As filed with the Securities and Exchange Commission on May 25, 2022

Registration No. 333-262897

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 3

to

Form F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

UE RESORTS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Republic of the Philippines		7011		98-1640348
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

 

UE Resorts International, Inc.

New Seaside Drive, Entertainment City

Barangay Tambo, Parañaque City

Metro Manila 1701

Philippines

+63 2 880 7555

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

(800) 221-0102

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all correspondence to:

 

James Grandolfo, Esq. Milbank LLP 30/F Alexandra House Central Hong Kong Tel: +852 2971 4888		Jason Ader 26 Capital Acquisition Corp. 701 Brickell Avenue Miami, Florida 33131 Tel: (305) 709-6664		Xavier Kowalski, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, NY 10022 Tel: (212) 756 2000

 

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and on completion of the merger and share acquisition described in the enclosed proxy statement/prospectus.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

The information in this preliminary proxy statement/prospectus is not complete and may be changed. The registrant may not sell the securities described herein until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS — SUBJECT TO COMPLETION DATED MAY 25, 2022

PROXY STATEMENT/PROSPECTUS

 

UE Resorts International, Inc.		26 Capital Acquisition Corp.

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS OF

26 CAPITAL ACQUISITION CORP.

 

 

PROSPECTUS FOR UP TO 34,375,000 COMMON SHARES, 24,250,000 WARRANTS AND 24,250,000 COMMON SHARES UNDERLYING WARRANTS OF UE RESORTS INTERNATIONAL, INC.

 

 

The board of directors of 26 Capital Acquisition Corp., a Delaware corporation (“26 Capital”), has approved the agreement and plan of merger and share acquisition (the “Merger and Share Acquisition Agreement”), dated as of October 15, 2021, by and among Tiger Resort Asia Ltd., a Hong Kong private limited company (“TRA”), UE Resorts International, Inc. (formerly known as Okada Manila International, Inc.), a Philippine corporation (“UERI”), Project Tiger Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Tiger Resort, Leisure and Entertainment, Inc., a Philippine corporation (“TRLEI”), and 26 Capital. Pursuant to the Merger and Share Acquisition Agreement, Merger Sub will merge with and into 26 Capital and stockholders of 26 Capital will acquire the right to subscribe for UERI common shares (the “Merger and Share Acquisition”). For stockholders of 26 Capital who elect to subscribe for UERI common shares, the subscription price for the UERI common shares will be paid, on behalf of each subscribing 26 Capital stockholder, by 26 Capital, as described under “The Merger and Share Acquisition Agreement — The Subscription”, and 26 Capital stockholders will not be required to pay any additional consideration for the UERI common shares beyond exchanging their shares in the Merger and Share Acquisition. As a result of the Merger and Share Acquisition, and upon consummation thereof and the other transactions contemplated by the Merger and Share Acquisition Agreement, 26 Capital will become a wholly owned subsidiary of UERI, with securityholders of 26 Capital becoming securityholders of UERI.

26 Capital stockholders are being asked to consider a vote upon the Merger and Share Acquisition and certain proposals related thereto as described in this proxy statement/prospectus.

As a result of, and upon consummation of, the Merger and Share Acquisition, all outstanding shares of 26 Capital common stock (except for (i) any shares owned by 26 Capital, Merger Sub or any subsidiary of 26 Capital (“Excluded Shares”), which will be canceled without consideration, (ii) any shares of 26 Capital common shares that are held by stockholders who have made a valid redemption election (“Redeemed Shares”), which shares will be redeemed in accordance with 26 Capital’s organizational documents, and (iii) any shares of 26 Capital common shares that are held by stockholders who have perfected and not withdrawn a demand for appraisal rights pursuant to the applicable provision of the DGCL (“Dissenting Shares”)), shall be converted into and shall for all purposes represent only the right to subscribe for and purchase, pursuant to the Subscription Agreement and a letter of transmittal and subscription confirmation, one validly issued, fully paid and non-assessable share of common stock of UERI.

Further, at the Effective Time (as defined below), each warrant to acquire shares of 26 Capital that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, shall be converted into and become a warrant to purchase an equal number of UERI common shares, and UERI shall assume each warrant in accordance with its terms as in effect as of the date of the Merger and Share Acquisition Agreement. Immediately prior to the Effective Time, and subject to the receipt of requisite approvals of the applicable shareholders, the UEC Parties (as defined below) intend to effect a reorganization whereby TRLEI, then a consolidated subsidiary of TRA and beneficial owner of 100% of the issued and outstanding shares in UERI (“UERI Sale Shares”), will sell to TRA the UERI Sale Shares pursuant to a deed of absolute sale of shares. TRA will thereafter subscribe for additional shares in UERI in cash and contribute 100% of the issued and outstanding shares beneficially owned by TRA in TRLEI, including certain receivables due from TRLEI, as additional paid in capital in UERI, pursuant to subscription and contribution agreements (“Reorganization”). At the Effective Time, as a result of the Reorganization, and subject to the receipt of requisite approvals from government agencies to implement the Reorganization, UERI will become a direct wholly owned subsidiary of TRA, with TRLEI becoming a direct wholly owned subsidiary of UERI. The Reorganization is further described in the Merger and Share Acquisition Agreement. See “Information About UERI — Corporate Structure Charts” beginning on page 160 for more information.

The registration statement includes a prospectus of UERI that covers (i) the UERI common shares issuable to the 26 Capital stockholders in the Merger and Share Acquisition, as discussed above, (ii) the UERI warrants that will be issued in exchange for the 26 Capital warrants, as discussed above, and (iii) the UERI common shares that may become issuable upon the exercise of such UERI warrants. Accordingly, UERI is registering up to an aggregate of 34,375,000 UERI common shares, 24,250,000 UERI warrants and 24,250,000 UERI common shares issuable upon the exercise of the UERI warrants.

Proposals to approve the Merger and Share Acquisition Agreement and the other matters discussed in this proxy statement/prospectus will be presented at the special meeting of 26 Capital stockholders scheduled to be held on                     , 2022 in virtual format.

Although UERI is not currently a public reporting company, following the effectiveness of the registration statement of which this proxy statement/prospectus is a part and the closing of the Merger and Share Acquisition, UERI will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). UERI intends to apply for listing of the UERI common shares and UERI warrants on Nasdaq under the proposed symbols “UERI” and “UERIW”, respectively, to be effective at the consummation of the Merger and Share Acquisition. It is a condition of the consummation of the Merger and Share Acquisition that the UERI common shares are approved for listing on Nasdaq (subject only to official notice of issuance thereof). While trading on Nasdaq is expected to begin on the first business day following the date of completion of the Merger and Share Acquisition, there can be no assurance that UERI’s securities will be listed on Nasdaq or that a viable and active trading market will develop. See “Risk Factors ” beginning on page 42 for more information.

UERI will be an “emerging growth company” as defined in the JOBS Act and is therefore eligible to take advantage of certain reduced reporting requirements otherwise applicable to other public companies.

UERI will also be a “foreign private issuer” as defined in the Exchange Act and will be exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, UERI’s officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, UERI will not be required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

In addition, UERI will be a “controlled company” under Nasdaq corporate governance rules since more than 50% of the voting power for the election of UERI’s directors will held by TRA.

The accompanying proxy statement/prospectus provides 26 Capital stockholders with detailed information about the Merger and Share Acquisition and other matters to be considered at the special meeting of 26 Capital stockholders. We encourage you to read the entire accompanying proxy statement/prospectus, including the annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 42 of the accompanying proxy statement/prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OR ANY OF THE SECURITIES TO BE ISSUED IN THE MERGER AND SHARE ACQUISITION, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AND SHARE ACQUISITION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy statement/prospectus is dated              and is first being mailed to shareholders of 26 Capital on or about                     , 2022.

PRELIMINARY — SUBJECT TO COMPLETION DATED MAY 25, 2022

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

OF 26 CAPITAL ACQUISITION CORP.

To Be Held On                     

TO THE STOCKHOLDERS OF 26 CAPITAL ACQUISITION CORP.:

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of 26 Capital Acquisition Corp., a Delaware corporation (“26 Capital”), will be held at              Eastern time, on,             . You are cordially invited to attend and participate in the special meeting online by visiting https://                    . The special meeting will be held for the following purposes:

 

1.

Proposal No. 1 — The Merger and Share Acquisition Proposal — To consider and vote upon a proposal to approve and adopt the Merger and Share Acquisition Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A, and the transactions contemplated therein, including the Merger and Share Acquisition whereby Merger Sub will merge with and into 26 Capital, with 26 Capital surviving as a wholly-owned subsidiary of UERI (the “Merger and Share Acquisition Proposal”).

 

2.

Proposal No. 2 — The Charter Proposal — To consider and vote upon a proposal to approve the following material differences between 26 Capital’s amended and restated certificate of incorporation (the “26 Capital Charter”) and UERI’s amended and restated articles of incorporation to be effective upon the consummation of the Merger and Share Acquisition: (i) the name of the new public entity will be “UE Resorts International, Inc.” as opposed to “26 Capital Acquisition Corp.”; (ii) UERI’s amended and restated articles of incorporation will provide for one class of UERI common shares as opposed to the two classes of 26 Capital common stock provided for in the 26 Capital Charter; (iii) UERI’s corporate existence is perpetual as opposed to 26 Capital’s corporate existence terminating if a business combination is not consummated within a specific period of time; and (iv) UERI’s amended and restated articles of incorporation will not include the various provisions applicable only to special purpose acquisition corporations that the 26 Capital Charter contains (the “Charter Proposal”).

 

3.

Proposal No. 3 — The Subscription Proposal — To consider and vote upon a proposal to (i) approve and adopt the Subscription Agreement, a copy of which is attached to this proxy statement/prospectus as Annex B, and the transactions contemplated therein, (ii) approve the appointment of 26 Capital to act on behalf of its stockholders under the Subscription Agreement, including subscribing for UERI common shares at a purchase price of 0.05 PHP (0.05 Philippine pesos) at the Effective Time with the cash payment for such UERI common shares being made on behalf of the applicable stockholders, (iii) approve the declaration of a cash dividend (the “Subscription Dividend”) on the outstanding shares of 26 Capital common stock immediately prior to the closing of the Merger and Share Subscription (which will not include any Redeemed Shares) in the amount of 0.05 PHP (0.05 Philippine pesos) in order to fund the cash payment on behalf of stockholders of 26 Capital under the Subscription Agreement, and (iv) approve the use of the Subscription Dividend to either be paid by 26 Capital to UERI as the subscription price for the UERI common shares issued by UERI pursuant to the Subscription Agreement or paid to the holders of 26 Capital’s common stock who do not elect to subscribe for UERI common shares (these payments are together referred to as the “Use of Dividend Proceeds”) (the “Subscription Proposal”).

 

4.

Proposal No. 4 — The 2022 Equity Award Plan Proposal — To consider and vote upon a proposal to approve the UE Resorts International, Inc. 2022 Equity Award Plan (the “Equity Plan”) (the “Equity Plan Proposal”).

 

5.

Proposal No. 5 — The Adjournment Proposal — To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, if the parties are not able to consummate the Merger and Share Acquisition (the “Adjournment Proposal”).

We will also transact any other business as may properly come before the special meeting or any adjournment or postponement thereof.

The items of business listed above are more fully described elsewhere in the proxy statement/prospectus. Whether or not you intend to attend the special meeting, we urge you to read the attached proxy statement/prospectus in its entirety, including the annexes and accompanying financial statements, before voting. In particular, we urge you to carefully read the section in the proxy statement/prospectus titled “Risk Factors.”

Only holders of record of 26 Capital common stock at the close of business on              (the “record date”), are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements of the special meeting.

After careful consideration, 26 Capital’s board of directors has determined that each of the proposals listed is fair and in the best interest of 26 Capital and its stockholders and recommends that you vote or give instruction to vote “FOR” each of the proposals set forth above. When you consider the recommendations of 26 Capital’s board of directors, you should keep in mind that 26 Capital’s directors and officers may have interests in the Merger and Share Acquisition that conflict with, or are different from, your interests as a stockholder of 26 Capital. See the section titled “The Merger and Share Acquisition Proposal — Interests of 26 Capital’s Directors and Officers in the Merger and Share Acquisition.”

The Merger and Share Acquisition Proposal is conditioned on approval of the Subscription Proposal. If either of these proposals are not approved and the applicable closing condition in the Merger and Share Acquisition Agreement is not waived, the remaining proposals will not be presented to stockholders for a vote. The approval of the Charter Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal and the Subscription Proposal. The Equity Plan Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal, the Charter Proposal and the Subscription Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

All 26 Capital stockholders are cordially invited to attend the special meeting, which will be held virtually over the Internet at https://                    . To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a holder of record of 26 Capital common stock on the record date, you may also cast your vote at the special meeting. If your 26 Capital common stock is held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares, or, if you wish to attend the special meeting, obtain a proxy from your broker or bank. Public stockholders of 26 Capital may elect to redeem their public shares even if the vote “FOR” the Merger and Share Acquisition Proposal.

A complete list of 26 Capital stockholders of record entitled to vote at the special meeting will be available for ten days before the special meeting at the principal executive offices of 26 Capital for inspection by stockholders during business hours for any purpose germane to the special meeting.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting virtually or not, please complete, sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly voted and counted.

If you have any questions or need assistance voting your shares, please contact              at             . Questions can also be sent by email to             . This notice of special meeting and the proxy statement/prospectus relating to the Merger and Share Acquisition will be available at https://                    .

Thank you for your participation. We look forward to your continued support.

By Order of the Board of Directors

Jason Ader Chairman of the Board of Directors

                    , 2022

IF YOU RETURN YOUR SIGNED PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

ALL HOLDERS OF SHARES OF 26 CAPITAL CLASS A STOCK OUTSTANDING (THE “26 CAPITAL PUBLIC SHARES”) HAVE THE RIGHT TO HAVE THEIR 26 CAPITAL PUBLIC SHARES REDEEMED FOR CASH IN CONNECTION WITH THE PROPOSED MERGER AND SHARE ACQUISITION. 26 CAPITAL PUBLIC STOCKHOLDERS ARE NOT REQUIRED TO AFFIRMATIVELY VOTE FOR OR AGAINST THE MERGER AND SHARE ACQUISITION PROPOSAL, TO VOTE ON THE MERGER AND SHARE ACQUISITION PROPOSAL AT ALL, OR TO BE HOLDERS OF RECORD ON THE RECORD DATE IN ORDER TO HAVE THEIR SHARES REDEEMED FOR CASH.

THIS MEANS THAT ANY PUBLIC STOCKHOLDER HOLDING 26 CAPITAL PUBLIC SHARES MAY EXERCISE REDEMPTION RIGHTS REGARDLESS OF WHETHER THEY ARE ENTITLED TO VOTE ON THE MERGER AND SHARE ACQUISITION PROPOSAL.

TO EXERCISE REDEMPTION RIGHTS, HOLDERS MUST TENDER THEIR STOCK IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, THE TRUSTEE OF THE TRUST ACCOUNT THAT HOLDS A PORTION OF THE PROCEEDS OF THE 26 CAPITAL IPO (THE “TRUSTEE”), NO LATER THAN TWO BUSINESS DAYS PRIOR TO THE SPECIAL MEETING. YOU MAY TENDER YOUR STOCK BY EITHER DELIVERING YOUR STOCK CERTIFICATE TO THE TRUSTEE OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DEPOSIT WITHDRAWAL AT CUSTODIAN SYSTEM. IF THE MERGER AND SHARE ACQUISITION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “SPECIAL MEETING OF 26 CAPITAL STOCKHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.

TABLE OF CONTENTS

 

		Page
ADDITIONAL INFORMATION			1
ABOUT THIS PROXY STATEMENT/PROSPECTUS			1
INDUSTRY AND MARKET DATA			2
TRADEMARKS, TRADE NAMES AND SERVICE MARKS			3
PRESENTATION OF FINANCIAL AND OTHER INFORMATION			4
FREQUENTLY USED TERMS			7
EXCHANGE RATES			10
QUESTIONS AND ANSWERS			11
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS			25
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			40
RISK FACTORS			42
SPECIAL MEETING OF 26 CAPITAL STOCKHOLDERS			87
THE MERGER AND SHARE ACQUISITION PROPOSAL			95
THE MERGER AND SHARE ACQUISITION AGREEMENT			110
CERTAIN AGREEMENTS RELATED TO THE MERGER AND SHARE ACQUISITION			121
OTHER PROPOSALS TO BE CONSIDERED BY 26 CAPITAL’S STOCKHOLDERS			123
MATERIAL TAX CONSIDERATIONS			128
INFORMATION ABOUT 26 CAPITAL			147
26 CAPITAL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			153
CERTAIN 26 CAPITAL RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS			156
INFORMATION ABOUT UERI			158
UERI’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			191
CERTAIN UERI RELATIONSHIPS AND RELATED PERSON TRANSACTIONS			203
SELECTED HISTORICAL FINANCIAL DATA OF UERI			205
SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF 26 CAPITAL			209
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			210
COMPARATIVE PER SHARE DATA			222
MANAGEMENT AFTER THE MERGER AND SHARE ACQUISITION			223
DESCRIPTION OF UERI COMMON SHARES			235
DESCRIPTION OF UERI WARRANTS			240
COMPARISON OF YOUR RIGHTS AS A HOLDER OF 26 CAPITAL’S SHARES AND YOUR RIGHTS AS A POTENTIAL HOLDER OF UERI COMMON SHARES			243
UERI COMMON SHARES ELIGIBLE FOR FUTURE SALE			253
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			255
PRICE RANGE OF SECURITIES AND DIVIDEND INFORMATION			259
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS			260
LEGAL MATTERS			261
ENFORCEABILITY OF CIVIL LIABILITY			261
EXPERTS			261
DELIVERY OF DOCUMENTS TO STOCKHOLDERS			261
TRANSFER AGENT AND REGISTRAR			262
WHERE YOU CAN FIND MORE INFORMATION			263
INDEX TO FINANCIAL STATEMENTS			F-1
Annexes
ANNEX A — Merger and Share Acquisition Agreement			A-1
ANNEX A-1 — Amendment No. 1 to the Merger and Share Acquisition Agreement			A-1-1
ANNEX A-2 — Amendment No. 2 to the Merger and Share Acquisition Agreement			A-2-1
ANNEX B — Form of Subscription Agreement			B-1

 

i

		Page
ANNEX C — Amended Articles of Incorporation and Amended By-Laws of UE Resorts International, Inc.			C-1
ANNEX D — Independent Consultant Report			D-1
ANNEX E — Delaware General Corporation Law Section 262			E-1
ANNEX F — Form of Registration Rights Agreement			F-1

 

ii

ADDITIONAL INFORMATION

You may request copies of this proxy statement/prospectus and any other publicly available information concerning 26 Capital, without charge, by written request to D.F. King & Co., Inc., 26 Capital’s proxy solicitor, by calling (866) 342-4883 (shareholders) or (212) 269-5550 (banks and brokers), or by emailing ADER@dfking.com, or from the SEC through the SEC website at http://www.sec.gov.

In order for 26 Capital shareholders to receive timely delivery of the documents in advance of the special meeting of 26 Capital to be held on             , you must request the information no later than five business days prior to the date of the special meeting, by             .

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms a part of a registration statement on Form F-4 filed with the SEC by UERI, constitutes a prospectus of UERI under Section 5 of the Securities Act with respect to (a) the UERI common shares to be issued to 26 Capital stockholders in connection with the Merger and Share Acquisition and (b) the UERI warrants to be issued to 26 Capital stockholders in connection with the Merger and Share Acquisition and the UERI common shares issuable upon exercise thereof. This document also constitutes a proxy statement of 26 Capital under Section 14(a) of the Exchange Act, and the rules thereunder, and a notice of meeting with respect to the special meeting of 26 Capital stockholders to consider and vote upon the Merger and Share Acquisition Proposal, the Charter Proposal, the Subscriptions Proposal, the Equity Plan Proposal and the Adjournment Proposal.

Unless otherwise indicated or the context otherwise requires, all references in this proxy statement/prospectus to the terms “UERI” refer to UE Resorts International, Inc. All references in this proxy statement/prospectus to “26 Capital” refer to 26 Capital Acquisition Corp.

 

1

INDUSTRY AND MARKET DATA

Unless otherwise indicated, information contained in this proxy statement/prospectus concerning UERI’s industry and the regions in which it operates, including UERI’s general expectations and market position, market opportunity, market share and other management estimates, is based on information obtained from various independent publicly available sources and other industry publications, surveys and forecasts. In addition, UERI has included in this proxy statement/prospectus, as Annex D, the Independent Consultant Report (as defined herein), which contains additional industry and market data relating to UERI. None of these surveys, reports, industry forecasts or market research information, which UERI believes to be reliable based upon its management’s knowledge of the industry, has been independently verified, unless otherwise indicated. While UERI believes that such market data, industry forecasts and similar information are generally reliable, such information is inherently imprecise. In addition, assumptions and estimates of UERI’s future performance and growth objectives and the future performance of its industry and the markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed under the headings “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” and “UERI’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement/prospectus.

 

2

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

This document contains references to trademarks, trade names and service marks belonging to UERI, 26 Capital or other entities. Solely for convenience, trademarks, trade names and service marks referred to in this proxy statement/prospectus may appear without the ^® or ^™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us of, any other companies.

 

3

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Statements

26 Capital

The historical financial statements of 26 Capital were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and are denominated in U.S. dollars.

TRLEI

TRLEI’s audited financial statements as of and for the years ended December 31, 2021, 2020 and 2019, included in this proxy statement/prospectus, have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), and are reported in Philippine pesos.

UERI refers in various places in this proxy statement/prospectus to a non-IFRS financial measure, namely Adjusted EBITDA, which is more fully explained in “— Non-IFRS measure.” The presentation of non-IFRS information is not meant to be considered in isolation or as a substitute for TRLEI’s audited financial statements and unaudited condensed consolidated interim financial statements, in each case prepared in accordance with IFRS.

This proxy statement/prospectus contains translations of certain amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Philippine peso amounts represent such U.S. dollar amounts or could be, or could have been, converted into U.S. dollars at the rates indicated or at all. Unless otherwise indicated, all translations from Philippine pesos to U.S. dollars have been made at a rate of PHP 50.774 = $1.00, being the rate for the conversion of U.S. dollars with Philippine pesos quoted in the Daily Reference Exchange Rate Bulletin of the Bangko Sentral ng Pilipinas (the “BSP”) on December 31, 2021. On May 23, 2022, the closing rate quoted on the Reference Exchange Rate Bulletin was PHP 52.230 = $1.00.

UERI

UERI’s audited financial statements as of December 31, 2021 and for the period from March 10, 2021 (inception) through December 31, 2021, included in this proxy statement/prospectus, have been prepared in accordance with the IFRS issued by the IASB, and are reported in Philippine pesos.

The Merger and Share Acquisition is made up of the series of transactions provided in the Merger and Share Acquisition Agreement as described elsewhere within this proxy statement/prospectus. Following the Merger and Share Acquisition, UERI will qualify as a foreign private issuer and will continue to prepare its consolidated financial statements in accordance with IFRS. In addition, UERI will be a “controlled company” under Nasdaq corporate governance rules.

Accordingly, the unaudited pro forma condensed combined financial information and the comparative per share information that will be presented in this proxy statement/prospectus will be prepared in accordance with IFRS.

Projections and Independent Consultant Report

This proxy statement/prospectus, includes, in Annex D, the Okada Manila Gaming Market Study, dated October 2021, as supplemented and amended (the “Independent Consultant Report”), prepared by The Innovation Group, an international research and advisory firm in the gaming, entertainment, hospitality, tourism and leisure sectors (the “Independent Consultant”).

 

4

The Independent Consultant Report contains projections of certain financial data relating to UERI, including but not limited to revenue, expenses and EBITDA (the “Projections”).

The Projections are for reference purposes only, and accordingly, prospective investors are cautioned not to place undue reliance on the Independent Consultant Report or the Projections or other information derived from the Independent Consultant Report included in this proxy statement/prospectus. Under no circumstances should the inclusion of the Independent Consultant Report and any information derived therefrom, including any Projections, included in this proxy statement/prospectus be regarded as a representation or warranty by UERI, 26 Capital, any of their respective affiliates or any other person with respect to the accuracy of the Projections or the accuracy of their underlying assumptions or that UERI will achieve any of the projected results. Neither UERI, 26 Capital nor the Independent Consultant can give any assurance that the assumptions upon which the Projections have been prepared are correct or that UERI’s actual results of operations will be consistent with the Projections or any estimates provided in this proxy statement/prospectus or the Independent Consultant Report. Therefore, no representations are made, nor are they intended to be made, nor should any be inferred, with respect to the likely existence of a particular future set of facts or circumstances. UERI’s actual results may be materially less favorable than those inferred by any of the Projections.

The Projections are based on certain assumptions that are described in the Independent Consultant Report. While UERI believes that the assumptions are reasonable as of the date of the Independent Consultant Report, they are based on UERI’s and the Independent Consultant’s views as of the date of the Independent Consultant Report and are subject to change or adjustment over time. UERI undertakes no obligation to update the Independent Consultant Report or any of the information set forth therein or any of the Projections to reflect developments that may occur in the future, many of which are beyond UERI’s control. If the assumptions used in formulating the Projections and estimates prove to be incorrect, or if UERI’s future performance differs materially from the Projections, then UERI’s results may be materially adversely affected. Accordingly, you should not place undue reliance on the Projections. The Independent Consultant Report speaks only as of its date, and the occurrence of unanticipated events or any other events since that time that could render the Projections and the other information set forth therein inaccurate. You should note that the Independent Consultant Report and the information contained therein are provided only as of the date set forth therein and do not contemplate any event, circumstances or changes with respect to UERI or otherwise after such date.

You are further cautioned that while the Independent Consultant Report is included in this proxy statement/prospectus on the basis of the Independent Consultant’s experience and expertise in the matters discussed therein, the Projections contained in this proxy statement/prospectus have not be audited or reviewed by UERI’s or 26 Capital’s independent auditors.

Without limiting the generality of the foregoing, the Independent Consultant Report is expressly subject to the qualifications, assumptions made, procedures followed, matters considered and any limitations on the scope of work contained therein.

Note on Forward Looking Statements and Risks in the Independent Consultant Report

Although the Independent Consultant has compiled the Independent Consultant Report with the utmost care and diligence, the Independent Consultant makes no representations or warranties about the accuracy or suitability of the statements in the Independent Consultant Report and its information for any purpose. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements.

Non-IFRS measures

This proxy statement/prospectus contains non-IFRS measures, namely Adjusted EBITDA (defined as operating profit / (loss) before depreciation and other adjustments).

 

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Management believes Adjusted EBITDA facilitates operating performance comparisons from period to period and company to company by eliminating potential differences caused by currency fluctuations (affecting exchange gains and losses), variations in capital structures (affecting interest income and expense), tax positions (such as the impact on periods or companies of change in effective tax rates or net operating losses) and the age and book value of tangible and intangible assets (affecting related depreciation and amortization expense).

While UERI believes that presentation of this non-IFRS measure is helpful to investors because similar measures are widely used by certain investors, security analysts and other interested parties as supplemental measures of performance and liquidity, investors should not construe this non-IFRS measure as an alternative to profit or to cash flows from operations. In addition, Adjusted EBITDA of UERI may not be comparable to similarly titled measures used by other companies.

In addition, Adjusted EBITDA (as used by UERI) may not be comparable to EBITDA (as used by the Independent Consultant) for the Projections. Prospective investors should review the Independent Consultant Report accompanying such Projections, which contains a discussion of the assumptions used in preparing the Projections.

 

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FREQUENTLY USED TERMS

In this document, unless the context otherwise requires:

“26 Capital Charter” means the Amended and Restated Certificate of Incorporation of 26 Capital, as currently in effect.

“26 Capital Class A Stock” means the class A common stock, par value $0.0001 per share, of 26 Capital.

“26 Capital Class B Stock” means the class B common stock, par value $0.0001 per share, of 26 Capital.

“26 Capital common stock” means, collectively, the 26 Capital Class A Stock and the 26 Capital Class B Stock.

“26 Capital IPO” means the initial public offering of 26 Capital, which was consummated on January 20, 2021.

“26 Capital public shares” means the shares of 26 Capital Class A Stock outstanding.

“26 Capital units” means the units sold in the 26 Capital IPO , each consisting of one share of 26 Capital Class A Stock and one-half of a redeemable 26 Capital warrant.

“26 Capital warrants” means the warrants issued by 26 Capital, each entitling the holder thereof to purchase one share of 26 Capital common stock for $11.50 per share.

“AML” means anti-money laundering.

“BIR” means the Bureau of Internal Revenue, the national taxation authority in the Philippines.

“BSP” means Bangko Sentral ng Pilipinas, the central bank of the Philippines.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Corporation Code” means Republic Act No. 11232, otherwise known as the Revised Corporation Code, of the Philippines.

“Data Privacy Act” means Republic Act No. 10173, otherwise known as the Data Privacy Act of 2012, of the Philippines.

“DGCL” means the Delaware General Corporation Law, as amended.

“DTC” means the Depository Trust Company.

“Eagle I Lease” means the 22-year lease agreement between TRLEI and Eagle 1, as amended.

“Effective Time” means the time that the Merger and Share Acquisition becomes effective, which shall occur at such time as the certificate of merger is accepted for filing by the Delaware Secretary of State or at such later date and time as specified in the certificate of merger.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Founder Shares” means the 6,875,000 shares of 26 Capital Class B Common Stock held by the Sponsor (or its permitted transferees), which were acquired in a private placement prior to the 26 Capital IPO for an aggregate purchase price of $25,000.

 

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“IFRS” means the International Financial Reporting Standards.

“Independent Consultant” means The Innovation Group, an international research and advisory firm in the gaming, entertainment, hospitality, tourism and leisure sectors.

“Independent Consultant Report” means the Okada Manila Gaming Market Study, dated October 2021, as supplemented and amended, prepared by the Independent Consultant.

“Intellectual Property Code” means Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines, as amended.

“Investment Company Act” means the U.S. Investment Company Act of 1940, as amended.

“IRS” means U.S. Internal Revenue Service.

“ISO” means International Standards Organization.

“JOBS Act” means the U.S. Jumpstart Our Business Startups Act of 2012, as amended.

“Merger” means the merger of Merger Sub with and into 26 Capital, with 26 Capital surviving the merger as a wholly owned subsidiary of UERI.

“Merger and Share Acquisition” means the transactions contemplated by the Merger and Share Acquisition Agreement.

“Merger and Share Acquisition Agreement” means the agreement and plan of merger and share acquisition, dated as of October 15, 2021, as amended by Amendment No. 1, dated as of February 15, 2022, and Amendment No. 2, dated as of March 30, 2022, by and among TRA, UERI, Merger Sub, TRLEI and 26 Capital.

“Merger and Share Acquisition Proposal” means the proposal to approve and adopt the Merger and Share Acquisition Agreement, and the transactions contemplated thereby, and the Merger and Share Acquisition.

“Merger Sub” means Project Tiger Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of UERI.

“Nasdaq” means the Nasdaq Stock Market LLC.

“Okada Manila” means an integrated casino resort and hotel complex located in the Entertainment City gaming strip in Parañaque City, Metro Manila, Philippines, owned and operated by TRLEI.

“PAGCOR” means the Philippine Amusement and Gaming Corporation.

“PAGCOR Charter” means Presidential Decree No. 1869, as amended by Republic Act No. 9487, and amending Presidential Decree Nos. 1067-A, 1067-B, 1067-C, 1399, 1632.

“PCAOB” means the U.S. Public Company Accounting Oversight Board.

“PEZA” means the Philippine Economic Zone Authority.

“PFIC” means passive foreign investment company.

“Philippine SEC” means the Philippine Securities and Exchange Commission.

 

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“Provisional License” means the preliminary authorization issued by PAGCOR to establish and operate a casino.

“Regular License” means the regular casino gaming license issued by PAGCOR to TRLEI on April 25, 2022 as authorization to establish and operate a casino, following fulfillment of the conditions under the Provisional License.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Securities Regulation Code” mean Republic Act No. 8799, otherwise known as the Securities Regulation Code, of the Philippines, as revised, and its implementing rules and regulations.

“Sponsor” means 26 Capital Holdings LLC, a Delaware limited liability company.

“Tax Act” means the U.S. Tax Cuts and Jobs Act of 2017.

“Tax Code” means the National Internal Revenue Code of the Philippines, as amended.

“Trust Account” means the trust account that holds a portion of the proceeds of 26 Capital’s initial public offering.

“U.S. GAAP” or “GAAP” means United States generally accepted accounting principles.

“UEC” means Universal Entertainment Corporation, a joint stock company (kabushiki kaisha) incorporated with limited liability under the laws of Japan, whose common stock is listed on the Tokyo Stock Exchange, JASDAQ (standard) market.

“UEC Parties” means, collectively, TRA, UERI, Merger Sub and TRLEI.

“UERI common shares” means the common shares, with a par value of PHP 0.05 per share, of UERI.

“UERI warrants” means the warrants to purchase UERI common shares.

 

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EXCHANGE RATES

The Philippine Dealing System (the “PDS”), a computer network supervised by the BSP, through which the members of the Bankers Association of the Philippines effect spot and forward currency exchange transactions, was introduced in 1992. The Philippine Dealing System was adopted by the BSP as a means to monitor foreign exchange rates. The BSP Rate is the weighted average rate for the purchase of U.S. dollars with Philippine pesos under the Philippine Dealing System and published in the BSP’s Reference Exchange Rate Bulletin. On December 31, 2021, the BSP Rate was PHP 50.774 = $1.00.

The following table sets forth certain information concerning the BSP Rate between the Philippine peso and the U.S. dollar for the periods and dates indicated, expressed in Philippine pesos per $1.00.

 

Period		Low1				Average2				High3				Period end
		(in PHP per $)
Year ended December 31, 2019			50.489				51.796				52.887				50.744
Year ended December 31, 2020			48.033				49.624				51.320				48.036
Year ended December 31, 2021			47.666				49.255				50.959				50.774

 

Source: BSP Online Statistical Database.

Notes:

1	Lowest daily closing exchange rate for the period.

2	Weighted average rate under the PDS.

3	Highest daily exchange rate for the period.

 

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QUESTIONS AND ANSWERS

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting, including with respect to the proposed Merger and Share Acquisition. The following questions and answers do not include all of the information that may be important to 26 Capital’s stockholders. 26 Capital stockholders are urged to carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to herein, to fully understand the proposed Merger and Share Acquisition and the voting procedures for the special meeting.

 

Q:	Why am I receiving this proxy statement/prospectus?

A:    26 Capital’s stockholders are being asked to consider and vote upon a proposal to approve and adopt the Merger and Share Acquisition Agreement and the transactions contemplated therein, among other proposals. 26 Capital has entered into the Merger and Share Acquisition Agreement, by and among TRA, UERI, Merger Sub, TRLEI and 26 Capital. Pursuant to the Merger and Share Acquisition Agreement, Merger Sub will merge with and into 26 Capital and stockholders of 26 Capital will receive the right to subscribe for UERI common shares. The subscription price for the UERI common shares shall be paid in cash, and fixed based on an amount equivalent to at least the par value of UERI common shares. For stockholders of 26 Capital who elect to subscribe for UERI common shares, the subscription price for the UERI common shares will be paid, on behalf of each subscribing 26 Capital stockholder, by 26 Capital, as described under “The Merger and Share Acquisition Agreement—The Subscription”, and 26 Capital stockholders will not be required to pay any additional consideration for the UERI common shares beyond exchanging their shares in the Merger and Share Acquisition. The subscription to UERI common shares, by 26 Capital stockholders who elect to subscribe for UERI common shares, as contemplated in the Merger and Share Acquisition Agreement, was structured as a cash transaction in order to efficiently meet Philippine regulatory requirements for subscription to shares in a Philippine company under the Corporation Code. As a result of the Merger and Share Acquisition, and upon consummation thereof and the other transactions contemplated by the Merger and Share Acquisition Agreement, 26 Capital will become a wholly owned subsidiary of UERI, with securityholders of 26 Capital becoming securityholders of UERI. In addition, each outstanding warrant to purchase shares of 26 Capital Class A common stock will entitle the holders to purchase UERI common shares upon consummation of the Merger and Share Acquisition. For additional information, see the section entitled “Proposal No. 1 — The Merger and Share Acquisition Proposal — The Merger and Share Acquisition Agreement — Consideration.” A copy of the Merger and Share Acquisition Agreement is attached to this proxy statement/prospectus as Annex A.

