemed
issued and outstanding as of the Effective Time and whenever a
dividend or other distribution is declared by Parent in respect of
the Parent Common Stock, the record date for which is after the
Effective Time, that declaration shall include dividends or other
distributions in respect of all shares issuable pursuant to this
Agreement. No dividends or other distributions in respect of the
Parent Common Stock shall be paid to any holder of any
unsurrendered share of Company Stock until the Certificate (or
affidavit of loss in lieu of the Certificate as provided in
Section 2.06) or Book-Entry
Share is surrendered for exchange in accordance with this
Section 2.02. Subject to the
effect of applicable Laws, following such surrender, there shall be
issued or paid to the holder of record of the whole shares of
Parent Common Stock issued in exchange for shares of the Company
Stock in accordance with this
Section 2.02, without interest:
(i) at the time of such surrender, the dividends or other
distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent
Common Stock and not paid; and (ii) at the appropriate payment
date, the dividends or other distributions payable with respect to
such whole shares of Parent Common Stock with a record date after
the Effective Time but with a payment date subsequent to
surrender.
Section
2.03 Dissenting
Shares. Notwithstanding any
provision of this Agreement to the contrary, including
Section
2.01, shares of Company Stock
issued and outstanding immediately prior to the Effective Time
(other than Cancelled Shares) and held by a holder who has not
voted in favor of adoption of this Agreement or consented thereto
in writing and who is entitled to demand and has properly exercised
appraisal rights of such shares in accordance with Section 262 of
the DGCL (such shares of Company Stock being referred to
collectively as the "Dissenting
Shares" until such time as such
holder fails to perfect or otherwise waives, withdraws, or loses
such holder's appraisal rights under the DGCL with respect to such
shares) shall not be converted into a right to receive the Merger
Consideration, but instead shall be entitled to only such rights as
are granted by Section 262 of the DGCL; provided,
however, that if, after the
Effective Time, such holder fails to perfect, waives, withdraws, or
loses such holder's right to appraisal pursuant to Section 262 of
the DGCL or if a court of competent jurisdiction shall determine
that such holder is not entitled to the relief provided by Section
262 of the DGCL, such shares of Company Stock shall be treated as
if they had been converted as of the Effective Time into the right
to receive the Merger Consideration in accordance with
Section
2.01(b), without interest
thereon, upon surrender of such Certificate formerly representing
such share or transfer of such Book-Entry Share, as the case may
be. The Company shall provide Parent prompt written notice of any
demands received by the Company for appraisal of shares of Company
Stock, any waiver or withdrawal of any such demand, and any other
demand, notice, or instrument delivered to the Company prior to the
Effective Time that relates to such demand, and Parent shall have
the opportunity and right to direct all negotiations and
proceedings with respect to such demands. Except with the prior
written consent of Parent, the Company shall not make any payment
with respect to, or settle, or offer to settle, any such
demands.
Section
2.04 Adjustments.
Without limiting the other provisions of this Agreement, if at any
time during the period between the date of this Agreement and the
Effective Time, any change in the outstanding shares of capital
stock of the Company or the Parent Common Stock shall occur (other
than the issuance of additional shares of capital stock of the
Company or Parent as permitted by this Agreement), including by
reason of any reclassification, recapitalization, stock split
(including a reverse stock split), or combination, exchange,
readjustment of shares, or similar transaction, or any stock
dividend or distribution paid in stock, the Exchange Ratio and any
other amounts payable pursuant to this Agreement shall be
appropriately adjusted to reflect such change.
Section
2.05 Withholding
Rights. Each of the Exchange
Agent, Parent, Merger Sub, and the Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this ARTICLE II
such amounts as may be required to be
deducted and withheld with respect to the making of such payment
under any Treasury Regulations or other applicable Laws regarding
Taxes. To the extent that amounts are so deducted and withheld by
the Exchange Agent, Parent, Merger Sub, or the Surviving
Corporation, as the case may be, such amounts shall be treated for
all purposes of this Agreement as having been paid to the Person in
respect of which the Exchange Agent, Parent, Merger Sub, or the
Surviving Corporation, as the case may be, made such deduction and
withholding.
Section
2.06 Lost
Certificates. If any
Certificate shall have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen, or destroyed and, if required by
Parent, the posting by such Person of a bond, in such reasonable
amount as Parent may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the
Exchange Agent will issue, in exchange for such lost, stolen, or
destroyed Certificate, the Merger Consideration to be paid in
respect of the shares of Company Stock formerly represented by such
Certificate as contemplated under this ARTICLE
II.
Section
2.07 Treatment of Stock Options and
Other Stock-Based Compensation.
(a) Company
Stock Options.
(i)
At the Effective Time, each equity
award granting such recipient a right to acquire shares of Company
Common Stock (each, a "Company Stock
Option") that is outstanding,
unvested and unexercised immediately prior to the Effective Time
(each, an “Unvested Stock
Option”), whether or not
then exercisable, shall be, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company, the Option
holder or any other Person, assumed by Parent and shall be
automantically converted into a Parent Stock Option in accordance
with this Section
2.07. Each such Parent Stock
Option so assumed and converted shall: (A) prior to the Effective
Time, continue to have, and shall be subject to, the same terms and
conditions as applied to the Company Stock Option, subject to
modification and approval in accordance with the terms of the
Company Stock Plan prior to the Closing, inclusive of the exercise
price per share of the Parent Common Stock and vesting conditions
that shall be negotiated in good faith by the principals of the
Company and Parent and finalized at least five (5) days prior to
the Closing Date; and (B) after the Closing, be subject in all
respects to the terms and conditions of the Parent Stock
Plan.
(ii) Notwithstanding
the foregoing, if, no later than five (5) Business Days immediately
prior the Closing Date, (A) the Company Stock Plan can be
terminated in accordance with its terms and applicable Law; (B) the
Company Stock Options can be cancelled in accordance with their
terms and applicable Law; (C) the Purchaser Awards can be granted
to the Unvested Equityholders, and (D) in each case of (A) –
(C), on the advice of legal counsel, the applicable Company
Continuing Employees will not be affected for U.S. federal income
tax purposes, then
(w) the Company shall terminate the
Company Stock Plan and cancel the Company Stock Options no later
than one Business Day prior to the Closing Date, (x) the Company
shall deliver written evidence thereof satisfactory to Parent prior
to the Closing, (y) each Company Stock Option holder shall cease to
have any rights with respect to such cancelled Company Stock
Options, and (z) promptly following the Closing, Parent shall grant
one or more Purchaser Awards pursuant to the Parent Stock Plan to
each employee holder of unvested Company Stock Options so cancelled
(“Unvested
Equityholder”) in
accordance with Section
5.10.
(iii) For
the avoidance of doubt, any vested but unexercised Company Stock
Options shall be assumed by Parent and shall be automatically
converted into Parent Stock Options in accordance with this
Section
2.07. Each such Parent Stock
Option so assumed and converted shall: (A) prior to the Effective
Time, continue to have, and shall be subject to, the same terms and
conditions as applied to the Company Stock Option, subject to
modification and approval in accordance with the terms of the
Company Stock Plan prior to the Closing; and (B) after the Closing,
be subject in all respects to the terms and conditions of the
Parent Stock Plan.
(iv) As
of the Effective Time, each Company Stock Option assumed and
converted pursuant to Section
2.07(a)(iii) shall be an option
to acquire that number of whole shares of Parent Common Stock
(rounded down to the nearest whole share) equal to the
product
of: (A) the number of shares of
Company Common Stock subject to such Company Stock Option, and (B)
the Exchange Ratio, at an exercise price per share of Parent Common
Stock (rounded up to the nearest whole cent) equal to the quotient
obtained by dividing (x) the exercise price per share of Company
Common Stock of such Company Stock Option by (y) the Exchange
Ratio; provided,
that
the exercise price and the number of
shares of Parent Common Stock subject to the Parent Stock Option
shall be determined in a manner consistent with the requirements of
Section 409A of the Code, and, in the case of Company Stock Options
that are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code, consistent with the
requirements of Section 424(a) of the Code.
(b) Company
Restricted Shares. The Company
shall take all requisite action so that, at the Effective Time,
each share of Company Common Stock subject to vesting, repurchase,
or other lapse of restrictions (a "Company Restricted
Share") that is outstanding
under any Company Stock Plan as of immediately prior to the
Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be assumed by Parent and
shall be converted into a Parent Restricted Share in accordance
with this Section
2.07. Each Parent Restricted
Share shall continue to have and be subject to substantially the
same terms and conditions as were applicable to such Company
Restricted Share immediately before the Effective Time (including
vesting, repurchase, or other lapse restrictions). As of the
Effective Time, each such holder of Company Restricted Shares so
assumed and converted will receive that number of whole Parent
Restricted Shares equal to the product (rounded down to the nearest
whole number) of: (i) the number of shares of Company Restricted
Shares held by that holder as of immediately prior to the Effective
Time; and (ii) the Exchange Ratio.
(c) Resolutions
and Other Company Actions. At
or prior to the Effective Time, the Company, the Company Board and
the compensation committee of the Company Board, as applicable,
shall adopt any resolutions and take any actions necessary
(including obtaining any employee consents) to (i) effectuate the
provisions 2.07(a) and Section 2.07(b) and (ii) cause the Company
Stock Plan to terminate at or prior to the Effective Time. In the
event any holder of Company Stock Options has exercised any
unvested Company Stock Option pursuant to the Company Stock Plan,
the Company shall cause each such Company Stock Option holder's
then-current account balance for such exercised but unvested
Company Stock Options to be distributed in cash to such employee at
the time of plan termination.
Section
2.08 Tax
Treatment. For U.S. federal income Tax purposes, it is
intended that the Merger qualify as a "reorganization" within the
meaning of Section 368(a) of the Code, and the regulations
promulgated thereunder, that this Agreement will constitute a "plan
of reorganization" for purposes of Sections 354 and 361 of the
Code.
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as
set forth in the correspondingly numbered Section of the Company
Disclosure Letter that relates to such Section or in another
Section of the Company Disclosure Letter to the extent that it is
reasonably apparent on the face of such disclosure that such
disclosure is applicable to such Section, the Company hereby
represents and warrants to Parent and Merger Sub as of the date of
this Agreement as follows:
Section
3.01 Organization
and Qualification of the Company. The Company is a corporation duly organized,
validly existing and in good standing under the Laws of the state
of Delaware and has full corporate power and authority to own,
operate or lease the properties and assets now owned, operated or
leased by it and to carry on its business as it has been and is
currently conducted. Section 3.01(i)
of the Company Disclosure Letter sets
forth each jurisdiction in which the Company is licensed or
qualified to do business, and the Company is duly licensed or
qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the
operation of its business as currently conducted makes such
licensing or qualification necessary. Section
3.01(ii) of the Company
Disclosure Letter sets forth, for each Subsidiary that is not,
directly or indirectly, wholly-owned by the Company: (i) the number
and type of any capital stock of, or other equity or voting
interests in, such Subsidiary that is outstanding as of the date
hereof; and (ii) the number and type of shares of capital stock of,
or other equity or voting interests in, such Subsidiary that, as of
the date hereof, are owned, directly or indirectly, by the Company.
All of the outstanding shares of capital stock of, or other equity
or voting interests in, each Subsidiary of the Company that is
owned directly or indirectly by the Company have been validly
issued, were issued free of pre-emptive rights, are fully paid and
non-assessable, and are free and clear of all Liens, including any
restriction on the right to vote, sell, or otherwise dispose of
such capital stock or other equity or voting interests, except for
any Liens: (A) imposed by applicable securities Laws; or (B)
arising pursuant to the Charter Documents of any non-wholly-owned
Subsidiary of the Company. Except for the capital stock of, or
other equity or voting interests in, its Subsidiaries, the Company
does not own, directly or indirectly, any capital stock of, or
other equity or voting interests in, any
Person.
Section
3.02 Authority
and Board Approval.
(a) Authority.
The Company has full corporate power and authority to enter into
and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party and, subject to, in
the case of the consummation of the Merger, adoption of this
Agreement by the affirmative vote or consent of Stockholders
representing a majority of the outstanding Shares
("Requisite
Company Vote"), to consummate
the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and any
other Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated hereby
and thereby have been duly authorized by all requisite corporate
action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize
the execution, delivery and performance of this Agreement or to
consummate the Merger and the other transactions contemplated
hereby and thereby, subject only, in the case of consummation of
the Merger, to the receipt of the Requisite Company Vote. The
Requisite Company Vote is the only vote or consent of the holders
of any class or series of the Company's capital stock required to
approve and adopt this Agreement and the Transaction Documents,
approve the Merger and consummate the Merger and the other
transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by the Company, and (assuming due
authorization, execution and delivery by each other party hereto)
this Agreement constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms. When each Transaction Document to which the Company is or
will be a party has been duly executed and delivered by the Company
(assuming due authorization, execution and delivery by each other
party thereto), such Transaction Document will constitute a legal
and binding obligation of the Company enforceable against it in
accordance with its terms. For purposes of this Agreement, the
Company will not be considered to have received the Requisite
Company Vote in the event that Dissenting Shares constitute more
than two percent (2%) of the issued and outstanding voting
securities of the Company, on an as-converted
basis.
(b) Board
Approval. The Company Board, by
resolutions duly adopted by a unanimous vote at a meeting of all
directors of the Company duly called and held and, not subsequently
rescinded or modified in any way, has: (i) determined that this
Agreement and the transactions contemplated hereby, including the
Merger, upon the terms and subject to the conditions set forth
herein, are fair to, and in the best interests of, the Company and
the Company's stockholders; (ii) approved and declared advisable
this Agreement, including the execution, delivery, and performance
thereof, and the consummation of the transactions contemplated by
this Agreement, including the Merger, upon the terms and subject to
the conditions set forth herein; (iii) directed that this Agreement
be submitted to a vote of the Company's stockholders for adoption
at the Company Stockholders Meeting; and (iv) resolved to recommend
that Company stockholders vote in favor of adoption of this
Agreement in accordance with the DGCL (collectively, the
"Company
Board Recommendation").
Section
3.03 No
Conflicts; Consents; Anti-Takeover Statutes.
(a) No
Conflicts; Consents. The
execution, delivery and performance by the Company of this
Agreement and the Transaction Documents to which it is a party, and
the consummation of the transactions contemplated hereby and
thereby, including the Merger, do not and will not: (i) conflict
with or result in a violation or breach of, or default under, any
provision of the Company's Restated Certificate of Incorporation,
by-laws or other organizational documents of the Company
("Company
Charter Documents"); (ii)
subject to, in the case of the Merger, obtaining the Requisite
Company Vote, conflict with or result in a violation or breach of
any provision of any Law or governmental Order applicable to the
Company; (iii) require the consent, notice or other action by any
Person under, conflict with, result in a violation or breach of,
constitute a default or an event that, with or without notice or
lapse of time or both, would constitute a default under, result in
the acceleration of or create in any party the right to accelerate,
terminate, modify or cancel any Company Material Contract; or (iv)
result in the creation or imposition of any Lien on any properties
or assets of the Company. No consent, approval, Permit, Order,
declaration or filing with, or notice to, any Governmental Entity
is required by or with respect to the Company in connection with
the execution, delivery and performance of this Agreement and the
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, except for the filing of the
Certificate of Merger with the Secretary of State of
Delaware.
(b) Anti-Takeover
Statutes. No "fair price,"
"moratorium," "control share acquisition," "supermajority,"
"affiliate transactions," "business combination," or other similar
anti-takeover statute or regulation enacted under any federal,
state, local, or foreign laws applicable to the Company is
applicable to this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement. The Company Board has
taken all actions so that the restrictions contained in Section 203
of the DGCL applicable to a "business combination" (as defined in
such Section 203) will not apply to the execution, delivery, or
performance of this Agreement and the consummation of the Merger
and the other transactions contemplated by this
Agreement
Section
3.04 Capital
Structure.
(a) Capital
Stock.
(i) The
authorized capital stock of the Company consists of: (A) 27,237,530
shares of Company Common Stock; and (B) 20,518,956 shares of
Company Preferred Stock which consists of 15,979,351 shares are
designated as Series A Preferred Stock", and 4,539,351 shares are
designated as "Series A-1 Preferred Stock".
(ii) As
of the date of this Agreement: (A) 1,000 shares of Company Common
Stock were issued and outstanding (not including shares held in
treasury); (B) 27,236,530 shares of Company Common Stock were
issued and held by the Company in its treasury; (C) 15,979,351
shares of the Company's Series A Preferred Stock were issued and
outstanding or held by the Company in its treasury; (D) 4,539,351
shares of the Company’s Series A-1 Preferred Stock were
issued and outstanding or held by the Company in its treasury; (E)
no other shares of the Company's Preferred Stock are outstanding or
held by the Company in its treasury; and (F) and since the date of
this Agreement and through the date hereof, no additional shares of
Company Common Stock or shares of Company Preferred Stock have been
issued other than the issuance of shares of Company Common Stock
upon the exercise or settlement of Company Equity
Awards.
(iii) All
of the outstanding shares of capital stock of the Company are, and
all shares of capital stock of the Company which may be issued as
contemplated or permitted by this Agreement will be, when issued,
duly authorized, validly issued, fully paid, and non-assessable,
and not subject to any pre-emptive rights. No Subsidiary of the
Company owns any shares of Company Common
Stock.
(b) Stock
Awards. Except as set forth
on Section
3.04(b) of the Company Disclosure
Letter:
(i) As
of the date of this Agreement, an aggregate of 677,618 shares of
Company Common Stock were reserved for issuance pursuant to Company
Equity Awards not yet granted under the Company Stock Plan. As of
the date of this Agreement, 3,316,220 shares of Company Common
Stock were reserved for issuance pursuant to outstanding Company
Stock Options and no shares of Company Restricted Shares were
issued and outstanding.
(ii) Since
January 1, 2021 and through the date hereof, no Company Equity
Awards have been granted and no additional shares of Company Common
Stock have become subject to issuance under the Company Stock Plan.
Section 3.04(b)(ii) of the Company Disclosure Letter sets forth as
of the date of this Agreement a list of each outstanding Company
Equity Award granted under the Company Stock Plan and: (A) the name
of the holder of such Company Equity Award; (B) the number of
shares of Company Common Stock subject to such outstanding Company
Equity Award; (C) if applicable, the exercise price, purchase
price, or similar pricing of such Company Equity Award; (D) the
date on which such Company Equity Award was granted or issued; (E)
the applicable vesting, repurchase, or other lapse of restrictions
schedule, and the extent to which such Company Equity Award is
vested and exercisable as of the date hereof; and (F) with respect
to Company Stock Options, the date on which such Company Stock
Option expires. All shares of Company Common Stock subject to
issuance under the Company Stock Plan, upon issuance in accordance
with the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly
issued, fully paid, and non-assessable.
(iii) Except as
disclosed on Schedule 3.04(b)(iii), there are no Contracts to which
the Company is a party obligating the Company to accelerate the
vesting of any Company Equity Award as a result of the transactions
contemplated by this Agreement (whether alone or upon the
occurrence of any additional or subsequent events).
Other than the Company Equity Awards, as of the
date hereof, there are no outstanding: (A) securities of the
Company or any of its Subsidiaries convertible into or exchangeable
for Voting Debt or shares of capital stock of the Company; (B)
options, warrants, or other agreements or commitments to acquire
from the Company or any of its Subsidiaries, or obligations of the
Company or any of its Subsidiaries to issue, any Voting Debt or
shares of capital stock of (or securities convertible into or
exchangeable for shares of capital stock of) the Company; or (C)
restricted shares, restricted stock units, stock appreciation
rights, performance shares, profit participation rights, contingent
value rights, "phantom" stock, or similar securities or rights that
are derivative of, or provide economic benefits based, directly or
indirectly, on the value or price of, any shares of capital stock
of the Company, in each case that have been issued by the Company
or its Subsidiaries (the items in clauses (A), (B), and (C),
together with the capital stock of the Company, being referred to
collectively as "Company
Securities"). All outstanding
shares of Company Common Stock, all outstanding Company Equity
Awards, and all outstanding shares of capital stock, voting
securities, or other ownership interests in any Subsidiary of the
Company, have been issued or granted, as applicable, in compliance
in all material respects with all applicable securities
Laws.
(iv) There
are no outstanding Contracts requiring the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any
Company Securities or Company Subsidiary Securities. Neither the
Company nor any of its Subsidiaries is a party to any voting
agreement with respect to any Company Securities or Company
Subsidiary Securities.
(c) Voting
Debt. No bonds, debentures,
notes, or other indebtedness issued by the Company or any of its
Subsidiaries: (i) having the right to vote on any matters on which
stockholders or equityholders of the Company or any of its
Subsidiaries may vote (or which is convertible into, or
exchangeable for, securities having such right); or (ii) the value
of which is directly based upon or derived from the capital stock,
voting securities, or other ownership interests of the Company or
any of its Subsidiaries, are issued or outstanding (collectively,
"Voting
Debt").
(d) Company
Subsidiary Securities. As of
the date hereof, there are no outstanding: (i) securities of the
Company or any of its Subsidiaries convertible into or exchangeable
for Voting Debt, capital stock, voting securities, or other
ownership interests in any Subsidiary of the Company; (ii) options,
warrants, or other agreements or commitments to acquire from the
Company or any of its Subsidiaries, or obligations of the Company
or any of its Subsidiaries to issue, any Voting Debt, capital
stock, voting securities, or other ownership interests in (or
securities convertible into or exchangeable for capital stock,
voting securities, or other ownership interests in) any Subsidiary
of the Company; or (iii) restricted shares, restricted stock units,
stock appreciation rights, performance shares, profit participation
rights, contingent value rights, "phantom" stock, or similar
securities or rights that are derivative of, or provide economic
benefits based, directly or indirectly, on the value or price of,
any capital stock or voting securities of, or other ownership
interests in, any Subsidiary of the Company, in each case that have
been issued by a Subsidiary of the Company (the items in clauses
(i), (ii), and (iii), together with the capital stock, voting
securities, or other ownership interests of such Subsidiaries,
being referred to collectively as "Company Subsidiary
Securities").
Section
3.05 Financial
Statements; Undisclosed Liabilities.
(a) Financial
Statements.
(i) Section
3.05(a)(i) of the Company Disclosure Letter sets forth the
unaudited financial statements consisting of the balance sheet of
the Company as at January 31, 2021 and the related statements of income and retained
earnings, stockholders' equity and cash flow for the thirty-one
(31) day period then ended (the "Interim Financial
Statements" or the
“Financial
Statements”).
(ii)
The Interim Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved, subject to normal and recurring
year-end reclassifications and adjustments (the effect of which
will not be materially adverse) and the absence of notes. The
Interim Financial Statements are based on the books and records of
the Company, and fairly present the financial condition of the
Company as of the date they were prepared and the results of the
operations of the Company for the periods indicated. The balance
sheet of the Company as of January 31, 2021 is referred to herein
as the "Interim Balance
Sheet" and the date thereof as
the "Interim
Balance Sheet Date". The
Company maintains a standard system of accounting established and
administered in accordance with GAAP.
(b) Undisclosed
Liabilities. Except as set
forth on Section 3.05(b)
of the Disclosure Letter, the Company
does not have any Liabilities which are of a nature required by
GAAP to be reflected on a balance sheet or the notes thereto, other
than (i) those which are adequately reflected or reserved against
in the Balance Sheet as of the Balance Sheet Date, (ii) those which
have been incurred in the Ordinary Course of Business since the
Balance Sheet Date or in contemplation of the transactions
contemplated by this Agreement (except as would need to be
disclosed pursuant to subsection (ii) of this Section
3.05(b), or (c) that would not
individually or in the aggregate, reasonably be expected to be
material to the Company, taken as a whole.
Section
3.06 Absence
of Certain Changes, Events and Conditions. Except as set forth in Section 3.06
of the Company Disclosure Letter,
since the Balance Sheet Date, other than (i) the Bridge Loan, and
(ii) in the Ordinary Course of Business, there has not been, with
respect to the Company, any:
(a) event,
occurrence or development that has had, or could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect;
(b) amendment
of the Company Charter Documents;
(c) split,
combination or reclassification of any shares of its capital
stock;
(d) issuance,
sale or other disposition of any of its capital stock, or grant of
any options, warrants or other rights to purchase or obtain
(including upon conversion, exchange or exercise) any of its
capital stock;
(e) declaration
or payment of any dividends or distributions on or in respect of
any of its capital stock or redemption, purchase or acquisition of
its capital stock;
(f) material
change in any method of accounting or accounting practice of the
Company, except as required by Law or GAAP or as disclosed in the
notes to the Financial Statements;
(g) change
in the Company's cash management practices and its policies,
practices and procedures with respect to collection of accounts
receivable, establishment of reserves for uncollectible accounts,
accrual of accounts receivable, inventory control, prepayment of
expenses, payment of trade accounts payable, accrual of other
expenses, deferral of revenue and acceptance of customer
deposits;
(h) except
for the Bridge Loan Note, entry into any Contract that would
constitute a Company Material Contract;
(i) incurrence,
assumption or guarantee of any indebtedness for borrowed money
except unsecured current obligations and Liabilities incurred in
the Ordinary Course of Business;
(j) transfer,
assignment, sale or other disposition of any of the assets shown or
reflected in the Balance Sheet or cancellation of any debts or
entitlements;
(k) transfer,
assignment or grant of any license or sublicense of any material
rights under or with respect to any Company Intellectual Property
or Company IP Agreements;
(l) material
damage, destruction or loss (whether or not covered by insurance)
to its property;
(m) any
capital investment in, or any loan to, any other
Person;
(n) acceleration,
termination, material modification to or cancellation of any
Company Material Contract;
(o) any
material capital expenditures outside the Ordinary Course of
Business;
(p) imposition
of any Lien upon any of the Company properties, capital stock or
assets, tangible or intangible;
(q) (i)
grant of any bonuses, whether monetary or otherwise, or increase in
any wages, salary, severance, pension or other compensation or
benefits in respect of its current or former employees, officers,
directors, independent contractors or consultants, other than as
provided for in any written agreements or required by applicable
Law, (ii) change in the terms of employment for any employee or any
termination of any employees, except as was previously contemplated
prior to the execution of this Agreement and as set forth on
Section
3.06(q) of the Company
Disclosure Letter, or (iii) action to accelerate the vesting or
payment of any compensation or benefit for any current or former
employee, officer, director, independent contractor or
consultant;
(r) hiring
or promoting any person as or to (as the case may be) an officer or
hiring or promoting any employee below officer, except to fill a
vacancy in the Ordinary Course of Business;
(s) adoption,
modification or termination of any: (i) employment, severance,
retention or other agreement with any current or former employee,
officer, director, independent contractor or consultant, (ii)
Benefit Plan or (iii) collective bargaining or other agreement with
a union, in each case whether written or oral;
(t) any
loan to (or forgiveness of any loan to), or entry into any other
transaction with, any of its stockholders or current or former
directors, officers and employees (other than the Bridge
Loan);
(u) entry
into a new line of business or abandonment or discontinuance of
existing lines of business;
(v) except
for the Merger, adoption of any plan of merger, consolidation,
reorganization, liquidation or dissolution or filing of a petition
in bankruptcy under any provisions of federal or state bankruptcy
Law or consent to the filing of any bankruptcy petition against it
under any similar Law;
(w) purchase,
lease or other acquisition of the right to own, use or lease any
property or assets for an amount in excess of $25,000, individually
(in the case of a lease, per annum), except for purchases of
inventory or supplies in the Ordinary Course of
Business;
(x) acquisition
by merger or consolidation with, or by purchase of a substantial
portion of the assets or stock of, or by any other manner, any
business or any Person or any division thereof;
(y) action
by the Company to make, change or rescind any Tax election, amend
any Tax Return or take any position on any Tax Return, take any
action, omit to take any action or enter into any other transaction
that would have the effect of increasing the Tax liability or
reducing any Tax asset of Parent in respect of any Post-Closing Tax
Period; or
(z) any
Contract to do any of the foregoing, or any action or omission that
would result in any of the foregoing.
Section
3.07
Taxes.
(a) Tax
Returns and Payment of Taxes.
The Company and each of its Subsidiaries have duly and timely filed
or caused to be filed (taking into account any valid extensions)
all material Tax Returns required to be filed by them. Such Tax
Returns are true, complete, and correct in all material respects.
Neither Company nor any of its Subsidiaries is currently the
beneficiary of any extension of time within which to file any Tax
Return other than extensions of time to file Tax Returns obtained
in the Ordinary Course of Business. All material Taxes due and
owing by the Company or any of its Subsidiaries (whether or not
shown on any Tax Return) have been timely paid or, where payment is
not yet due, the Company has made an adequate provision for such
Taxes in the Company's Financial Statements in accordance with
GAAP. The Company's most recent Financial Statements reflect an
adequate reserve (in accordance with GAAP) for all material Taxes
payable by the Company and its Subsidiaries through the date of
such Financial Statements. Neither the Company nor any of its
Subsidiaries has incurred any material Liability for Taxes since
the date of the Company's most recent Financial Statements outside
of the Ordinary Course of Business.
(b) Withholding.
The Company and each of its Subsidiaries have withheld and timely
paid each material Tax required to have been withheld and paid in
connection with amounts paid or owing to any Company Employee,
creditor, customer, shareholder, or other party (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442
of the Code or similar provisions under any state, local, and
foreign Laws), and materially complied with all information
reporting and backup withholding provisions of applicable
Law.
(c) Liens.
There are no Liens for material Taxes upon the assets of the
Company or any of its Subsidiaries other than for current Taxes not
yet due and payable or for Taxes that are being contested in good
faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP has been made in the Company's most recent
Financial Statements.
(d) Tax
Deficiencies and Audits. No
deficiency for any material amount of Taxes which has been
proposed, asserted, or assessed in writing by any taxing authority
against the Company or any of its Subsidiaries remains unpaid.
There are no waivers or extensions of any statute of limitations
currently in effect with respect to Taxes of the Company or any of
its Subsidiaries. There are no audits, suits, proceedings,
investigations, claims, examinations, or other administrative or
judicial proceedings ongoing or pending with respect to any
material Taxes of the Company or any of its
Subsidiaries.
(e) Tax
Jurisdictions. No claim has
ever been made in writing by any taxing authority in a jurisdiction
where the Company and its Subsidiaries do not file Tax Returns that
the Company or any of its Subsidiaries is or may be subject to Tax
in that jurisdiction.
(f) Tax
Rulings. Neither the Company
nor any of its Subsidiaries has requested or is the subject of or
bound by any private letter ruling, technical advice memorandum, or
similar ruling or memorandum with any taxing authority with respect
to any material Taxes, nor is any such request
outstanding.
(g) Consolidated
Groups, Transferee Liability, and Tax Agreements. Neither Company nor any of its Subsidiaries: (i)
has been a member of a group filing Tax Returns on a consolidated,
combined, unitary, or similar basis; (ii) has any material
liability for Taxes of any Person (other than the Company or any of
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any comparable provision of local, state, or foreign Law), as a
transferee or successor, by Contract, or otherwise; or (iii) is a
party to, bound by or has any material liability under any Tax
sharing, allocation, or indemnification agreement or
arrangement.
(h) Change
in Accounting Method. Neither
Company nor any of its Subsidiaries has agreed to make, nor is it
required to make, any material adjustment under Section 481(a) of
the Code or any comparable provision of state, local, or foreign
Laws relating to Taxes by reason of a change in accounting method
or otherwise.
(i) Post-Closing
Tax Items. The Company and its
Subsidiaries will not be required to include any material item of
income in, or exclude any material item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any: (i) "closing agreement" as
described in Section 7121 of the Code (or any corresponding or
similar provision of state, local or foreign Law) executed on or
prior to the Closing Date; (ii) installment sale or open
transaction disposition made on or prior to the Closing Date; (iii)
prepaid amount received on or prior to the Closing Date; or (iv)
election under Section 108(i) of the Code.
(j) Ownership
Changes. Without regard to this
Agreement, neither the Company nor any of its Subsidiaries has
undergone an "ownership change" within the meaning of Section 382
of the Code.
(k) Section
355. Neither Company nor any of
its Subsidiaries has been a "distributing corporation" or a
"controlled corporation" in connection with a distribution
described in Section 355 of the Code.
(l) Reportable
Transactions. Neither Company
nor any of its Subsidiaries has been a party to, or a material
advisor with respect to, a "reportable transaction" within the
meaning of Section 6707A(c)(1) of the Code and Treasury Regulations
Section 1.6011-4(b).
(m) Intended
Tax Treatment. Neither the
Company nor any of its Subsidiaries has taken or agreed to take any
action, and to the Knowledge of the Company there exists no fact or
circumstance, that is reasonably likely to prevent or impede the
Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
Section
3.08 Intellectual
Property.
(a) Scheduled
Company-Owned IP.
Section
3.08(a) of the Company
Disclosure Letter contains a correct, current and complete list, as
of the date hereof, of:
(i) all
Intellectual Property Registrations, specifying as to each, as
applicable: the title, mark, or design; the jurisdiction by or in
which it has been issued, registered or filed; the patent,
registration or application serial number; the issue, registration
or filing date; and the current status;
(ii) all
unregistered Trademarks included in the Company-Owned
IP;
(iii) all
proprietary Software included in the Company-Owned IP;
and
(iv) all
other Company IP that is used or held for use by the Company in its
business or operations.
All
required filings and fees related to the Intellectual Property
Registrations have been timely filed with and paid to the relevant
Governmental Entities and authorized registrars, and all
Intellectual Property Registrations are otherwise in good standing.
The Company has provided Parent with true and correct copies of
file histories, documents, certificates, office actions,
correspondence, and other materials related to all Intellectual
Property Registrations.
(b) Scheduled
Company IP Agreements. Section 3.08(b)
of the Company Disclosure
Letter contains a
correct, current and complete list of all Company IP Agreements,
specifying for each the date, title, and parties thereto, and
separately identifying the Company IP Agreements: (i) under which
the Company is a licensor or otherwise grants to any Person any
right or interest relating to any Company-Owned IP; (ii) under
which the Company is a licensee or otherwise granted any right or
interest relating to the Intellectual Property of any Person; and
(iii) which otherwise relate to the Company's ownership or use of
any Intellectual Property, in each case identifying the
Intellectual Property covered by such Intellectual Property
Agreement. The Company has provided Parent and Merger Sub with true
and complete copies (or in the case of any oral agreements, a
complete and correct written description) of all such Company IP
Agreements, including all modifications, amendments and supplements
thereto and waivers thereunder. Each Intellectual Property
Agreement is valid and binding on the Company in accordance with
its terms and is in full force and effect. Neither the Company nor
any other party thereto is, or is alleged to be, in breach of or
default under, or has provided or received any notice of breach of,
default under, or intention to terminate (including by
non-renewal), any Intellectual Property
Agreement.
(c) Scheduled
Platform Agreements.
Section
3.08(c) of the Company
Disclosure Letter contains a
correct, current, and complete list of all social media accounts
used by the Company in its business or operations. The Company has
complied with all terms of use, terms of service, and other
Contracts and all associated policies and guidelines relating to
its use of any social media platforms, sites, or services used by
the Company in its business or operations (collectively,
“Platform
Agreements”). There are
no Actions settled, pending, or threatened alleging (A) any breach
or other violation of any Platform Agreement by the Company; or (B)
defamation, any violation of publicity rights of any Person, or any
other violation by the Company in connection with its use of social
media in the conduct of its business or
operations.
(d) Right
to Use; Title. The Company or
one of its Subsidiaries is the sole and exclusive legal and
beneficial, and with respect to the Intellectual Property
Registrations, record, owner of all right, title and interest in
and to the Company-Owned IP, and has the valid and enforceable
right to use all other Intellectual Property used or held for use
in or necessary for the conduct of the business of the Company and
its Subsidiaries as currently conducted and as proposed to be
conducted ("Company IP", and collectively with the Company-Owned IP, the
"Intellectual Property
Assets"), in each case, free
and clear of Liens. The Intellectual Property Assets are all of the
Intellectual Property necessary to operate the business of the
Company and its Subsidiaries as presently conducted and proposed to
be conducted. The Company has entered into binding, valid and
enforceable written Contracts with each current and former employee
and independent contractor who is or was involved in or has
contributed to the invention, creation, or development of any
material Intellectual Property during the course of employment or
engagement with the Company or its Subsidiaries whereby such
employee or independent contractor (i) acknowledges the Company's
exclusive ownership of all Intellectual Property invented, created
or developed by such employee or independent contractor within the
scope of his or her employment or engagement with the Company or
any of its Subsidiaries; (ii) grants to the Company a present,
irrevocable assignment of any ownership interest such employee or
independent contractor may have in or to such Intellectual
Property, to the extent such Intellectual Property does not
constitute a “work made for hire” under applicable Law;
and (iii) irrevocably waives any right or interest, including any
moral rights, regarding such Intellectual Property, to the extent
permitted by applicable Law. All assignments and other instruments
necessary to establish, record, and perfect the Company's ownership
interest in the Intellectual Property Registrations have been
validly executed, delivered, and filed with the relevant
Governmental Entities an authorized registrars.
(e) Validity
and Enforceability. The Company
and its Subsidiaries' rights in the Company-Owned IP are valid,
subsisting, and enforceable. The Company and each of its
Subsidiaries have taken reasonable steps to maintain the Company IP
and to protect and preserve the confidentiality of all trade
secrets included in the Company IP. All of the Intellectual
Property Assets are valid and enforceable, and all Intellectual
Property Registrations are subsisting and in full force and effect.
The Company has taken all reasonable and necessary steps to
maintain and enforce the Intellectual Property Assets and to
preserve the confidentiality of all Trade Secrets included in the
Intellectual Property Assets, including by requiring all Persons
having access thereto to execute binding, written non-disclosure
agreements. Neither the execution, delivery, or performance of this
Agreement, nor the consummation of the transactions contemplated
hereunder, will result in the loss or impairment of or payment of
any additional amounts with respect to, or require the consent of
any other Person in respect of, the Company's right to own or use
any Intellectual Property Assets in the conduct of its business as
currently conducted and as proposed to be conducted. Immediately
following the Closing, all Intellectual Property Assets will be
owned or available for use by the Surviving Corporation on
substantially the same terms as they were owned or available for
use by the Company immediately prior to the
Closing.
(f) Non-Infringement.
The conduct of the business of the Company and any of its
Subsidiaries, as currently and formerly conducted and as proposed
to be conducted, including the use of the Intellectual Property
Assets in connection therewith, and the content, products,
processes, and services of the Company in the operation of its
business, have not infringed, misappropriated, or otherwise
violated and will not infringe, misappropriate, or otherwise
violate the Intellectual Property or other rights of any Person. No
Person has infringed, misappropriated, or otherwise violated, nor
is infringing, misappropriating, or otherwise violating, any
Intellectual Property Assets or Company IP
Agreements.
(g) IP
Legal Actions and Orders. There
are no Legal Actions pending or, to the Knowledge of the Company,
threatened: (i) alleging any infringement, misappropriation, or
violation of the Intellectual Property of any Person by the Company
or anCompany, or any of its Subsidiaries, or any other Person
alleging any infringement, misappropriation, or other violation by
any Person of any Intellectual Property Assets. The Company is not
aware of any facts or circumstances that could reasonably be
expected to give rise to any such Action. The Company is not
subject to any outstanding or prospective governmental Order
(including any motion or petition therefor) that does or could
reasonably be expected to restrict or impair the use of any
Company-Owned IP or the Company or any of its Subsidiaries' rights
with respect to any Company IP, in each case.
(h) Condition
of IT Systems. All IT Systems
are in good working condition and are sufficient for the operation
of the Company's business as currently conducted and as proposed to
be conducted. Since May 1, 2020, there has been no malfunction,
failure, continued substandard performance, denial-of-service, or
other cyber incident, including any cyberattack, or other
impairment of the IT Systems that has resulted or is reasonably
likely to result in disruption or damage to the Company's business
or operations. The Company has taken all commercially reasonable
steps to safeguard the confidentiality, availability, security, and
integrity of its IT Systems, including implementing and maintaining
appropriate backup, disaster recovery, and Software and hardware
support arrangements.
(i) Data
Privacy Laws. The Company and
its Subsidiaries have complied in all material respects with all
applicable Laws and all internal or publicly posted policies,
notices, and statements concerning the collection, use, processing,
storage, transfer, and security of personal information in the
conduct of the Company's business and operations. Since May 1,
2020, the Company has not (i) experienced any actual, alleged, or
suspected data breach or other security incident involving personal
information in its possession or control or (ii) been subject to or
received any notice of any audit, investigation, complaint, or
other Action by any Governmental Entity or other Person concerning
the Company's collection, use, processing, storage, transfer, or
protection of personal information or actual, alleged, or suspected
violation of any applicable Law concerning privacy, data security,
or data breach notification, in each case in connection with the
Company's operation of its business, and there are no facts or
circumstances that could reasonably be expected to give rise to any
such Action.
Section
3.09 Compliance;
Permits.
(a) Compliance.
The Company and each of its Subsidiaries is, and has been since May
1, 2020, in compliance with, all Laws or Orders applicable to the
Company or any of its Subsidiaries or by which the Company or any
of its Subsidiaries or any of their respective businesses or
properties is bound. No Governmental Entity has issued any written
notice or notification stating that the Company or any of its
Subsidiaries is not in compliance with any Law.
(b) Permits.
The Company and its Subsidiaries hold, to the extent necessary to
operate their respective businesses as such businesses are being
operated as of the date hereof, all permits, licenses,
registrations, variances, clearances, consents, commissions,
franchises, exemptions, orders, authorizations, and approvals from
Governmental Entities (collectively, "Permits"). No suspension, cancellation, non-renewal, or
adverse modifications of any Permits of the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company,
threatened. The Company and each of its Subsidiaries is, and has
been since May 1, 2020, in compliance with the terms of all
Permits, except where the failure to be in such compliance would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
Section
3.10 Litigation. There is no Legal Action pending, or to the
Knowledge of the Company, threatened against the Company or any of
its Subsidiaries or any of their respective properties or assets
or, to the Knowledge of the Company, any officer or director of the
Company or any of its Subsidiaries in their capacities as such
other than any such Legal Action that: (a) does not involve an
amount in controversy in excess of $25,000; and (b) does not seek
material injunctive or other material non-monetary relief. None of
the Company or any of its Subsidiaries or any of their respective
properties or assets is subject to any order, writ, assessment,
decision, injunction, decree, ruling, or judgment
("Order") of a Governmental Entity or arbitrator, whether
temporary, preliminary, or permanent, which would reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect. To the Knowledge of the Company, there are no SEC
inquiries or investigations, other governmental inquiries or
investigations, or internal investigations pending or, to the
Knowledge of the Company, threatened, in each case regarding any
accounting practices of the Company or any of its Subsidiaries or
any malfeasance by any officer or director of the
Company.
Section
3.11 Employee
Matters.
(a) Section
3.11(a) of the Company
Disclosure Letter contains a true and complete list, as of the date
hereof, of each benefit plan, program, policy, agreement,
collective bargaining agreement, or other arrangement providing for
compensation, severance, deferred compensation, performance awards,
stock or stock-based awards, fringe, retirement, death, disability,
or medical benefits or other employee benefits or remuneration of
any kind, including each employment, termination, severance,
retention, change in control, or consulting or independent
contractor plan, program, arrangement, or agreement, in each case
whether written or unwritten or otherwise, funded or unfunded,
including each "employee benefit plan," within the meaning of
Section 3(3) of ERISA, whether or not subject to ERISA, which is or
has been sponsored, maintained, contributed to, or required to be
contributed to, by the Company or any of its Subsidiaries for the
benefit of any current or former employee, independent contractor,
consultant, or director of the Company or any of its Subsidiaries
(each, a "Company
Employee"), or with respect to
which the Company or any Company ERISA Affiliate has or may have
any Liability (collectively, the "Company Employee
Plans").
(b) Documents.
The Company has made available to Parent correct and complete
copies (or, if a plan is not written, a written description) of all
Company Employee Plans and amendments thereto, and, to the extent
applicable: (i) all related trust agreements, funding arrangements,
and insurance contracts now in effect or required in the future as
a result of the transactions contemplated by this Agreement or
otherwise; (ii) the most recent determination letter received
regarding the tax-qualified status of each Company Employee Plan;
(iii) the most recent financial statements for each Company
Employee Plan; (iv) the Form 5500 Annual Returns/Reports and
Schedules for the most recent plan year for each Company Employee
Plan; (v) the current summary plan description for each Company
Employee Plan; and (vi) all actuarial valuation reports related to
any Company Employee Plans.
(c) Employee
Plan Compliance.
(i) Each
Company Employee Plan (including any multiemployer plans within the
meaning of Section 3(37) of ERISA (each a "Multiemployer
Plan")) has been established,
administered, and maintained in all material respects in accordance
with its terms and in material compliance with applicable Laws,
including but not limited to ERISA and the
Code;
(ii) all
the Company Employee Plans that are intended to be qualified under
Section 401(a) of the Code are so qualified and have received
timely determination letters from the IRS and no such determination
letter has been revoked nor, to the Knowledge of the Company, has
any such revocation been threatened, or with respect to a prototype
plan, can rely on an opinion letter from the IRS to the prototype
plan sponsor, to the effect that such qualified retirement plan and
the related trust are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and to the
Knowledge of the Company no circumstance exists that is likely to
result in the loss of such qualified status under Section 401(a) of
the Code;
(iii) the
Company and its Subsidiaries, where applicable, have timely made
all contributions, benefits, premiums, and other payments required
by and due under the terms of each Company Employee Plan and
applicable Law and accounting principles, and all benefits accrued
under any unfunded Company Employee Plan have been paid, accrued,
or otherwise adequately reserved to the extent required by, and in
accordance with GAAP;
(iv) except
to the extent limited by applicable Law, each Company Employee Plan
can be amended, terminated, or otherwise discontinued after the
Effective Time in accordance with its terms, without material
liability to Parent, the Company, or any of its Subsidiaries (other
than ordinary administration expenses and in respect of accrued
benefits thereunder);
(v) there
are no investigations, audits, inquiries, or Legal Actions pending
or, to the Knowledge of the Company, threatened by the IRS, U.S.
Department of Labor, Health and Human Services, Equal Employment
Opportunity Commission, or any similar Governmental Entity with
respect to any Company Employee Plan;
(vi) there
are no material Legal Actions pending, or, to the Knowledge of the
Company, threatened with respect to any Company Employee Plan (in
each case, other than routine claims for benefits);
and
(vii) to
the Knowledge of the Company, neither the Company nor any of its
Company ERISA Affiliates has engaged in a transaction that could
subject the Company or any Company ERISA Affiliate to a tax or
penalty imposed by either Section 4975 of the Code or Section
502(i) of ERISA.
(d) Plan
Liabilities. Neither the
Company nor any Company ERISA Affiliate has:
(i) incurred
or reasonably expects to incur, either directly or indirectly, any
liability under Title I or Title IV of ERISA, or related provisions
of the Code or foreign Law relating to any Company Employee Plan
and nothing has occurred that could constitute grounds under Title
IV of ERISA to terminate, or appoint a trustee to administer, any
Company Employee Plan;
(ii) except
for payments of premiums to the Pension Benefit Guaranty
Corporation ("PBGC") which have been timely paid in full, not
incurred any liability to the PBGC in connection with any Company
Employee Plan covering any active, retired, or former employees or
directors of the Company or any Company ERISA Affiliate, including,
without limitation, any liability under Sections 4069 or 4212(c) of
ERISA or any penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility, or withdrawn from any such Company
Employee Plan in a manner that could subject it to liability under
Sections 4062, 4063 or 4064 of ERISA;
(iii) failed
to comply with Section 601 et. seq. of ERISA and Section 4980B of the Code;
or
(iv) incurred
any withdrawal liability (including any contingent or secondary
withdrawal liability) within the meaning of Sections 4201 or 4204
of ERISA to any Multiemployer Plan and nothing has occurred that
presents a risk of the occurrence of any withdrawal from or the
partition, termination, reorganization, or insolvency of any such
Multiemployer Plan which could result in any liability of the
Company or any Company ERISA Affiliate to any such Multiemployer
Plan. No complete or partial termination of any Company Employee
Plan has occurred or is expected to occur.
(e) Certain
Company Employee Plans. With
respect to each Company Employee Plan:
(i)
no such plan is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA or a "multiple
employer plan" within the meaning of Section 413(c) of the Code and
neither the Company nor any of its Company ERISA Affiliates has now
or at any time contributed to, sponsored, maintained, or had any
liability or obligation in respect of any such Multiemployer Plan
or multiple employer plan;
(ii) no
Legal Action has been initiated by the PBGC to terminate any such
Company Employee Plan or to appoint a trustee for any such Company
Employee Plan;
(iii) no
Company Employee Plan is subject to the minimum funding standards
of Section 302 of ERISA or Sections 412, 418(b), or 430 of the
Code, and none of the assets of the Company or any Company ERISA
Affiliate is, or may reasonably be expected to become, the subject
of any lien arising under Section 303 of ERISA or Sections 430 or
436 of the Code; and
(iv) no
"reportable event," as defined in Section 4043 of ERISA, has
occurred, or is reasonably expected to occur, with respect to any
such Company Employee Plan.
(f) No
Post-Employment Obligations. No
Company Employee Plan provides post-termination or retiree health
benefits to any person for any reason, except as may be required by
COBRA or other applicable Law, and neither the Company nor any
Company ERISA Affiliate has any Liability to provide
post-termination or retiree health benefits to any person or ever
represented, promised, or contracted to any Company Employee
(either individually or to Company Employees as a group) or any
other person that such Company Employee(s) or other person would be
provided with post-termination or retiree health benefits, except
to the extent required by COBRA or other applicable
Law.
(g) Potential
Governmental or Lawsuit Liability. Other than routine claims for benefits: (i)
there are no pending or, to the Knowledge of the Company,
threatened claims by or on behalf of any participant in any Company
Employee Plan, or otherwise involving any Company Employee Plan or
the assets of any Company Employee Plan; and (ii) no Company
Employee Plan is presently or has since May 1, 2020, been the
subject of an examination or audit by a Governmental Entity or is
the subject of an application or filing under, or is a participant
in, an amnesty, voluntary compliance, self-correction, or similar
program sponsored by any Governmental Entity.
(h) Section
409A Compliance. Each Company
Employee Plan that is subject to Section 409A of the Code has been
operated in compliance with such section and all applicable
regulatory guidance (including, without limitation, proposed
regulations, notices, rulings, and final
regulations).
(i) Health
Plan Compliance. Each of the
Company and its Subsidiaries complies in all material respects with
the applicable requirements of COBRA or any similar state statute
with respect to each Company Employee Plan that is a group health
plan within the meaning of Section 5000(b)(1) of the Code or such
state statute.
(j) Effect
of Transaction. Except as set
forth on Section 3.11(j)
of the Company Disclosure Letter,
neither the execution or delivery of this Agreement, the
consummation of the Merger, nor any of the other transactions
contemplated by this Agreement will (either alone or in combination
with any other event): (i) entitle any current or former director,
employee, contractor, or consultant of the Company to severance pay
or any other payment; (ii) accelerate the timing of payment,
funding, or vesting, or increase the amount of compensation due to
any such individual; (iii) limit or restrict the right of the
Company to merge, amend, or terminate any Company Employee Plan; or
(iv) increase the amount payable or result in any other material
obligation pursuant to any Company Employee Plan. No amount that
could be received (whether in cash or property or the vesting of
any property) as a result of the consummation of the transaction
contemplated by this Agreement by any employee, director, or other
service provider of the Company under any Company Employee Plan or
otherwise would not be deductible by reason of Section 280G of the
Code nor would be subject to an excise tax under Section 4999 of
the Code.
Section
3.12 Employment
Law Matters; Labor.
(a) Section
3.12(a) of the Company Disclosure Letter contains a list
of all persons who are employees, independent contractors or
consultants of the Company as of the date hereof, including any
employee who is on a leave of absence of any nature, paid or
unpaid, authorized or unauthorized, and sets forth for each such
individual the following: (i) name; (ii) title or position
(including whether full or part time); (iii) hire date; (iv)
current annual base compensation rate; (v) commission, bonus or
other incentive-based compensation; and (vi) a description of the
fringe benefits provided to each such individual as of the date
hereof. As of the date hereof, all compensation, including wages,
commissions and bonuses, payable to all employees, independent
contractors or consultants of the Company for services performed on
or prior to the date hereof have been paid in full and there are no
outstanding agreements, understandings or commitments of the
Company with respect to any compensation, commissions or
bonuses.
(b) The
Company and each of its Subsidiaries: (i) is in compliance with all
applicable Laws and agreements regarding hiring, employment,
termination of employment, plant closing and mass layoff,
employment discrimination, harassment, retaliation, and reasonable
accommodation, leaves of absence, terms and conditions of
employment, wages and hours of work, employee classification,
employee health and safety, leasing and supply of temporary and
contingent staff, engagement of independent contractors, including
proper classification of same, payroll taxes, and immigration with
respect to Company Employees, and contingent workers; and (ii) is
in compliance with all applicable Laws relating to the relations
between it and any labor organization, trade union, work council,
or other body representing Company Employees.
(c) Labor.
Neither Company nor any of its Subsidiaries is party to, or subject
to, any collective bargaining agreement or other agreement with any
labor organization, work council, or trade union with respect to
any of its or their operations. No material work stoppage,
slowdown, or labor strike against the Company or any of its
Subsidiaries with respect to employees who are employed within the
United States is pending, threatened, or has occurred since May 1,
2020, and no material work stoppage, slowdown, or labor strike
against the Company or any of its Subsidiaries with respect to
employees who are employed outside the United States is pending,
threatened, or has occurred since May 1, 2020. None of the Company
Employees is represented by a labor organization, work council, or
trade union, and there is no organizing activity, Legal Action,
election petition, union card signing or other union activity, or
union corporate campaigns of or by any labor organization, trade
union, or work council directed at the Company or any of its
Subsidiaries, or any Company Employees. There are no Legal Actions,
government investigations, or labor grievances pending, or
threatened relating to any employment related matter involving any
Company Employee or applicant, including, but not limited to,
charges of unlawful discrimination, retaliation or harassment,
failure to provide reasonable accommodation, denial of a leave of
absence, failure to provide compensation or benefits, unfair labor
practices, or other alleged violations of Law, except for any of
the foregoing which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect.
Section
3.13 Real
Property and Personal Property Matters.
(a) Leased
Real Estate.
Section
3.13(a) of the Company
Disclosure Letter contains a true and complete list of all Leases
(including all amendments, extensions, renewals, guaranties, and
other agreements with respect thereto) as of the date hereof for
each such Leased Real Estate (including the date and name of the
parties to such Lease document). The Company has delivered to
Parent a true and complete copy of each such Lease. Except as set
forth in Section 3.13(a)
of the Company Disclosure Letter, with
respect to each of the Leases: (i) such Lease is legal, valid,
binding, enforceable, and in full force and effect; (ii) neither
the Company nor any of its Subsidiaries nor, to the Knowledge of
the Company, any other party to the Lease, is in breach or default
under such Lease, and no event has occurred or circumstance exists
which, with or without notice, lapse of time, or both, would
constitute a breach or default under such Lease; (iii) the
Company's or its Subsidiary's possession and quiet enjoyment of the
Leased Real Estate under such Lease has not been disturbed, and to
the Knowledge of the Company, there are no disputes with respect to
such Lease; and (iv) there are no Liens on the estate created by
such Lease. Neither the Company nor any of its Subsidiaries has
assigned, pledged, mortgaged, hypothecated, or otherwise
transferred any Lease or any interest therein nor has the Company
or any of its Subsidiaries subleased, licensed, or otherwise
granted any Person (other than another wholly-owned Subsidiary of
the Company) a right to use or occupy such Leased Real Estate or
any portion thereof.
(b) Real
Estate Used in the Business.
The Leased Real Estate identified in Section 3.13(a)
of the Company Disclosure Letter
comprise all of the real property used or intended to be used in,
or otherwise related to, the business of the Company or any of its
Subsidiaries.
(c) Personal
Property. The Company and each
of its Subsidiaries are in possession of and have good and
marketable title to, or valid leasehold interests in or valid
rights under contract to use, the machinery, equipment, furniture,
fixtures, and other tangible personal property and assets owned,
leased, or used by the Company or any of its Subsidiaries, free and
clear of all Liens.
(d) Condition
and Sufficiency of Assets. The
buildings, plants, structures, furniture, fixtures, machinery,
equipment, vehicles and other items of tangible personal property
of the Company are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures,
furniture, fixtures, machinery, equipment, vehicles and other items
of tangible personal property is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The buildings, plants, structures,
furniture, fixtures, machinery, equipment, vehicles and other items
of tangible personal property currently owned or leased by the
Company, together with all other properties and assets of the
Company, are sufficient for the continued conduct of the Company's
business after the Closing in substantially the same manner as
conducted prior to the Closing and constitute all of the rights,
property and assets necessary to conduct the business of the
Company as currently conducted.
Section
3.14 Environmental
Matters. Except for such
matters as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect:
(a) The
Company and its Subsidiaries are, and have been, in compliance with
all Environmental Laws, which compliance includes the possession,
maintenance of, compliance with, or application for, all Permits
required under applicable Environmental Laws for the operation of
the business of the Company and its Subsidiaries as currently
conducted.
(b) Neither
the Company nor any of its Subsidiaries has disposed of, released,
or discharged any Hazardous Substances on, at, under, in, or from
any real property currently or, to the Knowledge of the Company,
formerly owned, leased, or operated by it or any of its
Subsidiaries or at any other location that is: (i) currently
subject to any investigation, remediation, or monitoring; or (ii)
reasonably likely to result in liability to the Company or any of
its Subsidiaries, in either case of (i) or (ii) under any
applicable Environmental Laws.
(c) Neither
the Company nor any of its Subsidiaries has: (i) produced,
processed, manufactured, generated, transported, treated, handled,
used, or stored any Hazardous Substances, except in compliance with
Environmental Laws, at any Real Estate; or (ii) exposed any
employee or any third party to any Hazardous Substances under
circumstances reasonably expected to give rise to any material
Liability or obligation under any Environmental
Law.
(d) Neither
the Company nor any of its Subsidiaries has received written notice
of and there is no Legal Action pending, or to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries,
alleging any Liability or responsibility under or non-compliance
with any Environmental Law or seeking to impose any financial
responsibility for any investigation, cleanup, removal,
containment, or any other remediation or compliance under any
Environmental Law. Neither the Company nor any of its Subsidiaries
is subject to any Order, settlement agreement, or other written
agreement by or with any Governmental Entity or third party
imposing any material Liability or obligation with respect to any
of the foregoing.
(e)
Neither the Company nor any of its
Subsidiaries has expressly assumed or retained any Liabilities
under any applicable Environmental Laws of any other Person,
including in any acquisition or divestiture of any property or
business.
Section
3.15 Material
Contracts.
(a) Material
Contracts. For purposes of this
Agreement, "Company Material
Contract" shall mean the
following to which the Company or any of its Subsidiaries is a
party or any of the respective assets are bound (excluding any
Leases):
(i) any
"material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the Securities Act);
(ii) any
employment or consulting Contract (in each case with respect to
which the Company has continuing obligations as of the date hereof)
with any current or former (A) officer of the Company, (B) member
of the Company Board, or (C) Company Employee providing for an
annual base salary or payment in excess of
$100,000.00;
(iii) any
Contract providing for indemnification or any guaranty by the
Company or any Subsidiary thereof, in each case that is material to
the Company and its Subsidiaries, taken as a whole, other than (A)
any guaranty by the Company or a Subsidiary thereof of any of the
obligations of (1) the Company or another wholly-owned Subsidiary
thereof or (2) any Subsidiary (other than a wholly-owned
Subsidiary) of the Company that was entered into in the Ordinary
course of Business pursuant to or in connection with a customer
Contract, or (B) any Contract providing for indemnification of
customers or other Persons pursuant to Contracts entered into in
the Ordinary Course of Business;
(iv) any
Contract that purports to limit in any material respect the right
of the Company or any of its Subsidiaries (or, at any time after
the consummation of the Merger, Parent or any of its Subsidiaries)
(A) to engage in any line of business, (B) compete with any Person
or solicit any client or customer, or (C) operate in any
geographical location;
(v) any
Contract relating to the disposition or acquisition, directly or
indirectly (by merger, sale of stock, sale of assets, or
otherwise), by the Company or any of its Subsidiaries after the
date of this Agreement of assets or capital stock or other equity
interests of any Person, in each case with a fair market value in
excess of $25,000;
(vi) any
Contract that grants any right of first refusal, right of first
offer, or similar right with respect to any material assets,
rights, or properties of the Company or any of its
Subsidiaries;
(vii) any
Contract that contains any provision that requires the purchase of
all or a material portion of the Company's or any of its
Subsidiaries' requirements for a given product or service from a
given third party, which product or service is material to the
Company and its Subsidiaries, taken as a whole;
(viii) any
Contract that obligates the Company or any of its Subsidiaries to
conduct business on an exclusive or preferential basis or that
contains a "most favored nation" or similar covenant with any third
party or upon consummation of the Merger will obligate Parent, the
Surviving Corporation, or any of their respective Subsidiaries to
conduct business on an exclusive or preferential basis or that
contains a "most favored nation" or similar covenant with any third
party;
(ix) any
partnership, joint venture, limited liability company agreement, or
similar Contract relating to the formation, creation, operation,
management, or control of any material joint venture, partnership,
or limited liability company, other than any such Contact solely
between the Company and its wholly-owned Subsidiaries or among the
Company's wholly-owned Subsidiaries;
(x) any
mortgages, indentures, guarantees, loans, or credit agreements,
security agreements, or other Contracts, in each case relating to
indebtedness for borrowed money, whether as borrower or lender, in
each case in excess of $25,000, other than (A) accounts receivables
and payables, and (B) loans to direct or indirect wholly-owned
Subsidiaries of the Company;
(xi) any
employee collective bargaining agreement or other Contract with any
labor union;
(xii) any
Company IP Agreement;
(xiii) any
other Contract under which the Company or any of its Subsidiaries
is obligated to make payment or incur costs in excess of $25,000 in
any year and which is not otherwise described in clauses
(i)–(xii) above; or
(xiv) any
Contract which is not otherwise describeed in clauses
(i)–(xiii) above that is material to the Company and its
Subsidiaries, taken as a whole.
(b) Schedule
of Material Contracts; Documents. Section
3.15(b) of the Company
Disclosure Letter sets forth a true and complete list as of the
date hereof of all Company Material Contracts. The Company has made
available to Parent correct and complete copies of all Company
Material Contracts, including any amendments
thereto.
(c) No
Breach. (i) All the Company
Material Contracts are legal, valid, and binding on the Company or
its applicable Subsidiary, enforceable against it in accordance
with its terms, and is in full force and effect; (ii) neither the
Company nor any of its Subsidiaries nor, to the Knowledge of the
Company, any third party has violated any provision of, or failed
to perform any obligation required under the provisions of, any
Company Material Contract; and (iii) neither the Company nor any of
its Subsidiaries nor, to the Knowledge of the Company, any third
party is in breach, or has received written notice of breach, of
any Company Material Contract.
Section
3.16 Accounts
Receivable. The accounts
receivable reflected on the Interim Balance Sheet and the accounts
receivable arising after the date thereof (a) have arisen from bona
fide transactions entered into by the Company involving the sale of
goods or the rendering of services in the Ordinary Course of
Business; (b) constitute only valid, undisputed claims of the
Company not subject to claims of set-off or other defenses or
counterclaims other than normal cash discounts accrued in the
Ordinary Course of Business; and (c) subject to a reserve for bad
debts shown on the Interim Balance Sheet or, with respect to
accounts receivable arising after the Interim Balance Sheet Date,
on the accounting records of the Company, are collectible in full
within sixty (60) days after billing. The reserve for bad debts
shown on the Interim Balance Sheet or, with respect to accounts
receivable arising after the Interim Balance Sheet Date, on the
accounting records of the Company have been determined in
accordance with GAAP, consistently applied, subject to normal
year-end adjustments and the absence of disclosures normally made
in footnotes.
Section
3.17 Customers
and Suppliers.
(a) Material
Customers. Section 3.17(a)
of the Company Disclosure Letter sets
forth each customer who has paid aggregate consideration to the
Company for goods or services rendered in an amount greater than or
equal to $50,000 annually since May 1, 2020 (collectively, the
"Company Material
Customers"). The Company has
not received any notice, and has no reason to believe, that any of
the Company Material Customers has ceased, or intends to cease
after the Closing, to use its goods or services or to otherwise
terminate or materially reduce its relationship with the
Company.
(b) Material
Suppliers. Section 3.17(b)
of the Company Disclosure Letter sets
forth (i) each supplier to whom the Company has paid consideration
for goods or services rendered in an amount greater than or equal
to $50,000 annually since May 1, 2020 (collectively, the
"Company
Material Suppliers"). The
Company has not received any notice, and has no reason to believe,
that any of the Company Material Suppliers has ceased, or intends
to cease, to supply goods or services to the Company or to
otherwise terminate or materially reduce its relationship with the
Company.
Section
3.18 Insurance.
All insurance policies of the Company and its Subsidiaries are in
full force and effect and provide insurance in such amounts and
against such risks as the Company reasonably has determined to be
prudent, taking into account the industries in which the Company
and its Subsidiaries operate, and as is sufficient to comply with
applicable Law. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, neither the Company nor any of its Subsidiaries is in
breach or default, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action
which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination or modification of, any of
such insurance policies. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect and to the Knowledge of the Company: (i) no insurer of any
such policy has been declared insolvent or placed in receivership,
conservatorship, or liquidation; and (ii) no notice of cancellation
or termination, other than pursuant to the expiration of a term in
accordance with the terms thereof, has been received with respect
to any such policy.
Section
3.19 Information
Supplied. None of the
information supplied or to be supplied by or on behalf of the
Company for inclusion or incorporation by reference in the proxy
statement to be filed with the SEC and sent to the Parent's
stockholders in connection with the Parent Stock Issuance and the
Merger (including any amendments or supplements thereto, the
"Proxy
Statement") will, at the date
it is first mailed to the Parent's stockholders or at the time of
the Parent Stockholders Meeting or at the time of any amendment or
supplement thereof, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement will comply as
to form in all material respects with the requirements of the
Exchange Act. Notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to statements made or
incorporated by reference therein based on information that was not
supplied by or on behalf of the Company.
Section
3.20 Anti-Corruption
Matters. None of the Company,
any of its Subsidiaries or any director, officer or, to the
Knowledge of the Company, employee or agent of the Company or any
of its Subsidiaries has: (i) used any funds for unlawful
contributions, gifts, entertainment, or other unlawful payments
relating to an act by any Governmental Entity; (ii) made any
unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign
or violated any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or (iii) made any other unlawful payment under
any applicable Law relating to anti-corruption, bribery, or similar
matters. Neither the Company nor any of its Subsidiaries has
disclosed to any Governmental Entity that it violated or may have
violated any Law relating to anti-corruption, bribery, or similar
matters. To the Knowledge of the Company, no Governmental Entity is
investigating, examining, or reviewing the Company's compliance
with any applicable provisions of any Law relating to
anti-corruption, bribery, or similar matters.
Section
3.21 Books
and Records. The minute books
and stock record books of the Company, all of which have been made
available to Parent, are complete and correct in all material
respects and have been maintained in accordance with sound business
practices. The minute books of the Company contain materially
accurate and complete records of all meetings, and actions taken by
written consent of, the Stockholders, the Company Board and any
committees of the Company Board, and no meeting, or action taken by
written consent, of any such Stockholders, Company Board or
committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of
Parent.
Section
3.22 Related-Party
Transactions. Other than the
Bridge Loan Note, no executive officer or director of the Company
or any person owning 5% or of the Shares (or any of such person's
immediate family members or Affiliates or associates) is a party to
any Contract with or binding upon the Company or any of its assets,
rights or properties or has any interest in any property owned by
the Company or has engaged in any transaction with any of the
foregoing since May 1, 2020.
Section
3.23 Brokers.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement or any Transaction
Document based upon arrangements made by or on behalf of
Company.
Section
3.24 Full
Disclosure. No representation
or warranty by the Company in this Agreement and no statement
contained in the Company Disclosure Letter or any certificate or
other document furnished or to be furnished to Parent or any of its
Representatives pursuant to this Agreement contains any untrue
statement of a material fact, or omits to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not
misleading.
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
Except: (a) as disclosed in the Parent SEC
Documents at least one (1) Business Day prior to the date hereof;
or (b) as set forth in the correspondingly numbered Section of the
Parent Disclosure Letter that relates to such Section or in another
Section of the Parent Disclosure Letter; Parent and Merger Sub
hereby jointly and severally represent and warrant to the Company
as follows:
Section
4.01 Organization;
Standing and Power; Charter Documents;
Subsidiaries.
(a) Organization;
Standing and Power. Each of
Parent and its Subsidiaries is a corporation, limited liability
company, or other legal entity duly organized, validly existing,
and in good standing (to the extent that the concept of "good
standing" is applicable in the case of any jurisdiction outside the
United States) under the Laws of its jurisdiction of organization,
and has the requisite corporate, limited liability company, or
other organizational, as applicable, power and authority to own,
lease, and operate its assets and to carry on its business as now
conducted. Each of Parent and its Subsidiaries is duly qualified or
licensed to do business as a foreign corporation, limited liability
company, or other legal entity and is in good standing (to the
extent that the concept of "good standing" is applicable in the
case of any jurisdiction outside the United States) in each
jurisdiction where the character of the assets and properties
owned, leased, or operated by it or the nature of its business
makes such qualification or license necessary, except where the
failure to be so qualified or licensed or to be in good standing,
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) Charter
Documents. The copies of the
Amended and Restated Certificate of Incorporation and By-Laws of
Parent as most recently filed with the Parent SEC Documents are
true, correct, and complete copies of such documents as in effect
as of the date of this Agreement. Parent has delivered or made
available to the Company a true and correct copy of the Charter
Documents of Merger Sub. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Charter
Documents.
(c) Subsidiaries.
All of the outstanding shares of capital stock of, or other equity
or voting interests in, each Subsidiary of Parent have been validly
issued and are owned by Parent, directly or indirectly, free of
pre-emptive rights, are fully paid and non-assessable, and are free
and clear of all Liens, including any restriction on the right to
vote, sell, or otherwise dispose of such capital stock or other
equity or voting interests, except for any Liens: (i) imposed by
applicable securities Laws; or (ii) arising pursuant to the Charter
Documents of any non-wholly-owned Subsidiary of Parent. Except for
the capital stock of, or other equity or voting interests in, its
Subsidiaries, Parent does not own, directly or indirectly, any
capital stock of, or other equity or voting interests in, any
Person.
Section
4.02 Capital
Structure.
(a) Capital
Stock. The authorized capital
stock of Parent consists of: (i) 100,000,000 shares of Parent
Common Stock; and (ii) 10,000,000 shares of preferred stock, par
value $0.001 per share, of Parent (the "Parent Preferred
Stock"). As of the date of this
Agreement: (A) 21,608,144 shares of Parent Common Stock were issued
and outstanding (not including shares held in treasury); (B)
78,391,856 shares of Parent Common Stock were issued and held by
Parent in its treasury; and (C) no shares of Parent Preferred Stock
were issued and outstanding or held by Parent in its treasury. All
of the outstanding shares of capital stock of Parent are, and all
shares of capital stock of Parent which may be issued as
contemplated or permitted by this Agreement, including the shares
of Parent Common Stock constituting the Merger Consideration, will
be, when issued, duly authorized, validly issued, fully paid, and
non-assessable, and not subject to any pre-emptive rights. No
Subsidiary of Parent owns any shares of Parent Common
Stock.
(b) Stock
Awards. As of December 31,
2020, an aggregate of 588,423 shares of Parent Common Stock were
reserved for issuance pursuant to Parent Equity Awards not yet
granted under the Parent Stock Plans. As of December 31, 2020,
2,020,073 shares of Parent Common Stock were reserved for issuance
pursuant to outstanding Parent Equity Awards, and no shares of
Parent Restricted Shares were issued and outstanding. All shares of
Parent Common Stock subject to issuance under the Parent Stock
Plans, including the Parent Equity Awards constituting Merger
Consideration to be issued pursuant to Section
2.07, upon issuance in
accordance with the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid, and
non-assessable.
Section
4.03 Authority;
Non-Contravention; Governmental Consents; Board
Approval.
(a) Authority.
Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into and to perform its obligations under this
Agreement and, subject to, in the case of the consummation of the
Merger: (i) the adoption of this Agreement by Parent as the sole
stockholder of Merger Sub; and (ii) the need to obtain the
affirmative vote or consent of a majority of the outstanding shares
of the Parent Common Stock to the Parent Stock Issuance (the
"Requisite
Parent Vote"), to consummate
the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub and
no other corporate proceedings on the part of Parent or Merger Sub
are necessary to authorize the execution and delivery of this
Agreement or to consummate the Merger, the Parent Stock Issuance,
and the other transactions contemplated by this Agreement, subject
only, in the case of consummation of the Merger, to: (i) the
adoption of this Agreement by Parent as the sole stockholder of
Merger Sub; and (ii) the need to obtain the Requisite Parent Vote.
This Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming due execution and delivery by the Company,
constitutes the legal, valid, and binding obligation of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, and other similar Laws
affecting creditors' rights generally and by general principles of
equity.
(b) Non-Contravention.
The execution, delivery, and performance of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated by this Agreement, do not and will
not: (i) subject to obtaining the Requisite Parent Vote, contravene
or conflict with, or result in any violation or breach of, the
Charter Documents of Parent or Merger Sub; (ii) assuming that all
of the Consents contemplated by clauses (i) through (v) of
Section
4.03(c) have been obtained or
made, and in the case of the consummation of the Merger, obtaining
the Requisite Parent Vote, conflict with or violate any Law
applicable to Parent or Merger Sub or any of their respective
properties or assets; (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, result in Parent's or any of its
Subsidiaries' loss of any benefit or the imposition of any
additional payment or other liability under, or alter the rights or
obligations of any third party under, or give to any third party
any rights of termination, amendment, acceleration, or
cancellation, or require any Consent under, any Contract to which
Parent or any of its Subsidiaries is a party or otherwise bound as
of the date hereof; or (iv) result in the creation of a Lien on any
of the properties or assets of Parent or any of its Subsidiaries,
except, in the case of each of clauses (ii), (iii), and (iv), for
any conflicts, violations, breaches, defaults, loss of benefits,
additional payments or other liabilities, alterations,
terminations, amendments, accelerations, cancellations, or Liens
that, or where the failure to obtain any Consents, in each case,
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(c) Governmental
Consents. No Consent of any
Governmental Entity is required to be obtained or made by Parent or
Merger Sub in connection with the execution, delivery, and
performance by Parent and Merger Sub of this Agreement or the
consummation by Parent and Merger Sub of the Merger, the Parent
Stock Issuance, and the other transactions contemplated hereby,
except for: (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware; (ii) the filing with
the SEC of (A) the Proxy Statement in definitive form in accordance
with the Exchange Act, and (B) the filing of such reports under the
Exchange Act as may be required in connection with this Agreement,
the Merger, the Parent Stock Issuance, and the other transactions
contemplated by this Agreement; (iii) such Consents as may be
required under Antitrust Laws, in any case that are applicable to
the transactions contemplated by this Agreement; (iv) such Consents
as may be required under applicable state securities or "blue sky"
Laws and the securities Laws of any foreign country or the rules
and regulations of Nasdaq; and (vi) such other Consents which if
not obtained or made would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect.
(d) Board
Approval.
(i) The
Parent Board by resolutions duly adopted by a unanimous vote at a
meeting of all directors of Parent duly called and held and, not
subsequently rescinded or modified in any way, has (A) determined
that this Agreement and the transactions contemplated hereby,
including the Merger, and the Parent Stock Issuance, upon the terms
and subject to the conditions set forth herein, are fair to, and in
the best interests of, Parent and Parent's stockholders, (B)
approved and declared advisable this Agreement, including the
execution, delivery, and performance thereof, and the consummation
of the transactions contemplated by this Agreement, including the
Merger and the Parent Stock Issuance, upon the terms and subject to
the conditions set forth herein, (C) directed that the Parent Stock
Issuance be submitted to a vote of the Parent's stockholders for
adoption at the Parent Stockholders Meeting, and (D) resolved to
recommend that Parent's stockholders vote in favor of approval of
the Parent Stock Issuance (collectively, the "Parent Board
Recommendation").
(ii) The
Merger Sub Board by resolutions duly adopted by a unanimous vote at
a meeting of all directors of Merger Sub duly called and held and,
not subsequently rescinded or modified in any way, has (A)
determined that this Agreement and the transactions contemplated
hereby, including the Merger, upon the terms and subject to the
conditions set forth herein, are fair to, and in the best interests
of, Merger Sub and Parent, as the sole stockholder of Merger Sub,
(B) approved and declared advisable this Agreement, including the
execution, delivery, and performance thereof, and the consummation
of the transactions contemplated by this Agreement, including the
Merger, upon the terms and subject to the conditions set forth
herein, (C) directed that this Agreement be submitted to a vote by
Parent, and (D) resolved to recommend that Parent vote in favor of
adoption of this Agreement in accordance with the
DGCL.
Section
4.04 SEC
Filings; Financial Statements; Undisclosed
Liabilities.