26 Capital’s units, 26 Capital Class A Stock and 26 Capital warrants are traded on Nasdaq under the symbols “ADERU,” “ADER,” and “ADERW,” respectively. Prior to the closing of the Merger and Share Acquisition, UERI will apply to list, to be effective at the time of the Merger and Share Acquisition, its common shares and warrants on Nasdaq. We expect its common shares and warrants to be listed under the symbols “UERI” and “UERIW,” respectively. At the closing, any 26 Capital units that are not already trading separately will automatically separate into their component shares of UERI common shares and warrants to purchase UERI common shares. UERI will not have units traded following consummation of the Merger and Share Acquisition.

This proxy statement/prospectus and its annexes contain important information about the proposed business combination and the other matters to be acted upon at the special meeting. Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes, which 26 Capital urges you to do.

 

Q:	What is being voted on at the special meeting?

A:    26 Capital’s stockholders are being asked to vote on the following proposals:

Proposal No. 1 — The Merger and Share Acquisition Proposal — To consider and vote upon a proposal to approve and adopt the Merger and Share Acquisition Agreement, a copy of which is attached to this proxy

 

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statement/prospectus as Annex A, and the transactions contemplated therein, including the Merger and Share Acquisition whereby Merger Sub will merge with and into 26 Capital, with 26 Capital surviving as a wholly-owned subsidiary of UERI.

Proposal No. 2 — The Charter Proposal — To consider and vote upon a proposal to approve the following material differences between the 26 Capital Charter and UERI’s amended and restated articles of incorporation to be effective upon the consummation of the Merger and Share Acquisition: (i) the name of the new public entity will be “UE Resorts International, Inc.” as opposed to “26 Capital Acquisition Corp.”; (ii) UERI’s amended and restated articles of incorporation will provide for one class of UERI common shares as opposed to the two classes of 26 Capital common stock provided for in the 26 Capital Charter; (iii) UERI’s corporate existence is perpetual as opposed to 26 Capital’s corporate existence terminating if a business combination is not consummated within a specific period of time; and (iv) UERI’s amended and restated articles of incorporation will not include the various provisions applicable only to special purpose acquisition corporations that the 26 Capital Charter contains.

Proposal No. 3 — The Subscription Proposal — To consider and vote upon a proposal to (i) approve and adopt the Subscription Agreement, a copy of which is attached to this proxy statement/prospectus as Annex B, and the transactions contemplated therein, (ii) approve the appointment of 26 Capital to act on behalf of its stockholders under the Subscription Agreement, including subscribing for UERI common shares at a purchase price of 0.05 PHP (0.05 Philippine pesos) at the Effective Time with the cash payment for such UERI common shares being made on behalf of the applicable stockholders, (iii) approve the declaration of the Subscription Dividend on the outstanding shares of 26 Capital common stock immediately prior to the closing of the Merger and Share Subscription (which will not include any Redeemed Shares) in the amount of 0.05 PHP (0.05 Philippine pesos) in order to fund the cash payment on behalf of stockholders of 26 Capital under the Subscription Agreement and (iv) approve the Use of Dividend Proceeds. Pursuant to the Merger and Share Acquisition Agreement, stockholders of 26 Capital will receive the right to subscribe for UERI common shares. For stockholders of 26 Capital who elect to subscribe for UERI common shares, the subscription price for the UERI common shares will be paid, on behalf of each subscribing 26 Capital stockholder, by 26 Capital, as described under “The Merger and Share Acquisition Agreement — The Subscription”, and 26 Capital stockholders will not be required to pay any additional consideration for the UERI common shares beyond exchanging their shares in the Merger and Share Acquisition.

Proposal No. 4 — The 2022 Equity Award Plan Proposal — To consider and vote upon a proposal to approve the UE Resorts International, Inc. 2022 Equity Award Plan.

Proposal No. 5 — The Adjournment Proposal — To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, if the parties are not able to consummate the Merger and Share Acquisition.

 

Q:	Who can attend, vote and ask questions at the special meeting?

A:    Only 26 Capital stockholders as of the record date, or their duly appointed proxies, may virtually attend the special meeting. To enter the special meeting and have the ability to submit questions during the special meeting, stockholders must have their 16-digit control number available. Only one stockholder per 16-digit control number can access the special meeting. We encourage stockholders to log in to the website and access the special meeting before the special meeting’s start time.

Stockholders may vote electronically during the special meeting at              by entering your 16-digit control number and following the instructions.

During the special meeting, 26 Capital will endeavor to answer as many questions submitted by stockholders as time permits. 26 Capital reserves the right to exclude questions regarding topics that are not

 

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pertinent to meeting matters or company business. If 26 Capital receives substantially similar questions, it may group such questions together and provide a single response to avoid repetition.

 

Q:	Are the proposals conditioned on one another?

A:    The Merger and Share Acquisition Proposal is conditioned on approval of the Subscription Proposal. If either of these proposals are not approved and the applicable closing condition in the Merger and Share Acquisition Agreement is not waived, the remaining proposals will not be presented to stockholders for a vote. The Charter Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal and the Subscription Proposal. The Equity Plan Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal, the Charter Proposal and the Subscription Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus. It is important for you to note that if any of the Merger and Share Acquisition Proposal, the Charter Proposal or the Subscription Proposal is not approved by 26 Capital stockholders, then the Merger and Share Acquisition will not be consummated.

Q:    Why is 26 Capital providing stockholders with the opportunity to vote on the Merger and Share Acquisition?

A:    The 26 Capital Charter requires that 26 Capital provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of its initial business combination in conjunction with either a tender offer or a stockholder vote. For business and other reasons, 26 Capital has elected to provide its stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote rather than pursuant to a tender offer. Therefore, 26 Capital is seeking to obtain the approval of its stockholders of the Merger and Share Acquisition Proposal, as required by the DGCL, in order to provide our public stockholders with the opportunity to redeem their public shares in connection with the closing of the Merger and Share Acquisition.

 

Q:    What

will happen in the Merger and Share Acquisition?

A:    At the closing, Merger Sub will merge with and into 26 Capital, with 26 Capital surviving as a wholly-owned subsidiary of UERI. In connection with the consummation of the Merger and Share Acquisition, stockholders of 26 Capital will receive the right to subscribe for UERI common shares. For stockholders of 26 Capital who elect to subscribe for UERI common shares, the subscription price will be to be paid, on behalf of each subscribing 26 Capital stockholder, by 26 Capital as described under “The Merger and Share Acquisition Agreement—The Subscription,” and 26 Capital stockholders will not be required to pay any additional consideration for the UERI common shares beyond exchanging their shares in the Merger and Share Acquisition. Upon consummation of the Merger and Share Acquisition, UERI will become the public company.

 

Q:    What

equity stake will current 26 Capital stockholders and TRA hold in UERI after the closing?

A:    We anticipate that, upon completion of the Merger and Share Acquisition, assuming that none of the 26 Capital stockholders exercise redemption rights and assuming that all stockholders of 26 Capital who receive the right to subscribe for UERI common shares have subscribed for such UERI common shares, an aggregate of approximately 34,375,000 UERI common shares will be issued in connection with the Merger and Share Acquisition, existing 26 Capital stockholders will hold in the aggregate approximately 13.75% of UERI’s outstanding common stock (approximately 11.00% held by 26 Capital public stockholders and approximately 2.75% held by the Sponsor) and TRA will hold approximately 86.25% of UERI’s outstanding common stock. These ownership percentages do not take into account (1) any warrants or options to purchase UERI common shares that will be outstanding following the Merger and Share Acquisition or (2) any equity awards that may be issued under our proposed Equity Plan following the Merger and Share Acquisition. If the actual facts are different than these assumptions (which is likely), the ownership percentages held by each of our existing stockholders, including Sponsor and TRA, will be different.

 

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For additional information regarding beneficial ownership, see “Security Ownership of Certain Beneficial Owners and Management.”

If any of the 26 Capital stockholders as of              redeem their public shares at the closing of the Merger and Share Acquisition in accordance with the 26 Capital Charter but continue to hold public warrants after the closing of the Merger and Share Acquisition, the aggregate value of the warrants that may be retained by them, based on the closing trading price per warrant as of May 19, 2022, would be approximately $6.9 million, or $0.50 per public warrant, regardless of the amount of redemptions by 26 Capital stockholders. 26 Capital stockholders that do not redeem their shares in connection with the Merger and Share Acquisition will experience dilution upon the exercise of warrants that remain outstanding after the closing of the Merger and Share Acquisition. The percentage of the total number of outstanding shares of UERI common stock that will be owned by public stockholders as a group will vary based on the number of shares for which the holders thereof request redemption in connection with the Merger and Share Acquisition.

The following table illustrates varying beneficial ownership levels in the combined company, as well as possible sources and extents of dilution for non-redeeming 26 Capital stockholders, assuming no redemptions by 26 Capital stockholders, 10% redemption by 26 Capital stockholders, 50% redemption by 26 Capital stockholders, 75% redemption by 26 Capital stockholders and the maximum redemptions by 26 Capital stockholders:

 

		No Redemptions(5)				%				10% Redemption(1)(5)				%				50% Redemption(2)(5)				%				75% Redemption(3)(5)				%				Maximum Redemption(4)(5)				%
TRA(6)			250,035,040				87.9	%			250,035,040				88.8	%			250,035,040				92.4	%			250,035,040				94.8	%			250,035,040				97.3	%
26 Capital public stockholders			27,500,000				9.7	%			24,750,000				8.8	%			13,750,000				5.1	%			6,875,000				2.6	%			0				—
Sponsor			6,875,001				2.4	%			6,875,001				2.4	%			6,875,001				2.5	%			6,875,001				2.6	%			6,875,001				2.7	%
Pro forma UERI shares as of May 23, 2022(7)			284,410,043				100.0	%			281,660,043				100.0	%			270,660,043				100.0	%			263,785,043				100.0	%			256,910,043				100.0	%
Public warrants			13,750,000								13,750,000								13,750,000								13,750,000								13,750,000
Private warrants			9,000,000								9,000,000								9,000,000								9,000,000								9,000,000

 

Notes:

(1)	Assumes 2,750,000 shares of 26 Capital Class A Stock are redeemed.

(2)	Assumes 13,750,000 shares of 26 Capital Class A Stock are redeemed.

(3)	Assumes 20,625,000 shares of 26 Capital Class A Stock are redeemed.

(4)	Assumes all 27,500,000 shares of 26 Capital Class A Stock are redeemed.

(5)

Figures exclude any UERI common shares that may be issued pursuant to the management bonus plan under the Merger and Share Acquisition Agreement. Pursuant to the Merger and Share Acquisition Agreement, UERI may issue up to 750,000 UERI common shares as a management bonus plan to executives and management of TRLEI, to be effective as of and conditional upon completion of the Merger and Share Acquisition.

(6)	Includes 80 UERI common shares to be held by the non-independent directors of UERI on behalf of TRA.

(7)	Includes 2 additional UERI common shares to be held by the other independent directors of UERI, as required under Philippine law.

 

Q:	What conditions must be satisfied to complete the Merger and Share Acquisition?

A:    There are a number of closing conditions in the Merger and Share Acquisition Agreement, including that 26 Capital stockholders have approved and adopted the Merger and Share Acquisition Agreement. For a summary of the conditions that must be satisfied or waived prior to completion of the Merger and Share Acquisition, see “The Merger and Share Acquisition Agreement — Conditions to Closing of the Merger.”

 

Q:	Why is 26 Capital proposing the Charter Proposal?

A:    26 Capital is asking its stockholders to approve material differences between the organizational documents of UERI that will be in effect upon the closing of the Merger and Share Acquisition and the 26 Capital Charter. The proposed material differences that 26 Capital is asking stockholders to approve include the following:

(i)    the name of the new public entity will be “UE Resorts International, Inc.” as opposed to “26 Capital Acquisition Corp.”;

 

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(ii)    UERI’s amended and restated articles of incorporation will provide for one class of UERI common shares as opposed to the two classes of 26 Capital common stock provided for in the 26 Capital Charter;

(iii)    UERI’s corporate existence is perpetual as opposed to 26 Capital’s corporate existence terminating if a business combination is not consummated within a specific period of time; and

(iv)    UERI’s amended and restated articles of incorporation will not include the various provisions applicable only to special purpose acquisition corporations that the 26 Capital Charter contains.

 

Q:	Why is 26 Capital proposing the Subscription Proposal?

A:    The purpose of the Subscription Proposal is for 26 Capital stockholders to (i) approve and adopt the Subscription Agreement and the transactions contemplated thereby, (ii) authorize 26 Capital to Act on behalf of its stockholders under the Subscription Agreement, including subscribing for UERI common shares, (iii) approve the declaration of the Subscription Dividend and (iv) to approve the Use of Proceeds. The Merger and Share Acquisition was structured to involve a cash subscription by 26 Capital stockholders that elect to subscribe for UERI common shares in connection with the consummation of the transaction in order to efficiently meet Philippine regulatory requirements for subscription to shares in a Philippine company under the Corporation Code.

 

Q:	Why is 26 Capital proposing the Equity Plan Proposal?

A:    The purpose of the Equity Plan is to provide eligible employees, directors and consultants of UERI and its subsidiaries with the opportunity to receive stock-based incentive awards in order to encourage such persons to contribute materially to the growth of UERI and its subsidiaries and align their economic interests with those of its stockholders. The Equity Plan will be adopted by UERI prior to the completion of the Merger and Share Acquisition. 26 Capital is asking its stockholders to approve the Equity Plan on a non-binding advisory basis.

 

Q:	What happens if I sell my shares of 26 Capital common stock before the special meeting?

A:    The record date for the special meeting is                     , 2022, and is earlier than the date on which we expect the Merger and Share Acquisition to be completed. If you transfer your shares of 26 Capital common stock before the record date, you will have no right to vote those shares at the special meeting or redeem those shares for a pro rata portion of the proceeds held in the 26 Capital Trust Account. If you transfer your shares of 26 Capital common stock after the record date, but before the special meeting, unless the transferee obtains a proxy from you to vote those shares, you will retain your right to vote at the special meeting. However, you will not be able to seek redemption of your shares because you will no longer be able to deliver them for cancelation upon consummation of the Merger and Share Acquisition. Regardless of whether you transfer your shares of common stock before or after the record date, your transferee will be entitled to exercise redemption rights with respect to the shares purchased by following the procedures set forth in this proxy statement/prospectus.

Q:    Why will I need to subscribe for UERI common shares in Merger and Share Acquisition rather than receiving UERI common shares directly?

A:    The Merger and Share Acquisition was structured to involve a cash subscription by 26 Capital stockholders that elect to subscribe for UERI common shares in connection with the consummation of the transaction in order to efficiently meet Philippine regulatory requirements for subscription to shares in a Philippine company under the Corporation Code. 26 Capital stockholders who elect to subscribe for UERI common shares will have the subscription price for the UERI common shares paid, on behalf of such stockholder, by 26 Capital, as described under “The Merger and Share Acquisition Agreement—The Subscription”, and 26 Capital stockholders will not be required to pay any additional consideration for the UERI common shares beyond exchanging their shares in the Merger and Share Acquisition.

 

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Q:	What constitutes a quorum at the special meeting?

A:    A quorum will be present at the special meeting if holders of outstanding shares of 26 Capital common stock representing a majority of the voting power of all outstanding shares of 26 Capital capital stock entitled to vote at such meeting are represented in person or by proxy. If a stockholder fails to vote his, her or its shares online or by proxy, or if a broker fails to vote online or by proxy shares held by it in nominee name, such shares will not be counted for the purposes of establishing a quorum. If a stockholder who holds his, her or its shares in “street name” through a broker or other nominee fails to give voting instructions to such broker or other nominee (a “broker non-vote”) on all of the proposals set forth in this proxy statement/prospectus, such shares will not be counted for the purposes of establishing a quorum. An abstention from voting, shares represented at the special meeting online or by proxy but not voted on one or more proposals, or a broker non-vote, so long as the stockholder has given the broker or other nominee voting instructions on at least one of the proposals in this proxy statement/prospectus, will each count as present for the purposes of establishing a quorum. In the absence of a quorum, the chairman of the special meeting may adjourn the special meeting until a quorum shall attend. As of the record date for the special meeting, the presence online or by proxy of              shares of 26 Capital common stock is required to achieve a quorum.

 

Q:	What vote is required to approve the proposals presented at the special meeting?

A:    The approval of each of the Merger and Share Acquisition Proposal and the Subscription Proposal requires the affirmative vote of holders of a majority of the outstanding shares of common stock. Accordingly, a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will each have the effect as a vote “AGAINST” each of the Merger and Share Acquisition Proposal and the Subscription Proposal. The approval of each of the Charter Proposal, the Equity Plan Proposal and the Adjournment Proposal requires the affirmative vote of the holders of a majority of the votes cast on such proposals. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and, thus, will have no effect on the outcome of any of these proposals.

 

Q:	How will the Sponsor and 26 Capitals’s directors and officers vote?

A:    In connection with the 26 Capital IPO, 26 Capital entered into an agreement with the Sponsor and each of 26 Capital’s executive officers and directors pursuant to which they each agreed to vote any shares of 26 Capital common stock owned by them in favor of a proposed business combination. As of the date of this proxy statement/prospectus, the Sponsor (and its affiliates (as defined by Rule 405 under the Securities Act)) and 26 Capital’s executive officers and directors, in the aggregate, own approximately 20% of the issued and outstanding shares of 26 Capital common stock. None of the Sponsor, nor any of 26 Capital’s executive officers or directors, have entered into agreements, and are not currently in negotiations, to purchase or sell shares prior to the record date.

Q:    May the Sponsor or 26 Capital’s directors or executive officers or their respective affiliates purchase shares in connection with the Merger and Share Acquisition?

A:    At any time prior to the special meeting, the Sponsor or the 26 Capital directors or executive officers or their respective affiliates may purchase shares of 26 Capital common stock on the open market, and may purchase shares in privately negotiated transactions from stockholders who vote, or indicate an intention to vote, against the Merger and Share Acquisition Proposal, or who have elected or redeem, or indicate an intention to redeem, their shares in connection with the Merger and Share Acquisition. Any such privately negotiated purchases may be effected at purchase prices that are in excess of fair market value or in excess of the per-share pro rata portion of the Trust Account. The Sponsor or 26 Capital’s directors or executive officers or their respective affiliates may also enter into transactions with stockholders and others to provide them with incentives to acquire shares of 26 Capital common stock, to vote their shares in favor of the Merger and Share Acquisition Proposal or to not redeem their shares in connection with the Merger and Share Acquisition. While the exact nature of such

 

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incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such persons against potential loss in value of their shares, including the granting of put options and the transfer to such persons of shares or warrants for nominal value. The Sponsor, 26 Capital’s executive officers or directors or their respective affiliates will not effect any such purchases when they are in possession of any material non-public information relating to 26 Capital or UERI, during a restricted period under Regulation M under the Exchange Act or in a transaction which would violate Section 9(a)(2) or Rule 10(b)-5 under the Exchange Act.

 

Q:	How many votes do I have at the special meeting?

A:    26 Capital’s stockholders are entitled to one vote at the special meeting for each share of 26 Capital common stock held of record as of                     , 2022, the record date for the special meeting. As of the close of business on the record date, there were              outstanding shares of 26 Capital common stock.

Q:    What interests do the Sponsor and 26 Capital’s executive officers and directors have in the Merger and Share Acquisition?

A:    The Sponsor and 26 Capital’s directors and executive officers have interests in the Merger and Share Acquisition that are different from or in addition to (and which may conflict with) the interests of 26 Capital’s stockholders. As more fully set forth below, the Sponsor and its affiliates have approximately $73.4 million in the aggregate at risk that depends upon the completion of a business combination. Specifically, (i) $25,000 of such amount was paid for the 6,875,000 Founder Shares (which if unrestricted and freely tradable would be valued at approximately $67.8 million, based on the closing price of the 26 Capital common stock on May 19, 2022), (ii) $7,500,000 for its 7,500,000 private placement warrants (which was valued at $0.53 per private placement warrant, or approximately $4.0 million in the aggregate, as of May 19, 2022), (iii) the Sponsor has loaned 26 Capital an additional $1,500,000 in order to fund working capital, which amount will convert into 1,500,000 private placement warrants upon consummation of the Merger and Share Acquisition (which would be valued at $0.53 per private placement warrant, or approximately $0.8 million in the aggregate, as of May 19, 2022) and (iv) between February 25, 2022 and March 1, 2022, the Sponsor purchased an aggregate of 1,500,000 public warrants on the open market (which, based on the closing trading price per warrant as of May 19, 2022, would be approximately $750,000, or $0.50 per public warrant). The foregoing interests, and those set forth in more detail below, present a risk that the Sponsor and its affiliates will benefit from the completion of the Merger and Share Acquisition, including in a manner that may not be aligned with public stockholders. These interests include, among other things, the interests listed below:

 

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that the Sponsor and certain of 26 Capital’s officers and directors will hold UERI common shares following the Merger and Share Acquisition, subject to lock-up agreements;

 

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that the Sponsor and 26 Capital’s officers and directors will hold private placement warrants to purchase UERI common shares following the Merger and Share Acquisition;

 

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the fact that given the differential in purchase price that the Sponsor paid for the Founder Shares as compared to the price of the 26 Capital units sold in the IPO and the substantial number of UERI common shares that the Sponsor will receive upon conversion of the Founder Shares in connection with the Merger and Share Acquisition, the Sponsor and its affiliates may realize a positive rate of return on such investments even if other public stockholders experience a negative rate of return following the Merger and Share Acquisition;

 

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that the Sponsor and 26 Capital’s officers and directors have entered into a letter agreement with 26 Capital, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of the initial business combination;

 

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that the Sponsor and 26 Capital’s officers and directors have entered into a letter agreement with 26 Capital, pursuant to which they have waived their rights to liquidating distributions from the Trust

 

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Account with respect to any Founder Shares held by them if 26 Capital fails to complete its initial business combination by January 20, 2023. However, if the Sponsor or 26 Capital’s officers or directors acquire public shares in or after the 26 Capital IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares;

 

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if the Trust Account is liquidated, including in the event 26 Capital is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify 26 Capital to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which 26 Capital has entered into an acquisition agreement or claims of any third party for services rendered or products sold to 26 Capital, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

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the nomination of certain individuals by the Sponsor as directors of UERI following the closing; and

 

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the continued indemnification of 26 Capital’s current directors and officers and the continuation of directors’ and officers’ liability insurance after the Merger and Share Acquisition.

These interests may influence 26 Capital’s directors in making their recommendation that you vote in favor of the approval of the Merger and Share Acquisition Proposal and the other proposals set forth in this proxy statement/prospectus. See “Security Ownership of Certain Beneficial Owners and Management” for more information.

 

Q:	Do I have redemption rights?

A:     If you are a holder of shares of 26 Capital Class A Stock, you may redeem your shares for cash equal to a pro rata share of the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Merger and Share Acquisition (including any portion of the interest earned thereon which was not previously used or distributed to 26 Capital to pay dissolution expenses or taxes), upon the consummation of the Merger and Share Acquisition. A holder of 26 Capital Class A Stock, together with any of his, her or its affiliates or any other person with whom such holder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, with respect to 15% or more of the outstanding shares of 26 Capital Class A Stock. The Sponsor and 26 Capital’s executive officers and directors have waived their redemption rights with respect to their shares in 26 Capital in connection with the Merger and Share Acquisition. All such shares held by the Sponsor and 26 Capital’s executive officers and directors will be excluded from the pro rata calculation used to determine the per-share redemption price. For illustrative purposes, based on funds in the Trust Account of approximately $275 million on March 31, 2022, the estimated per share redemption price would have been approximately $10.00. Additionally, shares properly tendered for redemption will only be redeemed if the Merger and Share Acquisition is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including any portion of the interest earned thereon which was not previously used or distributed to 26 Capital to pay dissolution expenses or taxes) upon 26 Capital’s liquidation.

Q:    Do the Sponsor or 26 Capital’s directors and officers have redemption rights in connection with the Merger and Share Acquisition?

A:    The Sponsor and 26 Capital’s executive officers and directors have entered into a letter agreement with 26 Capital, pursuant to which they have agreed to waive their redemption rights with respect to any public shares held by them in connection with the completion of 26 Capital’s initial business combination.

 

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Q:    Do the Sponsor or 26 Capital’s directors and executive officers have liquidating distribution rights in the Trust Account in connection with the Merger and Share Acquisition?

A:    The Sponsor and 26 Capital’s executive officers and directors have entered into a letter agreement with 26 Capital, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if 26 Capital fails to complete its initial business combination by January 20, 2023. However, if the Sponsor or 26 Capital’s executive officers or directors acquire public shares in or after the 26 Capital IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares.

 

Q:	Will how I vote affect my ability to exercise redemption rights?

A:    No. You may exercise your redemption rights regardless of whether, or how, you vote your shares of 26 Capital common stock on the Merger and Share Acquisition Proposal or any other proposal described in this proxy statement/prospectus. As a result, the Merger Agreement and Share Acquisition can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.

 

Q:	How do I exercise my redemption rights?

A:    In order to exercise your redemption rights, you must prior to 5:00 p.m., Eastern Time on                     , 2022 (two business days before the special meeting), (i) submit a written request, which includes the name of the beneficial owner of the shares to be redeemed, to Continental Stock Transfer & Trust Company, the trustee of the trust account that holds a portion of the proceeds of the 26 Capital IPO (the “Trustee”), that your public shares be redeemed for cash, and (ii) deliver your stock to the Trustee physically or electronically through The Depository Trust Company (“DTC”).

Any demand for redemption, once made, may be withdrawn at any time until the date of the special meeting. If you deliver your shares for redemption to our transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that our transfer agent return the shares to you (physically or electronically). You may make such a request by contacting our transfer agent at the address listed under the question “Who can help answer my questions?” below.

 

Q:	What are the U.S. federal income tax consequences of exercising my redemption rights?

A:    The receipt of cash by a U.S. holder of 26 Capital common stock in redemption of such shares will be a taxable transaction for U.S. federal income tax purposes. Please see the section entitled “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations — U.S. Holders — U.S. Holders Exercising Redemption Rights with Respect to 26 Capital Common Stock” for additional information. You are urged to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

Q:    What are the U.S. federal income tax consequences to me as a result of the Merger and Share Acquisition?

A:    Subject to the limitations and qualifications described in the section of this proxy statement/prospectus entitled “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations,” the parties to the Merger and Share Acquisition intend that (i) the Merger and Share Acquisition qualify as a “reorganization” within the meaning of Section 368(a) of the Code and the Merger and Share Acquisition and the Reorganization collectively qualify as a transaction described in Section 351 of the Code, and (ii) any transfer of 26 Capital shares by a U.S. investor pursuant to the Merger and Share Acquisition qualify for an exception to Section 367(a)(1) of the Code as of the Effective Time (other than with respect to any such investor that would

 

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own, actually or constructively, 5% or more (by vote or value) of the outstanding UERI shares immediately after the Merger and Share Acquisition and that fails to enter into a valid “gain recognition agreement” with respect to the transferred UERI common shares) (collectively, the “Intended Tax Treatment”).

If the Merger and Share Acquisition qualify as a tax-free reorganization pursuant to Section 368 of the Code and additional requirements for tax-free treatment under Section 367(a) of the Code are satisfied, a U.S. Holder generally should not recognize gain or loss if, pursuant to the Merger and Share Acquisition, the U.S. Holder either (i) exchanges only 26 Capital common stock (but not 26 Capital warrants) for UERI common shares, (ii) exchanges 26 Capital warrants for UERI warrants, or (iii) both exchanges 26 Capital common stock for UERI common shares and exchanges 26 Capital warrants for UERI warrants. In such a case, the aggregate tax basis of the UERI common shares received by a U.S. Holder in the Merger and Share Acquisition should be equal to the aggregate adjusted tax basis of the 26 Capital common stock surrendered in exchange therefor. The tax basis in an UERI warrant received by a U.S. Holder in the Merger and Share Acquisition should be equal to the adjusted tax basis of a 26 Capital warrant exchanged therefor. The holding period of the UERI common shares and/or UERI warrants received by a U.S. Holder in the Merger and Share Acquisition should include the period during which the 26 Capital common stock and/or warrants exchanged therefor were held by such U.S. Holder.

If the Merger and Share Acquisition does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, but the Merger and Share Acquisition and Reorganization collectively qualify as a transaction described in Section 351 of the Code, then the tax treatment would be the same with respect to clause (i) of the previous paragraph, but a U.S. Holder that exchanges 26 Capital warrants for UERI warrants in connection with the Merger and Share Acquisition would recognize gain or loss on such exchange, and, in such case, a U.S. Holder’s tax basis in the UERI warrant received in the Merger would be equal to the fair market value of such warrant at the time of the Merger and Share Acquisition, and a U.S. Holder’s holding period in its UERI warrant would begin on the day after the Merger.

The tax consequences of the Merger and Share Acquisition are complex and will depend on your particular circumstances. For a more detailed discussion of the U.S. federal income tax considerations of the Merger and Share Acquisition, see the section this proxy statement/prospectus entitled “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations.” If you are a U.S. Holder exchanging 26 Capital common stock or 26 Capital warrants in the Merger and Share Acquisition, or are contemplating the exercise of your redemption rights with respect to your 26 Capital common stock, you are urged to consult your tax advisor to determine the tax consequences thereof.

 

Q:	If I am a 26 Capital warrant holder, can I exercise redemption rights with respect to my warrants?

A:    No. The holders of 26 Capital warrants have no redemption rights with respect to 26 Capital warrants or any shares of common stock underlying such warrants. Upon consummation of the Merger and Share Acquisition, the 26 Capital warrants will, by their terms, entitle the holders to purchase UERI common shares in lieu of shares of 26 Capital Class A common stock at a purchase price of $11.50 per share, subject to adjustment.

 

Q:	Do I have appraisal rights if I object to the proposed Merger and Share Acquisition?

A:    Yes.

Under Delaware law, if the Merger and Share Acquisition is completed, holders of 26 Capital common stock who do not vote in favor of the Merger and Share Acquisition Proposal, who have not validly waived appraisal rights and who otherwise comply with the requirements and procedures of Section 262 of the DGCL may exercise their rights of appraisal, which generally entitle stockholders to receive a cash payment equal to the fair value of their 26 Capital common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger and Share Acquisition, as determined by the Delaware Court of Chancery. The “fair value” could be higher or lower than, or the same as, the consideration provided for in the Merger and Share

 

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Acquisition Agreement. For a more detailed description of the appraisal rights available to 26 Capital stockholders and the procedures required to exercise appraisal rights, see “The Merger and Share Acquisition —Appraisal Rights”. A copy of the full text of Section 262 of the DGCL is attached as Annex E to this proxy statement/prospectus.

Q:    What happens to the funds held in the Trust Account upon consummation of the Merger and Share Acquisition?

A:    If the Merger and Share Acquisition is consummated, the funds held in the Trust Account will be released to UERI, and those funds will be used to pay or fund (i) the redemption price for shares of 26 Capital common stock redeemed by 26 Capital stockholders who properly exercise redemption rights, (ii) $9,625,000 in deferred underwriting compensation payable to Cantor Fitzgerald & Co. for 26 Capital’s IPO, (iii) fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees, and other professional fees) that were incurred by or on behalf of 26 Capital and its affiliates in connection with the Merger and Share Acquisition, and (iv) general corporate purposes of UERI, including, but not limited to, working capital for operations, capital expenditures and future acquisitions.

 

Q:	What happens if the Merger and Share Acquisition is not consummated?

A:    There are certain circumstances under which the Merger and Share Acquisition Agreement may be terminated. See “The Merger and Share Acquisition Agreement — Termination” for information regarding the parties’ specific termination rights.

If, as a result of the termination of the Merger and Share Acquisition Agreement or otherwise, 26 Capital is unable to complete the Merger and Share Acquisition or another business combination transaction by January 20, 2023, the 26 Capital Charter provides that it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem all public shares then outstanding at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any amounts representing interest earned on the Trust Account, less any interest released to 26 Capital for the payment of taxes or dissolution expenses, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of 26 Capital’s remaining stockholders and its board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

26 Capital expects that the amount of any distribution that its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Merger and Share Acquisition, subject in each case to 26 Capital’s obligations under Delaware law to provide for claims of creditors and other requirements of applicable law. The Sponsor and 26 Capital’s officers and directors have waived their redemption rights with respect to their Founder Shares.

In the event of liquidation, there will be no distribution with respect to the 26 Capital outstanding warrants. Accordingly, the warrants will expire worthless.

 

Q:	When is the Merger and Share Acquisition expected to be completed?

A:    26 Capital currently anticipates that the Merger and Share Acquisition will be consummated within two business days following the date that all conditions to the consummation of the Merger and Share Acquisition have been satisfied or waived in accordance with the Merger and Share Acquisition Agreement. In any event, 26 Capital expects the closing of the Merger and Share Acquisition to occur on or prior to             , 2022.

 

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For a description of the conditions to the consummation of the Merger and Share Acquisition, see “The Merger and Share Acquisition Agreement — Conditions to Closing of the Merger.”

 

Q:	What do I need to do now?

A:    Whether or not you plan to virtually attend the special meeting, 26 Capital urges you to read this proxy statement/prospectus and its annexes carefully, including “Risk Factors” beginning on page 39, and to consider how the Merger and Share Acquisition will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and online or on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

Q:	How do I vote?

A:    If you were a holder of record of 26 Capital common stock on                     , 2022, the record date for the special meeting, you may vote with respect to the proposals at the special meeting or any adjournment thereof, electronically by using the 16-digit control number included in the notice, proxy card, or the voting instructions that accompanied this proxy statement/prospectus, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided to you by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly represented and voted at the meeting. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to virtually attend the special meeting and vote, obtain a legal proxy from your broker, bank or nominee.

 

Q:	What will happen if I abstain from voting or fail to vote at the special meeting?

A:    At the special meeting, if you abstain from voting with respect to a particular proposal, your shares will be counted as present for purposes of establishing a quorum. A failure to vote or an abstention will have the effect of a vote “AGAINST” each of the Merger and Share Acquisition Proposal and the Subscription Proposal, but will have no effect on the outcome of the Charter Proposal, the Equity Plan Proposal or the Adjournment Proposal.

 

Q:	What will happen if I sign and return my proxy card without indicating how I wish to vote?

A:    Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders at the special meeting or any adjournment thereof.

 

Q:	If I am not going to attend the special meeting, should I return my proxy card instead?

A:    Yes. Whether you plan to virtually attend the special meeting or not, please read this proxy statement/prospectus carefully, and vote your shares online or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Q:    If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

A:    No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. We believe the proposals presented to the stockholders will be considered non-discretionary and, therefore, your

 

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broker, bank, or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your bank, broker, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will be counted as present for the purpose of determining the existence of a quorum at the special meeting so long as a stockholder has given the broker or other nominee voting instructions on at least one of the proposals set forth in this proxy statement/prospectus. However, broker non-votes will not be counted as “votes cast” at the special meeting. This will have the effect of a vote cast “AGAINST” each of the Merger and Share Acquisition Proposal and the Subscription Proposal, but will have no effect on the outcome of the vote on the other proposals. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q:	May I change my vote after I have mailed my signed proxy card?

A:    Yes. You may change your vote by sending a later-dated, signed proxy card to 26 Capital transfer agent at the address listed under “Who can help answer my questions?” below so that it is received by the transfer agent prior to the special meeting, or attend the special meeting online and vote. You also may revoke your proxy by sending a notice of revocation to 26 Capital’s chief executive officer, which must be received by 26 Capital’s chief executive officer prior to the special meeting.

Q:    What should I do if I receive more than one set of voting materials?

A:    You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q:	Who will solicit and pay the cost of soliciting proxies?

A:    The board of directors of 26 Capital is soliciting proxies to be voted at the special meeting. 26 Capital will pay the cost of soliciting proxies for the special meeting. 26 Capital intends to engage D.F. King to assist in the solicitation of proxies for the special meeting. 26 Capital will pay D.F. King a fee of approximately $25,000 for such services. 26 Capital will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of its common stock for their expenses in forwarding soliciting materials to beneficial owners of 26 Capital common stock and in obtaining voting instructions from those owners. 26 Capital’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:	Who can help answer my questions?

A:    If you have questions about the proposals or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact 26 Capital’s proxy solicitor at:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Shareholders (toll-free): (866) 342-4883

Banks and Brokers: (212) 269-5550

Email: ADER@dfking.com

 

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To obtain timely delivery, 26 Capital stockholders must request the materials no later than five business days prior to the special meeting.

You may also obtain additional information about 26 Capital from documents filed with the Securities and Exchange Commission (“SEC”) by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your public shares, please see the section entitled “Special Meeting of 26 Capital Stockholders — Redemption Rights and Procedures” for additional information. Generally, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to 26 Capital’s transfer agent prior to the special meeting. If you have questions regarding the certification of your position or delivery of your stock, please contact our transfer agent:

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this proxy statement/prospectus, including statements regarding UERI’s, 26 Capital’s or the combined company’s future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential” or the negative of these terms or other similar expressions. Forward-looking statements include, without limitation, UERI’s or 26 Capital’s expectations concerning the outlook for their or the combined company’s business, productivity, plans and goals for future operational improvements and capital investments, operational performance, future market conditions or economic performance and developments in the capital and credit markets and expected future financial performance, as well as any information concerning possible or assumed future results of operations of the combined company as set forth in the section of this proxy statement/prospectus titled “The Merger and Share Acquisition Proposal — 26 Capital’s Board of Directors’ Reasons for the Merger and Share Acquisition and the Recommendation of the Board of Directors.” Forward-looking statements also include statements regarding the expected benefits of the proposed Merger and Share Acquisition between UERI and 26 Capital.

Forward-looking statements involve a number of risks, uncertainties and assumptions, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

 

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If any 26 Capital stockholder fails to properly demand a 26 Capital stockholder redemptions, such stockholder will not be entitled to convert its 26 Capital common stock into a pro rata portion of the Trust Account;

 

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The financial and other interests of 26 Capital’s board of directors may have influenced 26 Capital’s board of directors’ decision to approve the Merger and Share Acquisition;

 

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The UERI securities to be received by 26 Capital’s securityholders as a result of the Merger and Share Acquisition will have different rights from 26 Capital securities and 26 Capital’s stockholders will have a reduced ownership and voting interest of the combined company after consummation of the Merger and Share Acquisition;

 

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The amount of redemption requests made by 26 Capital public stockholders;

 

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Potential litigation relating to the Merger and Share Acquisition;

 

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UERI’s and/or TRLEI’s ability to recover from the COVID-19 pandemic, generate revenue and achieve profitability;

 

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The accuracy of the Projections by the Independent Consultant, as well as the underlying assumptions of the Projections; and

 

•

Changes in general economic or political conditions;

 

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Competitive factors in the gaming industry in which UERI competes;

 

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Varying legal and regulatory requirements in the United States and the Philippines; and

 

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The other matters described in the section titled “Risk Factors” beginning on page 39.

In addition, the Merger and Share Acquisition is subject to the satisfaction of the conditions to the completion of the Merger and Share Acquisition set forth in the Merger and Share Acquisition Agreement and the absence of events that could give rise to the termination of the Merger and Share Acquisition Agreement, the possibility that the Merger and Share Acquisition does not close, and risks that the proposed Merger and Share Acquisition disrupts current plans and operations and business relationships, or poses difficulties in attracting or retaining employees for UERI and/or TRLEI.

 

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UERI and 26 Capital caution you against placing undue reliance on forward-looking statements, which reflect current beliefs and are based on information currently available as of the date a forward-looking statement is made. Forward-looking statements set forth herein speak only as of the date of this proxy statement/prospectus. Neither UERI nor 26 Capital undertakes any obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event that any forward-looking statement is updated, no inference should be made that UERI or 26 Capital will make additional updates with respect to that statement, related matters, or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear, up to the consummation of the Merger and Share Acquisition, in 26 Capital’s public filings with the SEC or, upon and following the consummation of the Merger and Share Acquisition, in UERI’s public filings with the SEC, which are or will be (as appropriate) accessible at www.sec.gov, and which you are advised to consult. For additional information, please see the section titled “Where You Can Find More Information” beginning on page 260.

Market and industry data used throughout this proxy statement/prospectus, including statements regarding market size and technology adoption rates, is based on the good faith estimates of UERI’s management, which in turn are based upon UERI’s management’s review of internal surveys, independent industry surveys and publications, and other third party research and publicly available information. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While UERI is not aware of any misstatements regarding the industry data presented herein, its estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and “UERI’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement/prospectus.

 

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RISK FACTORS

You should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before you decide whether to vote or instruct your vote to be cast to approve the proposals described in this proxy statement/prospectus. The risks described below are those which UERI and 26 Capital believe are the material risks that they face. Additional risks not presently known to them or which they currently consider immaterial may also have an adverse effect on them or the combined company following the Merger and Share Acquisition. Some statements in this proxy statement/prospectus, including such statements in the following risk factors, constitute forward-looking statements. See the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Related to UERI’s Business and Operations

The COVID-19 pandemic has had, and is expected to continue to have, a material adverse effect on UERI’s business, financial results and liquidity.

The COVID-19 pandemic and measures to prevent the spread of the novel coronavirus have had, and are expected to continue to have a material negative impact on Okada Manila, and ultimately, on UERI’s business. In response to the outbreak of the pandemic in early 2020, governmental authorities in a number of countries and territories, including the Philippines, took certain actions to attempt to mitigate the spread of the virus. Such actions included the imposition of regional and nationwide lockdowns and other restrictions, many of which have remained in place or become more stringent since the beginning of 2020. Certain travel restrictions affecting the Philippines remain in place as of the date of this registration statement.

The inability and unwillingness of consumers to travel since the outbreak of the pandemic has had a significant impact on tourism and foreign visitation to the Philippines and Okada Manila, which has had, and which UERI expects to continue to have, a material adverse effect on UERI’s business and results of operations. UERI’s total revenues decreased from PHP 28,176 million in the year ended December 31, 2019 to PHP 10,711 million in the year ended December 31, 2020 and PHP 13,714 million in the year ended December 31, 2021 and its net loss increased from PHP 438 million in the year ended December 31, 2019 to PHP 9,107 million in the year ended December 31, 2020 and PHP 9,240 million in the year ended December 31, 2021. During this period, UERI’s Adjusted EBITDA reversed from earnings of PHP 6,872 million in the year ended December 31, 2019 to a loss of PHP 1,262 million in the year ended December 31, 2020 and subsequent reversed again to earnings of PHP 2,308 million in the year ended December 31, 2021. In addition, in order to comply with social distancing regulations, Okada Manila’s casino was required to operate at not more than 30% venue capacity during general community quarantine (“GCQ”), 50% during Alert 4, 75% during Alert 3 and 90% during Alert 2.

Furthermore, in the wake of the declaration of COVID-19 as a global pandemic, PAGCOR directed casinos to “temporarily cease gaming operations” from March 15, 2020 until the enhanced community quarantine (“ECQ”) was lifted. In June 2020, Okada Manila was permitted to resume gaming operations on a “dry/trial run” and opened its casino to junket operators and selected patrons. In August 2020, the gaming operations started accepting carded patrons subject to compliance with the 30% venue capacity required by the Interagency Task Force on the Management of Emerging Infectious Diseases (“IATF”). Further expansion of gaming operations was implemented in subsequent months, pursuant to PAGCOR’s directives and IATF’s restrictions on physical distancing and hygiene protocols which are being strictly observed to date. In March to May 2021, and in August to early September 2021, certain restrictions on gaming operations were re-imposed, which were then gradually relaxed starting mid-September 2021. Further, the numerous travel restrictions and social distancing policies instituted by local and overseas governmental authorities have resulted in a significant reduction in visitation to Okada Manila and there can be no assurance that Okada Manila will not be forced to close or suspend operations in the future because of future COVID-19-related restrictions as the introduction of additional variants (such as Delta and Omicron) continues to complicate the global response to the pandemic.

Given the evolving conditions created by and in response to the COVID-19 pandemic, UERI is currently unable to determine when travel-related restrictions and conditions will be further eased in the Philippines.

 

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Measures that have been lifted or are expected to be lifted may be reintroduced if there are adverse developments in the COVID-19 situation in the Philippines.

As of the date of this registration statement, there are no fully-effective treatments that are broadly approved for COVID-19 and there can be no assurance that a fully-effective treatment will be developed. While the Philippine Government has granted emergency use authorization to several vaccines for use by certain governmental health agencies, there is considerable uncertainty with regard to how quickly such vaccines can be produced, distributed and deployed to the general public across the globe, whether governments will be willing and able to procure a sufficient supply of vaccinations, how widely-accepted the vaccines will be within different communities, and how effective the vaccines will be at reducing or preventing the spread of COVID-19, especially in light of new variants (such as Delta and Omicron).

Even once travel advisories and restrictions have been lifted, demand for casino resorts may remain weak for a significant length of time and inbound tourism to the Philippines may be slow to recover. UERI cannot predict when, or even if, operating results at Okada Manila will return to pre-pandemic levels. In particular, consumer behavior related to discretionary spending and traveling, including demand for casino resorts, may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of the COVID-19 pandemic. In addition, UERI cannot predict the impact that the COVID-19 pandemic will have on its partners, which may adversely impact its operations.

Given the uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and around the imposition or relaxation of containment measures, the impact on UERI’s results of operations, cash flows and financial condition in 2021 and beyond may be material, but cannot be reasonably estimated at this time. The extent of the effects of the outbreak on UERI’s business and the casino resort industry more generally is highly uncertain and will ultimately depend on future developments, including the duration and severity of the COVID-19 pandemic; the negative impact it has on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; its short and longer-term impact on the demand for travel, transient and group business, and levels of consumer confidence even after travel advisories and restrictions are lifted; the ability of UERI and its business partners to successfully navigate the impacts of the pandemic; actions governments, businesses and individuals take in response to the pandemic, including limiting or banning travel and limiting or banning leisure, casino and entertainment (including sporting events) activities; and how quickly economies, travel activity, and demand for gaming, entertainment and leisure activities recovers after the pandemic subsides. To the extent the COVID-19 pandemic adversely affects UERI’s business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks related to UERI’s business, including those relating to its level of indebtedness, UERI’s need to generate sufficient cash flows to service its indebtedness, and UERI’s ability to comply with the covenants or other restrictions contained in the agreements that govern its indebtedness.

There are currently a number of travel restrictions and other limitations affecting entry to the Philippines, and UERI is unable to predict when all, or any of, such travel restrictions will be eased, whether any additional restrictions will be reintroduced, or the period of time required for tourism to return to pre-pandemic levels, if at all.

During the height of the COVID-19 pandemic, travel to the Philippines was only open to Filipino citizens and foreign nationals classified as foreign investors or employed in companies holding offices in the country, with exceptions granted only in special cases. The Philippine subsequent loosened travel restrictions, as of the date of this registration statement, permits the entry of vaccinated persons and recovered COVID-19 patients with negative PCR tests. As a result of the foregoing, Okada Manila’s hotel occupancy rate fell from 98.1% in the year ended December 31, 2019 to 83.0% in the year ended December 31, 2020 and 75.4% in the year ended December 31, 2021.

 

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Certain travel restrictions affecting the Philippines remain in place as of the date of this registration statement. UERI is unable to predict when all, or any of, such travel restrictions will be eased, whether any additional restrictions will be reintroduced, or the period of time required for tourism to return to pre-pandemic levels, if at all.

UERI is subject to risks relating to litigation, disputes and regulatory investigations which may adversely affect its reputation, results of operation and financial condition.

UERI is currently subject to several legal actions, such as the ongoing dispute with Mr. Kazuo Okada described below and elsewhere in this prospectus (see “Legal Proceedings”). In addition, UERI may, from time to time, be subject to legal actions, disputes and regulatory investigations in the ordinary course of its business. UERI is also subject to risks relating to legal and regulatory proceedings and investigations that it or its affiliates may be a party to from time to time, or that could develop in the future. UERI’s reputation as well as results of operation and financial condition may be adversely affected by its involvement or the involvement of its affiliates in litigation and regulatory proceedings.

In addition, regulatory and government authorities in the Philippines have wide discretion to take procedural actions in support of their investigations and regulatory proceedings, including limitation or suspension of licenses or approvals, as well as seizures and freezing of assets and other properties that are perceived to be connected or related to such investigations or regulatory proceedings. On April 27, 2022, the Second Division of the Supreme Court of the Philippines issued an order that the parties (TRLEI and Mr. Okada) and their representatives should “observe the status quo prevailing prior to [Mr. Okada’s] removal as stockholder, director, chairman and CEO of [TRLEI] in 2017” (the “Status Quo Order”). The Status Quo Order is a temporary or provisional measure while the division of the Supreme Court of the Philippines is still studying the case and has yet to decide on the merits of the case. In response to the Status Quo Order, TRLEI filed an Urgent Motion for Reconsideration requesting the Second Division of the Supreme Court of the Philippines to reconsider or revoke the Status Quo Order. TRLEI also filed an Urgent Omnibus Motion [Supplemental Motion for Reconsideration, Lift the Status Quo Ante Order and Show Cause]. On the other hand, Mr. Okada’s lawyers and alleged representative have made attempts to enforce the Status Quo Order by making representations to various entities that they are now the authorized representatives to transact on behalf of TRLEI. They have also filed a Motion to cite in contempt TRLEI Board of Directors and officers for alleged disobedience of the Status Quo Order and to ask for certain measures to compel TRLEI to recognize Mr. Okada as “the sole representative of TRAL and Chairman and CEO of TRLEI with full authority to manage TRLEI prior to his removal in 2017.” As of the date of this registration statement, the parties’ various motions, including TRLEI’s motion to reconsider, remain pending. See also “Information About UERI — Legal Proceedings” and “Risk Factors — Risks Related to UERI’s Business and Operations — The former Chairman of UEC, Kazuo Okada, has engaged in, and may continue to engage in, activities that may interfere with UERI’s business.”

Procedural actions, including the Status Quo Order, taken by regulatory or government authorities may affect UERI’s assets and properties in connection with any investigation or legal or regulatory proceeding involving UERI or any of its affiliates, which may have a material adverse effect on its business, condition, results of operation and prospects. In particular, UEC has an outstanding principal amount of $760 million in U.S. dollar-denominated notes due 2024 (the “UEC Notes”) that provide noteholders with a right to require UEC to repurchase the notes in the event one or more individuals is nominated or elected by Mr. Okada (or any group involving him) to the board of directors of UEC or any of its subsidiaries, including TRLEI (the “Investor Put Option”). Furthermore, the UEC Notes are currently guaranteed by TRLEI, and the removal of the guarantee is conditioned, among others, upon the listing of TRLEI. If (i) the Status Quo Order is not reconsidered or revoked, (ii) Mr. Okada is able to exercise influence over the composition of the board of directors of TRLEI or any of its subsidiaries, thereby triggering the Investor Put Option and (iii) any or all holders of the UEC Notes exercise the Investor Put Option, then UEC would need to refinance the UEC Notes, raise additional capital and/or sell its assets to repay the UEC Notes. If UEC were unable to honor the Investor Put Option, UEC would be in breach of its obligations under the UEC Notes and/or experience significant liquidity concerns. Furthermore, if the

 

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foregoing occurs prior to the removal of TRLEI’s guarantee over the UEC Notes, then TRLEI would also be liable for the entire amount due under the UEC Notes.

The former Chairman of TRLEI and UEC, Kazuo Okada, has engaged in, and may continue to engage in, activities that may interfere with UERI’s business.

Mr. Kazuo Okada, the former Chairman of TRLEI and UEC, filed an intra-corporate complaint (docketed as Civil Case No. 2018-226) against TRLEI asking for a declaration of nullity as regards to his removal in 2017 as a shareholder, director and officer of TRLEI, and an order for his reinstatement to the aforesaid positions. The Regional Trial Court initially dismissed the case. Mr. Okada then appealed to the Court of Appeals, but his appeal was denied. Mr. Okada then appealed to the Supreme Court of the Philippines. On April 27, 2022, the Second Division of the Supreme Court of the Philippines issued the Status Quo Order. The Status Quo Order is a temporary or provisional measure, while the division of the Supreme Court of the Philippines is still studying the case and has yet to decide on the merits of the case. TRLEI filed an Urgent Motion for Reconsideration requesting the Second Division of the Supreme Court of the Philippines to reconsider or revoke the Status Quo Order. TRLEI also filed an Urgent Omnibus Motion [Supplemental Motion for Reconsideration, Lift the Status Quo Ante Order and Show Cause]. On the other hand, Mr. Okada’s lawyers and alleged representative have made attempts to enforce the Status Quo Order by making representations to various entities that they are now the authorized representatives to transact on behalf of TRLEI. They have also filed a Motion to cite in contempt TRLEI Board of Directors and officers for alleged disobedience of the Status Quo Order and to ask for certain measures to compel TRLEI to recognize Mr. Okada as “the sole representative of TRAL and Chairman and CEO of TRLEI with full authority to manage TRLEI prior to his removal in 2017.” As of the date of this registration statement, the parties’ motions, including TRLEI’s motion to reconsider, remain pending. See “Risk Factors — Risks Related to UERI’s Business and Operations — UERI is subject to risks relating to litigation, disputes and regulatory investigations which may adversely affect its reputation, results of operation and financial condition.” and “Information About UERI — Legal Proceedings”.

Management of UERI view these cases as frivolous but have been required to dedicate significant time and resources to address such behavior in the past and may be required to continue to dedicate time and resources in the future, which in turn may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

Okada Manila is operating with limited amenities and subject to certain occupancy limitations, and UERI is unable to predict the length of time it will take for operations to return to normal or if Okada Manila will be required to close in the future due to the COVID-19 pandemic.

Although Okada Manila remains open as of the date of this registration statement, Okada Manila is operating without all amenities and subject to certain occupancy limitations. To mitigate the risk of transmission of COVID-19, UERI has been required to implement a number of measures, including mask protection, and the need to present COVID-19 vaccination results and health declarations in order to enter certain areas of Okada Manila. Accordingly, Okada Manila is generating revenues that are significantly lower than historical results. While UERI engaged in aggressive cost reduction efforts to minimize cash outflows and has continued to engage in such cost reduction efforts, UERI still has significant fixed and variable expenses, which have had, and which UERI expects will continue to have, an adverse effect on its profitability.

If Okada Manila is subject to temporary partial or complete shutdowns in the future due to COVID-19-related concerns, UERI’s revenue, profitability and cash flows could be adversely affected and there can be no assurance that the impact on Okada Manila’s, and ultimately UERI’s, business and financial results would not be materially different than the impact it has experienced previously in connection with the pandemic.

In addition, prior to March 1, 2022 Okada Manila was also required to implement other health measures, including limiting casino players based on seated capacity, temperature checks, limitations on restaurant

 

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capacity, entertainment events and conventions and other measures to enforce social distancing. There is no assurance that Okada Manila will not be subject to additional restrictions in the future if Metro Manila is placed into a higher alert level as a result of any future outbreaks, which would in turn affect Okada Manila’s business and financial results.

Past financial results of Okada Manila may not be indicative of future performance.

Okada Manila has been subject to various mandatory closures as well as occupancy limitations throughout the course of the COVID-19 pandemic. As a result, the operational and financial performance of Okada Manila during the year ended December 31, 2020 and the year ended December 31, 2021 may not be representative of Okada Manila’s performance during other periods.

In addition, the operational interruptions have reduced the time that Okada Manila was open for business, resulting in lower volumes in the corresponding fiscal periods. Due to application of the law of large numbers, Okada Manila may have been subject to greater wins and losses during these periods, and operational data during these periods may not be representative of the same during other periods.

UERI faces competition in the Philippines and elsewhere in Asia, and it may not compete successfully and may be unable to gain or sustain its market share.

The hotel, resort and gaming businesses are highly competitive. UERI competes internationally, in Asia and within the Philippines, with many of the largest gaming, hospitality, leisure and resort companies in the world, as well as operators of smaller, “boutique” style, luxury and upscale resorts. Some of these current and future competitors are larger than UERI and may have more diversified resources and greater access to capital to support their developments and operations in the Philippines and elsewhere.

In the Philippine gaming market, UERI competes with both Filipino- and foreign-owned hotels and resorts. UERI competes domestically with the numerous PAGCOR-operated gaming facilities across the Philippines, as well as other private casino and gambling operations, including eight licensed private casino operators in the special economic zones of Entertainment City in Manila, such as City of Dreams Manila and Solaire Resort & Casino, and Clark Freeport Zone, such as Widus Hotel, Midori Hotel and Royce Hotel. In addition, UERI will compete with other casinos and integrated resorts which are currently in the early stages of planning and/or construction, including planned projects in Mactan Island, Kawit Island and Mandaue City in Cebu and Sun Valley in Clark.

UERI believes some or all of these gaming competitors may, to the extent they have not yet, partner with international gaming companies for the development and ongoing operation of their integrated tourism resorts. See “Information About UERI — Competition”. UERI also competes with other competitors specializing in horse racing, online gaming, jueteng, cockfighting, lotteries, sweepstakes and other smaller-scale gaming operators. To the extent that the other companies with PAGCOR or other Philippine Government licenses develop their own resorts and casinos or partner with international gaming companies, and to the extent that PAGCOR further develops its existing gaming establishments or opens or grants licenses for new gaming establishments, there may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI also competes with gaming operators in other more established gaming centers across the Asia region, particularly those of Macau and Singapore. Macau has built a strong reputation as a premier gaming destination within Asia and the largest gaming market in the world, according to the Gaming Inspection and Coordination Bureau of Macau. As of September 2021, there were a total of 41 casinos in Macau, operated by, among others, Wynn Resorts, Las Vegas Sands, SJM Holdings, Galaxy Entertainment Group, Melco Resorts and MGM China Holdings. In Singapore, two large-scale integrated tourism resort and gaming complexes have been in operation since 2010, contributing significant competition in the region. Further, other countries, such as South Korea, Cambodia, Malaysia and Vietnam, have legalized casinos under certain conditions with most casinos only open

 

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to foreign tourists. Other regions in Asia, such as Japan, Taiwan and Thailand, may legalize casino gaming in the future, which could further increase regional competition. UERI also faces competition from other major gaming centers located around the world, including Las Vegas and Australia, and cruise ships with gaming facilities operating out of Hong Kong and other areas of Asia. UERI competes directly with these existing and future gaming destinations to attract international customers and business from independent gaming promoters. Because a number of these destinations have a longer track record of gaming operations and more established reputations as gaming centers, UERI may not be successful in its efforts to attract foreign customers and independent gaming promoters to Okada Manila. Any failure by UERI to successfully compete may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

Okada Manila is still in a development stage and is subject to significant risks and uncertainties.

Okada Manila commenced construction in December 2012, had a soft opening in December 2016 and had a grand opening on November 17, 2018. UERI still expects to complete additional development, including the fit-out of Tower B by 2022. Due to the foregoing, Okada Manila is not yet generating its full potential revenue, and there is limited historical financial information available about Okada Manila’s operations upon which investors can make an evaluation of Okada Manila’s business and prospects.

UERI may encounter risks and difficulties in relation to the development of Okada Manila, which may be heightened in a rapidly developing market such as the gaming market in the Philippines and in Southeast Asia. Some of these risks relate to UERI’s ability to:

 

•

complete fit-out of Okada Manila within its anticipated time schedule and on budget, which is in part dependent upon factors beyond UERI’s control, as described in more detail in “— UERI may encounter problems that substantially increase the costs of completing Okada Manila”;

 

•

successfully comply with the terms of the Regular License;

 

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attract and retain customers and qualified employees;

 

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operate, support, expand and develop Okada Manila’s operations and facilities;

 

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successfully partner with independent gaming promoters to attract VIP customers to Okada Manila;

 

•

successfully market Entertainment City as an alternative to Macau, Singapore and other Asian destinations with legalized gaming facilities and integrated tourism resorts;

 

•

maintain effective control of UERI’s operating costs and expenses;

 

•

develop and maintain internal personnel, systems and procedures to assure compliance with the regulatory requirements applicable to the Philippine gaming industry;

 

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respond to changes in the regulatory environment; and

 

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respond to competitive market pressures and general economic conditions.

If UERI is unable to complete any of these tasks, it may be unable to complete and operate Okada Manila in the manner it anticipates or at all, or to generate revenues in the amounts and by the periods it anticipates. The occurrence of any of these events may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

TRLEI’s gaming operations are dependent on the Regular License issued by PAGCOR.

PAGCOR is the Philippine regulatory body with jurisdiction over all gaming activities in the Philippines except for lotteries, sweepstakes, jueteng, horse racing, and gaming inside certain special economic zones such as the Cagayan Export Zone. Okada Manila’s gaming areas may only legally operate under the Regular License granted by PAGCOR, which imposes certain requirements with which TRLEI and its service providers must comply.

 

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The Regular License is coterminous with Presidential Decree No. 1869, as amended by Republic Act No. 9487, and amending Presidential Decree Nos. 1067-A, 1067-B, 1067-C, 1399, 1632 (the “PAGCOR Charter”), which will expire on July 11, 2033 and will be renewed subject to the terms of the extension of the PAGCOR Charter. The PAGCOR Charter can be renewed only by an act of the Philippine Congress.

The Regular License is also subject to suspension or termination upon the occurrence of certain events. Some of the requirements and provisions imposed by the Regular License include the following requirements, among others:

 

•

to pay license fees monthly to PAGCOR;

 

•

not to exceed a 70% debt to 30% equity ratio for the licensee;

 

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to ensure at least 95% of Okada Manila’s employees involved in the gaming operations are locally-hired;

 

•

to deposit an aggregate amount of $100 million into one or more escrow accounts and maintain, at any given time, an aggregate minimum balance of $50 million in such accounts;

 

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to ensure that no violations of Philippine AML laws take place in Okada Manila;

 

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to remit 2% of the gross gaming revenue (“GGR”) generated from non-junket tables to a foundation established by TRLEI and approved by PAGCOR that is devoted to the restoration of Philippine cultural heritage;

 

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to submit a bank guarantee, letter of credit or surety bond to PAGCOR in the amount of PHP 100 million;

 

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to secure from PAGCOR a Notice to Commence Casino Operations prior to the casino opening/ commencement of casino operations; and

 

•

to pay PAGCOR, upon collection, a fee equivalent to 5% of non-gaming revenue received from all food and beverage, retail and entertainment outlets of Okada Manila (excluding revenues in connection with hotel operations but including rental income from retail concessionaires within hotels).

Moreover, certain provisions and requirements of the Regular License are open to different interpretations and have not been tested in Philippine courts or made subject to more detailed interpretative rules. There is no guarantee that TRLEI’s proposed mode of compliance with the requirements of the Regular License will be free from administrative or judicial scrutiny in the future. Any difference in interpretation between PAGCOR and TRLEI with respect to the Regular License could result in sanctions against TRLEI, including fines or other penalties, such as suspension or termination of the Regular License.

There can be no assurance that TRLEI will be able to comply with all of the Regular License’s requirements, or that the Regular License will not be modified to contain more onerous terms.

UERI may be subject to additional taxes if the tax regime currently enjoyed by PAGCOR licensees is amended by the Philippine Congress or if its interpretation by the relevant authorities changes.

The Regular License provides that the licensee will pay license fees as a percentage of casino revenues to PAGCOR “in lieu of national and local taxes” with reference to the income component of the casino revenue. On March 15, 2011, the Supreme Court of the Philippines decision in “PAGCOR v. Bureau of Internal Revenue”, (G.R. No. 172087, March 15, 2011) (the “2011 Decision”) held that PAGCOR’s exemption from corporate income tax under the PAGCOR Charter was implicitly revoked by R.A. No. 9337 in 2005. R.A. No. 9337 amended the National Internal Revenue Code of 1997 (“NIRC”) by deleting PAGCOR from the list of Philippine Government owned and controlled corporations which are exempt from paying corporate income tax.

 

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The 2011 Decision was superseded in a Supreme Court ruling (GR No. 215427) dated December 10, 2014 (the “2014 Decision”), in which the Supreme Court clarified that PAGCOR shall be subject to income tax only with respect to its operation of other related services, whereas PAGCOR’s income from its gaming operations is exempt from income tax under PD 1869 and shall be subject to the 5% franchise tax, in lieu of all taxes. The decision emphasized that R.A. 9337 only revoked PAGCOR’s exemption from corporate income tax in relation to its income from other related services, and PAGCOR’s income from its gaming operations remain to be exempt from income tax.

Section 13(2)(a) of the PAGCOR Charter entitles PAGCOR to pay a 5% franchise tax in lieu of any income or other tax, whether national or local, and Section 13(2)(b) extends the same exemption to corporations, associations, agencies and individuals with whom PAGCOR or the casino operator has any contractual relationship in connection with the operations of casinos and those receiving compensation or remuneration from PAGCOR or the casino operator as a result of essential facilities furnished and/ or technical services rendered to PAGCOR or the casino operator. Although the 2014 Decision clarified the exemption of the income of PAGCOR from corporate income taxes, it did not rule on whether PAGCOR’s tax privilege of paying 5% franchise tax inures to the benefit of third parties with a contractual relationship with PAGCOR in connection with the operation of casinos, including UERI, considering that such issue was not raised with the Supreme Court.

In the 2016 case “Bloomberry Resorts and Hotels, Inc. v. BIR” (G.R. No. 212530, August 10, 2016), the Supreme Court confirmed that the 2014 Decision in favor of PAGCOR inures to the benefit of third parties with a contractual relationship with PAGCOR in connection with the operation of casinos, including gaming licensees. Thus, based on this Bloomberry ruling, upon PAGCOR’s payment of the 5% franchise tax, the income of licensees (such as UERI) from their gaming operations is exempt from corporate income tax.

In 2018, the Court of Tax Appeals (“CTA”) issued a consistent ruling in “Thunderbird Pilipinas Hotels and Resorts, Inc. v. Commissioner of Internal Revenue” (C.T.A. Case No. 8612, September 6, 2018). The CTA canceled the alleged deficiency tax on Special Preferential Tax Rate (“SPRT”) granted by Republic Act No. 9400 otherwise known as “The Bases Conversion and Development Act of 1992” for the income received as a Poro- Point Freeport Zone Enterprise. The CTA ruled that the tax for the said income should have been included in the 5% franchise tax already paid, in light of the earlier Supreme Court decision on PAGCOR’s tax exemption status which held that it inures to the benefit of its licensees such as the petitioner. In 2020, the Supreme Court reversed this decision in “Thunderbird Pilipinas Hotels and Resorts, Inc. v. Commissioner of Internal Revenue”, (G.R. No. 211327, November 11, 2020) and held that PAGCOR’s tax exemption extends only to PAGCOR contractees in connection with PAGCOR’s casino operations and not PAGCOR licensees that operate their own casinos. Nevertheless, the Supreme Court also distinguished the facts of Thunderbird from Bloomberry, stating that the former related to events in 2006, which was prior to the amendment of the PAGCOR charter via R.A. 9487 in June 2007, whereas the latter related to subsequent events. Hence, the Supreme Court states that the Bloomberry decision might have been resolved in light of the amendment.

Despite the favorable ruling in Bloomberry, there is no assurance that the current tax exemption enjoyed by PAGCOR and its licensees (regarding their casino revenue) will remain, particularly in light of the ruling in Thunderbird.

On March 29, 2022, the BIR issued Revenue Memorandum Circular No. 32-2022 (“RMC No. 32-2022”) which affirmed the ruling in Bloomberry, stating that PAGCOR licensees shall be exempt from payment of corporate income tax, but also cited Thunderbird which declared that “for PAGCOR licensees, their revenues from gaming operations, involving sale of goods and/or services in the course of trade or business, are generally subject to VAT.” The BIR distinguished the tax treatment for licensees and contractees and explained that while the tax exemption on indirect tax, like VAT, applies to PAGCOR contractees, the same is not true for PAGCOR licensees. Thus, the PAGCOR licensee’s revenue may only be subject to zero per cent (0%) VAT if it has also contracted with PAGCOR in connection with the latter’s gaming operations. UERI has not received any demand notice from the BIR for payment of VAT as of the date of this registration statement.

 

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RMC No. 32-2022 also directed PAGCOR licensees to remit the 5% franchise tax directly to the BIR. This is different from the prior practice wherein the franchise tax was already included in the license fees that the PAGCOR licensees remitted to PAGCOR. PAGCOR subsequently advised PAGCOR licensees to remit the franchise tax to the BIR under protest beginning in the first quarter of 2022, while PAGCOR is seeking legal remedy on the issue. PAGCOR further advised that any amount of franchise tax already remitted to PAGCOR by a PAGCOR licensee for the first quarter of 2022 may be applied to future financial obligations of such licensee to PAGCOR.

In addition to the foregoing, the Philippine Congress has the power to pass amendatory legislation that may remove or change this tax exemption. Any change to UERI’s tax exemption status, including the possible payment of a 12% VAT on its gaming revenue, may have a material adverse effect on its business, condition, results of operation and prospects.

TRLEI’s fiscal incentives are subject to continued compliance with its registration agreement with PEZA and to future legislations on tax incentives for PEZA-registered entities.

On March 22, 2010, former Philippine President Gloria Macapagal-Arroyo issued Proclamation No. 2026 under which Okada Manila, with an aggregate area of 407,993 sq.m., was declared as a tourism economic zone. Subsequently, TRLEI executed a registration agreement and was issued Registration Certificate No. 12-03-T on April 17, 2012 by the Philippine Economic Zone Authority (“PEZA”).

As a PEZA-registered Ecozone Tourism Economic Zone Enterprise, TRLEI is entitled to certain fiscal and non-fiscal incentives. TRLEI’s fiscal incentives include (i) a corporate income tax holiday for four years, (ii) tax and duty free importation of capital equipment required for technical validity and operation of TRLEI’s registered activities, (iii) exemption from wharfage dues and export tax, impost or fees, (iv) exemption from all local government imposts, fees, licenses or taxes except real estate tax on land, and (v) VAT zero-rating of its local transactions with its local suppliers of goods, properties, and services directly related to its PEZA-registered project i.e., establishment and operation of Okada Manila. However, the VAT zero-rating incentive does not apply to any goods, properties, and services related to TRLEI’s casino operations. After the lapse of the four-year income corporate income tax holiday, the following incentives will apply: (i) exemption from national and local taxes, in lieu thereof a payment of 5% final tax on gross taxable income solely derived from servicing foreign client, in lieu of all national and local taxes, and (ii) additional deduction for training expenses against the 5% tax on gross income. TRLEI’s non-fiscal incentives include (i) the permanent resident status within the ecozone for foreign investors with initial investment of at least $50,000, (ii) employment of foreign nationals, and (iii) simplified import and export duties.