(a) SEC
Filings. Parent has timely
filed with or furnished to, as applicable, the SEC all registration
statements, prospectuses, reports, schedules, forms, statements,
and other documents (including exhibits and all other information
incorporated by reference) required to be filed or furnished by it
with the SEC since February 15, 2021 (the "Parent SEC
Documents"); provided, however,
it is expressly understood that the Parent’s annual report on
Form 10-K will not be filed prior to the execution hereof, but will
be filed prior to March 31, 2021, the date by which it must be
filed with the SEC. True, correct, and complete copies of all the
Parent SEC Documents are publicly available on EDGAR. To the
Knowledge of Parent, as of their respective filing dates or, if
amended or superseded by a subsequent filing prior to the date
hereof, as of the date of the last such amendment or superseding
filing (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of the
relevant meetings, respectively), each of the Parent SEC Documents
complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the
Sarbanes-Oxley Act, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Documents. To the
Knowledge of Parent, none of the Parent SEC Documents, including
any financial statements, schedules, or exhibits included or
incorporated by reference therein at the time they were filed (or,
if amended or superseded by a subsequent filing prior to the date
hereof, as of the date of the last such amendment or superseding
filing), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the
Knowledge of Parent, none of the Parent SEC Documents is the
subject of ongoing SEC review or outstanding SEC investigation and
there are no outstanding or unresolved comments received from the
SEC with respect to any of the Parent SEC Documents. None of
Parent's Subsidiaries is required to file or furnish any forms,
reports, or other documents with the SEC.
(b) Financial
Statements. Each of the
consolidated financial statements (including, in each case, any
notes and schedules thereto) contained in or incorporated by
reference into the Parent SEC Documents: (i) complied as to form in
all material respects with the published rules and regulations of
the SEC with respect thereto as of their respective dates; (ii) was
prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes thereto and, in the case of unaudited interim financial
statements, as may be permitted by the SEC for Quarterly Reports on
Form 10-Q); and (iii) fairly presented in all material respects the
consolidated financial position and the results of operations,
changes in stockholders' equity, and cash flows of Parent and its
consolidated Subsidiaries as of the respective dates of and for the
periods referred to in such financial statements, subject, in the
case of unaudited interim financial statements, to normal and
year-end audit adjustments as permitted by GAAP and the applicable
rules and regulations of the SEC (but only if the effect of such
adjustments would not, individually or in the aggregate, be
material).
(c) Undisclosed
Liabilities. The audited
balance sheet of Parent dated as of December 31, 2019, and the
unaudited balance sheet dated September 30, 2020, contained in the
Parent SEC Documents filed prior to the date hereof is hereinafter
referred to as the "Parent Balance
Sheet." Neither Parent nor any
of its Subsidiaries has any Liabilities other than Liabilities
that: (i) are reflected or reserved against in the Parent Balance
Sheet (including in the notes thereto); (ii) were incurred since
the date of the Parent Balance Sheet in the Ordinary Course of
Business; (iii) are incurred in connection with the transactions
contemplated by this Agreement; or (iv) would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(d) Nasdaq
Compliance. Parent is in
compliance with all of the applicable listing and corporate
governance rules of Nasdaq, except for any non-compliance that
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
Section
4.05 Litigation;
Compliance.
(a) There
is no Legal Action pending, or to the Knowledge of Parent,
threatened against Parent or any of its Subsidiaries or any of
their respective properties or assets or, to the Knowledge of
Parent, any officer or director of Parent or any of its
Subsidiaries in their capacities as such other than any such Legal
Action that: (a) does not involve an amount that would reasonably
be expected to have, individually or in the aggregate, Material
Adverse Effect; and (b) does not seek material injunctive or other
material non-monetary relief. None of Parent or any of its
Subsidiaries or any of their respective properties or assets is
subject to any Order of a Governmental Entity or arbitrator,
whether temporary, preliminary, or permanent, which would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. To the Knowledge of Parent, there are no
SEC inquiries or investigations, other governmental inquiries or
investigations, or internal investigations pending or, to the
Knowledge of Parent, threatened, in each case regarding any
accounting practices of Parent or any of its Subsidiaries or any
malfeasance by any officer or director of
Parent.
(b) Parent
and each of its Subsidiaries is, and has been since January 1,
2020, in compliance with, all Laws or Orders applicable to Parent
or any of its Subsidiaries or by which Parent or any of its
Subsidiaries or any of their respective businesses or properties is
bound. No Governmental Entity has issued any written notice or
notification stating that Parent or any of its Subsidiaries is not
in compliance with any Law.
Section
4.06 Absence
of Certain Changes or Events.
Since the date of the Parent Balance Sheet, except in connection
with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, the business
of Parent and each of its Subsidiaries has been conducted in the
Ordinary Course of Business and there has not been or occurred any
Parent Material Adverse Effect or any event, condition, change, or
effect that could reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse
Effect
Section
4.07 Intellectual
Property.
(a) Right
to Use; Title. The Parent or
one of its subsidiaries is the sole and exclusive owner of all
right, title, and interest in and to the Parent-Owned IP, and has
the valid and enforceable right to use all other Intellectual
Property used or held for use in or necessary for the conduct of
the business of the Company and its Subsidiaries as currently
conducted and as proposed to be conducted ("Parent IP"), in each case, free and clear of all Liens,
except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(b) Validity
and Enforceability. Parent or
one of its Subsidiaries' rights in the Parent-Owned IP are valid,
subsisting, and enforceable, except as would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company and each of its Subsidiaries have taken
reasonable steps to maintain the Parent IP and to protect and
preserve the confidentiality of all trade secrets included in the
Parent IP, except where the failure to take such actions would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(c) Non-Infringement.
To the knowledge of Parent, and except as would not be reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect: (i) the conduct of the businesses of Parent and any
of its subsidiaries has not infringed, misappropriated, or
otherwise violated, and is not infringing, misappropriating, or
otherwise violating, any Intellectual Property of any other Person;
and (ii) to the Knowledge of Parent, no third party is infringing
upon, violating, or misappropriating any Parent
IP.
(d) IP
Legal Actions and Orders. There
are no Legal Actions pending or, to the Knowledge of the Parent,
threatened: (i) alleging any infringement, misappropriation, or
violation of the Intellectual Property of any Person by Parent or
any of its Subsidiaries; or (ii) challenging the validity,
enforceability, or ownership of any Parent-Owned IP or Parent or
any of its Subsidiaries' rights with respect to any Parent IP, in
each case except for such Legal Actions that would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect. Parent and its Subsidiaries are not subject to any
outstanding Order that restricts or impairs the use of any
Parent-Owned IP, except where compliance with such Order would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
Section
4.08 Employee
Matters.
(a) Employee
Plan Compliance.
(i) Each
Parent Employee Plan (including any Multiemployer Plans) has been
established, administered, and maintained in all material respects
in accordance with its terms and in material compliance with
applicable Laws, including but not limited to ERISA and the
Code;
(ii) all
Parent Employee Plans that are intended to be qualified under
Section 401(a) of the Code are so qualified and have received
timely determination letters from the IRS and no such determination
letter has been revoked nor, to the Knowledge of Parent, has any
such revocation been threatened, or with respect to a prototype
plan, can rely on an opinion letter from the IRS to the prototype
plan sponsor, to the effect that such qualified retirement plan and
the related trust are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and to the
Knowledge of Parent no circumstance exists that is likely to result
in the loss of such qualified status under Section 401(a) of the
Code;
(iii) Parent
and its Subsidiaries, where applicable, have timely made all
contributions, benefits, premiums, and other payments required by
and due under the terms of each Parent Employee Plan and applicable
Law and accounting principles, and all benefits accrued under any
unfunded Parent Employee Plan have been paid, accrued, or otherwise
adequately reserved to the extent required by, and in accordance
with GAAP;
(iv) there
are no investigations, audits, inquiries, or Legal Actions pending
or, to the Knowledge of Parent, threatened by the IRS, U.S.
Department of Labor, Health and Human Services, Equal Employment
Opportunity Commission, or any similar Governmental Entity with
respect to any Parent Employee Plan;
(v) there
are no material Legal Actions pending, or, to the Knowledge of
Parent, threatened with respect to any Parent Employee Plan (in
each case, other than routine claims for benefits);
and
(vi) to
the Knowledge of Parent, neither Parent nor any of its Parent ERISA
Affiliates has engaged in a transaction that could subject Parent
or any Parent ERISA Affiliate to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of
ERISA.
(b) Plan
Liabilities. Neither Parent nor
any Parent ERISA Affiliate has:
(i) incurred
or reasonably expects to incur, either directly or indirectly, any
liability under Title I or Title IV of ERISA, or related provisions
of the Code or foreign Law relating to any Parent Employee Plan and
nothing has occurred that could constitute grounds under Title IV
of ERISA to terminate, or appoint a trustee to administer, any
Parent Employee Plan;
(ii) except
for payments of premiums to the PBGC which have been timely paid in
full, not incurred any liability to the PBGC in connection with any
Parent Employee Plan covering any active, retired, or former
employees or directors of Parent or any Parent ERISA Affiliate,
including, without limitation, any liability under Sections 4069 or
4212(c) of ERISA or any penalty imposed under Section 4071 of
ERISA, or ceased operations at any facility, or withdrawn from any
such Parent Employee Plan in a manner that could subject it to
liability under Sections 4062, 4063 or 4064 of
ERISA;
(iii) Failed
to comply with Section 601 et. seq. of ERISA and Section 4980B of the Code;
or
(iv) incurred
any withdrawal liability (including any contingent or secondary
withdrawal liability) within the meaning of Sections 4201 or 4204
of ERISA to any Multiemployer Plan and nothing has occurred that
presents a risk of the occurrence of any withdrawal from or the
partition, termination, reorganization, or insolvency of any such
Multiemployer Plan which could result in any liability of Parent or
any Parent ERISA Affiliate to any such Multiemployer Plan. No
complete or partial termination of any Parent Employee Plan has
occurred or is expected to occur.
(c) Certain
Parent Employee Plans. With
respect to each Parent Employee Plan:
(i)
no such plan is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA or a "multiple
employer plan" within the meaning of Section 413(c) of the Code and
neither Parent nor any of its Parent ERISA Affiliates has now or at
any time contributed to, sponsored, maintained, or had any
liability or obligation in respect of any such Multiemployer Plan
or multiple employer plan;
(ii) no
Legal Action has been initiated by the PBGC to terminate any such
Parent Employee Plan or to appoint a trustee for any such Parent
Employee Plan;
(iii) no
Parent Employee Plan is subject to the minimum funding standards of
Section 302 of ERISA or Sections 412, 418(b), or 430 of the Code,
and none of the assets of Parent or any Parent ERISA Affiliate is,
or may reasonably be expected to become, the subject of any lien
arising under Section 303 of ERISA or Sections 430 or 436 of the
Code; and
(iv) no
"reportable event," as defined in Section 4043 of ERISA, has
occurred, or is reasonably expected to occur, with respect to any
such Parent Employee Plan.
(d) Potential
Governmental or Lawsuit Liability. Other than routine claims for benefits: (i)
there are no pending or, to the Knowledge of Parent, threatened
claims by or on behalf of any participant in any Parent Employee
Plan, or otherwise involving any Parent Employee Plan or the assets
of any Parent Employee Plan; and (ii) no Parent Employee Plan is
presently or has since January 1, 2020, been the subject of an
examination or audit by a Governmental Entity or is the subject of
an application or filing under, or is a participant in, an amnesty,
voluntary compliance, self-correction, or similar program sponsored
by any Governmental Entity.
(e) Section
409A Compliance. Each Parent
Employee Plan that is subject to Section 409A of the Code has been
operated in compliance with such section and all applicable
regulatory guidance (including, without limitation, proposed
regulations, notices, rulings, and final
regulations).
(f) Health
Plan Compliance. Each of Parent
and its Subsidiaries complies in all material respects with the
applicable requirements of COBRA or any similar state statute with
respect to each Parent Employee Plan that is a group health plan
within the meaning of Section 5000(b)(1) of the Code or such state
statute.
Section
4.09 Employment
Law Matters; Labor.
(a) Employee
Law Matters. Parent and each of
its Subsidiaries: (i) is in material compliance with all applicable
Laws and agreements regarding hiring, employment, termination of
employment, plant closing and mass layoff, employment
discrimination, harassment, retaliation, and reasonable
accommodation, leaves of absence, terms and conditions of
employment, wages and hours of work, employee classification,
employee health and safety, leasing and supply of temporary and
contingent staff, engagement of independent contractors, including
proper classification of same, payroll taxes, and immigration with
respect to Parent Employees, and contingent workers; and (ii) is in
material compliance with all applicable Laws relating to the
relations between it and any labor organization, trade union, work
council, or other body representing Parent
Employees.
(b) Labor.
Neither Parent nor any of its Subsidiaries is party to, or subject
to, any collective bargaining agreement or other agreement with any
labor organization, work council, or trade union with respect to
any of its or their operations. No material work stoppage,
slowdown, or labor strike against Parent or any of its Subsidiaries
with respect to employees who are employed within the United States
is pending, threatened, or has occurred since January 1, 2020, and
no material work stoppage, slowdown, or labor strike against Parent
or any of its Subsidiaries with respect to employees who are
employed outside the United States is pending, threatened, or has
occurred since January 1, 2020. None of the Parent Employees is
represented by a labor organization, work council, or trade union,
and there is no organizing activity, Legal Action, election
petition, union card signing or other union activity, or union
corporate campaigns of or by any labor organization, trade union,
or work council directed at Parent or any of its Subsidiaries, or
any Parent Employees. There are no Legal Actions, government
investigations, or labor grievances pending, or threatened relating
to any employment related matter involving any Parent Employee or
applicant, including, but not limited to, charges of unlawful
discrimination, retaliation or harassment, failure to provide
reasonable accommodation, denial of a leave of absence, failure to
provide compensation or benefits, unfair labor practices, or other
alleged violations of Law, except for any of the foregoing which
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
Section
4.10 Environmental
Matters. Except for such
matters as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect:
(a) Parent
and its Subsidiaries are, and have been, in compliance with all
Environmental Laws, which compliance includes the possession,
maintenance of, compliance with, or application for, all Permits
required under applicable Environmental Laws for the operation of
the business of Parent and its Subsidiaries as currently
conducted.
(b) Neither
Parent nor any of its Subsidiaries has disposed of, released, or
discharged any Hazardous Substances on, at, under, in, or from any
real property currently or, to the Knowledge of Parent, formerly
owned, leased, or operated by it or any of its Subsidiaries or at
any other location that is: (i) currently subject to any
investigation, remediation, or monitoring; or (ii) reasonably
likely to result in liability to Parent or any of its Subsidiaries,
in either case of (i) or (ii) under any applicable Environmental
Laws.
(c) Neither
Parent nor any of its Subsidiaries has: (i) produced, processed,
manufactured, generated, transported, treated, handled, used, or
stored any Hazardous Substances, except in compliance with
Environmental Laws, at any Real Estate; or (ii) exposed any
employee or any third party to any Hazardous Substances under
circumstances reasonably expected to give rise to any material
Liability or obligation under any Environmental
Law.
(d) Neither
Parent nor any of its Subsidiaries has received written notice of
and there is no Legal Action pending, or to the Knowledge of
Parent, threatened against Parent or any of its Subsidiaries,
alleging any Liability or responsibility under or non-compliance
with any Environmental Law or seeking to impose any financial
responsibility for any investigation, cleanup, removal,
containment, or any other remediation or compliance under any
Environmental Law. Neither Parent nor any of its Subsidiaries is
subject to any Order, settlement agreement, or other written
agreement by or with any Governmental Entity or third party
imposing any material Liability or obligation with respect to any
of the foregoing.
(e)
Neither Parent nor any of its
Subsidiaries has expressly assumed or retained any Liabilities
under any applicable Environmental Laws of any other Person,
including in any acquisition or divestiture of any property or
business.
Section
4.11 Parent
Material Contracts. All Parent
Material Contracts are legal, valid, and binding on Parent or its
applicable Subsidiary, enforceable against it in accordance with
its terms, and is in full force and effect; (ii) neither Parent nor
any of its Subsidiaries nor, to the Knowledge of Parent, any third
party has violated any provision of, or failed to perform any
obligation required under the provisions of, any Parent Material
Contract; and (iii) neither Parent nor any of its Subsidiaries nor,
to the Knowledge of Parent, any third party is in breach, or has
received written notice of breach, of any Parent Material
Contract.
Section
4.12 Insurance.
All insurance policies of Parent and
its Subsidiaries are in full force and effect and provide insurance
in such amounts and against such risks as Parent reasonably has
determined to be prudent, taking into account the industries in
which Parent and its Subsidiaries operate, and as is sufficient to
comply with applicable Law. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect, neither Parent nor any of its Subsidiaries is in breach or
default, and neither Parent nor any of its Subsidiaries has taken
any action or failed to take any action which, with notice or the
lapse of time, would constitute such a breach or default, or permit
termination or modification of, any of such insurance policies.
Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect and to the Knowledge
of Parent: (i) no insurer of any such policy has been declared
insolvent or placed in receivership, conservatorship, or
liquidation; and (ii) no notice of cancellation or termination,
other than pursuant to the expiration of a term in accordance with
the terms thereof, has been received with respect to any such
policy.
Section
4.13 Brokers.
Neither Parent, Merger Sub, nor any of their respective Affiliates
has incurred, nor will it incur, directly or indirectly, any
liability for investment banker, brokerage, or finders' fees or
agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby for which the
Company would be liable in connection the
Merger.
Section
4.14 Information
Supplied. None of the
information supplied or to be supplied by or on behalf of Parent or
Merger Sub for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to Parent's
stockholders or at the time of Parent Stockholders Meeting or at
the time of any amendment or supplement thereof, contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act. Notwithstanding the
foregoing, no representation or warranty is made by Parent or
Merger Sub with respect to statements made or incorporated by
reference therein based on information based on information that
were not supplied by or on behalf of Parent or Merger
Sub.
Section
4.15 Ownership
of Company Stock. Neither
Parent nor any of its Affiliates or Associates "owns" (as defined
in Section 203(c)(9) of the DGCL) any shares of Company
Stock.
Section
4.16 Intended
Tax Treatment. Neither Parent
nor any of its Subsidiaries has taken or agreed to take any action,
and to the Knowledge of Parent there exists no fact or
circumstance, that is reasonably likely to prevent or impede the
Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
ARTICLE V
COVENANTS
Section
5.01 Conduct of Business of the
Company. Except as contemplated
by this Agreement, any Transaction Document, in order to effect the
transactions contemplated hereby or thereby, as required by
applicable Law or any COVID-19 Reasonable Action or COVIID-19
Measure or with the prior written consent of Parent (which consent
shall not be unreasonably withheld, condition or delayed and which
will be deemed granted if Parent does not respond to a request for
consent within five (5) Business Days), the Company shall, and
shall cause each of its Subsidiaries to, during the period from the
date of this Agreement until the Effective Time, conduct its
business in the Ordinary Course of Business, and, to the extent
consistent therewith, the Company shall, and shall cause each of
its Subsidiaries to, use its reasonable best efforts to preserve
substantially intact its and its Subsidiaries' business
organization, to keep available the services of its and its
Subsidiaries' current officers and employees, to preserve its and
its Subsidiaries' present relationships with customers, suppliers,
distributors, licensors, licensees, and other Persons having
business relationships with it. Without limiting the generality of
the foregoing, between the date of this Agreement and the Effective
Time, except as otherwise expressly contemplated by this Agreement,
as set forth in Section 5.01
of the Company Disclosure Letter, as
required by applicable Law, the Company shall not, nor shall it
permit any of its Subsidiaries to, without the prior written
consent of Parent (which consent shall not be unreasonably
withheld, conditioned, or delayed):
(a) amend
or propose to amend its Charter Documents (other than in connection
with the transactions contemplated by this
Agreement);
(b) (i)
split, combine, or reclassify any Company Securities or Company
Subsidiary Securities, (ii) repurchase, redeem, or otherwise
acquire, or offer to repurchase, redeem, or otherwise acquire, any
Company Securities or Company Subsidiary Securities, or (iii)
declare, set aside, or pay any dividend or distribution (whether in
cash, stock, property, or otherwise) in respect of, or enter into
any Contract with respect to the voting of, any shares of its
capital stock (other than dividends from its direct or indirect
wholly-owned Subsidiaries);
(c) issue,
sell, pledge, dispose of, or encumber any Company Securities or
Company Subsidiary Securities, other than the issuance of shares of
Company Common Stock upon the exercise of any Company Equity Award
outstanding as of the date of this Agreement in accordance with its
terms;
(d) except
as required by applicable Law or by any Company Employee Plan or
Contract in effect as of the date of this Agreement (i) increase
the compensation payable or that could become payable by the
Company or any of its Subsidiaries to directors, officers, or
employees, other than increases in compensation made to non-officer
employees in the Ordinary Course of Business, or (ii) adopt, enter
into, amend, terminate, or take any action to accelerate rights
under any Company Employee Plans or any plan, agreement, program,
policy, trust, fund, or other arrangement that would be a Company
Employee Plan if it were in existence as of the date of this
Agreement, or make any contribution to any Company Employee Plan,
other than contributions required by Law, the terms of such Company
Employee Plans as in effect on the date hereof, or that are made in
the Ordinary Course of Business;
(e) acquire,
by merger, consolidation, acquisition of stock or assets, or
otherwise, any business or Person or division thereof or make any
loans, advances, or capital contributions to or investments in any
Person in excess of $25,000 in the aggregate;
(f) (i)
transfer, license, sell, lease, or otherwise dispose of (whether by
way of merger, consolidation, sale of stock or assets, or
otherwise) or pledge, encumber, or otherwise subject to any Lien
(other than a Permitted Lien), any assets, including the capital
stock or other equity interests in any Subsidiary of the
Company; provided, that
the foregoing shall not prohibit the
Company and its Subsidiaries from transferring, selling, leasing,
or disposing of obsolete equipment or assets being replaced, or
granting of non-exclusive licenses under the Company IP, in each
case in the Ordinary Course of Business, or (ii) adopt or effect a
plan of complete or partial liquidation, dissolution,
restructuring, recapitalization, or other
reorganization;
(g) except
for the Bridge Financing and the Bridge Loan Note, repurchase,
prepay, or incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or options, warrants, calls, or other rights to acquire
any debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities of another Person, enter into any
"keep well" or other Contract to maintain any financial statement
condition of any other Person (other than any wholly-owned
Subsidiary of it) or enter into any arrangement having the economic
effect of any of the foregoing, other than in connection with the
financing of ordinary course trade payables consistent with past
practice;
(h) enter
into or amend or modify in any material respect, or consent to the
termination of (other than at its stated expiry date), any Company
Material Contract or any Lease with respect to material Real Estate
or any other Contract or Lease that, if in effect as of the date
hereof would constitute a Company Material Contract or Lease with
respect to material Real Estate hereunder, except in each case in
the Ordinary Course of Business;
(i) institute,
settle, or compromise any Legal Action involving the payment of
monetary damages by the Company or any of its Subsidiaries of any
amount exceeding $25,000 in the aggregate, other than (i) any Legal
Action brought against Parent or Merger Sub arising out of a breach
or alleged breach of this Agreement by Parent or Merger Sub, and
(ii) the settlement of claims, liabilities, or obligations reserved
against on the Company Balance Sheet; provided, that
neither the Company nor any of its
Subsidiaries shall settle or agree to settle any Legal Action which
settlement involves a conduct remedy or injunctive or similar
relief or has a restrictive impact on the Company's business
without prior written consent of Parent (which consent will not
unreasonably be withheld or delayed);
(j) make
any material change in any method of financial accounting
principles or practices, in each case except for any such change
required by a change in GAAP or applicable Law;
(k) except
as required by Applicable Law, (i) settle or compromise any
material Tax claim, audit, or assessment for an amount materially
in excess of the amount reserved or accrued on the Company Balance
Sheet (or most recent consolidated balance sheet included in the
Company's Balance Sheet), (ii) make or change (outside of the
Ordinary Course of Business any material Tax election, change any
annual Tax accounting period, or adopt or change any method of Tax
accounting, (iii) amend any material Tax Returns or file claims for
material Tax refunds (other than in connection with obtaining any
refund of Taxes), or (iv) enter into any material closing
agreement, surrender in writing any right to claim a material Tax
refund, offset or other reduction in Tax liability or consent to
any extension or waiver of the limitation period applicable to any
material Tax claim or assessment relating to the Company or its
Subsidiaries;
(l) enter
into any material agreement, agreement in principle, letter of
intent, memorandum of understanding, or similar Contract with
respect to any joint venture, strategic partnership, or
alliance;
(m) take
any action to exempt any Person from, or make any acquisition of
securities of the Company by any Person not subject to, any state
takeover statute or similar statute or regulation that applies to
Company with respect to a Takeover Proposal or otherwise, including
the restrictions on "business combinations" set forth in Section
203 of the DGCL, except for Parent, Merger Sub, or any of their
respective Subsidiaries or Affiliates, or the transactions
contemplated by this Agreement;
(n) abandon,
allow to lapse, sell, assign, transfer, grant any security interest
in otherwise encumber or dispose of any Company IP, or grant any
right or license to any Company IP other than pursuant to
non-exclusive licenses entered into in the Ordinary Course of
Business;
(o) terminate
or modify in any material respect, or fail to exercise renewal
rights with respect to, any material insurance
policy;
(p) except
to the extent expressly permitted by
Section 5.04 or
ARTICLE
VII, take any action that is
intended or that would reasonably be expected to, individually or
in the aggregate, prevent, materially delay, or materially impede
the consummation of the Merger, or the other transactions
contemplated by this Agreement; or
(q) agree
or commit to do any of the foregoing.
Section
5.02 Conduct of the Business of
Parent. Except as contemplated
by this Agreement, any Transaction Document, in order to effect the
transactions contemplated hereby or thereby, as required by
applicable Law or any COVID-19 Reasonable Action or COVIID-19
Measure or with the prior written consent of the Company (which
consent shall not be unreasonably withheld, condition or delayed
and which will be deemed granted if the Company does not respond to
a request for consent within five (5) Business Days), Parent shall,
and shall cause each of its Subsidiaries to, during the period from
the date of this Agreement until the Effective Time, conduct its
business in the Ordinary Course of Business. Without limiting the
generality of the foregoing, between the date of this Agreement and
the Effective Time, except as otherwise expressly contemplated by
this Agreement or as set forth in Section 5.02
of the Parent Disclosure Letter or as
required by applicable Law, Parent shall not, nor shall it permit
any of its Subsidiaries to, without the prior written consent of
the Company (which consent shall not be unreasonably withheld,
conditioned, or delayed):
(a) amend
its Charter Documents in a manner that would adversely affect the
Company or the holders of Company Common Stock relative to the
other holders of Parent Common Stock;
(b) (i)
split, combine, or reclassify any Parent Securities in a manner
that would adversely affect the Company or the holders of Company
Common Stock relative to the other holders of Parent Common Stock,
(ii) repurchase, redeem, or otherwise acquire, or offer to
repurchase, redeem, or otherwise acquire, any Parent Securities, or
(iii) declare, set aside, or pay any dividend or distribution
(whether in cash, stock, property, or otherwise) in respect of, or
enter into any Contract with respect to the voting of, any shares
of its capital stock (other than dividends from its direct or
indirect wholly-owned Subsidiaries);
(c) acquire,
by merger, consolidation, acquisition of stock or assets, or
otherwise, any business or Person or division thereof or make any
loans, advances, or capital contributions to or investments in any
Person, in each case that would reasonably be expected to prevent,
impede, or materially delay the consummation of the Merger or other
transactions contemplated by this Agreement;
(d) adopt
or effect a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization, or other
reorganization;
(e) except
to the extent expressly permitted by
Section 5.04 or
ARTICLE
VII, take any action that is intended or that would
reasonably be expected to, individually or in the aggregate,
prevent, impede, or materially delay the consummation of the
Merger, or the other transactions contemplated by this Agreement;
or
(f) agree
or commit to do any of the foregoing.
Section
5.03 Access
to Information; Confidentiality.
(a) From
the date of this Agreement until the earlier to occur of the
Effective Time or the termination of this Agreement in accordance
with the terms set forth in ARTICLE
VII, the Company shall, and
shall cause its Subsidiaries to, afford to Parent and Parent's
Representatives reasonable access, at reasonable times and in a
manner as shall not unreasonably interfere with the business or
operations of the Company or any Subsidiary thereof, to the
officers, employees, accountants, agents, properties, offices, and
other facilities and to all books, records, contracts, and other
assets of the Company and its Subsidiaries, and the Company shall,
and shall cause its Subsidiaries to, furnish promptly to Parent
such other information concerning the business and properties of
the Company and its Subsidiaries as Parent may reasonably request
from time to time. Neither the Company nor any of its Subsidiaries
shall be required to provide access to or disclose information
where such access or disclosure would jeopardize the protection of
attorney-client privilege or contravene any Law (it being agreed
that the parties shall use their reasonable best efforts to cause
such information to be provided in a manner that would not result
in such jeopardy or contravention). No investigation shall affect
the Company's representations, warranties, covenants, or agreements
contained herein, or limit or otherwise affect the remedies
available to Parent or Merger Sub pursuant to this
Agreement.
(b) Parent
and the Company shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement, dated September 9, 2020,
between Parent and the Company (the "Confidentiality
Agreement"), which shall
survive the termination of this Agreement in accordance with the
terms set forth therein. This Agreement and the terms contained
herein are "confidential information" subject to the terms of the
Confidentiality Agreement.
Section
5.04 No
Solicitation.
(a) Neither
the Company, on the one hand, nor Parent, on the other hand, shall,
and each shall cause their respective Subsidiaries not to, and
shall not authorize or permit its or its respective Subsidiaries'
directors, officers, employees, advisors, and investment bankers
(with respect to any Person, the foregoing Persons are referred to
herein as such Person's "Representatives")
to, directly or indirectly, solicit, initiate, or knowingly take
any action to facilitate or encourage the submission of any
Takeover Proposal or the making of any proposal that could
reasonably be expected to lead to any Takeover Proposal, or: (i)
conduct or engage in any discussions or negotiations with, disclose
any non-public information relating to the Company or Parent or any
of their respective Subsidiaries to, afford access to the business,
properties, assets, books, or records of the Company or Parent or
any of their respective Subsidiaries to, or knowingly assist,
participate in, facilitate, or encourage any effort by, any third
party that is seeking to make, or has made, any Takeover Proposal;
(ii) (A) except where the Company Board or the Parent Board, as
applicable, makes a good faith determination, after consultation
with outside legal counsel, that the failure to do so would be
inconsistent with its fiduciary duties, amend or grant any waiver
or release under any standstill or similar agreement with respect
to any class of equity securities of the Company or Parent, as
applicable, or any of their respective Subsidiaries, or (B) approve
any transaction under, or any third party becoming an "interested
stockholder" under, Section 203 of the DGCL; or (iii) enter into
any agreement in principle, letter of intent, term sheet,
acquisition agreement, merger agreement, option agreement, joint
venture agreement, partnership agreement, or other Contract
relating to any Takeover Proposal (each, an "Acquisition
Agreement"). Neither the
Company Board shall effect a Company Adverse Recommendation Change,
nor shall the Parent Board effect a Parent Adverse Recommendation
Change. The Company on the one hand, and Parent, on the other hand,
shall, and shall cause their respective Subsidiaries to cease
immediately and cause to be terminated, and shall not authorize or
knowingly permit any of its or their Representatives to continue,
any and all existing activities, discussions, or negotiations, if
any, with any third party conducted prior to the date hereof with
respect to any Takeover Proposal and shall use its reasonable best
efforts to cause any such third party (or its agents or advisors)
in possession of non-public information in respect of the Company
or Parent, as applicable, and any of their respective Subsidiaries
that was furnished by or on behalf such party or its respective
Subsidiaries to return or destroy (and confirm destruction of) all
such information.
(b) In
addition, the Company, on the one hand, and Parent, on the other
hand, shall not and shall cause their respective subsidiaries not
to: (i) participate in negotiations or discussions with any third
party that has made a Takeover Proposal or (ii) furnish to any
third party non-public information relating to such party or any of
its respective Subsidiaries. Nothing contained herein shall prevent
the Parent Board from disclosing to its stockholders a position
contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the
Exchange Act with regard to a Takeover Proposal, if the Parent
Board determines, after consultation with outside legal counsel,
that failure to disclose such position would constitute a violation
of applicable Law.
(c) The
Company, on the one hand, and Parent, on the other hand, shall
notify the other party promptly (but in no event later than 24
hours) after it obtains Knowledge of the receipt by the such party
(or any of its Representatives) of any Takeover Proposal, any
inquiry that could reasonably be expected to lead to a Takeover
Proposal, any request for non-public information relating to such
party or any of its Subsidiaries or for access to the business,
properties, assets, books, or records of such party or any of its
Subsidiaries by any third party. In such notice, such party shall
identify the third party making, and details of the material terms
and conditions of, any such Takeover Proposal, indication or
request. Such party shall keep the other party fully informed, on a
current basis, of the status and material terms of any such
Takeover Proposal, indication or request, including any material
amendments or proposed amendments as to price and other material
terms thereof.
(d) Except
as expressly permitted by this Section
5.04, neither the Company Board
shall effect a Company Adverse Recommendation Change, nor shall the
Parent Board effect a Parent Adverse Recommendation Change; or, in
either case, enter into (or permit any of its respective
Subsidiaries to enter into) an Acquisition
Agreement.
Section
5.05 Parent
Board Composition. As soon as
reasonably practicable after the Closing, Parent Board shall cause
Parent to increase the number of directors serving on the Parent
Board from six (6), to eight (8). After such increase in the number
of directors serving on the Parent Board is effected, the current
directors serving on the Parent Board will cause the two (2) vacant
seats on the Parent Board to be filled by appointment as follows,
(i) one (1) member whom shall be Mike Wann; and (ii) the remaining
one (1) member to be mutually agreed upon by Mike Wann and the
other members of Parent's Board of Directors, for which such
director must meet the requirements of an "independent director"
pursuant to the rules and regulations of
Nasdaq;
Section
5.06 Proxy
Statement.
(a) Preparation.
In connection with the Parent Stockholders Meeting, as soon as
reasonably practicable following the date of this Agreement, Parent
shall prepare and file with the SEC the Proxy Statement. Parent
shall notify the Company within a commercially reasonable time
after the issuance of any stop order or suspension of the
qualification of the shares of Parent Common Stock issuable in
connection with the Merger for offering or sale in any
jurisdiction. Parent shall use its reasonable best efforts to: (A)
cause the Proxy Statement to be mailed to Parent's stockholders as
soon as commercially reasonable following Parent's preparation of
the Proxy Statement, and (B) ensure that the Proxy Statement
complies in all material respects with the applicable provisions of
the Securities Act and Exchange Act. Parent shall also take any
other action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be
taken under the Securities Act, the Exchange Act, any applicable
foreign or state securities or "blue sky" Laws, and the rules and
regulations thereunder in connection with the issuance of Parent
Stock in the Merger, and the Company shall furnish to Parent all
information concerning the Company as may be reasonably requested
in connection with any such actions.
(b) Disclosure.
Parent and the Company shall furnish to the other party all
information concerning such Person and its Affiliates required by
the Securities Act or the Exchange Act to be set forth in the Proxy
Statement. Each of Parent and the Company shall promptly correct
any information provided by it for use in the Proxy Statement if
and to the extent that such information shall have become false or
misleading in any material respect. Each of Parent and the Company
shall take all steps necessary to amend or supplement the Proxy
Statement, as applicable, and to cause the Proxy Statement, as so
amended or supplemented, to be filed with the SEC and disseminated
to the holders of Company Stock and/or Parent Common Stock, in each
case as and to the extent required by applicable
Law.
Section
5.07 Company
Stockholder Meeting; Notification of Appraisal
Rights
(a) Company
Stockholder Meeting. The Company shall take all action necessary to
duly call, give notice of, convene, and hold the Company
Stockholders Meeting as soon as reasonably practicable after the
date of this Agreement. Subject to Section 5.04
hereof, the Company shall use
reasonable best efforts to (a) solicit from the holders of Company
Stock proxies in favor of the adoption of this Agreement and
approval of the Merger; and (b) take all other actions necessary or
advisable to secure the vote or consent of the holders of Company
Stock required by applicable Law to obtain such approval. The
Company shall use its reasonable best efforts to cooperate with
Parent to hold the Company Stockholders Meeting on the same day and
at the same time as the Parent Stockholders Meeting as soon as
reasonably practicable after the date of this Agreement, and to set
the same record date for each such meeting. If the Company Board
makes a Company Adverse Recommendation Change, it will not alter
the obligation of the Company to submit the adoption of this
Agreement and the approval of the Merger to the holders of Company
Stock at the Company Stockholders Meeting to consider and vote
upon, unless this Agreement shall have been terminated in
accordance with its terms prior to the Company Stockholders
Meeting.
(b) Notification
of Appraisal Rights. Notice of
the Company Stockholder Meeting shall notify the holders of Company
Stock of their dissent and appraisal rights pursuant to Section 262
of the DGCL. The Stockholder Notice shall include therewith a copy
of Section 262 of Delaware Law and all such other information as
Parent shall reasonably request, and shall be sufficient in form
and substance to start the twenty (20) day period during which a
Stockholder must demand appraisal of such Stockholder's Common
Stock as contemplated by Section 262(d)(2) of the DGCL. All
materials submitted to holders of Company Stock in accordance with
this Section 5.07(b)
shall be subject to Parent's advance
review and reasonable approval.
Section
5.08 Parent
Stockholders Meeting; Approval by Sole Stockholder of Merger
Sub.
(a) Parent
shall take all action necessary to duly call, give notice of,
convene, and hold the Parent Stockholders Meeting as soon as
reasonably practicable after the date of this Agreement, and, in
connection therewith, Parent shall mail the Proxy Statement to the
holders of Parent Common Stock in advance of the Parent
Stockholders Meeting. The Proxy Statement shall include the Parent
Board Recommendation. Subject to Section 5.04
hereof, Parent shall use reasonable
best efforts to: (i) solicit from the holders of Parent Common
Stock proxies in favor of the approval of the Parent Stock
Issuance; and (ii) take all other actions necessary or advisable to
secure the vote or consent of the holders of Parent Common Stock
required by applicable Law to obtain such approval. Parent shall
use its reasonable best efforts to cooperate with Company to hold
the Parent Stockholders Meeting on the same day and at the same
time as the Company Stockholders Meeting as soon as reasonably
practicable after the date of this Agreement, and to set the same
record date for each such meeting.
(b) Immediately
following the execution and delivery of this Agreement, Parent, as
sole stockholder of Merger Sub, shall adopt this Agreement and
approve the Merger, in accordance with the
DGCL.
Section
5.09 Notices of
Certain Events; Stockholder Litigation; No Effect on Disclosure
Letter.
(a) The
Company shall notify Parent and the Merger Sub, and Parent and the
Merger Sub shall notify the Company, promptly of: (i) any notice or
other communication from any Person alleging that the consent of
such Person is or may be required in connection with the
transactions contemplated by this Agreement; (ii) any notice or
other communication from any Governmental Entity in connection with
the transactions contemplated by this Agreement; and (iii) any
event, change, or effect between the date of this Agreement and the
Effective Time which causes or is reasonably likely to cause the
failure of the conditions set forth in Section
6.02(a), Section
6.02(b), or Section
6.02(c)
of this Agreement (in the case of the
Company and its Subsidiaries) or Section
6.03(a), Section
6.03(b), or Section
6.03(c)
of this Agreement (in the case of
Parent and Merger Subs), to be satisfied.
(b) The
Company shall promptly advise Parent in writing after becoming
aware of any Legal Action commenced, or to the Company's Knowledge
threatened, after the date hereof against the Company or any of its
directors by any stockholder of the Company (on their own behalf or
on behalf of the Company) relating to this Agreement or the
transactions contemplated hereby (including the Mergers) and shall
keep Parent reasonably informed regarding any such Legal
Proceeding. The Company shall give Parent the opportunity to
consult with the Company regarding the defense or settlement of any
such stockholder litigation and shall consider Parent's views with
respect to such stockholder litigation and shall not settle any
such stockholder litigation without the prior written consent of
Parent (which consent shall not be unreasonably withheld, delayed,
or conditioned).
(c) Parent
shall promptly advise the Company in writing after becoming aware
of any Legal Action commenced, or to Parent’s Knowledge
threatened, after the date hereof against Parent or any of its
directors by any stockholder of Parent (on their own behalf or on
behalf of Parent) relating to this Agreement or the transactions
contemplated hereby (including the Mergers) and shall keep the
Company reasonably informed regarding any such Legal
Proceeding.
(d) In
no event shall: (i) the delivery of any notice by a party pursuant
to this Section 5.09
limit or otherwise affect the
respective rights, obligations, representations, warranties,
covenants, or agreements of the parties or the conditions to the
obligations of the parties under this Agreement; (ii) disclosure by
the Company be deemed to amend or supplement the Company Disclosure
Letter or constitute an exception to the Company's representations
or warranties; or (iii) disclosure by Parent be deemed to amend or
supplement the Parent Disclosure Letter or constitute an exception
to Parent's or Merger Subs' representations or warranties.
This Section 5.09
shall not constitute a covenant or
agreement for purposes of Section
6.02(b)
or Section
6.03(b).
Section
5.10 Employees; Benefit
Plans.
(a) Parent
shall prepare and deliver to the Company no later than ten (10)
Business Days prior to the Closing, the Offer Letters for each
employee anticipated to be employed by the Company as of
immediately prior the Closing Date (the “Company Continuing
Employees”). The Company
shall use reasonable best efforts to distribute the Offer Letters
to each Company Continuing Employee and to collect duly executed
copies of the Offer Letters from each Company Continuing Employee
as soon as reasonably practicable after delivery
thereof.
(b) If
the conditions set forth in Section
2.07(a)(ii) are satisfied as of
the date immediately prior to the Closing Date, then promptly
following the Closing, Parent shall grant equity awards under the
Parent Stock Plan (the “Purchaser
Awards”) to each
Company Continuing Employee who is an Unvested Equityholder. The
determination of the value of any such Purchaser Awards shall be
negotiated in good faith by the principals of the Company and
Parent and finalized at least five (5) days prior to the Closing
Date. For purposes of this Agreement, a determination of "value" of
a Purchaser Award shall include all aspects of the Purchaser Award,
including but not limited to, the exercise price per share of
Parent Common Stock pursuant to the Purchaser Awards, the vesting
period of the Purchaser Awards, and the inherent value of the
liquidity of the Parent Common Stock.
(c) With
respect to any "employee benefit plan" as defined in Section 3(3)
of ERISA maintained by Parent or any of its Subsidiaries, excluding
any retiree healthcare plans or programs maintained by Parent or
any of its Subsidiaries, any defined benefit retirement plans or
programs maintained by Parent or any of its Subsidiaries, and any
equity compensation arrangements maintained by Parent or any of its
Subsidiaries (collectively, "Parent Benefit
Plans") in which any Company
Continuing Employees will participate effective as of the Effective
Time, Parent shall, or shall cause the Surviving Corporation to,
credit all service of the Company Continuing Employees with the
Company or any of its Subsidiaries, as the case may be as if such
service were with Parent, for purposes of eligibility to
participate (but not for purposes of vesting or benefit accrual,
except for vacation, if applicable) for full or partial years of
service in any Parent Benefit Plan in which such Company Continuing
Employees may be eligible to participate after the Effective
Time; provided, that
such service shall not be credited to
the extent that: (i) such crediting would result in a duplication
of benefits; (ii) such service was not credited under the
corresponding Company Employee Plan; or (iii) for the purpose of
equity compensation arrangements, as otherwise negotiated in good
faith by the principals of the Company and Parent as set forth
in Section
5.10(b).
(d) Effective
no later than the day immediately preceding the Closing Date, the
Company shall terminate all Company Employee Plans maintained by
the Company or its Subsidiaries; provided, that
such Company Employee Plans can be
terminated in accordance with their terms and applicable Law
without any adverse consequences with respect to any Company ERISA
Affiliate. No later than the day immediately preceding the Closing
Date, the Company shall provide Parent with evidence that such
Company Employee Plans have been terminated.
(e) This
Section
5.10 shall be binding upon and
inure solely to the benefit of each of the parties to this
Agreement, and nothing in this Section
5.10, express or implied, shall
confer upon any Company Employee, any beneficiary, or any other
Person any rights or remedies of any nature whatsoever under or by
reason of this Section
5.10. Nothing contained herein,
express or implied: (i) shall be construed to establish, amend, or
modify any benefit plan, program, agreement, or arrangement; (ii)
shall alter or limit the ability of the Surviving Corporation,
Parent or any of their respective Affiliates to amend, modify, or
terminate any benefit plan, program, agreement, or arrangement at
any time assumed, established, sponsored, or maintained by any of
them; or (iii) shall prevent the Surviving Corporation, Parent, or
any of their respective Affiliates from terminating the employment
of any Company Continuing Employee following the Effective Time.
The parties hereto acknowledge and agree that the terms set forth
in this Section 5.10
shall not create any right in any
Company Employee or any other Person to any continued employment
with the Surviving Corporation, Parent, or any of their respective
Subsidiaries or compensation or benefits of any nature or kind
whatsoever, or otherwise alters any existing at-will employment
relationship between any Company Employee and the Surviving
Corporation.
(f) With
respect to matters described in this Section
5.10, the Company will not send
any written notices or other written communication materials to
Company Employees without the prior written consent of
Parent.
(g) To
the extent necessary to effect the treatment of Company Stock
Options under the Company Stock Plan pursuant to
Section 2.07, the Company will use its reasonable best-efforts
to deliver to Parent the consents of all holders of Unvested
Options required for the substitution and conversion of such
Company Stock Options into Parent Stock Options, such consents to
be in form and substance as reasonably acceptable to both
parties.
Section
5.11 Directors' and Officers'
Indemnification and Insurance.
(a) Parent
and Merger Sub agree that all rights to indemnification,
advancement of expenses, and exculpation by the Company now
existing in favor of each Person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective
Time an officer or director of the Company or any of its
Subsidiaries (each an "Indemnified
Party") as provided in the
Charter Documents of the Company, in each case as in effect on the
date of this Agreement, or pursuant to any other Contracts in
effect on the date hereof and disclosed in Section 5.11 of the
Company Disclosure Letter, shall be assumed by the Surviving
Corporation in the Merger, without further action, at the Effective
Time and shall survive the Merger and shall remain in full force
and effect in accordance with their terms, and, in the event that
any proceeding is pending or asserted or any claim made during such
period, until the final disposition of such proceeding or
claim.
(b) For
six years after the Effective Time, to the fullest extent permitted
under applicable Law, Parent and the Surviving Corporation (the
"Indemnifying
Parties") shall indemnify,
defend, and hold harmless each Indemnified Party against all
losses, claims, damages, liabilities, fees, expenses, judgments,
and fines arising in whole or in part out of actions or omissions
in their capacity as such occurring at or prior to the Effective
Time (including in connection with the transactions contemplated by
this Agreement), and shall reimburse each Indemnified Party for any
legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such
losses, claims, damages, liabilities, fees, expenses, judgments,
and fines as such expenses are incurred, subject to the Surviving
Corporation's receipt of an undertaking by such Indemnified Party
to repay such legal and other fees and expenses paid in advance if
it is ultimately determined in a final and non-appealable judgment
of a court of competent jurisdiction that such Indemnified Party is
not entitled to be indemnified under applicable Law;
provided,
however, that the Surviving
Corporation will not be liable for any settlement effected without
the Surviving Corporation's prior written consent (which consent
shall not be unreasonably withheld, conditioned, or
delayed).
(c) The
Surviving Corporation shall, and Parent shall cause the Surviving
Corporation to: (i) maintain in effect for a period of six years
after the Effective Time, if available, the current policies of
directors' and officers' liability insurance maintained by the
Company immediately prior to the Effective Time
(provided,
that the Surviving Corporation
may substitute therefor policies, of at least the same coverage and
amounts and containing terms and conditions that are not less
advantageous to the directors and officers of the Company and its
Subsidiaries when compared to the insurance maintained by the
Company as of the date hereof); or (ii) obtain as of the Effective
Time "tail" insurance policies with a claims period of six years
from the Effective Time with at least the same coverage and amounts
and containing terms and conditions that are not less advantageous
to the directors and officers of the Company and its Subsidiaries,
in each case with respect to claims arising out of or relating to
events which occurred before or at the Effective Time (including in
connection with the transactions contemplated by this
Agreement); provided, however,
that in no event will the Surviving
Corporation be required to expend an annual premium for such
coverage in excess of 150% percent of the last annual premium paid
by the Company or any of its Subsidiaries for such insurance prior
to the date of this Agreement, which amount is set forth in Section
5.11(c) of the Company Disclosure Letter (the "Maximum
Premium"). If such insurance
coverage cannot be obtained at an annual premium equal to or less
than the Maximum Premium, the Surviving Corporation will obtain,
and Parent will cause the Surviving Corporation to obtain, that
amount of directors' and officers' insurance (or "tail" coverage)
obtainable for an annual premium equal to the Maximum
Premium.
(d) The
obligations of Parent and the Surviving Corporation under
this Section 5.11
shall survive the consummation of the
Merger and shall not be terminated or modified in such a manner as
to adversely affect any Indemnified Party to whom this
Section
5.11 applies without the
consent of such affected Indemnified Party (it being expressly
agreed that the Indemnified Parties to whom this
Section
5.11 applies shall be third
party beneficiaries of this Section
5.11, each of whom may enforce
the provisions of this Section
5.11).
(e) In
the event Parent, the Surviving Corporation, or any of their
respective successors or assigns: (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving
corporation or entity in such consolidation or merger; or (ii)
transfers all or substantially all of its properties and assets to
any Person, then, and in either such case, proper provision shall
be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume all of the
obligations set forth in this Section
5.11. The agreements and
covenants contained herein shall not be deemed to be exclusive of
any other rights to which any Indemnified Party is entitled,
whether pursuant to Law, Contract, or otherwise. Nothing in this
Agreement is intended to, shall be construed to or shall release,
waive, or impair any rights to directors' and officers' insurance
claims under any policy that is or has been in existence with
respect to the Company or its officers, directors, and employees,
it being understood and agreed that the indemnification provided
for in this Section 5.11
is not prior to, or in substitution
for, any such claims under any such policies.
Section
5.12 Reasonable Best
Efforts.
(a) Upon
the terms and subject to the conditions set forth in this Agreement
(including those contained in this Section
5.12), each of the parties
hereto shall, and shall cause its Subsidiaries to, use its
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, and to satisfy all
conditions to, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including: (i) the
obtaining of all necessary Permits, waivers, and actions or
nonactions from Governmental Entities and the making of all
necessary registrations and filings (including filings with
Governmental Entities) and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entities; (ii) the
obtaining of all necessary consents or waivers from third parties;
and (iii) the execution and delivery of any additional instruments
necessary to consummate the Merger and to fully carry out the
purposes of this Agreement. Parent will take all action necessary
to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth
in this Agreement. The Company and Parent shall, subject to
applicable Law, promptly: (A) cooperate and coordinate with the
other in the taking of the actions contemplated by clauses (i),
(ii), and (iii) immediately above; and (B) supply the other with
any information that may be reasonably required in order to
effectuate the taking of such actions. Each party hereto shall
promptly inform the other party or parties hereto, as the case may
be, of any communication from any Governmental Entity regarding any
of the transactions contemplated by this Agreement. If the Company
or Parent receives a request for additional information or
documentary material from any Governmental Entity with respect to
the transactions contemplated by this Agreement, then it shall use
reasonable best efforts to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party,
an appropriate response in compliance with such request, and, if
permitted by applicable Law and by any applicable Governmental
Entity, provide the other party's counsel with advance notice and
the opportunity to attend and participate in any meeting with any
Governmental Entity in respect of any filing made thereto in
connection with the transactions contemplated by this Agreement.
Neither Parent nor the Company shall commit to or agree (or permit
any of their respective Subsidiaries to commit to or agree) with
any Governmental Entity to stay, toll, or extend any applicable
waiting period under any applicable Antitrust Laws, without the
prior written consent of the other (such consent not to be
unreasonably withheld, conditioned, or
delayed).
(b) Without
limiting the generality of the undertakings pursuant to
Section Section
5.12(a) hereof, the parties hereto shall: (i) provide or
cause to be provided as promptly as reasonably practicable to
Governmental Entities with jurisdiction over any Antitrust Laws
(each such Governmental Entity, a "Governmental Antitrust
Authority") information and
documents requested by any Governmental Antitrust Authority as
necessary, proper, or advisable to permit consummation of the
transactions contemplated by this Agreement, including preparing
and filing any notification, report form, and related material and
any additional consents and filings under any other Antitrust Laws
as promptly as practicable following the date of this Agreement,
and thereafter to respond as promptly as practicable to any request
for additional information or documentary material that may be made
any applicable Antitrust Laws; and (ii) subject to the terms set
forth in Section 5.12(c)
hereof, use their reasonable best
efforts to take such actions as are necessary or advisable to
obtain prompt approval of the consummation of the transactions
contemplated by this Agreement by any Governmental Entity or
expiration of applicable waiting periods.
(c) In
the event that any administrative or judicial action or proceeding
is instituted (or threatened to be instituted) by a Governmental
Entity or private party challenging the Merger or any other
transaction contemplated by this Agreement, or any other agreement
contemplated hereby, the Company shall cooperate in all respects
with Parent and Merger Sub and shall use its reasonable best
efforts to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any Order, whether
temporary, preliminary, or permanent, that is in effect and that
prohibits, prevents, or restricts consummation of the transactions
contemplated by this Agreement. Notwithstanding anything in this
Agreement to the contrary, none of Parent, Merger Sub, or any of
their Affiliates shall be required to defend, contest, or resist
any action or proceeding, whether judicial or administrative, or to
take any action to have vacated, lifted, reversed, or overturned
any Order, in connection with the transactions contemplated by this
Agreement.
(d) Notwithstanding
anything to the contrary set forth in this Agreement, none of
Parent, Merger Sub, or any of their respective Subsidiaries shall
be required to, and the Company may not, without the prior written
consent of Parent, become subject to, consent to, or offer or agree
to, or otherwise take any action with respect to, any requirement,
condition, limitation, understanding, agreement, or order to: (i)
sell, license, assign, transfer, divest, hold separate, or
otherwise dispose of any assets, business, or portion of business
of the Company, the Surviving Corporation, Parent, Merger Sub, or
any of their respective Subsidiaries; (ii) conduct, restrict,
operate, invest, or otherwise change the assets, business, or
portion of business of the Company, the Surviving Corporation,
Parent, Merger Sub, or any of their respective Subsidiaries in any
manner; or (iii) impose any restriction, requirement, or limitation
on the operation of the business or portion of the business of the
Company, the Surviving Corporation, Parent, Merger Sub, or any of
their respective Subsidiaries; provided, that
if requested by Parent, the Company
will become subject to, consent to, or offer or agree to, or
otherwise take any action with respect to, any such requirement,
condition, limitation, understanding, agreement, or order so long
as such requirement, condition, limitation, understanding,
agreement, or order is only binding on the Company in the event the
Closing occurs.
Section
5.13 Public
Announcements. The initial
press release with respect to this Agreement and the transactions
contemplated hereby shall be a release mutually agreed to by the
Company and Parent. Thereafter, each of the Company, Parent, and
Merger Sub agrees that no public release or announcement concerning
the transactions contemplated hereby shall be issued by any party
without the prior written consent of the Company and Parent (which
consent shall not be unreasonably withheld, conditioned, or
delayed), except as may be required by applicable Law or the rules
or regulations of any applicable United States securities exchange
or other Governmental Entity to which the relevant party is subject
or submits, in which case the party required to make the release or
announcement shall use its reasonable best efforts to allow the
other party reasonable time to comment on such release or
announcement in advance of such issuance.
Section
5.14 Anti-Takeover
Statutes. If any "control share
acquisition," "fair price," "moratorium," or other anti-takeover
Law becomes or is deemed to be applicable to Parent, the Merger
Sub, the Company, the Merger, or any other transaction contemplated
by this Agreement, then each of the Company and the Company Board
on the one hand, and Parent and the Parent Board on the other hand,
shall grant such approvals and take such actions as are necessary
so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and
otherwise act to render such anti-takeover Law inapplicable to the
foregoing.
Section
5.15 Section
16 Matters. Prior to the
Effective Time, Parent and Merger Sub, shall each take all such
steps as may be required to cause to be exempt under Rule 16b-3
promulgated under the Exchange Act any acquisitions of Parent Common Stock (including
derivative securities with respect to such shares) that are treated
as acquisitions under such rule and result from the transactions
contemplated by this Agreement by each individual who may become or
is reasonably expected to become subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to
Parent immediately after the Effective Time.
Section
5.16 Stock
Exchange Matters.
Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued in
connection with the Merger (including shares of Parent Common Stock
to be reserved for issuance upon exercise of Parent Stock Options
and Parent Restricted Shares; in each case, to be issued pursuant
to
Section
2.07) to
be listed on
Nasdaq (or such other stock exchange as may be mutually agreed upon
by the Company and Parent), subject to official notice of issuance,
prior to the Effective Time.
Section
5.17 Certain
Tax Matters. Each of the
Company and Parent shall, and shall cause each of its respective
Subsidiaries to, use reasonable best efforts to obtain the tax
opinions referenced in Section
6.02(e)
and Section
6.03(e). None of the Company or Parent shall (and the
Company and Parent shall cause their respective Subsidiaries not
to) take or fail to take any action which action (or failure to
act) would reasonably be expected to prevent or impede the Merger
from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
Section
5.18 Further
Assurances. At and after the
Effective Time, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name
and on behalf of the Company or Merger Sub, any deeds, bills of
sale, assignments, or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and
things to vest, perfect, or confirm of record or otherwise in the
Surviving Corporation any and all right, title, and interest in, to
and under any of the rights, properties, or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
CONDITIONS; CLOSING
DELIVERABLES
Section
6.01 Conditions
to Each Party's Obligation to Effect the Merger. The respective obligations of each party to this
Agreement to effect the Merger is subject to the satisfaction or
waiver (where permissible pursuant to applicable Law) on or prior
to the Closing Date of each of the following
conditions:
(a) Company
Stockholder Approval. This
Agreement will have been duly adopted by the Requisite Company
Vote.
(b) Parent
Stockholder Approval. The
Parent Stock Issuance will have been approved by the Requisite
Parent Vote.
(c) Regulatory
Approvals. All required filings
have been made and all required approvals obtained (or waiting
periods expired or terminated) under applicable
Laws.
(d) No
Injunctions, Restraints, or Illegality. No Governmental Entity having jurisdiction over
any party hereto shall have enacted, issued, promulgated, enforced,
or entered any Laws or Orders, whether temporary, preliminary, or
permanent, that make illegal, enjoin, or otherwise prohibit
consummation of the Merger, the Parent Stock Issuance, or the other
transactions contemplated by this Agreement.
(e) Governmental
Consents. All consents,
approvals and other authorizations of any Governmental Entity set
forth in Section 3.03
of the Company Disclosure Letter
and Section 4.03(c)
of the Parent Disclosure Letter and
required to consummate the Merger, the Transaction Documents, the
Parent Stock Issuance, and the other transactions contemplated by
this Agreement (other than the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware) shall have
been obtained, free of any condition that would reasonably be
expected to have a Material Adverse Effect.
(f) Agreement
Regarding Equity Plans. The
principals of Parent and the Company shall have agreed as to the
method and mechanics relating to the treatment of Company Stock
Options and the Company Stock Plan as of the Effective Time
pursuant to Section 2.07 hereof.
Section
6.02 Conditions
to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to
effect the Merger are also subject to the satisfaction or waiver
(where permissible pursuant to applicable Law) by Parent and Merger
Sub on or prior to the Closing Date of the following
conditions:
(a) Representations
and Warranties.
(i) The
representations and warranties of the Company set forth in
ARTICLE
III of this Agreement (other
than the Company Fundamental Representations) shall be true and
correct in all respects (without giving effect to any limitation
indicated by the words "Material Adverse Effect," "in all material
respects," "in any material respect," "material," or "materially")
as of the date hereof and as of immediately prior to the Effective
Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as
of that date), except where the failure of such representations and
warranties to be so true and correct as would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect;
(ii) the
Company Fundamental Representations shall be true and correct in
all respects as of the date hereof and as of immediately prior to
the Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as
of that date), in each case, except for de minimis failures to be true and
correct.
(b) Performance
of Covenants. The Company shall
have performed in all material respects all obligations, and
complied in all material respects with the agreements and
covenants, in this Agreement required to be performed by or
complied with by it at or prior to the Closing.
(c) Company
Material Adverse Effect. Since
the date of this Agreement, there shall not have occurred any
Material Adverse Effect in respect of the Company, or any event,
change, or effect that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect in respect
of the Company.
(d) Officers
Certificate. Parent will have
received a certificate, signed by the chief executive officer or
chief financial officer of the Company, certifying as to the
matters set forth in Section
6.02(a), Section
6.02(b), and Section
6.02(c)
hereof.
(e) Tax
Opinion. Parent shall have
received a written legal opinion, dated as of the Closing Date to
the effect that, on the basis of certain facts, representations,
and assumptions set forth or referred to in such opinion, the
Merger will qualify as a "reorganization" within the meaning of
Section 368(a) of the Code. In rendering the opinion described in
this Section
6.02(e), such counsel shall be entitled to receive and
rely upon customary representation letters from Parent and the
Company.
(f) Audit.
Company shall have retained Baker Tilly US, LLP
("Auditor") to conduct a full audit of Company's financial
statements for fiscal year 2020, and such audit shall have been
completed to Parent's satisfaction, in its sole and absolute
discretion.
(g) Registration
Rights Agreement. Parent and
each holder of Company Stock shall have executed such party’s
Signature Page to the Registration Rights Agreement, and delivered
executed copies of the same to the other parties hereto. The
Registration Rights Agreement shall be effective upon
Closing.
(h) Bridge
Loan and Bridge Loan Note. The
Company and one of its stockholders, Evolution Media MC Holdings,
LLC, shall have entered into that certain Convertible Promissory
Note, an executed copy of which is attached hereto as
Exhibit
B (the
“Bridge Loan
Note”), which provides
for a bridge loan to the Company for general corporate and working
capital purposes, and on the terms and conditions set forth in the
Bridge Loan Note (the “Bridge Loan”). The amount of the Bridge Loan shall be
referred to as the “Bridge Loan
Amount.”
(i) Voting
Agreement. The officers,
directors, and holders of 10% of the issued and outstanding Company
Stock (the "Significant
Stockholders") shall have
executed each respective party's signature page to the Voting
Agreement, and delivered executed copies of the same to Parent and
Merger Sub. The Voting Agreement shall be effective upon
Closing.
(j) D&O
Resignations. Parent and Merger
Sub shall have received letters of resignation addressed to
Company, effective as of a date no later than the Closing Date and
in substantially the form attached hereto as Exhibit C
(the “Resignations”), from each of the officers and directors
of Company.
(k) Lock
Up Agreements. The officers,
directors, and Significant Stockholders of Company shall have
executed such party's signature page to the applicable Lock Up
Agreement, and delivered executed copies of the same to Parent and
Merger Sub.
(l) Consent
to Assignment Channel Agreement. The Company shall have received written notice
from Microsoft Corporation consenting to the transactions
contemplated by this Agreement, and waiving its right to terminate,
that certain Minecraft Online Channel Agreement, dated April 24,
2017 (the "Channel
Agreement"). Such notice to
further provide confirmation that the Channel Agreement shall
remain in full force and effect after the Effective Time, and shall
have delivered such notice to Parent prior to the Closing
Date.
(m) Acceptance
of Offer Letter by Company Employees. The Company employees shall have executed the
applicable Offer Letters, and the Company shall have delivered the
same to Parent.
Section
6.03 Conditions
to Obligation of the Company.
The obligation of the Company to effect the Merger is also subject
to the satisfaction or waiver by the Company on or prior to the
Closing Date of the following conditions:
(a) Representations
and Warranties.
(i) The
representations and warranties of Parent and Merger Sub (other than
the Parent Fundamental Representations) set forth in
ARTICLE IV of this Agreement shall be true and correct in all
respects (without giving effect to any limitation indicated by the
words " Material Adverse Effect," "in all material respects," "in
any material respect," "material," or "materially") as of the date
hereof and as of immediately prior to the Effective Time, as if
made at and as of such time (except those representations and
warranties that address matters only as of a particular date, which
shall be true and correct in all respects as of that date), except
where the failure of such representations and warranties to be so
true and correct would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
and
(ii) the
Parent Fundamental Representations shall be true and correct in all
respects as of the date hereof and as of immediately prior to the
Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all material
respects as of that date), in each case, except for
de minimis
failures to be true and
correct.
(b) Performance
of Covenants. Parent and Merger
Sub shall have performed in all material respects all obligations,
and complied in all material respects with the agreements and
covenants, of this Agreement required to be performed by or
complied with by them at or prior to the
Closing.
(c) Parent
Material Adverse Effect. Since
the date of this Agreement, there shall not have occurred any
Material Adverse Effect in respect of Parent, or any event, change,
or effect that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect in respect of
Parent.
(d) Officers
Certificate. The Company will
have received a certificate, signed by an officer of Parent,
certifying as to the matters set forth in Section
6.03(a), Section
6.03(b), and Section
6.03(c).
(e) Employee
Offer Letters. Parent shall
have executed the Offer Letters and delivered such executed copies
of the same to the Company.
(f) Tax
Opinion. The Company shall have
received a written legal opinion , dated as of the Closing Date to
the effect that, on the basis of certain facts, representations,
and assumptions set forth or referred to in such opinion, the
Merger will qualify as a "reorganization" within the meaning of
Section 368(a) of the Code. In rendering the opinion described in
this Section
6.03(e), such counsel shall be entitled to receive and
rely upon customary representation letters from Parent and the
Company.
(g) Registration
Rights Agreement. Parent shall
have executed such party’s Signature Page to the Registration
Rights Agreement, and delivered executed copies of the same to the
other parties thereto.
(h) Lock
Up Agreements. The officers and
directors of Parent and Merger Sub shall have executed such party's
signature page to the applicable Lock Up Agreement, and delivered
executed copies of the same to Parent and Merger
Sub.
TERMINATION, AMENDMENT, AND
WAIVER
Section
7.01 Termination By Mutual
Consent. This Agreement may be
terminated at any time prior to the Effective Time (whether before
or after the receipt of the Requisite Company Vote or the Requisite
Parent Vote) by the mutual written consent of Parent and the
Company.
Section
7.02 Termination
By Either Parent or the Company. This Agreement may be terminated by either
Parent or the Company at any time prior to the Effective Time
(whether before or after the receipt of the Requisite Company Vote
or the Requisite Parent Vote):
(a) if
the Merger has not been consummated on or before 11:59 P.M.,
Pacific Time, on April 30, 2021 (the "End Date"); provided, however,
that the right to terminate this
Agreement pursuant to this Section
7.02(a)
shall not be available to any party
whose breach of any representation, warranty, covenant, or
agreement set forth in this Agreement has been the cause of, or
resulted in, the failure of the Merger to be consummated on or
before the End Date;
(b) if
any Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced, or entered any Law or Order
making illegal, permanently enjoining, or otherwise permanently
prohibiting the consummation of the Merger, the Parent Stock
Issuance, or the other transactions contemplated by this Agreement,
and such Law or Order shall have become final and
nonappealable; provided, however,
that the right to terminate this
Agreement pursuant to this Section
7.02(b)
shall not be available to any party
whose breach of any representation, warranty, covenant, or
agreement set forth in this Agreement has been the cause of, or
resulted in, the issuance, promulgation, enforcement, or entry of
any such Law or Order;
(c) if
this Agreement has been submitted to the stockholders of the
Company for adoption at a duly convened Company Stockholders
Meeting and the Requisite Company Vote shall not have been obtained
at such meeting (unless such Company Stockholders Meeting has been
adjourned or postponed, in which case at the final adjournment or
postponement thereof); or
(d) if
the Parent Stock Issuance has been submitted to the stockholders of
Parent for approval at a duly convened Parent Stockholders Meeting
and the Requisite Parent Vote shall not have been obtained at such
meeting (unless such Parent Stockholders Meeting has been adjourned
or postponed, in which case at the final adjournment or
postponement thereof).
Section
7.03 Termination
by Parent. This Agreement may
be terminated by Parent at any time prior to the Effective
Time:
(a) if:
(i) a Company Adverse Recommendation Change shall have occurred; or
(ii) the Company shall have breached or failed to perform in any
material respect any of its covenants and agreements set forth
in Section 5.04
or Section
5.07; or
(b) if
there shall have been a breach of any representation, warranty,
covenant, or agreement on the part of the Company set forth in this
Agreement such that the conditions to the Closing of the Merger set
forth in Section 6.02(a)
or Section 6.02(b), as
applicable, would not be satisfied and, in either such case, such
breach is incapable of being cured by the End Date;
provided,
that Parent shall have given
the Company at least thirty (30) days written notice prior to such
termination stating Parent's intention to terminate this Agreement
pursuant to this Section
7.03(b); provided
further, that Parent shall not
have the right to terminate this Agreement pursuant to this
Section
7.03(b)
if Parent or Merger Sub is then in
material breach of any representation, warranty, covenant, or
obligation hereunder, which breach has not been
cured.
Section
7.04 Termination
by the Company. This Agreement
may be terminated by the Company at any time prior to the Effective
Time:
(a) if:
(i) a Parent Adverse Recommendation Change shall have occurred; or
(ii) Parent shall have breached or failed to perform in any
material respect any of its covenants and agreements set forth
in Section 5.04
or Section
5.07(a); or
(b) if
there shall have been a breach of any representation, warranty,
covenant, or agreement on the part of Parent or Merger Sub set
forth in this Agreement such that the conditions to the Closing of
the Merger set forth in Section
6.03(a)
or Section
6.03(b), as applicable, would not be satisfied and, in
either such case, such breach is incapable of being cured by the
End Date; provided, that
the Company shall have given Parent at
least thirty (30) days written notice prior to such termination
stating the Company's intention to terminate this Agreement
pursuant to this Section
7.04(b); provided
further, that the Company shall
not have the right to terminate this Agreement pursuant to
this Section
7.04(b)
if the Company is then in material
breach of any representation, warranty, covenant, or obligation
hereunder, which breach has not been cured.
Section
7.05 Notice of Termination; Effect
of Termination. The party
desiring to terminate this Agreement pursuant to this
ARTICLE
VII (other than pursuant
to Section
7.01) shall deliver written
notice of such termination to each other party hereto specifying
with particularity the reason for such termination, and any such
termination in accordance with this Section 7.05
shall be effective immediately upon
delivery of such written notice to the other party. If this
Agreement is terminated pursuant to this ARTICLE
VII, it will become void and of
no further force and effect, with no liability on the part of any
party to this Agreement (or any stockholder, director, officer,
employee, agent, or Representative of such party) to any other
party hereto, except: (a) with respect to Section
5.03(b), this Section
7.05, Section
7.06, and ARTICLE VIII
(and any related definitions contained
in any such Sections or Article), which shall remain in full force
and effect; and (b) with respect to any liabilities or damages
incurred or suffered by a party, to the extent such liabilities or
damages were the result of fraud or the breach by another party of
any of its representations, warranties, covenants, or other
agreements set forth in this Agreement.
Section
7.06 Fees and Expenses Following
Termination.
(a) If
this Agreement is terminated by:
(i) Parent
pursuant to Section
7.03, then, except for a breach
for a failure by the Company to receive the Requisite Company Vote,
the Company shall pay to Parent (by wire transfer of immediately
available funds), within two (2) Business Days after such
termination, Parent's Expenses actually incurred by Parent on or
prior to the termination of this Agreement; and
(ii) the
Company pursuant to Section
7.04, then, except for a breach
for a failure by Parent to receive the Requisite Parent Vote,
Parent shall pay to the Company (by wire transfer of immediately
available funds), within two (2) Business Days after such
termination, the Company's Expenses actually incurred by the
Company on or prior to the termination of this Agreement;
and
(b) The
parties acknowledge and hereby agree that the provisions of
this Section 7.06
are an integral part of the
transactions contemplated by this Agreement (including the Merger),
and that, without such provisions, the parties would not have
entered into this Agreement. If the Company, on the one hand, or
Parent and Merger Sub, on the other hand, shall fail to pay in a
timely manner the amounts due pursuant to this Section
7.06, and, in order to obtain
such payment, the other party makes a claim against the non-paying
party that results in a judgment, the non-paying party shall pay to
the other party the reasonable costs and expenses (including its
reasonable attorneys' fees and expenses) incurred or accrued in
connection with such suit, together with interest on the amounts
set forth in this Section 7.06
at the prime lending rate prevailing
during such period as published in The Wall Street
Journal. Any interest payable
hereunder shall be calculated on a daily basis from the date such
amounts were required to be paid until (but excluding) the date of
actual payment, and on the basis of a 360-day year. The parties
acknowledge and agree that in no event shall the Company be
obligated to pay the expenses of Parent, or Parent the expenses of
Company, on more than one occasion.
(c) Except
as expressly set forth in this Section
7.06, all Expenses incurred in
connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such
Expenses.
Section
7.07 Amendment.
At any time prior to the Effective Time, this Agreement may be
amended or supplemented in any and all respects, whether before or
after receipt of the Requisite Company Vote or the Requisite Parent
Vote, by written agreement signed by each of the parties
hereto; provided, however,
that: (a) following the receipt of the
Requisite Company Vote, there shall be no amendment or supplement
to the provisions of this Agreement which by Law or in accordance
with the rules of any relevant self-regulatory organization would
require further approval by the holders of Company Stock without
such approval; and (b) following the receipt of the Requisite
Parent Vote, there shall be no amendment or supplement to the
provisions of this Agreement which by Law or in accordance with the
rules of any relevant self-regulatory organization would require
further approval by the holders of Parent Common Stock without such
approval.
Section
7.08 Extension;
Waiver. At any time prior to
the Effective Time, Parent or Merger Sub, on the one hand, or the
Company, on the other hand, may: (a) extend the time for the
performance of any of the obligations of the other party(ies); (b)
waive any inaccuracies in the representations and warranties of the
other party(ies) contained in this Agreement or in any document
delivered under this Agreement; or (c) unless prohibited by
applicable Law, waive compliance with any of the covenants,
agreements, or conditions contained in this Agreement. Any
agreement on the part of a party to any extension or waiver will be
valid only if set forth in an instrument in writing signed by such
party. The failure of any party to assert any of its rights under
this Agreement or otherwise will not constitute a waiver of such
rights.
MISCELLANEOUS
Section
8.01 Definitions. For purposes of this Agreement, the following
terms will have the following meanings when used herein with
initial capital letters:
"Acceptable Confidentiality
Agreement" means a
confidentiality and standstill agreement that contains
confidentiality and standstill provisions that are no less
favorable to a party hereof than those contained in the
Confidentiality Agreement.
"Acquisition
Agreement" has the meaning set
forth in Section
5.04(a).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or
is under common control with, such first Person. For the purposes
of this definition, "control" (including, 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 that Person, whether through the ownership of voting
securities, by Contract, or otherwise.
"Agreement" has the meaning set forth in the
Preamble.
"Antitrust
Laws" means (A) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR
Act") or (B) any other Laws
that are designed or intended to prohibit, restrict, or regulate
actions having the purpose or effect of monopolization or restraint
of trade or significant impediments or lessening of competition or
creation or strengthening of a dominant position through merger or
acquisition ("Foreign Antitrust
Laws" and, together with the
HSR Act, the "Antitrust
Laws").
"Associate" has the meaning set forth in Section 203(c)(2)
of the DGCL.
"Balance
Sheet" has the meaning set
forth in Section
3.05(a).
"Book-Entry
Share" has the meaning set
forth in Section
2.01(c).
"Bridge Loan" has the meaning set forth in Section 6.02(h).
"Bridge Loan
Amount" has the meaning set
forth in Section
6.02(h).
"Bridge Loan
Note" has the meaning set forth
in Section
6.02(h).
"Business Day" means any day, other than Saturday, Sunday, or
any day on which banking institutions located in Los Angeles are
authorized or required by Law or other governmental action to
close.
"Certificate" has the meaning set forth in Section 2.01(c).
"Certificate of
Merger" has the meaning set
forth in Section
1.03.
"Charter
Documents" means the
certificate of incorporation (including certificate of
designations), by-laws, or like organizational documents, each as
amended, of any Person.
"Closing" has the meaning set forth in Section 1.02.
"Closing Date" has the meaning set forth in Section 1.02.
"COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and as codified in Section
4980B of the Code and Section 601 et. seq. of ERISA.
"Code" has the meaning set forth in the
Recitals.
"Company" has the meaning set forth in the
Preamble.
"Company Adverse Recommendation
Change" shall mean the Company
Board: (a) failing to make, withdraw, amend, modify, or materially
qualify, in a manner adverse to Parent, the Company Board
Recommendation; (b) recommending a Takeover Proposal; (c) failing
to recommend against acceptance of any tender offer or exchange
offer for the shares of Company Common Stock within ten Business
Days after the commencement of such offer; (d) failing to reaffirm
(publicly, if so requested by Parent) the Company Board
Recommendation within ten (10) Business Days after the date any
Takeover Proposal (or material modification thereto) is first
publicly disclosed by the Company or the Person making such
Takeover Proposal; (e) making any public statement inconsistent
with the Company Board Recommendation; or (f) resolving or agreeing
to take any of the foregoing actions.
"Company
Board" has the meaning set
forth in the Recitals.
"Company Board
Recommendation" has the meaning
set forth in Section
3.02(b).
"Company Common
Stock" has the meaning set
forth in the Recitals.
"Company Continuing
Employees" has the meaning set
forth in Section
5.10(a).
"Company Disclosure
Letter" means the disclosure
letter, dated as of the date of this Agreement and delivered by the
Company to Parent concurrently with the execution of this
Agreement.
"Company
Employee" has the meaning set
forth in Section
3.11(a).
"Company Employee
Plans" has the meaning set
forth in Section
3.11(a).
"Company Equity
Award" means a Company Stock
Option or a Company Restricted Share granted under one of the
Company Stock Plan, as the case may be.
"Company ERISA
Affiliate" means all employers,
trades, or businesses (whether or not incorporated) that would be
treated together with the Company or any of its Affiliates as a
"single employer" within the meaning of Section 414 of the
Code.
“Company Fundamental
Representations” means
each of the representations and warranties set forth in Sections
3.01 (Organization and Qualification of the Company), 3.02
(Authority and Board Approval), 3.04 (Capital Structure) and 3.23
(Brokers).