On March 19, 2014, the City Government of Parañaque and PEZA entered into a Memorandum of Agreement (“MOA”) on the effective implementation of the incentives of PEZA registered entities exempting them from the payment of local taxes and licenses. Under the MOA, for proper coordination on which entities within the City Government of Parañaque are enjoying the fiscal incentives, PEZA agreed to provide a list of PEZA-registered entities entitled to income tax holiday and 5% gross income tax. 2% of the 5% gross income tax must be remitted to the City Government of Parañaque after the expiration of the four-year income tax holiday enjoyed by PEZA registered entities identified by PEZA. PEZA will remain fully responsible and accountable for the issuance of permits, including building permits on the spaces occupied by PEZA registered companies.

Under PEZA’s Letter of Approval No. 17-ERD-ITH/WAIV/TEZE-2751 dated November 27, 2017, PEZA approved TRLEI’s waiver of its Income Tax Holiday incentive. Consequently, when TRLEI commenced commercial operations on December 30, 2016, it began to enjoy a 5% Gross Income Tax (“GIT”) incentive in lieu of all local and national taxes.

If TRLEI is unable to comply with its PEZA Registration Agreement, its PEZA registration may be suspended or revoked and it may be prevented from enjoying fiscal and non-fiscal incentives available to other Tourist Economic Zone Enterprises.

 

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Moreover, certain PEZA incentives are open to different interpretations by the taxing authorities and have not been tested in Philippine courts or made subject to more detailed interpretative rules. There is no guarantee that TRLEI’s mode of availment of such incentives will be free from administrative or judicial scrutiny in the future.

However, on April 11, 2021, Republic Act No. 11534, otherwise known as the Corporate Recovery & Tax Incentives for Enterprises Act (“CREATE”), became effective. Under Section 311-C of CREATE, registered business enterprises already enjoying the 5% GIT incentive shall be allowed to continue availing of the said incentive for ten (10) years from effectivity of CREATE, or until April 10, 2031 only.

The Philippine Government could grant additional rights to conduct gaming in the future, which could significantly increase competition and cause UERI to lose or be unable to gain market share.

PAGCOR has issued the Regular License to UERI and provisional/regular gaming licenses to three other companies in Entertainment City, Philippines for the development and operation of integrated casino resorts as of the date of this registration statement. PAGCOR has also licensed private casino operators in special economic zones, including Clark Ecozone, Poro Point, La Union, Binangonan, Rizal and Newport City CyberTourism Zone, Pasay City. The Regular License granted by PAGCOR to UERI is non-exclusive, and PAGCOR has given no assurances to UERI that it will not issue additional gaming licenses, or that it will limit the number of licenses it issues.

Any additional gaming licenses issued by PAGCOR could increase competition in the Philippine gaming industry, which could diminish the value of UERI’s Regular License. This may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI may be unable to maintain, or develop additional, successful relationships with reputable independent gaming promoters, or compete for such relationships as the Philippine gaming industry grows.

UERI intends to attract additional foreign gaming visitors to Okada Manila, particularly VIP guests, and expects to increase the percentage of such visitors to be brought in by independent gaming promoters, similar to the junket operators currently conducting business in the Philippines and at other gaming destinations across Asia. It is difficult to gauge UERI’s ability to attract and maintain independent gaming promoters given the limited historical operations of Okada Manila prior to the COVID-19 pandemic and the disruptions caused by the pandemic. The competition to attract independent gaming promoters and their customers is growing increasingly difficult as more integrated tourism resorts commence operations in the Philippines and as the country’s gaming industry continues to develop. There can also be no assurance that independent gaming promoters will be able to effectively market Okada Manila to potential international VIP customers, especially since competitor gaming and tourism resorts in established gaming destinations, both within Entertainment City, and internationally, such as in Macau and Singapore, are likely to have relationships with these independent gaming promoters. Any failure by UERI to maintain strong relationships with a sufficient number and quality of independent gaming promoters will force UERI to seek alternative means of attracting foreign VIP visitors, which may be less successful or not successful at all, and which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

The success of Okada Manila will depend on the reputation and integrity of the independent gaming promoters that UERI engages, and it may be adversely affected by a lack of probity and integrity of such operators.

The reputation and integrity of the parties with whom UERI engages in its gaming business, particularly independent gaming promoters, will be crucial to UERI’s reputation as a gaming company and its ability to operate in compliance with the Regular License and Philippine gaming regulations and policies. The Regular License requires UERI to regularly inform PAGCOR regarding independent gaming promoters with whom it

 

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deals and prohibits UERI from dealing with persons listed on a blacklist maintained by PAGCOR. UERI will endeavor, through contractual protections and otherwise, to ensure that the independent gaming promoters with whom UERI partners will comply with the high standards of probity and integrity required by PAGCOR but UERI cannot guarantee that such standards will be maintained. Any failure by such independent gaming promoters to maintain these standards may damage UERI’s reputation, attribute a lack of probity and integrity to UERI, or lead PAGCOR to adversely modify or revoke the Regular License or otherwise penalize UERI, any of which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

There is no assurance that the independent gaming promoters that UERI engages will continue operations.

There is no assurance that independent gaming promoters that UERI engages will continue operations. For example, in December 2021, Suncity Group’s VIP gaming room operations were terminated in Macau following the arrest of its controlling shareholder Alvin Chau by the Macau police. Similarly, UERI also terminated Suncity Group’s VIP gaming room at Okada Manila. While UERI believes that the developments relating to Suncity Group will not have a material impact on its business, there is no assurance that other junket operators will continue their respective businesses, or that the closing of VIP gaming rooms will not occur in the Philippines or at Okada Manila, any of which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI’s success depends on the effective execution of its business strategy and its inability to do so may affect its financial condition and results of operations.

UERI’s business strategy focuses on attracting customers to Okada Manila through delivering a first class experience to all customer segments and effective marketing. The successful execution of its business strategy may be adversely affected by a number of factors, such as delays in the ongoing construction of Okada Manila and effectiveness of marketing campaigns as well as factors beyond UERI’s control, such as slowdown in the domestic, regional and/or global economies, change in the Philippine Government’s policies with respect to gaming, real estate and/or tourism industries and natural disasters or epidemic diseases that impact the tourism industry in the Philippines. If UERI is unable to successfully execute its business strategy, it may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

VIP gaming customers may cause significant volatility in UERI’s revenues and cash flows.

Notwithstanding existing travel restrictions as a result of the COVID-19 pandemic, UERI intends to resume attracting foreign gaming visitors to Okada Manila once travel restrictions are loosened, particularly VIP players who typically place large individual wagers and have generally high daily spends. High-end gaming of this type is typically more volatile than other forms of gaming, beyond the volatility already inherent and variances in win-loss results attributable to high-end gaming. Such volatility could have a material impact on UERI’s revenues, cash flows and financial results in a particular quarter. In such a case, UERI’s gaming revenues may experience significant volatility during a particular interim period and may not be indicative of such revenues for a full year. Further, a default in payment by a VIP guest, or material cases of fraud involving guests, could adversely affect UERI’s operating results during the relevant interim period.

UERI may be exposed to credit risk on credit extended to its clients.

UERI extends credit to certain VIP clients whose level of play and financial resources, in the opinion of UERI’s management, warrant such an extension. This credit is typically unsecured. For these extensions of credit, UERI may provide a certain amount of “front money” as a deposit, or secure such credit by uncertified or personal checks as collateral.

UERI may not be able to collect all of the gaming receivables from its credit players. UERI expects that it will be able to enforce gaming obligations only in a limited number of jurisdictions, including the Philippines. To

 

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the extent that UERI extends credit to clients from other jurisdictions, it may not have access to a forum in which it will be able to collect all of its gaming receivables because, among other reasons, courts of many jurisdictions do not enforce gaming debts and UERI may encounter forums that will refuse to enforce such debts.

The interests of certain significant shareholders of UERI may differ from those of other shareholders.

As of the date of this registration statement, Universal Entertainment Corporation (“UEC”) indirectly holds all of the voting rights in UERI and is the ultimate controlling shareholder of UERI. In addition, as of December 31, 2021, Okada Holdings holds 70.28% of the total voting rights in UEC. There can be no assurance that the interests of such shareholders will align with those of other shareholders of UERI.

UERI may experience difficulty in managing its expected growth.

UERI may not be able to implement an effective growth strategy in the future to keep pace with the development UERI expects in the Philippine gaming market, and UERI may not be able to construct, fit-out and operate additional facilities or expand Okada Manila. The failure by UERI to take advantage of the opportunities presented by a growing market may have a material adverse effect on UERI’s business, condition, results of operation and prospects. In addition, if UERI is unable to successfully manage the potential difficulties associated with growing its operations or expanding Okada Manila, it may not be able to maintain operating efficiencies as Okada Manila expands. If UERI is not able to continue to capture scale efficiencies, successfully manage personnel and hiring, improve its systems, continue its cost discipline strategies and enhance its product offerings, UERI may not be able to achieve or maintain its goals with respect to operating margins.

UERI depends on existing members of management and key employees to implement its growth strategy, and the failure to retain them or to attract appropriately qualified new personnel could affect UERI’s ability to implement its growth strategy successfully.

The successful implementation of UERI’s growth strategy depends in part on its ability to retain its experienced management team and key employees and on UERI’s ability to attract appropriately qualified new personnel. As such, the loss of any key member of UERI’s management team or other key employees could hinder or delay its ability to implement its growth strategy effectively. Furthermore, if UERI is unable to attract appropriately qualified new personnel, UERI may not be successful in implementing its growth strategy. Either instance may have a material adverse effect on the business, condition, results of operation and prospects of UERI.

UERI may encounter problems that substantially increase the costs of completing Okada Manila.

The total minimum remaining required project costs payable by UERI (for purposes of UERI’s contractual and regulatory requirements) is estimated to be approximately $110 million as of December 2021. This amount includes the value of incurred and anticipated construction costs, furniture, fixtures and equipment (“FF&E”), supplies and equipment, consultant fees and retention amounts.

Okada Manila is subject to significant development and completion risks, which could have a material adverse impact on its projected timetable and costs. These risks include the following:

 

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engineering problems, including defective plans and specifications;

 

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shortages of, and price increases in, energy, materials and skilled and unskilled labor, and inflation in key supply markets;

 

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delays in obtaining or the inability to obtain necessary permits, licenses and approvals;

 

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changes in laws and regulations, or in the interpretation and enforcement of laws and regulations, applicable to gaming, leisure, real estate development or construction projects, or in regulatory or government personnel;

 

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•

labor disputes or work stoppages;

 

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disputes with and defaults by contractors and subcontractors;

 

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environmental, health and safety issues, including site accidents;

 

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weather interferences or delays;

 

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floods, fires, typhoons, earthquakes or other natural disasters;

 

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geological, construction, excavation, regulatory and equipment problems; and

 

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other unanticipated circumstances or cost increases.

The occurrence of any of these development and completion risks could increase the total costs of Okada Manila, delay or prevent completion or otherwise affect the design and features of Okada Manila, and therefore delay UERI’s ability to increase operations of Okada Manila and grow its revenues. Any of the foregoing may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI may require additional equity or debt financing in order to complete Okada Manila, and UERI’s ability to obtain such financing may be limited, which could delay or prevent the completion of Okada Manila.

UERI may require additional debt or equity funding in order to complete Okada Manila and make debt service payments to its creditors. The amount of additional financing is dependent to an extent on whether Okada Manila can be completed within budget, the timing of completion and continued ramp up of operations, as well as the amount of cash flow from its existing and expected future operations. If delays and cost overruns prove to be significant, or if the actual operating revenues of Okada Manila are lower than UERI’s projections, the additional funding that UERI will require could be substantial and raising such funding may not be possible. Even if such funding can be obtained, any additional indebtedness would result in increased debt service obligations and could result in the imposition of operating and financing covenants, or liens on UERI’s assets, any of which could restrict and have a significant effect on its operations. Moreover, the sale of equity securities of UERI would result in dilution of your interest in UERI.

UERI’s ability to obtain required capital on acceptable terms is subject to a variety of uncertainties, including:

 

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limitations on UERI’s ability to incur debt, including as a result of prospective lenders’ evaluations of its creditworthiness and pursuant to restrictions on incurrence of debt in its existing and anticipated loan facilities, including limitations on liens, financial and other covenants;

 

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investors’ and lenders’ perception of, and demand for, debt and equity securities of gaming, leisure and hospitality companies, as well as the availability of competing financing and investment opportunities in the Philippines;

 

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internal policies or restrictions of certain lenders and investors against investing in gaming and hospitality companies;

 

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investor interest in any potential future equity capital offering by UERI;

 

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whether it is necessary to provide credit support or other assurances from UERI’s affiliates, and whether such affiliates are willing to provide such support or assurances at all or on terms and conditions and in amounts that are commercially acceptable to lenders;

 

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UERI’s future financial condition, results of operations and cash flows;

 

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requirements for approval or notification for certain transactions from Philippine authorities, the Philippine SEC and/or shareholders of UERI;

 

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Philippine governmental regulation related to gaming in the Philippines;

 

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conditions of the U.S., Hong Kong, Japan, Philippine and other capital markets in which UERI may seek to raise funds;

 

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economic, political and other conditions in the Philippines, Japan and Asia generally; and

 

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changes in interest rates.

Without the necessary capital, UERI may not be able to complete all current development or any future development of Okada Manila.

There can be no assurance that the necessary financing will be available in amounts or on terms acceptable to UERI, or at all. Past lenders in the Philippines have imposed restrictive project and financial covenants on UERI. Lenders for subsequent debt financings may impose even stricter financial covenants on UERI, which could hamper its free cash flow and also restrict its financial and operational flexibility moving forward. If UERI fails to raise additional funds in such amounts and at such times as it may need, UERI may be forced to reduce its expenditures and growth to a level that can be supported by its cash flow and delay the development and expansion of Okada Manila and the ramp up of operations or the future development and operations of Okada Manila, which may result in UERI’s inability to meet drawing conditions under its existing or future financing arrangements or default and exercise of remedies by the lenders under such loan facilities. In that event, UERI may not be able to complete all current development or any future development of Okada Manila and could suffer a partial or complete loss of its investments in Okada Manila as a result.

The ongoing fit-out may continue to have a negative impact on UERI’s business.

As UERI continues to complete the development of Okada Manila, guests may be subject to noise and other inconveniences as a result of the ongoing fit-out. The noise complaints from ongoing fit-out impacts UERI’s ability to attract visitors to the casino, most notably VIP gamers. Until fit-out is completed, UERI may continue to experience a negative impact on its business, financial condition and results of operations.

The ongoing fit-out and any future construction and fit-out of Okada Manila is subject to hazards that may cause personal injury or loss of life.

The construction and fit-out of large scale properties such as Okada Manila can be dangerous. Workers and employees of contractors at Okada Manila are subject to hazards that may cause personal injury or loss of life, which may subject UERI to liabilities, possible losses, delays in completion of Okada Manila, negative publicity and damage to its reputation. Although UERI believes it has taken the necessary safety precautions that are consistent with industry practice, these precautions may not be adequate to prevent serious personal injuries or loss of life, damage to property or delays. Any accidents or other incidents which occur during the ongoing fit-out or any future construction and fit-out of Okada Manila may subject Okada Manila’s future development to delays, including delays imposed by regulators, liabilities and possible losses, which may not be covered by insurance, and which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI expects to continue to record significant depreciation in the near future.

Under IFRS, TRLEI commenced recording depreciation for each structure as such structure was completed and turned over to TRLEI. Beginning in 2018, TRLEI commenced recording significant depreciation due to completion and turnover of a significant number of structures relating to Okada Manila. UERI expects to continue recording significant depreciation in the near future as a result of its newly-completed structures at Okada Manila.

Ongoing unionization efforts may affect UERI’s cost structure.

As of the date of this registration statement, there is no existing collective bargaining agreement between TRLEI and any of its certified labor unions. For supervisory employees of TRLEI, the labor union called “Obrero

 

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Pilipino Tiger Resort Chapter” has been certified as their exclusive bargaining agent, and a collective bargaining agreement has been negotiated but remains pending ratification by a majority of the bargaining unit. In addition, efforts to unionize rank-and-file employees are ongoing. However, legal proceedings relating to such unionization are ongoing and the union representing rank-and-file employees remains to be determined by the Philippine Department of Labor and Employment. The unionization of Okada Manila’s employees may require UERI to negotiate and enter into one or more collective bargaining agreements which may affect UERI’s cost structure and increase operating costs as a result.

The win rates for Okada Manila’s gaming operations depend on a variety of factors, some of which are beyond UERI’s control.

The gaming industry is characterized by an element of chance. In addition to the element of chance, theoretical win rates are also affected by other factors, including players’ skill, experience and financial resources, the mix of games played, the spread of table limits, the volume of bets that players place and the amount of time players spend on gambling. Thus, Okada Manila’s actual win rates may differ greatly over interim periods, such as from quarter to quarter and may cause UERI’s quarterly results to be volatile. In addition, UERI may not have full control over its winnings or the winnings of its casino patrons.

The factors described above, alone or in combination, along with the possibility of guests’ casino winnings exceeding those of Okada Manila’s, have the potential to negatively impact Okada Manila’s win rates, and may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI may be unable to maintain effective internal controls.

The internal control systems at Okada Manila are intended to effectively monitor and ensure efficient functioning of all departments of operations. The internal controls, comprised of monitoring systems, information technology and security systems, and cash management and security systems, are only able to provide reasonable, not absolute, assurance that the objectives of such systems are met. UERI may be adversely affected by the failure of any or all of its internal control systems and cannot guarantee that it will be able to adapt its internal control systems to the new forms of gaming or new practices that continually and rapidly emerge in the gaming industry. A failure in internal control systems, including any that affect the ability of Okada Manila to accurately report its casino revenues, may also lead PAGCOR to adversely modify or revoke the Regular License. Any of these failures could materially and adversely impact UERI’s business, financial condition and results of operations.

UERI may be unable to maintain effective data protection mechanisms.

UERI is required to maintain effective data protection mechanisms under the Data Privacy Act and other privacy related regulations and issuances given its processing of personal information of hotel guests, casino players, reward circle members, and even employees, among other data subjects. UERI has complied with the Data Privacy Act by completing a required data privacy impact assessment, securing and registering its data processing system with the National Privacy Commission (“NPC”), and registering a data protection officer with the NPC. While UERI has policies and procedures and security and information technology infrastructure in place for the protection of personal data, there is no insurance against breaches to the security of customer information data. A data breach can result in fines and penalties being imposed by the NPC, other authorized government agencies or a Philippine court of competent jurisdiction, and a decline in reputation and patronage from customers, a number of whom require a high level of discretion from us. Such a breach may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI may not be able to prevent money laundering at Okada Manila.

Large amounts of cash move through casinos daily and UERI has implemented strict anti-money laundering (“AML”) measures in compliance with, or in excess of, the requirements of Philippine Republic Act No. 9160

 

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(as amended by Republic Act Nos. 9194, 10167, 10365, 10927 and 11521), known as the Anti-Money Laundering Act of 2001. In addition, in the normal course of business, TRLEI is required by the regulatory authorities from the Philippines to attend meetings and interviews from time to time to discuss its operations as they relate to AML laws and regulations. UERI also trains its employees to recognize and report covered and suspicious transactions, as well as proper procedures in reporting and minimizing anomalous transactions and practices. In addition, UERI’s board of directors and the AML Compliance Committee which is mostly composed of certain senior officers are regularly provided with special training regarding updates of AML laws and practices. See “Information About UERI — Quality Assurance, Internal Controls and Government Oversight — Anti-Money Laundering”.

There is no guarantee that measures adopted by UERI to detect attempted money laundering at Okada Manila will be successful. In 2016, one of the integrated resorts in Entertainment City was implicated in relation to alleged theft and money laundering of funds which belonged to the central bank of Bangladesh, wherein the said integrated resort was allegedly the outlet for which such illegal funds were circulated to certain individuals in the Philippines. Representatives of the integrated resort were asked to testify in legislative inquiries into the matter, specifically to examine whether the Philippines’ statutory exemption for casinos in respect of certain money laundering reporting obligations should be amended. Although the integrated resort in question has not been found liable for any wrongdoing as of the date of this registration statement, incidents such as these demonstrate the importance of strict money laundering controls for the gaming industry in the Philippines. In addition, the non-regulation of proxy gambling in the Philippines has been identified as a potential deficiency in the AML system. Finally, the Philippines’ threshold for reporting large transactions exceeding PHP 5,000,000 (approximately $95,000) is generally higher than the thresholds applicable in other jurisdictions such as Macau (approximately $62,000) and Singapore ($10,000).

Any incidents of money laundering at Okada Manila or allegations of money laundering, whether true or not, may damage UERI’s reputation and its relationship with PAGCOR and the Anti-Money Laundering Council (“AMLC”). Investigations by regulators directed at Okada Manila may disrupt UERI’s gaming operations and damage its reputation. Incidents of money laundering may also cause UERI, its management and employees substantial penalties. The failure of measures to detect money laundering at Okada Manila may have a material adverse effect on UERI’s business, condition, results of operation and prospects and lead AMLC to charge sanctions and penalties or PAGCOR to revoke or adversely modify the Regular License, among other possible sanctions.

If UERI is unsuccessful in defending against any claims alleging that UERI has received misappropriated or misapplied funds, this may require further improvements to its AML procedures, and systems and controls and UERI’s business operations may be subject to greater scrutiny from relevant regulatory authorities, all of which may increase compliance costs. No assurance can be provided that any provisions UERI has made for such matters will be sufficient. Litigation and regulatory proceedings and investigation are inherently unpredictable and UERI’s results of operations or cash flows may be adversely affected by an unfavorable resolution of any pending or future litigation, disputes and regulatory investigation.

Violations of anti-corruption laws could have a negative impact on UERI.

Violations of the United States Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws (collectively, “Anti-Corruption Laws”) may result in substantial sanctions and monetary penalties, including criminal sanctions and penalties. UERI has in place an ongoing compliance program that includes internal policies, procedures and training aimed to prevent and detect compliance issues and risks with these Anti-Corruption Laws. However, there can be no assurance that UERI’s directors, officers, employees, contractors and agents have always or will continually adhere to such compliance programs or allegations will not be made accusing UERI or its directors, officers, employees, contractors or agents of violating the Anti-Corruption Laws. In the event of any actual or alleged violation of Anti-Corruption Laws, UERI could be subject to investigations, prosecutions and other legal proceedings and actions that could result in penalties, administrative remedies and

 

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criminal sanctions, which may have a material adverse effect on its business, condition, results of operation and prospects.

The former Chairman of UEC, Kazuo Okada, was previously under investigation by the Hong Kong Independent Commission Against Corruption and was apparently arrested in August 2018 as a result. In 2012, as a result of allegations in a news article, the Philippine National Bureau of Investigation (the “NBI”) initiated an investigation into possible illegality in connection with alleged fund transfers between companies affiliated with, owned by or controlled by Kazuo Okada and a consultant of PAGCOR. The NBI later confirmed that the case had been closed due to lack of evidence. Through their impact on UERI’s reputation, such investigations may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

Okada Manila could encounter security issues from time to time.

UERI is involved in the gaming, integrated tourism, hotel and leisure industries, which are all dependent on a substantial number of people visiting Okada Manila every day. As a result, UERI may encounter security risks and issues from such a large number and wide variety of patrons at its facilities. Although UERI believes that it has established a security system for Okada Manila consistent with international standards and best practices, there can be no assurance that no security incidents will occur at Okada Manila from time to time. These types of incidents may range from immaterial disturbances to material property-wide breaches such as has been the case for similar properties in the recent past.

For example, in June 2017, an armed man attempted to steal casino chips from Resorts World Manila and in the process set fire to several casino facilities and caused a stampede of the casino patrons, which resulted in the death of 38 people and caused 70 non-fatal injuries. As a result of this security breach, PAGCOR temporarily suspended the operating license of Resorts World Manila, pending rectification of the security deficiencies which enabled the armed man to enter the casino.

Any similar occurrences, or any failure of UERI’s security system to address or curb these security incidents, could affect the general reputation of UERI or result in a suspension of its licenses, any of which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

In addition, UERI collects, handles and maintains customer information, including personal information and other confidential information, in the course of its business operations. UERI is subject to various regulations regarding the storage and protection of customer information, and UERI is required to exercise care in protecting the confidentiality of personal information, as well as to take steps to ensure the security of its services. Any material leak of personal information, due to hacking or other unauthorized access of one of UERI’s databases, or due to the willful misconduct or inadvertent mistake of one of UERI’s own employees or otherwise, could result in claims or lawsuits against UERI, and UERI could be held legally responsible for any damages sustained by the affected persons. Such events could also result in reputational damage even if UERI is not held legally responsible. Furthermore, UERI may also face fines and penalties including the removal of any of its registrations, permits, and/or licenses from Philippine regulators such as the NPC, AMLC, and the SEC. Any of the above consequences may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI may not be able to prevent cheating and fraud at Okada Manila.

UERI may not be able to detect and prevent cheating and fraud in Okada Manila’s games due to sophisticated methods of cheating. UERI’s employees may collude with guests to cheat or themselves defraud UERI, which may make such cheating and fraud more difficult to detect and prevent. Independent gaming promoters operating in Okada Manila and other persons may also enter into betting arrangements regarding the outcome of games in the facility without the knowledge of UERI’s staff, depriving it of revenue. UERI may be unable to prevent attempts to alter or counterfeit gaming chips, despite the multiple security measures and marks

 

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of authenticity built into such chips. Gaming chips will function similarly to currency within Okada Manila’s gaming areas and successful attempts to cash in counterfeit gaming chips will reduce UERI’s revenues. Finally, reports of cheating, fraud and counterfeiting in Okada Manila, regardless of their truth, may damage the reputation of UERI and Okada Manila. Any of these incidents, whether successful or not, may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

UERI’s gaming business depends entirely on Okada Manila, which may subject UERI to greater concentration risk than its competitors with multiple gaming properties.

Okada Manila is UERI’s sole integrated tourism resort. As a result, UERI’s gaming business depends entirely on Okada Manila, which may subject it to greater risks than a gaming company with multiple operating properties due to a lack of diversification of its gaming businesses, including in relation to its sources of gaming revenues and cash flows. Specifically, on the occurrence of any event which could cause disruption in the operations of Okada Manila, such as power outages, civil disturbances, terrorist attacks, among others, UERI would not have any other revenue-generating gaming properties or projects. Any of these factors may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

Changes in public acceptance of gaming in the Philippines may adversely affect UERI.

Public acceptance of gaming changes periodically in various gaming locations in the world and represents an inherent risk to the gaming industry. This risk of a decline in public acceptance is increased in the Philippines because its population is predominantly Roman Catholic and the Philippine Catholic Church, community groups, non-governmental organizations and individual government officials have, on occasion, taken strong and explicit stands against gaming. PAGCOR has, in the past, been subject to lawsuits by individuals trying to halt the construction of casinos in their communities, and church leaders have, on occasion, called for PAGCOR’s abolition. President Duterte, who himself has repeatedly publicly declared his dislike for casino gambling, has taken some very strong though ambivalent measures with respect to certain sectors of the gaming industry. Since assuming office on June 30, 2016, he has (a) refused to renew the license for PAGCOR e-casino licensee Philweb Corporation, (b) strictly enforced rules against illegal online gambling operations and the use of illegal aliens by casinos, and (c) issued an Executive Order clarifying the definition of illegal gambling and the limitations to the power of the special economic zones in licensing online gaming operators.

UERI cannot guarantee that negative sentiments will not be expressed in the future against UERI or Okada Manila, or integrated tourism resorts in general and that such expressions will not be to a degree that could reduce the number of visitors to Okada Manila, which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

The validity of the title to the land forming the Okada Manila site may be subject to certain lawsuits, challenges and claims.

The Okada Manila site is entirely located on reclaimed land (the “Project Reclaimed Land”). It is possible that the ownership, registration, possession and validity of the registered owner’s title to the Okada Manila site may be challenged before the Philippine courts pursuant to the Philippine Constitution and the Public Land Act, as interpreted by the Philippine Supreme Court.

Based on Philippine law, reclaimed lands are, upon reclamation, inalienable lands of the public domain which may not be sold or disposed. Mere reclamation of foreshore lands by a Philippine Government agency tasked to distribute such land (an “End User Agency”) does not convert these inalienable natural resources of the State into alienable or disposable lands of the public domain. Such lands must first be classified as, and converted into, alienable land of the public domain before they can be sold to Filipino citizens. In addition, certain legal requirements (i.e. presidential proclamation and special patent) and procedures must be complied with to convert reclaimed lands into alienable lands of the public domain.

 

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Furthermore, pursuant to the Supreme Court decision in Chavez v. Public Estates Authority (G.R. No. 133250, July 9, 2002, reconsideration denied on May 6, 2003 and November 11, 2003, the decision and resolutions, collectively, the “PEA Amari Decision”), reclaimed foreshore land may only be transferred from the Philippine Government if there is a law which declares the land as patrimonial property for sale to private parties, or such transfer is made by a Philippine Government agency considered an End User Agency and to an individual who is a Philippine citizen. However, the PEA Amari Decision and subsequent decisions also recognize that certain transfers of land prior to the PEA Amari Decision’s promulgation will not be invalidated, despite violation of the Philippine Constitution, due to considerations of equity and social justice to avoid prejudice to vested rights years after such land was transferred from the Philippine Government. It remains unsettled to what degree such considerations apply to transfers to corporations by a non-End User Agency.

TRLEI’s lease agreements are subject to certain legal risks.

The land on which Okada Manila stands consists of a 27.8 hectare property (6.9 hectares of which are undeveloped) (the “Property”) which is leased by TRLEI from Eagle I (40% of which is owned by Brontia Limited), and a 3.4 hectare property which is leased by TRLEI from PAGCOR.

The lease with Eagle I is covered by the Eagle I Lease. The lease also gives TRLEI the right to use and manage certain road lots and open space with a total area of approximately 6.9 hectares. The Eagle I Lease sets the term of the lease for 21 years, from January 1, 2012 to December 31, 2033, or the same year that the Regular License will expire, renewable by written agreement of the parties under terms mutually acceptable to them. This was subsequently amended to change the term of the lease to 50 years (from January 1, 2012 to December 31, 2061), subject to renewal for another 25 years at the option of TRLEI. However, the additional leasehold right period is yet to be annotated in the title. The Eagle I Lease provides for the construction of a casino and hotel, budget hotel, commercial and amusement areas, residential areas, and other related facilities, including administrative facilities (the “Improvements”) over the Property.

Based on the Amendment to Restated and Amended Contract of the Lease dated March 16, 2022, the rent beginning on March 1, 2022 is PHP 116,402,455.00 per month, subject to an escalation rate of 3% annually beginning March 1, 2023.

The original Eagle I Lease is registered with the office of the Register of Deeds and annotated on the titles to the Property. In a subsequent amendment to the Eagle I Lease, Eagle I agreed to give TRLEI an assignable right of first refusal in case Eagle I intends to sell the Property. In case the right of first refusal is not exercised, Eagle I will require any transferee of the Property to respect and abide by the terms of the Eagle I Lease. The Eagle I Lease can be canceled by Eagle I on any of the following grounds: (a) default or breach of the conditions of the Eagle I Lease, subject to applicable grace periods; (b) dissolution, bankruptcy, or insolvency of TRLEI; and (c) abandonment of Property and Improvements for more than 60 days.

The Eagle I Lease, as amended, stipulates that all improvements to the leased premises, except the movables, furniture and those items which can be removed without causing damage or defacement, shall become the property of Eagle I upon expiration of the lease, without any obligation to pay or reimburse TRLEI.

After the closing of the Merger and Share Acquisition, the Eagle I Lease will be further amended to carve out from the lease the portion of the undeveloped land with an aggregate area of 6.9 hectares. After the amendment of the Eagle I Lease, the leased property will have a total aggregate area of 19.4 hectares. The amendment of the Eagle I Lease shall be subject to corporate approvals of the board of directors of Eagle I and TRLEI, and will require prior approval or confirmation of no objection from PEZA. PAGCOR notice/approval may also be needed, but this is subject to further determination. See “Business — Real Property — Eagle I Lease” for more information.

The lease with PAGCOR is covered by a Contract of Lease dated March 16, 2017 and Addendum dated February 22, 2019 (collectively, the “PAGCOR Lease”). The term of the PAGCOR Lease is coterminous with

 

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the term of the PAGCOR Charter, that is, until July 11, 2033, with an option to renew for the extended period of the PAGCOR Charter. The purpose of the lease is to develop and maintain thereon a world-class entertainment and gaming complex.

The PAGCOR Lease may be revoked or canceled in the event of (a) habitual delay in the performance of contractual obligations; (b) three consecutive delays in the payment of rental, interest or penalty; (c) failure to comply with a material provision; (d) bankruptcy, insolvency or rehabilitation; (e) falsity of material representation or warranty; (f) failure to comply with pertinent law, rule or regulation; (g) assignment or transfer of the lease without prior written approval of PAGCOR; or (h) order of closure or liquidation of lessee. Upon revocation or cancelation of the lease on such grounds, PAGCOR will take possession of the leased property including improvements thereon.

Any future termination of the Eagle I Lease or the PAGCOR Lease would have a material adverse effect on UERI’s business, condition, results of operation and prospects.

The ownership of the lessor over the properties in Mausonan Island, El Nido, Palawan which are leased to TRLEI is subject to certain legal risks.

TRLEI and Babel Holdings, Inc. entered into a Contract of Lease dated June 6, 2016 whereby the lessor allows TRLEI to lease the property for a period of 25 years. However, the transfer certificate of title and tax declarations over the property have not yet been transferred to or consolidated in the name of Babel Holdings Inc.

Currently, the leased property is reserved for possible future projects. However, in the event that a new project will be constructed therein by TRLEI, and pending the issuance of a new transfer certificate of title under the name of Babel Holdings, Inc., there is a risk that third parties may, to the detriment of the enjoyment of the property to be constructed, purchase the property from the registered owner and solely rely on the information provided in the annotations of the current transfer certificate of title as recorded in the register of deeds.

The ownership structure of the entity holding the title to the land forming the Okada Manila site may be challenged on the grounds of violating the Philippine Anti-Dummy Law.

The initial ownership structure of Eagle I, the entity that holds the title to the land forming the Okada Manila site, was questioned in the past by the Philippine Department of Justice (the “Philippine DOJ”) and the NBI for, among others, a violation of the Philippine Anti-Dummy Law (“ADL”).

Under the Philippine Constitution and the Public Land Act, only Philippine citizens or Philippine corporations at least 60% of whose capital stock is owned by Philippine citizens (“Philippine Nationals”) are allowed to purchase and own private land in the Philippines. The ADL prohibits the lending by a Philippine citizen of his name or citizenship to be used for the purpose of evading a constitutional or legal provision requiring Philippine citizenship for the exercise or enjoyment of a right, franchise or privilege; falsely simulating the existence of a certain percentage of capital as being owned by Philippine citizens when such minimum capital is required for the enjoyment of a right, franchise or privilege; transfer, conveyance of said right, franchise or privilege to a person or corporation not otherwise qualified under the Philippine Constitution or the provisions of existing laws, permitting one who is not a Philippine citizen to acquire, use, exploit or enjoy a right, franchise, privilege, property or business the exercise and enjoyment of which are expressly reserved by the Philippine Constitution or existing laws to Philippine Nationals, and knowingly aiding, assisting, or abetting in the planning, consummation or perpetration of any such acts. Violation of the ADL carries a penalty of imprisonment, fine and/or forfeiture.

In a series of opinions on the ADL, the Philippine DOJ has held that one of many possible significant indicators of a dummy arrangement is a foreign investor providing practically all the funds for a joint investment undertaken by Philippine businessmen and their foreign partner.

 

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In July 2013, the NBI filed a criminal complaint against UEC, TRLEI, Eagle I, and certain other entities and individuals with the Philippine DOJ, the agency tasked to investigate ADL violations, for violating ADL when Eagle I purchased the land to be used for Okada Manila (the “Land”). The complaint primarily alleged that UEC, despite not being a Philippine National, wholly owned Eagle I through direct and indirect investments, including advancing to Eagle I the amount of PHP 13,651,534,858 in order to fully fund the PHP 13,134,973,244.70 purchase price for the Land.

A panel of Philippine DOJ prosecutors conducted a preliminary investigation on such and other allegations in the criminal complaint. On September 28, 2015, the panel issued a Resolution provisionally dismissing the complaint with respect to the charge of an ADL violation “for integration and completion of complainant NBI’s evidence, without prejudice to the refiling of the same, if the evidence so warrants.” A year later, the Philippine DOJ confirmed via written notification to UEC that the NBI did not find any new evidence that would justify the re-filing of the case. The Philippine DOJ panel of prosecutors recommended that the case be closed for lack of additional evidence.

Since October 2015, the ownership structure of Eagle I has been reorganized twice. Under its current ownership structure, 40% of Eagle I’s capital is owned by Brontia Limited, a wholly-owned subsidiary of UEC, and 60% owned by Eagle II Holdco, Inc., which is owned in turn by All Seasons Hotels & Resorts Corporation and Copperstar Holdings, Inc., both of which are ultimately wholly owned by Philippine citizens. UEC continues to book a deposit in Eagle I in the amount of ¥27,167 million which has been partially repaid and may continue to be repaid by Eagle I from rent paid to it by TRLEI.

There is no guarantee that the Philippine Government will not in the future re-file the criminal complaint, file new cases or seek other sanctions against UEC, UERI, or Eagle I for an ADL violation. Any future filing or other sanctions may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

TRLEI may be held liable for the alleged non-payment of services rendered by its contractors.

TransAsia Construction Development Corp. (“TCDC”), a corporation engaged in construction, filed a case against Mitsukazu Nakata, Byron Yip, Kenji Sugiyama, Hans Van Der Sande, Takako Okada, Hajime Tokuda, Toji Takeuchi, Kenshi Asano, Maria Jeanette Gringio Tayag, Liza Engay-Carlos, Ronaldo Patani, Ropert Demdam, Roland Azurin, Jun Fujimoto, Kentaro Amamoto, and Tomohiro Okada for alleged violations of Articles 315 (Estafa) and 316 (Other forms of swindling) of the Revised Penal Code. TCDC was engaged by TRLEI as its main contractor for certain mechanical electrical plumbing and fire protection works in respect of Okada Manila. TCDC claims that it has unpaid invoices for services rendered amounting to approximately PHP 500 million. The criminal complaint filed by TCDC was dismissed by the public prosecutor in February 2022 for prematurity and insufficiency of evidence. TCDC subsequent filed a motion for reconsideration with motion for inhibition, which is pending.

The TCDC case is in the nature of a criminal complaint against the aforementioned directors and officers of TRLEI. The general rule is that a corporation is invested by law with a personality separate and distinct from that of the persons composing it or its directors and officers, or from any other legal entity that it may be related to. Thus, TRLEI may not be held accountable for actions of the aforementioned individuals should they be held responsible in the criminal case.

However, there is the risk that TCDC may file a separate civil case against TRLEI for payment of the services rendered that were allegedly unpaid. The obligations of a corporation, acting through its directors, officers, and employees, are its own sole liabilities. Therefore, TRLEI may be held liable for the alleged claims.

The gaming industry in the Philippines is highly regulated.

The Philippine gaming industry is highly regulated. UERI is subject to the regulation of PAGCOR. See “— UERI’s gaming operations are dependent on the Regular License issued by PAGCOR”.

 

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In addition to PAGCOR licenses and approvals, UERI and its gaming collaborators will have to obtain all requisite approvals, permits, certificates and licenses from various Philippine Government and local government agencies in relation to business operations, labor, public works, safety, fire, buildings, health and AML, including a letter of no objection (“LONO”) from the city council. UERI or its gaming collaborators may be unable to obtain or renew all required approvals, permits, LONO, certificates, and licenses or requirements may be imposed that prove unduly onerous, which may have a material adverse effect on UERI’s business, condition, results of operation and prospects.

In addition to complying with terms and conditions of its Regular License and general regulation on casino gaming operations, UERI is subject to increasingly specific regulation with respect to junket and chipwashing (rolling chip volume) operations and video streaming. Currently, junket and chipwashing (rolling chip volume) tables cannot exceed 25% of the total gaming tables and strict identification, registration, and monitoring requirements are required for junket operators, players, and runners. Video streaming, while previously unregulated, is now limited to 50% of the approved junket tables and is not open to local players. Proxy betting is not recognized in the current regulations.

Current laws, such as licensing requirements, tax rates and other regulatory obligations, including those for junket operations and video streaming, could change or become more stringent, resulting in additional regulations being imposed upon the gaming operations in the Philippines. For example, there have been recent overtures by the Philippine national government and the local government to adopt more stringent rules on the prohibition of smoking in public places. If such changes materialize and are strictly implemented, Philippine casinos will either have to prohibit smoking on their gaming floors or retrofit their gaming floors to be compliant with stringent standards for designated smoking areas.

Any such adverse developments in the regulation of the Philippine gaming industry could be difficult to comply with and could significantly increase UERI’s costs, which may have a material adverse effect on its business, condition, results of operation and prospects.

A conflict between the interpretation of PAGCOR and the Local City Government of Parañaque as to PAGCOR’s tax exemption may trigger TRLEI’s obligation to pay real property taxes on leased properties.

PAGCOR has received a Statement of Account for the alleged non payment and delinquency for its failure to pay real property tax on some of the properties leased by PAGCOR to TRLEI. PAGCOR insists that under Section 13 of its charter, P.D. No. 1869, it is not liable to pay real property taxes. On August 5, 2020, PAGCOR wrote a Letter to TRLEI clarifying that PAGCOR maintains its position that it is exempt from local taxes.

Non-payment of real property tax for a period of exceeding 10 years may result in the declaration of the property as a delinquent account in the records of the Office of the City Treasurer. As a remedy available to the government, the local government may levy the real property and sell the same, including the improvements situated thereon, in a public auction in order to satisfy the delinquent taxes.

If the issue remains unsolved, the matter may ripen into a litigation matter to the detriment of TRLEI’s leasehold rights. As an alternative, the provision of Section 7 of the Contract of Lease may be applied wherein the Lessee/TRLEI shall pay the real property taxes assessed and imposed.

On March 26, 2021, the Corporate Recovery and Tax Incentives for Enterprises (“CREATE”) Law was signed into law. CREATE focuses on lowering corporate income tax rates and rationalizing fiscal incentives to attract more local and foreign investments in the Philippines. To give registered entities ample time to adjust to the new incentives, registered entities are given a transitory period. Under CREATE, income tax holidays granted under existing registered activities will be permitted to continue the remaining period of such income tax holidays. On the other hand, existing registered activities granted either an income tax holidays and 5% gross income tax (“GIR”), or are currently availing the 5% gross income tax, will be able to enjoy a 10 year 5% special

 

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corporate income tax (“SCIT”) transition period. TRLEI waived its right to the income tax holiday and is currently availing the 5% gross income tax.

The proposal to extend the availment of tax incentives of existing registered business enterprises was vetoed by President Duterte. In this regard, after the lapse of the period for TRLEI to avail of its 5% gross income tax incentive, TRLEI will be subject to the regular corporate income tax rate of 25%.

UERI may be required to secure a legislative franchise if Congress passes legislation imposing such a requirement.

There were certain legislative bills (particularly House Bill Nos. 6111 and 6514) which sought to reorganize PAGCOR into the Philippine Amusement and Gaming Authority (“PAGA”), which would consolidate all regulatory functions in the gaming industry. Said House Bills proposed to transfer to PAGA all the regulatory functions currently spread out to the Philippine Charity Sweepstakes Office (“PCSO”), the Games and Amusement Board (“GAB”), the Cagayan Economic Zone Authority (“CEZA”), the Aurora Pacific Economic Zone and Freeport (“APECO”), and other special economic zones. Consequently, PAGA will be purely regulatory in nature and shall not be an operator of games of chance, in contrast to the current dual function of PAGCOR.

Further, both House Bills provided for the abolition of the GAB, and would require all gaming operations to secure their legislative franchise from Congress before they are allowed to operate gaming activities. PAGCOR’s licensees will be required to secure a legislative franchise from Congress within one year from the effectivity of the Act, otherwise, their operations would be considered illegal. In addition, franchisees under the legislative franchise would be subject to a 5% franchise tax on aggregate gross earnings. The full amount of tax collections would then be utilized to fund charitable obligations of PAGCOR and the PCSO.

PAGCOR opposed the passing of the aforementioned bills when they submitted a position paper entitled “The Opinion of PAGCOR for RA 9587. An Act further amending PD 1869, otherwise known as ‘the PAGCOR Charter’ enacted by Senate and the House of Representatives,” wherein it stated that the legislative franchise by Congress for gaming is not necessary. This was refuted by certain legislators who argued that the PAGCOR franchise under PD 1869 was extended for another 25 years by an act of Congress, which in effect shows that PAGCOR continues to exist precisely because Congress has the power to grant franchises for gaming.

PAGCOR’s licensees, including UERI, also opposed the passage of such bills insofar as they would require the licensees to secure a legislative franchise, primarily on the ground that such a requirement would be an unconstitutional impairment of contract. The bills were not passed by the previous Congress, but there is no guarantee that they will not be revived or passed in the next Congress after the 2022 national elections. If similar bills become law, UERI’s business, financial condition and results of operations would be adversely affected.

Casinos in the Philippines may become subject to even stricter Anti-Money Laundering Regulation.

On July 14, 2017, President Duterte signed into law Republic Act No. 10927 which amended AMLA and classified casinos as covered institutions required to comply with AML and anti-terrorism financing safeguards. The inclusion of casinos was in response to a legislative inquiry into the theft of approximately $81,000,000 of the Bangladesh Central Bank’s funds with the Federal Reserve Bank of New York using SWIFT credentials of Bangladesh Central Bank. That inquiry concluded that of the $81,000,000 hacked from the Bangladesh Central Bank, the Senate Blue Ribbon Committee determined that approximately $63,000,000 were delivered to junkets at Solaire Resort & Casino and Midas Hotel & Casino and which later could not be located. The inclusion of casinos also ensured the compliance by the Philippines with Recommendation 22 of the Financial Action Task Force which requires casinos and other designated non-financial businesses and professions to comply with the same or similar reporting, record-keeping, and customer due diligence requirements of financial institutions.

 

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Aside from including casinos as covered persons, the rules and regulations implementing R.A. No. 10927 or the Casino Implementing Rules and Regulations (“CIRR”) impose multiple preventive mechanisms against money laundering and terrorism financing, i.e., the mandatory adoption of a Money Laundering Prevention Program (“MLPP”), which requires detailed policies on KYC processes, record-keeping and retention, transaction reporting, a continuous AML training program, risk-based screening and recruitment processes, an internal audit system and mechanism for addressing audit findings, policies governing cooperation with the AMLC and PAGCOR, designation of an AML compliance officer, and risk identification, assessment, and mitigation.

Suspicious transactions are reported to the AMLC within the next working date from the occurrence thereof, which shall be the date of the establishment of the suspicion or determination of the suspicious nature of the transaction.

A covered transaction is defined as “a single casino cash transaction involving an amount in excess of PHP 5,000,000.00 or its equivalent in any other currency.” Covered transaction reports (“CTRs”) are submitted to AMLC within 5 working days from the date of the occurrence of the transaction.

While UERI’s AML policy is based on global best practices and fully complies and in some sectors exceeds the requirements of Philippine law, Philippine regulation is continuously evolving and may result in the enactment of strict requirements that could result in inefficiencies in UERI’s operations.

Risks Related to the Philippines

Overseas investors may face difficulties in protecting their interests as a shareholder because UERI is subject to Philippine corporate rules and regulations which provide less extensive shareholder protections than other jurisdictions.

UERI’s corporate affairs are governed by its amended articles of incorporation, amended by-laws, the Corporation Code and the Securities Regulation Code, which differ from the legal principles that would apply if UERI was incorporated in a jurisdiction outside the Philippines. In addition, investors’ rights or the rights of holders of the UERI common shares under the Philippine corporation law to protect their interests relative to actions by UERI’s Board of Directors may be fewer and less-defined than under the laws of those other jurisdictions. Although insider trading and price manipulation are crimes under Philippine law, the Philippine securities markets are not as highly regulated and supervised as markets in certain other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well-defined and enforced in the Philippines than elsewhere, putting holders of the UERI common shares at a potential disadvantage.

Corporate governance, disclosure and financial reporting standards in the Philippines may differ from those in other countries.

There may be less publicly available information about Philippine companies than what is regularly made available by public companies in the U.S. and other jurisdictions. Philippine SEC requirements with respect to corporate governance standards may also be less stringent than those applicable in certain other jurisdictions.

Furthermore, rules against self-dealing and those protecting minority shareholders may be less developed in the Philippines. Such differing standards in certain areas of disclosure and corporate governance may materially and adversely affect the interests of UERI’s shareholders.

The activities and assets of UERI are based in the Philippines, therefore, any downturn in the Philippine economy could have a material adverse impact on UERI’s business, financial condition, results of operations, and prospects.

UERI derives operating income and operating profits from the Philippines and, as such, is highly dependent on the state of the Philippine economy. Factors that may adversely affect the Philippine economy include:

 

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decreases in business, industrial, manufacturing or financial activities in the Philippines, the Southeast Asian region or globally; scarcity of credit or other financing, resulting in lower demand for products and services; the sovereign credit ratings of the country; foreign exchange rate fluctuations; foreign exchange controls; a prolonged period of inflation or increase in interest rates; levels of employment, consumer confidence and income; decrease in remittances from overseas Filipino workers (“OFWs”); changes in the Philippine Government’s taxation policies; Philippine Government budget deficits; the emergence of infectious diseases and epidemics in the Philippines or in other countries in Southeast Asia and any related restrictions on travel and movement to control the spread of disease; natural disasters, including but not limited to tsunamis, typhoons, earthquakes, fires, floods and similar events; political instability, terrorism or military conflict in the Philippines, other countries in the region or globally; and other regulatory, social, political or economic developments in or affecting the Philippines.

The Philippines is currently experiencing an economic downturn due to the COVID-19 pandemic and resultant community quarantine. The country’s gross domestic product suffered a 9.6% contraction for the whole of 2020 with economists forecasting it to rise sharply in 2021 by 6.5% to 7.5%. The World Bank expects the Philippine economy to grow by 5.9% and 6.0% in 2022 and 2023, respectively.

Factors that may adversely affect the Philippine economy include:

 

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decreases in business, industrial, manufacturing or financial activities in the Philippines, Southeast Asia or globally;

 

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scarcity of credit or other financing, resulting in lower demand for products and services provided by companies in the Philippines, Southeast Asia or globally;

 

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exchange rate fluctuations and foreign exchange controls;

 

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rising inflation or increases in interest rates;

 

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levels of employment, consumer confidence and income;

 

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changes in the Philippine Government’s fiscal and regulatory policies and regulations, including tax laws and regulations that impact or may impact inflation and consumer demand;

 

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Philippine Government budget deficits;

 

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adverse trends in the current accounts and balance of payments of the Philippine economy;

 

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public health epidemics or outbreaks of diseases;

 

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natural disasters, including but not limited to tsunamis, typhoons, earthquakes, fires, floods and similar events;

 

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political instability, terrorism or military conflict in the Philippines, in other countries in the region or globally; and

 

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other regulatory, social, political or economic developments in or affecting the Philippines.

Uncertainty surrounding the global economic outlook could cause economic conditions in the Philippines to deteriorate and there can be no assurance that current or future Government policies will continue to be conducive to sustaining economic growth. There can be no assurance that the Philippines will maintain strong economic fundamentals in the future.

Any future deterioration in economic conditions in the Philippines due to these or other factors could materially and adversely affect the Company’s customers and contractual counterparties. This, in turn, could materially and adversely affect UERI’s financial position and results of operations. Therefore, changes in the conditions of the Philippine economy could materially and adversely affect UERI’s business, financial condition or results of operations.

 

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Political instability in the Philippines may have a negative effect on the Philippine economy and business environment which could have a material adverse impact on UERI’s business.

The Philippines has from time to time experienced political and military instability. In recent history, there has been political instability in the Philippines, including alleged extra-judicial killings, alleged electoral fraud, impeachment proceedings against two former presidents and two chief justices of the Supreme Court of the Philippines, hearings on graft and corruption issues against various government officials, and public and military protests arising from alleged misconduct by previous and current administrations. In addition, a number of officials of the Philippine government are currently under investigation or have been indicted on corruption charges stemming from allegations of misuse of public funds, extortion, bribery, or usurpation of authority. There can be no assurance that acts of political violence will not occur in the future and any such events could negatively impact the Philippine economy. An unstable political environment may negatively affect the general economic conditions and operating environment in the Philippines, which in turn could have a material adverse effect on UERI’s business, operations, and financial condition.

In addition, UERI may be affected by political and social developments in the Philippines and changes in the political leadership and/or government policies in the Philippines. Such political or regulatory changes may include (but are not limited to) the introduction of new laws and regulations that could impact the Company’s business.

The Philippine general elections for national and local officials took place on May 9, 2022. There can be no assurance that the new administration after the 2022 general elections will continue to implement social and economic policies that promote a favorable and stable macroeconomic and business environment. Policy instabilities or fundamental change of policy directions, including those with respect to Philippine foreign policy, may lead to an increase in political or social uncertainty and the loss of investor confidence in the Philippines. Any potential instability could have an adverse effect on the Philippine economy, which may impact UERI’s business, prospects, financial condition and results of operations.

The credit ratings of the Philippines may restrict the access to capital of Philippine companies, including UERI

International credit rating agencies issue credit ratings for companies with reference to the country in which they are resident. As a result, the sovereign credit ratings of the Philippines directly affect companies that are residents in the Philippines, such as UERI. Historically the Philippines’ sovereign debt has been rated relatively low by international credit rating agencies. As of December 31, 2021, the Philippines’ long-term foreign-currency denominated debt was rated Baa2 by Moody’s, BBB+ S&P Global Ratings, and BBB with negative outlook by Fitch. However, no assurance can be given that Fitch, Moody’s, S&P Global Ratings or any other international credit rating agency, will not downgrade the credit ratings of the Philippine Government in the future and, therefore, of Philippine companies, including UERI. Any such downgrade could have a material adverse effect on liquidity in the Philippine financial markets and the ability of the Philippine government and Philippine companies, including UERI, to raise additional financing, and will increase borrowing and other costs.

Public health crises or outbreaks of diseases could have an adverse effect on economic activity in the Philippines, and could materially and adversely affect UERI’s business, financial condition and results of operations.

An outbreak of disease or similar public health threat, such as COVID-19, or a pandemic, could trigger a public health crisis which would have an adverse effect on economic activity in the Philippines, and could materially and adversely affect UERI’s business, financial condition and results of operations. In addition, outbreaks of disease could result in increased government restrictions and regulation, including quarantines of personnel and customers, or an inability to access UERI’s facilities or network infrastructure, which could adversely affect its operations.

 

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These measures have caused disruption to businesses and economic activities, and their impacts on businesses continue to evolve. The quarantine measures remain subject to further evaluation by the Inter-Agency Task Force for the Management of Emerging Infectious Diseases.

Based on reports from the Philippine Statistics Authority, the country’s gross domestic product (“GDP”) contracted by 9.6% in 2020 and grew by 5.6% in 2021.

The extent of the impact of COVID-19 on the Philippine economy and the speed and certainty of any economic recovery cannot be predicted for certain, and any new surge in infections may result in stricter quarantine or lockdown measures across provinces, cities and municipalities and may lead to further contraction of the Philippine economy, closure of businesses, and rise in unemployment rates.

The extent of the impact of the COVID-19 on UERI’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak and related restrictions, and the overall impact of COVID-19 on the Philippine economy and demand for UERI’s services, all of which are highly uncertain and cannot be predicted.

The Philippines has also experienced other public health epidemics or outbreaks of diseases, such as avian influenza or bird flu, African Swine Fever, dengue and polio, among others, which have adversely affected the local economy. For example, in 2019, the Department of Health declared a national dengue with 430,282 cases recorded for the year with 1,612 deaths. Furthermore, in September 2019, the Department of Health declared a polio epidemic after a case of the disease was recorded in Lanao del Sur after 19 years recording no cases in the country. If any such localized outbreak or any public health epidemic becomes widespread in the Philippines or increases in severity, this could have an adverse effect on economic activity in the Philippines, and could materially and adversely affect UERI’s business, financial condition and results of operations.

Acts of terrorism could destabilize the country and could have a material adverse effect on UERI’s assets and financial condition.

The Philippines has been subject to a number of terrorist attacks in the past several years. The Philippine army has been in conflict with various groups which have been identified as being responsible for kidnapping and terrorist activities in the Philippines as well as clashes with separatist groups. In addition, bombings have taken place in the Philippines, mainly in cities in the southern part of the country. For example, in January 2019, bombs were detonated in the Jolo Cathedral in the Municipality of Jolo, Sulu and a Mosque in Zamboanga City, Zamboanga del Sur. In May 2017, a clash erupted in Marawi, Lanao del Sur between government security forces and the ISIS-affiliated Maute group, following the government’s offensive to capture alleged ISIS leader in Southeast Asia, Isnilon Hapilon, who was believed to be in the city. President Duterte immediately declared Martial Law in Mindanao amid protests from the opposition and sectors of civil society. In a special joint session convened on July 22, 2017, both Houses of Congress voted to extend Martial Law until the end of 2017. On October 17, 2017, President Duterte declared the liberation of Marawi City. The clashes resulted in the loss of lives of civilians, soldiers and ISIS inspired extremists, as well as damage to property and livelihood of Marawi residents and the reconstruction of the city is on going. Martial Law in Mindanao was extended by both Houses of Congress until December 31, 2019. The martial law in Mindanao was lifted on January 1, 2020, however certain areas in Mindanao remain under a state of emergency and law enforcement groups are in heightened security as a measure against potential terror threats.

On July 3, 2020, Republic Act No. 11479, otherwise known as the Ant-Terrorism Act of 2020, was signed into law and to replace Republic Act No. 9372, otherwise known as the Human Security Act of 2007. The law is currently being challenged in the Supreme Court by multiple groups.

An increase in the frequency, severity or geographic reach of these terrorist acts, violent crimes, bombings and similar events could have a material adverse effect on investment and confidence in, and the performance of,

 

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the Philippine economy. Any such destabilization could cause interruption to UERI’s business and materially and adversely affect UERI’s financial conditions, results of operations and prospects.

Continued conflicts between the Government and separatist groups could lead to further injuries or deaths by civilians and members of the Armed Forces of the Philippines, which could destabilize parts of the Philippines and adversely affect the Philippine economy. There can be no assurance that the Philippines will not be subject to further acts of terrorism or violent crimes in the future, which could have a material adverse effect on UERI’s business, financial condition, and results of operations.

Natural or other catastrophes, including severe weather conditions, may adversely affect UERI’s business, materially disrupt UERI’s operations and result in losses not covered by its insurance.

The Philippines has experienced a number of major natural catastrophes over the years, including typhoons, droughts, volcanic eruptions and earthquakes. There can be no assurance that the occurrence of such natural catastrophes will not materially disrupt UERI’s operations. These factors, which are not within UERI’s control, could potentially have significant effects on UERI’s assets and operations. Should an uninsured loss or a loss in excess of insured limits occur, UERI could lose all or a portion of the capital invested in such business, as well as the anticipated future turnover, while remaining liable for any costs or other financial obligations related to the business. Any material uninsured loss could materially and adversely affect UERI’s business, financial condition and results of operations.

Territorial disputes with China and a number of Southeast Asian countries may disrupt the Philippine economy and business environment.

The Philippines, China and several Southeast Asian nations have been engaged in a series of longstanding territorial disputes over certain islands in the West Philippine Sea, also known as the South China Sea. The Philippines maintains that its claim over the disputed territories is supported by recognized principles of international law consistent with the United Nations Convention on the Law of the Sea (“UNCLOS”). Despite efforts to reach a compromise, a dispute arose between the Philippines and China over a group of small islands and reefs known as the Scarborough Shoal. Actions taken by both sides have threatened to disrupt trade and other ties between the two countries, including a temporary ban by China on Philippine banana imports, a temporary suspension of tours to the Philippines by Chinese travel agencies and the rejection by China of the Philippines’ request for arbitral proceedings administered in accordance with the UNCLOS to resolve the disputes.

In 2016, the Permanent Court of Arbitration ruled in favor of the Philippines against China over territorial disputes in the West Philippine Sea. The arbitral tribunal unanimously ruled, among others, that (a) China has “no historical rights” to the resources within the sea areas falling within the “nine dash line;” (b) Chinese reclamation activity in the West Philippine Sea has caused irreparable damage to the environment, obligating the Chinese government to stop further activities in the West Philippine Sea; and (c) China has violated the Philippines’ sovereign rights in its exclusive economic zone by interfering with Philippine fishing and petroleum exploration, constructing artificial islands, and failing to prevent Chinese fishermen from fishing in the zone. However, China has said it will not recognize the ruling. With no formal enforcement mechanism in place, the territorial dispute in the West Philippine Sea remains contentious and unresolved. There is no guarantee that the territorial dispute between the Philippines and other countries, would end or that any existing tension will not escalate further, as China has taken steps to exercise control over the disputed territory.

There had been other occurrences of territorial disputes with Malaysia and Taiwan. In March 2013, several hundred armed Filipino Muslims illegally entered Malaysia in a bid to enforce an alleged historical claim on the territory. Clashes between the Filipino Muslim individuals and the Malaysian armed forces resulted in casualties on both sides. Taiwan imposed economic sanctions on the Philippines as a result of an incident in May 2013, whereby a Taiwanese fisherman was unintentionally killed by a Philippine coast guard ship that opened fire on his vessel in a disputed exclusive economic zone between Taiwan and the Philippines. The sanctions were eventually lifted after a formal apology was issued by the Government.

 

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Recently, the Chinese coast guards blocked and fired water cannons on two Philippine ships that would take food supplies to the military personnel within Philippines’ exclusive economic zone. The continued territorial disputes between China and the Philippines could cause effects on the relationship of the two countries and the number of tourists that may go through and out of the country.

Should territorial disputes between the Philippines and other countries in the region continue or escalate further, the Philippines and its economy may be disrupted and UERI’s operations could be adversely affected as a result.

Investors may face difficulties enforcing judgments against UERI.

It may be difficult for investors to enforce judgments against UERI obtained outside of the Philippines. In addition, the majority of UERI’s directors and officers are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside of the United States. As a result, it may be difficult for investors to effect service of process upon such persons, or to enforce against them judgments obtained in courts or arbitral tribunals of the United States predicated upon the laws of the United States.

The Philippines is party to the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards, but it is not party to any international treaty relating to the recognition or enforcement of foreign judgments. Nevertheless, the Philippine Rules of Civil Procedure provide that a final and conclusive judgment of a foreign court is enforceable in the Philippines through an independent action filed to enforce such judgment, and without re trial or re examination of the issues, only if: (i) such judgment was obtained by collusion or fraud, (ii) the foreign court rendering such judgment did not have jurisdiction, (iii) such order or judgment is contrary to good customs, public order, or public policy of the Philippines, (iv) the party against whom the enforcement is sought did not receive notice of the proceedings before the foreign court, or (v) such judgment was based upon a clear mistake of law or fact.

Risks Related to Being a Public Company

UERI will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives.

Upon the completion of the Merger and Share Acquisition, UERI will become a public company subject to reporting requirements in the United States, and it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may increase even more after UERI is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company, UERI will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq. UERI’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, UERI expects these changing rules and regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, substantially increasing legal and financial compliance costs and making some activities more time-consuming and costly. For example, UERI expects these rules and regulations to make it more difficult and more expensive for it to obtain director and officer liability insurance and it may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. UERI cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of these requirements could also make it more difficult for UERI to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers.

A market for UERI’s securities may not develop or be sustained.

Following the Merger and Share Acquisition, the price of UERI’s securities may fluctuate significantly due to general market and economic conditions. An active trading market for UERI’s securities following the Merger

 

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and Share Acquisition may not develop as expected or, if developed, it may not be sustained. In addition, the price of UERI’s securities after the Merger and Share Acquisition can vary due to general economic conditions and forecasts, UERI’s general business condition and the release of UERI’s financial reports. Additionally, if UERI’s securities become delisted from Nasdaq and are quoted on the OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange), the liquidity and price of UERI’s securities may be more limited than if UERI was quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

26 Capital has identified a material weakness in its internal control over financial reporting. This material weakness could continue to adversely affect its ability to report its results of operations and financial condition accurately and in a timely manner.

26 Capital’s management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. 26 Capital’s management is likewise required, on a quarterly basis, to evaluate the effectiveness of its internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of 26 Capital’s annual or interim financial statements will not be prevented or detected on a timely basis.

26 Capital identified a material weakness in its internal control over financial reporting related to its accounting for complex financial instruments. As a result of this material weakness, 26 Capital’s management concluded that its internal control over financial reporting was not effective as of December 31, 2021. This material weakness resulted in a material misstatement of 26 Capital’s Class A common stock subject to possible redemption, Class A common stock, additional paid-in capital, accumulated deficit and related financial disclosures for the affected periods. See “Note 2 — Restatement of Previously Issued Financial Statements” in the accompanying audited financial statements of 26 Capital, included elsewhere in this proxy statement/prospectus.

Any failure to maintain internal control over 26 Capital’s financial reporting could adversely impact 26 Capital’s ability to report its financial position and results of operations on a timely and accurate basis, which could delay or disrupt its efforts to consummate an initial business combination. If 26 Capital’s financial statements are not accurate, investors may not have a complete understanding of its operations. Likewise, if 26 Capital’s financial statements are not filed on a timely basis, 26 Capital could be subject to sanctions or investigations by the stock exchange on which its ordinary shares is listed, the SEC or other regulatory authorities. In either case, this could result in a material adverse effect on 26 Capital’s ability to consummate an initial business combination.

26 Capital can give no assurance as to its ability to timely remediate the material weakness identified, if at all, or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

The Sarbanes-Oxley Act requires, among other things, that UERI maintain effective disclosure controls and procedures and internal control over financial reporting. UERI is continuing to develop and refine its disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by it in the reports that it will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to UERI’s principal executive and financial officers.

 

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UERI’s current controls and any new controls that it develops may become inadequate because of changes in conditions in its business. Further, weaknesses in UERI’s internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect UERI’s operating results or cause it to fail to meet its reporting obligations and may result in a restatement of UERI’s financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations. Since UERI is an “emerging growth company,” as defined in the Securities Act, as modified by the JOBS Act, it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in UERI’s reported financial and other information.

In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, UERI has expended and anticipates that it will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of its internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase UERI’s operating costs and could materially and adversely affect its ability to operate its business. In the event that UERI’s internal controls are perceived as inadequate or that it is unable to produce timely or accurate financial statements, investors may lose confidence in UERI’s operating results and the stock price of UERI may decline. In addition, if UERI is unable to continue to meet these requirements, it may not be able to obtain or maintain listing on Nasdaq.

UERI’s independent registered public accounting firm is not required to formally attest to the effectiveness of its internal control over financial reporting until after UERI is no longer an emerging growth company. At such time, UERI’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which UERI’s controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on UERI’s business and operating results.

Risks Related to Ownership of the Combined Entity

UERI’s amended articles of incorporation, amended by-laws and Philippine law could prevent a takeover that shareholders consider favorable and could also reduce the market price of UERI common shares.

Certain provisions of UERI’s amended articles of incorporation, amended by-laws and Philippine law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire UERI or for UERI’s shareholders to elect different individuals to its board of directors, even if doing so would be beneficial to its shareholders, and may limit the price that investors may be willing to pay in the future for the UERI common shares. Further, Philippine tax considerations may make potential transactions undesirable to UERI or to some of its shareholders whose country of residence does not have a tax treaty with the Philippines granting tax relief to such shareholders from Philippine tax.

UERI has never declared or paid cash dividends on its shares, and may never do so. Accordingly, you may not receive any return on investment unless you sell your UERI common shares for a price greater than the price you paid for the 26 Capital common stock.

UERI has never declared or paid any cash dividends on its shares. UERI does not intend to pay dividends for the foreseeable future. It currently intends to retain all available funds and any future earnings for use in the operation of its business and does not anticipate paying any dividends on the UERI common shares in the foreseeable future. Consequently, you may be unable to realize a gain on your investment except by selling your UERI common shares after price appreciation, which may never occur.

 

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UERI’s board of directors has sole discretion whether to pay dividends. If UERI’s board of directors decides to pay dividends, the form, frequency and amount will depend upon its future, operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that its directors may deem relevant. Payment of dividends may also be subject to Philippine withholding taxes.

The UERI common shares and UERI warrants may not be listed on a national securities exchange after the Merger and Share Acquisition, which could limit investors’ ability to make transactions in such securities and subject UERI to additional trading restrictions.

UERI intends to apply to have the UERI common shares and UERI warrants approved for listing on Nasdaq after the consummation of the Merger and Share Acquisition. UERI will be required to meet certain initial listing requirements to be listed, including having a minimum number of round lot shareholders. UERI may not be able to meet the initial listing requirements in connection with the Merger and Share Acquisition. Further, even if the UERI common shares and UERI warrants are so listed, UERI may be unable to maintain the listing of such securities in the future. If UERI fails to meet the initial listing requirements and Nasdaq does not list the UERI common shares and UERI warrants (and the related closing condition with respect to the listing of the UERI common shares is waived by the parties), UERI could face significant material adverse consequences, including:

 

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a limited availability of market quotations for the UERI common shares and UERI warrants;

 

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a reduced level of trading activity in the secondary trading market for the UERI common shares and UERI warrants;

 

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a limited amount of news and analyst coverage for UERI;

 

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a decreased ability to issue additional securities or obtain additional financing in the future; and

 

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UERI’s securities would not be “covered securities” under the National Securities Markets Improvement Act of 1996, which is a federal statute that prevents or pre-empts the states from regulating the sale of certain securities, including securities listed on Nasdaq, in which case UERI’s securities would be subject to regulation in each state where UERI offers and sells securities.

The market price and trading volume of the UERI common shares may be volatile and could decline significantly following the Merger and Share Acquisition.

The stock markets, including Nasdaq on which UERI intends to list the UERI common shares and UERI warrants to be issued in the Merger and Share Acquisition, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for the UERI common shares and UERI warrants following the Merger and Share Acquisition, the market price of the UERI common shares and UERI warrants may be volatile and could decline significantly. In addition, the trading volume in the UERI common shares and UERI warrants may fluctuate and cause significant price variations to occur. If the market price of the UERI common shares and UERI warrants declines significantly, you may be unable to resell UERI common shares or warrants at or above the market price of the UERI common shares and UERI warrants as of the date immediately following the consummation of the Merger and Share Acquisition. UERI and 26 Capital cannot assure you that the market price of the UERI common shares and UERI warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

 

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the realization of any of the risk factors presented in this proxy statement/prospectus;

 

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actual or anticipated differences in UERI’s estimates, or in the estimates of analysts, for UERI’s revenues, earnings, results of operations, level of indebtedness, liquidity or financial condition;

 

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additions and departures of key personnel;

 

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failure to comply with the requirements of Nasdaq;

 

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failure to comply with the Sarbanes-Oxley Act or other laws or regulations;

 

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future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases, of UERI’s securities including due to the expiration of contractual lock-up agreements;

 

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publication of research reports about UERI;

 

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the performance and market valuations of other similar companies;

 

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failure of securities analysts to initiate or maintain coverage of UERI, changes in financial estimates by any securities analysts who follow UERI or UERI’s failure to meet these estimates or the expectations of investors;

 

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new laws, regulations, subsidies or credits or new interpretations of existing laws applicable to UERI;

 

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commencement of, or involvement in, litigation involving UERI;

 

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broad disruptions in the financial markets, including sudden disruptions in the credit markets;

 

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speculation in the press or investment community;

 

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actual, potential or perceived control, accounting or reporting problems;

 

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changes in accounting principles, policies and guidelines; and

 

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other events or factors, including those resulting from infectious diseases, health epidemics and pandemics (including the ongoing COVID-19 public health emergency), natural disasters, war, acts of terrorism or responses to these events.