"Common Stock Merger
Consideration" has the meaning
set forth in Section
2.01(b).
"Company IP" has the meaning set forth in Section 3.08(d).
"Company IP
Agreements" means all licenses,
sublicenses, consent to use agreements, settlements, coexistence
agreements, covenants not to sue, waivers, releases, permissions,
and other Contracts, whether written or oral, relating to
Intellectual Property and to which the Company or any of its
Subsidiaries is a party, beneficiary, or otherwise
bound.
"Company Material
Contract" has the meaning set
forth in Section
3.15(a).
"Company-Owned
IP" means all Intellectual
Property that is owned by the Company, or one of its Subsidiaries,
together with all (i) royalties, fees, income, payments, and other
proceeds now or hereafter due or payable to the Company with
respect to such Intellectual Property; and (ii) claims and causes
of action with respect to such Intellectual Property, including all
rights to and claims for damages, restitution, and injunctive and
other legal or equitable relief for infringement, misappropriation,
or other violation thereof.
"Company Preferred
Stock" has the meaning set
forth in the Recitals.
"Company Restricted
Share" has the meaning set
forth in Section
2.07(c).
"Company
Securities" has the meaning set
forth in Section
3.04(b)(iii).
"Company
Stock" has the meaning set
forth in the Recitals.
"Company Stock
Option" has the meaning set
forth in Section
2.07(a).
"Company Stock
Plan" means the 2020 Equity
Incentive Plan of the Company, as may be amended from time to
time.
"Company Stockholders
Meeting" means the special
meeting of the stockholders of the Company to be held to consider
the adoption of this Agreement.
"Company Subsidiary
Securities" has the meaning set
forth in Section
3.04(d).
"Confidentiality
Agreement" has the meaning set
forth in Section
5.03(b).
"Consent" means the consent, approval, order, or
authorization of, or registration, declaration, or filing with, or
notice of any Governmental Entity.
"Contracts" means any contracts, agreements, licenses,
notes, bonds, mortgages, indentures, leases, or other binding
instruments or binding commitments, whether written or
oral.
“COVID-19” means SARS-CoV-2 or
COVID-19, and any evolutions or mutations thereof or related or
associated epidemics, pandemic or disease outbreaks.
“COVID-19 Measures” means any
quarantine, “shelter in place,” “stay at
home,” workforce reduction, social distancing, shut down,
closure, sequester or any other similar Law, Order, directive,
guidelines or recommendations promulgated by any Governmental
Entity, including the Centers for Disease Control and Prevention
and the World Health Organization, in connection with or in
response to COVID-19, including but not limited to, the Coronavirus
Aid, Relief, Economic Security Act (CARES) and Families First
Act.
“COVID-19 Reasonable
Actions” means (x) any
commercially reasonable action taken, or omitted to be taken, by an
Acquired Company pursuant to any Law, directive, pronouncement or
guideline issued by any Governmental Entity or industry group
providing for business closures, “sheltering-in-place” or other restrictions
that relates to, or arises out of, any pandemic, epidemic or
disease outbreak and (y) any commercially reasonable action taken,
or omitted to be taken, by an Acquired Company to protect the
business of such Acquired Company that is responsive to any
pandemic, epidemic or disease outbreak; provided, however,
that the Company shall provide five
(5) Business Days' prior written notice to Parent before taking
such actions.
"DGCL" has the meaning set forth in the
Recitals.
"EDGAR" means the Electronic Data Gathering, Analysis,
and Retrieval database of the SEC.
"Effective
Time" has the meaning set forth
in Section
1.03.
"End Date" has the meaning set forth in Section 7.02(a).
"Environmental
Laws" means any applicable Law,
and any Order or binding agreement with any Governmental Entity:
(a) relating to pollution (or the cleanup thereof) or the
protection of natural resources, endangered or threatened species,
human health or safety, or the environment (including ambient air,
soil, surface water or groundwater, or subsurface strata); or (b)
concerning the presence of, exposure to, or the management,
manufacture, use, containment, storage, recycling, reclamation,
reuse, treatment, generation, discharge, transportation,
processing, production, disposal or remediation of any Hazardous
Materials. The term "Environmental Law" includes, without
limitation, the following (including their implementing regulations
and any state analogs): the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
§§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended by the
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
§§ 6901 et seq.; the Federal Water Pollution Control Act of 1972,
as amended by the Clean Water Act of 1977, 33 U.S.C. §§
1251 et
seq.; the Toxic Substances
Control Act of 1976, as amended, 15 U.S.C. §§ 2601
et
seq.; the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. §§
11001 et
seq.; the Clean Air Act of
1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C.
§§ 7401 et seq.; and the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. §§ 651 et seq.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange
Agent" has the meaning set
forth in Section
2.02(a).
"Exchange
Fund" has the meaning set forth
in Section
2.02(a).
"Exchange
Ratio" has the meaning set
forth in Section 2.01(b).
"Expenses" means, with respect to any Person, all
reasonable and documented out-of-pocket fees and expenses
(including all fees and expenses of counsel, accountants, financial
advisors, and investment bankers of such Person and its
Affiliates), incurred by such Person or on its behalf in connection
with or related to the authorization, preparation, negotiation,
execution, and performance of this Agreement and any transactions
related thereto, any litigation with respect thereto, the
preparation, printing, filing, and mailing of the Proxy Statement,
the filing of any required notices under any Antitrust Laws, or in
connection with other regulatory approvals, and all other matters
related to the Merger, the Parent Stock Issuance, and the other
transactions contemplated by this Agreement.
"GAAP" means United States generally accepted
accounting principles.
"Governmental Antitrust
Authority" has the meaning set
forth in Section
5.12(b).
"Governmental
Entity" means any
supranational, national, state, municipal, local, or foreign
government, any instrumentality, subdivision, court, administrative
agency or commission, or other governmental authority, or any
quasi-governmental or private body exercising any regulatory or
other governmental or quasi-governmental
authority.
"Hazardous
Substance" shall mean: (a) any
material, substance, chemical, waste, product, derivative,
compound, mixture, solid, liquid, mineral, or gas, in each case,
whether naturally occurring or man-made, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect
under Environmental Laws; and (b) any petroleum or
petroleum-derived products, radon, radioactive materials or wastes,
asbestos in any form, lead or lead-containing materials, urea
formaldehyde foam insulation, and polychlorinated
biphenyls.
"Indemnified
Party" has the meaning set
forth in Section
5.11(a).
"Indemnifying
Parties" has the meaning set
forth in Section
5.11(b).
"Intellectual Property
Assets" has the meaning set
forth in Section
3.08(d).
"Intellectual
Property" means any and all
rights in, arising out of, or associated with any of the following
in any jurisdiction throughout the world: (a) issued patents and
patent applications (whether provisional or non-provisional),
including divisionals, continuations, continuations-in-part,
substitutions, reissues, reexaminations, extensions, or
restorations of any of the foregoing, and other Governmental
Entity-issued indicia of invention ownership (including
certificates of invention, petty patents, and patent utility
models) (“Patents”); (b) trademarks, service marks, brands,
certification marks, logos, trade dress, trade names, and other
similar indicia of source or origin, together with the goodwill
connected with the use of and symbolized by, and all registrations,
applications for registration, and renewals of, any of the
foregoing (“Trademarks”); (c) copyrights and works of authorship,
whether or not copyrightable, and all registrations, applications
for registration, and renewals of any of the foregoing
(“Copyrights”); (d) internet domain names and social
media account or user names (including “handles”),
whether or not Trademarks, all associated web addresses, URLs,
websites and web pages, social media sites and pages, and all
content and data thereon or relating thereto, whether or not
Copyrights; (e) mask works, and all registrations, applications for
registration, and renewals thereof; (f) trade secrets, know-how,
inventions (whether or not patentable), discoveries, improvements,
technology, business and technical information, databases, data
compilations and collections, tools, methods, processes,
techniques, and other confidential and proprietary information and
all rights therein (“Trade
Secrets”); (g) computer
programs, operating systems, applications, firmware and other code,
including all source code, object code, application programming
interfaces, data files, databases, protocols, specifications, and
other documentation thereof (“Software”); and (h) rights of publicity; and (i) all
other intellectual or industrial property and proprietary
rights.
"Intellectual Property
Registrations" means all
Company-Owned IP that is subject to any issuance, registration, or
application by or with any Governmental Entity or authorized
private registrar in any jurisdiction, including issued Patents,
registered Trademarks, domain names and Copyrights, and pending
applications for any of the foregoing
"IRS" means the United States Internal Revenue
Service.
"IT Systems" means all computer hardware (including network
and telecommunications equipment) and Software (including
associated preparatory materials, user manuals and other related
documentation) owned, used, leased or licensed by or to the Company
or any of its Subsidiaries.
"Proxy
Statement" has the meaning set
forth in Section
3.19.
"Knowledge" means: (a) with respect to the Company and its
Subsidiaries, the actual knowledge of Michael Wann; and (b) with
respect to Parent and its Subsidiaries, the actual knowledge of Ann
Hand.
"Laws" means any federal, state, local, municipal,
foreign, multi-national or other laws, common law, statutes,
constitutions, ordinances, rules, regulations, codes, Orders, or
legally enforceable requirements enacted, issued, adopted,
promulgated, enforced, ordered, or applied by any Governmental
Entity.
"Lease" shall mean all leases, subleases, licenses,
concessions, and other agreements (written or oral) under which the
Company or any of its Subsidiaries holds any Leased Real Estate,
including the right to all security deposits and other amounts and
instruments deposited by or on behalf of the Company or any of its
Subsidiaries thereunder.
"Leased Real
Estate" shall mean all
leasehold or subleasehold estates and other rights to use or occupy
any land, buildings, structures, improvements, fixtures, or other
interest in real property held by the Company or any of its
Subsidiaries.
"Legal Action" means any suit, action, proceeding, arbitration,
mediation, audit, hearing, inquiry or, to the Knowledge of the
Person in question, investigation (in each case, whether civil,
criminal, administrative, investigative, formal, or informal)
commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Entity.
"Liability" shall mean any liability, indebtedness, or
obligation of any kind (whether accrued, absolute, contingent,
matured, unmatured, determined, determinable, or otherwise, and
whether or not required to be recorded or reflected on a balance
sheet under GAAP).
"Liens" means, with respect to any property or asset,
all pledges, liens, mortgages, charges, encumbrances,
hypothecations, options, rights of first refusal, rights of first
offer, and security interests of any kind or nature
whatsoever.
"Lock Up
Agreement" means that certain
Lock Up Agreement, to be entered into by each officer and director
of Parent, Merger Sub, and Company, and each significant holder of
Company Stock, in the form attached hereto as Exhibit
D, whereby the parties to the
Lock Up Agreement agree to certain restrictions on each party's
ability to dispose of shares of Parent Common Stock, subject to the
terms and conditions set forth therein.
"Material Adverse
Effect" means, with respect to
any Person, any event, occurrence, fact, condition, or change that
is, or would reasonably be expected to become, individually or in
the aggregate, materially adverse to: (a) the business, results of
operations, condition, or assets of such Person and its
Subsidiaries, taken as a whole; or (b) the ability of such Person
to consummate the transactions contemplated hereby on a timely
basis; provided, that the effect of the following events,
occurrences, facts, conditions and changes shall not be taken into
account in determining whether a Material Adverse Effect with
respect to such Person has occurred or is reasonably expected to
occur:
(i) any
change or development in United States or non-U.S. banking,
financial or securities markets, or general economic or business
conditions (including any disruption thereof and any decline in the
price of any security or any market index);
(ii) any
act of war, hostilities or terrorism, or any escalation or material
worsening of any such hostilities;
(iii) any
earthquakes, hurricanes, tornadoes, flood, tsunami, natural
disaster, act of God or other comparable event;
(iv)
any epidemic, pandemic, or disease outbreak (including COVID-19),
escalation or general worsening thereof, or compliance with
COVID-19 Measures or laws, regulations, statutes, directives,
pronouncements or guidelines issued by a Governmental Entity, the
Centers for Disease Control and Prevention, the World Health
Organization or industry group providing for business closures,
“sheltering-in-place,” curfews or other restrictions
that relate to, or arise out of, an epidemic, pandemic or disease
outbreak (including COVID-19) or any change in such laws,
regulations, statutes, directives, pronouncements or guidelines or
interpretations thereof following the date of this Agreement or any
material worsening of such conditions threatened or existing as of
the date of this Agreement;
(v) any
changes or prospective changes in any Law (or the interpretation or
enforcement thereof) or actions taken to comply with such
changes;
(vi) changes
or prospective changes in GAAP (or the interpretation
thereof);
(vii) the
announcement or pendency of this Agreement or the performance of
the transactions contemplated by this Agreement and/or the
Transaction Documents;
(viii) the
taking of any action contemplated by this Agreement and/or the
Transaction Documents, including the completion of the transactions
contemplated hereby and thereby, and any action taken at the
written request or with the written consent of the Company or
Parent, or any of their respective Affiliates, and any failure to
take any action, if such action is prohibited by this Agreement
and/or the Transaction Documents;
(ix) any
failure of the Company, Parent, or their respective Subsidiaries,
to meet, with respect to any period or periods, any internal or
published projections, forecasts, predictions or estimates of
earnings, revenues or other financial or operating metrics for any
period ending before, on or after the date hereof (although any
facts and circumstances that may have given rise or contributed to
any such failure that are not otherwise excluded from the
definition of Material Adverse Effect may be taken into account in
determining whether there has been a Material Adverse Effect under
this clause (ix);
provided,
however,
that any change, event, circumstance, development, effect,
condition, matter, occurrence or state of fact set forth in the foregoing clauses (i), (ii),
(iii), (v) and (vi) may be taken into account in determining
whether there has been, is or
would reasonably expected to be a Material Adverse Effect if such
change, event, circumstance, development, effect, condition,
matter, occurrence or state of fact has a disproportionate adverse effect on the
applicable Person (taken as a whole) relative to other similarly
situated Persons operating in the same
industry.
"Maximum
Premium" has the meaning set
forth in Section
5.11(c).
"Merger" has the meaning set forth in Section 1.01.
"Merger
Consideration" has the meaning
set forth in Section
2.01(b)(iv).
"Merger Sub" has the meaning set forth in the
Preamble.
"Merger Sub
Board" has the meaning set
forth in the Recitals.
"Multiemployer
Plan" has the meaning set forth
in Section
3.11(c).
"Nasdaq" has the meaning set forth in Section 2.01(e).
"Offer Letter" means the offers of employment submitted by
Parent to the Company's employees regarding such employee's
employment by Parent after the Closing Date, such Offer Letter to
include the general terms of any Parent Equity Awards to be granted
under the Parent Stock Plan.
"Order" has the meaning set forth in Section 3.10.
“Ordinary Course of
Business” means an action
taken, or omitted to be taken, by any Person in the ordinary course
of such Person’s business consistent with past practice
(including, for the avoidance of doubt, recent past custom and
practice in light of COVID-19 or COVID-19 Measures);
provided, however, that any commercially reasonable action taken,
or omitted to be taken, that relates to, or arises out of, any
pandemic, epidemic or disease outbreak shall be deemed to be in the
Ordinary Course of Business.
"Parent" has the meaning set forth in the
Preamble.
"Parent Adverse Recommendation
Change" shall mean the Parent
Board: (a) failing to make, withdraw, amend, modify, or materially
qualify, in a manner adverse to the Company, the Parent Board
Recommendation; (b) failing to include the Parent Board
Recommendation in the Proxy Statement that is mailed to Parent's
stockholders; (c) recommending a Takeover Proposal; (d) failing to
recommend against acceptance of any tender offer or exchange offer
for the shares of Parent Common Stock within ten Business Days
after the commencement of such offer; (e) failing to reaffirm
(publicly, if so requested by the Company) the Parent Board
Recommendation within ten (10) Business Days after the date any
Takeover Proposal (or material modification thereto) is first
publicly disclosed by Parent or the Person making such Takeover
Proposal; (f) making any public statement inconsistent with the
Parent Board Recommendation; or (g) resolving or agreeing to take
any of the foregoing actions.
"Parent Benefit
Plans" has the meaning set
forth in Section
5.10(b).
"Parent Board" has the meaning set forth in the
Recitals.
"Parent Board
Recommendation" has the meaning
set forth in Section
4.03(d)(i).
"Parent Common
Stock" has the meaning set
forth in the Recitals.
"Parent Disclosure
Letter" means the disclosure
letter, dated as of the date of this Agreement and delivered by
Parent and Merger Sub to the Company concurrently with the
execution of this Agreement.
"Parent Equity
Award" means a Parent Stock
Option or a Parent Restricted Share, as the case may
be.
"Parent ERISA
Affiliate" means all employers,
trades, or businesses (whether or not incorporated) that would be
treated together with Parent or any of its Affiliates as a "single
employer" within the meaning of Section 414 of the
Code.
“Parent Fundamental
Representations” means
each of the representations and warranties set forth in Sections
4.01(a) (Organization; Standing and Power), 4.01(b)(Subsidiaries),
4.02 (Capital Structure), 4.03(a) (Authority), 4.03(d) (Board
Approval), and 4.22 (Brokers).
"Parent Material
Contract" means the following
to which the Parent or any of its Subsidiaries is a party or any of
the respective assets are bound (excluding any
Leases):
(a) any
"material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the Securities Act);
(b) any
Contract that purports to limit in any material respect the right
of Parent or any of its Subsidiaries (or, at any time after the
consummation of the Merger, Parent or any of its Subsidiaries) (A)
to engage in any line of business, (B) compete with any Person or
solicit any client or customer, or (C) operate in any geographical
location;
(c) any
Contract that grants any right of first refusal, right of first
offer, or similar right with respect to any material assets,
rights, or properties of Parent or any of its
Subsidiaries;
(d) any
Contract that contains any provision that requires the purchase of
all or a material portion of Parent's or any of its Subsidiaries'
requirements for a given product or service from a given third
party, which product or service is material to Parent and its
Subsidiaries, taken as a whole;
(e) any
material Contract that obligates Parent or any of its Subsidiaries
to conduct business on an exclusive or preferential basis or that
contains a "most favored nation" or similar covenant with any third
party or upon consummation of the Merger will obligate Parent, the
Surviving Corporation, or any of their respective Subsidiaries to
conduct business on an exclusive or preferential basis or that
contains a "most favored nation" or similar covenant with any third
party;
(f) any
partnership, joint venture, limited liability company agreement, or
similar Contract relating to the formation, creation, operation,
management, or control of any material joint venture, partnership,
or limited liability company, other than any such Contact solely
between Parent and its wholly-owned Subsidiaries or among Parent's
wholly-owned Subsidiaries;
(g) any
employee collective bargaining agreement or other Contract with any
labor union; or
(h) any
Parent IP Agreement material to the conduct of Parent's
business.
"Parent-Owned
IP" means all Intellectual
Property that is owned by Parent, or one of its Subsidiaries,
together with all (i) royalties, fees, income, payments, and other
proceeds now or hereafter due or payable to the Parent with respect
to such Intellectual Property; and (ii) claims and causes of action
with respect to such Intellectual Property, including all rights to
and claims for damages, restitution, and injunctive and other legal
or equitable relief for infringement, misappropriation, or other
violation thereof.
"Parent Preferred
Stock" has the meaning set
forth in the Recitals.
"Parent Restricted
Share" means any Parent Common
Stock subject to vesting, repurchase, or other lapse of
restrictions granted under any Parent Stock
Plan.
"Parent SEC
Documents" has the meaning set
forth in Section
4.04(a).
"Parent
Securities" means,
collectively, (A) securities of Parent or any of its Subsidiaries
convertible into or exchangeable for Parent Voting Debt or shares
of capital stock of Parent, (B) options, warrants, or other
agreements or commitments to acquire from Parent or any of its
Subsidiaries, or obligations of Parent or any of its Subsidiaries
to issue, any Parent Voting Debt or shares of capital stock of (or
securities convertible into or exchangeable for shares of capital
stock of) Parent, or (C) restricted shares, restricted stock units,
stock appreciation rights, performance shares, profit participation
rights, contingent value rights, "phantom" stock, or similar
securities or rights that are derivative of, or provide economic
benefits based, directly or indirectly, on the value or price of,
any shares of capital stock of Parent, in each case that have been
issued by Parent or its Subsidiaries.
"Parent Stock
Consideration" has the meaning
set forth in Section Section
2.01(b)(i).
"Parent Stockholders
Meeting" means the special
meeting of the stockholders of Parent to be held to consider the
approval of the Parent Stock Issuance.
"Parent Stock
Issuance" has the meaning set
forth in the Recitals.
"Parent Stock
Option" means any option to
purchase Parent Common Stock granted under any Parent Stock
Plan.
"Parent Stock
Plans" means the following
plans, in each case as amended: Super League Gaming, Inc. 2014
Stock Option and Incentive Plan.
"Parent Voting
Debt" means securities of
Parent or any of its Subsidiaries that are convertible into or
exchangeable for bonds, debentures, notes, or other indebtedness
issued by Parent or any of its Subsidiaries that: (i) have the
right to vote on any matters on which stockholders or equityholders
of Parent or any of its Subsidiaries may vote (or which is
convertible into, or exchangeable for, securities having such
right); or (ii) the value of which is directly based upon or
derived from the capital stock, voting securities, or other
ownership interests of Parent or any of its
Subsidiaries.
"PBGC" has the meaning set forth in Section 3.11(d).
"Permits" has the meaning set forth in Section 3.09(b).
"Person" means any individual, corporation, limited or
general partnership, limited liability company, limited liability
partnership, trust, association, joint venture, Governmental
Entity, or other entity or group (which term will include a "group"
as such term is defined in Section 13(d)(3) of the Exchange
Act).
"Platform
Agreement" has the meaning set
forth on Section
3.08(c).
"Preferred Stock Merger
Consideration" has the meaning
set forth in Section
2.01(b)(iv)
"Real Estate" means the Leased Real
Estate.
"Registration Rights
Agreement" means that certain
Registration Rights Agreement to be entered into between Parent and
the holders of Company Stock regarding the registration of the
shares constituting the Merger Consideration, in the form attached
hereto as Exhibit
E.
"Representatives"
has the meaning set forth in Section 5.04(a).
"Requisite Company
Vote" has the meaning set forth
in Section
3.02(a).
"Requisite Parent
Vote" has the meaning set forth
in Section 4.03(a).
"Resignations" has the meaning set forth in Section 6.02(j).
"Sarbanes-Oxley
Act" means the Sarbanes-Oxley
Act of 2002, including the rules and regulations promulgated
thereunder.
"SEC" means the Securities and Exchange
Commission.
"Securities
Act" means the Securities Act
of 1933, as amended.
"Significant
Stockholders" has the meaning
set forth in Section
6.02(i).
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other business entity of which a
majority of the shares of voting securities is at the time
beneficially owned, or the management of which is otherwise
controlled, directly or indirectly, through one or more
intermediaries, or both, by such Person.
"Surviving
Corporation" has the meaning
set forth in Section
1.01.
"Takeover
Proposal" means with respect to
the Company or Parent, as the case may be, an inquiry, proposal, or
offer from, or indication of interest in making a proposal or offer
by, any Person or group relating to any transaction or series of
related transactions (other than the transactions contemplated by
this Agreement), involving any: (a) direct or indirect acquisition
of assets of a party hereto or its Subsidiaries (including any
voting equity interests of Subsidiaries, but excluding sales of
assets in the Ordinary Course of Business) equal to 15% or more of
the fair market value of such party's consolidated assets or to
which 15% or more of such party's net revenues or net income on a
consolidated basis are attributable; (b) direct or indirect
acquisition of 15% or more of the voting equity interests of a
party hereto; (c) tender offer or exchange offer that if
consummated would result in any Person or group (as defined in
Section 13(d) of the Exchange Act) beneficially owning (within the
meaning of Section 13(d) of the Exchange Act) 15% or more of the
voting power of the a party hereto; (d) merger, consolidation,
other business combination, or similar transaction involving a
party hereto or any of its Subsidiaries, pursuant to which such
Person or group (as defined in Section 13(d) of the Exchange Act)
would own 15% or more of the consolidated assets, net revenues, or
net income of such party and its Subsidiaries, taken as a whole;
(e) liquidation, dissolution (or the adoption of a plan of
liquidation or dissolution), or recapitalization or other
significant corporate reorganization of a party hereto or one or
more of its Subsidiaries which, individually or in the aggregate,
generate or constitute 15% or more of the consolidated assets, net
revenues, or net income of such party and its Subsidiaries, taken
as a whole; or (f) any combination of the
foregoing.
"Taxes" means all federal, state, local, foreign and
other income, gross receipts, sales, use, production, ad valorem,
transfer, franchise, registration, profits, license, lease,
service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp,
occupation, premium, property (real or personal), real property
gains, windfall profits, customs, duties or other taxes, fees,
assessments, or charges of any kind whatsoever, together with any
interest, additions or penalties with respect thereto and any
interest in respect of such additions or
penalties.
"Tax Returns" means any return, declaration, report, claim for
refund, information return or statement, or other document relating
to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Transaction
Documents" means this
Agreement, the Company Disclosure Letter, the Parent Disclosure
Letter, the Voting Agreement, the Registration Rights Agreement,
the Bridge Loan Note,
"Treasury
Regulations" means the Treasury
regulations promulgated under the Code.
"Voting
Agreement" means that certain
Voting Agreement to be entered into between Parent, Merger Sub, and
the Significant Stockholders, in the form attached hereto as
Exhibit
F.
"Voting Debt" has the meaning set forth in Section 3.04(c).
Section
8.02 Interpretation;
Construction.
(a) The
table of contents and headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall
not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a Section,
Exhibit, Article, or Schedule, such reference shall be to a Section
of, Exhibit to, Article of, or Schedule of this Agreement unless
otherwise indicated. Unless the context otherwise requires,
references herein: (i) to an agreement, instrument, or other
document means such agreement, instrument, or other document as
amended, supplemented, and modified from time to time to the extent
permitted by the provisions thereof; and (ii) to a statute means
such statute as amended from time to time and includes any
successor legislation thereto and any regulations promulgated
thereunder. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation," and the word "or" is
not exclusive. The word "extent" in the phrase "to the extent"
means the degree to which a subject or other thing extends, and
does not simply mean "if." A reference in this Agreement to $ or
dollars is to U.S. dollars. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms
defined. The words "hereof," "herein," "hereby," "hereto," and
"hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to "this Agreement" shall
include the Company Disclosure Letter and Parent Disclosure
Letter.
(b) The
parties have participated jointly in negotiating and drafting this
Agreement. In the event that an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provision of this
Agreement.
Section
8.03 Survival. None of the representations and warranties
contained in this Agreement or in any instrument delivered under
this Agreement will survive the Effective Time. This
Section
8.03 does not limit any
covenant or agreement of the parties contained in this Agreement
which, by its terms, contemplates performance after the Effective
Time. The Confidentiality Agreement will survive termination of
this Agreement in accordance with its terms.
Section 8.04
Governing
Law. This Agreement shall be
governed by and construed in accordance with the internal laws of
the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware
or any other jurisdiction) that would cause the application of Laws
of any jurisdiction other than those of the State of
Delaware.
Section 8.05
Submission to
Jurisdiction. Each of the
parties hereto irrevocably agrees that any Legal Action or
proceeding with respect to this Agreement and the Transaction
Documents, and the rights and obligations arising hereunder or
thereunder, or for recognition and enforcement of any judgment in
respect of this Agreement and the rights and obligations arising
hereunder brought by any other party hereto or its successors or
assigns shall be brought and determined exclusively in the State
Court of California, or in the event (but only in the event) that
such court does not have subject matter jurisdiction over such
action or proceeding, in the federal district courts within the
State of California . Each of the parties hereto agrees that
mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section
8.07 or
in such other manner as may be permitted by applicable Laws, will
be valid and sufficient service thereof. Each of the parties hereto
hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect of its property, generally and
unconditionally, to the personal jurisdiction of the aforesaid
courts and agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this
Agreement in any court or tribunal other than the aforesaid courts.
Each of the parties hereto hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim, or
otherwise, in any action or proceeding with respect to this
Agreement and the rights and obligations arising hereunder, or for
recognition and enforcement of any judgment in respect of this
Agreement and the rights and obligations arising hereunder: (a) any
claim that it is not personally subject to the jurisdiction of the
above named courts for any reason other than the failure to serve
process in accordance with this Section
8.05; (b) any claim that it or
its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment
in aid of execution of judgment, execution of judgment or
otherwise); and (c) to the fullest extent permitted by the
applicable Law, any claim that (i) the suit, action or proceeding
in such court is brought in an inconvenient forum, (ii) the venue
of such suit, action or proceeding is improper, or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or
by such courts.
Section 8.06
Waiver of Jury
Trial. EACH PARTY ACKNOWLEDGES
AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES
AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS
AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE
EVENT OF A LEGAL ACTION; (B) SUCH PARTY HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER; (C) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY; AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS Section
8.06.
Section 8.07
Notices. All notices, requests, consents, claims,
demands, waivers, and other communications hereunder shall be in
writing and shall be deemed to have been given: (a) when delivered
by hand (with written confirmation of receipt); (b) when received
by the addressee if sent by a nationally recognized overnight
courier (receipt requested); (c) on the date sent by facsimile or
email of an electronic document (with confirmation of transmission)
if sent during normal business hours of the recipient, and on the
next Business Day if sent after normal business hours of the
recipient; or (d) on the third day after the date mailed, by
certified or registered mail, return receipt requested, postage
prepaid. Such communications must be sent to the respective parties
at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this
Section
8.07):
|
If to
Parent or Merger Sub, to:
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|
Super
League Gaming, Inc.
2912
Colorado Ave., Suite 203
Santa
Monica, CA 90404
Attention:
Ann Hand, President & CEO
|
|
with a copy
(which will not constitute notice to Parent or Merger Sub)
to:
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Disclosure
Law Group, a Professional Corporation
655 West
Broadway, Suite 870
San Diego,
CA 92101
Attention:
Jessica R. Sudweeks
Email:
jsudweeks@disclosurelawgroup.com
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If to the
Company, to:
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|
Mobcrush
Streaming, Inc.
Email:
mike@mobcrush.com
Attention:
Michael Wann, Chief Executive Officer
|
|
with a copy
(which will not constitute notice to the Company) to:
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|
Ropes &
Gray LLP
1211 Avenue
of the Americas New York, NY 10036-8704
Attention:
Carl Marcellino
Email:
carl.marcellino@ropesgray.com
|
or to such
other Persons, addresses, email addresses or facsimile numbers as
may be designated in writing by the Person entitled to receive such
communication as provided above.
Section 8.08
Entire
Agreement. This Agreement
(including the Exhibits to this Agreement), the Company Disclosure
Letter, the Parent Disclosure Letter, and the Transaction Documents
constitute the entire agreement among the parties with respect to
the subject matter of this Agreement and supersede all other prior
agreements and understandings, both written and oral, among the
parties to this Agreement with respect to the subject matter of
this Agreement and the Transaction Documents. In the event of any
inconsistency between the statements in the body of this Agreement,
the Transaction Documents, the Parent Disclosure Letter, and the
Company Disclosure Letter (other than an exception expressly set
forth as such in the Parent Disclosure Letter or Company Disclosure
Letter), the statements in the body of this Agreement will
control.
Section 8.9
No Third Party
Beneficiaries. Except as
provided in Section 5.11
hereof (which shall be to the benefit
of the parties referred to in such section), this Agreement is for
the sole benefit of the parties hereto and their permitted assigns
and respective successors and nothing herein, express or implied,
is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit, or remedy of any nature
whatsoever under or by reason of this
Agreement.
Section 8.10
Severability. If any term or provision of this Agreement is
invalid, illegal, or unenforceable in any jurisdiction, such
invalidity, illegality, or unenforceability shall not affect any
other term or provision of this Agreement or invalidate or render
unenforceable such term or provision in any other jurisdiction.
Upon such determination that any term or other provision is
invalid, illegal, or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
Section 8.11
Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither party may assign its
rights or obligations hereunder without the prior written consent
of the other party, which consent shall not be unreasonably
withheld, conditioned, or delayed; provided, however,
that prior to the Effective Time,
Merger Sub may, without the prior written consent of the Company,
assign all or any portion of its rights under this Agreement to
Parent or to one or more of Parent's direct or indirect
wholly-owned subsidiaries. No assignment shall relieve the
assigning party of any of its obligations
hereunder.
Section 8.12
Remedies. Except as otherwise provided in this Agreement,
any and all remedies expressly conferred upon a party to this
Agreement will be cumulative with, and not exclusive of, any other
remedy contained in this Agreement, at Law, or in equity. The
exercise by a party to this Agreement of any one remedy will not
preclude the exercise by it of any other
remedy.
Section 8.13
Specific
Performance. The parties hereto
agree that irreparable damage would occur if any provision of this
Agreement were not performed in accordance with the terms hereof
and that the parties shall be entitled to an injunction or
injunctions to prevent breaches or threatened breaches of this
Agreement or to enforce specifically the performance of the terms
and provisions hereof in any federal court located in the State of
California or any California state court, in addition to any other
remedy to which they are entitled at Law or in
equity.
Section 8.14
Counterparts;
Effectiveness. This Agreement
may be executed in any number of counterparts, all of which will be
one and the same agreement. This Agreement will become effective
when each party to this Agreement will have received counterparts
signed by all of the other parties.
[SIGNATURE PAGE
FOLLOWS]
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective
officers thereunto duly authorized.
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|
COMPANY
|
|
|
By: /s/ Mike
Wann
Name:
Michael Wann
Title:
President & CEO
|
|
|
PARENT
|
|
|
By: /s/ Ann
Hand
Name: Ann
Hand
Title:
President & CEO
|
|
|
MERGER
SUB
|
|
|
By/s/ Ann
Hand
Name: Ann
Hand
Title:
President & CEO
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ANNEX
B
VOTING
AGREEMENT
This VOTING AGREEMENT (this
“Agreement”),
is entered into as of [●], 2021, by and among
[SLGG/Mobcrush], Inc. a Delaware corporation (the
“Company”), and
the shareholder listed on the signature page hereto under the
heading “Shareholder” (the “Shareholder”).
WHEREAS, the Company
intends to enter into an Agreement and Plan of Merger (the
“Merger
Agreement”) by and between the Company,
[SLGG/Mobcrush], and [Merger Sub], Inc., a Delaware corporation
("Merger Sub"), pursuant to
which, among other things, the Company will [cause Merger Sub to
merge with Mobcrush/merge with and into Merger Sub], as effected by
the exchange of 0.528 shares of [Company/Super League] common
stock, par value $0.001per share (the "Super League Stock"), for every one (1)
share of Mobcrush common stock, par value $0.001 per share (the
"Mobcrush Common Stock"),
and preferred stock, par value $0.001 per share (the "Mobcrush Preferred Stock", and
collectively with the Mobcrush Common Stock, the "Mobcrush Stock"), subject to certain
exceptions, terms, and limitations, as more specifically set forth
in the Merger Agreement.
WHEREAS, as of the date
hereof, the Shareholder owns, collectively, those certain
securities of the Company (the “Shareholder Securities”) set
forth on Appendix
“1” attached hereto, which represent in the
aggregate approximately [●]% of the total issued and
outstanding voting securities of the Company, on an as converted
basis; and
WHEREAS, as a condition to
the willingness of the parties to the Merger Agreement to enter
into the Merger Agreement and to consummate the transactions
contemplated thereby (collectively, the “Transaction”), [Super
League/Mobcrush] has required that each Shareholder agree, and in
order to induce the other parties to the Transaction to enter into
the Merger Agreement, each Shareholder has agreed, to enter into
this Agreement with respect to all the Shareholder Securities now
owned and which may hereafter be acquired by the Shareholder and
any other securities, if any, which such Shareholder is currently
entitled to vote, or after the date hereof, becomes entitled to
vote, at any meeting of shareholders of the Company (the
“Other
Securities”) necessary or desirable to approve the
Transaction and each of the proposals contemplated thereby, each as
more particularly set forth herein.
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE
I
VOTING AGREEMENT OF THE SHAREHOLDER
SECTION 1.01. Agreement to Approve Merger Agreement
and Transaction. Subject to the last sentence of this
Section 1.01, Shareholder hereby agrees that at any meeting of the
shareholders of the Company, however called, and in any action by
written consent of the Company’s shareholders, the
Shareholder shall vote the Shareholder Securities and the Other
Securities in favor of approving (i) the Merger Agreement in
substantially the form as is attached hereto as Exhibit A, and (ii) the
Transaction (collectively, the “Initial Shareholder Approval”).
The obligations of the Shareholder under this Section 1.01 shall
terminate immediately following the occurrence of the Initial
Shareholder Approval.
[SECTION 1.02. Agreement to Adopt Equity Award
Plan. Subject to the last sentence of this Section 1.02,
following (or concurrently with in the event of the actions in
Section 1.01 above and this Section 1.02 occurring simultaneously)
the Company's receipt of the requisite number of votes required to
approve the Merger Agreement and Transaction, as contemplated by
Section 1.01 hereinabove, the Shareholder hereby agrees that at any
meeting of the shareholders of the Company, however called, and in
any action by written consent of the Company’s shareholders,
the Shareholder shall vote the Shareholder Securities and Other
Securities (a) against any proposal or any other corporate action
or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which could result in any
of the conditions to the Company’s obligations under the
Merger Agreement not being fulfilled; and (b) for any proposal not
inconsistent with the above that is necessary or desirable by the
Company’s Board of Directors to approve, or in furtherance
of, the Transaction (together, “Secondary Shareholder Approval”).
Each Shareholder acknowledges receipt and review of a copy of the
Merger Agreement and the other Transaction Documents (as defined in
the Merger Agreement). The obligations of the Shareholder under
this Section 1.02 shall terminate immediately following the
occurrence of the Secondary Shareholder Approval.]
[Section 1.02 Agreement Not to Approve Actions
Contrary to Merger Agreement. Subject to the last sentence
of this Section 1.02, following (or concurrently with in the event
of the actions in Section 1.01 above and this Section 1.02
occurring simultaneously) the Company's receipt of the requisite
number of votes required to approve the Merger Agreement and
Transaction, as contemplated by Section 1.01 hereinabove, the
Shareholder hereby agrees that at any meeting of the shareholders
of the Company, however called, and in any action by written
consent of the Company’s shareholders, the Shareholder shall
vote the Shareholder Securities and Other Securities (a) against
any proposal or any other corporate action or agreement that would
result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger
Agreement or which could result in any of the conditions to the
Company’s obligations under the Merger Agreement not being
fulfilled; and (b) for any proposal not inconsistent with the above
that is necessary or desirable by the Company’s Board of
Directors to approve, or in furtherance of, the Transaction
(together, “Secondary
Shareholder Approval”). Each Shareholder acknowledges
receipt and review of a copy of the Merger Agreement and the other
Transaction Documents (as defined in the Merger Agreement). The
obligations of the Shareholder under this Section 1.02 shall
terminate immediately following the occurrence of the Secondary
Shareholder Approval.]