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert UERI’s management’s attention and resources, which could have a material adverse effect on us.

If, following the Merger and Share Acquisition, securities or industry analysts do not publish or cease publishing research or reports about UERI, its business or its market, or if they change their recommendations regarding the UERI common shares adversely, then the price and trading volume of the UERI common shares could decline.

The trading market for the UERI common shares will be influenced by the research and reports that industry or financial analysts publish about its business. UERI does not control these analysts, or the content and opinions included in their reports. As a new public company, UERI may be slow to attract research coverage and the analysts who publish information about the UERI common shares will have relatively little experience with UERI, which could affect their ability to accurately forecast UERI’s results and make it more likely that UERI fails to meet their estimates. In the event UERI obtains industry or financial analyst coverage, if any of the analysts who cover UERI issues an inaccurate or unfavorable opinion regarding it, UERI’s share price would likely decline. In addition, the share prices of many companies in the gaming industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If UERI’s financial results fail to meet, or significantly exceed, its announced guidance or the expectations of analysts or public investors, analysts could downgrade the UERI common shares or publish unfavorable research about it. If one or more of these analysts cease coverage of UERI or fail to publish reports on it regularly, UERI’s visibility in the financial markets could decrease, which in turn could cause its share price or trading volume to decline.

UERI’s failure to meet the continued listing requirements of Nasdaq could result in a delisting of its securities.

If, after listing, UERI fails to satisfy the continued listing requirements of Nasdaq such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist its

 

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securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, UERI can provide no assurance that any action taken by it to restore compliance with listing requirements would allow its securities to become listed again, stabilize the market price or improve the liquidity of its securities, prevent its securities from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if UERI’s securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of UERI’s securities may be more limited than if it were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

The process of taking a company public by means of a business combination with a special purpose acquisition company is different from taking a company public through an initial public offering and may create risks for unaffiliated investors.

An initial public offering involves a company engaging underwriters to purchase its shares and resell them to the public. An underwritten offering imposes statutory liability on the underwriters for material misstatements or omissions contained in the registration statement unless they are able to sustain the burden of providing that they did not know and could not reasonably have discovered such material misstatements or omissions. This is referred to as a “due diligence” defense and results in the underwriters undertaking a detailed review of a company’s business, financial condition and results of operations. Going public via a business combination with a SPAC does not involve any underwriters and may therefore result in less careful review of information that is presented to the public.

In addition, going public via a business combination with a SPAC does not involve a book-building process as is the case in an initial public offering. In an initial public offering, the initial value of a company is set by investors who indicate the price at which they are prepare to purchase shares from the underwriters. In the case of a SPAC business combination transaction, the value of the company is established by means of negotiations between the target company, the SPAC and, in some cases, “PIPE” investors who agree to purchase shares at the time of the business combination. The process of establishing the value of a company in a SPAC business combination may be less effective than an IPO book-building process and also does not reflect events that may have occurred between the date of the business combination agreement and the closing of the transaction. Furthermore, initial public offerings are frequently oversubscribed resulting in additional potential demand for shares in the aftermarket following the initial public offering. There is no such book of demand built up in connection with SPAC transaction which may result in the share price being less likely to be sustained after the transaction.

Lastly, because UERI will not become a public reporting company by means of a traditional underwritten initial public offering, securities or industry analysts may be less likely to provide coverage of UERI. Investment banks may also be less likely to agree to underwrite securities offerings on behalf of UERI than they might if UERI became a public reporting company by means of a traditional underwritten initial public offering, because they may be less familiar with UERI as a result of more limited coverage by analysts and the media. The failure to receive research coverage or support in the market for the UERI common shares could have an adverse effect on UERI’s ability to develop a liquid market for the UERI common shares or to raise capital.

UERI will qualify as an emerging growth company within the meaning of the Securities Act, and if UERI takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make UERI’s securities less attractive to investors and may make it more difficult to compare UERI’s performance with other public companies.

UERI will qualify as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. Under the JOBS Act, and if UERI takes advantage of certain exemptions from

 

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disclosure requirements available to emerging growth companies, this could make UERI’s securities less attractive to investors and may make it more difficult to compare UERI’s performance with other public companies. Furthermore, under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. UERI intends to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.

For as long as UERI continues to be an emerging growth company, it may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, its shareholders may not have access to certain information that they may deem important. UERI could be an emerging growth company for up to five years, although circumstances could cause it to lose that status earlier, including if its total annual gross revenue exceeds $1.07 billion, if it issues more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time it is a “large accelerated filer” under U.S. securities laws.

UERI cannot predict if investors will find UERI common shares less attractive because it may rely on these exemptions. If some investors find UERI common shares less attractive as a result, there may be a less active trading market for UERI common shares and UERI’s share price may be more volatile. Further, there is no guarantee that the exemptions available to UERI under the JOBS Act will result in significant savings. To the extent that UERI chooses not to use exemptions from various reporting requirements under the JOBS Act, it will incur additional compliance costs, which may impact UERI’s financial condition.

UERI will be a foreign private issuer and, as a result, it will not be subject to U.S. proxy rules but will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. issuer.

Upon the closing of the Merger and Share Acquisition, UERI will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because UERI qualifies as a foreign private issuer under the Exchange Act and, although UERI will follow Philippine laws and regulations with regard to such matters, UERI will be exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including: (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers will be required to file their annual report on Form 20-F by 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, even though UERI is contractually obligated and intends to make interim reports available to UERI’s shareholders, copies of which UERI is required to furnish to the SEC on a Form 6-K, and even though UERI is required to file reports on Form 6-K disclosing whatever information UERI has made or are required to make public pursuant to Philippine law or distribute to UERI’s shareholders and that is material to the company, you may not have the same protections afforded to shareholders of companies that are United States domestic issuers.

UERI may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, UERI is a foreign private issuer, and therefore UERI is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign

 

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private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to UERI on June 30, 2022. In the future, UERI would lose its foreign private issuer status if (1) more than 50% of its outstanding voting securities are owned by U.S. residents and (2) a majority of its directors or executive officers are U.S. citizens or residents, or if UERI fails to meet additional requirements necessary to avoid loss of foreign private issuer status. If UERI loses its foreign private issuer status, UERI will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. UERI will also have to mandatorily comply with U.S. federal proxy requirements, and its officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, UERI will lose its ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, UERI would incur significant additional legal, accounting and other expenses that UERI will not incur as a foreign private issuer.

As UERI is a foreign private issuer and follows certain home country corporate governance practices, its shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

As a foreign private issuer, UERI has the option to follow certain home country corporate governance practices rather than those of the Nasdaq, provided that UERI discloses the requirements UERI is not following and describes the home country practices UERI is following. UERI intends to rely on this “foreign private issuer exemption” with respect to the Nasdaq rules requiring, amongst others, the majority of the board to be comprised of independent directors, independent directors to conduct regularly scheduled executive sessions and shareholder approval prior to certain types of securities issuances. UERI may in the future elect to follow home country practices with regard to other matters. As a result, UERI’s shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements. For more information, see “Management After the Merger and Share Acquisition — Corporate Governance Practices.”

UERI may redeem the UERI warrants prior to their exercise at a time that is disadvantageous to holders, thereby making such warrants worthless. Additionally, the exercise price for the UERI warrants will be $11.50 per UERI common share and the UERI warrants may expire worthless unless the stock price is higher than the exercise price during the exercise period.

UERI will have the ability to redeem outstanding UERI warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant; provided that the last reported sales price of the UERI common shares equals or exceeds $18.00 per share (as adjusted for adjustments to the number of UERI common shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date UERI sends the notice of such redemption to the warrant holders. Redemption of the outstanding UERI warrants could force warrant holders to (i) exercise their UERI warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) sell their UERI warrants at the then-current market price when they might otherwise wish to hold their UERI warrants or (iii) accept the nominal redemption price which, at the time the outstanding UERI warrants are called for redemption, is likely to be substantially less than the market value of the UERI warrants.

The exercise price of the UERI warrants will be $11.50 per UERI common share, subject to adjustment. As a result, the warrants may expire worthless unless the stock price reaches that level during the exercise period.

The private placement warrants are identical to the public warrants except that, so long as they are held by the Sponsor, or 26 Capital’s officers or directors or their respective permitted transferees, (i) they will not be redeemable, (ii) they will not be transferable, assignable or salable until 30 days after the completion of the Merges and Share Acquisition (subject to limited exceptions), (iii) they may be exercised by the holders on a

 

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cashless basis, and (iv) they are entitled to registration rights. If the private placement warrants are held by holders other than the Sponsor or 26 Capital’s officers or directors or their respective permitted transferees, the private placement warrants will be redeemable by UERI in all redemption scenarios and exercisable by the holders on the same basis as the public warrants. If the holders of the private placement warrants exercise their warrants on a cashless basis UERI will not receive cash proceeds from the exercise of such warrants.

Changes in tax laws or exposure to additional income tax liabilities could affect UERI’s future profitability and reduce net returns to UERI’s shareholders.

UERI’s tax treatment is subject to changes in tax laws, regulations, and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration, and the practices of tax authorities in jurisdictions in which we operate. The income and other tax rules in the jurisdictions in which UERI operates are constantly under review by taxing authorities and other governmental bodies. Changes to tax laws (which changes may have retroactive application) could adversely affect UERI or its shareholders. We are unable to predict what tax proposals may be proposed or enacted in the future or what effect such changes would have on UERI’s business, but such changes, to tax legislation, regulations, policies or practices, could affect UERI’s financial position and overall or effective tax rates in the future in countries where we have operations and where UERI is organized or resident for tax purposes, and increase the complexity, burden and cost of tax compliance. We urge investors to consult with their legal and tax advisers regarding the implication of potential changes in tax laws on an investment in UERI common shares and UERI warrants.

U.S. holders of UERI common shares and/or warrants may suffer adverse tax consequences if UERI is treated as a passive foreign investment company.

A non-U.S. corporation generally will be treated as a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes, in any taxable year if either (ii) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is generally treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains. Based on the current and anticipated composition of the income, assets and operations of UERI and its subsidiaries, it is not expected that UERI will be a PFIC for U.S. federal income tax purposes for the taxable year that includes the Merger and Share Acquisition or in foreseeable future taxable years. Although, this is a factual determination that depends on, among other things, the composition of UERI’s income and assets, and the market value of its shares and assets, including the composition of income and assets and the market value of shares and assets of its subsidiaries, from time to time, and thus a complete determination can only be made annually after the close of each taxable year. If UERI is a PFIC for any taxable year, a U.S. Holder of UERI common shares may be subject to adverse tax consequences and may incur certain information reporting obligations. Under the PFIC rules, unless such U.S. Holder makes an election available under the Code (which election could itself have adverse consequences for such U.S. Holder), such U.S. Holder may be subject to U.S. federal income tax at the then prevailing maximum rates on ordinary income and possibly an “interest” charge, in respect of “excess distributions” and upon any gain from the disposition of UERI common shares, as if the excess distribution or gain had been recognized ratably over such U.S. Holder’s holding period of the UERI common shares. Certain elections (including a qualified electing fund or a mark-to-market election) that may be available to U.S. Holders of UERI common shares to mitigate some of the adverse tax consequences resulting from PFIC treatment, however, are not available with respect to the UERI warrants. For a further discussion, see “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations — U.S. Holders — U.S. Federal Income Tax Considerations of Ownership and Disposition of UERI Common Shares and UERI Warrants — Passive Foreign Investment Company Rules.” U.S. Holders of UERI common shares and warrants are strongly encouraged to consult their own advisors regarding the potential application of these rules to UERI and the ownership of UERI common shares and/or warrants.

 

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The Merger and Share Acquisition may not qualify as a reorganization under Section 368(a) of the Code or a transaction described in Section 351 of the Code or may be taxable under Section 367(a) of the Code, potentially causing U.S. investors who own 26 Capital shares and/or 26 Capital warrants to recognize gain or loss for U.S. federal income tax purposes.

It is intended that (i) the Merger and Share Acquisition qualify as a “reorganization” within the meaning of Section 368(a) of the Code and the Merger and Share Acquisition and the Reorganization collectively qualify as a transaction described in Section 351 of the Code, and (ii) any transfer of 26 Capital shares by a U.S. investor pursuant to the Merger and Share Acquisition qualify for an exception to Section 367(a)(1) of the Code as of the Effective Time (other than with respect to any such investor that would own, actually or constructively, 5% or more (by vote or value) of the outstanding UERI common shares immediately after the Merger and Share Acquisition and that fails to enter into a valid “gain recognition agreement” with respect to the transferred UERI common shares) (collectively, the “Intended Tax Treatment”). The parties intend to report the Merger and Share Acquisition in a manner consistent with the Intended Tax Treatment to the extent permitted by law. However, there are significant factual and legal uncertainties as to whether the Merger and Share Acquisition will qualify for the Intended Tax Treatment. See “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations — U.S. Holders — U.S. Federal Income Tax Considerations of the Merger and Share Acquisition — Tax Consequences of the Merger and Share Acquisition Under Section 368(a) of the Code.” Moreover, the closing of the Merger and Share Acquisition is not conditioned upon the receipt of an opinion of counsel that the Merger and Share Acquisition will qualify for the Intended Tax Treatment, and neither 26 Capital nor UERI intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Merger and Share Acquisition. Accordingly, no opinion of counsel providing that the Merger and Share Acquisition will qualify for the Intended Tax Treatment will be given, and no assurance can be given that the IRS will not challenge the Intended Tax Treatment or that a court will not sustain a challenge by the IRS.

The IRS may not agree that UERI should be treated as a non-U.S. corporation for U.S. federal income tax purposes.

Under current U.S. federal income tax law, a corporation generally will be considered to be a U.S. corporation for U.S. federal income tax purposes if it is created or organized in the United States or under the law of the United States or of any State. Accordingly, under generally applicable U.S. federal income tax rules, UERI, which is incorporated and tax resident in the Philippines, would generally be classified as a non-U.S. corporation for U.S. federal income tax purposes. Section 7874 of the Code and the Treasury regulations promulgated thereunder, however, contain specific rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. If it were determined that UERI is treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, UERI would be liable for U.S. federal income tax on its income in the same manner as any other U.S. corporation and certain distributions made by UERI to Non-U.S. Holders (as defined in “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations”) of UERI may be subject to U.S. withholding tax.

As more fully described in the section titled “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations,” based on the terms of the Merger and Share Acquisition and certain factual assumptions, UERI does not currently expect to be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code after the Merger and Share Acquisition. However, the application of Section 7874 of the Code is complex, subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such U.S. Treasury regulations with possible retroactive effect) and subject to certain factual uncertainties, some of which must be finally determined after the completion of the Merger and Share Acquisition. Accordingly, there can be no assurance that the IRS will not challenge the status of UERI as a non-U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code or that such challenge would not be sustained by a court.

 

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If the IRS were to successfully challenge under Section 7874 of the Code UERI’s status as a non U.S. corporation for U.S. federal income tax purposes, UERI and certain UERI shareholders may be subject to significant adverse tax consequences, including a higher effective corporate income tax rate on UERI and the application of U.S. withholding taxes on dividends paid on UERI shares to non-U.S. shareholders, subject to reduction under an applicable income tax treaty.

See “Material Tax Considerations — Certain Material U.S. Federal Income Tax Considerations” for a more detailed discussion of the application of Section 7874 of the Code to UERI. Investors should consult their own tax advisors regarding the application of Section 7874 of the Code to the Merger and Share Acquisition and the tax consequences to UERI and its shareholders if the classification of UERI as a non-U.S. corporation is not respected.

Risks Related to the Merger and Share Acquisition

The completion of the Merger and Share Acquisition is subject to a number of important conditions, and the Merger and Share Acquisition Agreement may be terminated before the completion of the Merger and Share Acquisition in accordance with its terms. As a result, there is no assurance that the Merger and Share Acquisition will be completed.

The completion of the Merger and Share Acquisition is subject to the satisfaction or waiver, as applicable, of a number of important conditions set forth in the Merger and Share Acquisition Agreement, including the approval of the Merger and Share Acquisition by the stockholders of 26 Capital, the approval of the listing of the UERI common shares on Nasdaq, and several other customary closing conditions. If these conditions are not satisfied or, if applicable, waived, the Merger and Share Acquisition Agreement may be terminated by either party and you will not receive the opportunity to acquire UERI common shares. For more information, see “The Agreement and Plan of Merger and Share Acquisition.”

The Unaudited Pro Forma Condensed Combined Financial Information included in this proxy statement/prospectus may not be representative of our results after the Merger and Share Acquisition.

The Unaudited Pro Forma Condensed Combined Financial Information included elsewhere in this proxy statement/prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the transactions been consummated as of the dates indicated, nor is it indicative of our future operating results or financial position after the assumed consummation of the transactions. The Unaudited Pro Forma Condensed Combined Financial Information present the combination of our financial information and the financial information of UERI after giving effect to the Merger and Share Acquisition and related adjustments described in the accompanying notes. See “Unaudited Pro Forma Condensed Combined Financial Information.”

The Unaudited Pro Forma Condensed Combined Financial Information does not reflect future events that may occur, including any future nonrecurring charges resulting from the Merger and Share Acquisition, and does not consider potential impacts of current market conditions on future operating results or financial position. The Unaudited Pro Forma Condensed Combined Financial Information is based in part on certain assumptions that we believe are reasonable under the circumstances. Our assumptions may not prove to be accurate over time.

Your ownership percentage in UERI will be less than the ownership percentage you currently hold in 26 Capital.

Your ownership percentage in UERI common shares following the Merger and Share Acquisition will be less than your existing ownership percentage in 26 Capital as a result of dilution attributable to the relative equity values of the companies involved in the Merger and Share Acquisition. Immediately after the Merger and Share Acquisition, it is anticipated that (i) the former shareholders of 26 Capital will hold as a group approximately

 

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13.75% of the UERI common shares and (ii) the current shareholder of UERI will hold as a group approximately 86.25% of the outstanding UERI common shares. As a result, you may have less influence over matters submitted to a vote of UERI shareholders.

The board of directors of 26 Capital did not obtain a fairness opinion in determining whether or not to proceed with the Merger and Share Acquisition, and as a result, we cannot assure you that the terms of the transaction are fair, from a financial point of view, to the stockholders of 26 Capital.

In analyzing the Merger and Share Acquisition, the management team of 26 Capital conducted significant due diligence on TRLEI and engaged in comprehensive discussions regarding the terms of the transaction, including the relative ownership of the combined company following the Merger and Share Acquisition. Neither party is required to obtain an opinion from an unaffiliated third party that the relative ownership of the combined company following the Merger and Share Acquisition is fair to its stockholders from a financial point of view. Based on the due diligence efforts, the scope of the negotiations, input from its advisors, and the background of 26 Capital’s board of directors and management, the board of directors of 26 Capital believes that the valuation implied by the relative ownership of the combined company is fair to its stockholders from a financial perspective. Notwithstanding the foregoing, the board of directors of 26 Capital did not obtain a formal fairness opinion to assist it in this determination. Accordingly, the board of directors of 26 Capital may be incorrect in its assessment of the Merger and Share Acquisition.

Some of 26 Capital’s officers and directors may have conflicts of interest that may influence or have influenced them to support or approve the Merger and Share Acquisition without regard to your interests or in determining whether UERI is appropriate for 26 Capital’s initial business combination.

The personal and financial interests of the Sponsor, officers and directors may influence or have influenced their motivation in identifying and selecting a target for the Merger and Share Acquisition, their support for completing the Merger and Share Acquisition and the operation of UERI following the Merger and Share Acquisition.

The Sponsor owns 6,875,000 shares of Class B common stock of 26 Capital, which were initially acquired prior to the 26 Capital IPO for an aggregate purchase price of $25,000 and 26 Capital’s directors and officers have pecuniary interests in the 26 Capital Class B common stock held by the Sponsor through their ownership interest in the Sponsor. Such shares had an aggregate market value of approximately $67.8 million based upon the closing price of $9.855 per share on Nasdaq on May 19, 2022. In addition, the Sponsor purchased an aggregate of 7,500,000 private placement warrants, each exercisable for one share of 26 Capital Class A Stock at $11.50 per share, for a purchase price of $7,500,000, or $1.00 per warrant. Such 26 Capital private placement warrants had an aggregate market value of $6.9 million based upon the closing price of $0.50 per warrant on Nasdaq on May 19, 2022. The Sponsor has loaned 26 Capital an additional $1,500,000 in order to fund working capital, which amount will convert into 1,500,000 private placement warrants upon consummation of the Merger and Share Acquisition (which would be valued at $0.53 per private placement warrant, or approximately $0.8 million in the aggregate, as of December 31, 2021).

26 Capital’s Amended and Restated Certificate of Incorporation require 26 Capital to complete an initial business combination prior to January 20, 2023 (unless 26 Capital submits and its stockholders approve an extension of such date). If the Merger and Share Acquisition, or another business combination, is not completed and 26 Capital is forced to wind up, dissolve and liquidate in accordance with its Amended and Restated Certificate of Incorporation, the shares of 26 Capital Class B Stock currently held by the Sponsor and the private placement warrants purchased by Sponsor will be worthless.

The Sponsor, its directors and officers, and their respective affiliates have incurred significant out-of-pocket expenses in connection with performing due diligence on suitable targets for business combinations and the negotiation of the Merger and Share Acquisition. At the closing, the Sponsor, its directors and officers, and their

 

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respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on 26 Capital’s behalf, such as identifying potential target businesses and performing due diligence on suitable targets for business combinations. If a business combination is not completed prior to January 20, 2023, the Sponsor, directors and officers, or any of their respective affiliates will not be eligible for any such reimbursement.

The Sponsor and 26 Capital’s officers and directors (or their affiliates) may make loans from time to time to 26 Capital to fund certain capital requirements. The Sponsor had previously loaned 26 Capital an aggregate of up to $275,000 to cover expenses related to 26 Capital’s initial public offering pursuant to a promissory note that was repaid in full on January 20, 2021. As of the date of this proxy statement/prospectus, no additional loans have been made, but loans may be made after the date of this proxy statement/prospectus. If the Merger and Share Acquisition is not consummated or another business combination is not otherwise completed, the loans may not be repaid and would be forgiven except to the extent there are funds available to 26 Capital outside of the Trust Account.

Certain officers and members of the 26 Capital board of directors also participate in arrangements that may provide them with other interests in the Merger and Share Acquisition that are different from yours, including, among others, arrangements for the continued service as directors of UERI following the consummation of the Merger and Share Acquisition, and hold warrants to purchase shares of 26 Capital Class A Stock, as described under “The Merger and Share Acquisition Proposal — Interests of 26 Capital’s Directors and Officers in the Merger and Share Acquisition” beginning on page 97 of this proxy statement/prospectus.

These interests, among others, may influence or have influenced the Sponsor and the officers and members of the 26 Capital board of directors to support or approve the Merger and Share Acquisition, as the Sponsor has incentives to complete an acquisition of a less favorable target company or on terms less favorable to 26 Capital stockholders rather than to liquidate. For more information concerning the interests of 26 Capital’s officers and directors, see “The Merger and Share Acquisition Proposal—Interests of 26 Capital’s Directors and Officers in the Merger and Share Acquisition” beginning on page 97 of this proxy statement/prospectus.

If you elect not to purchase UERI common shares in the Subscription, you will not receive any UERI common shares or any other securities of UERI and the only consideration that you receive in the Merger and Share Acquisition will be an amount of cash equal to 0.05 PHP per share.

As described under “The Merger and Share Acquisition Agreement — The Subscription,” the consideration that 26 Capital stockholders receive in the Merger and Share Acquisition will be the right to subscribe for UERI common shares upon the completion of the Merger and Share Acquisition. Unless you elect not to subscribe for such UERI common shares, 26 Capital will be deemed to have purchased one UERI common share on your behalf for each share of 26 Capital Class A common stock exchanged in connection with the Merger and Share Acquisition.

However, if you elect not to subscribe for UERI common shares, the only consideration that you receive will be an amount of cash equal to 0.05 PHP per share, which is expected to be significantly less than the amount of cash that you would receive if you instead elect to have your shares redeemed as described under “Special Meeting of 26 Capital Common Stockholders — Redemption Rights.” 26 Capital stockholders should be aware that they can elect not to subscribe for UERI common shares by either affirmatively electing to “opt out” in the letter of transmittal/subscription confirmation that will be sent to them following the Effective Time or by failing to deliver a completed letter of transmittal/subscription confirmation within one year of the Effective Time.

 

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Risks Related to the Redemption

26 Capital stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 15% of the public shares.

A public stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 15% of the 26 Capital common stock sold in its initial public offering. Accordingly, if you hold more than 15% of such shares and the Merger and Share Acquisition Proposal is approved, you will not be able to seek redemption rights with respect to the full amount of your shares and may be forced to hold the shares in excess of 15% or sell them in the open market. 26 Capital cannot assure you that the value of such excess shares will appreciate over time following the Merger and Share Acquisition or that the market price of UERI common shares will exceed the per-share redemption price.

There is no guarantee that a 26 Capital stockholder’s decision to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

There is no assurance as to the price at which a 26 Capital stockholder may be able to sell its UERI common shares in the future following the completion of the Merger and Share Acquisition or shares with respect to any alternative business combination. Certain events following the consummation of any initial business combination, including the Merger and Share Acquisition, may cause an increase in the share price, and may result in a lower value realized now than a 26 Capital stockholder might realize in the future had the stockholder not redeemed his, her or its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation of any initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price. A stockholder should consult the stockholder’s tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

Risks Related to the Reorganization

If UERI does not own legal title to the TRLEI Shares upon the closing of the Merger and Share Acquisition, UERI will initially need to rely on contractual arrangements with TRLEI and such contractual arrangements may not be as effective in providing control over TRLEI as direct ownership.

Pursuant to the Reorganization, UERI Sale Shares shall be sold by TRLEI to TRA pursuant to a deed of absolute sale. At this point, TRLEI and UERI shall both be wholly-owned subsidiaries of TRA. Thereafter, in order for TRLEI to be a subsidiary of UERI, TRA will subscribe to additional shares in UERI payable in cash and contribute 100% of its issued and outstanding shares in TRLEI (“TRLEI Shares”), including certain receivables due from TRLEI, as additional paid in capital (“APIC”) in UERI.

The transfer of the UERI Sale Shares to TRA requires the issuance of a Certificate Authorizing Registration (“CAR”) from the BIR. Furthermore, the contribution by TRA of TRLEI Shares in UERI as APIC will also require issuance of a CAR. A CAR is, in effect, a tax clearance relative to transfer certain properties such as transfers of shares of stocks in a Philippine corporation. It is also a mandatory requirement before the legal ownership over the shares can be recorded in the stock and transfer book of a corporation, and the corresponding stock certificates canceled and issued in favor of the transferee or buyer. On March 11, 2022, the CAR in respect of the transfer was obtained from the BIR. On March 25, 2022, the BIR issued a tax ruling (“Tax Ruling”) on the Reorganization. As of March 30, 2022, the recording of the transfer in the stock and transfer book of TRLEI is ongoing (and is expected by the UEC Parties to be completed prior to the closing of the Merger and Share Acquisition). However, there is no assurance that the recording will be completed in time.

If UERI does not possess legal ownership of the TRLEI Shares upon the closing of the Merger and Share Acquisition, UERI will instead rely on contractual arrangements with TRLEI. For a description of these

 

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contractual arrangements, see “The Merger and Share Acquisition Agreement — The Reorganization.” These contractual arrangements may not be as effective as direct ownership in providing UERI with control over TRLEI.

If UERI has direct legal ownership of the TRLEI Shares, UERI would be able to exercise its rights directly as an equity holder and appoint representatives to TRLEI’s board of directors, which could effect changes to the management and operations of TRLEI. If, instead, UERI relies on contractual arrangements, UERI may not be able to directly change the members of the board of directors of TRLEI and would have to rely on TRA to perform its contractual obligations to make any such changes in the board of directors of TRLEI. TRA may have conflicts of interest with UERI or its shareholders, and TRA may not act in the best interests of UERI or may not perform its obligations under these contracts. If UERI is required to enforce its contractual rights or there is any dispute relating to these contracts that remains unresolved, UERI will need to enforce its rights under the contractual arrangements under Philippine law, which may be costly and time-consuming and will be subject to uncertainties in the outcome of such enforcement. Consequently, the contractual arrangements may not be as effective in ensuring control over TRLEI as direct ownership.

There are governmental approvals that should be secured to implement the Reorganization, and there is no assurance on the timeline to secure these.

On October 19, 2018, the BSP issued a certificate of registration (“Certificate of Registration”) with MSB Registration No. 60-00731-0-00000 in favor of TRLEI. Pursuant to this registration, TRLEI is allowed to operate as a Money Changer (“MC”) / Foreign Exchange Dealer (“FXD”) with a Type “E” registration in the Philippines, subject to the applicable provisions of law and BSP rules and regulations, as well as the provisions of the Anti-Money Laundering Act of 2001, as amended, and its implementing rules and regulations. In a letter dated October 29, 2018, one of the conditions imposed by the BSP on the issuance of the Certificate of Registration as MC/FXD to TRLEI is for TRLEI to assume full responsibility to comply with all the requirements, rules and regulations of the BSP regarding the registration and notification of all its offices/branches and its compliance with the registration requirements. The BSP issued BSP Circular No. 942-17 on January 20, 2017 amending Section 4511N of the Manual of Regulations for Non-Bank Financial Institutions and providing the rules and regulations governing the operations and reporting obligations of non-bank entities engaged in money service business operations, including MCs and FXDs dealers. Under this issuance, MCs and FXDs are required to obtain prior approval from the BSP for any change in control of a corporation. “Control” shall refer to any transaction involving voting shares of stock of an MC/FXD that will result in ownership or control of at least twenty percent (20%) of voting shares of stock of the MC/FXD by any person, whether natural or juridical, or which will enable such person to elect, or be elected as, a director of such MC/FXD.

The MC/FXD shall submit the names of its proposed new controlling shareholder for evaluation of the BSP. Apart from the submission of the names of the new controlling shareholder, the MC/FXD shall also submit a duly notarized DET-generated Form 3M with all the relevant details of the entity, a copy of the contract/agreement/arrangement, schedule of stockholdings before and after the transfer of ownership, the Personal Data and Authorization Form, National Bureau of Investigation clearances and proof of attendance to the mandatory training on anti-money laundering/combating the financing of terrorism of newly elected/appointed directors, and other documents which the BSP may require in the course of their evaluation. Prior to the Reorganization, TRA owned 100% of the shares in TRLEI. Eventually, TRLEI will be a wholly-owned subsidiary of UERI. The transfer of ownership in TRLEI from TRA to UERI will trigger the application of the notification requirement under BSP Circular No. 942-17. The processing time for securing an approval from the BSP of the change in control is two (2) months to three (3) months, which may affect the timeline to complete the Reorganization. If UERI is unable to comply with the notification requirement, this may result in the cancelation of TRLEI’s registration as an MC/FXD.

Furthermore, pursuant to Article II of the Regular License, any material change in the master development plan or the project implementation plan will need prior written approval and consent of PAGCOR, which

 

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approval and consent shall not be unreasonably withheld. TRLEI is of the view that excluding the undeveloped areas from TRLEI’s lease would not be such a material change, because the actual project implementation plan that was approved by PAGCOR and is being implemented by TRLEI does not need or involve those undeveloped areas. However, there is a risk that PAGCOR may view the situation differently and require TRLEI to obtain prior approval and consent from PAGCOR. If TRLEI does seek prior approval and consent from PAGCOR, there is a further risk that PAGCOR may not approve.

In addition, TRLEI will need to secure a letter of no objection or letter of authority from PEZA to exclude undeveloped land on the properties to be leased and used for the operations of Okada Manila. Under TRLEI’s Registration Agreement with PEZA, TRLEI shall ensure and maintain continuous possession of the 407,993 sq.m. lot area inside Okada Manila, under the terms and conditions of its Lease Agreement with the owner/lessor.

In view of the intention to exclude the undeveloped land on the opposite side of the road surrounding the lease land where Okada Manila is located, TRLEI must obtain a letter of no objection or letter of authority and submit a copy of the amended lease agreement with the PEZA. Otherwise, TRLEI’s fiscal and non-fiscal incentives may be revoked.

See “Business — Real Property — Eagle I Lease” for more information.

Risks Related to the Projections

The Projections contained herein, as well as their underlying assumptions, may be inaccurate.

This proxy statement/prospectus, including the Independent Consultant Report attached as Annex D, contains certain assumptions and Projections with respect to revenue, expenses and EBITDA of UERI. Prospective investors should review the Independent Consultant Report accompanying such Projections, which contains a discussion of the assumptions used in preparing the projections, together with this proxy statement/prospectus (including, without limitation, “Risk Factors”, “UERI’s Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and TRLEI’s audited financial statements and the accompanying notes thereto, included in this proxy statement/prospectus), in their entirety. The information in this proxy statement/prospectus in the section “UERI’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and TRLEI’s audited financial statements and the accompanying notes describe UERI’s actual historical results of operations, while the Independent Consultant Report and the Projections contained therein do not represent any past results of UERI’s operations nor do they necessarily represent any of UERI’s future results. Moreover, following the date of the Independent Consultant Report contained herein, neither UERI nor the Independent Consultant will provide revised Projections, or any report or analysis of any differences between the Projections contained therein and actual results later achieved, and UERI has no duty to, and does not intend to, update the Projections, even if material events or conditions occur, or become known, that would affect the assumptions, Projections or other information set forth in the Independent Consultant Report.

Since the preparation of the Projections, Okada Manila has been subjected to a number of unforeseen conditions, including, among others, (i) the surge of the Omicron variant and the operating restrictions faced by Okada Manila in January 2022, (ii) a slower than expected border reopening for the Philippines’ inbound tourism and (iii) slower than expected relaxation of regional travel rules. None of the foregoing were contemplated in the Projections, and each such event may affect UERI’s actual results of operations.

For the purposes of preparing the Projections and such estimates, certain assumptions were made with respect to technical and performance parameters of Okada Manila, material contingencies and other matters that are not within UERI’s, the Independent Consultant’s or any other person’s control and the outcome of which cannot be predicted, including, among others, operating performance, future capital expenditures, future operation and maintenance costs, future revenues, the non-occurrence of force majeure or other similar events. Accordingly, the financial projections do not necessarily reflect future costs or cash flows.

 

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The assumptions used for the Projections are subject to significant uncertainties and the actual results of our operations could differ materially from those projected. There is no assurance that these assumptions are correct or that the projections and estimates will reflect UERI’s actual results of operations. Therefore, no representations are made or intended nor should any be inferred, with respect to the accuracy of the projections or estimates. If UERI’s actual results are materially less favorable than those shown or contained in the Projections, or if the assumptions used in formulating the Projections and estimates prove to be incorrect, then UERI’s results may be materially impaired.

In addition, the terms of the engagement of the Independent Consultant do not allow investors to rely on its reports. Accordingly, investors will not have recourse against the Independent Consultant in connection with its report.

 

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SPECIAL MEETING OF 26 CAPITAL STOCKHOLDERS

General

26 Capital is furnishing this proxy statement/prospectus to its stockholders as part of the solicitation of proxies by its board of directors for use at the special meeting to be held on                     , 2022, and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to 26 Capital’s stockholders on or about                     , 2022.

Date and Time of Special Meeting

The special meeting will be held at             , Eastern Time, on                     , 2022, or such other date and time to which such meeting may be adjourned or postponed, for the purposes set forth in the accompanying notice.

The special meeting will be a completely virtual meeting of stockholders, which will be conducted via live webcast. You will be able to attend the special meeting online, vote and submit your questions during the special meeting by visiting             . The virtual meeting format allows attendance from any location in the world.

Voting Power; Record Date

You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of 26 Capital common stock at the close of business on                     , 2022, which is the record date for the special meeting. You are entitled to one vote for each share of 26 Capital common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that shares held beneficially by you are voted in accordance with your instructions. On the record date, there were              shares of 26 Capital common stock outstanding, of which              are public shares and              are Founder Shares held by the Sponsor.

Vote of 26 Capital’s Initial Stockholders

In connection with the 26 Capital IPO, 26 Capital entered into an agreement with the Sponsor and its officers and directors pursuant to which they agreed to vote any shares of 26 Capital common stock owned by them in favor of the Merger and Share Acquisition Proposal. As of the date of this proxy statement/prospectus, the Sponsor (and its affiliates (as defined in Rule 405 under the Securities Act)), executive officers and directors own approximately 20% of the outstanding shares of 26 Capital common stock.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum will be present at the special meeting if a majority of the voting power of all outstanding shares of capital stock entitled to vote at such meeting are represented at the meeting online or by proxy. An abstention from voting, shares represented at the special meeting online or by proxy (but not voted on one or more proposals) or a broker non-vote (so long as the stockholder has given the broker or other nominee voting instructions on at least one proposal in this proxy statement/prospectus) will each count as present for the purposes of establishing a quorum. In the absence of a quorum, the chairman of the special meeting may adjourn the special meeting. As of the record date for the special meeting, the presence online or by proxy of              shares of 26 Capital common stock would be required to achieve a quorum.

The approval of the Merger and Share Acquisition Proposal requires the affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon. The approval of each of the other proposals requires the affirmative vote of holders of a majority of the outstanding shares of common stock.

The Merger and Share Acquisition Proposal is conditioned on the approval of the Subscription Proposal. In addition, (i) the Charter Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal

 

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and Subscription Proposal, (ii) the Subscription Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal, (iii) the Equity Plan Proposal is conditioned on the approval of the Merger and Share Acquisition Proposal, the Charter Proposal and the Subscription Proposal, and (iv) the Adjournment Proposal is not conditioned on the approval of any other proposal set forth in the proxy statement/prospectus. It is important for you to note that if the Merger and Share Acquisition Proposal or the Subscription Proposal is not approved by 26 Capital stockholders, then 26 Capital will not consummate the Merger and Share Acquisition. If 26 Capital does not consummate the Merger and Share Acquisition and fails to complete an initial business combination by January 20, 2023, 26 Capital will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to its public stockholders.

Recommendation to 26 Capital Stockholders

The 26 Capital board of directors believes that each of the Merger and Share Acquisition Proposal, the Charter Proposal, the Subscription Proposal, the Equity Plan Proposal and the Adjournment Proposal to be presented at the special meeting is fair to and in the best interests of 26 Capital and its stockholders and unanimously recommends that 26 Capital stockholders vote “FOR” each of the proposals.

When you consider the recommendation of the 26 Capital board of directors in favor of approval of the Merger and Share Acquisition Proposal, you should keep in mind that 26 Capital’s directors and officers have interests in the Merger and Share Acquisition that are different from or in addition to (or which may conflict with) your interests as a stockholder. See the section entitled “The Merger and Share Acquisition Proposal — Interests of 26 Capital’s Directors and Officers in the Merger and Share Acquisition” for additional information.

Broker Non-Votes and Abstentions

Under the rules of various national and regional securities exchanges your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. 26 Capital believes the proposals presented to our stockholders will be considered non-discretionary and, therefore, your broker, bank or nominee cannot vote your shares without your instruction. If you do not provide instructions to your bank, broker or other nominee, it may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.”

An abstention from voting, shares represented at the special meeting online or by proxy (but not voted on one or more proposals), or a broker non-vote (so long as the stockholder has given the broker or other nominee voting instructions on at least one of the proposals in this proxy statement/prospectus) will each count as present for the purposes of establishing a quorum. A stockholder’s failure to vote by proxy or to vote online at the special meeting, an abstention from voting or a broker non-vote will have the effect of a vote “AGAINST” each of the Merger and Share Acquisition Proposal and the Subscription Proposal, but will not have any effect on the outcome of the vote on the Charter Proposal, the Equity Plan Proposal or the Adjournment Proposal.

Voting Your Shares

Each share of 26 Capital common stock that you own in your name entitles you to one vote on each of the proposals for the special meeting. Your proxy card or cards show the number of shares of 26 Capital common stock that you own. There are several ways to vote your shares of common stock:

 

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You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided to you by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are

 

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properly represented and voted at the meeting. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of 26 Capital common stock will be voted as recommended by our board of directors. Our board of directors recommends voting “FOR” each of the proposals.

 

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You can attend the special meeting and vote online even if you have previously voted by submitting a proxy as described above. You will be able to virtually attend, vote your shares and submit questions during the special meeting via a live webcast available at             . You will need your control number for access.

Revoking Your Proxy

If you give a proxy, you may revoke it at any time before the special meeting or at such meeting by doing any one of the following:

 

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you may send another proxy card with a later date;

 

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you may notify 26 Capital’s chief executive officer prior to the special meeting; or

 

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you may virtually attend the special meeting, revoke your proxy, and vote online, as indicated above.

No Additional Matters May Be Presented at the Special Meeting

The special meeting has been called only to consider the approval of the Merger and Share Acquisition Proposal, the Charter Proposal, the Subscription Proposal, the Equity Plan Proposal and the Adjournment Proposal. Under the 26 Capital bylaws, other than procedural matters incident to the conduct of the special meeting, no other matters may be considered at the special meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the special meeting.

Who Can Answer Your Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your shares of 26 Capital common stock, you may call D.F. King & Co., Inc., 26 Capital’s proxy solicitor, at (866) 342-4883 (toll free) for individuals. Banks and Brokerage Firms may call collect at: (212) 269-5550.

Redemption Rights and Procedures

Pursuant to the 26 Capital charter, any holders of 26 Capital common stock may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the trust account as of two business days prior to the consummation of the Merger and Share Acquisition. If demand is properly made and the Merger and Share Acquisition is consummated, these shares, immediately prior to the Merger and Share Acquisition, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the trust account (calculated as of two business days prior to the consummation of the Merger and Share Acquisition, less franchise and income taxes payable).

In order to exercise your redemption rights, you must:

 

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check the box on the enclosed proxy card to elect redemption;

 

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submit a request in writing, which includes the name of the beneficial owner of the shares to be redeemed, to 26 Capital’s transfer agent that your public shares be redeemed for cash; and

 

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deliver your public shares either physically or electronically through DTC to our transfer agent at least two business days before the special meeting. Stockholders seeking to exercise redemption rights and

 

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opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

If you do not properly comply with the procedures and requirements to redeem your public shares described above, your shares will not be redeemed. Any demand for redemption, once made, may be withdrawn at any time until the date of the special meeting. If you delivered your shares for redemption to our transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that our transfer agent return the shares (physically or electronically). You may make such request by contacting our transfer agent at the phone number or address listed above prior to the date of the special meeting.

Prior to exercising redemption rights, stockholders should verify the market price of 26 Capital common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their redemption rights. We cannot assure you that you will be able to sell your shares of 26 Capital common stock in the open market, even if the market price per share is higher than the redemption price, as there may not be sufficient liquidity in 26 Capital common stock when you wish to sell your shares.

If you exercise your redemption rights, your shares of 26 Capital common stock will cease to be outstanding immediately prior to the Merger and Share Acquisition and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the trust account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of UERI following the Merger and Share Acquisition, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.

If the Merger and Share Acquisition is not approved and we do not consummate an initial Merger and Share Acquisition by January 20, 2023, 26 Capital will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the 26 Capital stockholders and the 26 Capital warrants will expire worthless.

Appraisal Rights

Under Delaware law, holders of 26 Capital common stock that have not otherwise waived appraisal rights have the right to dissent from the Merger and Share Acquisition and to receive payment in cash for the fair value of their shares of 26 Capital common stock as determined by the Delaware Court of Chancery, together with interest, if any, as determined by the court, in lieu of the consideration 26 Capital stockholders would otherwise be entitled to pursuant to the merger agreement if they follow the procedures set forth in Section 262 of the DGCL. These rights are known as appraisal rights.

26 Capital stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. Strict compliance with the statutory procedures is required to perfect appraisal rights under Delaware law.

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a 26 Capital stockholder in order to dissent from the Merger and Share Acquisition and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex E hereto. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL may result in a termination or waiver of appraisal rights. All references in this summary to a “stockholder” are to the record holder of shares of 26 Capital common stock unless otherwise indicated. Only a

 

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holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of 26 Capital common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Section 262 of the DGCL requires that stockholders for whom appraisal rights are available be notified not less than 20 days before the stockholders’ meeting to vote on the merger that appraisal rights will be available. A copy of Section 262 must be included with such notice. This joint proxy statement/prospectus constitutes notice to 26 Capital stockholders of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262 and a copy of Section 262 is attached hereto as Annex E. If a 26 Capital stockholder wishes to consider exercising appraisal rights, such stockholder should carefully review the text of Section 262 contained in Annex E hereto because failure to timely and properly comply with the requirements of Section 262 will result in the loss of appraisal rights under Delaware law.

If you are a record holder of shares of 26 Capital common stock and wish to elect to demand appraisal of your shares, you must satisfy each of the following conditions:

 

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You must deliver to 26 Capital a written demand for appraisal of your shares before the vote with respect to the Merger and Share Acquisition Proposal is taken. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the Merger and Share Acquisition Proposal. Voting against or failing to vote for the adoption and approval of the Merger and Share Acquisition Proposal by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL.

 

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You must not vote in favor of, or consent in writing to, the adoption and approval of the Merger and Share Acquisition Proposal. A vote in favor of the adoption and approval of the Merger and Share Acquisition Proposal, by proxy or in person, will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. A proxy which does not contain voting instructions will, unless revoked, be voted in accordance with the recommendation of the boards of directors of 26 Capital, which recommendation, to the extent not changed before the 26 Capital special meeting is FOR the Merger and Share Acquisition Proposal. Therefore, a 26 Capital stockholder who votes by proxy and who wishes to exercise appraisal rights must affirmatively vote against the Merger and Share Acquisition Proposal or abstain from voting on the Merger and Share Acquisition Agreement and the Merger and Share Acquisition.

 

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You must continue to hold your shares of 26 Capital common stock through the effective date of the Merger and Share Acquisition. Therefore, a stockholder who is the record holder of shares of 26 Capital common stock on the date the written demand for appraisal is made but who thereafter transfers such shares prior to the effective date of the Merger and Share Acquisition will lose any right to appraisal with respect to such shares.

If you fail to comply with any of these conditions and the Merger and Share Acquisition is completed, you will be entitled to receive the consideration (subject to your continued ownership of the 26 Capital common stock as of the consummation of the Merger and Share Acquisition) contemplated by the Merger and Share Acquisition Agreement, but you will have no appraisal rights with respect to your shares of 26 Capital common stock. All demands for appraisal should be addressed to 26 Capital Acquisition Corp., 701 Brickell Avenue, Suite 1550, Miami, FL 33131, Attention: Chief Executive Officer, and must be delivered before the vote on the merger proposal is taken at the 26 Capital special meeting and should be executed by, or on behalf of, the record holder of the shares of 26 Capital common stock. The demand must reasonably inform 26 Capital of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares of 26 Capital common stock.

 

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To be effective, a demand for appraisal by a holder of 26 Capital common stock must be made by, or in the name of, such registered stockholder, fully and correctly, as the stockholder’s name appears on his, her or its 26 Capital stock certificate(s) or 26 Capital book-entry shares. Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to 26 Capital. The beneficial holder must, in such cases, have the registered owner, such as a broker, bank or other nominee, submit the required demand in respect of those shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by or for the fiduciary; and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, who holds shares as a nominee for others, may exercise his or her right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the record owner.

If a 26 Capital stockholder holds shares of 26 Capital common stock in a brokerage account or in other nominee form and wishes to exercise appraisal rights, such stockholder should consult with his, her or its broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

Within ten days after the Effective Time, the surviving corporation must give written notice that the Merger and Share Acquisition has become effective to each former 26 Capital stockholder who has properly filed a written demand for appraisal and who did not vote in favor of the merger proposal. Within 120 days after the Effective Date, any stockholder who has complied with Section 262 of the DGCL will, upon written request to the surviving corporation, be entitled to receive a written statement setting forth the aggregate number of shares not voted in favor of the Merger and Share Acquisition Proposal and with respect to which demands for appraisal rights have been received and the aggregate number of holders of such shares. A person who is the beneficial owner of shares of 26 Capital common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, request from the surviving corporation the statement described in the previous sentence. Such written statement will be given to the requesting 26 Capital stockholder within ten days after such written request is received by the surviving corporation or within ten days after expiration of the period for delivery of demands for appraisal, whichever is later. Within 120 days after the effective date of the Merger and Share Acquisition, either the surviving corporation or any 26 Capital stockholder who has complied with the requirements of Section 262 of the DGCL and who is otherwise entitled to appraisal rights may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all 26 Capital stockholders entitled to appraisal. A person who is the beneficial owner of shares of 26 Capital common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file the petition described in the previous sentence. Upon the filing of the petition by a 26 Capital stockholder, service of a copy of such petition will be made upon the surviving corporation. The surviving corporation has no obligation to file such a petition in the event there are dissenting 26 Capital stockholders. Accordingly, the failure of a 26 Capital stockholder to file such a petition within the period specified could nullify the 26 Capital stockholder’s previously written demand for appraisal. There is no present intent on the part of 26 Capital to file an appraisal petition, and 26 Capital stockholders seeking to exercise appraisal rights should not assume that 26 Capital will file such a petition or that 26 Capital will initiate any negotiations with respect to the fair value of such shares. Accordingly, 26 Capital stockholders who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL.

If a petition for appraisal is duly filed by a 26 Capital stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service

 

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of a copy of the petition, to provide the Delaware Court of Chancery with a duly verified list containing the names and addresses of all 26 Capital stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. After notice to dissenting stockholders who demanded appraisal of their shares, the Delaware Court of Chancery is empowered to conduct a hearing upon the petition, and to determine those 26 Capital stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided thereby. The Delaware Court of Chancery may require the 26 Capital stockholders who have demanded appraisal for their shares and who hold stock represented by certificates to submit their 26 Capital stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any 26 Capital stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder. Additionally, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all 26 Capital stockholders who asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of 26 Capital’s common stock as measured in accordance with subsection (g) of Section 262 of the DGCL or (b) the value of the merger consideration in respect of such shares exceeds $1 million. After determination of the 26 Capital stockholders entitled to appraisal of their shares of 26 Capital Class A Stock, the Delaware Court of Chancery will appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the Merger and Share Acquisition, together with interest, if any. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger and Share Acquisition through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Date and the date of payment of the judgment. Notwithstanding the foregoing, at any time before the entry of judgment in the proceedings, 26 Capital may pay to each stockholder entitled to appraisal an amount in cash, in which case interest will accrue thereafter as provided herein only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (ii) interest theretofore accrued, unless paid at that time. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon accrued during the pendency of the proceeding, to the 26 Capital stockholders entitled to receive the same, upon surrender by such holders of the 26 Capital stock certificates representing those shares or of any applicable 26 Capital book-entry shares.

In determining fair value, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation.

Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion that does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

26 Capital stockholders should be aware that the fair value of shares of 26 Capital common stock as determined under Section 262 of the DGCL could be more than, the same as, or less than the value that such 26 Capital stockholder is entitled to receive under the terms of the Merger and Share Acquisition Agreement.

 

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Costs of the appraisal proceeding may be imposed upon the surviving corporation and the 26 Capital stockholders participating in the appraisal proceeding by the Delaware Court of Chancery as the Court deems equitable in the circumstances. Upon the application of a 26 Capital stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any 26 Capital stockholder in connection with the appraisal proceeding, including reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Any 26 Capital stockholder who had demanded appraisal rights will not, after the Effective Time, be entitled to vote shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment as of a record date prior to the effective time; however, if no petition for appraisal is filed within 120 days after the effective time, or if the 26 Capital stockholder delivers a written withdrawal of such stockholder’s demand for appraisal and an acceptance of the terms of the merger either within 60 days after the effective time or thereafter with the written consent of the surviving corporation, then the right of that 26 Capital stockholder to appraisal will cease and that 26 Capital stockholder will be entitled to receive the consideration contemplated by the Merger and Share Acquisition Agreement. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any 26 Capital stockholder without the prior approval of the Court, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that any 26 Capital stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will maintain the right to withdraw its demand for appraisal and to accept the consideration that such holder would have received pursuant to the Merger and Share Acquisition Agreement within 60 days after the effective date of the Merger and Share Acquisition.

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL may result in the loss of a 26 Capital stockholder’s statutory appraisal rights. In view of the complexity of Section 262 of the DGCL, 26 Capital stockholders who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.

 

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THE MERGER AND SHARE ACQUISITION PROPOSAL

General

26 Capital is asking its stockholders to approve and adopt the Merger and Share Acquisition Agreement and the transactions contemplated thereby. 26 Capital stockholders should read carefully this proxy statement/prospectus in its entirety, including the “The Merger and Share Acquisition Agreement,” for more detailed information concerning the Merger and Share Acquisition and the Merger and Share Acquisition Agreement. 26 Capital also urges its stockholders to read carefully the Merger and Share Acquisition Agreement in its entirety before voting on this proposal. A copy of the Merger and Share Acquisition Agreement is attached as Annex A to this proxy statement/prospectus.

Because 26 Capital is holding a stockholder vote on the Merger and Share Acquisition, our charter provides that we may consummate the Merger and Share Acquisition only if it is approved by the affirmative vote of holders of a majority of the outstanding shares of common stock.

Pro Forma Capitalization

The pro forma implied equity valuation of UERI upon consummation of the Merger and Share Acquisition is estimated to be approximately $2.5 billion, assuming no redemptions, based on a $10.00 per share price. We estimate that, immediately following the Effective Time, assuming none of 26 Capital’s public stockholders demand redemption of their 26 Capital Class A Stock pursuant to the 26 Capital Charter, the securityholders of UERI will own approximately 13.75% of the outstanding UERI common shares, and securityholders of 26 Capital will own the remaining UERI common shares. We estimate that, at the Effective Time, assuming all of 26 Capital’s public stockholders demand redemption of their 26 Capital Class A Stock pursuant to the 26 Capital Charter, the securityholders of UERI will own approximately 86.25% of the outstanding UERI common shares, and the securityholders of 26 Capital will own the remaining UERI common shares. The pro forma ownership percentages described in this paragraph exclude the 26 Capital warrants to be issued pursuant to the Merger and Share Acquisition upon conversion of the 26 Capital warrants.

Background of the Merger and Share Acquisition Proposal

26 Capital is a Delaware corporation formed on August 24, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Merger and Share Acquisition with the UEC Parties is the result of an active search for a potential transaction utilizing the network and investment experience of 26 Capital’s management team and board of directors. The terms of the Merger and Share Acquisition Agreement and the other ancillary agreements are the result of arm’s-length negotiations between the UEC Parties and 26 Capital and their respective representatives and advisors. The following is a discussion of the background of these negotiations, the Merger and Share Acquisition Agreement (and the ancillary agreements) and the Merger and Share Acquisition. The following chronology summarizes the key meetings and events that led to the signing of the Merger and Share Acquisition Agreement, but it does not purport to catalog every conversation and correspondence by and among representatives of 26 Capital, the UEC Parties and their respective advisors.

On January 20, 2021, 26 Capital consummated its initial public offering of 27,500,000 units (the “26 Capital IPO”). Each unit consisted of one share of 26 Capital Class A Stock and one-half of one redeemable warrant to purchase one share of 26 Capital Class A Stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $275,000,000. Simultaneously with the closing of the initial public offering, 26 Capital consummated the sale of 7,500,000 warrants at a price of $1.00 per warrant in a private placement to the Sponsor, generating gross proceeds of $7,500,000. Following the closing of the initial public offering, an amount of $275,000,000 from the net proceeds of the sale of the units in 26 Capital IPO and the sale of the warrants in the private placement was placed in the Trust Account.

 

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Prior to the closing of the 26 Capital IPO, neither 26 Capital, nor any authorized person on its behalf, initiated any substantive discussions, formal or otherwise, with respect to a business combination involving any of the UEC Parties.

After the closing of the 26 Capital IPO, representatives of 26 Capital commenced an active search for prospective acquisition targets, with an emphasis on companies in gaming and gaming technology, branded consumer, lodging and entertainment, and internet commerce industries. During this period, representatives of 26 Capital reviewed self-generated ideas and initiated contact with, and were contacted by, a number of individuals and entities with respect to business combination opportunities. 26 Capital identified the following general criteria in evaluating candidates for an initial business combination:

 

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companies that were financially sound, but were potentially in need of financial, operational, strategic or managerial transformations;

 

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segments of existing public companies which do not fit strategically within their existing structure and/or which were significantly undervalued;

 

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companies that offered an attractive valuation combined with the opportunity for value creation through a combination of elements, such as a clear plan to unlock incremental value through operational and/or strategic improvements, a partial sale of existing operations or a clear path to bring the target company to the public market;

 

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companies that would benefit from the leadership and strategic vision of the 26 Capital board and management team; and

 

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companies which could benefit from access to additional capital as well as the 26 Capital board’s and management team’s industry relationships and expertise to rapidly scale.

Based on these criteria, 26 Capital’s officers, directors and other representatives ultimately identified and evaluated over 50 potential target businesses from a wide range of industries during the period following the 26 Capital IPO. The potential target businesses considered included companies in the gaming, online gaming and gaming technology, casual online gaming, financial technology, branded consumer, travel, tourism and hospitality, lodging and entertainment, internet commerce, sports and eSports, aerospace, metaverse, internet marketing, payment processing, telecommunications and internet networking, and software as a service industries. In connection with such evaluation, representatives of 26 Capital had discussions regarding potential transactions with members of management and other representatives of certain potential acquisition targets. Some of these potential targets were eliminated because 26 Capital concluded that the valuation for the target business would be too high or there were structural impediments that would be difficult to overcome. Some were eliminated because the acquisition candidate did not fit within the criteria specified above. And some potential targets were eliminated because the target was not interested in pursuing a business combination at the time of the discussions. 26 Capital ultimately entered into substantive discussions with nine potential target businesses, signed confidentiality agreements with five and submitted preliminary, non-binding letters of interest to four potential target companies, including UEC.

 

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The first company seriously evaluated by 26 Capital, Company A, was in the video game industry. Following preliminary conversation, 26 Capital entered into a confidentiality agreement with Company A in February 2021 and ultimately executed a non-binding letter of intent with Company A that same month. 26 Capital conducted business, commercial, technology and financial due diligence and held numerous meetings with Company A’s management and other representatives. On the basis that 26 Capital’s diligence did not support the valuation that the parties had been discussing, 26 Capital decided not to pursue further discussions with Company A.

 

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Following preliminary conversations, 26 Capital entered into a confidentiality agreement with Company B, a company in the aerospace industry, in March 2021. 26 Capital conducted initial business, commercial and financial due diligence and held several discussions with Company B’s

 

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management and other representatives. 26 Capital decided to terminate discussions with Company B due to concerns regarding its future prospects.

 

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Following preliminary conversations, 26 Capital entered into a confidentiality agreement with Company C, a company in the tourism, lodging and entertainment industries, in March 2021. 26 Capital conducted substantial business, commercial and financial due diligence and held numerous discussions with Company C’s management and other representatives and ultimately submitted a non-binding letter of intent in March 2021. Company C did not sign the letter of intent and ultimately chose to pursue a transaction with a partner other than 26 Capital.

 

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26 Capital entered into preliminary discussions with Company D, a company involved in a professional sports league, in April 2021. Following several discussions with Company D’s management, discussions lapsed due to potential valuation, use of proceeds and structural issues.

 

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26 Capital entered into preliminary discussions with Company E, a company involved in the eSports industry, in April 2021. 26 Capital conducted business, commercial and financial due diligence and held numerous discussions with Company E’s management and other representatives, but ultimately terminated discussions with Company E over valuation concerns.

 

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Following preliminary conversations, 26 Capital entered into a confidentiality agreement and ultimately a non-binding letter of intent with Company F, a company in the gaming and payment processing industries, in April 2021. 26 Capital conducted substantial business, commercial and financial due diligence and held numerous meetings with Company F’s management and other representatives. 26 Capital ultimately decided to let discussions with Company F lapse due to concerns regarding its future prospects.

 

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26 Capital entered into discussions with Company G, a company in the eSports and gaming sectors, in April 2021. 26 Capital conducted business, commercial and financial due diligence and held several meetings with Company G’s management and other representatives. 26 Capital ultimately decided to let discussions lapse with Company G due to concerns regarding its future prospects.

 

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Following preliminary conversations, 26 Capital entered into a confidentiality agreement with Company H, a company in the eSports and gaming sectors, in July 2021. 26 Capital conducted initial business due diligence and held several meetings with Company H’s management. Given that Company H was at a very early stage without a clear path forward, as well as concerns regarding the timing of any transaction and conditions in Company H’s home market, 26 Capital decided not to continue further discussions with Company H.

On February 12, 2021, UEC publicly announced that it had made the decision to start formally examining a listing of its integrated resort business, known as Okada Manila, in the United States through the use of a SPAC. Mr. Ader, the Chief Executive Officer and Chairman of 26 Capital, who has followed gaming in Asia widely throughout his career, learned of this public announcement shortly after its release. However, 26 Capital was occupied with identifying other potential target companies and pursuing at least preliminary negotiations with several such companies, and did not focus on the Okada Manila opportunity at that time.

On July 12, 2021, Mr. Ader was introduced via videoconference to Mr. Toji Takeuchi, Executive Officer and Head of the Corporate Planning Division of UEC and Board Member of TRLEI, by an investor in UEC. Following this initial meeting, Mr. Ader submitted a non-binding letter of intent to UEC that proposed a merger between TRLEI and 26 Capital at an enterprise value of $2.6 billion. UEC did not sign this letter of intent, although it did elect to engage in further discussions with 26 Capital.

On July 19, 2021, Mr. Ader, along with Matthew Katzeff, Managing Director and Senior Analyst of 26 Capital, and Andrew Wallach, Co-Founder and Partner, and Barry Konig, Co-Founder and Director, of Spring Owl Capital Management, which is affiliated with the Sponsor and controlled by Mr. Ader, and other advisors to 26 Capital held a videoconference with Mr. Takeuchi and Hans Van Der Sande, Chief Financial Officer, of

 

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TRLEI. The primary purpose of this call was for Mr. Ader to provide additional background information regarding 26 Capital and its key team members, as well as Mr. Ader’s experience in the gaming industry. The parties also used part of the call to review some of the key terms raised in 26 Capital’s letter of intent.

Following its identification of TRLEI as a potential partner for a business combination, 26 Capital and its representatives started conducting business, commercial, operational, financial and legal due diligence, and 26 Capital started exploring potential structures with its U.S. legal counsel, Schulte Roth & Zabel LLP (“SRZ”), and eventually its Philippine legal counsel, Gorriceta Africa Cauton & Saavedra (“Gorriceta”), for the proposed transaction. Preliminary business diligence requests were agreed between 26 Capital and UEC in mid-July 2021, and from July 2021 until the signing of the Merger and Share Acquisition Agreement, representatives of 26 Capital and its advisors conducted due diligence on Okada Manila through document review and conference calls with representatives of Okada Manila. 26 Capital’s diligence covered various areas, including, among others, commercial operations and contracts, financial results, litigation, legal compliance, intellectual property, tax, employment matters and general corporate matters. 26 Capital also engaged third party consultants to conduct financial and tax diligence and to perform a gaming market study with respect to the Philippines, including developing business and financial forecasts for Okada Manila based on its books and records (the “Independent Consultants Report”).

During August and September, Mr. Ader and Mr. Takeuchi, in consultation with their respective U.S. and Philippine advisors, held numerous calls and videoconferences to review and discuss several potential transaction structures in light of the various impacts of U.S. and Philippine securities, tax and regulatory requirements, as well as the contractual obligations of the parties, before ultimately agreeing on the structure set forth in the Merger and Share Acquisition Agreement. It was during these discussion that the parties decided to effect the Reorganization prior to consummating the proposed transaction and to structure the Merger and Share Acquisition to include the cash subscription by 26 Capital, acting as agent for its stockholders, for equity securities of UERI in order to efficiently meet Philippine regulatory requirements under the Corporation Code. Also during this time period, Mr. Ader spoke periodically with individual directors of 26 Capital regarding the Okada Manila opportunity and the progress of discussions regarding the potential transaction.

On August 28, 2021, Mr. Ader delivered the initial draft of the Merger and Share Acquisition Agreement to UEC, which was subsequently shared with Baker & McKenzie LLP, a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world, and its relevant local affiliates (“BM”), U.S., Philippine and Japanese counsel to UEC and the UEC Parties. The initial draft of the Merger and Share Acquisition Agreement used the structure that the parties and their advisors had developed over the prior weeks, including the Reorganization and the cash subscription construct. It proposed a transaction with an enterprise value of $2.6 billion, which would be subject to adjustment in connection with the closing of the transaction for net indebtedness in order to establish the applicable equity value. An adjustment for working capital was also under consideration at that time. The initial draft did not include a minimum cash condition or any obligation with respect to obtaining a PIPE investment, but did include, among other provisions, very broad expense reimbursement obligations in favor of 26 Capital and expansive covenants obligating UEC and the UEC Parties to complete the transaction, including a performance guarantee by UEC.

Over the following weeks, UEC and its advisors had the draft agreement translated into Japanese for a detailed review, held several meetings to discuss the terms proposed by 26 Capital and potential responses and worked to identify an auditor for TRLEI.

On September 23, 2021, BM delivered to SRZ a list of material issues that UEC and the UEC Parties had identified in the initial draft of the Merger and Share Acquisition Agreement. These issues included the treatment of a potential PIPE investment, a proposal to use a fixed valuation structure as of signing for the transaction (rather than the adjustment mechanism proposed by 26 Capital), the treatment of expenses incurred by 26 Capital, the scope of the representations and warranties and pre-closing covenants, the scope of the closing conditions, and 26 Capital’s request for a guarantee by UEC. Throughout the course of that day and the morning

 

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of September 24, 2021, 26 Capital’s management and SRZ held several conference calls to discuss the issues raised by UEC. On the afternoon of September 24, 2021, representatives of BM and SRZ had a conference call to discuss the issues list, and reached agreement on several of the open points, including the inclusion of a covenant to seek a PIPE investment post-signing, the scope of the closing conditions and the deletion of UEC’s performance guarantee given assets held by TRLEI.

On September 30, 2021, BM circulated a revised draft of the Merger and Share Acquisition Agreement, which reflected the discussions held on September 24, 2021, and an initial draft of the Subscription Agreement.

During the week of October 4, 2021, representatives of 26 Capital, UEC, the UEC Parties, SRZ, Gorriceta and BM held numerous conference calls and videoconferences to negotiate and finalize the terms of the Merger and Share Acquisition Agreement (and related disclosure schedules), as well as the terms of the Subscription Agreement, the Registration Rights Agreement and the other ancillary agreements in order to resolve the remaining significant open points in the transaction documents. These open points included, among other things, (a) the scope of the Reorganization and mechanics of the cash subscription construct, (b) the overall suite of representations, warranties and covenants to be provided by each party under the Merger and Share Acquisition Agreement, (c) post-closing governance arrangements, and (d) the circumstances under which 26 Capital would be reimbursed for its transaction-related expenses.

On October 7, 2021, 26 Capital’s board of directors held a videoconference with representatives from 26 Capital’s management team and SRZ to discuss the status of the transaction, as well as the potential timeline to signing and closing the transactions contemplated by the Merger and Share Acquisition Agreement.

From October 11, 2021 through the execution of the Merger and Share Acquisition Agreement, representatives of 26 Capital, UEC, the UEC Parties, SRZ, Gorriceta and BM continued to hold numerous calls and videoconferences to finalize the Merger and Share Acquisition Agreement (and related disclosure schedules) and the ancillary agreements and to work on the public relations materials regarding the announcement of the transaction. On October 13, 2021, representatives of UEC proposed a fixed equity valuation amount of $2.5 billion for the transaction, with the enterprise value remaining at $2.6 billion, which 26 Capital ultimately accepted.

On October 14, 2021, the board of directors of 26 Capital held a special meeting to discuss the proposed Merger and Share Acquisition. Representatives of SRZ presented a summary of the transaction structure and the terms of the Merger and Share Acquisition Agreement and the ancillary agreements. Representatives of SRZ also reviewed the fiduciary duties of the directors both in general and for approving the contemplated transaction.

Representatives of the Independent Consultant then presented the Independent Consultant Report and their review of the opportunity presented by Okada Manila, which had been prepared with input from the management of 26 Capital and Okada Manila. The board of directors of 26 Capital discussed the transaction, reviewed the press release and investor presentation related to the proposed transaction and then unanimously adopted resolutions (a) determining that it is in the best interests of 26 Capital and its stockholders for 26 Capital to enter into the Merger and Share Acquisition Agreement, (b) adopting the Merger and Share Acquisition Agreement and approving 26 Capital’s execution, delivery and performance of the same and the consummation of the transactions contemplated by the Merger and Share Acquisition Agreement including the entry into the ancillary agreements, and (c) approving the filing of the proxy statement with the SEC.

On October 14, 2021, the respective boards of directors of TRA, TRLEI and UERI held special meetings to discuss the proposed Merger and Share Acquisition. The boards of directors of each company discussed the proposed transaction and unanimously adopted resolutions, subject to the approval of the board of UEC having been obtained in respect of the proposed transaction, (a) to authorize their respective corporations to enter into the Merger and Share Acquisition Agreement and appoint authorized representatives therefor, and, (b) in respect of UERI, to authorize UERI to incorporate a subsidiary under the laws of the State of Delaware, and the ratification of Byron Yip’s authority to execute and deliver documents for such purpose.

 

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On October 15, the board of directors of UEC held a special meeting to discuss the proposed Merger and Share Acquisition and adopted a resolution to authorize the respective corporations to enter into the Merger and Share Acquisition Agreement.

On October 15, 2021, the parties executed the Merger and Share Acquisition Agreement. 26 Capital then filed a Current Report on Form 8-K on October 15, 2021, that included a press release, and filed a Current Report on Form 8-K on October 18, 2021, that included a copy of the Merger and Share Acquisition Agreement and an investor presentation.

26 Capital’s Board of Directors’ Reasons for the Merger and Share Acquisition and the Recommendation of the Board of Directors

26 Capital’s board of directors, in evaluating the Merger and Share Acquisition, consulted with 26 Capital’s officers and legal advisors and other advisors. In reaching its resolution (i) that the Merger and Share Acquisition Agreement and the transactions contemplated thereby are advisable and in the best interests of 26 Capital and its stockholders and (ii) to recommend that the stockholders adopt the Merger and Share Acquisition Agreement and approve the transactions contemplated thereby, 26 Capital’s board of directors considered a range of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the Merger and Share Acquisition, 26 Capital’s board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. 26 Capital’s board of directors viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of 26 Capital’s reasons for the Merger and Share Acquisition and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements.”