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
Shareholder hereby makes
the following representations and warranties to the
Company:
SECTION 2.01. Authority Relative to This
Agreement. Each Shareholder has all necessary legal
capacity, power and authority to execute and deliver this
Agreement, to perform his or its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by such Shareholder and
constitutes a legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance
with its terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws now or hereafter in effect
relating to, or affecting generally the enforcement of
creditors’ and other obligees’ rights, (b) where the
remedy of specific performance or other forms of equitable relief
may be subject to certain equitable defenses and principles and to
the discretion of the court before which the proceeding may be
brought, and (c) where rights to indemnity and contribution
thereunder may be limited by applicable law and public
policy.
SECTION 2.02. No Conflict.
(a)
The execution and delivery of this Agreement by such Shareholder
does not, and the performance of this Agreement by such Shareholder
shall not, (i) conflict with or violate any federal, state or local
law, statute, ordinance, rule, regulation, order, judgment or
decree applicable to such Shareholder or by which the Shareholder
Securities or the Other Securities owned by such Shareholder are
bound or affected or (ii) 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 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 Shareholder
Securities or the Other Securities owned by such Shareholder
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which such Shareholder is a party or by which such
Shareholder or the Shareholder Securities or Other Securities owned
by such Shareholder are bound.
(b)
The execution and delivery of this Agreement by such Shareholder
does not, and the performance of this Agreement by such Shareholder
shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental entity by
such Shareholder.
SECTION 2.03. Title to the Stock. As of the
date hereof, each Shareholder is the owner of the Shareholder
Securities set forth opposite such Shareholder’s name on
Appendix A attached
hereto, entitled to vote, without restriction, on all matters
brought before holders of capital stock of the Company, which the
Shareholder Securities represent on the date hereof the percentage
of the outstanding stock and voting power of the Company set forth
on such Appendix. The Shareholder Securities are all the securities
of the Company owned, either of record or beneficially, by such
Shareholder. The Shareholder Securities are owned free and clear of
all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on such Shareholder’s
voting rights, charges and other encumbrances of any nature
whatsoever. No Shareholder has appointed or granted any proxy,
which appointment or grant is still effective, with respect to the
Shareholder Securities or Other Securities owned by such
shareholder.
ARTICLE
III
COVENANTS
SECTION 3.01. No Disposition or Encumbrance of
Stock. Notwithstanding anything herein to the contrary, the
Shareholder hereby covenants and agrees that until the date the
Initial Shareholder Approval [and Secondary Shareholder Approval]
[has/have] been obtained, except as contemplated by this Agreement,
such Shareholder shall not offer or agree to sell, transfer,
tender, assign, hypothecate or otherwise dispose of, grant a proxy
or power of attorney with respect to, or create or permit to exist
any security interest, lien, claim, pledge, option, right of first
refusal, agreement, limitation on the Shareholder’s voting
rights, charge or other encumbrance of any nature whatsoever
(“Encumbrance”)
with respect to the Shareholder Securities or Other Securities,
directly or indirectly, initiate, solicit or encourage any person
to take actions which could reasonably be expected to lead to the
occurrence of any of the foregoing; provided, however, that any such
Shareholder may assign, sell or transfer any Shareholder Securities
or Other Securities provided that any such recipient of the
Shareholder Securities or Other Securities has delivered to the
Company a written agreement in a form reasonably satisfactory to
the Company that the recipient shall be bound by, and the
Shareholder Securities and/or Other Securities so transferred,
assigned or sold shall remain subject to this
Agreement.
SECTION 3.02. Company Cooperation. The
Company hereby covenants and agrees that it will not, and such
Shareholder irrevocably and unconditionally acknowledges and agrees
that the Company will not (and waives any rights against the
Company in relation thereto), recognize any Encumbrance or
agreement on any of the Shareholder Securities or Other Securities
subject to this Agreement unless the provisions of Section 3.01
have been complied with. The Company agrees to use its reasonable
best efforts to ensure that at any time in which any Shareholder
Approval is required pursuant to the Securities Purchase Agreement,
it will cause holders of Shareholder Securities or Other Securities
representing the percentage of outstanding capital stock required
to vote in favor of the Transaction in order for the Company to
comply with its obligations under the Securities Purchase Agreement
to become party to and bound by the terms and conditions of this
Agreement and the Shareholder Securities and Other Securities held
by such holders to be subject to the terms and conditions of this
Agreement.
ARTICLE
IV
MISCELLANEOUS
SECTION 4.01. Further Assurances. The
Shareholder will execute and deliver such further documents and
instruments and take all further action as may be reasonably
necessary in order to consummate the transactions contemplated
hereby.
SECTION 4.02. Specific Performance. The
parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in
accordance with the terms hereof and that the Company shall be
entitled to specific performance of the terms hereof, in addition
to any other remedy at law or in equity. The Company shall be
entitled to its reasonable attorneys’ fees in any action
brought to enforce this Agreement in which it is the prevailing
party.
SECTION 4.03. Entire Agreement. This
Agreement constitutes the entire agreement among the Company and
the Shareholder with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written
and oral, among the Company and the Shareholder with respect to the
subject matter hereof.
SECTION 4.04. Amendment. The provisions of
this Agreement may not be amended or waived, nor may this Agreement
be terminated by the Company other than pursuant to the provisions
of Section 4.07.
SECTION 4.05. Severability. If any provision
of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction,
the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest
extent that it would be valid and enforceable, and the invalidity
or unenforceability of such provision shall not affect the validity
of the remaining provisions of this Agreement so long as this
Agreement as so modified continues to express, without material
change, the original intentions of the parties as to the subject
matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
SECTION 4.06. Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal
laws of the State of Delaware, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of Delaware. The parties hereby agree that all actions or
proceedings arising directly or indirectly from or in connection
with this Agreement shall be litigated only in the State of
Delaware or the United States District Court located in Delaware.
The parties consent to the jurisdiction and venue of the foregoing
courts and consent that any process or notice of motion or other
application to any of said courts or a judge thereof may be served
inside or outside the State of Delaware or the District of Delaware
by registered mail, return receipt requested, directed to the party
being served at its address set forth on the signature ages to this
Agreement (and service so made shall be deemed complete three (3)
days after the same has been posted as aforesaid) or by personal
service or in such other manner as may be permissible under the
rules of said courts. Each of the Company and the Shareholder
irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the
venue of any such suit, action, or proceeding brought in such a
court and any claim that suit, action, or proceeding has been
brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
SECTION 4.07. Termination. Except as set
forth in Section 3.01 with respect to the Shareholder’s
obligations set forth in Section 3.01, this Agreement shall
terminate immediately following closing of the
Transaction.
[Signature
Page Follows]
IN WITNESS WHEREOF, each Shareholder and
the Company has duly executed this Agreement.
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THE
COMPANY:
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[SUPER
LEAGUE GAMING, INC. / MOBCRUSH STREAMING, INC.]
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By:
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Name:
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Title:
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Dated: [●],
2021
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SHAREHOLDER:
[
]
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Dated: [●],
2021
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Address:
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APPENDIX 1
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Shareholder
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Common Stock
Owned
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Voting Percentage
of Stock Outstanding
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[●]
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[●]
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[●]%
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ANNEX
C
Form of Registration Rights
Agreement
REGISTRATION
RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this
“Agreement”), dated as of
[●], 2021, is entered into by and between Super League
Gaming, Inc., a Delaware corporation (the “Company”), and and each
of the signatories hereto (each a “Shareholder” and
collectively, the “Shareholders”)
..
WHEREAS, Capitalized terms used herein
and not otherwise defined herein shall have the respective meanings
set forth in that certain Agreement and Plan of Merger, by and
between the Company and Mobcrush Streaming, Inc., a Delaware
corporation ("Mobcrush"), dated as of
[●], 2021 (as amended, restated, supplemented or otherwise
modified from time to time, the “Merger Agreement”);
and
WHEREAS, the Company has agreed, upon the
terms and subject to the conditions of the Merger Agreement, to
issue shares of the Company's Common Stock (as defined below) to
the Shareholders in exchange for their shares of Mobcrush, and to
provide the Shareholders certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the
“Securities
Act”), and applicable state securities
laws.
NOW, THEREFORE, in consideration of the
promises and the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged,
the Company and the Shareholder hereby agree as
follows:
1. DEFINITIONS.
As used in this Agreement,
the following terms shall have the following meanings:
a. “Common Stock” means the
Company’s common stock, par value $0.001 per share, and any
securities into which such Common Stock may hereinafter be
reclassified.
b. “Person” means any
individual or entity including but not limited to any corporation,
a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or
political subdivision thereof or a governmental
agency.
c. “Register,”
“registered,” and
“registration” refer to a
registration made by preparing and filing a Registration Statement
or similar document in compliance with the 1933 Act (as defined
below), and the declaration or ordering of effectiveness of such
Registration Statement or document.
d. “Registrable Securities”
means all of the shares of the Company's Common Stock which have
been, or which may, from time to time be issued or become issuable
to the Shareholders under the Merger Agreement (without regard to
any limitation or restriction on purchases), and any and all shares
of capital stock issued or issuable with respect to the Merger
Agreement as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without
regard to any limitation on purchases under the Merger
Agreement.
e. "Registration Period" means the
period that will terminate upon the earlier of (i) the date on
which all Registrable Securities covered by such Initial
Registration Statement as amended from time to time, have been
sold, and (ii) the date on which all Registrable Securities covered
by such Registration Statement may be sold without restriction and
without the need for current public information pursuant to Rule
144.
f. “Registration Statement”
means one or more registration statements of the Company covering
only the sale of the Registrable Securities.
g. "Required Shareholders" means,
as of any date of determination, the Shareholders holding a
majority of the Registrable Securities as of such
date.
h. “SEC” means the U.S.
Securities and Exchange Commission.
2. REGISTRATION.
a. Mandatory
Registration. No later than ninety (90) days from the date
of the consummation of the transactions contemplated by the Merger
Agreement (the “Filing Deadline”), the
Company shall prepare and file with the SEC one Registration
Statement (the “Initial Registration
Statement”) covering the resale of all of the
Registrable Securities on a continuous basis pursuant to Rule 415
of the Securities Act. The Initial Registration Statement filed
hereunder shall be on Form S-3; provided, that if Form S-3 is not
available for the registration of the resale of Registrable
Securities hereunder, the Company shall (x) register the resale of
the Registrable Securities on another appropriate form and (y)
undertake to register the resale of Registrable Securities on Form
S-3 as soon as such form is available, provided, that the Company shall
maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by
the staff of the SEC. No Shareholder shall be named as an
“underwriter” in the Initial Registration Statement
without such Shareholder’s prior written consent. Such
Initial Registration Statement also shall cover, to the extent
allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional
shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.
Such Initial Registration Statement shall not include any shares of
Common Stock or other securities for the account of any other
Person (including the Company) without the prior written consent of
the Required Shareholders. The Initial Registration Statement (and
each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(b) to the Shareholders and their counsel
prior to its filing or other submission. If (i) the Initial
Registration Statement covering the Registrable Securities is not
filed with the SEC on or prior to the Filing Deadline, or (ii)
prior to the effective date of the Initial Registration Statement,
the Company shall fail to file any pre-effective amendment to the
Initial Registration Statement required to be filed by the SEC or
otherwise respond to comments from the SEC within thirty (30) days
from the date of receipt of such comments (a “Response Failure”), the Company
will make payments to each Shareholder, as liquidated damages and
not as a penalty, in an amount equal to 0.5% of the aggregate value
of the Merger Consideration paid to such Shareholder in exchange
for such Shareholder's shares of Mobcrush Stock on the Closing Date
pursuant to the Merger Agreement (such amount, with respect to each
Shareholder, the “Merger
Consideration Amount”) for the first 30-day period or
pro rata for any portion thereof following the Filing Deadline for
which no Initial Registration Statement is filed with respect to
the Registrable Securities, or following a Response Failure, as the
case may be, and 1.0% of such Shareholder’s Merger
Consideration Amount for each 30-day period thereafter or pro rata
for any portion thereof for which no Initial Registration Statement
is filed with respect to the Registrable Securities, or following a
Response Failure, as the case may be; provided, that the maximum payments to
any Shareholder pursuant to this Section 2(a)(i) shall not exceed
5.0% of such Shareholder’s Merger Consideration Amount. Such
payments shall constitute the Shareholders’ exclusive
monetary remedy for such events, but shall not affect the right of
the Shareholders to seek injunctive relief.
b. Piggy-Back
Registrations. If, at any time there is not an effective
Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities
issuable in connection with the Company’s stock option or
other employee benefit plans, then the Company shall deliver to
Shareholder a written notice of such determination and, if within
fifteen (15) days after the date of the delivery of such notice,
Shareholder shall so request in writing, the Company shall include
in such registration statement all or any part of such Registrable
Securities that Shareholder requests to be registered or such
amount as otherwise shall be permitted to be included thereon in
accordance with applicable SEC rules, regulations and
interpretations so as to permit the resale of such Registrable
Securities by the Shareholder under Rule 415 under the Securities
Act; provided, however, that the Company shall not be
required to register any Registrable Securities pursuant to this
Section that are eligible for resale pursuant to Rule 144 (without
volume restrictions or current public information requirements)
promulgated by the SEC pursuant to the Securities Act or that are
the subject of a then effective Registration
Statement.
c. Rule
424 Prospectus. The Company shall, as required by applicable
securities regulations, from time to time file with the SEC,
pursuant to Rule 424 promulgated under the Securities Act, the
prospectus and prospectus supplements, if any, to be used in
connection with sales of the Registrable Securities under the
Registration Statement. The Shareholders and their counsel shall
have a reasonable opportunity to review and comment upon such
prospectus prior to its filing with the SEC, and the Company shall
give due consideration to all such comments. The Shareholders shall
use their reasonable best efforts to comment upon such prospectus
within three (3) Business Days from the date the Shareholders
receives the final pre-filing version of such
prospectus.
d. Sufficient
Number of Shares Registered. In the event the number of
shares available under the Registration Statement is insufficient
to cover all of the Registrable Securities, the Company shall amend
the Registration Statement or file a new Registration Statement (a
“New Registration
Statement”), so as to cover all of such Registrable
Securities (subject to the limitations set forth in Sections 2(a) and (b)) as soon
as practicable, but in any event not later than ten (10) Business
Days after the necessity therefor arises, subject to any limits
that may be imposed by the SEC pursuant to Rule 415 under the
Securities Act. The Company shall use it reasonable best efforts to
cause such amendment and/or New Registration Statement to become
effective as soon as practicable following the filing
thereof.
e.
Offering. If the staff of the
SEC (the “Staff”) or the SEC seeks
to characterize any offering pursuant to a Registration Statement
filed pursuant to this Agreement as constituting an offering of
securities that does not permit such Registration Statement to
become effective and be used for resales by the Shareholders under
Rule 415 at then-prevailing market prices (and not fixed prices),
or if after the filing of the initial Registration Statement with
the SEC pursuant to Section 2(a), the Company is
otherwise required by the Staff or the SEC to reduce the number of
Registrable Securities included in such initial Registration
Statement, then the Company shall reduce the number of Registrable
Securities to be included in such initial Registration Statement
(with the prior consent, which shall not be unreasonably withheld,
of the Shareholders and their legal counsel as to the specific
Registrable Securities to be removed therefrom) until such time as
the Staff and the SEC shall so permit such Registration Statement
to become effective and be used as aforesaid. In the event of any
reduction in Registrable Securities pursuant to this paragraph, the
Company shall file one or more New Registration Statements in
accordance with Section
2(d) until such time as all Registrable Securities have been
included in Registration Statements that have been declared
effective and the prospectus contained therein is available for use
by the Shareholders. Notwithstanding any provision herein or in the
Merger Agreement to the contrary, the Company’s obligations
to register Registrable Securities (and any related conditions to
the Shareholders’ obligations) shall be qualified as
necessary to comport with any requirement of the SEC or the Staff
as addressed in this Section 2(e).
3. RELATED
OBLIGATIONS.
With respect to the
Registration Statement and whenever any Registrable Securities are
to be registered pursuant to Section 2 including on any New
Registration Statement, the Company shall use its reasonable best
efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following
obligations:
a. The
Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to any
registration statement and the prospectus used in connection with
such registration statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the Securities Act, as may
be necessary to keep the Registration Statement or any New
Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities of the Company covered by the
Registration Statement or any New Registration Statement until such
time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in such registration
statement.
b.
The Company shall permit the Shareholders to review and comment
upon the Registration Statement or any New Registration Statement
and all amendments and supplements thereto at least two (2)
Business Days prior to their filing with the SEC, and not file any
document in a form to which the Shareholders or their counsel
reasonably objects. The Shareholders shall use their reasonable
best efforts to comment upon the Registration Statement or any New
Registration Statement and any amendments or supplements thereto
within two (2) Business Days from the date the Shareholders receive
the final version thereof. The Company shall furnish to the
Shareholders, without charge any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to
the Registration Statement or any New Registration
Statement.
c. Upon
request of any Shareholder, the Company shall furnish to such
Shareholder, (i) promptly after the same is prepared and filed with
the SEC, at least one copy of such registration statement and any
amendment(s) thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits,
(ii) upon the effectiveness of any registration statement, a copy
of the prospectus included in such registration statement and all
amendments and supplements thereto (or such other number of copies
as such Shareholder may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus,
as such Shareholder may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities
owned by the requesting Shareholder. For the avoidance of doubt,
any filing available to the Shareholders via the SEC’s live
EDGAR system shall be deemed “furnished to the
Shareholders” hereunder.
d. The
Company shall use reasonable best efforts to (i) register and
qualify the Registrable Securities covered by a registration
statement under such other securities or “blue sky”
laws of such jurisdictions in the United States as the Shareholders
reasonably request, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject
itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction. The
Company shall promptly notify the Shareholders who hold Registrable
Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of
any of the Registrable Securities for sale under the securities or
“blue sky” laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
e. As
promptly as practicable after becoming aware of such event or
facts, the Company shall notify the Shareholders in writing of the
happening of any event or existence of such facts as a result of
which the prospectus included in any registration statement, as
then in effect, includes an untrue statement of a material fact or
omits 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, and
promptly prepare a supplement or amendment to such registration
statement to correct such untrue statement or omission, and deliver
a copy of such supplement or amendment to the Shareholders (or such
other number of copies as a Shareholder may reasonably request).
The Company shall also promptly notify the Shareholders in writing
(i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a registration
statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to the
Shareholders by email or facsimile on the same day of such
effectiveness and by overnight mail), (ii) of any request by the
SEC for amendments or supplements to any registration statement or
related prospectus or related information, and (iii) of the
Company’s reasonable determination that a post-effective
amendment to a registration statement would be
appropriate.
f. The
Company shall use its reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of
any registration statement, or the suspension of the qualification
of any Registrable Securities for sale in any jurisdiction and, if
such an order or suspension is issued, to obtain the withdrawal of
such order or suspension at the earliest possible moment and to
notify the Shareholders of the issuance of such order and the
resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such
purpose.
g. The
Company shall (i) cause all the Registrable Securities to be listed
on each securities exchange on which securities of the same class
or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the
rules of such exchange, or (ii) secure designation and quotation of
all the Registrable Securities on Nasdaq. The Company shall pay all
fees and expenses in connection with satisfying its obligation
under this Section
3(g).
h. The
Company shall cooperate with the Shareholders to facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be
offered pursuant to any registration statement and enable such
certificates to be in such denominations or amounts as the
Shareholders may reasonably request and registered in such names as
the Shareholders may request.
i.
The Company shall at all times provide a
transfer agent and registrar with respect to its Common
Stock.
j. If
reasonably requested by the Shareholders, the Company shall (i)
immediately incorporate in a prospectus supplement or
post-effective amendment such information as the Shareholders
believe should be included therein relating to the sale and
distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold, the purchase price being paid therefor and
any other terms of the offering of the Registrable Securities; (ii)
make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable upon notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) supplement or make amendments
to any registration statement.
k. The
Company shall use its reasonable best efforts to cause the
Registrable Securities covered by any registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of
such Registrable Securities.
l. The
Company shall notify the Shareholders by facsimile or e-mail as
promptly as practicable, and in any event, within twenty-four (24)
hours, after any Registration Statement is declared effective and
shall simultaneously provide the Shareholders with copies of any
related prospectus to be used in connection with the sale or other
disposition of the securities covered thereby. Thereafter, if
requested by the Shareholders at any time, the Company shall
require its counsel to deliver to the Shareholders a written
confirmation whether or not the effectiveness of such registration
statement has lapsed at any time for any reason (including, without
limitation, the issuance of a stop order) and whether or not the
registration statement is current and available to the Shareholders
for sale of all of the Registrable Securities.
m. The
Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Shareholders of
Registrable Securities pursuant to any registration
statement.
4. OBLIGATIONS
OF THE SHAREHOLDERS.
a. Each
Shareholder agrees to complete and deliver to the Company the
Selling Stockholder Questionnaire attached heretoas Exhibit A. In addition to the
information provided by each Shareholder in the Selling Stockholder
Questionnaire, the Company shall notify the Shareholders in writing
of the information the Company reasonably requires from the
Shareholders in connection with any registration statement
hereunder. The Shareholders shall furnish to the Company such
information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request.
b. The
Shareholders agree to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and
filing of any registration statement hereunder.
c. The
Shareholders agree that, upon receipt of any notice from the
Company of the happening of any event or existence of facts of the
kind described in Section
3(f) or the first sentence of 3(e), the Shareholders will
immediately discontinue disposition of Registrable Securities
pursuant to any registration statement(s) covering such Registrable
Securities until the Shareholders’ receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(f) or the first
sentence of Section 3(e).
5. EXPENSES
OF REGISTRATION.
All reasonable expenses,
other than sales or brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to
Sections 2 and
3, including,
without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company.
6. INDEMNIFICATION.
a. To
the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend the Shareholders, each
Person, if any, who controls any Shareholder, the members, the
directors, officers, partners, employees, agents, representatives
of each Shareholder and each Person, if any, who controls any
Shareholder within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the
“Exchange
Act”) (each, an “Indemnified Person”),
against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively,
“Claims”) incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a
party thereto (“Indemnified Damages”), to
which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact in the Registration
Statement, any New Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which
Registrable Securities are offered (“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement or any New
Registration Statement or (iv) any material violation by the
Company of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”). The Company
shall reimburse each Indemnified Person promptly as such expenses
are incurred and are due and payable, for any reasonable legal fees
or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement
contained in this Section
6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information about the
Shareholders furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the
preparation of the Registration Statement, any New Registration
Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant
to Section 3(c) or
Section 3(e); (ii)
with respect to any superseded prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject
thereof (or to the benefit of any person controlling such person)
if the untrue statement or omission of material fact contained in
the superseded prospectus was corrected in the revised prospectus,
as then amended or supplemented, if such revised prospectus was
timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the
Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation
and such Indemnified Person, notwithstanding such advice, used it;
(iii) shall not be available to the extent such Claim is based on a
failure of the Shareholders to deliver or to cause to be delivered
the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall
not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Registrable Securities by the
Shareholder pursuant to Section 9.
b. In
connection with the Registration Statement or any New Registration
Statement, the Shareholders, and each of them, agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner
as is set forth in Section
6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement or any New
Registration Statement, each Person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange
Act (collectively and together with an Indemnified Person, an
“Indemnified
Party”), against any Claim or Indemnified Damages to
which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information about
the Shareholders and furnished to the Company by the Shareholders
expressly for use in connection with such registration statement;
and, subject to Section
6(d), the Shareholders will reimburse any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section
6(b) and the agreement with respect to contribution
contained in Section
7 shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of
the Shareholders, which consent shall not be unreasonably withheld;
provided, further, however, that the Shareholders
shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to the Shareholders as a result of the sale of Registrable
Securities pursuant to such registration statement. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and
shall survive the transfer of the Registrable Securities by the
Shareholders pursuant to Section 9.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of
notice of the commencement of any action or proceeding (including
any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under
this Section 6,
deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to
be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel
in such proceeding. The Indemnified Party or Indemnified Person
shall cooperate fully with the indemnifying party in connection
with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or claim. The
indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent,
provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such claim or litigation.
Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified
Party under this Section
6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The
indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
e. The
indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7. CONTRIBUTION.
To the extent any
indemnification by an indemnifying party is prohibited or limited
by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that: (i) no seller of
Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and
(ii) contribution by any seller of Registrable Securities shall be
limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.
8. REPORTS
AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making
available to the Shareholders the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Shareholders to sell
securities of the Company to the public without registration
(“Rule
144”), the Company agrees, at the Company’s sole
expense, to:
a. make
and keep public information available, as those terms are
understood and defined in Rule 144;
b. file
with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange
Act so long as the Company remains subject to such requirements and
the filing of such reports and other documents is required for the
applicable provisions of Rule 144;
c. furnish
to the Shareholders so long as the Shareholders owns Registrable
Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting and or disclosure
provisions of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested to permit the Shareholders to sell such securities
pursuant to Rule 144 without registration; and
d.
take such additional action as is requested by the Shareholders to
enable the Shareholders to sell the Registrable Securities pursuant
to Rule 144, including, without limitation, delivering all such
legal opinions, consents, certificates, resolutions and
instructions to the Company’s Transfer Agent as may be
requested from time to time by the Shareholders and otherwise fully
cooperate with each Shareholder and such Shareholder’s broker
to effect such sale of securities pursuant to Rule
144.
The Company agrees that
damages may be an inadequate remedy for any breach of the terms and
provisions of this Section
8 and that Shareholders shall, whether or not it is pursuing
any remedies at law, be entitled to equitable relief in the form of
a preliminary or permanent injunctions, without having to post any
bond or other security, upon any breach or threatened breach of any
such terms or provisions.
9.
ASSIGNMENT OF REGISTRATION
RIGHTS.
The Company shall not
assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Shareholders. The
Shareholders may not assign their rights under this Agreement
without the written consent of the Company.
10. AMENDMENT
OF REGISTRATION RIGHTS.
No provision of this
Agreement may be amended or waived by the parties from and after
the date that is one Business Day immediately preceding the initial
filing of the Registration Statement with the SEC. Subject to the
immediately preceding sentence, no provision of this Agreement may
be (i) amended other than by a written instrument signed by both
parties hereto or (ii) waived other than in a written instrument
signed by the party against whom enforcement of such waiver is
sought. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver
thereof.
11. MISCELLANEOUS.
a. A
Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered
owner of such Registrable Securities.
b. Any
notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile or email (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) Business Day after deposit with a
nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses
for such communications shall be:
If to
the Company:
Super
League Gaming, Inc.
2912
Colorado Ave., Suite 203
Santa
Monica, CA 90404
Attention: Ann Hand,
President & CEO
With a
copy to (which shall not constitute notice or service of
process):
Disclosure Law Group, a
Professional Corporation
655 West
Broadway, Suite 870
San
Diego, CA 92101
Attention: Jessica R.
Sudweeks
Email:
jsudweeks@disclosurelawgroup.com
If to
the Shareholder:
With a
copy to (which shall not constitute notice or service of
process):
Ropes
& Gray LLP
1211
Avenue of the Americas New York, NY 10036-8704
Attention: Carl
Marcellino
Email:
carl.marcellino@ropesgray.com.
or at such other address
and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given
to each other party three (3) Business Days prior to the
effectiveness of such change. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the
sender's facsimile machine or email account containing the time,
date, recipient facsimile number or email address, as applicable,
and an image of the first page of such transmission or (C) provided
by a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above,
respectively.
c. The
corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other
than the State of Delaware. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts
sitting the State of Delaware, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
d. This
Agreement and the Merger Agreement constitute the entire agreement
among the parties hereto with respect to the subject matter hereof
and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Merger Agreement supersede all
prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
e. Subject
to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties hereto.
f. The
headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning
hereof.
g. This
Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile
transmission or by e-mail in a “.pdf” format data file
of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
h. Each
party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
i. The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any
party.
j. This
Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any
other Person.
* * * *
*
IN WITNESS WHEREOF, the parties have
caused this Registration Rights Agreement to be duly executed as of
day and year first above written.
THE COMPANY:
SUPER
LEAGUE GAMING, INC.
By:______________________
Name:
Ann Hand
Title: President &
CEO
SHAREHOLDER:
[NAME]
BY:
[NAME OF MANAGER/ENTITY]
By:_______________________
Name:
Title:
EXHIBIT A
(Selling Stockholder
Questionnaire)
SUPER
LEAGUE GAMING, INC.
Selling
Stockholder Notice and Questionnaire
The undersigned understands
that the Super League Gaming, Inc., a Delaware Corporation (the
“Company”),
intends to file with the Securities and Exchange Commission (the
“Commission”) a
registration statement “Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”), of those shares
of Common Stock issuable in connection with the transactions
contemplated by that certain Agreement and Plan of Merger, by and
between the Company and Mobcrush Streaming, Inc., a Delaware
corporation, dated as of March 9, 2021 (as amended, restated,
supplemented or otherwise modified from time to time, the
“Merger
Agreement”).
Certain legal consequences
arise from being named as a selling stockholder in the Registration
Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registerable Securities are advised to consult
their own securities law counsel regarding the consequences of
being names or not being named as a selling stockholder in the
Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial
owner (the “Selling
Stockholder”) of Registrable Securities hereby elects
to include the Registrable Securities owned by it in the
Registration Statement.
The undersigned hereby
provides the following information to the Company and represents
and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a)
Full Legal Name of Selling
Stockholder
(b)
Full Legal Name of
Registered Holder (if not the same as (a) above) through which
Registrable Securities are held:
(c)
Full Legal Name of Natural
Control Person (which means a natural person who directly or
indirectly alone or with others has power to vote or dispose of the
securities covered by this Questionnaire):
2.
Address for Notices to Selling Stockholder:
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Telephone:
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Fax:
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Contact
Person:
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3.
Broker-Dealer Status:
(a)
Are you a
broker-dealer?
Yes
☐ No ☐
(b)
If “yes” to
Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to the
Company?
Yes
☐ No ☐
Note:
If “no” to
Section 3(b), the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration
Statement.
(c)
Are you an affiliate of a
broker-dealer?
Yes
☐ No ☐
(d)
If you are an affiliate of
a broker-dealer, do you certify that you purchased the Registrable
Securities in the ordinary course of business, and at the time of
the purchase of the Registrable Securities to be resold, you had no
agreements or understandings, directly or indirectly, with any
person to distribute the Registrable Securities?
Yes
☐ No ☐
Note:
If “no” to
Section 3(d), the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration
Statement.
4.
Beneficial Ownership of Securities of the Company Owned by the
Selling Stockholder.
Except
as set forth below in this Item 4, the undersigned is not the
beneficial or registered owner of any securities of the Company
other than the securities issuable pursuant to the Purchase
Agreement.
(a)
Type and Amount of other
securities beneficially owned by the Selling
Stockholder:
5.
Relationships with the Company:
Except
as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners
of 5% of more of the equity securities of the undersigned) has held
any position or office or has had any other material relationship
with the Company (or its predecessors or affiliates) during the
past three years.
State any exceptions
here:
The undersigned agrees to
promptly notify the Company of any material inaccuracies or changes
in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains
effective; provided, that the undersigned shall not be required to
notify the Company of any changes to the number of securities held
or owned by the undersigned or its affiliates.
By signing below, the
undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 5 and the inclusion of
such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon
by the Company in connection with the preparation or amendment of
the Registration Statement and the related prospectus and any
amendments or supplements thereto.
IN WITNESS WHEREOF the
undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by
its duly authorized agent.
|
Date: ______________
|
Beneficial
Owner:
|
|
|
By:
Name:
Title:
|
PLEASE
FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND EXECUTED
NOTICE AND QUESTIONNAIRE TO:
[ADD NAME AND
ADDRESS]
ANNEX
D
April 21, 2021
Super League Gaming, Inc.
2912 Colorado Avenue, Suite #203
Santa Monica, California 90404
Attention: Board of Directors
Members of the Board:
You have requested our opinion with respect to the fairness, from a
financial point of view, to Super League Gaming, Inc.
(“Parent”) of the Merger Consideration (as defined
below) to be paid by Parent pursuant to the terms of the Agreement
and Plan of Merger, dated as of March 9, 2021 (the
“Agreement”), by and among Parent, Mobcrush Streaming
Inc. (the “Company”), and SLG Merger Sub II, Inc., a
wholly-owned subsidiary of Parent (“Merger Sub”).
Capitalized terms used but not defined herein have the meanings
ascribed to such terms in the Agreement. Pursuant to the Agreement,
and subject to the terms and conditions set forth therein, Merger
Sub will merge (the “Merger”) with and into the
Company, the Company will become a wholly-owned subsidiary of
Parent, and each share of common stock, par value $0.0001 per share
(“Company Common Stock”), of the Company, and preferred
stock, par value $0.0001 per share (“Company Preferred
Stock” and together with the Company Common Stock, the
“Company Capital Stock”), of the Company outstanding
immediately prior to the Effective Time (other than Cancelled
Shares and Dissenting Shares) will be converted into the right to
receive 0.528 shares (such number of shares, as it may be adjusted
in accordance with the terms of the Agreement, including Schedule
2.01(b) thereto, the “Merger Consideration”) of common
stock, par value $0.001 per share (“Parent Common
Stock”), of Parent.
In arriving at our opinion, we have reviewed the Agreement and
certain publicly available business and financial information
relating to Parent. We have also reviewed certain other information
relating to the Company and Parent, including financial forecasts
relating to the Company for the fiscal years ending December 31,
2021 and December 31, 2022 prepared by the management of the
Company and revised and provided to us by the management of Parent
(the “Company Projections) , and have met with the
managements of the Company and Parent and certain of their
respective representatives to discuss the businesses and prospects
of the Company and Parent. We also reviewed estimates prepared and
provided to us by the management of Parent with respect to the cost
savings and revenue synergies, net of costs necessary to achieve
such cost savings and revenue synergies (the “Synergies
Estimates”) anticipated by such management to result from the
Merger. We have also considered certain financial data of the
Company and Parent and certain stock market data of Parent, in each
case for the period through January 29, 2021 (the “Valuation
Date”), and we have compared that data with similar data for
the period through the Valuation Date for other companies with
publicly traded equity securities in businesses we deemed similar
to those of the Company, and we have considered, to the extent
publicly available prior to or on the Valuation Date, the financial
terms of certain other business combinations and other transactions
which have been completed or announced and which we deemed
relevant. We also considered such other information, financial
studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not independently verified
any of the foregoing information and, with your consent, we have
assumed and relied upon such information being complete and
accurate in all respects material to our analyses and this opinion.
With respect to the Company Projections that we have relied upon
for purposes of our analyses, we have been advised by the
managements of the Company and Parent, and we have assumed with
your consent, that such forecasts and estimates have been
reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of the managements of
each of the Company and Parent as to the future financial
performance of the Company. With respect to the Synergies Estimates
that we have relied upon for purposes of our analyses, we have been
advised by the management of Parent, and we have assumed with your
consent, that such estimates have been reasonably prepared in good
faith on bases reflecting the best currently available estimates
and judgments of the management of Parent as to the cost savings
and revenue synergies, net of costs necessary to achieve such cost
savings and revenue synergies, anticipated by such management to
result from the Merger, and will be realized in the amounts and the
times indicated thereby. At your direction, we have assumed that
the Company Projections and the Synergies Estimates are a
reasonable basis upon which to evaluate the Company and the Merger,
and at your direction we have relied upon the Company Projections
and the Synergies Estimates for purposes of our analyses and this
opinion. We express no view or opinion with respect to the Company
Projections or the Synergies Estimates, or the assumptions and
methodologies upon which they are based.
For purposes of our analyses and this opinion, we have been advised
and we have assumed that the Merger will qualify as a
“reorganization” within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended. We have assumed,
with your consent, that, in the course of obtaining any regulatory
or third party consents, approvals or agreements in connection with
the Merger, no modification, delay, limitation, restriction or
condition will be imposed that would have an adverse effect on the
Company, Parent or the contemplated benefits of the Merger and that
the Merger will be consummated in compliance with all applicable
laws and regulations and in accordance with the terms of the
Agreement without waiver, modification or amendment of any term,
condition or agreement thereof that is material to our analyses or
this opinion. In addition, we have not been requested to make, and
have not made, an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of the Company or Parent,
nor have we been furnished with any such evaluations or
appraisals.
Our opinion addresses only the fairness, from a financial point of
view, to Parent of the Merger Consideration to be paid by Parent in
the Merger pursuant to the Agreement and does not address any other
aspect or implication of the Merger or any agreement, arrangement
or understanding entered into in connection therewith or otherwise,
including, without limitation, the form or structure of the Merger
or the fairness of the amount or nature of, or any other aspect
relating to, any compensation, if any, or consideration to be
received by or otherwise payable to any officers, directors,
employees, security holders or affiliates of any party to the
Merger, or class of such persons, relative to the Merger
Consideration or otherwise. Furthermore, we are not expressing any
advice or opinion regarding matters that require legal, regulatory,
accounting, insurance, intellectual property, tax, environmental,
executive compensation or other similar professional advice. We
have assumed that Parent has or will obtain such advice or opinions
from the appropriate professional sources. The issuance of this
opinion was approved by our authorized internal
committee.
Our opinion is necessarily based on information made available to
us as of the date hereof and upon financial, economic, market and
other conditions as they exist and can be evaluated on the date
hereof. We have not undertaken, and are under no obligation, to
update, revise, reaffirm or withdraw this opinion, or otherwise
comment on or consider events occurring or coming to our attention
after the date hereof. We are not expressing any opinion as to what
the value of Parent Common Stock actually will be when issued to
the holders of Company Capital Stock pursuant to the Agreement or
the prices or ranges of prices at which Parent Common Stock may be
purchased or sold at any time. Economics Partners assumed that the
Parent Common Stock to be issued in the Merger will be listed on
the Nasdaq Stock Market as of the consummation of the Merger. Our
opinion does not address the relative merits of the Merger as
compared to alternative transactions or strategies that might be
available to the Parent, nor does it address the underlying
business decision of the Board of Directors of Parent to proceed
with or effect the Merger.
We are entitled to receive a fee from Parent upon the rendering of
our opinion. In addition, Parent has agreed to reimburse us for
certain of our expenses and to indemnify us and certain related
parties for certain liabilities and other items arising out of or
related to our engagement. Economics Partners and its affiliates in
the past have provided valuation services to Mobcrush for which
services Economics Partners and its affiliates have received
compensation, including, during the past two years, providing 409a
valuation services. In addition, Economics Partners and its
affiliates may in the future provide management consulting and
financial advice and services to Mobcrush, Super League Gaming and
their respective affiliates for which advice and services Economics
Partners and its affiliates would expect to receive
compensation.
It is understood that this letter is for the information of the
Board of Directors of Parent (in its capacity as such) and does not
constitute advice or a recommendation to any security holder of
Parent or the Company as to how such security holder should vote or
act on any matter relating to the proposed Merger.
Based upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the Merger Consideration to be paid by Parent
in the Merger pursuant to the Agreement is fair, from a financial
point of view, to Parent.