Before reaching its decision, the 26 Capital board of directors reviewed the results of the due diligence review conducted by its directors, officers and advisors, which included:

 

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numerous meetings and calls with the management team and advisors of the UEC Parties regarding past and future operations;

 

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review of material contracts, material liabilities and other material matters;

 

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technical, financial, legal, insurance, market and accounting due diligence;

 

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consultation with Okada Manila management and legal counsel to the UEC Parties;

 

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review of historical financial performance of Okada Manila (including audited and unaudited financials) and the Independent Consultant Report (including projections for Okada Manila included therein); and

 

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financial and valuation analysis of Okada Manila and the Merger and Share Acquisition.

Based on its review of the industry data and the operational, financial and other relevant information related to Okada Manila provided by the UEC Parties and the Independent Consultant and presented to 26 Capital’s board of directors, factors considered by the 26 Capital board of directors included, but were not limited to, the following material factors:

 

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Attractive Valuation. After consulting with its advisors, including the financial comparison prepared by 26 Capital management, 26 Capital’s board of directors believes:

 

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Okada Manila’s implied equity valuation of $2.5 billion is favorable for 26 Capital relative to the current valuations experienced by comparable publicly traded companies in the gaming sector; and

 

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Okada Manila’s implied enterprise valuation of $2.6 billion is favorable for 26 Capital as it is significantly less than the identified replacement costs of Okada Manila’s property and equipment alone;

 

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Unique Growth Optionality. 26 Capital’s board of directors believes Okada Manila is uniquely positioned to pursue, in addition to expected growth from domestic and tourist gaming visitors, growth from the newly regulated online Philippine domestic gaming market and the potential to participate with its largest stockholder in a future integrated resort development in Japan.

 

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High Growth Market. 26 Capital’s board of directors believes Okada Manila is favorably positioned in the high growth, capacity constrained Entertainment City casino market, which market grew 24% annually from 2013-2019 and achieved gross gaming revenue in 2019 of over $3.3 billion. As travel and hospitality restriction resulting from the global pandemic ease, 26 Capital’s board of directors believes that there could be significant demand for Okada Manila’s offerings;

 

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Stockholder Liquidity. The obligation in the Merger and Share Acquisition Agreement to have the UERI common shares issued as consideration listed on the Nasdaq, a major U.S. stock exchange, which 26 Capital’s board of directors believes has the potential to offer stockholders greater liquidity;

 

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Strategic Alignment. 26 Capital’s board of directors believes that the combination of the accomplished Okada Manila management team, who are known for their decades of experience in the Asian gaming and hospitality sector, with the financial and legal expertise that UEC can provide and Mr. Ader’s contacts and expertise in gaming, gaming technology, lodging, entertainment and internet commerce will help unlock value and drive growth opportunities for Okada Manila;

 

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Projected Revenue Profile. 26 Capital’s board of directors evaluated the gross gaming revenue, total gross revenue and Adjusted EBITDA projections for the combined company through 2025, and noted, in particular, the substantial growth projected across this period;

 

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Nature of the Property. 26 Capital’s board of directors took note of the fact that Okada Manila is the largest world-class destination integrated resort in the Philippines, with a gaming floor that is the largest in the country and one of the largest in the world since 2017, but which also presents a far reaching and appealing mix of attractions across gaming options, accommodations, retail options and dining options and other amenities. 26 Capital’s board of directors also evaluated the benefits of Okada Manila being newly-constructed, which may give it a certain cache with potential visitors and suggests that the property should not require substantial capital expenditures in order to update the property in the next several years;

 

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Due Diligence. 26 Capital’s due diligence examinations of Okada Manila and the Philippine gaming market and discussions with the UEC Parties’ management and legal advisors;

 

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Other Alternatives. 26 Capital’s board of directors believes, after a thorough review of other business combination opportunities reasonably available to 26 Capital, that the Merger and Share Acquisition represents the best potential business combination for 26 Capital and the most attractive opportunity for 26 Capital’s management to accelerate its business plan based upon the process utilized to evaluate and assess other potential business combination targets, and 26 Capital’s board of directors’ belief that such process has not presented a better alternative; and

 

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Terms and Conditions of the Merger and Share Subscription Agreement. The terms and conditions of the Merger and Share Subscription Agreement and the transactions contemplated thereby, including the Merger and the Subscription, were, in the opinion of 26 Capital’s board of directors, generally consistent (other than with respect to the subscription mechanic) with similar transactions, with the benefit of not being subject to a minimum cash condition, and the product of arm’s-length negotiations between 26 Capital and the UEC Parties.

In the course of its deliberations, in addition to the various other risks associated with the combined business, as described in the section titled “Risk Factors” appearing elsewhere in this proxy statement/

 

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prospectus, 26 Capital’s board of directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Merger and Share Acquisition, including, but not limited to, the following:

 

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Competition. Competition in the gaming, lodging and hospitality industries, and the potential failure to continually develop, improve and market its offerings and services in a timely manner to compete successfully against competitors;

 

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Intellectual Property. Okada Manila depends on its intellectual property, and its future success is dependent on its ability to retain access to and protect its intellectual property and not infringe on the rights of others;

 

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Key Personnel. Key personnel in Okada Manila’s industries are vital and competition for such personnel is intense. The loss of any key personnel and/or Okada Manila’s inability to recruit additional personnel could be detrimental to its operations;

 

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Public Company Risks. Okada Manila’s executive team does not have experience operating or managing public companies and the added administrative, regulatory and reporting requirements that ensue;

 

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Macroeconomic Risks. Macroeconomic uncertainty, including the potential impact of the COVID-19 pandemic and the resulting uncertainty in the Asian and Philippine gaming markets;

 

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Benefits Not Achieved. The risk that the potential benefits of the Merger and Share Acquisition may not be fully achieved or may not be achieved within the expected timeframe;

 

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Redemption Risk. The potential that a significant number of 26 Capital stockholders elect to redeem their shares prior to the consummation of the Merger and Share Subscription and pursuant to the 26 Capital Charter, which would potentially make the Merger and Share Acquisition more difficult to complete;

 

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Stockholder Vote. The risk that 26 Capital’s stockholders may fail to provide the respective votes necessary to effect the Merger and Share Acquisition;

 

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Closing Conditions. The fact that the completion of the Merger and Share Acquisition is conditioned on the satisfaction of certain closing conditions that are not within 26 Capital’s control;

 

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Litigation. The possibility of litigation challenging the Merger and Share Acquisition or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Merger and Share Acquisition;

 

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Liquidation of 26 Capital. The risks and costs to 26 Capital if the Merger and Share Acquisition is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in 26 Capital being unable to effect a business combination within the completion window, which could require 26 Capital to liquidate;

 

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26 Capital Stockholders Receiving Minority Position. The fact that existing 26 Capital stockholders will hold a minority position in the combined company;

 

•

Distractions to Operations. The risk that the potential diversion of the management of the combined business and employee attention as a result of the Merger and Share Acquisition may adversely affect operations of the combined business; and

 

•

Fees and Expenses. The fees and expenses associated with completing the Merger and Share Acquisition.

 

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In addition to considering the factors described above, 26 Capital’s board of directors also considered other factors including, without limitation:

 

•

Interests of Certain Persons. Some officers and directors of 26 Capital may have separate interests in the Merger and Share Acquisition. See the section above titled “— Interests of 26 Capital’s Directors and Officers in the Merger and Share Acquisition;”

 

•

Waiver of Corporate Opportunity Doctrine. 26 Capital’s certificate of incorporation contains a waiver of the corporate opportunity doctrine, and there could have been business combination targets that have been appropriate for a combination with 26 Capital but were not offered due to a 26 Capital director’s duties to another entity. 26 Capital does not believe that the waiver of the corporate opportunity doctrine in its certificate of incorporation interfered with its ability to identify an acquisition target; and

 

•

Other Risks. Various other risks associated with Okada Manila’s business, as described in the section titled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.

26 Capital’s board of directors concluded that the potential benefits that it expected 26 Capital and its stockholders to achieve as a result of the Merger and Share Acquisition outweighed the potentially negative factors associated with the Merger and Share Acquisition. Accordingly, 26 Capital’s board of directors determined that the Merger and Share Acquisition Agreement and the transactions contemplated therein were advisable, fair to and in the best interests of 26 Capital and its stockholders.

Interests of 26 Capital’s Directors and Officers in the Merger and Share Acquisition

The Sponsor and 26 Capital’s directors and executive officers have interests in the Merger and Share Acquisition that are different from or in addition to (and which may conflict with) the interests of 26 Capital’s stockholders. As more fully set forth below, the Sponsor and its affiliates have approximately $73.4 million in the aggregate at risk that depends upon the completion of a business combination. Specifically, (i) $25,000 of such amount was paid for the 6,875,000 Founder Shares (which if unrestricted and freely tradable would be valued at approximately $67.8 million, based on the closing price of the 26 Capital common stock on May 19, 2022), (ii) $7,500,000 for its 7,500,000 private placement warrants (which was valued at $0.53 per private placement warrant, or approximately $4.0 million in the aggregate, as of May 19, 2022), (iii) the Sponsor has loaned 26 Capital an additional $1,500,000 in order to fund working capital, which amount will convert into 1,500,000 private placement warrants upon consummation of the Merger and Share Acquisition (which would be valued at $0.53 per private placement warrant, or approximately $0.8 million in the aggregate, as of May 19, 2022) and (iv) between February 25, 2022 and March 1, 2022, the Sponsor purchased an aggregate of 1,500,000 public warrants on the open market (which, based on the closing trading price per warrant as of May 19, 2022, would be approximately $750,000, or $0.50 per public warrant). As part of 26 Capital’s initial public offering, the Sponsor and 26 Capital’s officers directors agreed, among other things, to waive their respective redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of a business combination and their respective rights to liquidating distributions from the trust account in respect of the Founder Shares if 26 Capital fails to complete a business combination within the required period. 26 Capital did not provide any separate consideration to the Sponsor or its officers and directors for such waiver. The foregoing interests, and those set forth in more detail below, present a risk that the Sponsor and its affiliates will benefit from the completion of the Merger and Share Acquisition, including in a manner that may not be aligned with public stockholders. These interests include, among other things, the interests listed below:

 

•

that the Sponsor and certain of 26 Capital’s officers and directors will hold UERI common shares following the Merger and Share Acquisition, subject to lock-up agreements;

 

•

that the Sponsor and 26 Capital’s officers and directors will hold private placement warrants to purchase UERI common shares following the Merger and Share Acquisition;

 

•

the fact that given the differential in purchase price that the Sponsor paid for the Founder Shares as compared to the price of the 26 Capital units sold in the IPO and the substantial number of UERI

 

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common shares that the Sponsor will receive upon conversion of the Founder Shares in connection with the Merger and Share Acquisition, the Sponsor and its affiliates may realize a positive rate of return on such investments even if other public stockholders experience a negative rate of return following the Merger and Share Acquisition;

 

•

that the Sponsor and 26 Capital’s officers and directors have entered into a letter agreement with 26 Capital, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of the initial business combination;

 

•

that the Sponsor and 26 Capital’s officers and directors have entered into a letter agreement with 26 Capital, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if 26 Capital fails to complete its initial business combination by January 20, 2023. However, if the Sponsor or 26 Capital’s officers or directors acquire public shares in or after the 26 Capital IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares;

 

•

if the Trust Account is liquidated, including in the event 26 Capital is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify 26 Capital to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which 26 Capital has entered into an acquisition agreement or claims of any third party for services rendered or products sold to 26 Capital, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

•

the nomination of certain individuals by the Sponsor as directors of UERI following the closing; and

 

•

the continued indemnification of 26 Capital’s current directors and officers and the continuation of directors’ and officers’ liability insurance after the Merger and Share Acquisition.

In addition, John Waterfield, a member of 26 Capital’s board of directors, purchased an aggregate of 1,041,667 public warrants on March 2, 2022 and March 3, 2022 on the open market.

These interests may influence 26 Capital’s directors in making their recommendation that you vote in favor of the approval of the Merger and Share Acquisition Proposal and the other proposals set forth in this proxy statement/prospectus. See “Security Ownership of Certain Beneficial Owners and Management” for more information.

Expected Accounting Treatment

The Merger and Share Acquisition will be accounted for as a capital reorganization in accordance with IFRS. Under this method of accounting, 26 Capital will be treated as the “acquired” company for accounting purposes. Accordingly, the Merger and Share Acquisition will be treated as the equivalent of TRLEI issuing shares at the closing of the Merger and Share Acquisition for the net assets of 26 Capital as of the closing date, accompanied by a recapitalization. The net assets of 26 Capital will be stated at historical cost, with no goodwill or other intangible assets recorded.

TRLEI has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

•

TRLEI’s shareholders will have the largest voting interest in UERI under both the no redemption and maximum redemption scenarios;

 

•

the board of directors of the post-combination company has seven members, and TRLEI shareholders have the ability to nominate at least the majority of the members of the board of directors;

 

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•

TRLEI’s senior management is the senior management of the post-combination company;

 

•

the business of TRLEI will comprise the ongoing operations of UERI; and

 

•

TRLEI is the larger entity, in terms of substantive operations and employee base.

The Merger and Share Acquisition, which is not within the scope of IFRS 3 since 26 Capital does not meet the definition of a business in accordance with IFRS 3, is accounted for within the scope of IFRS 2. Any excess of fair value of UERI’s common shares issued over the fair value of 26 Capital’s identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred.

Independent Consultant Report

In connection with its consideration of the potential Merger and Share Acquisition, 26 Capital’s board of directors was provided with the Independent Consultant Report.

26 Capital engaged the Independent Consultant based on the Independent Consultant’s experience and reputation in the gaming sector. The Independent Consultant is regularly engaged to analyze companies in the gaming sector. Pursuant to its engagement by 26 Capital, the Independent Consultant is entitled to receive compensation based on agreed-upon hourly rate schedule, with the total expense not to exceed $20,000. 26 Capital has also agreed to reimburse the Independent Consultant for certain expenses related to the Independent Consultant’s engagement.

In the ordinary course of business, certain of the Independent Consultant’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, 26 Capital, the UEC Parties or any other party that may be involved in the Merger and Share Acquisition.

The Independent Consultant and its affiliates may provide consulting, advisory or other services to 26 Capital, the UEC Parties, other participants in the Merger and Share Acquisition or their respective affiliates or security holders in the future, for which the Independent Consultant and its affiliates may receive compensation. Since January 1, 2020, neither 26 Capital nor the UEC Parties, nor any of their respective affiliates have engaged in any transactions with, or paid or received any consideration from, the Independent Consultant, other than in connection with the Merger and Share Acquisition as set forth above.

In preparing its report, the Independent Consultant assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with the Independent Consultant and upon the assurances of the managements and other representatives of 26 Capital and the UEC Parties that they were not aware of any relevant information that was omitted or that remained undisclosed to the Independent Consultant.

The Independent Consultant Report includes certain prospective financial information (the “Projections”). The Projections are included in this proxy statement/prospectus solely to provide 26 Capital’s stockholders access to information made available in connection with its board of directors’ consideration of the proposed Merger and Share Acquisition. The Projections should not be viewed as public guidance.

Furthermore, the Projections did not take into account any circumstances or events occurring after the date on which the Projections were prepared, which was October 14, 2021. Furthermore, the Projections were prepared by the Independent Consultant rather than by UEC Parties.

The Projections were not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the SEC or the American Institute of Certified Public Accountants with respect

 

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to prospective financial information. The Projections have not been audited. Neither the independent registered public accounting firms of UERI nor 26 Capital nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or their achievability, and the independent accounting firms of UERI and 26 Capital assume no responsibility for, and disclaim any association with, the Projections.

While presented with numerical specificity, the Projections are forward-looking and reflect numerous estimates and assumptions including, among other things, the matters described in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

The Projections are not included in this proxy statement/prospectus in order to induce any 26 Capital stockholders to vote in favor of any of the proposals at the special meeting.

We encourage you to review the financial statements of 26 Capital included in this proxy statement/prospectus, as well as the financial information in “Unaudited Pro Forma Condensed Combined Financial Information” and the audited and unaudited historical financial statements of TRLEI included in this proxy statement/prospectus and to not rely on any single financial measure.

None of the Independent Consultant, 26 Capital or UERI, or any of their respective affiliates, intends to, and, except to the extent required by applicable law, each of them expressly disclaims any obligation to, update, revise or correct the Projections to reflect circumstances existing or arising after the date such Projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Projections are shown to be in error or any of the Projections otherwise would not be realized.

 

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Adjusted EBITDA Improvement Opportunities

Actual 2019 Adjusted EBITDA for Okada Manila was $134 million. Based on analysis by the Independent Consultant, Okada Manila may attain steady-state Adjusted EBITDA levels in excess of $516 million annually in the fifth year, a difference of approximately $382 million. To bridge this gap, the Independent Consultant has identified several opportunity areas for revenue enhancement and cost savings. The Independent Consultant’s ramp-up forecasts attainment of this goal – along with five years of 4.0% inflation. The broad areas of opportunity and corresponding bridge from 2019 actual to 2025 Adjusted EBITDA projection are reflected in the waterfall below:

 

 

Source:

The Independent Consultant

According to the Independent Consultant, the Projections are predicated upon the realization of a number of Adjusted EBITDA improvement opportunities, namely the following:

 

•

Land-based Revenue Growth to Contribute $113.3 million in 2025 Adjusted EBITDA – At 2019 margins, the growth of land-based GGR from 2019 levels to 2025 levels is expected to contribute $113.3 million to Adjusted EBITDA in 2025.

 

•

Changes in Gaming and Non-Gaming Mix to Contribute $14.4 million – The weight of non-gaming revenues, especially those with higher margin (such as beverage sales at bars and nightclubs), is expected to gradually increase over the years from 2021 to 2025. This is anticipated to contribute approximately $14.4 million to 2025 Adjusted EBITDA.

 

•

Changes in VIP and Mass Gaming Mix to Contribute $139.5 million – Okada Manila has been pursuing a shift from junket business to in-house direct high roller play. In-house high rollers still play on rolling chip programs; however, the commission/rebate rates are lower than those through junkets. Reduced weight of junket and increased high roller gaming revenue improves margin by reducing

 

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costly commissions and marketing costs such as comps, although partially offset higher taxes on mass gaming revenue.

 

•

Reductions in Payroll and Payroll-related Benefits to Contribute $86.4 million – The Independent Consultant estimates that benefit saving of approximately $25 million from strategic eliminations during the pandemic will remain in effect. Additionally, a total of approximately $61 million in saving is anticipated from margin improvement through leveraging scale and non-variable job positions. Labor cost is projected to account for 10.8% of total gross revenue, in contrast to nearly 15% of total gross revenue in 2019.

 

•

Other Margin Benefits of Scale to Contribute $15.0 million – This category of opportunities cover margin improvement by leveraging fixed costs in General/Administrative, Repairs/Maintenance, Utilities, and other operating areas. A total of approximately $15 million is anticipated to contribute to 2025 Adjusted EBITDA.

 

•

Addition of iGaming to Contribute $14.0 million – With the PIGO license secured, Okada Manila is ready to roll out its offering of online gaming to domestic VIP and premium players, which is expected to contribute $14 million to 2025 Adjusted EBITDA.

Adjusted EBITDA Forecast

According to the Independent Consultant, the Adjusted EBITDA forecast for Okada Manila is as follows:

 

(in $ thousands)		2021				2022				2023				2024				2025				2026
Total gross revenues			391,438				892,675				1,300,568				1,446,467				1,601,553				1,802,496
Total expenses			390,027				652,160				911,282				992,859				1,085,256				1,205,975
EBITDA			1,411				240,515				389,285				453,608				516,297				596,521

Regulatory Approvals

There are no regulatory approvals required in connection with the consummation of the Merger and Share Acquisition.

The Reorganization shall be subject to notices and/or approvals from government agencies in the Philippines, including, among others:

 

(a)

Philippine SEC approval on the amendment to UERI’s organizational documents;

 

(b)

in respect of the contribution by TRA of TRLEI Shares in UERI as APIC: (i) notice of the change in ownership of TRLEI to the PAGCOR; and (ii) prior approval or letter of no objection from the BSP on the change in ownership of TRLEI; and

 

(c)

in respect of the amendments to the lease with Eagle I: (i) prior approval by the PAGCOR (subject to further determination) and (ii) prior approval or confirmation of no objection from the PEZA, regarding the reduction of the area of the land leased by TRLEI from Eagle I.

The (a) transfer of UERI Sale Shares by TRLEI to TRA, and (b) the contribution by TRA of TRLEI Shares in UERI as APIC, will require the issuance of a CAR by the BIR. A CAR is, in effect, a tax clearance relative to transfer certain properties such as transfers of shares of stocks in a Philippine corporation. It is also a mandatory requirement before the legal ownership over the shares can be recorded in the stock and transfer book of a corporation, and the corresponding stock certificates cancelled and issued in favor of the transferee or buyer. The issuance of a CAR requires the submission of supporting documents for the evaluation by the BIR’s regional/district office in order to determine whether taxes have been duly paid. While UERI believes that the contribution of TRLEI Shares as APIC in UERI will not be subject to CGT being in the nature of a capital investment rather

 

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than taxable income, the complex and unique nature of the transaction may pose challenges in justifying the tax exemption from CGT despite the supporting legal basis for said exemption. The BIR has required the parties to the transaction to secure a Tax Ruling to confirm the non-applicability and exemption from CGT and/or other taxes. On March 11, 2022, the CAR in respect of the transfer was obtained from the BIR. On March 25, 2022, the BIR issued the Tax Ruling on the Reorganization.

Satisfaction of 80% Test

After consideration of the factors identified and discussed in the section entitled “— 26 Capital’s Board of Directors’ Reasons for the Merger and Share Acquisition and the Recommendation for the Board of Directors,” the 26 Capital board of directors concluded that the Merger and Share Acquisition met all of the requirements disclosed in the prospectus for its initial public offering with respect to its initial business combination, including that the Merger and Share Acquisition had a fair market value of at least 80% of the balance of the funds in the Trust Account at the time of execution of the Merger and Share Acquisition Agreement.

Vote Required for Approval

The approval of the Merger and Share Acquisition Proposal, as well as the approval of the Subscription Proposal, requires the affirmative vote of holders of a majority of the outstanding shares of common stock of 26 Capital as of the Record Date. Abstentions, broker non-votes or a failure to vote by proxy or in person (which would include presence at a virtual meeting) at the special meeting will each have the effect of a vote “AGAINST” each of the Merger and Share Acquisition Proposal and the Subscription Proposal. The Charter Proposal, the Equity Plan Proposal and the Adjournment Proposal each require the affirmative vote of a majority of the votes cast by 26 Capital stockholders, voting together as a single class. Abstentions, broker non-votes or a failure to vote by proxy or in person (which would include presence at a virtual meeting) at the special meeting will have no effect on the approval of these proposals. The Merger and Share Acquisition Proposal is conditioned on the approval of the Subscription Proposal. If the Subscription Proposal is not approved, this proposal will have no effect, even if approved by 26 Capital stockholders.

As of the Record Date, there were 6,875,000 shares of 26 Capital Class B common stock entitled to vote at the special meeting. This represents approximately 20% of the total votes entitled to be cast at the special meeting. The holders of the 26 Capital Class B common stock have agreed to vote such shares in favor of the Merger and Share Acquisition Proposal.

Recommendations of the Board of Directors

26 CAPITAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE “FOR” THE MERGER AND SHARE ACQUISITION PROPOSAL.

 

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THE MERGER AND SHARE ACQUISITION AGREEMENT

The following is a summary of the material terms of the Merger and Share Acquisition Agreement. A copy of the Merger and Share Acquisition Agreement is attached as Annex A to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. The Merger and Share Acquisition Agreement has been attached to this proxy statement/prospectus to provide you with information regarding its terms. It is not intended to provide any other factual information about 26 Capital or UERI. The rights and obligations of the parties are governed by the express terms and conditions of the Merger and Share Acquisition Agreement and not by this summary or any other information contained in this proxy statement/prospectus. You should refer to the full text of the Merger and Share Acquisition Agreement for details of the Merger and Share Acquisition and the terms and conditions of the Merger and Share Acquisition Agreement.

The Merger and Share Acquisition Agreement contains representations and warranties that the parties have made to one another as of specific dates and may be subject to standards of materiality applicable to the parties thereto that differ from those applicable to investors. These representations and warranties have been made for the benefit of the other parties to the Merger and Share Acquisition Agreement and may be intended not as statements of fact but rather as a way of allocating the risk to one of the parties if those statements prove to be incorrect. In addition, the assertions embodied in the representations and warranties are qualified by information in confidential disclosure schedules exchanged by the parties in connection with signing the Merger and Share Acquisition Agreement. While 26 Capital and UERI do not believe that these disclosure schedules contain information required to be publicly disclosed under the applicable securities laws, other than information that has already been so disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger and Share Acquisition Agreement. Accordingly, you should not rely on the representations and warranties as current characterizations of factual information because they were made as of specific dates, may be intended merely as a risk allocation mechanism among the parties to the Merger and Share Acquisition Agreement and are modified by the disclosure schedules.

The Reorganization

Prior to the Closing, TRA will effect a reorganization of parts of its business (the “Reorganization”) in accordance with the Merger and Share Acquisition Agreement. Pursuant to the Reorganization, among other matters, UERI will become a direct subsidiary of TRA and intercompany receivables (other than ordinary course trade receivables) due from TRLEI to TRA and certain of its affiliates will be contributed to UERI as additional paid-in capital.

Pursuant to the Merger and Share Acquisition, TRLEI will become a wholly-owned subsidiary of UERI. However, if the recording in the stock and transfer book of TRLEI of the transfer of the shares of TRLEI from TRA to UERI does not occur prior to the closing of the Merger and Share Acquisition, the parties intend to consummate the Merger and Share Acquisition without transferring legal ownership of TRLEI to UERI. Instead, pursuant to the contribution agreement that will transfer TRLEI’s outstanding equity to UERI, TRA shall, pending the recording of the transfer of legal ownership: (i) at all times deal with, transfer and dispose of the shares of TRLEI, including with respect to any dividends thereon, the proceeds thereof, and any rights or privileges relating thereto, solely in accordance with instructions given to it by UERI; (ii) at all times, at UERI’s request, sign, execute, and deliver any transfer, proxy form, receipt, notice, or other instrument relating to the TRLEI shares or any dividends, proceeds, rights or privileges relating thereto; and (iii) not exercise any voting or other right in respect of the TRLEI shares contrary to the direction of UERI. The UEC Parties currently anticipate that the ownership of the TRLEI Shares by UERI will be recorded prior to the closing of the Merger and Share Acquisition. In addition, TRA will execute an irrevocable proxy, appointing UERI as TRA’s proxy to vote the TRLEI shares at all regular and special meetings of TRLEI’s stockholders.

 

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The steps of the Reorganization are as follows:

 

Step 1 UERI becomes a subsidiary of TRA
1.1		TRLEI will sell to TRA, and TRA will purchase from TRLEI, 100% of the issued and outstanding shares in UERI (including 8 common shares held by and in the name of nominee directors and beneficially owned by TRLEI) pursuant to a deed of absolute sale of shares.
1.2		TRA will pay TRLEI cash consideration for such shares.
Step 2 Transfer of intercompany receivables due from TRLEI
2.1		UEC will assign to TRA its receivables due from TRLEI (other than trade receivables incurred in the ordinary course of business).
Step 3 TRLEI becomes a subsidiary of UERI
3.1		TRA will (a) subscribe for additional new shares in UERI, and (b) contribute and transfer 100% of (i) TRLEI’s issued and outstanding shares (whether common and preferred shares) and (ii) its receivables due from TRLEI, including deposits for future subscriptions (other than trade receivables incurred in the ordinary course of business) to UERI (including 11 common shares held by and in the name of nominee directors and beneficially owned by TRA) as additional paid in capital pursuant to subscription and contribution agreements.
3.2		TRA will pay UERI cash consideration for such shares.
Step 4 Amendment of the organizational documents of UERI and recapitalization of UERI
4.1		The organizational documents of UERI will be amended to be consistent with those set forth in Exhibit E of the Merger and Share Subscription Agreement.
4.2		TRA and UERI will take actions to provide for:   A. TRA to hold, as of the Effective Time (as defined in the Merger Agreement), a number of UERI common shares, rounded to the nearest whole share, equal to TRLEI’s equity value divided by $10.00 (including UERI common shares held by TRA’s nominee directors in UERI, which shares are beneficially owned by TRA), and will hold no other UERI securities (of any class or series and including deposits for future subscriptions);   B. the issuance of UERI common shares, at par value, pursuant to the subscription agreement and such securities (if any) as may be subscribed for pursuant to PIPE subsription agreements; and   C. the issuance of UERI warrants as contemplated by the Merger Agreement.   Such actions may include, as appropriate, issuing new UERI common shares, surrending UERI common shares and/or UERI preferred shares for cancellation, and/or combining or dividing UERI common shares.
Step 5 Eagle I Lease is separated
5.1		TRLEI (lessee) and Eagle I (lessor) will amend or otherwise modify (as mutually agreed between the parties) the Eagle I Lease to exclude a portion of the undeveloped land on the opposide site of the road surrounding the leased land where TRLEI’s building is located. The Eagle I Lease will be further amended after closing of the Merger and Share Acquisition to exclude the remaining portion of such undeveloped land.

 

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The Subscription

Prior to the Closing, but after the redemption of any shares of 26 Capital as described under “Special Meeting of 26 Capital Stockholders — Redemption Rights,” 26 Capital will, acting on behalf of its stockholders, subscribe for UERI common shares at a purchase price of 0.05 PHP, with the payment for such UERI common shares being made in cash by 26 Capital on behalf of its applicable stockholders (the “Subscription”). In order to fund this cash payment on behalf the applicable 26 Capital stockholders, 26 Capital will, prior to Closing, declare and pay a cash dividend on the shares of 26 Capital common stock in the amount of 0.05 PHP per share (which is equal to the par value of the UERI common shares underlying the UERI common shares). The proceeds from the dividend will either be paid by 26 Capital to UERI in accordance with the Subscription Agreement in exchange for UERI common shares or paid to holders of 26 Capital common stock who elect not to participate in the Subscription (but have not elected to have their shares redeemed by 26 Capital). If 26 Capital is unable to ensure that the Subscription Dividend is compliant with the DGCL, then 26 Capital and the UEC Parties have agreed to negotiate in good faith to determine and alternative procedure to fund the Subscription.

The Merger

The terms and conditions of the Merger of Merger Sub with and into 26 Capital, with 26 Capital surviving the Merger as a wholly owned subsidiary of UERI, are contained in the Merger and Share Acquisition Agreement, which is attached as Annex A to this proxy statement/prospectus. We encourage you to read the Merger and Share Acquisition Agreement carefully, as it is the legal document that governs the Merger and related transactions.

Closing and Effective Time of the Merger and Subscription

The closing will take place as promptly as reasonably practicable, but in no event later than the second business day following the satisfaction of the conditions set forth in the Merger and Share Acquisition Agreement and summarized below under “— Conditions to Closing of the Merger and Share Acquisition,” unless the parties agree in writing to another time or unless the Merger and Share Acquisition Agreement is terminated pursuant to its terms.

The Merger will become effective at such time as the certificate of merger is duly filed with the Delaware Secretary of State or at such later date or time as is agreed between the parties and specified in the certificate of merger.

Consideration to be Received in the Merger

At the Effective Time, all outstanding shares of 26 Capital common stock (except for (i) any shares owned by 26 Capital, Merger Sub or any subsidiary of 26 Capital, which will be canceled without consideration, (ii) any shares of 26 Capital common shares that are held by stockholders who have made a valid redemption election, which shares will be redeemed in accordance with 26 Capital’s organizational documents, and (iii) any shares of 26 Capital common shares that are held by stockholders who have perfected and not withdrawn a demand for appraisal rights pursuant to the applicable provision of the DGCL), shall be converted into and shall for all purposes represent only the right to subscribe for and purchase, pursuant to the Subscription Agreement and a letter of transmittal and subscription confirmation, one validly issued, fully paid and non-assessable (the “Exchange Ratio”) UERI common share upon the exercise of such subscription right. Each American depositary share of UERI will represent one share of common stock of UERI.

Further, at the Effective Time, each warrant to acquire shares of 26 Capital that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, shall be converted into and become a warrant to purchase an equal number of UERI common shares, and UERI shall assume each warrant in accordance with its terms as in effect as of the date of the Merger and Share Acquisition Agreement).

 

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Ownership of the Combined Company Upon Completion of the Merger and Share Acquisition

We anticipate that, upon completion of the Merger and Share Acquisition, assuming that none of the 26 Capital stockholders exercise redemption rights and assuming that all stockholders of 26 Capital who receive the right to subscribe for UERI common shares have subscribed for such UERI common shares, an aggregate of approximately 34,375,000 UERI common shares will be issued in connection with the Merger and Share Acquisition, existing 26 Capital stockholders will hold in the aggregate approximately 13.75% of UERI’s outstanding common stock (approximately 11.00% held by 26 Capital public stockholders and approximately 2.75% held by the Sponsor) and TRA will hold approximately 86.25% of UERI’s outstanding common stock. These ownership percentages do not take into account (1) any warrants or options to purchase UERI common shares that will be outstanding following the Merger and Share Acquisition or (2) any equity awards that may be issued under our proposed Equity Plan following the Merger and Share Acquisition. If the actual facts are different than these assumptions (which is likely), the ownership percentages held by each of our existing stockholders, including Sponsor and TRA, will be different.

Representations and Warranties

The Merger and Share Acquisition Agreement contains representations and warranties that the parties have made to one another as of specific dates and may be subject to standards of materiality applicable to the parties thereto that differ from those applicable to investors. These representations and warranties have been made for the benefit of the other parties to the Merger and Share Acquisition Agreement and may be intended not as statements of fact but rather as a way of allocating the risk to one of the parties if those statements prove to be incorrect. In addition, the assertions embodied in the representations and warranties are qualified by information in confidential disclosure schedules exchanged by the parties in connection with signing the Merger and Share Acquisition Agreement. While 26 Capital and UERI do not believe that these disclosure schedules contain information required to be publicly disclosed under the applicable securities laws, other than information that has already been so disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger and Share Acquisition Agreement. Accordingly, you should not rely on the representations and warranties as current characterizations of factual information because they were made as of specific dates, may be intended merely as a risk allocation mechanism among the parties to the Merger and Share Acquisition Agreement and are modified by the disclosure schedules.

The Merger and Share Acquisition Agreement contains representations and warranties of 26 Capital relating, among other things, to:

 

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corporate organization

 

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authority

 

•

conflicts, consents and approvals

 

•

capitalization

 

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SEC filings

 

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financial statements

 

•

undisclosed liabilities

 

•

permits and compliance with laws

 

•

litigation

 

•

absence of certain changes or events

 

•

brokers

 

•

transactions with affiliates

 

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trust agreement

 

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business activities

 

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NASDAQ listing

 

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taxes

 

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disclosure documents

The Merger and Share Acquisition Agreement contains representations and warranties of the UEC Parties relating, among other things, to:

 

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corporate organization

 

•

authority

 

•

capitalization of the UEC Parties

 

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subsidiaries of certain UEC Parties

 

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conflicts, consents and approvals

 

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financial statements

 

•

undisclosed liabilities

 

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assets and real property

 

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contracts

 

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vendors

 

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labor matters

 

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employees and benefit plans

 

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intellectual property

 

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permits and compliance with laws

 

•

litigation

 

•

taxes

 

•

absence of certain changes or events

 

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insurance

 

•

environmental matters

 

•

brokers

 

•

transactions with affiliates

 

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indebtedness

 

•

solvency

 

•

prior operations of UERI or Merger Sub

 

•

UERI common shares

 

•

disclosure documents

Conduct of Business Pending Consummation of the Merger and Share Acquisition and Covenants

Each of the parties have agreed to use reasonable best efforts to take, or cause to be taken, or to do or cause to be done, all actions and things necessary or advisable to consummate and make effective as promptly as practicable the transactions contemplated by the Merger and Share Acquisition Agreement.

 

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