Very truly yours,
/s/ Economics Partners, LLC
Economics Partners, LLC
ANNEX
E
Audited Consolidated Financial Statements
of Mobcrush Streaming, Inc. as of December 31, 2020 and 2019,
and the Notes Related Thereto
|
|
|
|
|
|
Mobcrush Streaming,
Inc.
Consolidated Financial
Statements
Periods
Ended December 31, 2020 and 2019
|
|
|
|
|
|
|
Mobcrush Streaming, Inc.
Contents
|
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
E-4
|
|
|
|
|
Consolidated
Financial Statements
|
|
|
|
|
|
Consolidated Balance
Sheets
|
E-5
|
|
|
|
|
Consolidated Statements of
Operations
|
E-6
|
|
|
|
|
Consolidated Statements of
Stockholders’ Equity (Deficit)
|
E-7
|
|
|
|
|
Consolidated Statements of
Cash Flows
|
E-8
|
|
|
|
|
Notes to the Consolidated
Financial Statements
|
E-9 – E-24
|
Report of Independent Registered Public Accounting
Firm
To the Stockholders and the Board of Directors of Mobcrush
Streaming, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Mobcrush Streaming Inc. and its subsidiaries (the Company) as of
December 31, 2020 (Successor) and 2019 (Predecessor), the related
consolidated statements of operations, stockholders' equity and
cash flows for the period from May 5, 2020 to December 31, 2020
(Successor), the period from January 1, 2020 to May 4, 2020
(Predecessor), and the year ended December 31, 2019 (Predecessor),
and the related notes to the consolidated financial
statements (collectively, 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,
2020 (Successor) and 2019 (Predecessor), and the results of its
operations and its cash flows for the for the period from May 5,
2020 to December 31, 2020 (Successor), the period from January 1,
2020 to May 4, 2020 (Predecessor), and the year ended December 31,
2019 (Predecessor), in conformity with accounting principles
generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company has suffered
recurring losses from operations and negative cash flows from
operations. This raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans in
regard to these matters also are described in Note 3. 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 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. Those standards require that we plan and perform the audit
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/ Baker Tilly US, LLP
We have served as the Company's auditor since 2021.
Irvine, California
April 19, 2021
Mobcrush Streaming, Inc.
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
Current Assets
|
|
|
|
Cash
and cash equivalents
|
$1,712,103
|
$2,865,694
|
|
Accounts
receivable
|
1,134,216
|
947,001
|
|
Prepaid
expenses
|
215,647
|
324,962
|
|
Unbilled
revenue
|
-
|
7,600
|
|
Total
current assets
|
3,061,966
|
4,145,257
|
|
|
|
|
|
Property and equipment - Net
|
21,035
|
43,009
|
|
Intangible Assets
|
2,500,952
|
-
|
|
Goodwill
|
1,115,919
|
-
|
|
TOTAL ASSETS
|
$6,699,872
|
$4,188,266
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
Accounts
payable
|
$934,111
|
$655,017
|
|
Accrued
expenses
|
1,323,175
|
1,204,581
|
|
Deferred
revenue
|
180,000
|
18,661
|
|
Convertible
note due to stockholder
|
-
|
3,127,543
|
|
Total
current liabilities
|
2,437,286
|
5,005,802
|
|
Commitments and Contingencies (Note 9)
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit)
|
|
|
|
Series
Seed preferred stock, $0.0001 par value; 3,036,264 shares
authorized, issued and outstanding at December 31, 2019;
liquidation preference of $2,600,258 at December 31
2019
|
-
|
2,600,258
|
|
Series Seed-1 preferred
stock, $0.0001 par value; 1,569,961 shares authorized, issued and
outstanding at December 31, 2019; liquidation preference of
$2,999,993 at December 31 2019
|
-
|
2,299,993
|
|
Series A
preferred stock, $0.0001 par value; 15,979,351 and 3,267,496 shares
authorized, issued and
outstanding at December 31, 2020 and 2019; liquidation preference
of $15,979,351 and $13,252,964 at December 31 2020 and
2019
|
3,414,972
|
11,249,989
|
|
Series
A-1 preferred stock, $0.0001 par value; 7,263,341 shares
authorized, 4,539,605 shares issued and outstanding at Decembeer
31, 2020; liquidation preference of $4,999,921 at December 31,
2020
|
4,891,283
|
-
|
|
Series B
preferred stock, $0.0001 par value; 3,917,958 shares authorized,
3,917,949 shares issued and outstanding at Decembeer 31, 2019;
liquidation preference of $19,999,954 at December 31,
2019
|
-
|
19,808,899
|
|
Common stock, $0.01 and
$0.0001 par value at December 31, 2020 and 2019; 27,237,530 and
20,000,000 shares authorized at December 31, 2020 and 2019; 1,000
and 4,442,399 shares issued and outstanding at December 31, 2020
and 2019
|
10
|
40,901
|
|
Additional paid-in
capital
|
66,445
|
915,429
|
|
Accumulated
deficit
|
(4,110,124)
|
(37,733,005)
|
|
Total stockholders’ equity
(deficit)
|
4,262,586
|
(817,536)
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
$6,699,872
|
$4,188,266
|
The accompanying notes are an integral part of these consolidated
financial statements.
|
Mobcrush Streaming, Inc.
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
Period form May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
|
|
|
|
|
Revenues
|
$4,456,992
|
$2,070,483
|
$3,973,876
|
|
Cost
of sales
|
2,967,036
|
1,201,850
|
2,823,994
|
|
Gross Profit
|
1,489,956
|
868,633
|
1,149,882
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
Selling
and marketing expenses
|
1,211,419
|
1,001,255
|
1,992,673
|
|
Research
and development expenses
|
2,117,869
|
1,432,701
|
3,712,227
|
|
General
and administrative expenses
|
2,262,548
|
1,721,947
|
3,053,139
|
|
Loss from Operations
|
(4,101,880)
|
(3,287,270)
|
(7,608,157)
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
Interest
income
|
-
|
9,323
|
51,518
|
|
Interest
expense
|
-
|
(53,591)
|
(12,560)
|
|
Other
income (expense)
|
(8,244)
|
(2,960)
|
(14,422)
|
|
Total Other Income (Expense)
|
(8,244)
|
(47,228)
|
24,536
|
|
|
|
|
|
|
Net Loss
|
$(4,110,124)
|
$(3,334,498)
|
$(7,583,621)
|
The accompanying notes are an integral part of these consolidated
financial statements.
Consolidated Statements of Stockholders' Equity
(Deficit)
|
|
Series Seed
Preferred Stock
|
Series Seed-1
Preferred Stock
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
2019
|
3,036,264
|
$2,600,258
|
1,569,961
|
$2,299,993
|
3,267,496
|
$11,249,989
|
3,917,949
|
$19,808,899
|
4,422,399
|
$40,901
|
$546,168
|
$(30,149,384)
|
$6,396,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
369,261
|
-
|
369,261
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(7,583,621)
|
(7,583,621)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2019
|
3,036,264
|
$2,600,258
|
1,569,961
|
$2,299,993
|
3,267,496
|
$11,249,989
|
3,917,949
|
$19,808,899
|
4,422,399
|
$40,901
|
$915,429
|
$(37,733,005)
|
(817,536)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
132,826
|
-
|
132,826
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(3,334,498)
|
(3,334,498)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 3,
2020
|
3,036,264
|
$2,600,258
|
1,569,961
|
$2,299,993
|
3,267,496
|
$11,249,989
|
3,917,949
|
$19,808,899
|
4,422,399
|
$40,901
|
$1,048,255
|
$(41,067,503)
|
$(4,019,208)
|
|
|
|
Series A-1
Preferred Stock
|
|
|
Accumulated
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 4,
2020
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
stock
|
-
|
-
|
-
|
-
|
1,000
|
10
|
-
|
-
|
10
|
|
Issuance of Series
A preferred stock for cash and ssignment of note
receivable
|
15,979,351
|
3,414,972
|
-
|
-
|
-
|
-
|
-
|
-
|
3,414,972
|
|
Issuance of Series
A-1 preferred stock, net of issuance costs of
$108,638
|
|
|
4,539,605
|
4,891,283
|
|
|
|
|
4,891,283
|
|
Stock-based
compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
66,445
|
-
|
66,445
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(4,110,124)
|
(4,110,124)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2020
|
15,979,351
|
$3,414,972
|
4,539,605
|
$4,891,283
|
1,000
|
$10
|
$66,445
|
$(4,110,124)
|
$4,262,586
|
The accompanying notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
Period from May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
Cash Flows From Operating Activities
|
|
|
|
|
Net
loss
|
$(4,110,124)
|
$(3,334,498)
|
$(7,583,621)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
Depreciation
and amortization
|
356,061
|
12,121
|
44,256
|
|
Loss
(gain) on disposal of fixed assets
|
(521)
|
-
|
1,010
|
|
Stock-based
compensation expense
|
66,445
|
132,826
|
369,261
|
|
Non-cash
interest expense
|
-
|
53,591
|
12,561
|
|
Increase
(decrease) in cash resulting from changes in:
|
|
|
|
|
Accounts
receivable
|
(706,865)
|
519,650
|
249,832
|
|
Prepaid
expenses
|
(39,321)
|
148,636
|
(97,720)
|
|
Unbilled
receivables
|
4,516
|
3,084
|
544,600
|
|
Accounts
payable
|
45,991
|
233,103
|
543,268
|
|
Accrued
expenses
|
723,107
|
(599,220)
|
127,553
|
|
Deferred
revenue
|
180,000
|
(18,661)
|
18,661
|
|
Net
cash used in operating activities
|
(3,480,711)
|
(2,849,368)
|
(5,770,339)
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
Purchases
of property and equipment
|
(12,137)
|
(13,268)
|
(16,698)
|
|
Proceeds
from disposal of fixed assets
|
10,610
|
-
|
-
|
|
Net
cash used in investing activities
|
(1,527)
|
(13,268)
|
(16,698)
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
Proceeds
from issuance of common and preferred stock, net of $108,638
offering costs
|
5,191,283
|
-
|
-
|
|
Principal
borrowings from the CARES Act loan
|
-
|
546,810
|
-
|
|
Principal
repayments on the CARES Act loan
|
-
|
(546,810)
|
-
|
|
Proceeds
from issuance of convertible promissory notes
|
-
|
-
|
3,114,982
|
|
Net
cash (used in) provided by financing activities
|
5,191,283
|
-
|
3,114,982
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Cash
Equivalents
|
1,709,045
|
(2,862,636)
|
(2,672,055)
|
|
Cash and Cash Equivalents at Beginning of Period
|
3,058
|
2,865,694
|
5,537,749
|
|
Cash and Cash Equivalents at End of Period
|
$1,712,103
|
$3,058
|
$2,865,694
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow
Information:
|
|
|
|
|
Cash paid
during the year for:
|
|
|
|
|
Interest
|
$-
|
$-
|
$-
|
|
Income
taxes
|
$8,765
|
$2,959
|
$14,422
|
|
|
|
|
|
|
Non-cash investment and financing activities
|
|
|
|
|
Issuance
of preferred stock in exchange for assignment of note
receivable
|
$3,114,982
|
$-
|
$-
|
|
Noncash
assets and liabilities acquired from Mobcrush, Inc.
|
$3,114,982
|
$-
|
$-
|
The accompanying notes are an integral part of these consolidated
financial statements.
Mobcrush
Streaming, Inc.
Notes to the Consolidated Financial
Statements
1.
Organization and Business
Nature
of operations
Mobcrush Streaming, Inc. (“the
Company”) was formed on April 1, 2020. The Company provides
mobile livestreaming services. On May 4, 2020, the Company acquired
the assets of Mobcrush, Inc., which was formed on July 17, 2014.
Among the assets acquired were the wholly owned stock of INPvP,
LLC. The financial results of this wholly owned subsidiary are
included in these consolidated financial statements. All
intercompany balances and transactions have been eliminated in
consolidation.
2. Basis
of Presentation and Principles of Consolidation
The
accompanying consolidated financial statements have been prepared
on the accrual basis in accordance with generally accepted
accounting principles (“GAAP”) as promulgated in the
United States of America. As a result of the change in control of
the Company on May 4, 2020, Mobcrush Streaming, Inc. applied the
acquisition method of accounting with respect to the assets and
liabilities of Mobcrush, Inc. and its subsidiary INPvP, LLC that it
acquired, which were remeasured to fair value as of the date of the
transaction. The Company’s consolidated financial statements
for periods following the close of the transaction are labeled
“Successor” and reflect Mobcrush Streaming Inc.’s
basis of accounting in the new fair values of the assets and
liabilities of Mobcrush Inc. acquired businesses. All periods prior
to the close of the transaction reflect the historical accounting
basis in the Company’s assets and liabilities and are labeled
“Predecessor”. The Company’s consolidated
financial statements and footnotes include a black line division,
which appears between the columns titled Predecessor and Successor,
which signifies that the amounts shown for the periods to and
following the May 4, 2020 transaction are not comparable. See Note
4 for additional information on the May 4, 2020
transaction.
3.
Summary of Significant Accounting Principles
Going concern uncertainties and liquidity requirements
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which
contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The
consolidated financial statements do not reflect any adjustments
relating to the recoverability and reclassification of assets and
liabilities that might be necessary if the Company is unable to
continue as a going concern. Since inception, the Company has
incurred losses and negative cash flows from operations. Management
expects to incur additional operating losses and negative cash
flows from operations in the foreseeable future as the Company
continues its product development programs. For the years ended
December 31, 2020 and 2019, the Company incurred net losses had
cash used in operations as follows:
|
|
|
|
|
|
Period from May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
Net
loss
|
$(4,110,124)
|
$(3,334,498)
|
$(7,583,621)
|
|
Cash used
in operations
|
$(3,480,711)
|
$(2,849,368)
|
$(5,770,339)
|
As of
December 31, 2020, the Company had cash and cash equivalents of
approximately $1,712,000 and an accumulated deficit
of approximately $4,110,000.
Based on
the Company’s current level of expenditures, the Company
believes that its existing cash and cash equivalents as of December
31, 2020 will not provide sufficient funds to enable it to meet its
obligations for the next 12 months from the issuance of the
Company’s consolidated financial statements as of and for the
year ended December 31, 2020.
On March 9,
2021, the Company entered into an agreement to be acquired by a
public company (see Note 13). Should this acquisition not be
consummated, the Company plans to
raise additional capital by selling shares of capital stock or
other equity or debt securities. However, the Company can give no
assurance that such capital will be available on favorable terms or
at all. The Company may need additional financing thereafter until
it can achieve profitability.
Although the Company is actively pursuing the
aforementioned sale of the Company, if the transaction is not
completed the Company may not be able to raise cash on terms
acceptable to the Company or at all. There can be no assurance that
the Company will be successful in obtaining additional funding.
Financings, if available, may be on terms that are dilutive to
shareholders, and the prices at which new investors would be
willing to purchase the Company’s securities may be lower
than the current price of ordinary shares. The holders of new
securities may also receive rights, preferences or privileges that
are senior to those of existing holders of ordinary shares. If
additional financing is not available or is not available on
acceptable terms, the Company could be forced to
delay, reduce, or eliminate its research and development programs
or future commercialization efforts, which could adversely affect
its future business prospects and its ability to continue as a
going concern. .
Use of
estimates
The preparation
of the consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates. Significant estimates
made by management include, but are not limited to, the stage of
completion of contracts, realization of deferred tax assets,
accrued liabilities, stock-based compensation and the fair value of
the Company’s Common Stock and Preferred Stock.
Cash
and cash equivalents
The Company
considers all highly liquid investments with original maturities of
90 days or less at the date of purchase to be cash
equivalents.
Accounts
receivable and allowance for doubtful accounts
Accounts
receivable are derived from services delivered to customers and are
stated at their net realizable value.
Property
and equipment
Property and
equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. Equipment,
computers, software, and furniture and fixtures are depreciated
over periods ranging from five to seven years, and leasehold
improvements over the shorter period of the lease or the life of
the asset. The cost of maintenance and repairs is charged to
expense as incurred; significant renewals and betterments are
capitalized. Deductions are made for retirements resulting from
renewals or betterments.
Acquisitions
For
acquisitions that meet the definition of a business under ASC
805, the Company records the acquisition using the acquisition
method of accounting. All of the assets acquired, liabilities
assumed, contractual contingencies, and contingent consideration,
when applicable, are recorded at fair value at the acquisition
date. Any excess of the purchase price over the fair value of the
net assets acquired is recorded as goodwill. The application of the
acquisition method of accounting requires management to make
significant estimates and assumptions in the determination of the
fair value of assets acquired and liabilities assumed in order to
properly allocate purchase price consideration. For acquisitions
that do not meet the definition of a business under ASC 805,
the Company accounts for the transaction as an asset
acquisition.
Goodwill
and intangible assets
Goodwill is
tested for impairment at a minimum on an annual basis. Goodwill is
tested for impairment at the reporting unit level by first
performing a qualitative assessment to determine whether it is more
likely than not that the fair value of the reporting unit is less
than its carrying value. If the reporting unit does not pass the
qualitative assessment, then the reporting unit's carrying value is
compared to its fair value. The fair values of the reporting units
are estimated using market and discounted cash flow approaches.
Goodwill is considered impaired if the carrying value of the
reporting unit exceeds its fair value. The discounted cash flow
approach uses expected future operating results. Failure to achieve
these expected results may cause a future impairment of goodwill at
the reporting unit.
The Company
conducted its annual impairment test of goodwill as of
December 31, 2020. As a result of this test, the Company
recorded no impairment charge to its goodwill for the year ended
December 31, 2020.
Intangible
assets consist of trademarks, purchased customer and advertiser
relationships, influencers/content creators, and purchased
technology. Intangible assets are amortized over the period of
estimated benefit using the straight-line method and estimated
useful lives ranging from 4 to 10 years. No significant residual
value is estimated for intangible assets. The Company evaluates
long-lived assets (including intangible assets) for impairment
whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. An
asset is considered impaired if its carrying amount exceeds the
undiscounted future net cash flow the asset is expected to
generate.
The
Company’s evaluation of its long-lived assets completed
during the years ended December 31, 2020 and 2019 resulted in
no impairment charges.
Amortization
expense for intangible assets was approximately $339,000 during the
period from May 4, 2020 through December 31, 2020;$0 during the
period from January 1, 2020 through May 3, 2020;and $0 during
2019.
Future
amortization on intangible assets for the next five years is as
follows:
|
2021
|
$508,571
|
|
2022
|
508,571
|
|
2023
|
508,571
|
|
2024
|
501,905
|
|
2025
|
281,571
|
Preferred
stock
The Company
records Preferred Stock at fair value on the dates of issuance, net
of issuance costs. Preferred stock is recorded as
stockholders’ equity.
Income
taxes
For the years
ended December 31, 2020 and 2019 income taxes are recorded in
accordance with Financial Accounting Standards Board
(“FASB”) ASC Topic 740, Income Taxes (“ASC
740”), which provides for deferred taxes using an asset and
liability approach. Under this method, the Company records deferred
tax assets and liabilities for the expected future tax consequences
of temporary differences between the financial statement carrying
amounts and the tax basis of assets and liabilities using enacted
tax rates expected to be in effect when the differences are
expected to reverse. Valuation allowances are provided when
necessary to reduce net deferred tax assets to the amount that is
more likely than not to be realized. Based on the available
evidence, the Company is unable, at this time, to support the
determination that it is more likely than not that its deferred tax
assets will be utilized in the future. Accordingly, the Company
recorded a full valuation allowance as of December 31, 2020 and
2019. The Company intends to maintain valuation allowances until
sufficient evidence exists to support its reversal.
Current income
taxes (benefits) are based upon the year's income taxable for
federal and state tax reporting purposes. Deferred income taxes
(benefits) are provided for certain income and expenses, which are
recognized in different periods for tax and financial reporting
purposes.
Revenue
recognition
Revenue is
recognized when the Company transfers 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 and
services. In this regard, revenue is recognized when: (i) the
parties to the contract have approved the contract (in writing,
orally, or in accordance with other customary business practices)
and are committed to perform their respective obligations; (ii) the
entity can identify each party’s rights regarding the goods
or services to be transferred; (iii) the entity can identify the
payment terms for the goods or services to be transferred; (iv) the
contract has commercial substance (that is, the risk, timing, or
amount of the entity’s future cash flows is expected to
change as a result of the contract);and (v) it is probable that the
entity will collect substantially all of the consideration to which
it will be entitled in exchange for the goods or services that will
be transferred to the customer.
The Company
generates revenues and related cash flows from (i) platform
generated sales transactions, and (ii) advertising and
third-party content.
Platform Generated Sales Transactions
The Company
generates in-game Platform sales revenues via digital goods sold
within the platform, including cosmetic items, durable goods,
player ranks and game modes, leveraging the flexibility of the
Microsoft Minecraft Bedrock platform, and powered by the InPvP
cloud architecture technology platform. Revenue is generated
when transactions are facilitated between Microsoft and the end
user, either via in-game currency or cash.
Revenue for
digital goods sold on the platform is recognized when Microsoft
(our partner) collects the revenue and facilitates the transaction
on the platform. Revenue for such arrangements includes all revenue
generated, bad debt, make goods, and refunds of all transactions
managed via the platform by Microsoft. The revenue is
recognized on a reconciled monthly basis. Payments are made to the
Company monthly by Microsoft based on the reconciled sales revenue
generated.
Advertising and Third-Party Content Revenue
The Company
generates content through digital experiences that offer
opportunities for generating advertising revenue across social
platforms and influençer activations including live streaming.
The Company’s technology allows creators to live stream to
their fans across multiple social platforms and integrate with a
sponsored message or ad placement during the session.
For
advertising and third-party content arrangements that include
performance obligations satisfied over time, customers typically
simultaneously receive and consume the benefits under the
arrangement as the Company satisfies its performance obligations,
over the applicable contract term. As such, revenue is recognized
over the contract term based upon progress toward complete
satisfaction of the contract performance obligations (typically
utilizing a time, effort or delivery-based method of estimation).
Payments are typically due from customers once delivery is
complete for shorter campaigns. In the case of some longer
campaigns, the Company can break out the campaign billables into
installments.
Revenue billed
or collected in advance is recorded as deferred revenue until the
event occurs or until applicable performance obligations are
satisfied as described above. As of December 31, 2020, the Company
expects 100% of total deferred revenue to be realized in less
than a year.
Revenue was
comprised of the following for the periods presented:
|
|
|
|
|
|
Period from May 4, 2020 to December 31, 2020
|
Period form
January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
Platform
generated
|
$1,312,164
|
$796,245
|
$1,702,455
|
|
Advertising
and content
|
3,144,828
|
1,274,238
|
2,221,421
|
|
Other
|
̶
|
̶
|
50,000
|
|
Total
revenue
|
$4,456,992
|
$2,070,483
|
$3,973,876
|
Research
and development
The Company
engages in new product development efforts. Research and
development expenses relating to possible future products are
expensed as incurred.
Leases
The Company
leases all its office space and may enter into various other
operating lease agreements in conducting its business. At the
inception of a lease, the Company evaluates the lease agreement to
determine whether the lease is an operating or capital lease.
Operating lease expenses are recognized in the consolidated
statement of operations on a straight-line basis over the term of
the related lease. Some of the Company’s lease agreements may
contain renewal options, tenant improvement allowances, rent
abatements or rent escalation clauses. When such items are included
in a lease agreement, the Company records a deferred rent asset or
liability on the consolidated balance sheet equal to the difference
between the rent expense and cash rent payments.
Stock-based
compensation
The Company
accounts for its stock-based compensation in accordance
with ASC 718, Compensation-
Stock Compensation. The Company accounts for all stock-based
compensation awards using a fair-value method on the grant date and
recognizes the fair value of each award as an expense over the
requisite service period.
The Company
follows ASC 505-50, Equity-Based
Payments to Non-Employees, for stock options issued to
consultants and other non-employees. In accordance with ASC 505-50,
these stock options issued as compensation for services provided to
the Company are accounted for based upon the fair value of the
services provided or the estimated fair market value of the option,
whichever can be more clearly determined. The fair value of the
equity instrument, which is revalued at each reporting period, is
charged directly to compensation expense and additional paid-in
capital over the period during which services are
rendered.
Recent
accounting standards adopted
In May 2014,
the FASB issued ASC 606, “Revenue from Contracts with
Customers.” This standard superseded nearly all
existing revenue recognition guidance under GAAP. Under this
standard, revenue is recognized when promised goods or services are
transferred to customers in an amount that reflects the
consideration that is expected to be received for those goods or
services. This standard also requires additional disclosure about
the nature, amount, timing and uncertainty of revenue and cash
flows arising from customer contracts, including significant
judgments and changes in judgments. The Company adopted this
standard prior to January 1, 2019.
Recent
accounting standards not yet adopted
In February
2016, the FASB issued an ASU that requires lessees to present
right-of-use assets and lease liabilities on the balance sheet. The
new guidance is to be applied using a modified retrospective
approach at the beginning of the earliest comparative periods in
the financial statements and is effective for fiscal years
beginning after December 15, 2021 and early adoption is permitted.
The Company is evaluating the impact that this guidance will have
on its financial position, results of operations and financial
statement disclosures.
In June 2016,
the FASB issued guidance on the measurement and recognition of
credit losses on most financial assets. For trade receivables,
loans, and held-to-maturity debt securities, the current probable
loss recognition methodology is being replaced by an expected
credit loss model. For available-for-sale debt securities, the
recognition model on credit losses is generally unchanged, except
the losses will be presented as an adjustable allowance. The
guidance will be applied retrospectively with the cumulative effect
recognized as of the date of adoption. The guidance will become
effective at the beginning of the Company’s first quarter of
the fiscal year ending December 31, 2021 but can be adopted as
early as the beginning of the first quarter of fiscal year ending
December 31, 2020. The Company is currently assessing the impact
that adopting this new accounting guidance will have on its
financial statements and footnote disclosures.
4.
Acquisition of Mobcrush, Inc.
On May 4, 2020,
the Company entered into Asset Purchase Agreement with Mobcrush,
Inc., a Delaware Corporation (“Seller”), whereby the
Company acquired assets and assumed certain liabilities of the
Seller, which included the wholly owned stock of its subsidiary
INPvP, LLC (“the Acquisition”). Consideration for the
Acquisition consisted of the forgiveness of the convertible
promissory note described in Note 6.
The acquisition
of Mobcrush, Inc. was accounted for as a business combination using
the acquisition method pursuant to FASB ASC Topic 805. As the
acquirer for accounting purposes, the Company has estimated the
Purchase Price, assets acquired and liabilities assumed as of the
acquisition date, with the excess of the Purchase Price over the
fair value of net assets acquired recognized as goodwill. An
independent valuation expert assisted the Company in determining
these fair values.
The Purchase
Price allocation as of the acquisition date is presented as
follows:
|
|
|
|
Purchase
price:
|
|
|
Forgiveness
of debt, at fair value
|
$3,114,982
|
|
Total
Purchase Price
|
$3,114,982
|
|
|
|
|
Purchase price
allocation:
|
|
|
Cash
|
$3,058
|
|
Accounts
receivable
|
427,351
|
|
Other
current assets
|
180,842
|
|
Property
and equipment
|
36,000
|
|
Identifiable
intangible assets
|
2,840,000
|
|
Goodwill
|
1,115,919
|
|
Total
identifiable assets required
|
$4,603,170
|
|
Accounts
payable
|
(888,120)
|
|
Accrued
expenses
|
(600,068)
|
|
Net
assets acquired
|
$3,114,982
|
The allocation
of the purchase price for Mobcrush, Inc.’s intangible assets
were as follows:
|
|
|
|
|
|
|
|
|
Developed
technology
|
$1,140,000
|
4-5
|
|
Customer
relationships
|
200,000
|
7
|
|
Advertiser
relationships
|
500,000
|
10
|
|
Influencers / content
creators
|
600,000
|
5
|
|
Trademarks
|
400,000
|
5
|
|
Total
intangible assets
|
$2,840,000
|
|
5.
Balance Sheet Components
Property
and Equipment
Property and
equipment consisted of the following:
|
|
|
|
|
December
31,
|
|
|
|
Computer and
equipment
|
$38,048
|
$330,568
|
|
Leasehold
improvements
|
̶
|
25,070
|
|
Furniture and
fixtures
|
̶
|
93,026
|
|
Software
|
̶
|
7,840
|
|
|
38,048
|
456,504
|
|
Less accumulated
depreciation and
|
|
|
|
amortization
|
(17,013)
|
(413,495)
|
|
|
$21,035
|
$43,009
|
Depreciation
expense was approximately $17,000 during the period from May 4,
2020 through December 31, 2020; $12,000 during the period from
January 1, 2020 through May 3, 2020; and $44,000 during 2019.
Depreciation expense is included
in general and administrative expenses in the consolidated
statement of operations.
Accrued
Expenses
Accrued
expenses consisted of the following:
|
|
|
|
|
December
31,
|
|
|
|
Accrued partner
expenses
|
$599,587
|
$248,050
|
|
Accrued payroll &
payroll taxes
|
386,247
|
495,825
|
|
Accrued infrastructure
expenses
|
190,303
|
213,937
|
|
Accrued
commission
|
115,802
|
54,522
|
|
Other accrued
expenses
|
31,236
|
192,247
|
|
Total
accrued expenses
|
$1,323,175
|
$1,204,581
|
6.
Debt
Convertible
Promissory Note
In December
2019, the Company issued a $3,114,982 convertible promissory note
to a minority stockholder. The note bore interest at 5% compounded
annually and was due at the earlier of January 31, 2020 or the
closing of the next equity financing. Upon the next equity
financing, the note was to be automatically converted into the
shares issued in the equity financing at a conversion price equal
to 75% of the price per share paid in the equity financing. In May
2020, the note holder formed Mobcrush Streaming, Inc. and assigned
the note to that company. On May 4, 2020, in connection with
Mobcrush Streaming, Inc.’s purchase of the assets of
Mobcrush, Inc., the note plus accrued interest balance of
$3,181,134 was forgiven. The fair value of the loan forgiveness was
considered part of the purchase price consideration (see Note
4).
CARES
Act Payroll Protection Program Loan
During 2020 the
Company received and repaid $546,810 in loans under the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act).
7.
Stockholders’ Equity
Mobcrush, Inc. (Predecessor)
The Amended and
Restated Certificate of Incorporation dated September 8, 2016
authorized the issuance of 20,000,000 shares of Common Stock and
11,791,679 shares of Preferred Stock, with a par value of $0.0001
per share.
Preferred
Stock
During 2019 and
the period from January 1, 2020 through May 3, 2020, the following
shares of Mobcrush, Inc. preferred stock were outstanding:
3,036,264 shares of Series Seed; 1,569,961 shares of Series Seed-1;
3,267,496 shares of Series A; and 3,917,949 shares of Series
B.
Conversion
At the option
of the holder, shares of Series Seed, Series Seed-1, Series A, and
Series B Preferred Stock were convertible into Common Stock at a
conversion rate of one-to-one, subject to adjustments for stock
dividends, splits, combinations and similar events. Automatic
conversion would occur in the event of a firmly underwritten public
offering of Common Stock of the Company with total proceeds to the
Company of at least $30,000,000, before deduction of underwriters'
commissions and expenses.
Redemption
The shares of
the Series Seed, Series Seed-1, Series A, and Series B Preferred
Stock were redeemable only upon acquisition or liquidation of the
Company.
Liquidation
preference
With respect to
any distributions in connection with a liquidation, dissolution or
winding up of the Company, or in connection with the sale of voting
control of all or substantially all of the assets of the Company,
by way of merger, acquisition, consolidation or similar
transaction, prior to any distribution to Common Stockholders, the
holders of Series Seed, Series Seed-1, Series A, and Series B
Preferred Stock were entitled to receive $0.8564, $1.4650, $4.0560,
and $5.1047 per share, respectively, plus any declared but unpaid
dividends, adjusted to reflect any dividends previously paid. If,
upon the occurrence of such event, the assets and funds distributed
among the holders of Series Seed, Series Seed-1, Series A, and
Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full liquidation preference amounts,
the entire assets and funds of the Company legally available shall
be distributed ratably among the Preferred Stock holders in
proportion to the preferential amount to which each holder is
entitled.
After payment
of the liquidation preferences, the holders of Common Stock were
entitled to receive the remaining assets of the Company available
for distribution to its stockholders pro rata based on the number
of shares of Common Stock held by each holder.
Voting
rights
The holders
of vested shares of Common Stock shall be entitled to vote on any
matter submitted to a vote of the stockholders and each such holder
shall be entitled to one vote per share of Common Stock held. The
holders of Series Seed, Series Seed-1, Series A, and Series B
Preferred Stock shall be entitled to vote together with the Common
Stock as a single class on any matter submitted to a vote of the
stockholders, and shall be entitled to the number of votes equal to
the number of Common Stock issuable upon conversion of their
respective shares of Preferred Stock at the time such shares are
voted. The holders of a majority of the Preferred Stock have
additional voting rights as specified in the Company’s
Amended and Restated Certificate of Incorporation.
Mobcrush Streaming, Inc. (Successor)
The Amended and
Restated Certificate of Incorporation dated May 29, 2020 authorize
the issuance of 27,237,530 shares of Common Stock with a par value
of $0.01 per share, and 23,242,692 shares of Preferred Stock with a
par value of $0.0001 per share.
Preferred
Stock
In May 2020
upon inception of Mobcrush Streaming, Inc., the Company issued
1,000 shares of common stock and 15,979,351 shares of Series A
preferred stock to the convertible promissory note holder described
in Note 6. As consideration for the shares, the investor paid cash
of $300,000 and assigned the note receivable to Mobcrush Streaming,
Inc. The fair value of the assigned note receivable was determined
to be $3,114,982.
During the
period from May 4, 2020 through December 31, 2020, the Company
issued an aggregate of 4,539,605 shares of Series A-1 preferred
stock for proceeds of approximately $4,891,000, net of issuance
costs of approximately $109,000.
Conversion
At the option
of the holder, shares of Series A and Series A-1 Preferred Stock
are convertible into Common Stock at a conversion rate of
one-to-one, subject to adjustments for stock dividends, splits,
combinations and similar events. Automatic conversion will occur in
the event of a firmly underwritten public offering of Common Stock
of the Company with total proceeds to the Company of at least
$30,000,000, before deduction of underwriters' commissions and
expenses.
Redemption
The shares of
the Series A and Series A-1 Preferred Stock are redeemable only
upon acquisition or liquidation of the Company.
Liquidation
preference
With respect to
any distributions in connection with a liquidation, dissolution or
winding up of the Company, or in connection with the sale of voting
control of all or substantially all of the assets of the Company,
by way of merger, acquisition, consolidation or similar
transaction, prior to any distribution to Common Stockholders, the
holders of Series A and Series A-1 Preferred Stock are entitled to
receive $1.00 and $1.1014 per share, respectively, plus any
declared but unpaid dividends, adjusted to reflect any dividends
previously paid. If, upon the occurrence of such event, the assets
and funds distributed among the holders of Series A and Series A-1
Preferred Stock shall be insufficient to permit the payment to such
holders of the full liquidation preference amounts, the entire
assets and funds of the Company legally available shall be
distributed ratably among the Preferred Stock holders in proportion
to the preferential amount to which each holder is
entitled.
After payment
of the liquidation preferences, the holders of Common Stock are
entitled to receive the remaining assets of the Company available
for distribution to its stockholders pro rata based on the number
of shares of Common Stock held by each holder.
Voting
rights
The holders
of vested shares of Common Stock shall be entitled to vote on any
matter submitted to a vote of the stockholders and each such holder
shall be entitled to one vote per share of Common Stock held. The
holders of Series A and Series A-1 Preferred Stock shall be
entitled to vote together with the Common Stock as a single class
on any matter submitted to a vote of the stockholders, and shall be
entitled to the number of votes equal to the number of Common Stock
issuable upon conversion of their respective shares of Preferred
Stock at the time such shares are voted. The holders of a majority
of the Preferred Stock have additional voting rights as specified
in the Company’s Amended and Restated Certificate of
Incorporation.
8.
Equity Awards
In 2014, the
Board of Directors of Mobcrush, Inc. approved the Mobcrush, Inc.
2014 Equity Incentive Plan (the “2014 Plan”). The Plan
provided for the issuance of Common Stock options, appreciation
rights, and other awards to employees, directors, and consultants.
The number of shares that may be issued under the Plan was not to
exceed 4,416,538 shares. Options issued under the Plan generally
vested over a four-year period with cliff vesting for the first
year and had a 10-year expiration date. During 2020, the 2014 Plan
terminated upon the sale of Mobcrush, Inc.’s assets to
Mobcrush Streaming, Inc.
In 2020, the
Board of Directors of Mobcrush Streaming, Inc. approved the
Mobcrush Streaming, Inc. 2020 Equity Incentive Plan (the
“2020 Plan”). The Plan provided for the issuance of
Common Stock options, appreciation rights, and other awards to
employees, directors, and consultants. The number of shares that
may be issued under the Plan may not exceed 3,993,838 shares.
Options issued under the Plan generally vest over a four-year
period with cliff vesting for the first year and have a 10-year
expiration date.
The Company
adopted the fair value recognition provisions in accordance with
authoritative guidance related to equity-based payments.
Compensation expenses in 2020 and 2019 include the portion of
awards vested in the periods for all equity-based awards granted,
based on the grant date fair value estimated using a Black-Scholes
option valuation model, consistent with authoritative guidance,
using the weighted average assumptions in the table
below:
|
|
|
|
|
|
Period from May 4,
2020 to December 31, 2020
|
Period from January 1, 2020 to May 3,
2020
|
Year ended December
31, 2019
|
|
Expected
volatility
|
76.00%
|
47.67%
|
47.67%
|
|
Dividend yield
|
0.00%
|
0.00%
|
0.00%
|
|
Risk-free interest
rate
|
0.11%
|
2.8%
|
2.8%
|
|
Expected term in
years
|
3.00
|
2.00
|
2.00
|
Expected Volatility - The expected
volatility is based on a peer group in the industry in which the
Company does business.
Dividend Yield - The Company has not,
and does not, intend to pay dividends.
Risk-free Interest Rate - The Company
applies the risk-free interest rate based on the U.S. Treasury
yield in effect at the time of the grant consistent with the
expected term of the award.
Expected Term in Years - The Company
calculated the expected term using the Simplified Method. This
method uses the average of the contractual term of the option and
the weighted average vesting period in accordance with
authoritative guidance.
Forfeitures - Share-based compensation
expense recognized in the consolidated statement of operations is
based on awards ultimately expected to vest, reduced for estimated
forfeitures. Authoritative guidance applicable to equity-based
compensation requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. A forfeiture rate of 0%
was used for 2020 and 2019.
Estimates of
fair value are not intended to predict actual future events or the
value ultimately realized by employees who receive equity awards,
and subsequent events are not indicative of the reasonableness of
the original estimates of fair value made by the Company in
accordance with authoritative guidance.
A summary of
the Company’s share option activity is as
follows:
2014 Plan (Predecessor)
|
|
|
Weighted
Average Exercise Price
|
|
|
Options outstanding at
January 1, 2019
|
2,830,363
|
$1.44
|
$1,339,634
|
|
Granted
|
188,749
|
$1.91
|
|
|
Options outstanding at
December 31, 2019
|
3,019,112
|
$1.47
|
$1,348,125
|
|
Granted
|
218,145
|
$1.91
|
-
|
|
Forfeited
|
(3,237,257)
|
$1.50
|
-
|
|
Options outstanding at May
4, 2020
|
-
|
$-
|
$-
|
|
Options vested and
exercisable at May 4, 2020
|
-
|
$-
|
$-
|
* The
estimate of fair value of the Company’s Common Stock on
December 31, 2019 was $1.91 per share.
During the
period from January 1, 2020 through May 3, 2020 and the year ended
December 31, 2019, share-based compensation expense of
approximately $133,000 and $369,000, respectively, was included in
general and administrative expenses in the consolidated statement
of operations.
The weighted
average fair value of grant date awards granted during the period
from January 1, 2020 through May 3, 2020 and the year ended
December 31, 2019 was $0.54 and $0.54 per share,
respectively.
2020 Plan (Successor)
|
|
|
Weighted
Average Exercise Price
|
|
|
Options outstanding at May
4, 2020
|
-
|
$-
|
$-
|
|
Granted
|
3,306,220
|
$0.17
|
-
|
|
Options outstanding at
December 31, 2020
|
3,306,220
|
$0.17
|
$-
|
|
Options vested and
exercisable at December 31, 2020
|
545,129
|
$0.17
|
$-
|
* The
estimate of fair value of the Company’s Common Stock on
December 31, 2020 was $0.17 per share.
Additional
information regarding options outstanding as of December 31, 2020
is as follows:
|
|
|
Weighted
Average Remaining Contractual Life in Years
|
|
Weighted
Average Remaining Contractual Life in Years
|
|
$0.17
|
3,306,220
|
9.73
|
545,129
|
9.72
|
|
|
3,306,220
|
9.73
|
545,129
|
9.72
|
The intrinsic
value for options exercised represents the difference between the
estimate of fair value based on the valuation of the shares on the
date of exercise and the exercise price of the share
option.
During the
period from May 4, 2020 through December 31, 2020, share-based
compensation expense of approximately $66,000 was included in
general and administrative expenses in the consolidated statement
of operations.
As of December
31, 2020, there was approximately $176,000 of total unrecognized
compensation expense related to unvested share-based compensation
arrangements granted under the Plan. The cost is expected to be
recognized over a weighted average period of 3.37
years.
The weighted
average fair value of grant date awards granted during the period
May 4, 2020 through December 31, 2020 was $0.08 per share. There
were 687,618 stock option shares available to be issued at December
31, 2020.
9.
Commitment and Contingencies
Operating
leases
Rent expense,
net of sublease income, was approximately$0 during the period from
May 4, 2020 through December 31, 2020; $370,000 during the period
from January 1, 2020 through May 3, 2020; and $338,000 for the year
ended December 31, 2019. The facility lease of Mobcrush, Inc. was
not among the assets acquired by Mobcrush Streaming, Inc. on May 4,
2020 and was terminated. The Company did not enter into any leases
or subleases subsequent to that date. As such, the Company has no
future lease commitments as of December 31, 2020.
Litigation
In the normal
course of business, the Company may possibly be named as a
defendant in various lawsuits; there are no such lawsuits currently
pending nor is management aware of any such potential
lawsuits.
10.
Concentrations
Credit
risk
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and cash
equivalents.
The Company
maintains cash balances at financial institutions located in
California. Accounts at these institutions are secured by the
Federal Deposit Insurance Corporation. At times, balances may
exceed federally insured limits. The Company has not experienced
any losses in such accounts. Management believes that the Company
is not exposed to any significant credit risk with respect to its
cash and cash equivalents.
Customers
The Company
grants unsecured credit to its customers based on an evaluation of
the customer’s financial condition and a cash deposit is
generally not required. Management believes its credit policies do
not result in significant adverse risk and historically has not
experienced significant credit-related losses.
During the
period from May 4, 2020 through December 31, 2020, the Company had
three major customers that accounted for approximately 29%, 14%,
and 14%, respectively, of the Company’s total revenues. At
December 31, 2020, the amounts receivable (payable) from these
customers were approximately $198,000, $240,000, and
($40,000).
During the
period from January 1, 2020 through May 3, 2020, the Company had
three major customers that accounted for approximately 38%, 29%,
and 27%, respectively, of the Company’s total
revenues.
During 2019,
the Company had two major customers that accounted for
approximately 42% and 12%, respectively, of the Company’s
total revenues. At December 31, 2019, the amounts receivable from
these customers were approximately $209,000 and
$480,000.
11.
Income Taxes
Coronavirus
Aid, Relief and Economic Security Act
On March 27,
2020, the Coronavirus Aid, Relief, and Economic Security Act (the
CARES Act) was enacted and signed into law in response to the
market volatility and instability resulting from the COVID-19
pandemic. It includes a significant number of tax provisions and
lifts certain deduction limitations originally imposed by the Tax
Cuts and Jobs Act of 2017 (the 2017 Act). The changes are mainly
related to: (1) the business interest expense disallowance rules
for 2019 and 2020; (2) net operating loss rules; (3) charitable
contribution limitations; (4) employee retention credit; and (5)
the realization of corporate alternative minimum tax credits. The
Company does not anticipate the application of the CARES Act
provisions to materially impact the overall Consolidated Financial
Statements.
The components
of current income tax expense are as follows:
|
|
|
|
|
|
Period from May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 May 3, 2020
|
Year ended
December 31, 2019
|
|
Federal
|
$̶
|
$̶
|
$̶
|
|
State
|
̶
|
̶
|
̶
|
|
Total
income tax expense
|
$̶
|
$̶
|
$̶
|
Significant
components of the Company's net deferred tax asset at December 31,
2020 and 2019 are as follows:
|
|
|
|
|
December
31,
|
|
|
|
Deferred tax
assets:
|
|
|
|
Net
operating loss
|
$958,000
|
$9,114,000
|
|
Depreciation
and amortization
|
58,000
|
̶
|
|
Credits
|
̶
|
1,011,000
|
|
Other
|
̶
|
̶
|
|
Total deferred tax
assets
|
1,016,000
|
10,125,000
|
|
Valuation
allowance
|
(1,016,000)
|
(10,125,000)
|
|
Net deferred tax
assets
|
$̶
|
$̶
|
In assessing
the realizability of deferred tax assets of approximately
$1,016,000 at December 31, 2020 management considered whether it is
more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become
deductible.
A
reconciliation of the expected tax computed at the U.S. statutory
federal income tax rate to the total provision for income taxes
follows:
|
|
|
|
Period from May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 to May 3, 2020
|
Year ended
December 31, 2019
|
|
Computed
expected tax expense
|
$(863,000)
|
$(700,000)
|
$(1,593,000)
|
|
State
taxes, net of federal benefit
|
̶
|
̶
|
̶
|
|
Non-deductible
expenses
|
15,000
|
696,000
|
90,000
|
|
Change in
valuation allowance
|
848,000
|
4,000
|
1,503,000
|
|
Total
income tax expense
|
$--
|
$̶
|
$̶
|
Realization of
a portion of the Company’s deferred tax assets is dependent
upon the Company generating sufficient taxable income in future
years to obtain benefit from the reversal of temporary
differences.
Management
considered all available evidence under existing tax law and
anticipated expiration of tax statutes and determined that a
valuation allowance was required as of December 31, 2020 and 2019,
respectively, for those deferred tax assets that are not expected
to provide future tax benefits.
At December 31,
2020, the Company has available net operating loss carryforwards of
approximately $3,834,000 for federal income tax purposes, all
of which were generated after 2017 and can be carried forward
indefinitely under the Tax Cuts and Jobs Act.
At December 31,
2020, the net operating losses for state purposes are approximately
$2,194,000 and will begin to expire in 2035 if not
utilized.
At December 31,
2020, the Company has federal and state income tax credit
carryforwards of approximately $0 and $0, respectively. The federal
credit carryovers begin to expire in 2038. The state credit
carryovers do not expire.
The Company has
not completed a study to determine whether any ownership change per
the provisions of Section 382 of the Internal Revenue Code of 1986,
as amended, as well as similar state provisions, has occurred.
Utilization of the Company's net operating loss and income tax
credit carryforwards may be subject to a substantial annual
limitation due to ownership changes that may have occurred or that
could occur in the future. These ownership changes may limit the
amount of the net operating loss and income tax credit carryover
that can be utilized annually to offset future taxable income. In
general, an "ownership change" as defined by Section 382 of the
Code results from a transaction or series of transactions over a
three-year period resulting in an ownership change of more than 50
percentage points of the outstanding stock of a company by certain
stockholders.
Uncertain
tax positions
In accordance
with authoritative guidance, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest
amount that is more-likely-than-not to be sustained upon audit by
the relevant taxing authority. An uncertain income tax position
will not be recognized if it has less than a 50% likelihood of
being sustained. The Company has no material uncertain tax
positions as of December 31, 2020.
The Company
recognizes interest and penalties related to unrecognized tax
positions within the income tax expense line in the accompanying
consolidated statement of operations. There were no accrued
interest and penalties associated with uncertain tax positions as
of December 31, 2020 and 2019.
The Company is
subject to U.S. federal and state income tax, and in the normal
course of business, its income tax returns are subject to
examination by the relevant taxing authorities. As of December 31,
2020, the 2017 – 2020 tax years remain subject to examination
in the U.S. federal tax and various state tax jurisdictions.
However, to the extent allowed by law, the taxing authorities may
have the right to examine the period from 2013 through 2020 where
net operating losses and income tax credits were generated and
carried forward and make adjustments to the amount of the net
operating loss and income tax credit carryforward amount. The
Company is not currently under examination by federal or state
jurisdictions.
12.
Related Party Transactions
In December
2019, the Company issued a $3,114,982 convertible promissory note
to a minority stockholder. See Notes 4, 6, and 7.
13.
Subsequent Events
The Company has
evaluated subsequent events through April 19, 2021, the date which
the consolidated financial statements were available to be
issued.
Bridge
Note
On February 23,
2021, the Company issued a $500,000 convertible promissory note to
a stockholder. The note bears interest at 12% compounded monthly
and is due February 23, 2022. Upon the closing of a sale of the
Company (as contemplated by the Merger Agreement discussed below),
the note will automatically convert into the common shares of the
acquirer (i.e. Super League Gaming, Inc.).
Proposed
Acquisition of Mobcrush Streaming, Inc.
On March 9,
2021, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Super League Gaming, Inc. ("Super
League"), a publicly traded company. Upon completion of the Merger,
the Company will be a wholly-owned subsidiary of Super League
Gaming, Inc.
In accordance
with the terms and subject to the conditions of the Merger
Agreement: (A) each outstanding share of the Company’s common
stock and preferred stock (other than dissenting shares) will be
canceled and converted into the right to receive (i) 0.528 shares
of Super League's common stock (“Super League Common Stock"),
as determined in the Merger Agreement (the “Share Conversion
Ratio”), and (ii) any cash in lieu of fractional shares of
Super League Common Stock otherwise issuable under the Merger
Agreement (the "Merger Consideration"); (B) vested stock options
will be converted into comparable options that are exercisable for
shares of Super League Common Stock, with a value determined in
accordance with the Share Conversion Ratio; and (C) unvested stock
options will either be (i) converted into comparable options that
are exercisable for shares of Super League Common Stock, with a
value as determined by the Super League and the Company prior to
the closing of the Merger, or (ii) terminated and re-issued as
options that are exercisable for shares of Super League Common
Stock with a value as determined by Super League and the Company
prior to the closing of the Merger. Subject to certain adjustments
and other terms and conditions more specifically set forth in the
Merger Agreement, Super League will be issuing 12,582,204 shares of
Super League Common Stock as the Merger Consideration. The Merger
Agreement contains representations, warranties and covenants of
each of the parties thereto that are customary for transactions of
this type.
The obligations
of the Company and Super League to consummate the Merger are
subject to certain closing conditions, including, but not limited
to the approval of Super League's and the Company’s
shareholders.
ANNEX
F
Unaudited Pro Forma Condensed Combined Financial
Information,
and the Related Notes
Thereto, of Super League Gaming, Inc.
as of and for
the Year ended December 31,
2020
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
Overview
On March 9, 2021, Super League Gaming, Inc. (the
“Company” or “Super League”) entered into
an Agreement and Plan of Merger (the “Merger
Agreement”) by and among Mobcrush Streaming, Inc.
(“Mobcrush”), the Company, and SLG Merger Sub II, Inc.,
a wholly-owned subsidiary of the Company (“Merger Co”).
The Merger Agreement provides for the acquisition of Mobcrush by
the Company pursuant to the merger of Merger Co with and into
Mobcrush, with Mobcrush as the surviving corporation (the
“Merger”). Upon completion of the Merger, Mobcrush will
be a wholly-owned subsidiary of the Company.
In accordance with the terms and subject to the
conditions of the Merger Agreement: (A) each outstanding share of
Mobcrush common stock, par value $0.001 per share ("Mobcrush Common
Stock"), and Mobcrush preferred stock, par value $0.001 ("Mobcrush
Preferred Stock", and with the Mobcrush Common Stock, the "Mobcrush
Stock") (other than dissenting shares) will be canceled and
converted into the right to receive (i) 0.528 shares of the
Company's common stock, par value $0.001 per share ("Company Common
Stock"), as determined in the Merger Agreement (the “Share
Conversion Ratio”), and (ii) any cash in lieu of fractional
shares of Common Stock otherwise issuable under the Merger
Agreement (the "Merger Consideration"). Subject to certain
adjustments and other terms and conditions more specifically set
forth in the Merger Agreement, the Company will be issuing
12,582,204 shares of Company Common Stock as the Merger
Consideration.
The obligations of the Company and Mobcrush to
consummate the Merger are subject to certain closing conditions,
including, but not limited to the approval of Mobcrush's and the
Company’s shareholders.
Pro Forma Condensed Combined
Information
The following unaudited pro
forma condensed combined financial information combines the
historical financial statements of Super League and Mobcrush and
gives effect to the Merger as if the Merger had previously occurred
on the dates specified below. The pro forma adjustments
reflecting the completion of the Merger are based upon the
acquisition method of accounting in accordance with U.S. generally
accepted accounting principles ("GAAP"), and upon the assumptions
set forth in the notes to the unaudited pro forma condensed
combined financial statements.
In
accordance with the acquisition method of accounting, the actual
financial statements of Super League will reflect the Mobcrush
acquisition only from and after the actual date of acquisition.
Super League has not yet undertaken any detailed analysis of the
fair value of Mobcrush’s assets and liabilities and will not
finalize the purchase price allocation related to the Merger until
after the merger is consummated.
The unaudited pro forma condensed combined
balance sheet as of December 31, 2020, gives effect to the Merger
as if it had taken place on December 31, 2020. The unaudited pro
forma condensed combined
statements of operations for the year ended December 31, 2020,
reflect the Merger as if it had taken place on January 1,
2020.
The unaudited pro forma condensed combined
financial information, and the accompanying notes, should be read
in conjunction with the historical financial statements of the
Company as of and for the year ended December 31, 2020, which are
included in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 19, 2021,
including the notes thereto. The unaudited pro forma condensed
combined financial information, and the accompanying notes, should
also be read in conjunction with the historical financial
statements of Mobcrush as of and for the years ended December 31,
2020, and 2019, including the notes thereto, included elsewhere
herein.
The estimated acquisition consideration and
estimated fair value of assets acquired and liabilities assumed in
Note 2 and the preliminary pro forma adjustments in Note 3, are
based upon preliminary estimates and currently available
information. Final acquisition accounting adjustments may differ
from the preliminary pro forma adjustments presented
herein.
For purposes of the pro forma condensed combined
information, adjustments for estimated transaction and integration
costs for the Merger have been excluded. Aggregate estimated
transaction costs are expected to be approximately $900,000 and
include estimated costs associated with legal, advisory and
accounting fees of both companies. In addition, the combined
company will incur integration costs related to system and other
conversions and other integration costs. The specific details of
these integration plans will continue to be refined over the next
several quarters.
The unaudited pro forma condensed combined
financial information included herein does not give effect to any
potential cost reductions or other operating efficiencies that
could result from the Merger, including but not limited to those
associated with potential (i) reductions of corporate
overhead, (ii) eliminations of duplicate functions and
(iii) increased operational efficiencies through the adoption
of best practices and capabilities from each
company.
The unaudited pro forma condensed combined
balance sheet and statements of operations are for informational
purposes only. They do not purport to indicate the results that
would have actually been obtained had the acquisition been
completed on the assumed date or for the periods presented, or
which may be obtained in the future.
SUPER LEAGUE GAMING,
INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
As of December 31,
2020
|
|
Super
League
Gaming,
Inc.
|
|
Preliminary
Pro Forma Adjustments
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
|
$7,942,000
|
$1,712,000
|
$(1,712,000)
|
(A)
|
$7,942,000
|
|
Accounts receivable
|
588,000
|
1,134,000
|
|
|
1,722,000
|
|
Prepaid expenses and other current
assets
|
837,000
|
216,000
|
|
|
1,053,000
|
|
Total current
assets
|
9,367,000
|
3,062,000
|
(1,712,000)
|
|
10,717,000
|
|
Property and Equipment, net
|
138,000
|
21,000
|
44,000
|
(C)
|
203,000
|
|
Intangible and Other Assets,
net
|
1,907,000
|
2,501,000
|
3,480,000
|
(C),(E)
|
7,888,000
|
|
Goodwill
|
2,565,000
|
1,116,000
|
29,401,000
|
(C),(E)
|
33,082,000
|
|
Total
assets
|
$13,977,000
|
$6,700,000
|
$31,213,000
|
|
$51,890,000
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
$1,829,000
|
$2,258,000
|
$(1,712,000)
|
(A)
|
$2,375,000
|
|
Deferred Revenue
|
-
|
180,000
|
(180,000)
|
(B)
|
-
|
|
Total current
liabilities
|
1,829,000
|
2,438,000
|
(1,892,000)
|
|
2,375,000
|
|
|
|
|
|
|
|
|
Note Payable
|
1,208,000
|
-
|
-
|
|
1,208,000
|
|
Total
liabilities
|
3,037,000
|
2,438,000
|
(1,892,000)
|
|
3,583,000
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share;
10,000,000 shares authorized; no shares issued or
outstanding
|
|
|
|
|
|
|
Preferred Series A -
Mobcrush
|
|
3,415,000
|
(3,415,000)
|
(D)
|
-
|
|
Preferred Series A-1-
Mobcrush
|
|
4,891,000
|
(4,891,000)
|
(D)
|
-
|
|
Common stock, par value $0.001 per share;
100,000,000 shares authorized; 15,483,010 and 8,573,922 shares
issued and outstanding as of December 31, 2020 and 2019,
respectively.
|
25,000
|
-
|
13,000
|
(D)
|
38,000
|
|
Additional paid-in capital
|
115,459,000
|
66,000
|
38,841,000
|
(D),(E.1)
|
154,366,000
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
(104,544,000)
|
(4,110,000)
|
2,557,000
|
(C), (D), (E), (E.1)
|
(106,097,000)
|
|
Total stockholders’
equity
|
10,940,000
|
4,262,000
|
33,105,000
|
|
48,307,000
|
|
Total liabilities and
stockholders’ equity
|
$13,977,000
|
$6,700,000
|
$31,213,000
|
|
$51,890,000
|
SUPER LEAGUE GAMING,
INC.
UNAUDITED PRO FORMA
CONDENSEDCOMBINED STATEMENT OF OPERATIONS
For the Year Ended December
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Super League
Gaming, Inc.
|
Period from
May 4, 2020 to December 31, 2020
|
Period from
January 1, 2020 to May 3, 2020
|
Preliminary
Pro Forma Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$2,064,000
|
$4,457,000
|
$2,070,000
|
$-
|
|
$8,591,000
|
|
Cost of
Revenues
|
(856,000)
|
(2,967,000)
|
(1,202,000)
|
-
|
|
(5,025,000)
|
|
Gross
Profit
|
1,208,000
|
1,490,000
|
868,000
|
-
|
|
3,566,000
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
Selling, marketing and
advertising
|
5,403,000
|
1,211,000
|
1,001,000
|
-
|
|
7,615,000
|
|
Technology Platform and
Infrastructure
|
6,647,000
|
2,118,000
|
1,433,000
|
-
|
|
10,198,000
|
|
General and administrative
|
7,901,000
|
2,263,000
|
1,722,000
|
1,553,000
|
(F),(I)
|
13,439,000
|
|
Total operating
expenses
|
19,951,000
|
5,592,000
|
4,156,000
|
1,553,000
|
|
31,252,000
|
|
Net operating
loss
|
(18,743,000)
|
(4,102,000)
|
(3,288,000)
|
(1,553,000)
|
|
(27,686,000)
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
Interest expense
|
(8,000)
|
|
(54,000)
|
54,000
|
(G)
|
(8,000)
|
|
Other
|
19,000
|
(8,000)
|
7,000
|
-
|
|
18,000
|
|
Total other income
(expense)
|
11,000
|
(8,000)
|
(47,000)
|
54,000
|
|
10,000
|
|
Net Loss
|
$(18,732,000)
|
$(4,110,000)
|
$(3,335,000)
|
$(1,499,000)
|
|
$(27,676,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common
share
|
$(1.64)
|
|
|
$-
|
|
$(1.15)
|
|
Weighted-average number of shares outstanding,
basic and diluted
|
11,430,057
|
|
|
12,582,204
|
(H)
|
24,012,261
|
|
|
|
|
|
|
|
|
NOTES TO THE UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description
of Transaction and Basis of Presentation
On March 9, 2021, the Company entered into a
Merger Agreement by and among Mobcrush, the Company, and Merger Co.
The Merger Agreement provides for the acquisition of Mobcrush by
the Company pursuant to the merger of Merger Co with and into
Mobcrush, with Mobcrush as the surviving corporation. Upon
completion of the Merger, Mobcrush will be a wholly-owned
subsidiary of the Company.
In accordance with the terms and subject to the
conditions of the Merger Agreement: (A) each outstanding share of
Mobcrush Stock, (other than dissenting shares) will be canceled and
converted into the right to receive (i) 0.528 shares of the Company
Common Stock, as determined in the Merger Agreement, and (ii) any
cash in lieu of fractional shares of Company Common Stock otherwise
issuable under the Merger Agreement. Subject to certain adjustments
and other terms and conditions more specifically set forth in the
Merger Agreement, the Company will be issuing 12,582,204 shares of
Company Common Stock as the Merger
Consideration.
The obligations of the Company and Mobcrush to
consummate the Merger are subject to certain closing conditions,
including, but not limited to the approval of Mobcrush's and the
Company’s shareholders.
The accompanying unaudited pro forma condensed
combined financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and certain footnote disclosures normally
included in financial statements prepared in accordance with GAAP
have been condensed or omitted pursuant to such rules and
regulations; however, management believes that the disclosures are
adequate to make the information presented not
misleading.
The accompanying unaudited pro forma condensed
combined balance sheet as of December 31, 2020 gives effect to the
Merger as if it had taken place on December 31, 2020. The unaudited
pro forma condensed combined statement of operation for the year
ended December 31, 2020, reflects the Merger as if it had taken
place on January 1, 2020. The estimated fair values of the assets
acquired and liabilities assumed in Note 2 and the preliminary pro
forma adjustments in Note 3, are based upon preliminary estimates
and currently available information. Final acquisition method
accounting adjustments may differ from the pro forma adjustments
presented.
The pro forma adjustments include the
application of the acquisition method of accounting pursuant to ASC
Topic 805, "Business Combinations" (“ASC 805”). ASC 805
requires, among other things, that identifiable assets acquired and
liabilities assumed be recognized at their fair values as of the
acquisition date. Under the acquisition method of accounting, the
purchase consideration is allocated to the assets acquired,
including tangible assets, and identifiable intangible assets and
liabilities assumed, based on their estimated fair market values on
the date of acquisition. Any excess purchase price after the
initial allocation to identifiable net tangible and identifiable
intangible assets is assigned to goodwill. Amounts attributable to
intangible assets other than goodwill are amortized using the
straight-line method over the estimated economic useful life of the
underlying intangible asset. Fair value measurements can be highly
subjective, and it is possible that other professionals, applying
reasonable judgment to the same facts and circumstances, could
develop and support a range of alternative estimated
amounts.
The historical consolidated financial data has
been adjusted to give effect to pro forma events that are (1)
directly attributable to the Merger, (2) factually supportable, and
(3) with respect to the statements of operations, expected to have
a continuing impact on the combined results. The pro forma
adjustments are preliminary and based on management’s
preliminary estimates of the fair value and useful lives of the
assets acquired and liabilities assumed and have been prepared to
illustrate the estimated effect of the acquisition and certain
other adjustments.
2. Merger
Consideration and Estimated Fair Value of Assets Acquired and
Liabilities Assumed
The following preliminary allocation of the
Merger Consideration is based on the Company’s preliminary
estimates of the fair value of the tangible and intangible assets
and liabilities of Mobcrush as of December 31, 2020. The final
determination of the allocation of the purchase price will be based
on the fair value of such assets and liabilities as of the actual
consummation date of the acquisition and will be completed after
the acquisition is consummated. Such final determination of the
purchase price allocation may be different than the preliminary
estimates used in these pro forma condensed combined financial
statements.
Merger
Consideration. As described above, the Merger Consideration
is primarily comprised of 12,582,204 shares of Company Common
Stock. A preliminary estimate of the purchase consideration,
assuming the transaction closed on January 29, 2021, is as follows
(rounded to nearest thousandth, except share and per share
information):
|
Number of shares of Super League common
stock
|
12,582,204
|
|
Super League closing stock price - January 29,
2021
|
$3.07
|
|
Total estimated purchase price Fair value of
shares of Super League common stock
|
$38,627,000
|
|
For pro forma purposes, the
fair value of the Company Common Stock used in determining the
estimated Merger Consideration was $3.07 per share based on the
closing price of Company Common Stock on January 29,
2021.
The final Merger Consideration could
significantly differ from the amounts presented in the unaudited
pro forma condensed combined financial information due to changes
in Company Common Stock price as of the actual closing date of the
Merger. A sensitivity analysis related to the fluctuation in the
Company Common Stock price was performed to assess the impact that
a hypothetical change of 20% on the closing price of Company Common
Stock on January 29, 2021 would have on the equity component of the
estimated Merger Consideration and estimated goodwill as of the
closing date, as follows:
|
Change in Stock
Price:
|
|
Equity
Component of Merger Consideration
|
|
|
Increase 20%
|
$3.68
|
$46,303,000
|
$38,243,000
|
|
Decrease 20%
|
$2.46
|
$30,952,000
|
$22,792,000
|
As of April 30,
2021, the Company’s Common Stock closing price was
$5.38.
Estimated Fair
Value of Assets Acquired and Liabilities Assumed. Other than as described above
relating to the equity component of the Merger Consideration, the
unaudited pro forma condensed combined balance sheet as of December
31, 2020 gives pro forma effect to the Merger as if it was
completed on December 31, 2020. The estimated preliminary purchase
price of Mobcrush is allocated to the assets to be acquired and
liabilities to be assumed, based on the following preliminary basis
as of December 31, 2020:
|
|
|
|
Assets Acquired and
Liabilities Assumed:
|
|
|
Fair value of net tangible assets
acquired
|
$840,000
|
|
Intangible assets acquired -
patents
|
7,270,000
|
|
Goodwill
|
30,517,000
|
|
Total
|
$38,627,000
|
Management is primarily responsible for
determining the fair value of the tangible and identifiable
intangible assets acquired and liabilities assumed as of the
acquisition date. For the final analysis, management anticipates
considering a number of factors, including reference to an
independent analysis of estimated fair values solely for the
purpose of allocating the purchase price, which is not yet
complete. The preliminary estimates are subject to revision as more
detailed analysis is completed and additional information on the
fair values of the assets and liabilities acquired as of the
acquisition date becomes available. Any change in the estimated
fair value of the net assets acquired will change the amount of the
Merger Consideration allocable to tangible and intangible assets
acquired, and to goodwill, if any. Final acquisition method
accounting adjustments may therefore differ materially from the
proforma adjustments presented herein.
Immediately
prior to the effective time of the Merger, each vested option to
acquire shares of Mobcrush common stock will be exercised so that,
at the effective time of the Merger, shares of Mobcrush common
stock issued upon exercise of these vested options will receive
shares of Super League common stock issuable as Merger
Consideration. Unvested options to acquire shares of Mobcrush
common stock that are outstanding immediately prior to the
effective time shall be canceled, and a number of options to
purchase shares of Super League common stock will be issued to
replace the cancelled options in a manner consistent with options
currently granted by Super League under the 2014 Plan (the
“Replacement
Options”). The total number of Replacement Options to
be issued to assumed Mobcrush employees upon closing of the Merger
is estimated to be approximately 500,000 stock options.
The actual amount of Replacement
Options issued has not yet been determined and may differ
materially from the preliminary estimate provided
herein.
The Merger will be treated for tax purposes as a
nontaxable transaction and, as such, the historical tax bases of
the acquired assets and assumed liabilities, net operating losses,
and other tax attributes of Mobcrush will carryover. As a result,
no new tax goodwill will be created in connection with the Merger
as there is no step-up to fair value of the underlying tax bases of
the acquired net assets. The acquisition method of accounting
includes the establishment of a net deferred tax asset or liability
resulting from book tax basis differences related to assets
acquired and liabilities assumed on the date of acquisition.
Acquisition date deferred tax assets primarily relate to certain
net operating loss carryforwards of Mobcrush. Acquisition date
deferred tax liabilities related to specifically identified
non-goodwill intangibles resulting from the acquisition. For
purposes of the pro forma condensed combined financial information,
the estimated net deferred tax liability would be offset by the
Company’s existing net deferred tax assets, against which the
Company recorded a full valuation allowance as of December 31,
2020.
3.
Adjustments to Unaudited Pro Forma Condensed Combined Financial
Statements
The following
is a discussion of the adjustments made in connection with the
preparation of the unaudited pro forma condensed combined financial
statements. Each of these adjustments is based on a preliminary
assessment of currently available information, including
preliminary estimates of the fair values of Mobcrush's assets and
liabilities and estimated periodic amortization of such adjustments
to the extent applicable, and other preliminary estimates, as
described above. Actual adjustments will be made when the final
estimate of the fair value of Mobcrush's assets and liabilities on
the acquisition date is determined. Accordingly, the actual
adjustments to Mobcrush’s assets and liabilities and the
related amortization of such adjustments, and other estimates, may
differ materially from the estimates reflected in the unaudited pro
forma condensed combined financial statements contained
herein.
The accompanying unaudited pro forma combined
balance sheet gives effect to the Merger as if it had taken place
on December 31, 2020. The column entitled "Mobcrush Successor" on
the unaudited pro forma combined balance sheet reflects the
historical unaudited balance sheet of Mobcrush as of December 31,
2020. The unaudited pro forma combined statements of operations for
the year ended December 31, 2020, reflect the Merger as if it had
taken place on January 1, 2020. The columns entitled "Mobcrush
Successor" and “Mobcrush Predecessor” on the unaudited
pro forma condensed combined statements of operations reflects the
historical unaudited operating results of Mobcrush for the
applicable periods presented.
Unaudited Pro Forma Condensed
Combined Balance Sheet
The unaudited pro forma condensed combined
balance sheet also give effect to the following pro forma
adjustments:
(A)
To reflect the acquisition of Mobcrush’s
net liabilities at closing, pursuant to the terms of the Merger
Agreement. The adjustment contemplates that Mobcrush will use
existing cash to extinguish the applicable portion of liabilities
as of the proforma balance sheet date.
(B)
To reflect the estimated fair value of deferred
revenues in connection with the application of the acquisition
method of accounting.
(C)
To reflect the preliminary estimated fair value
of identifiable assets acquired and liabilities assumed. Intangible
assets are amortized over the estimated economic useful lives of
the underlying identifiable intangible assets, estimated as
described below, for purposes of the pro forma condensed combine
income statements included herein. Also reflects teh reversal of
fiscal 2020 depreciation and amortization expense for Mobcrush
pre-merger fixed assets and intangibles, totaling
$29,000.
(D)
To reflect the transfer of the Merger
Consideration as described above, primarily consisting of the
issuance of 12,582,204 shares of Company Common Stock to the
selling shareholders of Mobcrush, pursuant to the terms of the
Merger Agreement. Also includes pro forma adjustments to eliminate
the net equity of Mobcrush in connection with the application of
the acquisition method of accounting.
(E)
To reflect the reversal of Mobcrush’s
pre-merger existing intangibles and goodwill as of December 31,
2020, in connection with the application of acquisition method of
accounting. Also reflects the recording of estimated pro forma
amortization of identifiable intangibles acquired in connection
with the Merger totaling $1,289,000 for the period
presented.
(E.1)
To record in
additional paid-in capital and accumulated deficit, estimated
annual noncash stock compensation expense, totaling $293,000, in
connection with the issuance of an estimated 500,000 Replacement
Stock Options by Super League to certain Mobcrush employees assumed
in connection with the Merger, estimated using a Black-Scholes
calculation, based on an estimated stock price of $3.07. The actual
amount of Replacement Options to be issued has not yet been
determined and may differ materially from the preliminary estimate
provided herein.
Unaudited Pro Forma Condensed
Combined Income Statement
The unaudited pro forma condensed combined
income statement also give effect to the following pro forma
adjustments:
(F)
To reflect amortization of the estimated
intangible assets acquired on a straight-line basis over the
estimated economic useful life of the respective assets. The
preliminary allocation of Merger Consideration to the intangible
assets acquired and the related estimated useful lives was as
follows:
|
Description
|
|
Estimated
Useful Life (years)
|
Amortization
Expense per Year
|
|
Developed Technology
|
$2,500,000
|
5
|
$500,000
|
|
Influencers/Content Creators
|
1,800,000
|
5
|
360,000
|
|
Advertiser and Agency
Relationships
|
1,540,000
|
10
|
154,000
|
|
Trademarks
|
1,000,000
|
5
|
200,000
|
|
Other
|
466,000
|
5-7
|
75,000
|
|
|
$7,306,000
|
|
$1,289,000
|
Also reflects the reversal of fiscal 2020
depreciation and amortization expense for Mobcrush pre-merger fixed
assets and intangibles, totaling $29,000.
(G)
To exclude interest expense related to a
convertible promissory note to a minority stockholder of Mobcrush,
issued in December 2019, totaling $3,115,000, bearing interest at
5% compounded annually, with an original maturity of the earlier of
January 31, 2020, or the closing of the next equity financing. In
May 2020, the note holder became the majority stockholder of
Mobcrush Streaming, Inc. and assigned the note to that company. On
May 4, 2020, in connection with Mobcrush Streaming, Inc.’s
purchase of the assets of Mobcrush, Inc., the note plus accrued
interest balance of $3,181,000 was forgiven. This loan forgiveness
was considered part of the May 4, 2020 purchase price
consideration. There is no debt outstanding as of December 31,
2020. As such, the interest expense related to the promissory note
has been excluded from the accompanying unaudited pro forma
combined statements of operations for the periods
presented.
(H)
The denominator in computing pro forma earnings
(loss) per share includes only those common shares to be issued as
Merger Consideration in connection with the Merger on a pro forma
basis, totaling 12,582,204 shares.
(I)
To
record
estimated annual noncash stock compensation expense, totaling
$293,000, in connection with the issuance of an estimated 500,000
Replacement Stock Options by Super League to certain Mobcrush
employees assumed in connection with the Merger, estimated using a
Black-Scholes calculation, based on an estimated stock price of
$3.07. The actual amount of Replacement Options to be issued has
not yet been determined and may differ materially from the
preliminary estimate provided
herein.
|
Super League Gaming, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
2021 ANNUAL
MEETING OF STOCKHOLDERS – MAY 27, 2021 AT 10:00 AM
PDT
|
|
|
|
|
|
|
CONTROL ID:
|
|
|
|
|
|
|
|
|
REQUEST ID:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The undersigned stockholder(s) of Super League
Gaming, Inc., a Delaware Corporation (the
“Company”)
hereby appoints Ann Hand and Clayton Haynes, or any of them, as
proxy, with power of substitution, for and in the undersigned to
attend the 2021 Annual Meeting of Stockholders (the
“Meeting”) of the Company to be held virtually
at https://agm.issuerdirect.com/slgg
on Thursday, May 27, 2021 beginning at
10:00 AM PT, or at adjournment or postponement thereof, and there
to vote, as designated below.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete the reverse portion of this Proxy Card
and Fax to (202)
521-3464.
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INTERNET:
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https://www.iproxydirect.com/SLGG
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PHONE:
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1 (866)
752-VOTE(8683)
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2021 ANNUAL MEETING OF THE STOCKHOLDERS OFSuper League Gaming, Inc.
(the “Meeting”)
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE: ☒
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal
1
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Election
of Directors
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FOR
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WITHHOLD
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Election of
the two Class I director nominees named in the Company’s
proxy statement for the Meeting, each for a term of three
years.
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Kristin
Patrick
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☐
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☐
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CONTROL ID:
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David
Steigelfest
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☐
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☐
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REQUEST ID:
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Proposal
2
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Approval
of the 2014 Plan Amendment
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FOR
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AGAINST
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ABSTAIN
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Approval of
an amendment to our Amended and Restated 2014 Stock Option and
Incentive Plan to increase the number of shares of common stock
available for issuance thereunder to a total of 5.0 million
shares.
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☐
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☐
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☐
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Proposal
3
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Ratification
of Auditors
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FOR
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AGAINST
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ABSTAIN
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Ratification
of the appointment of Baker Tilly US, LLP as the Company’s
independent registered public accounting firm for the year ending
December 31, 2021.
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☐
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☐
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☐
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Proposal
4
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Mobcrush
Issuance Proposal
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FOR
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AGAINST
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ABSTAIN
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For purposes of complying with Nasdaq Listing Rule
5635, approval of the issuance of 12,582,204 shares of the
Company’s common stock, par value $0.001 per share
(“Common
Stock”), pursuant to the
terms of the Agreement and Plan of Merger, dated March 9, 2021, by
and among the Company, Mobcrush Streaming, Inc., and the other
parties thereto (the “Merger
Agreement”), which amount
is in excess of 20% of the Company’s Common Stock currently
issued and outstanding and will result in certain Mobcrush
stockholders becoming holders of 20% or more of the Company’s
outstanding Common Stock following completion of the merger
pursuant to the Merger Agreement.
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☐
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☐
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☐
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Proposal
5
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Adjournment Proposal
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FOR
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AGAINST
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ABSTAIN
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Approval of
a proposal to grant discretionary authority to adjourn the Meeting,
if necessary, to solicit additional proxies.
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☐
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☐
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☐
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MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
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MARK HERE FOR ADDRESS CHANGE ☐ New
Address (if applicable):
____________________________________________________________________________________
IMPORTANT: Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
Dated:
________________________, 2021
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(Print Name of Stockholder
and/or Joint Tenant)
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(Signature of
Stockholder)
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(Second Signature if held
jointly)
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